Service tax pdf e book - 8th edn- ca pritam mahure

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This is the 8th Edition of the e-book on Service Tax (incorporating changes upto 14 January 2014) - Created and collated by Pritam Mahure.
The e-book contains:
- Amended legal provisions alongwith recent judicial precedences
- Forewords by Shri V K Garg (Ex-Joint Secretary, TRU)
- Amended Service Tax legal provisions, Notifications, Circulars etc.
- Applicable provisions of Constitution of India

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Service tax pdf e book - 8th edn- ca pritam mahure

  1. 1. _ Service Tax Negative List Regime CA Pritam Mahure CA Pritam Mahure This book is a compilation of key Service Tax Legal provisions (as applicable from 1 July 2012). Relevant amendments have been shown in red colour/ track change. Also, Central Excise provisions which are applicable (vide sec. 83 of FA‘ 1994) to ST legislation are highlighted in green colour. For feedback/queries readers may write to capritam@gmail.com 8th Edition 14 January 2014
  2. 2. contents 1. ABOUT THE BOOK ..............................................................................8 2. NEGATIVE LIST – IN A NUTSHELL .................................................... 10 A. In a nutshell ..................................................................................... 10 B. Negative vis-à-vis Positive list regime – A Comparative Analysis ............. 10 C. Rules deleted/ substituted .................................................................. 10 D. Key provisions and effective date ........................................................ 11 E. Abatement (Refer Not. No. 26/2012 and Valuation Rules)....................... 11 F. Reverse Charge Mechanism (Refer Not. No. 30/2012-ST) ....................... 13 G. Brief Note on Negative List regime ...................................................... 14 3. EXISTING INDIRECT TAX SYSTEM IN INDIA .................................... 18 Key features of specified indirect taxes: ................................................... 18 Current Indirect tax implications on various transactions ............................ 20 4. SERVICE TAX — STATUTORY PROVISIONS....................................... 22 5. APPLICABLE CENTRAL EXCISE PROVISIONS ..................................... 79 6. SERVICE TAX RULES, 1994 .............................................................. 113 1. Short title and commencement ......................................................... 113 2. Definitions ...................................................................................... 113 3. Appointment of officers .................................................................... 117 4. Registration .................................................................................... 117 4A. Taxable service to be provided or credit to be distributed on invoice .... 119 4B. Issue of consignment note .............................................................. 121 5. Records .......................................................................................... 121 5A. Access to a registered premises....................................................... 122 6. Payment of service tax ..................................................................... 123 6A. Export of services.- ........................................................................ 129 7. Returns .......................................................................................... 129 7A. Returns ........................................................................................ 130 7B. Revision of return .......................................................................... 130 7C. Amount to be paid for delay in furnishing the prescribed return ........... 131 8. Form of appeals to commissioner of central excise (appeals) ................ 132 9. Form of appeals to appellate tribunal ................................................. 132 10. Procedure and facilities for large taxpayer......................................... 132 7. SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006 ............... 134 1.Short title and commencement. — ...................................................... 134 2.Definitions ....................................................................................... 134 Page 2 of 695
