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INTRODUCTION
Law Governing Service Tax
Chapter V of the Finance Act,
1994 (Sections 64 to 96) and Chapter VA of the Finance Act, 1994 (Sections 96A
to 96I) both the Chapters together are hereinafter referred to as the “Act”, as
amended from time to time, provide for the levy of service tax and constitute
the law governing service tax. The Government has also notified the following
rules:-
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Service Tax Rules, 1994
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Cenvat Credit Rules, 2004
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Service Tax (Advance Ruling) Rules, 2003
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Export of Services Rules, 2005
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Service tax (Registration of Special Category of Persons) Rules,
2005
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Taxation of
Services (provided from outside India and received in India) Rules, 2006
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Service Tax
(Determination of Value) Rules, 2006
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Works Contract
(Composition Scheme for Payment of Service Tax) Rules, 2007
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Service Tax
(Publication of Names) Rules, 2008
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Service Tax
(Provisional Attachment Property) Rules, 2008
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Service Tax
Return Preparer Scheme 2009
The Act is administered by the
Excise department. The effective rate of service tax is 10% w.e.f. 24.2.2009
[earlier 12%]. Further, the Finance (No.2) Act, 2004 has also levied an
education cess @ 2% on the amount of the service tax w.e.f. 10.9.2004 and
Finance Act, 2007 has levied an additional “secondary and higher education cess”
@ 1% on the amount of service tax w.e.f 11.5.2007. Thus, the effective rate of
Service Tax (including Cess) is 10.30%.
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PRELIMINARY LEGAL PROVISIONS
Situs of
Taxation
By section 64(1), the Act
extends to the whole of India except the state of Jammu and Kashmir, and by
section 64(3), the levy applies to “taxable services provided”. Hence on a
reading of section 64, the situs of taxation falls on taxable services
provided in India. In this context, “India” includes all the installations,
structures and vessels in the entire Continental Shelf (“CSI”) and Exclusive
Economic Zone (“EEZ”) of India [notification no. 1/2002 dated 1.3.2002 and
21/2009 dated 7.7.2009]. Hence services provided to / from CSI and EEZ of India
would be covered under service tax w.e.f. 7.7.2009.
Levy and Collection of
Service Tax
It is to be noted that in
accordance with section 66 service tax is levied on the value of taxable
services and taxable service is defined in section 65(105) of the Act. Section
65(105) defines “taxable service” as “any service provided or to be provided”
to a client, customer, etc. Thus, services “provided” and “to be provided” would
be covered within the ambit of service tax. The intention is to collect tax when
advance payments are received for services to be provided. Thus, service tax
would be payable even on advances received.
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PLACE OF PROVISION OF SERVICE
As already stated above, the
situs of taxation falls on
“taxable services”
provided or to be provided in India. As regards cross-border transactions to
determine the place of provision of services the law has introduced the concept
of “import of services” and “export of services” alongwith relevant rules to
determine where a service is supplied popularly known as the Place of Supply
Rules which are explained hereinafter.
IMPORT AND EXPORT OF
SERVICES
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Import of
services – Reverse charge mechanism codified - section 66A and Place of Supply
Rules for “reverse charge” introduced.
Preamble
1.1 The Finance Act, 2006 introduced section 66A to
bring certain cross-border transactions involving overseas service providers
within the ambit of service tax. In effect it brought certain services provided
by overseas service providers within the purview of service tax. In such cases
the recipient of the services in India would be liable to register and pay
service tax. This is known as the “reverse charge mechanism”. Taking into
account international practices the Taxation of Services (provided from outside
India and received in India) Rules, 2006 (“Import Rules”) has been notified w.e.f. 19.4.2006. These Rules inter alia specify when a taxable service
is to be treated as supplied in India and accordingly coming within the Indian
service tax net. This is more popularly known as the “Place of Supply Rules”.
1.2
Section 66A – Reverse charge
Section 66A provides for the
reverse charge mechanism as follows :
“66A. Charge of service
tax on services received from outside India. –
(1)
Where any service specified in clause (105) of section 65 is –
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provided or
to be provided by a person, who has established a business or has a fixed
establishment from which the service is provided or to be provided, or has his
permanent address or usual place of residence, in a country other than India,
and
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received by
a person (hereinafter referred to as the recipient) who has his place of
business, fixed establishment, permanent address or, as the case may be, usual
place of residence, in India
such service shall for the
purposes of this section, be taxable service and such taxable service shall
be treated as if the recipient had himself provided the service in India and
accordingly the provisions of this Chapter shall apply :
Provided
that where the recipient of the service is an individual and such service
received by him is otherwise than for the purpose of use in any business or
commerce, the provisions of this sub-section shall not apply:
Provided further
that where the provider of the service has his business establishment both in
that country and elsewhere, the country, where the establishment of the provider
of service directly concerned with the provision of service is located, shall be
treated as the country from which the service is provided or to be provided.
(2) Where a person is
carrying on a business through a permanent establishment in India and through
another permanent establishment in a country other than India, such permanent
establishments shall be treated as separate persons for the purposes of this
section.
Explanation 1.— A person
carrying on a business through a branch or agency in any country shall be
treated as having a business establishment in that country.
Explanation 2.—Usual place
of residence, in relation to a body corporate, means the place where it is
incorporated or otherwise legally constituted.”
1.3
The scope of the section is explained below :
(i)
The effect of
the provision is that if a person who is based outside India
provides services to a person based in India
the recipient is treated as a “provider of service” and accordingly all the
provisions of the Act as they apply in relation to a provider of taxable service
would apply to him. Thus, he would have to register, make payment, and file
returns as a service provider would do.
(ii) Where the
recipient is an individual and such service is received by him otherwise than
for the purpose of use in any business or commerce (say, for personal use), the
provisions of the reverse charge mechanism shall not apply i.e. the individual
would not be treated as a provider of service.
(iii) Where the
provider of the service has his business establishment in several countries, the
country where the establishment of the service provider directly concerned with
the provision of service is located, shall be treated as the country from which
the service is provided. Thus, where a provider who has his headquarters in the
US and a branch in India provides services directly from his headquarters
(without intervention of the branch in India) to an Indian company, the provider
shall be treated as providing services from US although he has an establishment
in India. In such cases, the reverse charge mechanism would be triggered.
However, where the Indian branch provided services to the Indian company, the
reverse charge mechanism would not be triggered.
(iv) Where a person
is carrying on a business through a permanent establishment in India and through
another permanent establishment in a country other than India, such permanent
establishments shall be treated as separate persons for the purposes of this
section. In this context Circular F. No. B1/4/2006 – TRU dated 19.04.06 issued
by the Ministry of Finance clarifies that services provided by the latter
permanent establishment to the former permanent establishment shall be treated
as provision of services by one person to another. However, it is to be noted
that the term “permanent establishment” has not been defined.
(v) A “branch” or an
“agency” is treated as a “business establishment”.
(vi) The “usual place
of residence” of a company is the place of incorporation or constitution.
The Taxation of
Services (provided from outside India and received in India) Rules, 2006
(“Import Rules”) effective from 19.4.2006
When is a service “provided
from outside India and received in India” ?
1.4 Taking into account international practices the
Central Government has notified the Taxation of Services (provided from outside
India and received in India) Rules, 2006 [“Import Rules”]. The Import Rules
inter alia set out the criteria to decide when a taxable service is to be
treated as “provided from outside India and received in India” and accordingly
liable for service tax in India.
Broadly, the Import Rules have
categorized the services in three categories and then have defined when a
service can be treated as “provided from outside India and received in India”.
The categories are:
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Immoveable
Property category
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Performance
based category
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Location of
service recipient category
The categories are explained
below.
Immovable Property Category
1.5 In case of 13 services (See Table A of Appendix 1),
which are provided in relation to immovable property, the services shall be
considered as provided from outside India and received in India (imported) if
the immovable property is situated in India.
Performance Based Category
1.6 In case
of 53 services (See Table B of Appendix 1), the services shall be considered as
provided from outside India and received in India (imported) if the services are
wholly or partly performed in India. However, in case of 3 services
viz., ‘management, maintenance and repair’, ‘technical testing and analysis’,
and ‘technical inspection and certification’ services–
(i)
where the said
services are provided through internet / computer / electronic network or any
other means; and
(ii)
the goods,
material or immoveable property in respect of which the said services are
provided are situated in India at the time of provision of service
then such services shall be
considered as performed in India, whether or not the said services are
actually performed in India.
Location of Service Recipient
Category
1.7 In case of 41 services (See Table C of Appendix 1),
the services shall be considered as provided from outside India and received in
India (imported) in case the recipient of service is located in India and the
services are used in relation to commerce or industry (i.e. commercial use).
Further, in case of services falling within the category “supply of tangible
goods for use”, the services would be considered as imported only if the goods
are located in India during the period of use by the recipient.
N.B.
The 3 recent services viz., (1) Services provided in relation to transport of (i)
coastal goods; and (ii) goods through inland water including National Waterways;
(2) Cosmetic and Plastic Surgery Services; and (3) Legal Consultancy Services
included by the Finance (No.2) Act, 2009 have not been included under any of the
categories since the Notifications for categorization of these services were not
issued when the referencer was going for print.
Services not subject to the
reverse charge
Two services are not subject
to reverse charge :
(i) Air transport of
passengers embarking in India for international journey;
(ii) Transport of
persons by a cruise ship embarking in any port in India.
The circular F. No.
B1/4/2006-TRU dated 19th April 2006 clarifies that the two services have not
been mentioned in the said categorization of services, since
“service tax in such cases is charged from the service provider
in India.”
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SYNOPSIS OF
EXPORT OF SERVICES RULES, 2005
2.1
The Finance (No.2) Act, 2004 had empowered the
Central Government to make rules to provide for –
(i)
determining export of taxable
services;
(ii)
granting exemption to, or
rebate of tax paid, on services exported; or
(iii)
rebate of tax paid on input
services consumed, or duties paid on goods used, for providing taxable services
which are exported.
Accordingly the Central
Government had notified the Export of Services Rules, 2005 (“Rules”) w.e.f.
15.3.2005 which inter alia set out the criteria to decide when a service
is deemed to have been exported, keeping in view the nature of the different
taxable services. The significant features of the Rules (as amended) are given
below.
No service tax payable on
taxable services exported
2.2 Taxable services maybe exported without payment of
service tax.
What is export of services?
2.3 Broadly, the rules have categorized the services in
three categories and then defined what would constitute “export” of services for
each category. The categories are:
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Immoveable
property category
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Performance
based category
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Location of
service recipient category
The above criteria are
virtually on the same lines as import rules elucidated in the previous section.
Infact export is a mirror image of import.
Immoveable Property Category
2.4
In case of 13 services (See Table A of Appendix 1)
which are provided in relation to immovable property, the services shall be
considered as exported if the immovable property is situated outside India.
