Service Tax

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SERVICE TAX Introduction of New Taxable Services / Extension in the existing coverage of taxable services (Section 65 (105) of Finance Act) After enactment: 1. Transport of goods by rail in any manner [zzzp] – (exemption was provided for services provided by Government Railways in relation to transportation of goods in containers in any manner earlier, now even these services provided by the Government Railways will also be taxable). 2. Cosmetic surgery or plastic surgery [zzzzk] – (New service included & exclusion from service tax for services towards surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma) 3. Transport of — (i) coastal goods; (ii) goods through national waterway; or (iii) goods through inland water [zzzzl] – (new services included, thus inland transportation cost would go up). 4. Advice, consultancy or assistance in any branch of law, in any manner by business entities [zzzzm] – (New Service included with exclusion of service provided by way of appearance before any Court / Tribunal or Government Authority. At the same time if the services are provided by an individual to an individual are also exempted. Business entity has been clearly defined as an association of persons, body of individuals, company or firm excluding an individual). With immediate effect: 1. In case of Taxation of Services (Provided from outside India & Received in India) Rules, 2006, the definition of India has been amended to incorporated installations, structures and vessels in the continental shelf of India and exclusive economic zone of India. Due to which services availed on the above-said will be taxable in the hands of the service receiver. Notification No. 21/2009 ST & 22/22009 ST both dated 7th July 2009. Amendments / Exclusions / Exemptions from the taxable services (Section 65of the Act): After enactment: 1. Sub-Broker – from the definition of stock broker, the category sub-broker has been excluded. (Section 101) – (Even today, the transactions though routed through subbroker are registered only with the stock brokers and hence might be the correction). 2. Information technology software [zzzze] – Wherever right to use information technology software for commercial exploitation was given, the word instead of “acquiring” has been correctly amended to “providing” right to use information technology software. Page 1 of 4

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3. Business Auxiliary Service [65(19)] – In the definition, services provided towards carrying out job work activity, the definition of Excisable goods along with definition of “manufacture” are both incorporated for better clarity. With immediate effect: 4. Services provided by Export Promotion Council on membership, subscription & other amounts under Section 65 (105) [zzze] – exemption has been granted for a temporary period ending upto 31st Day of March 2010. Only Export Promotion Councils / Associations as mentioned in the notification No. 16/2009 ST dated 07/07/2009 will be eligible for exemption. 5. Exemption to Service Tax under reverse charge for Services provided to an exporter for transport of goods by road from any CFS or ICDs to the port of export or from the place of removal to an ICD or CFS or port of export subject to a consignment note is produced in the name of the exporter vide Notification No. 18/2009 ST dated 7th July 2009. As on today, the same was exempted by way of refund. 6. Exemption to Service Tax under reverse charge for Services provided by a Commission Agent located outside India and engaged under a contract or an agreement or any other document by the exporter in India to cause sale of goods exported. Notification No. 18/2009 ST dated 7th July 2009. Exemption from service tax is limited to 1% of the FOB value of exports and in case if the amount exceeds this limit, service tax is payable on the additional service tax over and above 1% of FOB value of exports. This exemption is also subject to the commission being clearly mentioned in the shipping bill or bill of exports. The exemption is also not applicable in case of exporting company participating into the equity of the overseas joint venture or wholly owned subsidiary to whom the goods are being exported & such other conditions as mentioned in the said notification. Such transactions will also have to be reported in the six monthly ST Return. 7. Exemption to Service Tax on services relating to inter-bank transactions on purchase and sale of foreign currency between scheduled banks. Notification No. 19/2009 dated 7th July 2009. 8. Exemption to Service Tax on services provided to any person by a tour operator having a contract carriage permit for inter-state / intra-state transportation of passengers. Exemption is not granted to services relating to transportation of passengers for tourism, conducted tours, charter or hire service. Notification No. 20/2009 dated 7th July 2009. It seems service tax will be charged even for transportation of employees.