  3. 3. 2A. Determination of value of service portion in a works contract .............. 134 2B.Determination of value of service in relation to money changing ........... 137 2C. Determination of value of service portion involved in supply of food .... 138 3.Manner of determination of value ....................................................... 139 4.Rejection of value ............................................................................. 139 5.Inclusion in or exclusion .................................................................... 140 6.Cases in which the commission, costs, etc., will be included or excluded 142 8. POINT OF TAXATION RULES, 2011 .................................................. 145 1.Short title and commencement .......................................................... 145 2.Definitions ....................................................................................... 145 2A. Date of payment ........................................................................... 145 3.Determination of point of taxation ...................................................... 146 4.Determination of point of taxation in case of change in rate of tax .......... 147 5. Payment of tax in case of new services .............................................. 148 7. Determination of point of taxation in case of specified services /persons 148 8.Determination of point of taxation in case of copyrights, etc .................. 149 8A. Determination of point of taxation in other cases ............................... 149 9.Transitional Provisions ...................................................................... 149 9. PLACE OF PROVISION OF SERVICES RULES, 2012........................... 151 1. Short title, extent and commencement .......................................... 151 2. Definitions .................................................................................. 151 3. Place of provision generally .......................................................... 153 4. Place of provision of performance based services ............................ 154 5. Place of provision of services relating to immovable property ............ 154 6. Place of provision of services relating to events ............................... 155 7. Place of provision of services provided at more than one location ...... 155 8. POPS where provider and recipient are located in taxable territory .... 155 9. Place of provision of specified services ........................................... 155 10. Place of provision of goods transportation services .......................... 155 11. Place of provision of passenger transportation service ...................... 156 12. Place of provision of services provided on board a conveyance .......... 156 13. Powers to notify .......................................................................... 156 14. Order of application of rules.......................................................... 156 10. CENVAT CREDIT RULES, 2004 ....................................................... 157 1.Short title, extent and commencement................................................ 157 2.Definitions ....................................................................................... 157 Page 3 of 695
  4. 4. 3.CENVAT credit .................................................................................. 163 4.Conditions for allowing CENVAT credit ................................................. 173 5. Refund of CENVAT Credit .................................................................. 176 5A.Refund of CENVAT credit to units in specified areas ............................ 178 5B. Refund of CENVAT credit in case of reverse charge basis .................... 178 6.Obligation of a manufacturer or output service provider ....................... 179 7.Manner of distribution of credit by input service distributor .................... 187 7A.Distribution of credit on inputs ....................................................... 188 8.Storage of input outside the factory of the manufacturer ....................... 188 9.Documents and accounts ................................................................... 188 9A.Information relating to principal inputs .............................................. 192 10.Transfer of CENVAT credit ................................................................ 193 10A. Transfer of CENVAT credit of additional duty ................................... 193 11.Transitional provision ...................................................................... 195 12.Special dispensation........................................................................ 196 12A. Procedure and facilities for large tax payer ...................................... 197 12AAA. Power to impose restrictions in certain types of cases ................... 200 13.Power of Central Government to notify goods for deemed credit ........... 201 14.Recovery of CENVAT credit wrongly taken / erroneously refunded......... 201 15.Confiscation and penalty .................................................................. 201 15A. General penalty ........................................................................... 202 16.Supplementary provision ................................................................. 202 11. SERVICE TAX VCES, 2013 .............................................................. 203 12. Service Tax VCES Rules, 2013 ....................................................... 207 1. Short title and commencement ......................................................... 207 2. Definitions ...................................................................................... 207 3. Registration .................................................................................... 