Performance based category
2.5 In case of 53 services (See Table B of Appendix 1),
the services shall be considered as exported if the services are wholly or
partly performed outside India. However, in case of 3 services viz.,
‘management, maintenance and repair’, ‘technical testing and analysis’, and
‘technical inspection and certification’ services –
(i) where the said
services are provided through internet / computer / electronic network or any
other means; and
(ii) the goods,
material or immoveable property in respect of which the said services are
provided are situated outside India at the time of provision of service
then such services shall be
considered as performed outside India, whether or not the said services are
actually performed outside India.
Location of service
recipient criterion
2.6 In case of 41 services (See Table C of Appendix 1),
the services shall be considered as exported-
(i) If the recipient
of service is located outside India in a case where the services are provided
and used in or in relation to business or commerce (i.e. commercial use).
However, if such a recipient of service has any commercial establishment or
office in India, the services shall be considered to be exported only if the
order for provision of such services is made by the recipient of the service
from any of his commercial establishment or any office located outside India
(ii) If the recipient
of the service is located outside India at the time of provision of such
services in a case where the services are not provided and used in or in
relation to business or commerce (such as for personal use).
Further, in case of services
falling within the category “supply of tangible goods for use”, the services
would be considered as exported only if the goods are located outside India
during the period of use by the recipient.
N.B.
The 3 recent services viz., (1) Services provided in relation to transport of (i)
coastal goods; and (ii) goods through inland water including National Waterways;
(2) Cosmetic and Plastic Surgery Services; and (3) Legal Consultancy Services
included by the Finance (No.2) Act, 2009 have not been included under any of the
categories since the Notifications for categorization of these services were not
issued when the referencer was going for print.
Conditions applicable to all
categories for services to be considered as exported
2.7 The following conditions apply for services to be
considered as exported in all cases mentioned in paras 2.4 to para 2.6:
(i)
payment for such service provided outside India is received by
the service provider in convertible foreign exchange; and
(ii)
the service is -
(a)
“Provided from India” ; and
(b)
“used outside India”;
As per the CBEC Circular No.
111/05/2009-ST dated 24.2.2009 the services would be considered as used outside
India if the benefits of the services accrue outside India notwithstanding that
the services are “performed” in India
Services not subject to Export
Rules
2.8 Two services do not form part of the categorization
for the purpose of Export Rules. They are:
(i) Air transport of
passengers embarking in India for international journey;
(ii) Transport of
persons by a cruise ship embarking in any port in India.
The circular F. No.
B1/4/2006-TRU dated 19th April 2006 clarifies that the
“two services have not been mentioned in the said categorization of services, as
they are services provided in India.”
2.9 The Government has also notified conditions for
granting rebate of tax paid, on services exported and rebate of tax paid on
input services consumed, or duties paid on goods used, for providing taxable
services which are exported. These notifications are dealt with in Appendix 2.
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NEW PROVISIONS FOR VALUATION OF TAXABLE SERVICES
A. SECTION 67 –
VALUATION OF TAXABLE SERVICES
1.
The Finance Act, 2006 w.e.f. 18.4.2006 has substituted the
earlier provision with a new section 67 which provides for a more elaborate
method of computing the value. The significant features are as follows:
(i) Where the “consideration” for provision of the service is
in money, the gross amount charged by the service provider for such services
provided by him shall be the value of taxable service;
(ii) Where the “consideration” for provision of the service is
not wholly or partly in money, then the value of taxable service shall be such
amount in money as with the addition of service tax charged, be equivalent to
the consideration;
(iii) Where the “consideration” for provision of the service is
not ascertainable the value of taxable service shall be determined in a manner
laid down by the Rules which the Central Government has notified.
B.
NEW VALUATION
RULES W.E.F. 19.4.2006
Pursuant
to above the Central government has notified the Service tax (Determination of
Value) Rules, 2006 (“Valuation Rules”)
vide
notification no.12/2006-service tax, dated April 19, 2006. The valuation rules
are explained as under.
Determination of value
where consideration received is not wholly or partly consisting of money
2.
Where the consideration received is not wholly or partly
consisting of money, the value of taxable service shall be determined by the
application of the following rules.
Rule 1 :
The value shall be equivalent to the gross amount charged by the service
provider to provide similar services to any other person in the ordinary
course of trade and the gross amount charged is the sole consideration.
Rule 2 :
Where the value cannot be determined in accordance with rule 1 above, value
shall be the equivalent money value of the consideration as determined by
the service provider. Such value however, shall not be less than the cost of
provision of such taxable service.
Power of Central Excise
Officer to question the valuation
3.
The Central Excise Officer has the power to satisfy himself as to
the accuracy of any information furnished or document presented for valuation.
Where the Central Excise Officer is satisfied that the value determined by the
service provider is not in accordance with the provisions of the Act or the
Valuation Rules, the Central Excise Officer may proceed to determine the value
of such taxable service after issuing a notice and giving a hearing to the
assessee. The Circular No F. No.
B1/4/2006-TRU dated 19th April 2006 issued by Minister of Finance has instructed
the department to use extreme care and caution before exercising their powers
under this rule. It clarifies :
“4.1.6
It is expected that the department should use this provision with extreme care
and caution. Such verification should be undertaken only after the written
instructions from the Divisional AC/DC. After verification of the records, if
the department is of the view that the value so determined and adopted for
payment of service tax warrants revision, the issue should be decided after
issue of show cause notice and observing the prescribed procedures. Before
issuing any show cause notice on matters relating to valuation, concurrence of
Commissioner should be obtained.”
Reimbursement of expenditure
4.
Recovery
of reimbursements would also be included in the taxable value unless the
recovery by the service provider is as a “pure agent” of the client and
all
the
following conditions are satisfied :
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the service
provider acts as a pure agent of the recipient of service when he makes payment
to third party for the goods or services procured;
-
the recipient of
service receives and uses the goods or services so procured by the service
provider in his capacity as pure agent of the recipient of service;
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the recipient of
service is liable to make payment to the third party;
-
the recipient of
service authorises the service provider to make payment on his behalf;
-
the recipient of
service knows that the goods and services for which payment has been made by the
service provider shall be provided by the third party;
-
the payment made
by the service provider on behalf of the recipient of service has been
separately indicated in the invoice issued by the service provider to the
recipient of service;
-
the service
provider recovers from the recipient of service only such amount as has been
paid by him to the third party; and
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the goods or
services procured by the service provider from the third party as a pure agent
of the recipient of service are in addition to the services he provides on his
own account.
5.
A “pure agent” means a person who–
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enters into a
contractual agreement with the recipient of service to act as his pure agent to
incur expenditure or costs in the course of providing taxable service;
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neither intends
to hold nor holds any title to the goods or services so procured or provided as
pure agent of the recipient of service;
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does not use
such goods or services so procured; and
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receives only
the actual amount incurred to procure such goods or services.
Specific inclusions and
exclusions
6.
The Valuation Rules provides for inclusions and
exclusions in case of certain services.
Inclusions
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the aggregate of commission or
brokerage charged by a broker on the sale or purchase of securities including
the commission or brokerage paid by the stock-broker to any sub-broker;
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the adjustments made by the
telegraph authority from any deposits made by the subscriber at the time of
application for telephone connection or pager or facsimile or telegraph or telex
or for leased circuit;
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the amount of premium charged
by the insurer from the policy holder;
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the commission received by the
air travel agent from the airline;
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the commission, fee or any
other sum received by an actuary, or intermediary or insurance intermediary or
insurance agent from the insurer;
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the reimbursement received by
the authorised service station from manufacturer for carrying out any service of
any motor car, light motor vehicle or two wheeled motor vehicle manufactured by
such manufacturer.
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the commission or any amount
received by the rail travel agent from the Railways or the customer.
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the remuneration
or commission, by whatever name called, paid to such agent by the client
engaging such agent for the services provided by a clearing and forwarding agent
to a client rendering services of clearing and forwarding operations in any
manner; and
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the commission, fee or any other sum, by whatever
name called, paid to such agent by the insurer appointing such agent in relation
to insurance auxiliary services provided by an insurance agent
Exclusions
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initial deposit made by the
subscriber at the time of application for telephone connection or pager or
facsimile or telegraph or telex or for leased circuit;
-
the airfare collected by air
travel agent in respect of service provided by him;
-
the rail fare collected by
rail travel agent in respect of service provided by him.
-
interest
on loans.
Value of taxable service in
case of reverse charge - Import of services
7.
In the case of reverse charge mechanism due to import of
services, service tax is payable on the actual amount charged by the overseas
service provider. Further, where the services are considered as imported as a
result of being wholly or partly performed in India, the entire amount paid by
the receiver of service would be the value of taxable services liable for
service tax even if such amount includes an amount for services provided outside
India.
All circulars hitherto issued
on valuation provisions standwithdrawn
8.
Para 4.1.13
of the Circular
F.
No. B1/4/2006-TRU dated 19th April 2006 issued by Minister of Finance clarifies
that:
“4.1.13 In view of the comprehensive provisions on value of taxable services,
all the circulars issued relating to value of taxable services are withdrawn. If
there are any areas where specific clarification on valuation is needed, the
same may immediately be brought to the notice for consideration.”
C. Works contract
service – Valuation/Composition Scheme
9.
General
Service
tax is now leviable in the services involved in the execution of a “works
contract”. “Works contract” has been defined to mean a contract where -
a. transfer of
property in goods involved in the execution of such contract is leviable to VAT
/ sales tax;
and
b. the contract is
of the following nature -
(i) erection,
commissioning or installation of plant, machinery, equipment or structures etc.
or
(ii) construction of
a new building or a civil structure or a part thereof, or of a pipeline or
conduit, primarily for the purposes of commerce or industry; or
(iii) construction of
a new residential complex or a part thereof; or
(iv) completion and
finishing services, repair, alteration, renovation or restoration of, or similar
services, in relation to (ii) and (iii); or
(v) turnkey projects
including engineering, procurement and construction or commissioning (EPC)
projects;
Thus, in order to attract
service tax the works contract should be liable for VAT / sales tax and must be
one of the five categories mentioned above failing which it would not be liable
for service tax. However, works contract in respect of roads, airports,
railways, transport terminals, bridges, tunnels and dams shall be excluded.
The Central Government has
amended the Valuation Rules providing for valuation of works contract services.
Further, it has also prescribed an optional Composition Scheme for payment of
service tax on works contract services. The two alternatives available to a
service provider are elucidated below:
10.
Alternative 1 : Payment by valuation of services involved in a Works Contract
Service tax is required to be
paid on the gross amount charged for the works contract less the value of
transfer of property in goods involved in the execution of the said works
contract. The gross amount charged would, however, not include VAT or sales tax
paid on transfer of property in goods involved in the execution of the said
works contract.
