Service Tax Section 66 Finance Act 1994: Amey Avinash Neetu Neha Prashant Ritam
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Service Tax 10/24/09
Service Tax Section 66 Finance Act 1994 Amey Avinash Neetu Neha Prashant Ritam
1
Service Tax 10/24/09
Contents
Scope of Service Tax
Valuation
Constitutional Provisions
Registration
Nature & Levy
Administration
Inclusions
Exclusions
Import of Services
Export of Services
Exemptions
Taxable services & their classifications
Taxable Event
Service Provider & Service Receiver
2
Service Tax 10/24/09
Scope of Service Tax Tax of 21st Century.
Service tax is a “tax of the future”. Started in 1994 by finance Act, Section 66. Initially 3 services were taxable. Now there are around 110 taxable services.
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”.
Thus, services provided in the State of Jammu and Kashmir are not liable to service tax. 3
Service Tax 10/24/09
Scope of Service Tax The current Rate of service tax is 10%.
Add: Education cess: 2%
Add: Secondary Education cess: 1%.
The cess are payable on the duty & not on the whole amount. The cess need to be showed & paid separately to the government.
4
Service Tax 10/24/09
Constitutional Provisions • Constitutional Amendment making entry 92C to List I: Union List. which reads tax on services. • This provision has yet not been made effective. • The Tax is collected based on the entry 97 only, which relates to any other mater not included in list I,II Residual Powers.
5
Service Tax 10/24/09
Sources of Service tax LAW Sources of Service tax Law
Finance Act, 1994
Rules
ulars or Office Letters (Instructions) Orders
Notifications
Trade Notices
6
Service Tax 10/24/09
Nature & Levy
• There is no Service Tax Act. • It is imposed by enhanced scope of finance Act amended time 2 time. • It is levied only on Taxable service • It is levied only on the value of taxable service.
The Department of Revenue of the Ministry of Finance exercises control in respect of matters relating to all the direct and indirect taxes through two statutory Boards, namely,
the Central Board of Direct Taxes (CBDT)
Central Board of Excise and Customs (CBEC).
7
Service Tax 10/24/09
ADMINISTRATION OF SERVICE TAX
MINISTRY OF FINANCE ( 1 ) DIRECTOR GENERAL OF SERVICE TAX ( Co - ordinator between 3 & 5)
DEPARTMENT OF REVENUE ( 2 ) CENTRAL BOARD OF EXCISE AND CUSTOMS ( 3 ) CENTRAL EXCISE ZONES HEADED BY CHIEF (4)
COMMISSIONERS
CENTRAL EXCISE COMMISIONERATES HEADED BY COMMISSIONERS ( 5 )
8
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Nature & Levy • Service Tax can be collected by the service provider from the service receiver. • Excise & Service tax are different taxes, though they are administered by same department in maximum places in India. • Service Tax is destination based consumption tax • There is no service tax if there is a sale of goods. • If there is a part sale then the proper valuation has to be done.
9
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Nature & Levy o
This could be referred to between the case of Imagic Creative pvt ltd Vs. cct(2008). It has been held that service tax & vat are mutually exclusive. In case of composite contract, VAT cannot be imposed on the portion relating to a service.
• Service undertaken by sovereign/ public authorities is not a service. o
E.g.. § RTO § factories inspectors. 10
Service Tax 10/24/09
Taxable Service • Section 65(105) defines what are the taxable services. • The definitions vary according to the class of the service. o
E.g.. Stock broker : any service provided by the stock broker to the investor in connection with sale or purchase of securities listed on a recognized stock exchange will be a taxable service.
• Similar details are listed for each & every service.
11
Service Tax 10/24/09
Existence Of Service Tax • Service tax is attracted when there are 2 parties. • One cannot give service to himself. • In case of Rolls Royce Indus Power v. CCE 2004. It was held that service requires 2 parties. The issue was relating to consulting engg. services. it was there fore held that the service is not taxable as there are no 2 parties one giving the advise & other accepting it.
12
Service Tax 10/24/09
Taxable Event in service tax • Section 66 states that there would be a tax that would be levied at the rate of 10% on the service referred under sec 65(105) & collected in prescribed manner. • Any service provided by the provider to the receiver. • Service Import
13
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Taxable Event in service tax o
When the service provider has no office in India the service received by a person who has a office or establishment in India is liable to pay the tax.