207 4. Form of declaration .......................................................................... 207 5. Form of acknowledgment of declaration ............................................. 207 6. Payment of tax dues ........................................................................ 207 7. Form of acknowledgement of discharge .............................................. 208 FORM VCES-2 ...................................................................................... 210 FORM VCES-3 ...................................................................................... 211 13. Notifications.................................................................................. 212 14/2012 - Research & Development cess ............................................... 212 25/2012 - Mega exemption notification .................................................. 213 Page 4 of 695
  5. 5. 26/2012 - Abatement notification .......................................................... 229 27/2012 - Exemption for foreign diplomatic mission ................................ 236 29/2012 - Exemption on property tax paid ............................................. 239 30/2012 - Reverse charge mechanism ................................................... 241 31/2012 - Exemption to gta services for exporter.................................... 246 32/2012 - Exemption of services provided by tbi and ............................... 253 33/2012 - Exemption to small service providers ...................................... 256 34/2012 - Rescinding of earlier 81 notifications ....................................... 259 35/2012 - Earlier works contract composition scheme rescinded ............... 263 28/2011 - Notified continuous supply of services ..................................... 264 39/2012 - Rebate on inputs and input services ....................................... 265 40/2012 - Exemption on services provided to sez authorised operations .... 272 41/2012 - Rebate for service tax paid — new scheme .............................. 286 42/2012 - Exemption to service of commission agent .............................. 313 27/2012(ce) – Cenvat credit refund (rule 5) ........................................... 320 43/2012 - Exemption to railways........................................................... 324 45/2012 - Reverse charge mechanism for directors and security services ... 325 46/2012 – STR amended for reverse charge mechanism .......................... 326 47/2012 – Return due date .................................................................. 327 48/2012 - Amends ST-1 and Accounting codes re-notified ........................ 328 49/2012 - Exemption to Janashri and Aam Aadmi Bima Yojana ................. 339 1/2013 - Amendment in Service Tax Rules, 1994 .................................... 340 2/2013 - Construction of Complex – Taxable value 25% or 30% ............... 359 3/2013 - Mega Exemption Amended ...................................................... 360 4/2013 - Advance Ruling (Applicable for Public Company) ........................ 362 5/2013 - New ST-5, ST-6 and ST-7 notified ............................................ 363 6/2013 - Focus Market Scheme ............................................................. 373 7/2013 - Focus Product Scheme ............................................................ 377 8/2013 - Vishes Krishi and Gram Udyog Yojana ...................................... 380 9/2013 - Construction service – Change in abatement ............................. 382 10/2013 - Service Tax VCES Rules notified ............................................. 383 11/2013 - Amends Not. No. 6/2013-ST .................................................. 384 12/2013 - Special Economic Zone (SEZ) Developer / Unit ........................ 386 13/2013 – Amendment to Not. 25/2012 ................................................. 395 1/1/2013 - Ad-Hoc Exemption .............................................................. 396 12/2013 (CE) – Amendment in 3 (5A) of CCR ......................................... 397 Page 5 of 695
  6. 6. 14/2013 – Catering in canteen .............................................................. 398 15/ 2013- Amendment in SEZ Not. ........................................................ 399 16 /2013- E-payment (1 lac) ................................................................ 400 17/2013-Amendment to FMS Not. ......................................................... 401 01/2014 – Amendment in Mega Not. ..................................................... 402 01/2014-CE (NT) – CENVAT Credit amendment ...................................... 403 14. CIRCULARS .................................................................................... 404 160/11/2012 - Applicability Of EC and SHEC.......................................... 404 161/12/2012 – Accounting code for Negative List .................................... 406 162/13/2012 - Clarification on POTR...................................................... 408 163/14/2012 - Clarification on remittances............................................. 