Thus, two components are
required to be ascertained :
(a) the gross amount
charged for the works contract; and
(b) the value of the
goods involved in the execution of works contracts;
The value of goods would be
deducted from the gross amount charged to arrive at the value of services in a
works contract on which service tax at the applicable rates would be payable.
The value of goods involved in
the execution of a works contract shall be arrived at as follows :
(i)
where VAT / sales tax has been
paid on the actual value of transfer of property in goods then such value
shall be adopted.
(ii) In other cases [say, where the
VAT / sales tax has been paid under a composition scheme under the relevant
state law] the value of the goods may have to be arrived at by actual records.
It has been provided that the
value of works contract service shall include,-
(a) labour charges for execution of the works;
(b) amount paid to a
sub-contractor for labour and services;
(c) charges for planning,
designing and architect’s fees;
(d) charges for obtaining on hire
or otherwise, machinery and tools used for the execution of the works contract;
(e) cost of consumables such as
water, electricity, fuel, used in the execution of the works contract;
(f) cost of establishment of the
contractor relatable to supply of labour and services;
(g) other similar expenses
relatable to supply of labour and services; and
(h) profit earned by the service
provider relatable to supply of labour and services.
Thus, the above would have to
be excluded in determining the value of goods involved in the execution
of works contract.
11. Alternative 2 : Payment by Composition Scheme
A service provider instead of
valuing the works contract service as explained in alternative 1 above and
paying the service tax thereon, also has the option to avail of the composition
scheme and pay service tax @ 4% [prior to 1.3.2008 – 2%] of the
gross
amount charged
for the works contract (excluding VAT / sales tax paid on transfer of property
in goods involved in execution of works contract). However, in this alternative
no CENVAT credit of duty paid on “input goods” can be claimed. But
Cenvat
credit of tax / duty paid on “input services” and “capital goods” would be
allowed. This option is qua each contract. It must be exercised prior
to payment of service tax on a works contract and the option once exercised
shall apply for the entire works contract and cannot be withdrawn until the
completion of the said works contract.
W.e.f. 7.7.2009
notification no.
23/2009-ST has made the following amendments :
(i) including-
a.
the value of all goods used in
or in relation to the execution of the works contract, whether supplied under
any other contract for a consideration or otherwise; and
b.
the value of all the services
that are required to be provided for the execution of the works contract;
(ii) excluding-
a.
the value added tax or sales
tax as the case may be paid on transfer of property in goods involved; and
b.
the cost of machinery and
tools used in the execution of the said works contract except for the charges
for obtaining them on hire:
Circular No. D.O.F. No.
334/13/2009-TRU dated 6.7.2009 issued by Ministry of Finance has clarified that
the amendment is to ensure that all the goods and material that go into the
works contract whether it is supplied free of cost by the client or for some
other reason does not form part of contract is includible in the gross amount
charged for computing the value on which the 4% is to be applied. The
composition scheme is an alternative to the Rule 2A of Valuation Rules where the
intention is to exclude the value of goods. Thus, the circular expresses the
following intention of the amendment –
(a) the gross value
should also include the value of goods received free of cost from the client;
(b) Gross value
should also include the goods or materials used in the works contract whether
forming part of consideration of contract or not
However, this amendment would
not be applicable to the following contracts–
(i) where the
execution of the contract has already commenced on or before 7.7.2009
(ii) the payment
[except by way of debit or credit in any account] has been made in relation to
the said contract on or before 7.7.2009
The above referred circular
clearly clarifies that even if part payment is received prior to 7.7.2009 the
entire works contract would not be hit by the amendment.
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The following
additional condition is applicable. The composition scheme shall be permissible
only where the declared value of the works contract is not less than the gross
amount charged for such works contract. Thus, the composition scheme would be
applicable only if the composition rate [presently 4%] is applied on an amount
which is atleast equal to or more than gross amount charged
D.Book entries in
respect of transactions between associated enterprises - deemed charge and
payment
Section 67 of Act has been
amended to provide that as regards transactions between “Associated Enterprises”
(“AE”) as defined in section 92A of the Income-tax Act, 1961, the “gross amount
charged” by one enterprise on the other shall include 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 the person liable to pay
service tax. Simultaneously rule 6(1) of the Service Tax Rules, 1994 has also
been amended by inserting an Explanation to consider such credit / debit as
value of taxable service “received”.
Further the Circular No. D.O.
F. No.334/1/2008-TRU dated 29th February, 2008 vide para 6.3 states that:
“As an anti-avoidance
measure, it is proposed to clarify that service tax is leviable on taxable
services provided by the person liable to pay service tax even if the amount is
not actually received, but the amount is credited or debited in the books of
account of the service provider. In other words, service tax is required to be
paid after receipt of payment or crediting/debiting of the amount in the books
of accounts, whichever is earlier. However, this provision is restricted to
transaction between associated enterprises. This provision shall also apply to
service tax payable under reverse charge method (Section 66A) as taxable
services received from associated enterprises. For this purpose section 67 and
rule 6(1) are being amended.”
Thus, the intention it appears
is to ensure service tax is paid when the income/expense in respect of taxable
service is booked but the payment therefor has not been received. However, the
amendment in Section 67 may also cover cases where the amounts are
debited/credited unilaterally but are not charged.
The term ‘associated
enterprise’ has the same meaning as assigned to it in section 92A of the Income
Tax Act, 1961. It is a relative concept i.e. an enterprise is an associated
enterprise when it is viewed in relation to other enterprises. This concept is
used in the Income Tax Act for applying transfer pricing provisions. An
enterprise which participates, directly or indirectly, or through one or more
intermediaries, in the management or control or capital of the other enterprise
is considered as associated enterprise. It also covers an enterprise in respect
of which one or more persons who participate, directly or indirectly, or through
one or more intermediaries, in the management or control or capital of the other
enterprise. Section 92A(2) of the Income Tax Act specifies various situations
under which two enterprises shall be deemed to be associated enterprises.
Enterprise means a person who is engaged in the provision of any services of any
kind. However, it may be noted that the definition of an associated enterprises
in the context of Transfer Pricing Regulations for Income-tax Act, 1961 is
relevant only in case of international transactions but, in case of service tax,
it would also be relevant for domestic transactions.
E.
OTHER PROVISIONS
Valuation of taxable services to include advance payments
12.Payments received before, during or after the provision of
taxable service would form part of gross amount charged. Thus, the payments
received even before the provision of taxable service would form part of the
gross amount for charging service tax. Further the definition of “taxable
service” also covers “services to be provided”. Thus, service tax would be
payable even on advances received.
Concept of deemed service
non-existent
13.The
new valuation rules only deal with a case where the consideration is wholly or partly
in money
or where the consideration is not ascertainable. It does not deal with a
case where no consideration is payable for services rendered. Thus, service tax
is not payable on free services as the concept of deeming provision for
valuation of taxable services is non-existent.
Computation
of service tax where bill is inclusive of service tax.
14.The
law provides that in cases where the total amount charged is inclusive of
service tax the value of taxable service is to be computed by the following
methodology -
Value of Taxable Service
= 100 x Total amount charged
100+R
where, R is the rate of tax.
Thus, the amount of service
tax would be :
Amount of service tax =
R x Total amount charged
100+R
where, R is the rate of tax.
-
GAMUT AND COVERAGE OF SERVICE TAX LAW
1.Applicability
(i) Services received from persons
based outside India – service receiver to pay
In case of taxable services
provided by a
person who is based outside India
and received by a person based in India
in accordance with section 66A it is the recipient of the service who is
liable for paying service tax.
(ii) Insurance Companies to pay
service tax in respect of services provided by insurance agents
In case of insurance auxiliary
services, relating to general insurance and life insurance provided by an
insurance agent, service tax shall be paid by the general insurance company or
the life insurance company carrying on business in India which has appointed the
agent.
(iii) Mutual fund /
asset management companies to pay service tax on mutual fund distribution
services
W.e.f. 1.4.2005 in cases where the services of distribution of
mutual fund are provided by a mutual fund distributor or an agent, the mutual
fund or asset management company who is receiving such service would be liable
to register and pay service tax.
(iv) Sponsor of the
event to pay service tax in case of sponsorship services.
W.e.f. 1.5.2006 in case of
sponsorship services the recipient of service namely the body corporate or firm
who sponsors the event would be liable to pay service tax. W.e.f 1.4.2007 this
rule has been amended to provide that the recipient of service viz., the body
corporate or firm is required to pay service tax only if the body corporate
or firm is located in India. Thus in case of foreign sponsorships; i.e.,
where the sponsor is a body corporate or a firm located outside India, it would
be the provider of services i.e., the sponsored organisation which would be
liable to pay service tax.
In the case of services
provided by a goods transporting agency, where the Consignor or Consignee of
goods is a specified entity viz., a factory, a company, a statutory corporation,
a society, a co-operative society, a dealer of excisable goods, a body corporate
or a partnership firm “the person liable to pay service tax ” is the
person who is liable to pay the freight either himself or through his agent for
the transportation of goods.
N.B.
It is to be noted that where neither the consignor nor the consignee is any of
the specified entities mentioned above it would be the goods transport agency
which would be liable to pay Service Tax in such cases.
2.Classification of Services
The Act now covers 109
different types of services. In case a service is prima facie taxable
under two or more categories, the basic principles of classification would be as
follows:
a.
The category which provides
most specific description shall be preferred to a category providing a more
general description;
b.
Composite services, consisting
of a combination of different services, which cannot be classified in a manner
specified in clause (a), shall be classified under the category which gives them
their essential character;
c.
Where the first two methods
[(a) and (b) above] fail, the classification will be under the category which
occurs first in the statute amongst those categories which merit equal
consideration.
A list of various categories
of services in the order in which they occur in the statute is given in Appendix
3.
-
EXEMPTIONS APPLICABLE TO ALL SERVICES
1. Services provided to UN or International
Organization exempt [Not. No. 16/2002-S.T. dated 2.8.2002]
All
taxable services, provided by any person to the UN or International Organization
are exempt. “International Organization” means an international organization
declared by the Central Government in pursuance of Section 3 of the United
Nations (Privileges and Immunities) Act, 1947, to which the provisions of the
Schedule to the said Act apply.
2. Services, provided to a developer or units of
Special Economic Zone exempt [Not. No. 9/2009-ST dated 3.3.2009 and Not. No.
15/2009-ST dated 20.5.2009]
Taxable services provided to
the developer / unit of SEZ in relation to authorized operations is exempt from
service tax whether or not the said taxable services are provided inside the SEZ
subject to the certain conditions
Modus Operandi of
exemption
The exemption operates in the
following manner:
(i)
The exemption is
applicable only in respect of “specified services” provided to the SEZ
developer/unit. “Specified services” means those services which are required in
relation to the authorized operations and which have been approved by the
Approval Committee of the SEZ.