• The following are the taxable events: o
Entering in to a contact for service. : once you enter into a contract its certain that service would be provided. Service tax is actually payable only after its received, but receipt of the advance to provide the service in not a taxable event. It only defers the liability. 14
Service Tax 10/24/09
Taxable Event • Provision to service : this will happen is cases where the provision for providing the service was made before the services were taxable, but service is provided after service has become a taxable service. • The tax is payable only when received. • Receipt of payment is not a taxable event. • No Tax is payable if payment is received after the service becomes taxable, if the service was provided before it became taxable.
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Service Provider
• Liability of tax is on service provider. • The term service provider should be constructed in accordance with sec 65(105). • Thus service provider is one who provides the taxable service. • There are a few exception to the above clause.
16
Service Tax 10/24/09
Service Provider o
here the service receiver has to pay for the taxable service.
• In many case the service is taxable if its provided to "any person". • In some cases if service is provided to a client or a customer, it becomes taxable. • There fore tax-ability of the service would depend upon to who is the provider & receiver.
17
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Service Provider. & Receiver. • ANY PERSON defined :Individual, partnership firm, HUF, society, company, body, corporate, charitable institutions, coop. society, Central Govt, State Govt Bodies. o
Whether they have been incorporated or not.
• Services provided by the Government are taxable useless other wise specified. • Service on sub contract basis.: the sub-contractor is also a taxable service. The service are taxable even if they are used by the main provider for completion of his work.
18
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Highlights of provisions of valuation Service tax is payable on gross amount charged by service provider for service provided or “to be provided” and tax is payable as soon as advance is received. Value of taxable service + service tax payable= gross amount charged. If gross amount charged by the service provider is inclusive of service tax, value of taxable service will be back calculated. Gross amount charged for taxable service can be before during or after provision of service. Section 67(3)
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Service Tax 10/24/09
Highlights of provisions of valuation Where the consideration received for provision of services is wholly in money, the value shall be the gross amount charged by the service provider for provision of service relevant for valuation. Where the consideration for providing services is not wholly or partly in terms of money, service tax is payable on amount of money which is equivalent to the consideration. Where consideration is not ascertainable, valuation will be on the basis of valuation rules [section 67(1)(Ï Ï)
20
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Valuation Contd….
Rule 4 - Rejection of value
(1) The Central Excise Officer shall have the power to satisfy himself as to the accuracy of any information furnished or document presented for valuation. In other words, where there are adequate reasons warranting verification of the value adopted by the service provider for payment of service tax, rule 4 specifically enables verification of records in such cases.
21
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Valuation Contd….
(2) The provisions contained in rule 3 shall not restrict or put to question such power of the Central Excise Officer.
(3) A show cause notice shall be issued to the service provider, if the Central Excise Officer is satisfied that the value determined by such service provider is not in accordance with the provisions of the Act or these rules.
(4) Such show cause notice will specify the amount of service tax fixed by the Central Excise officer.
22
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Valuation Contd….
“Pure agent” means a person who– (a) 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;
Rule 5 - Inclusion in or exclusion from value of certain expenditure or costs
Rule 6 - Cases in which the commission, costs, etc., will be included or excluded.
Rule 7 - Actual consideration to be the value of taxable service provided from outside India
23
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REGISTRATION (Section 69)
Application for registration to be made by every person liable for paying the service tax in Form ST-1 within 30 days from the date on which service tax is levied or within 30 days from the date of commencement of business of providing taxable service, whichever is later.
Application for registration in Form ST-1 to be made within 30 days by service provider whose aggregate value of taxable service in a financial year exceeds rupees nine lakhs.
24
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REGISTRATION (Section 69)
In case assesses liable to pay service tax on taxable service provided/received from more than one premise or office and has centralized billing or accounting system, he may register such premise or office where centralized billing or accounting system is located. In such cases, application for registration to be made to CCE in whose jurisdiction the premise or office, from where centralized billing or accounting is done, is located.
25
Service Tax 10/24/09
REGISTRATION (Section 69)
Every assessee to intimate in writing to AC/DC of any change in information or detail furnished in Form No. ST-1 at the time of registration or any additional information or detail which he intends to furnish within 30 days of such change
Registration certificate in Form ST-2 shall be granted within 7 days from date of application/intimation, failing which the registration applied for shall be deemed to have been granted.