411 164/15/2012 – Clarification on vocational education ................................ 413 165/16/2012 - Circular on restoration of accounting codes ....................... 415 166/1/2013 – Reminder letters for insurance policies .............................. 427 167/2/2013 - Milk transportation by rail ................................................. 428 969/03/2013-CX – CESTAT Appeal forms ............................................... 429 168/3/2013 - Clarification on Pandal and Shamiyana ............................... 433 169/4/2013 - Clarification on VCES ....................................................... 435 170/5 /2013 - Clarification on VCES ...................................................... 437 171/6/2013 - Circular on Arrest and Bail ................................................ 442 172/7/2013 – Education services – Clarification ...................................... 446 173/8/2013 – Restaurant clarifications .................................................. 449 174/9/2013 – VCES clarifications .......................................................... 451 175/01/2014 ST – RWA Clarification ...................................................... 454 974/08/2013-CX - Arrest and Bail ......................................................... 456 15. P O T R C I R C U L A R S ..................................................................... 462 341/34/2010-TRU - POTR Clarifications .................................................. 462 154/5/2012-ST – POTR clarification ....................................................... 466 155/6/2012-ST – POTR Clarifications ..................................................... 467 158/9/2012-ST – Change in Rate .......................................................... 468 162/13/2012-ST – POTR Clarifications ................................................... 469 16. D R A F T C I R C U L A R ................................................................ 471 D r a f t c i r c u l a r o n s t a f f b e n e f i t s ................................................... 471 Draft circular on service tax on air transport ........................................... 477 17. INSTRUCTIONS/ ORDERS ............................................................. 480 Instructions – Negative list of service tax regime .................................... 480 Page 6 of 695
  7. 7. Filing of ST-3 ...................................................................................... 483 Order 3/2012 - Due date for filing of service tax return ............................ 485 Service Tax Instruction ........................................................................ 486 Order 2/2013 - ST-3 [30 April 2013] ..................................................... 488 Order 3/2013 - ST-3 [31 August 2013] .................................................. 489 Order 4/2013 - ST-3 [10 September 2013] ............................................ 490 F.No: 137/116/2012- E-payment 1 lacs ................................................. 491 F. No. B1/19/2013-TRU (Pt.) - VCES...................................................... 493 F. No. 137/50/2013-VCES .................................................................. 495 18. Budget 2013 ................................................................................. 496 Union FM –Budget Speech (Extracts) ..................................................... 496 TRU – Budget 2013 – Service Tax ......................................................... 500 Article – Budget 2013 – Changes in Service Tax ...................................... 503 Supply of food in restaurant, ‗sale‘ or ‗service‘? ....................................... 508 ST on Foreign Bank Charges ................................................................. 511 CEVAT Credit of ST paid under VCES ..................................................... 515 Applicability of VAT on flat .................................................................... 519 19. FAQ on VCES – CBEC ...................................................................... 523 20. Education Guide – CBEC ................................................................. 535 Page 7 of 695
  8. 8. 1. ABOUT THE BOOK FOREWORDS The challenge of dissemination of a tax law in a cogent and lucid manner is nearly as huge as its making. Mr. Pritam Mahure in this book has attempted to meet the challenge with laurels coming very close to what could even be termed as a ―work of art‖. Indirect tax reforms in recent years have been largely guided keeping in view the eventual goal of GST. The changes over the last couple of years in the areas of service tax are definitely precursors in that direction. A careful understanding and applicability of the new provisions will go a great length in helping our smooth transition towards GST. Taxation of services based on Negative List, together with many other significant changes, in 2012 has refreshed the challenge of managing change once again. Despite an elaborate effort to explain the new provisions by way of ―Education Guide‖ released by the Government, it still required considerable