(ii) If the
“specified services” are consumed wholly within the SEZ, than the service
provider is not required to charge service tax to the service recipient
(developer or units of SEZ).
(iii) In respect of
‘specified services” that is not consumed inside the SEZ, only a SEZ
developer/unit would be the person who is entitled to claim the exemption in
respect of the “specified services” provided to it by way of refunds. The
service provider shall not be eligible to claim an exemption with respect to
such specified services. It is, however, to be noted that with regard to
services that are not “specified services” there is no exemption under the
service tax law but the service provider may claim an exemption under the SEZ
Act.
(iv) The SEZ
developer/unit claiming exemption, is required to pay service tax on such
“specified services” that are not consumed inside the SEZ to the service
provider and thereafter claim refund in accordance with the procedure below.
Condition for claiming
exemption (refund)
In order to claim the
exemption the SEZ developers/units must satisfy the following conditions:
(i)
The “specified
services” must actually be used in the authorized operations.
(ii) The service tax
on “specified services” must be actually paid by the SEZ developer /unit.
(iii) The SEZ
developer/unit has not claimed cenvat credit of service tax paid on the
specified services.
(iv) The SEZ
developer / unit shall maintain proper account of receipt and utilisation of the
taxable services for which exemption is claimed.
Procedure for claiming
refund (exemption)
(i)
The SEZ
developer/unit has to file a refund claim with the jurisdictional
Assistant/Deputy Commissioner (“AC/DC”) within a period of six months (or such
extended period as the AC/DC may allow) from the date of actual payment of
service tax to the service provider.
(ii) If the SEZ
developer/unit is not registered under the Central Excise Act, 1944 or the
Finance Act, 1994 (Service tax law) it shall prior to the filing of refund claim
make an declaration, in the prescribed form to the jurisdictional AC/DC for
allotment of a Service tax Code number (STC number) who may after due
verification allot the STC number within 7 days of the receipt of the said
application.
(iii) The refund claim
shall be accompanied by the following documents, viz.:-
a.
copy of list of
“specified services” in relation to authorized operations approved by Approval
Committee;
b.
proof of payment
of service tax to the service provider;
c. a declaration by
SEZ developer/Unit to the effect that the said “specified services” have been
received by it in relation to its authorised operations in the SEZ.
(iv) The
jurisdictional AC/DC may after satisfying himself that the said specified
services have been used for the authorized operations grant refund of service
tax paid on the said services.
Note:
As per the Special Economic Zones Act, 2005 (‘SEZ Act’) no service tax is
payable on services provided to a developer or unit (including a unit under
construction) to carry on the authorized operations in a Special Economic Zone.
[Section 26(e) of the SEZ Act read with Rule 31 of SEZ Rules, 2006]. These
provisions override anything contrary in any other law for the time being in
force [Section 51 of the SEZ Act]. Hence the exemption provided under the SEZ
Act, 2005 maybe more beneficial to the assessee.
The provisions of SEZ Act maybe more relevant in the following cases:
(i)
where services other than specified services are
provided to SEZ developer / unit
(ii) where specified services are not consumed inside
the SEZ, the SEZ unit would prefer to request the service provider not to charge
service tax instead of opting for refund mechanism provided under service tax.
3.Exemption in respect of value of goods and
materials from the value of taxable service [Not. No. 12/2003-S.T. dated
20.6.2003 read with Not. No. 12/2004-S.T. dated 10.9.2004]
Value of
goods and materials sold by a service provider to the recipient of service is
exempt from service tax subject to documentary proof specifically indicating the
value of the said goods and materials. This exemption is subject to the
following conditions–
(i) that no credit of duty paid on such goods /
materials is taken; or
(ii) where such credit has been taken, an amount equal
to the amount of credit availed is paid before the sale of such goods /
materials.
4.Exemption
to Reserve Bank of India from payment of service tax
All
Taxable Services provided by Reserve Bank of India are exempt. Further, the
Reserve Bank is also not liable to pay service tax as recipient of the services
or as a payer of freight [Notification No. 22/2006 dated 31.5.2006].
5. Exemption scheme for small service providers –
minimum / threshold limit of Rs. 10 lakhs provided subject to conditions [Not.
No.6/2005-S.T. dated 1.3.2005 (as amended)]
Service Tax Law inspite of
being 10 years old did not have a minimum/threshold limit. Even if a person
renders taxable service for a paltry amount of Rs. 100/- he had to register and
pay service tax. The Central Government having appreciated the requirement of
minimum / threshold limit has issued notification No. 6/2005-S.T. dated
1.3.2005 providing for an exemption scheme for small service providers w.e.f.
1.4.2005. Thus, w.e.f. 1.4.2005 aggregate value of all taxable services upto Rs.
4 lakhs in a financial year provided from one or more premises shall be exempt
from service tax subject inter alia to certain conditions. W.e.f 1.4.2007
this limit of Rs. 4 lakhs was increased to Rs. 8 lakhs which is further
increased to Rs. 10 lakhs w.e.f. 1.4.2008. The conditions to be satisfied are as
follows:
Ø
CENVAT credit on
input services and capital goods is not availed;
Ø
An amount equal
to the CENVAT credit taken on inputs lying in stock or in process on the date on
which this exemption is availed would have to be paid;
Ø
Unutilised
balance of CENVAT credit shall lapse on the day the service provider starts
availing the exemption;
Ø
CENVAT credit
shall be availed only on such inputs or input services-
a) received on or
after the date on which the service provider starts paying service tax, and
b) used for the
provision of taxable services for which service tax is payable;
Calculation of monetary limits
The provisions regarding
monetary limits can be summarized as under:
(i) where the
previous year’s value of taxable service provided exceeds Rs. 10 lakhs , service
tax would be payable even if the current year’s turnover is less than Rs. 10
lakhs.
(ii) where the
previous year’s turnover is Rs. 10 lakhs or below and the current year’s
turnover exceeds Rs. 10 lakhs, no service tax is payable upto Rs. 10 lakhs if
the specified conditions are complied with.
Further, the sum total of
first consecutive payments ‘received’ during the financial year
towards the taxable services upto Rs. 10 lakhs would be exempt. The payments
received towards wholly exempt services are to be excluded for determining the
amount of Rs. 10 lakhs.
Thus, it appears that, while
considering the limit of Rs. 10 Lakhs of the current year, it is the payment
‘received’ for the taxable service that has to be considered but for
considering the previous year’s limit of Rs. 10 lakhs, it is the value of
taxable service ‘provided’ that has to be taken.
The above exemption would not
be applicable in the following cases:
1) where taxable
services are provided by a person under a brand name / trade name of another
person whether registered or not.
Thus, service provided by a
person under his own brand name would not be affected by this restriction and
would be entitled for the exemption.
2) Where service
tax is payable by a person
(i) Services
provided by Non-residents / foreign companies who do not have an office in India
(ii) Services
provided by insurance agents
(iii) Services
provided by a mutual fund distributor
(iv) Services
provided by a sponsor
Thus, the exemption would
apply only in cases where service tax is payable as a provider of service.
N. B.
The
service provider has the option not to avail the exemption and pay service tax
and such option, once exercised in a financial year, shall not be withdrawn
during the remaining part of such financial year.
6. Services provided to foreign diplomatic mission or
consular post in India is exempt [Notification No. 33/2007-S.T. dated
23.5.2007].
Taxable
services provided by any person for the official use of a foreign diplomatic
mission or consular post in India is exempt from service tax subject to
compliance of certain conditions and procedures.
7. Services provided to family members of foreign
diplomatic agents or career consular officers is exempt from service tax
[Notification No. 34/2007-S.T. dated 23.5.2007]
The
services provided by any person for the personal use or for the use of family
members of diplomatic agents or career consular officers posted in foreign
diplomatic mission or consular post in India is exempt from service tax subject
to compliance of certain conditions and procedures.
-
SUMMARY OF ABATEMENTS
The Central
Government has granted the exemption in the form of abatements / rebates to the
service providers vide several notifications which are summarised below -
|
Sr.
No. |
Nature of service |
Rebate Allowed |
Taxable value |
Rate of tax after
abatement |
|
(i) |
Mandap keepers
·
Mandap
keepers providing catering services i.e. supply of food
·
Hotels
providing mandap keeper services including catering services i.e. supply of
food (Refer note 2 below) |
40%
40% |
60%
60% |
6.18%
6.18% |
|
(ii) |
Tour operator providing
·
Package tour
[i.e. accommodation cum transport, part of tour]
·
Non-package
tour [say transport]
·
Only
accommodation booking forming part of a tour |
75%
60%
90% |
25%
40%
10% |
2.58%
4.12%
1.03% |
|
(iii) |
Rent-a-cab scheme operator |
60% |
40% |
4.12% |
|
(iv) |
Convention services along
with catering services (Refer note 2 below) |
40% |
60% |
6.18% |
|
(v) |
Outdoor catering
[involving supply of food] (Refer note 2 below) |
50% |
50% |
5.15% |
|
(vi) |
Pandal and Shamiana
Services including catering services (Refer note 2 below) |
30% |
70% |
7.21% |
|
(vii) |
Erection, commissioning or
installation (Refer note 3 below) |
67% |
33% |
3.399% |
|
(viii) |
Transport of goods by road
in a goods carriage |
75% |
25% |
2.58% |
|
(ix) |
Commercial or industrial
construction service (Refer note 4 below) |
67% |
33% |
3.399% |
|
(x) |
Construction of complex
(Refer note 4 below) |
67% |
33% |
3.399% |
|
(xi) |
Transport by containers
through Rail |
70% |
30% |
3.708% |
|
(xii) |
Business Auxiliary
services in relation to production or processing of parts or accessories in
the manufacture of cycles, cycle rickshaws and hand operated sewing
machines, for, or on behalf of, the client. [Refer note 5 below]
|
30% |
70% |
7.21% |
|
(xiii) |
Banking and other
Financial Services - Services provided in relation to a Chit
|
70% |
30% |
3.09% |
|
(xiv) |
Banking and other
Financial Services - Interest earned on finance leasing services /
equipment leasing / hire purchase |
90% |
10% |
1.03% |
Notes:
(1) The abatements
[except (viii) & (xiv)] would be available only if:
a.
no input credit
in respect of duties paid on input goods or capital goods or input services
has been taken; and
b.
exemption
providing for value of goods and materials sold from the value of taxable
service is not availed. [Notification No. 12/2003-ST dated 20.6.2003]
The abatement in item (viii)
above would be available without any conditions.
(2) The bill in case
sl. Nos. (i), (iv), (v) and (vi) should be inclusive of catering charges.
(3) The abatement /
rebate in case of erection, commissioning and installation is optional. Further,
the abatement is available only if the gross amount charged includes the value
of the plant, machinery, equipment, parts and any other material sold by the
commissioning and installation agency, during the course of providing erection,
commissioning or installation service.