In case of transfer of business, transferee to obtain a fresh certificate of registration.
26
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REGISTRATION (Section 69)
Registration certificate to be surrendered immediately to the Superintendent of Central Excise by an assessee who ceases to provide taxable service.
Superintendent to cancel the registration certificate after ensuring that the assessee has paid all monies due to the Central Government
27
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Valuation Rules
If consideration is not wholly or partly consisting of money, value will be determined by service provider as per rule 3.
As per rule 3(a) valuation shall be on basis of gross amount charged by service provider for similar services.
Valuation shall be on basis of equivalent money value of such consideration
28
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Valuation Rules
Central excise officer can reject the “value” and determine “value for service tax payment.
Payments made by service provider as agent of service receiver and recovered from service receiver are excluded for purpose for valuation.
Rules 5 and 6 make provisions for certain specific inclusion and exclusions for valuation.
In case of services provided from outside India, actual consideration received will be relevant for valuation(Rule 7) 29
Service Tax 10/24/09
Inclusions
All expenditure relating provision of service are includable
Out of pocket expenses incurred are includable
The commission or brokerage charged by a stock broker including commission/brokerage paid to sub-broker;
Premium charged by the insurer from the policy holder;
Commission received by air travel agent from airline;
Commission, fee or other sum received by actuary, intermediary, insurance intermediary or insurance agent from insurer;
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Exclusions
Often service provider incurs an expenditure & it is recovered from the service receiver
Customs duty, Demurrage paid by customs house agent
Advt charges on behalf of client.
Rail fare collected by rail travel agent; and
Interest on loans.
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Classification Of taxable services
Section 65A provides that classification of taxable services shall be determined according to the terms of the subclauses of clause (105) of section 65.
When for any reason, a taxable service is, prima facie, classifiable under two or more sub clauses of clause (105) of section 65, classification shall be effected as follows
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Classification Of taxable services
the sub-clause which provides the most specific description shall be preferred to sub clauses providing a more general description;
composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable;
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Classification Of taxable services
when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub clauses which equally merit consideration.
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Procedures
Payment of service tax [section 68 & rule 6 of service tax rules, 1994] Payment from cenvat credit + / GAR-7 Account code Mandatory e-Payment(if it exceeds 50 lakhs) Mandatory interest for late payment Return/Assessment Half yearly If last day is holiday Revised return Late fee Service tax collected from any person to be deposited with the central government Appeals , adjudication 35
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Appeals & Adjudication Adjudication Demand of service tax & recovery Rectification of mistake by amending own order Imposition of penalty Refund of service tax Appeals Appeal to commissioner Appeal to tribunal HC/SC
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IMPORT OF SERVICES Meaning: Generally, the tax on services provided from outside India and received in India is known as tax on “Import of Services.” Exemptions to an individual (First proviso to sec 66A(1) ) Service provider has establishment at more than one place Liability of recipient only when service is received in India Service tax liability in case of Import of Service. 37
Service Tax 10/24/09
FOUR CATEGORIES OF SERVICES: üServices in relation to immovable property. üServices to be performed in India. üServices received by recipient located in India. üservices which will never be treated as Import of services. üRule 4: If service is provided from outside India ad received in India, the recipient of service will be liable to register and pay service tax.
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FOUR CATEGORIES OF SERVICES: ü Rule 5: Cenvat Credit cannot be utilised for payment of service tax by the service receiver. ü Providing service through Internet. ü Tax to be paid in Cash but Cenvat Credit can be availed. ü Concept of deemed service non-existent ü
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Some Other Points
In bharti cellular ltd. V. CCE (2005) 179 ELT 334 (CESTAT), it has been held that no service tax is payable if SIM cards are given free as bonus, as when value of service is zero, its 12.24% (that time it was 8%) will also be zero.
However, this principle applies only when there is really a ‘free service’ and not when its cost is recovered through different means.
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Some Other Points
Services provided by mutual concerns to its members subject to service tax.
Services provided to united nations or international organisation exempt from payment of service tax.
Services provided to a developer or units of special economic zone exempt from payment of service tax
Exemption to goods and materials sold by service provider to Receipient of service
41
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Export Of Services
Export of Service Rules, 2005 makes it clear that exemption from service tax/rebate of service tax and excise duty paid is admissible only if there is ‘export of service’ as defined in these rules.