effort to carry out the task in the light of experience gained from its early applicability. Service tax law by itself is not comprehensive and relies considerably on the provisions from other enactments. To put it in a user-friendly manner for the tax-payers and other practitioners is an enormous challenge. I have noticed that Mr Pritam Mahure has taken immense pains to provide comprehensive coverage to the subject. It has been a pleasure for me to go through the subject once again, somewhat like watching a suspense movie all over again, knowing the ultimate truth, yet enjoying the nuances from time-to time. V K Garg Joint Secretary (Tax Research Unit) Department of Revenue Central Board of Excise & Customs Ministry of Finance, Government of India July 2013 Page 8 of 695
  9. 9. Special Thanks - I would like to thank Shri J. C. Chaturvedi (DG, DGCEI) who had suggested me the idea to write this book on Service Tax - I would like to thank Shri. Sunil Gabhawalla under whose able guidance I learnt Service Tax - I would like to thank Shri. Rajan Choudhary (Addl. Commissioner of Service Tax, Pune) for his valuable feedback for the book and guidance - Also, would like to thank Suresh Nair (Partner, Ernst & Young) for his valuable suggestions and expert guidance - Also, I am grateful to Pratik Shah (Director – Head Indirect Tax, SKP Crossborder Consulting Pvt Ltd) for his valuable suggestions and feedback About the author - CA Pritam Mahure practices in the field of Indirect Taxes (Service Tax, Excise and proposed GST) since more than a decade. - Pritam has also authored book on ―GST – Supply Chain Perspective‖ for Confederation of Indian Industry (CII) - Pritam has conducted numerous session for: o Corporates and industry o Government officers (Central Excise and Service Tax Department, DGST etc), o ASSOCHAM, CII, Marattha Chamber of Commerce and Industry (MCCIA), Deccan Chamber of Commerce (DCCIA), ICAI, GCM Worldwide etc. - Pritam has also raised and represented industry specific issues before CBEC - Pritam is also a faculty for ‗Indirect Tax‘ [CA/CS/CMA] - Pritam also writes regularly at Taxindiaonline.com, Economic Times, Taxmann, Centax, Lexsite etc - For suggestions/ feedback/ queries readers may feel free to revert at capritam@gmail.com/ +919920644648 Page 9 of 695
  10. 10. 2. NEGATIVE LIST – IN A NUTSHELL A. In a nutshell 1. Negative List 2. Positive List Service is taxable unless exempt Service is exempt unless taxable Applicable wef 1 July 2012 Applicable upto 30 June 2012 B. Negative vis-à-vis Positive list regime – A Comparative Analysis Current provisions Coverage Earlier provisions (Negative List) (Positive List) 65B Definitions 65 66B Charging Section 66 and 66A 66C Determination of Place of Export and Import Rules Provision of services 66D Negative List Service specific exclusions/ exemptions 66E Declared services 65 (105) 66F Interpretation Rules and 65A (covers classification Bundled services only) Valuation 67 and Valuation Rules Date of determination tax rate, POTR 67 and Valuation Rules (Amended) 67A and POTR value and exchange Rate 25/2012-ST One mega notification Various notifications C. Rules deleted/ substituted SR Rules Particulars Rationale for deletion of rules 1 Taxation of Services (Provided from Outside India & Received in India) Rules, 2006 Deleted Introduction of ‗Place of Provision of Services Rules, 2012‘ 2 Export of Services Rules, 2005 Deleted Introduction of ‗Place of Provision of Services Rules, 2012‘ 3 Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 Deleted Insertion of Rule 2A in the Service Tax Valuation Rules, 2006 Page 10 of 695
  11. 11. D. Key provisions and effective date Provisions Particulars Negative List regime Applicable w.e.f. 1 July 2012 Applicable rate of Service Tax 12.36% Service tax returns - For the period for October 2013 to March 2014 returns to be filed before 25 April 2014 E. Abatement (Refer Not. No. 26/2012 and Valuation Rules) SR 1 Service Taxable Goods Transport Agency (GTA) (any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage) Condition 25% - No cenvat credit availed Provided that when such person is located in a non-taxable territory, the provider of such service shall be liable to pay service tax. 2 Transport of goods by rail 30% - Nil 3 Transport of passengers by rail 30% - Nil 4 Transport of goods in a vessel from one port in India to another 50% - No cenvat credit availed 5 Transport of passengers by air 40% - Cenvat credit on inputs and CG is not availed 6 Supply of food or any other article of human consumption or any drink, in a restaurant / other premises Supply of food in convention centre, pandal, shamiana etc 40%/ 60% - Cenvat credit of goods in Ch. 1 to 22 not taken. Further, Rule 6 reversal required. - As above 8 Accommodation in hotels, inns etc 60% - Cenvat credit on inputs and CG is not availed 9 Renting of any motor vehicle designed to carry passengers 40% - No cenvat credit availed 10 Package tour 25% 11 Booking accommodation 10% 12 Services other than 11 and 12 provided in relation to tour 40% - As above - Bill incl. of charges for tour - No cenvat credit availed - Bill indicates so - NA if invoice only for service charges - No cenvat credit availed - Invoice is for gross 7 70% Page 11 of 695