(4) The abatement in
respect of construction services is available only if –
(i) the services are
not exclusively of completion and finishing services; and
(ii)
the “gross
amount charged” includes the value of goods and materials supplied or provided
or used by the provider of the construction service for providing such service.
(5) The abatement of business
auxiliary services mentioned in sl. No. (xii) above would be available only if
the gross amount charged is inclusive of the cost of inputs and input services,
whether or not supplied by the client.
(6) It
maybe noted that the above abatements give an abatement on the amount of tax and
not on the amount of value of taxable service charged.
-
PROCEDURAL INFORMATION
REGISTRATION
Application for registration
-
Application for
registration is to be made by every person liable for paying the service
tax in Form ST-1 [see Appendix 4] within 30 days from the date on which service
tax is levied or within 30 days from the date of commencement of business,
whichever is later, to the concerned Superintendent of Central Excise having
jurisdiction.
-
Every service
provider whose “aggregate value of all taxable services” in a financial year
from one or more premises exceeds Rs. 9 lakhs (prior to 1.4.2008 Rs. 7 lakhs)
shall make application to the Jurisdictional Superintendent of Central Excise in
the form ST-1 within 30 days of exceeding the aggregate value of Rs. 9 lakhs.
The “aggregate value” is to be reckoned on the basis of sum total of first
consecutive payments ‘received’ during the financial year towards taxable
services. The payments received towards wholly exempt services are to be
excluded.
-
Every input
service distributor (see definition in CENVAT Credit Rules, 2004) shall make an
application for registration in form ST-1 to the Jurisdictional Superintendent
of Central Excise within 30 days of commencement of business.
Intimation of any information
or details or any change.
(i) any change in
the information or details furnished by an assessee in the Form ST-1 at the time
of obtaining registration, or
(ii) any additional
information or details the assessee intends to furnish within a period of 30
days of such change.
(i) dispense with
the requirement of furnishing the original registration certificate at the time
of intimation of changes and instead furnish a self-certified photocopy of the
registration certificate.
(ii) provide for
issuance of a fresh registration certificate after incorporating changes
intimated by the assessee and accordingly the previous registration certificate
shall stand cancelled.
Premises to be registered
General Rule
Centralised registration
(i) provides such
service from more than one premises or offices;
(ii) receives such
service from more than one premises or offices;
(iii)
is having more than one premises or offices, which are engaged in relation to
such service in any manner making such person liable for paying service tax
has a centralized billing or
centralized accounting systems in respect of such service, located in one or
more offices or premises, he may, at his option, register such premises or
offices from where such centralized billing or centralized accounting systems
are located with the previous permission of the Commissioner in whose
jurisdiction the premises or offices from where centralized billing or
centralized accounting is done, are located.
Multiple Taxable Services
-
Where an
assessee is providing more than one taxable service, he may make a single
application mentioning therein all the taxable services provided by him. In case
the assessee is already registered for one service but subsequently becomes
liable for another category of service, then he has to intimate the additional
category of service as a change as mentioned under “Intimation of any
information or details or any change” above.
Certificate of registration
Cancellation of
Registration certificate
-
Every registered
assessee who ceases to provide taxable service shall surrender his registration
certificate immediately to the Superintendent of Central Excise. Where an
assessee makes an application for cancellation or surrenders his certificate,
the concerned Superintendent of Central Excise shall cancel the registration
certificate after verifying that the assessee has paid all the dues under the
service tax law.
PAYMENT OF SERVICE TAX
[SECTION 68 & RULES 2(1)(d) AND 6]
Person liable for paying
service tax
(i) In case of
insurance auxiliary services related to general insurance and life insurance
business provided by an insurance agent, service tax is to be paid by the
general insurance company or life insurance company carrying on business in
India which has appointed the agent
(ii) In case of taxable services
provided by a
person who is based outside India
and received by a person based in India
in accordance with section 66A it is the recipient of the service who is liable
for paying service tax.
(iii) In cases where
the services of distribution of mutual fund are provided by a mutual fund
distributor or an agent, the mutual fund or asset management company who is
receiving such service would be liable to register and pay service tax.
(iv) In the context
of services provided by a goods transporting agency, where the consignor or
consignee of goods is a specified entity viz., a factory, a company, a statutory
corporation, a society, a co-operative society, a dealer of excisable goods, a
body corporate or a partnership firm “the person liable to pay service tax” is
the person who is liable to pay the freight either himself or through his agent
for the transportation of goods.
N.B.
It is to be noted that
where neither the consignor nor the consignee is any of the specified entities
mentioned above it would be the goods transport agency which would be liable to
pay service tax in such cases
(v) In case of
sponsorship services
the recipient of service namely the body corporate or firm who sponsors the
event would be liable to pay service tax. W.e.f 1.4.2007 this rule has been
amended to provide that the recipient of service viz., the body corporate or
firm is required to pay service tax only if the body corporate or firm is
located in India. Thus in case of foreign sponsorships; i.e., where the
sponsor is a body corporate or a firm located outside India, it would be the
provider of services; i.e., the sponsored organisation which would be liable to
pay service tax.
Time limit for payment
- 6th of the month
immediately following the said calendar month in case of assessee’s deposting
tax electronically through internet banking.
- 5th
of the month
immediately following the said calendar month in other cases.
However, where the assessee is
an individual or a proprietary firm or a partnership firm service tax on the
value of taxable services received during any quarter (except
quarter ended March) is payable by the
-6th of the month
immediately following the said quarter in case of assessee’s deposting tax
electronically through internet banking.
-5th of the month
immediately following the said quarter in other cases.
The service tax on the
value of taxable services received for the month / quarter ended March should be
paid by 31st of March.
N.B.
In case of payment by cheque the date of payment is the date on which the cheque
is tendered to the designated bank, provided the cheque is not dishonoured in
the course of clearing.
Payment of service tax in
advance
(i) The details of
the advance tax paid is intimated to the Jurisdictional Superintendent of
Central Excise within 15 days from the date of payment; and
(ii) The details of
payment and adjustment of advance tax is disclosed in the returns.
Manner of payment
-
The service tax
shall be paid in Form GAR – 7 challan into the designated bank. The said Form
GAR – 7 challan for each month/quarter is to be submitted with the half-yearly
return.
-
It is mandatory
for all persons who have paid more than Rs. 50 lakhs service tax in the
preceding financial year or exceeded Rs. 50 lakhs during the current financial
year to pay service tax electronically through internet banking. The procedure
for payment is explained in detail in a circular which is available at the
following website : www.service tax.gov.in/servicetax/e-payment-st.htm. For
computing the limit of Rs. 50 lakhs :
(i) Each registered
premises would be treated as a separate assessee. Thus, where the assessee is
providing taxable service from more than one premises or offices the criterion
of Rs. 50 Lakhs would apply qua each registered premises / offices
individually.
(ii) In case of a
person who has opted to be a large tax payer unit (LTU) the aggregate payments
from all the registered premises would have to be considered.
(iii) the aggregate of
payments made as a provider of taxable services as well as a recipient of
taxable services would have to be considered.
(iv) the aggregate
amount of tax paid in cash plus CENVAT credit would have to be considered
Adjustment of taxes
-
The assessee may
adjust against his subsequent period’s liability the excess service tax paid by
him earlier for services which is not wholly or partially rendered
by him for any reason provided he has refunded the amount charged
as also the service tax thereon to the client.
-
W.e.f.
16.6.2005, an assessee who has opted for centralized registration at one or more
premises, may adjust against his subsequent period’s liability the excess
service tax paid by him earlier by reason of not receiving details of payments
received towards the value of taxable services at his other premises or offices.
Such adjustments must be intimated to the jurisdictional superintendent within
15 days from the date of such adjustment.
-
W.e.f 1.3.2007,
an assessee can adjust excess service tax paid against his succeeding
period’s [i.e. next month / quarter] liability provided the following
conditions are fulfilled.
1.
The excess
amount paid is on account of reasons not involving interpretation of law,
taxability, classification, valuation or applicability of any exemption
notification;
2.
The excess
amount allowed to be adjusted (in a month / quarter) would be a maximum of Rs.
1,00,000/-[prior to 1.3.2008 – Rs. 50,000/-]. However, where an assessee is
centrally registered, he may adjust the excess amount paid on account of delayed
receipt of details of payments towards value of taxable services, without any
monetary limit;
3.
The details and
reasons for such adjustment shall be intimated to the jurisdictional
Superintendent of Central Excise with in 15 days from the date of such
adjustment.
-
W.e.f. 1.6.2007 if the service
provider has paid excess tax in any month / quarter on account of non-availment
of the deduction in respect of property taxes paid from commercial rentals, the
assessee may adjust such excess amount paid by him against his subsequent
service tax liability within one year from the date of payment of such property
tax. The details of such adjustment shall be intimated to the jurisdictional
Superintendent of Central Excise within 15 days from the date of such
adjustment.
Interest on delayed payment
of tax
RETURNS [SECTION 70 AND
RULES 5(2), 7,7B]
-
The assessee must himself
assess the service tax due on the services provided by him and thereafter
furnish the returns.
-
The returns are to be filed in
triplicate in Form ST-3 (See Appendix 5) on half-yearly basis by the 25th of the
month following the particular half year.
-
In the case of
new assessees who have not yet filed their returns, such assessees shall at the
time of filing their returns for the first time furnish in duplicate to the
Superintendent of Central Excise a “list of all accounts maintained in relation
to service tax” of -
(i) all the records prepared or
maintained by the assessee for accounting of transactions in regard to,-
(a) providing of any service,
whether taxable or exempted;
(b) receipt or procurement of
input services and payment for such input services;
(c) receipt, purchase,
manufacture, storage, sale, or delivery, as the case may be, in regard of inputs
and capital goods;
(d) other activities, such as
manufacture and sale of goods, if any.
(ii) all other financial records
maintained by him in the normal course of business.
-
A ‘Nil’ return
also has to be filed.
-
Assessees have
been given an option to file their returns electronically [Refer CBEC Circular
No. ST 71/1/2004 dated 2/1/2004]
-
W.e.f. 1.3.2007
a new rule 7B is introduced to provide that an assessee may revise his returns
to correct a mistake or omission, within 90 days [prior to 1.3.2008 – 60 days]
from the date of submission of the original return. Further it is also provided
that the limitation period [1 year / 5 years] for issue of a show cause notice
u/s. 73 for the purpose of recovery of service tax will be reckoned from the
date of submission of such revised return.
RECORDS [RULE 4A AND 5]
General
Examination and inspection
of records.
(i) An officer authorised by the
Commissioner shall have access to any registered premises for the purpose of
carrying out any scrutiny, verification and checks as may be necessary to
safeguard the interest of revenue.