Meaning of India for purpose of “Export of service” - India includes territorial waters
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EXPORT OF SERVICES
Rule 3 classifies the taxable services in three categories –
(a) when the immovable property in respect of which the service is rendered is situated abroad [Rule 3(1)(i)]
(b) when the service is performed outside India [Rule 3(1)(ii)]
(c) when service is provided from India, but recipient of service is outside India [Rule 3(1) (iii)].
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Common Conditions Service provided from India and used outside India.
Payment received by service provider in convertible foreign exchange
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Rebate of Service tax If service is exported, there is no service tax liability.
Exporter has three options:
Export without payment of service tax and utilise cenvat credit on other services
Export without payment of service tax and claim rebate on input services and excise duty paid on inputs
Pay service tax and claim rebate
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Export Of Services
In relation to business or commerce, services shall be eligible for exemption as ‘export of services’
when the recipient of such services are located outside India.
when the recipient of such services are located outside India at the time of provision of such service.
Where such recipient has commercial establishment or any office relating thereto, in India,
such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India.
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Services not treated as” Export of Services” Air transport of passengers for international travel
Transport by cruise ships
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Export Of Services
Notification No.11/2005-ST dated 19-4-2005
Notification No.12/2005-ST dated 19-4-2005
Some requirements
Rebate available when taxable service is exported
Exports to Nepal and Bhutan
Payment in foreign exchange
Amount >= Rs.500
If rebate wrongly paid , then can be recovered with interest
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Tax Exemption “Exempted services” means taxable services which are exempt from whole of the service tax leviable thereon and includes services which no service tax is leviable under section 66 of the Finance Act. Services on which no tax is payable are also ‘exempt services’- services on which no service tax is leviable are also ‘exempted services’
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Exemptions
Services provided by mutal concerns to its members subject to service tax.
Services provided to united nations or international organization exempt from payment of service tax.
Services provided to a developer or units of special economic zone(SEZ) exempt from payment of service tax
Exemption to goods and materials sold by service provider to Receipient of service
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Exemptions
The Union Government has exempted from service tax taxable services provided by the Reserve Bank of India and taxable services provided to the RBI when the tax is liable to be paid by the RBI under Sec. 68 (2) of the Finance Act read with Rule 2 of the Service Tax Rules, 1994. Also exempt from the tax are taxable services received in India from outside the country by the RBI under Sec. 66A.
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Tax Exemption
As per service tax act small service provider exemption is available as per service tax notification 6/2005 amended by 8/2008 (budget ,08)and there are few conditions attached with it which are given in brief hereunder.
1. Aggregate value not exceeding 10 lakh rupee
in any financial year from whole of the service leviable thereon under section 66 of the service tax act, is exempt as small service provider ."Aggregate value" means the sum of total of the first consecutive payments received during Financial year gross amount as52
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Tax Exemption
2. the above exemption is not available if taxable
service provided by person under Brand name or trade name whether registered or not or of another person.
3. the above exemption is not available on value of taxable service where tax has been paid by the assessee as recipient of the service like in case of GOODS transport agency ,exemption is not available to consignee /consignor . 53
Service Tax 10/24/09
Tax Services provided to and by SEZ
Services provided to SEZ unit are taxable at the hands of services provider w..e.f. 3-3-2009
Service provider to SEZ unit or SEZ developer will have to charge and pay service tax except where the services are wholly consumed within SEZ.
SEZ unit/developers will have to get the list of the services approved from Approval Committee of SEZ.
Services wholly consumed within SEZ the service provider is not required to pay any service.
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Tax EXEMPTION in J&K
No Service in service provided in J&K
Service tax will not be payable only if service is provided in J&K
If a person from J&K provides service outside J&K in any other part of India that service will be taxable, as location where service is provided is relevant.
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Thank yOU
56
Service Tax Section 66 Finance Act 1994 Amey Avinash Neetu Neha Prashant Ritam
1
Service Tax 10/24/09
Contents
Scope of Service Tax
Valuation
Constitutional Provisions
Registration
Nature & Levy
Administration
Inclusions
Exclusions
Import of Services
Export of Services
Exemptions
Taxable services & their classifications
Taxable Event
Service Provider & Service Receiver
2
Service Tax 10/24/09
Scope of Service Tax Tax of 21st Century.