  12. 12. amount 13 Financial leasing services including hire purchase 10% - Nil 14 Services in relation to chit1 70% - No cenvat credit availed 15 2 Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, except where entire consideration is received after issuance of completion certificate by the competent authority,- - (i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004; - (ii) The value of land is included in the amount charged from the service receiver.‖. (a) for a residential unit satisfying both the following conditions, namely:– (i) the carpet area of the unit is less than 2000 square feet; and 25% (ii) the amount charged for the unit is less than rupees one crore; (b) for other than the (a) above 30% 3 Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority,(i) for residential unit having carpet area upto 2000 square feet or where the amount charged is less than rupees one crore (ii)(i) For other than (i) above 16 Works contracts entered into for execution of original works 25% 30% 40% - Cenvat credit on inputs not availed 1 In a chit business, the subscription is tendered in any one of the forms of ‗money‘ as defined in section 65B(33). It would, therefore, be a transaction in money. So considered, the transaction would fall within the exclusionary part of the definition of the word ‗service‘ as being merely a transaction in money…The notification No.26/2012-ST dated 20.06.2012 issued by the Government of India, Ministry of Finance (Department of Revenue) is quashed to the extent of the entry in serial No.8 thereof. Delhi Chit Fund Association 2013-TIOL-331-HC-DEL-ST 2 Not. No. 9/2013-ST dated 8 May 2013 Applicable wef 1 March 2013 [refer Not. No. 2/2013-ST] 3 Page 12 of 695
  13. 13. 17 18 Works contracts entered into for maintenance or repair or reconditioning or restoration or servicing of any goods For other works contracts, not covered under sr. no. 16 and 17 , including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property, 70% - Cenvat credit on inputs not availed 60% - Cenvat credit on inputs not availed F. Reverse Charge Mechanism (Refer Not. No. 30/2012-ST) SR Service 1 Provided by person who is located in non-taxable territory and received by any person located in taxable territory Works contract services by individual, HUF, firm or AOP Any person4 3 4 2 4 Service recipient % of ST payable Provider Nil Recipient 100% Body corporate 50% 50% Manpower supply for any purposes or security services by individual, HUF, firm or AOP Body corporate 25% 75% Renting of vehicle to any person who is not engaged in the similar line of business to carry passenger by individual, HUF, firm or AOP - With abatement - Without abatement Body corporate Nil 60% 100% 40% Exemption provided to certain persons vide Sr. No. 34 of Not. No. 25/2012-ST Page 13 of 695
  14. 14. 5 Support services5 by Government and Local Authority (excluding renting and 66D (a) (i) to (iii) Business entity Nil 100% 6 Provided or agreed to be provided by a director of a company to the said company (w.e.f. 7 August 2012 vide Not. 45/2012) Company Nil 100% 7 Individual advocate Business entity6 Nil 100% 8 Arbitral Tribunal Business entity7 Nil 100% 9 Sponsorship Body corporate or PF Nil 100% 10 GTA Nil 100% 11 Insurance agent to insurance companies Company, P. Firm, Factory, Society, excise registered assessee Insurance business Nil 100% G. Brief Note on Negative List regime8 What is the significance of the changes due to the new system of taxation? Budget 2012 proposes to usher a paradigm shift in the manner services will be taxed in future. The transition involves shift from taxation of 119 service-specific descriptions to a 5 Para 4.1.7 of Education Guide: What is the meaning of ―support services‖ which appears to be a phrase of wide ambit? Support services have been defined in section 65B of the Act as infrastructural, operational, administrative, logistic marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of movable or immovable property, security, testing and analysis. Thus services which are provided by government in terms of their sovereign right to business entities, and which are not substitutable in any manner by any private entity, are not support services e.g. grant of mining or licensing rights or audit of government entities established by a special law, which are required to be audited by CAG under section 18 of the Comptroller and Auditor-General‗s (Duties, Powers and Conditions of Service) Act, 1971 (such services are performed by CAG under the statue and cannot be performed by the business entity themselves and thus do not constitute support services.) Para 4.1.8 of Education Guide: Will the services provided by Police or security agencies to PSUs or corporate entities or sports events held by private entities be taxable? Yes. Services provided by government security agencies are covered by the main portion of the definition of support service as similar services can be provided by private entities. In any case it is also covered by the inclusive portion of the definition. However the tax will be actually payable on reverse charge by the recipient. 6 Exemption provided to certain persons vide Sr. No. 6 of Not. No. 25/2012-ST 7 Exemption provided to certain persons vide Sr. No. 6 of Not. No. 25/2012-ST 8 Relevant paras from TRU DOF No 334/1/2012-TRU dated 16 March 2012 Page 14 of 695