(ii) It
shall be obligatory on every assessee to make available to such officer or the
audit party deputed by the Commissioner or the Comptroller and Auditor General
of India to furnish within 15 working days from the day of demand or such
further period as may be allowed by such officer or the audit party for his
scrutiny,-
(a) the list of all accounts
maintained in relation to service tax which he has submitted to the department
at the time of filing his first return;
(b) trial balance or its
equivalent; and
(c) the income-tax audit report,
if any, under section 44AB of the Income-tax Act, 1961.
Requirements of an invoice
·
Serial number;
·
Name, address
and registration number of the service provider;
·
Name and address
of the service receiver;
·
Description,
classification and value of taxable service.
·
Service tax
payable thereon;
·
Signature of the
service provider or his authorised person
N.B.
(i) In case of service providers providing banking and financial services the
requirement of mentioning serial number and the address of the service receiver
has been dispensed with. (Notification no. 30/2004 dated 22.9.2004).
(ii) In case of goods
transport agency, in addition to the above the following details are also to be
shown:
· Details of
Consignment note number and date.
· Gross weight
of the Consignment.
Time limit for issue of
invoice
-
The invoice /
bill / challan has to be issued within a period of 14 days from the date of
completion of provision of services or receipt of payment towards value of such
taxable services, whichever is earlier. However, if –
(i) taxable services
are provided continuously for successive periods of time;
(ii) payment towards
value of taxable services is not received; and
(iii) the value is
determined and payable periodically, an invoice / bill / challan
may be issued within 14 days from the end of such period.
Requirements of a
consignment note to be issued by a goods transport operator
·
Serial number
·
Name of the
Consignor and Consignee.
·
Registration
number of the Goods Carriage.
·
Details of goods
transported.
·
Details of place
of origin and destination.
·
Person liable to
pay Service Tax viz., whether Consignor or Consignee or Goods Transport Agency.
RECOVERY OF SERVICE TAX NOT
LEVIED OR PAID OR SHORT LEVIED OR SHORT PAID OR ERRONEOUSLY REFUNDED (SEC. 73) &
ADJUDICATION OF PENALTIES (SECTION 83A)
(i) 5 years from the “relevant
date” in case of :
fraud;
collusion; or
wilful mis-statement;
or
suppression of
facts; or
contravention of
any of the provisions of the Act or Rules with an intent to evade payment of
service tax.
(ii) One
year from the “relevant date” in other cases.
The “relevant dates” would be
as under :
|
Circumstance |
Relevant date |
|
A. Where
service tax has escaped assessment or has been under assessed or has not
been paid or has been short paid: |
|
|
(i)
if the
assessee is liable to file the return, and |
|
|
(a)
return is
filed |
Date on which return filed
|
|
(b)
return is
not filed |
Last date on which the
return is to be filed |
|
(ii)
in other
cases |
Date on which service tax
is to be paid |
|
B.Where
service tax is provisionally assessed |
Date of adjustment of
service tax after final assessment. |
|
C.Where any
sum has been erroneously refunded
|
Date of refund |
-
No show cause
notice shall be served in case where the amount of service tax short paid or not
paid, is paid voluntarily alongwith interest by the assessee before the issuance
of the notice and the assessee informs the Central Excise Officer in writing.
This provision shall not apply to cases involving misstatement or suppression of
facts.
-
Conclusion
of proceedings on voluntary payment of service tax, interest and 25% of service
tax by way of penalty:
Section 73 provides for conclusion of the proceedings initiated
by a SCN in a case where the assessee has made a voluntary payment of service
tax, interest and penalty equivalent to 25% of the service tax within 30 days
from the receipt of the notice. However, where he pays only a part of the
service tax, interest and penalty [on that part] as aforesaid, the SCN
proceedings would be restricted to dues remaining unpaid. The above option is
available in case the SCN is issued pursuant to proviso to section 73(i) i.e. in
case where service tax is not levied or paid or short levied or short paid or
erroneously refunded by reason of fraud, collusion, willful misstatement or
suppression of facts or contravention of the provisions of the Act or Rules with
an intent to evade payment of service tax.
-
Section 83A
provides for adjudication of penalty proceedings by Central Excise Officers
empowered by the Central Board of Excise and Customs.
-
The Central
Excise adjudication procedures are made applicable to service tax. The procedure
provides as follows:
-
An opportunity
of being heard shall be given in all proceedings if the assessee so desires;
-
Adjournments of
hearings may be granted to an assessee if sufficient cause is shown;
-
Not more than 3
adjournments shall be granted to an assessee.
PROVISIONAL PAYMENT AND
ASSESSMENT (RULE 6)
-
When the
assessee is unable to correctly estimate actual service tax payable for any
month / quarter he may make a request in writing to the AC / DC to pay tax on a
provisional basis who on receipt of such request allow payment of tax on
provisional basis.
-
On receipt of
the order of the AC / DC allowing provisional assessment service tax maybe
initially paid on a provisional basis.
-
Where service tax is paid
provisionally a monthly statement in Form ST-3A giving difference between
provisional amount of service tax deposited and actual amount of service
tax payable is to be filed alongwith the half-yearly return in Form ST-3.
-
Where the
assessee has filed Form ST-3A the AC / DC shall complete the assessment after
calling for details if any.
-
The provisions of the Central
Excise Rules, 2001 shall apply except in so far as they relate to the execution
of a bond.
APPEALS TO THE COMMISSIONER (APPEALS)
Appeals by the assessee
(SECTION 85 & RULE 8)
-
An appeal may be
filed before the Commissioner of Central Excise (Appeals) [“CCE (A)”] by any
person aggrieved by an order passed by an adjudicating authority below the rank
of a Commissioner of Central Excise (“CCE”)
-
The appeal is to
be filed in duplicate within 3 months of receipt of assessment order in Form
ST-4 alongwith statement of facts, grounds of appeal, and a copy of decision or
order appealed against.
-
Appropriate
court fees stamp would be applicable.
Appeals by the department
[w.e.f. 19.8.2009] (SECTION 84)
-
An application
maybe filed before the CCE (A) by an adjudicating authority subordinate to the
CCE on the direction of the CCE who is satisfied that the order of the
adjudicating authority lacks legality or propriety for determination of points
arising out of the order
-
The CCE shall
direct such sub-ordinate authority within 3 months from the date of
communication of Order-In-Original and sub-ordinate authority shall make an
application before the CCE(A) within 1 month from the date of receipt of such
direction / order.
APPEALS TO THE APPELLATE
TRIBUNAL [SECTION 86 & RULE 9]
Appeals by the assessee
-
An appeal may be
filed before the Tribunal where an assessee aggrieved by an order passed by a
CCE u/s. 73, 83A or 84
or an order passed by a CCE (A) u/s. 85.
-
The appeal is to
be filed in quadruplicate within 3 months of receipt of order to be appealed
against in Form ST-5 alongwith statement of facts, grounds of appeal and copies
of order appealed against (including one certified copy).
-
The filing fees
is based on the quantum of demand which is as follows:
|
Amount of Service tax,
interest and penalty |
Fees Payable (Rs.) |
|
Rs. 5,00,000/- and below |
1000/- |
|
Rs. 5,00,001/- to Rs.
50,00,000/- |
5000/- |
|
Rs. 50,00,001/- and above |
10000/- |
In addition to the above, a
fee of Rs. 500/- is payable for :-
(i) An application
(other than that filed by the CCE / AC / DC) for grant of stay in an appeal or
rectification of mistake or for any other purpose; or
(ii) For restoration
of an appeal or an application (other than that filed by the CCE / AC / DC).
Appeal by the department
-
CCE on the
direction of the Committee of Chief Commissioners of Central Excise (consisting
of 2 Chief Commissioners) objecting to any order passed by a CCE u/s. 73, 83A or
84;
or
-
A Central Excise
officer on the direction of the Committee of Commissioners of Central Excise
(consisting of 2 Commissioners) objecting to any order passed by the CCE(A) u/s.
85.
-
The application
is to be filed in Form ST-7, in quadruplicate, within 3 months from the date on
which the order sought to be appealed against is received by the Committee of
Chief Commissioners or by the Committee of Commissioners as the case may be.
-
The appeal shall
be accompanied by statement of facts, grounds of application, and
-
Copy of order
passed by CCE (including one certified copy) and copy of the direction issued by
the Committee of Chief Commissioners; or
-
Copy of the
order passed by the CCE(A) (including one certified copy) and copy of the
direction issued by the Committee of Commissioners, as the case may be.
Memorandum of
cross-objections (Section 86 & Rule 9)
-
An assessee or
the CCE or a Central Excise officer subordinate to the CCE may present a
memorandum of Cross-objections, within 45 days from receipt of notice or
information about appeal filed.
-
The memorandum
of Cross-objections is to be filed in quadruplicate in Form ST-6.
REFUNDS
-
In the event the
assessee has to claim a refund he has to comply with section 11B of the Central
Excise Act, 1944 which is made applicable to service tax.
-
A refund claim
must comply with the following conditions:
(i) It maybe in Form R. [Though no form is prescribed,
the Central Excise Rules had earlier prescribed Form R].
(ii) It should be filed before the expiry of the
limitation period of one year from the date of payment of tax.
(iii) Proof should be adduced that the incidence of tax
has not been passed on to any person i.e. tax has been borne by the applicant.
MISCELLANEOUS
(i) Best Judgment
Assessment;
(ii) Interest on
delayed refund of pre-deposit;
(iii) Rectification of
mistake apparent from record by Central Excise Officer;
(iv) Power to search
and power to seize documents, books or things during search;
(v) Deposit of
excess service tax collected from any person alongwith interest to the
Government.
(vi) Provisional
attachment
(vii) Publication of
information in respect of certain persons in certain cases
(viii) Recovery of
amounts due to the Government.
(ix) Service tax
return preparer scheme
Penal
Consequences
|
Section No. |
Nature
of Default |
Consequences of Default |
|
76 |
Failure
to pay service tax |
Penalty
— Not less than Rs. 200/- per day
during which default continues or 2% of the service tax per month, whichever
is higher but restricted to the amount of service tax. [see note 3 below]. |
|
77 |
(i) Failure to register within the due date |
Higher of –
(i) Rs.
5,000/-; or
(ii) Rs.
200/- per day during which the default continues |
|
|
(ii) Failure to keep, maintain and retain books of accounts and
other documents |
Maximum – Rs. 5,000/- |
|
|
(iii) Failure to appear in response to a summon or furnish
information/ produce documents |
Higher of –
(i) Rs.
5,000/-; or
(ii) Rs.