Service tax is a “tax of the future”. Started in 1994 by finance Act, Section 66. Initially 3 services were taxable. Now there are around 110 taxable services.
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”.
Thus, services provided in the State of Jammu and Kashmir are not liable to service tax. 3
Service Tax 10/24/09
Scope of Service Tax The current Rate of service tax is 10%.
Add: Education cess: 2%
Add: Secondary Education cess: 1%.
The cess are payable on the duty & not on the whole amount. The cess need to be showed & paid separately to the government.
4
Service Tax 10/24/09
Constitutional Provisions • Constitutional Amendment making entry 92C to List I: Union List. which reads tax on services. • This provision has yet not been made effective. • The Tax is collected based on the entry 97 only, which relates to any other mater not included in list I,II Residual Powers.
5
Service Tax 10/24/09
Sources of Service tax LAW Sources of Service tax Law
Finance Act, 1994
Rules
ulars or Office Letters (Instructions) Orders
Notifications
Trade Notices
6
Service Tax 10/24/09
Nature & Levy
• There is no Service Tax Act. • It is imposed by enhanced scope of finance Act amended time 2 time. • It is levied only on Taxable service • It is levied only on the value of taxable service.
The Department of Revenue of the Ministry of Finance exercises control in respect of matters relating to all the direct and indirect taxes through two statutory Boards, namely,
the Central Board of Direct Taxes (CBDT)
Central Board of Excise and Customs (CBEC).
7
Service Tax 10/24/09
ADMINISTRATION OF SERVICE TAX
MINISTRY OF FINANCE ( 1 ) DIRECTOR GENERAL OF SERVICE TAX ( Co - ordinator between 3 & 5)
DEPARTMENT OF REVENUE ( 2 ) CENTRAL BOARD OF EXCISE AND CUSTOMS ( 3 ) CENTRAL EXCISE ZONES HEADED BY CHIEF (4)
COMMISSIONERS
CENTRAL EXCISE COMMISIONERATES HEADED BY COMMISSIONERS ( 5 )
8
Service Tax 10/24/09
Nature & Levy • Service Tax can be collected by the service provider from the service receiver. • Excise & Service tax are different taxes, though they are administered by same department in maximum places in India. • Service Tax is destination based consumption tax • There is no service tax if there is a sale of goods. • If there is a part sale then the proper valuation has to be done.
9
Service Tax 10/24/09
Nature & Levy o
This could be referred to between the case of Imagic Creative pvt ltd Vs. cct(2008). It has been held that service tax & vat are mutually exclusive. In case of composite contract, VAT cannot be imposed on the portion relating to a service.
• Service undertaken by sovereign/ public authorities is not a service. o
E.g.. § RTO § factories inspectors. 10
Service Tax 10/24/09
Taxable Service • Section 65(105) defines what are the taxable services. • The definitions vary according to the class of the service. o
E.g.. Stock broker : any service provided by the stock broker to the investor in connection with sale or purchase of securities listed on a recognized stock exchange will be a taxable service.
• Similar details are listed for each & every service.
11
Service Tax 10/24/09
Existence Of Service Tax • Service tax is attracted when there are 2 parties. • One cannot give service to himself. • In case of Rolls Royce Indus Power v. CCE 2004. It was held that service requires 2 parties. The issue was relating to consulting engg. services. it was there fore held that the service is not taxable as there are no 2 parties one giving the advise & other accepting it.
12
Service Tax 10/24/09
Taxable Event in service tax • Section 66 states that there would be a tax that would be levied at the rate of 10% on the service referred under sec 65(105) & collected in prescribed manner. • Any service provided by the provider to the receiver. • Service Import
13
Service Tax 10/24/09
Taxable Event in service tax o
When the service provider has no office in India the service received by a person who has a office or establishment in India is liable to pay the tax.
• The following are the taxable events: o
Entering in to a contact for service. : once you enter into a contract its certain that service would be provided. Service tax is actually payable only after its received, but receipt of the advance to provide the service in not a taxable event. It only defers the liability. 14
Service Tax 10/24/09
Taxable Event • Provision to service : this will happen is cases where the provision for providing the service was made before the services were taxable, but service is provided after service has become a taxable service. • The tax is payable only when received. • Receipt of payment is not a taxable event. • No Tax is payable if payment is received after the service becomes taxable, if the service was provided before it became taxable.