  15. 15. new regime whereby all services will be taxed unless they are covered by any of the entries in the negative list or are otherwise exempted. The new system is a marked shift by way of comprehensive taxation of the entire service sector without getting into complex issues of classification of services. What is the broad the scheme of new taxation? In the new system, service tax will be levied on all services provided in a taxable territory other than the services specified in the negative list. The key features of this system are as follows: At the outset ‗service‘ has been defined in clause (44) of section65B of the Act. Section 66B specifies the charge of service tax which is essentially that service tax shall be levied on all services provided or agreed to be provided in a taxable territory, other than services specified in the negative list. The negative list of services is contained in section 66D of the Act. Since provision of service in the taxable territory is an important ingredient of taxability, section 66C empowers the Central Government to make rules for determination of place of provision of service. Under these provisions the Place of Provision of Services Rules, 2012 have been made for which a separate and detailed guidance paper (GPB) has been issued. To remove some ambiguities certain activities have been specifically defined by description as services and are referred as Declared Services (listed in section 66E). In addition to the services specified in the negative list, certain exemptions have been given. Most of the exemptions are proposed to be consolidated in a single mega exemption for ease of reference. Principles have been laid down in section 66F of the Act for interpretation wherever services have to be treated differentially for any reason and also for determining the taxability of bundled services. The system of valuation of services for levy of service tax and of availment and utilization of Cenvat credits essentially remains the same with only incidental changes required for the new system of taxation What is service? In the existing system, only the services specified in clause (105) of section 65 of the Finance Act, 1994 are taxed under the charging section 66. In the new system, all services, other than services specified in the negative list, provided or agreed to be provided in the taxable territory by a person to another would be taxed under section 66B. This Note explains the various ingredients and aspects of the definition of service. Service‘ has been defined in clause (44) of the new section 65B and means – - any activity - for consideration Page 15 of 695
  16. 16. - carried out by a person for another - and includes a declared service. The said definition further provides that ‗Service‘ does not include – - any activity that constitutes only a transfer in title of (i) goods or (ii) immovable property by way of sale, gift or in any other manner - a transaction only in (iii) money or (iv) actionable claim - any service provided by an employee to an employer in the course of the employment. - fees payable to a court or a tribunal set up under a law for the time being in force There are three explanations appended to the definition of ‗service‘ which are dealt with in later part of this Guidance Note. Each of the ingredients bulleted above have been explained in the points below. Taxability of service The taxability of services or the charge of service tax has been specified in section 66B of the Act. To be a taxable a service should be – - provided or agreed to be provided by a person to another - in the taxable territory - and should not be specified in the negative list. Provided in the taxable territory - Taxable territory has been defined in section 65B of the Act as the territory to which the Act applies i.e the whole of territory of India other than the State of Jammu and Kashmir. - Detailed rules called the Place of Provision of Service Rules, 2012 have been made which determine the place of provision of service depending on the nature and description of service. - Please refer to the Place of Provision of Service Rules, 2012 Rules of interpretation Despite doing away with the service-specific descriptions, there will be some descriptions where some differential treatment will be available to a service or a class of services. Section 66F lays down the principles of interpretation of specified descriptions of services and bundled services. Principles for interpretation of specified descriptions of services Although the negative list approach largely obviates the need for descriptions of services, such descriptions continue to exist in the following areas – Page 16 of 695