200/- per day during which the default continues |
|
|
(iv)
Failure to make e-payment where mandatory |
Maximum – Rs. 5,000/- |
|
|
(v) Failure to issue invoices in the prescribed format |
Maximum – Rs. 5,000/ |
|
|
(vi)
Failure to account for an invoice |
Maximum – Rs. 5,000/ |
|
|
(vii) Contravention of the Act or Rules for which there is no
separate penalty |
Maximum – Rs. 5,000/ |
|
78 |
Suppressing the value of taxable service |
Penalty
— 100% to 200% of the service tax not levied or paid or short levied or
short paid or erroneously refunded. [See note 2 & 3 below]. |
|
70
& 94/7C |
Failure
to file returns on time |
Late
fees as under:
|
Period of delay (in days) |
Late fee (in Rs.) |
|
15
days |
500/- |
|
15
– 30 days |
1000/- |
|
Beyond 30 days |
1000/- plus Rs. 100 for every day beyond 30 days, so however,
that the total amount payable under this slab shall be restricted to Rs.
2000/-. |
|
Notes :
1.No penalty shall be imposed if
the assessee proves that there is “reasonable cause” for the failure. Further,
as regards late fees for failure to file returns on time w.e.f. 1.3.2008 the
Central Excise Officer may reduce or waive the “late fee” for delay in
furnishing of “Nil” returns if sufficient reasons are adduced for the delay.
2.The Finance Act, 2003 has
restricted the penalty under section 78 to 25% of service tax, if the amount of
service tax, interest
and such penalty, is paid within 30 days of the date of communication of the
adjudicating order. The benefit of such reduced penalty shall also apply where
the order determining the service tax relates to notices issued prior to
14.05.2003.
3.W.e.f. 16.5.2008
penalty for delay in payment or non-payment of service tax u/s. 76 would not be
imposable where the penalty u/s. 78 for concealment or suppression of value of
taxable service is payable.
4.The
provisions dealing with punishment (mainly penalties) to certain persons
(officer, persons in charge, director etc.) of the company for offences made by
the company under certain circumstances has been omitted w.e.f. 10.09.2004.
Thus, henceforth the show cause notices would be issued only to the company as
against the erstwhile practice of issuing the show cause notice to the company
and the officials.
-
Advance Ruling (Chapter VA – Sections 96A to 96I)
The Finance Act, 2003
introduced Advance Ruling mechanism in service tax. The ruling shall be in
respect of a question of law or fact regarding the liability to pay service tax
in relation to a service proposed to be provided by –
(a) a non-resident
setting up a “joint venture in India” in collaboration with a non-resident or a
resident; or
(b) a resident
setting up a “joint venture in India” in collaboration with a non-resident; or
(c) a wholly owned
subsidiary Indian company, of which the holding company is a foreign company.
(d) existing “joint
venture in India”
(e) any class or
category of residents notified by the Central Government. In this regard the
Central Government has notified ‘public sector companies’ w.e.f. 20.8.2009
For the purpose of clauses
(a), (b), & (d) above a “joint venture in India” is defined as follows:
“joint venture in India”
means a contractual arrangement whereby two or more persons undertake an
economic activity which is subject to joint control and one or more of the
participants or partners or equity holders is a non-resident having substantial
interest in such arrangement.”
The question on which the
advance ruling is sought shall be in respect of-
(a)
Classification
of any service as a taxable service;
(b)
The valuation of
taxable services for charging service tax;
(c)
The principles
to be adopted for the purposes of determination of value of the taxable service;
(d)
Applicability of
notifications issued;
(e)
Admissibility of
service tax credit.
(f)
Determination of
the liability to pay service tax on a taxable service.
-
DUE DATES FOR SERVICE TAX
|
1. |
Registration |
|
|
Within 30 days from the date on which service tax is levied or within 30
days of commencement of business whichever is later. |
|
2. |
Payment of Service Tax |
|
|
(a)
Payable by individuals, proprietary concerns
and partnership firms:
|
Payable on
amounts received during the quarter |
Payable by |
|
1st April
to 30th June |
5th July [6th
July in case of e-payment] |
|
1st July to
30th September |
5th October
[6th October in case of e-payment] |
|
1st October
to 31st December |
5th January
[6th January in case of e-payment] |
|
1st January
to 31st March |
31st March |
(b)
Payable by persons other than individuals,
proprietary concerns and partnership firms:
|
Payable on
amounts received during the month |
Payable by |
|
April – February |
5th of the
following month [6th of the
following month in case of
e-payment] |
|
March |
31st March |
|
|
3.
|
Returns |
|
|
|
1st April
to 30th September |
25th
October |
|
1st October
to 31st March |
25th April |
|
Appendix 1
CATEGORISATION OF SERVICES
FOR IMPORTS AND EXPORTS
IMMOVEABLE PROPERTY
CATEGORY
TABLE A
|
Sl.
No. |
Sub-clause of clause (105)
of section 65 |
Nature of
service
|
|
1.
|
d |
General Insurance Business
(in relation to immovable property) |
|
2.
|
p |
Architect |
|
3.
|
q |
Interior Decorator |
|
4.
|
v |
Real estate agent |
|
5.
|
zzq |
Commercial and industrial
Construction Service |
|
6.
|
zzza |
Site formation and
clearance, excavation and earthmoving and demolition services |
|
7.
|
zzzb |
Dredging |
|
8.
|
zzzc |
Survey and map-making by a
person other than an agency under the control of, or authorized by, the
Government (in relation to immovable property) |
|
9.
|
zzzh |
Construction of complex |
|
10. |
zzzr |
Auctioneers’ service (in
relation to immovable property) |
|
11. |
zzzy |
Services in relation to
Mining |
|
12. |
zzzz |
Renting of Immovable
Property for Commercial Purposes |
|
13. |
zzzza |
Services provided in
relation to execution of a works contract |
PERFORMANCE BASED CATEGOTY
TABLE B
|
Sl.
No. |
Sub-clause of clause (105)
of section 65 |
Nature of service |
|
1.
|
a |
Stock –broker |
|
2.
|
f |
Courier agency |
|
3.
|
h |
Custom house agent |
|
4.
|
i |
Steamer agent |
|
5.
|
j |
Clearing and forwarding
agent |
|
6.
|
l |
Air travel agent |
|
7.
|
m |
Mandap keeper |
|
8. |
n |
Tour operator |
|
9.
|
o |
Rent-a-cab scheme operator |
|
10. |
s |
Practicing Chartered
Accountant |
|
11. |
t |
Practicing Cost Accountant |
|
12. |
u |
Practicing Company
Secretary |
|
13. |
w |
Security agency |
|
14. |
x |
Credit rating agency |
|
15. |
y |
Market research agency |
|
16. |
z |
Underwriter |
|
17. |
zb |
Photography
|
|
18. |
zc |
Convention services |
|
19. |
zi |
Video tape production
services |
|
20. |
zj |
Sound recording
|
|
21. |
zn |
Port services (major
ports) |
|
22. |
zo |
Authorised service station
(Motor car, two wheeled motor vehicles and light motor vehicles) |
|
23. |
zq |
Beauty parlour |
|
24. |
zr |
Cargo handling services |
|
25. |
zt |
Dry cleaning |
|
26. |
zu |
Event management |
|
27. |
zv |
Fashion designer |
|
28. |
zw |
Health club and fitness
center |
|
29. |
zza |
Storage and warehousing
|
|
30. |
zzc |
Commercial training or
coaching |
|
31. |
zzd |
Erection, commission and
installation |
|
32. |
zzf |
Internet café |
|
33. |
zzg |
Maintenance or repair |
|
34. |
zzh |
Technical testing and
analysis |
|
35. |
zzi |
Technical inspection and
certification |
|
36. |
zzl |
Port services (minor
ports) |
|
37. |
zzm |
Airport services |
|
38. |
zzn |
Transport of goods by
Aircraft |
|
39. |
zzo |
Business exhibition
services |
|
40. |
zzp |
Goods transport agency
services |
|
41. |
zzs |
Opinion poll agency |
|
42. |
zzt |
Outdoor caterer
|
|
43. |
zzv |
Survey and exploration of
mineral |
|
44. |
zzw |
Pandal or shamiana
contractor |
|
45. |
zzx |
Travel agent (other than
rail and air travel agent) |
|
46. |
zzy |
Forward contract services |
|
47. |
zzzd |
Cleaning services
|
|
48. |
zzze |
Services provided by clubs or associations
|
|
49. |
zzzf |
Packaging services
|
|
50. |
zzzp |
Transport of goods in containers by rail provided by any person other than
Government Railway (Indian Railway)
|
|
51. |
zzzzg |
Services provided by Stock Exchange
|
|
52. |
zzzzh |
Services provided by Commodity Exchange
|
|
53. |
zzzzi |
Services provided by Processing & Clearing House
|
LOCATION OF SERVICE RECIPIENT
CATEGORY
TABLE C
|
Sl.
No. |
Sub-clause of clause (105)
of section 65 |
Nature of service
|
|
1. |
d |
General Insurance Business
(other than relating to immoveable property) |
|
2. |
e |
Advertisement agency |
|
3. |
g |
Consulting engineer |
|
4. |
k |
Manpower recruitment and
supply agency |
|
5. |
r |
Management and Business
Consultant |
|
6. |
za |
Scientific and technical
consultancy services |
|
7. |
zh |
On-line information or
database access or retrieval services |
|
8. |
zk |
Broadcasting services |
|
9. |
zl |
Insurance auxiliary
services in relation to general insurance |
|
10.
|
zm |
Banking and other
financial services – Banks, Fis, NBFCs, other body corporates and commercial
concerns |
|
11.
|
zs |
Cable services |
|
12.
|
zx |
Life insurance business |
|
13.
|
zy |
Insurance auxiliary
services relating to Life insurance |
|
14.
|
zz |
Rail travel agent |
|
15.
|
zzb |
Business auxiliary
services |
|
16.
|
zze |
Franchise services |
|
17.
|
zzk |
Foreign exchange broker
[other than referred in sub-clause (zm)] |
|
18.
|
zzr |
Intellectual property
services |
|
19.
|
zzu |
Radio and television
programme producer |
|
20.
|
zzz |
Transport of goods (other
than water) through pipeline or other conduit |
|
21.
|
zzzc |
Survey and map-making by a
person other than an agency under the control of, or authorized by, the
Government (other than relating to immoveable property) |
|
22.
|
zzzg |
Mailing list compilation
and mailing |
|
23.
|
zzzi |
Services provided by Registrar to an Issue |
|
24.
|
zzzj |
Services provided by Share Transfer Agent
|
|
25.
|
zzzk |
Services in relation to
Automated Teller Machine operations, maintenance or management |
|
26.
|
zzzl |
Recovery service |
|
27.
|
zzzm |
Sale of space or time for
advertisement |
|
28.
|
zzzn |
Sponsorship services
provided to a body corporate or firm, excluding sponsorship in relation to
sports events |
|
29.
|
zzzq |
Business support services
|
|
30.
|
zzzr |
Auctioneers’ service (other than
relating to immoveable property) |
|
31.
|
zzzs |
Public relations service
|
|
32.
|
zzzt |
Ship
management service
|
|
33.
|
zzzu |
Internet telephony service
|
|
34.
|
zzzw |
Credit card,
debit card, charge card or other payment card related service. |
|
35.
|
zzzx |
Telecommunication Services |
|
36.
|
zzzzb |
Development and supply of
content |
|
37.
|
zzzzc |
Asset management including
portfolio management and all forms of fund management provided by
individuals, etc |
|
38.
|
zzzzd |
Design services |
|
39.
|
zzzze |
Information technology
software service used for business or commerce |
|
40.
|
zzzzf |
Management of investment
under Unit Linked Insurance Plan (ULIP) scheme |
|
41.
|
zzzzj |
Supply of tangible goods
for use |
N.B.