Validations. 1. Information technology software – The words “provided” has been replaced with the word “acquiring” the right to use information technology software for commercial exploitation has been validated from 16th Day of May 2008 retrospectively and thus the door for justice is closed and further no suit or other proceedings shall be maintained or Page 2 of 4

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continued in any court, tribunal or other authority for the imposition of such service tax and no enforcement shall be made by any court of any decree or order relating to such action taken or anything done or omitted to be done as if the said amendment had been in force at all material times; 2. Specified Taxable Input services provided to Goods Transport Agency – Vide Notification No. 1/2009 ST dated 05/01/2009, exemption to specified input services viz. clearing & forwarding services, man-power recruitment & supply agency services, cargo handling services, storage and warehousing services, business auxiliary services, packing activity services, business support services & supply of tangiable goods services being provided to Goods Transport Agency has been exempted. In this Finance Bill, the exemption towards such input services being provided to GTA has been validated with effect from 1st of January 2005 thus, the GTA will be entitled for refund of such service tax paid on such input services. Application for refund has to be made within 6 months from the date of enactment of the bill. Works Contract (Composition Scheme for Payment of Service Tax) Amendment Rules, 2009 – amendments with immediate effect: 1. Earlier to this amendment, the contract value for WCT was the taxable value on which service tax was to be discharged at the rate of 4% under composition scheme. Due to this amendment, the taxable value will be arrived at after adding the material supplied free of cost provided by the principal to the works contractor and thus the liability of service tax by the service provider has gone up to the extend of free of cost material supplied by the principal. This amendment will not be applicable for works contract wherein the execution under the said contract has been commenced or where any payment has been received against such contract. Payment by way of debit or credit notes will not be accounted for as payment received or paid and hence new valuation rules will come into effect for discharging service tax. Notification No. 23/2009 ST dated 7th July 2009. Exemption by way of Refund on Input Services used for export of goods by manufacturer / merchant exporter on which Cenvat Credit is not availed [Notification No. 17/2009 ST dated 7th July 2009: 1. Simplified refund claim scheme has been introduced for refund of input services falling under Notification 41/2007 ST dated 06/10/2007 as amended and used for export of goods. 2. Manufacturer exporter having Central Excise Registration shall claim the refund of Service Tax paid on services from jurisdictional Asstt. / Dy. Commissioner of Central Excise in Form A-1 whereas Merchant Exporter / Manufacturer Export not registered with Central Excise shall claim refund of service tax paid on specified services from jurisdictional Asstt. / Dy. Commissioner of Central Excise of the registered office or the head office of the unit address in Form A-1 along with a declaration in Form A-2 who in turn will allot the service tax number to the assessee within 7 days from the date of receipt of the declaration along with application. 3. The refund claim shall be filed within one year from the date of export of goods i.e. date of “let export order”. 4. The list of documents has been separately mentioned in the said notification for the specified services as mentioned in the table therein. Page 3 of 4

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5. In case, the total amount of refund to be claimed is upto 0.25% of FOB value of exported goods, the required documents will be self-certified by the proprietor / partner / director or a person authorized by the Board of Directors and certificate also certifying the information towards the amount of refund claim and the related payment towards the same by the said persons. 6. In case, the total amount of refund to be claimed is more than 0.25% of FOB value of exported goods, the required documents will be self-certified by the proprietor / partner / director or a person authorized by the Board of Directors and certificate certifying the information towards the amount of refund claim and the related payment towards the same by the Chartered Accountant, who audits the annual accounts of the exporter for the purpose of Companies Act, 1956 or Income Tax Act, 1961 as the case may be. 7. The Asstt. / Dy. Commissioner of Central Excise after satisfying about the completeness of the application, including certifications, and the arithmetical accuracy, shall refund the service tax paid on specified services within one month from the receipt of such claim. In case of any discrepancies in the documentation, denial of such refund will be only on recording of the reasons in writing. 8. Even though at the time of refund payment certificate towards receipt of payment on export of goods will not be required, but if at a later stage if it is brought to the notice about the non-receipt of export remittances within the specified time or such extended time by the authorized dealer, the exporter will have to pay back the refund amount so claimed with interest. 9. Services towards Terminal Handling Charges has been newly included to the list of specified services. 10. For detailed procedure and application forms, refer to Notification No. 17/2009 ST. Appellate Procedure by the Department: As per Section 84 of Finance Act, 1994, Commissioner of Central Excise could review the orders passed by the officers sub-ordinate to the Commissioner by re-adjudicating it in case the Commissioner finds the order which lacks legality or appropriateness. Now, this power of readjudication has been withdrawn and the Commissioner has to order his officers to file an appeal before the Commissioner of Central Excise (Appeals) against such orders passed by his sub-ordinates. -------------- x --------------

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