15
Service Tax 10/24/09
Service Provider
• Liability of tax is on service provider. • The term service provider should be constructed in accordance with sec 65(105). • Thus service provider is one who provides the taxable service. • There are a few exception to the above clause.
16
Service Tax 10/24/09
Service Provider o
here the service receiver has to pay for the taxable service.
• In many case the service is taxable if its provided to "any person". • In some cases if service is provided to a client or a customer, it becomes taxable. • There fore tax-ability of the service would depend upon to who is the provider & receiver.
17
Service Tax 10/24/09
Service Provider. & Receiver. • ANY PERSON defined :Individual, partnership firm, HUF, society, company, body, corporate, charitable institutions, coop. society, Central Govt, State Govt Bodies. o
Whether they have been incorporated or not.
• Services provided by the Government are taxable useless other wise specified. • Service on sub contract basis.: the sub-contractor is also a taxable service. The service are taxable even if they are used by the main provider for completion of his work.
18
Service Tax 10/24/09
Highlights of provisions of valuation Service tax is payable on gross amount charged by service provider for service provided or “to be provided” and tax is payable as soon as advance is received. Value of taxable service + service tax payable= gross amount charged. If gross amount charged by the service provider is inclusive of service tax, value of taxable service will be back calculated. Gross amount charged for taxable service can be before during or after provision of service. Section 67(3)
19
Service Tax 10/24/09
Highlights of provisions of valuation Where the consideration received for provision of services is wholly in money, the value shall be the gross amount charged by the service provider for provision of service relevant for valuation. Where the consideration for providing services is not wholly or partly in terms of money, service tax is payable on amount of money which is equivalent to the consideration. Where consideration is not ascertainable, valuation will be on the basis of valuation rules [section 67(1)(Ï Ï)
20
Service Tax 10/24/09
Valuation Contd….
Rule 4 - Rejection of value
(1) The Central Excise Officer shall have the power to satisfy himself as to the accuracy of any information furnished or document presented for valuation. In other words, where there are adequate reasons warranting verification of the value adopted by the service provider for payment of service tax, rule 4 specifically enables verification of records in such cases.
21
Service Tax 10/24/09
Valuation Contd….
(2) The provisions contained in rule 3 shall not restrict or put to question such power of the Central Excise Officer.
(3) A show cause notice shall be issued to the service provider, if the Central Excise Officer is satisfied that the value determined by such service provider is not in accordance with the provisions of the Act or these rules.
(4) Such show cause notice will specify the amount of service tax fixed by the Central Excise officer.
22
Service Tax 10/24/09
Valuation Contd….
“Pure agent” means a person who– (a) 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;
Rule 5 - Inclusion in or exclusion from value of certain expenditure or costs
Rule 6 - Cases in which the commission, costs, etc., will be included or excluded.
Rule 7 - Actual consideration to be the value of taxable service provided from outside India
23
Service Tax 10/24/09
REGISTRATION (Section 69)
Application for registration to be made by every person liable for paying the service tax in Form ST-1 within 30 days from the date on which service tax is levied or within 30 days from the date of commencement of business of providing taxable service, whichever is later.
Application for registration in Form ST-1 to be made within 30 days by service provider whose aggregate value of taxable service in a financial year exceeds rupees nine lakhs.
24
Service Tax 10/24/09
REGISTRATION (Section 69)
In case assesses liable to pay service tax on taxable service provided/received from more than one premise or office and has centralized billing or accounting system, he may register such premise or office where centralized billing or accounting system is located. In such cases, application for registration to be made to CCE in whose jurisdiction the premise or office, from where centralized billing or accounting is done, is located.
25
Service Tax 10/24/09
REGISTRATION (Section 69)
Every assessee to intimate in writing to AC/DC of any change in information or detail furnished in Form No. ST-1 at the time of registration or any additional information or detail which he intends to furnish within 30 days of such change
Registration certificate in Form ST-2 shall be granted within 7 days from date of application/intimation, failing which the registration applied for shall be deemed to have been granted.
In case of transfer of business, transferee to obtain a fresh certificate of registration.
26
Service Tax 10/24/09
REGISTRATION (Section 69)
Registration certificate to be surrendered immediately to the Superintendent of Central Excise by an assessee who ceases to provide taxable service.