The 3 recent services viz., (1) Services provided in relation to transport of (i)
coastal goods; and (ii) goods through inland water including National Waterways;
(2) Cosmetic and Plastic Surgery Services; and (3) Legal Consultancy Services
included by the Finance (No.2) Act, 2009 have not been included under any of the
categories since the Notifications for categorization of these services were not
issued when the referencer was going for print.
Appendix 2
REBATE OF SERVICE TAX PAID
ON SERVICE EXPORTS AND DUTY / TAX PAID ON INPUTS / INPUT SERVICES USED FOR
SERVICE EXPORT.
I. REBATE OF TAX PAID ON
SERVICES EXPORTED
General
1.
Under the Export
Rules there are two options available to an exporter. He may claim an
‘exemption’ i.e. he may export his services without payment of service tax
provided the ‘export’ is in terms of the provisions of the Export Rules. The
other option is that he may claim a ‘rebate’ i.e. he pays service tax on
services exported outside India first and on satisfying certain conditions as
mentioned hereinafter he can obtain refund of the service tax paid.
Applicability
2.
Rebate of the
whole of the service tax, education cess and secondary and higher education cess
paid on services exported to countries other than Nepal and Bhutan, maybe
claimed subject to the conditions, limitations and procedures specified
hereinafter.
3.
Conditions
and limitations
-
The service must
be exported in terms of the Export Rules;
-
Payment for
export should be received in India in convertible foreign exchange;
-
The service tax,
education cess and secondary and higher education cess, should have been paid on
the services exported;
-
The amount of
rebate claimed should not be less than Rs. 500/-.
Procedure for presentation of
claim for rebate
4.
The application
for claim of rebate should be filed with the Jurisdictional Assistant / Deputy
Commissioner in the prescribed form (ASTR – 1), accompanied by,–
(i) Receipt of payment
against services exported
(ii) Payment of
service tax and cess on service exported,
If the Jurisdictional
Assistant / Deputy Commissioner, is satisfied that the claim is in order, he
shall sanction the rebate either in whole or in part.
Recovery of rebate wrongly
paid
5.
In case,-
(i) the service tax and cess,
have not been paid; or
(ii) the service has not been
exported,
the rebate paid, if any, shall
be recoverable with interest.
II. REBATE OF SERVICE TAX
PAID ON INPUT SERVICES USED, OR DUTIES PAID ON INPUT GOODS USED FOR PROVIDING
SERVICES WHICH ARE EXPORTED
Applicability
1.
Rebate of the
whole of the –
(i) service tax,
education cess and secondary and higher education cess paid on input services,
and
(ii) duty paid on
input goods,
used in providing services
that are exported to countries other than Nepal and Bhutan, maybe claimed
subject to the conditions, limitations and procedures specified hereinafter.
2.Conditions and
limitations
-
The service must
be exported in terms of the Export Rules;
-
Payment for
export should be received in India in convertible foreign exchange;
-
The tax / duty
should have been paid on the input services or input goods;
-
Input credit of
duty / tax paid on such inputs / input services for which rebate has been
claimed should not be availed.
-
The amount of
rebate claimed should not be less than Rs. 500/-.
3.Procedure
Prior to date of export, the
exporter must file a declaration with the jurisdictional Assistant / Deputy
Commissioner giving -
-
the description
of service intended to be exported;
-
description,
quantity, value, rate and the amount of duty payable on inputs actually required
to be used in providing the taxable service to be exported;
-
description,
value and the amount of service tax and cess payable on input services actually
required to be used in providing the service to be exported.
The Assistant / Deputy
Commissioner shall verify the correctness of the declaration filed prior to the
export, if necessary, by calling for any relevant information or samples of
inputs and if after such verification, he is satisfied that there is no
likelihood of evasion of duty / tax he may accept the declaration.
The exporter shall -
-
obtain the
inputs directly from a registered factory or from a dealer registered for the
purposes of the CENVAT Credit Rules, 2004 accompanied by invoices issued under
the Central Excise Rules, 2002;
-
receive the
input services under an invoice / bill / challan issued under the provisions of
Service Tax Rules, 1994.
After the taxable service has
been exported, the application for claim of rebate of the tax / duty shall be
filed with the Jurisdictional Assistant / Deputy Commissioner in Form ASTR-2
accompanied by, –
(i) receipt of payment
against services exported,
(ii) payment of duty / tax on
the inputs /input services.
4.
If the
Jurisdictional Assistant / Deputy Commissioner, is satisfied that the claim is
in order, he shall sanction the rebate either in whole or in part.
Recovery of rebate wrongly
paid
5.
In case,-
(i) the tax / duty
on input services or input goods have not been paid; or
(ii) the service has
not been exported, or
(iii) Input credit has
been availed on inputs and input services
for which rebate has been
claimed, the rebate paid, if any, shall be recoverable with interest.
Appendix 3
A list of services covered
under the service tax net.
|
S. No |
Nature of Service |
Effective Date |
|
1.
|
Stock
Broking :
i.
Stock-brokers
ii.
Sub-brokers |
01.07.94
10.09.04 |
|
2. |
General Insurance |
01.07.94 |
|
3. |
Advertising |
01.11.96 |
|
4. |
Courier |
01.11.96 |
|
5. |
Consulting Engineer |
07.07.97 |
|
6. |
Custom House Agent |
15.06.97 |
|
7. |
Steamer Agent |
15.06.97 |
|
8. |
Clearing & Forwarding Agent |
16.07.97 |
|
9. |
Manpower Recruitment Agency
Manpower Recruitment or supply Agency |
07.07.97 to 15.06.05
16.06.05 onwards |
|
10. |
Air
Travel Agent |
01.07.97 |
|
11. |
Mandap Keeper |
01.07.97 |
|
12. |
Tour
Operator
|
1.09.97 to 17.07.98 &
1.4.2000 Onwards |
|
13. |
Rent-a-cab scheme operator |
16.07.97 to 27.02.99 &
1.4.2000 Onwards |
|
14. |
Architect |
16.10.98 |
|
15. |
Interior Decorator |
16.10.98 |
|
16. |
Management and Business Consultant |
16.10.98 |
|
17. |
Practising Chartered Accountant |
16.10.98 |
|
18. |
Practising Cost Accountant |
16.10.98 |
|
19. |
Practising Company Secretary |
16.10.98 |
|
20. |
Real
Estate Agent |
16.10.98 |
|
21. |
Security Agency |
16.10.98 |
|
22. |
Credit Rating Agency |
16.10.98 |
|
23. |
Market Research Agency |
16.10.98 |
|
24. |
Underwriter |
16.10.98 |
|
25. |
Scientific and technical consultancy services |
16.07.01 |
|
26. |
Photography services |
16.07.01 |
|
27. |
Convention services |
16.07.01 |
|
28. |
On-line information and database access or retrieval services |
16.07.01 |
|
29. |
Videotape production services |
16.07.01 |
|
30. |
Sound
recording services |
16.07.01 |
|
31. |
Broadcasting services |
16.07.01 |
|
32. |
Insurance auxiliary services relating to general insurance |
16.07.01 |
|
33. |
Banking and Other Financial services provided by:
(i)Banking companies, Financial Institutions and NBFCs
(ii)Other body corporates
(iii)Non-corporate commercial
concerns
(iv)Any person
(v)Commercial concerns |
16.07.01
16.08.02
10.09.04 – 30.4.2006
1.5.2006 to 31.05.2007
01.06.2007
|
|
34. |
Port
services (Major Ports) |
16.07.01 |
|
35. |
Authorised service
stations for service and repair of motor car and 2 wheeled vehicles and
light motor vehicle. |
16.07.01 |
|
36. |
Beauty Parlours |
16.08.02 |
|
37. |
Cargo
Handling services |
16.08.02 |
|
38. |
Cable
Services :
-Cable
operators
-Multi-System
operators |
16.08.02
10.09.04 |
|
39. |
Dry
Cleaning services |
16.08.02 |
|
40. |
Event
Management |
16.08.02 |
|
41. |
Fashion Designers |
16.08.02 |
|
42. |
Health Club and Fitness Centres |
16.08.02 |
|
43. |
Life
Insurance business (taxable to the extent of risk cover component). |
10.09.04 |
|
44. |
Insurance auxiliary service relating to Life Insurance business |
16.08.02 |
|
45. |
Rail
Travel Agents |
16.08.02 |
|
46. |
Storage and Warehousing services |
16.08.02 |
|
47. |
Business auxiliary service |
01.07.03 |
|
48. |
Commercial training and coaching |
01.07.03 |
|
49. |
Commissioning and installation
Erection |
01.07.03
10.09.04 |
|
50. |
Franchise |
01.07.03 |
|
51. |
Internet café providing internet access |
01.07.03 |
|
52. |
Maintenance and repair
Management, maintenance and repair |
01.07.03 to 30.4.2006 &
1.5.06 onwards |
|
53. |
Technical testing and analysis |
01.07.03 |
|
54. |
Technical Inspection and certification |
01.07.03 |
|
55. |
Forex
broker other than corporate brokers |
01.07.03 |
|
56. |
Port
services (Minor ports) |
01.07.03 |
|
57. |
Airport services |
10.09.04 |
|
58. |
Transport of goods by air |
10.09.04 |
|
59. |
Business exhibition services |
10.09.04 |
|
60. |
Goods
transport agency which issues consignment note. |
01.01.05 |
|
61. |
Construction services
Commercial or Industrial Construction Service |
10.09.04 to 15.06.05
16.06.05 onwards |
|
62. |
Intellectual property services |
10.09.04 |
|
63. |
Opinion poll services |
10.09.04 |
|
64. |
Outdoor catering |
10.09.04 |
|
65. |
T.V.
or Radio Programme production |
10.09.04 |
|
66. |
Survey and exploration of mineral |
10.09.04 |
|
67. |
Pandal or shamiana services |
10.09.04 |
|
68. |
Travel agents (other than
air/rail travel agents) |
10.09.04 |
|
69. |
Forward contract services |
10.09.04 |
|
70. |
Transport of goods (other than water) through pipeline or other conduit |
| |