Superintendent to cancel the registration certificate after ensuring that the assessee has paid all monies due to the Central Government
27
Service Tax 10/24/09
Valuation Rules
If consideration is not wholly or partly consisting of money, value will be determined by service provider as per rule 3.
As per rule 3(a) valuation shall be on basis of gross amount charged by service provider for similar services.
Valuation shall be on basis of equivalent money value of such consideration
28
Service Tax 10/24/09
Valuation Rules
Central excise officer can reject the “value” and determine “value for service tax payment.
Payments made by service provider as agent of service receiver and recovered from service receiver are excluded for purpose for valuation.
Rules 5 and 6 make provisions for certain specific inclusion and exclusions for valuation.
In case of services provided from outside India, actual consideration received will be relevant for valuation(Rule 7) 29
Service Tax 10/24/09
Inclusions
All expenditure relating provision of service are includable
Out of pocket expenses incurred are includable
The commission or brokerage charged by a stock broker including commission/brokerage paid to sub-broker;
Premium charged by the insurer from the policy holder;
Commission received by air travel agent from airline;
Commission, fee or other sum received by actuary, intermediary, insurance intermediary or insurance agent from insurer;
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Service Tax 10/24/09
Exclusions
Often service provider incurs an expenditure & it is recovered from the service receiver
Customs duty, Demurrage paid by customs house agent
Advt charges on behalf of client.
Rail fare collected by rail travel agent; and
Interest on loans.
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Service Tax 10/24/09
Classification Of taxable services
Section 65A provides that classification of taxable services shall be determined according to the terms of the subclauses of clause (105) of section 65.
When for any reason, a taxable service is, prima facie, classifiable under two or more sub clauses of clause (105) of section 65, classification shall be effected as follows
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Service Tax 10/24/09
Classification Of taxable services
the sub-clause which provides the most specific description shall be preferred to sub clauses providing a more general description;
composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable;
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Service Tax 10/24/09
Classification Of taxable services
when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub clauses which equally merit consideration.
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Service Tax 10/24/09
Procedures
Payment of service tax [section 68 & rule 6 of service tax rules, 1994] Payment from cenvat credit + / GAR-7 Account code Mandatory e-Payment(if it exceeds 50 lakhs) Mandatory interest for late payment Return/Assessment Half yearly If last day is holiday Revised return Late fee Service tax collected from any person to be deposited with the central government Appeals , adjudication 35
Service Tax 10/24/09
Appeals & Adjudication Adjudication Demand of service tax & recovery Rectification of mistake by amending own order Imposition of penalty Refund of service tax Appeals Appeal to commissioner Appeal to tribunal HC/SC
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Service Tax 10/24/09
IMPORT OF SERVICES Meaning: Generally, the tax on services provided from outside India and received in India is known as tax on “Import of Services.” Exemptions to an individual (First proviso to sec 66A(1) ) Service provider has establishment at more than one place Liability of recipient only when service is received in India Service tax liability in case of Import of Service. 37
Service Tax 10/24/09
FOUR CATEGORIES OF SERVICES: üServices in relation to immovable property. üServices to be performed in India. üServices received by recipient located in India. üservices which will never be treated as Import of services. üRule 4: If service is provided from outside India ad received in India, the recipient of service will be liable to register and pay service tax.
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FOUR CATEGORIES OF SERVICES: ü Rule 5: Cenvat Credit cannot be utilised for payment of service tax by the service receiver. ü Providing service through Internet. ü Tax to be paid in Cash but Cenvat Credit can be availed. ü Concept of deemed service non-existent ü
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Service Tax 10/24/09
Some Other Points
In bharti cellular ltd. V. CCE (2005) 179 ELT 334 (CESTAT), it has been held that no service tax is payable if SIM cards are given free as bonus, as when value of service is zero, its 12.24% (that time it was 8%) will also be zero.
However, this principle applies only when there is really a ‘free service’ and not when its cost is recovered through different means.
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Service Tax 10/24/09
Some Other Points
Services provided by mutual concerns to its members subject to service tax.
Services provided to united nations or international organisation exempt from payment of service tax.
Services provided to a developer or units of special economic zone exempt from payment of service tax
Exemption to goods and materials sold by service provider to Receipient of service
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Service Tax 10/24/09
Export Of Services
Export of Service Rules, 2005 makes it clear that exemption from service tax/rebate of service tax and excise duty paid is admissible only if there is ‘export of service’ as defined in these rules.
Meaning of India for purpose of “Export of service” - India includes territorial waters
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Service Tax 10/24/09
EXPORT OF SERVICES
Rule 3 classifies the taxable services in three categories –
(a) when the immovable property in respect of which the service is rendered is situated abroad [Rule 3(1)(i)]
(b) when the service is performed outside India [Rule 3(1)(ii)]
(c) when service is provided from India, but recipient of service is outside India [Rule 3(1) (iii)].
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Service Tax 10/24/09
Common Conditions Service provided from India and used outside India.
Payment received by service provider in convertible foreign exchange
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Service Tax 10/24/09
Rebate of Service tax If service is exported, there is no service tax liability.
Exporter has three options:
Export without payment of service tax and utilise cenvat credit on other services
Export without payment of service tax and claim rebate on input services and excise duty paid on inputs
Pay service tax and claim rebate
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Service Tax 10/24/09
Export Of Services
In relation to business or commerce, services shall be eligible for exemption as ‘export of services’
when the recipient of such services are located outside India.
when the recipient of such services are located outside India at the time of provision of such service.
Where such recipient has commercial establishment or any office relating thereto, in India,
such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India.
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Service Tax 10/24/09
Services not treated as” Export of Services” Air transport of passengers for international travel
Transport by cruise ships
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Service Tax 10/24/09
Export Of Services
Notification No.11/2005-ST dated 19-4-2005
Notification No.12/2005-ST dated 19-4-2005
Some requirements
Rebate available when taxable service is exported
Exports to Nepal and Bhutan
Payment in foreign exchange
Amount >= Rs.500
If rebate wrongly paid , then can be recovered with interest
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Service Tax 10/24/09
Tax Exemption “Exempted services” means taxable services which are exempt from whole of the service tax leviable thereon and includes services which no service tax is leviable under section 66 of the Finance Act. Services on which no tax is payable are also ‘exempt services’- services on which no service tax is leviable are also ‘exempted services’
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Service Tax 10/24/09
Exemptions
Services provided by mutal concerns to its members subject to service tax.
Services provided to united nations or international organization exempt from payment of service tax.
Services provided to a developer or units of special economic zone(SEZ) exempt from payment of service tax
Exemption to goods and materials sold by service provider to Receipient of service
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Service Tax 10/24/09
Exemptions
The Union Government has exempted from service tax taxable services provided by the Reserve Bank of India and taxable services provided to the RBI when the tax is liable to be paid by the RBI under Sec. 68 (2) of the Finance Act read with Rule 2 of the Service Tax Rules, 1994. Also exempt from the tax are taxable services received in India from outside the country by the RBI under Sec. 66A.
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Service Tax 10/24/09
Tax Exemption
As per service tax act small service provider exemption is available as per service tax notification 6/2005 amended by 8/2008 (budget ,08)and there are few conditions attached with it which are given in brief hereunder.
1. Aggregate value not exceeding 10 lakh rupee
in any financial year from whole of the service leviable thereon under section 66 of the service tax act, is exempt as small service provider ."Aggregate value" means the sum of total of the first consecutive payments received during Financial year gross amount as52
Service Tax 10/24/09
Tax Exemption
2. the above exemption is not available if taxable
service provided by person under Brand name or trade name whether registered or not or of another person.
3. the above exemption is not available on value of taxable service where tax has been paid by the assessee as recipient of the service like in case of GOODS transport agency ,exemption is not available to consignee /consignor . 53
Service Tax 10/24/09
Tax Services provided to and by SEZ
Services provided to SEZ unit are taxable at the hands of services provider w..e.f. 3-3-2009
Service provider to SEZ unit or SEZ developer will have to charge and pay service tax except where the services are wholly consumed within SEZ.
SEZ unit/developers will have to get the list of the services approved from Approval Committee of SEZ.
Services wholly consumed within SEZ the service provider is not required to pay any service.
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Service Tax 10/24/09
Tax EXEMPTION in J&K
No Service in service provided in J&K
Service tax will not be payable only if service is provided in J&K
If a person from J&K provides service outside J&K in any other part of India that service will be taxable, as location where service is provided is relevant.
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Service Tax 10/24/09
Thank yOU
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