  17. 17. - In the negative list of services. - In the declared list of services. - In exemption notifications. - In the Place of Provision of Service Rules, 2012 - In few other rules and notifications. Page 17 of 695
  18. 18. 3. EXISTING INDIRECT TAX SYSTEM IN INDIA As per the Constitution of India, the taxing powers of the Central Government encompass taxes on income (except agricultural income), excise duty on goods manufactured in India (other than alcohol for human consumption), customs duty, inter-state sale of goods etc. The taxing powers of the State Governments include the power to tax agricultural income, excise duty on alcohol for human consumption, sales tax on intra-State sale of goods etc. On a high level basis, indirect taxes in the country can be categorised in three baskets - Central level indirect taxes : Customs duty, Excise duty, Service Tax etc State level indirect taxes: VAT, Entry Tax, Purchase Tax etc Local level indirect taxes: Octroi etc Excise Duty Service Tax Central Sales Tax, Research & Dev. Cess VAT/Sales Tax Entry Tax, Purchase Tax, Entertainment tax, Elect. duty Local Taxes Customs duty State Government Central Goverrnment The following diagram captures the aforesaid: Octroi / Local Body Tax Key features of specified indirect taxes: SR 1 Indirect Tax Customs duty Key features Customs duty is applicable on import of goods into India Customs duty is payable by the importer Rate of Customs duty is specified in the Customs Tariff Generic rate of Customs duty is 28.85% which comprises the following: Page 18 of 695
  19. 19. 2 Excise duty - - 3 Service Tax - 4 5 Research and Development Cess - VAT/ Sales Tax - - 6 CST - - a. Basic Customs Duty (generic rate is 10%) b. Additional Duty of Customs in lieu of excise9 (generic rate is 12%) c. Additional Duty of Customs in lieu of VAT10 (generic rate is 4%) d. Education cess11 @ 3% Customs duty is levied and governed under the Customs Act, 1962 and the Rules made thereunder Excise duty is applicable on ‗manufacture‘ of goods in India ‗Manufacture‘ typically implies a process at end the end of which a new and different article, having a distinctive name, character or use, emerges. Excise duty is payable by the manufacturer Rate of Excise duty is specified in the Excise Tariff Generic rate of Excise duty is 12.36% (including Cess 3%). Further, certain goods are liable to concessional rate of Excise duty of (i.e. 2.06%, 6.18%) Excise duty is levied and governed under the Excise Act, 1944 and the Rules made thereunder Service tax is applicable on provision of all services Service tax is not applicable on ‗Negative list12‘ services and certain exempt services13 Service tax is payable by Service provider. However, in certain case service recipient is also liable to pay service tax 14. Rate of Service Tax is 12.36% (including Cess 3%). Further, for certain services abatement is provided15 Service tax is levied and governed under the Finance Act, 1994 and the Rules made thereunder Research and Development (R&D) cess is applicable on import of technology through foreign collaborator The rate of R&D cess is 5% R&D cess is levied and governed under Research and Development Cess Act, 1986 and the Rules made thereunder VAT / Sales tax is applicable on sale of goods within a State VAT is payable by the seller Rate of VAT is State specific. Rate of VAT is specified the VAT schedule of the State Typically, the rate of VAT varies from 0% to 15% VAT is levied and governed under the State specific VAT Act and the Rules made thereunder CST is applicable on inter –State sale of goods CST is payable by the seller Rate of CST is 2% provided the buyer issues C form. If the buyer doesn‘t issue C form then CST is applicable at the rate equal to rate of VAT in the State from which goods are sold CST is levied and governed under The Central Sales Tax Act, 1956 and the Rules made thereunder 9 Also known as Counter-Veiling Duty/ CVD Also known as Special Additional Duty of Customs / SACD 11 Education cess @ 2% plus Secondary and Higher Education cess @ 1% 12 Negative List of services comprises of 17 services and is specified under Section 66D of Finance Act, 1994 13 Exemption is provided to 39 services vide Not. No. 25/2012-ST 14 Situations where service recipient is liable to pay ST (as recipient of service) is specified in Not. No. 30/2012-ST 15 Abatement to various services is specified under Not. No. 26/2012-ST and Service Tax (Determination of Value of Services) Rules, 2006 10 Page 19 of 695
  20. 20. 7 Entry Tax - 8 Octroi / Local Body Tax (LBT) - 9 Purchase Tax - 10 Entertainment tax - Entry tax is applicable on entry of specified goods in the State for sale, use or consumption Entry tax is levied by various States in India Entry tax is levied and governed under State specific Entry Tax Act and the Rules made thereunder Octroi is levied by the Municipal Corporation on entry of specified goods in their jurisdiction for sale, use or consumption Octroi is levied by various Municipal Corporations in the State of Maharashtra (such as Mumbai, Thane, Pune etc) Octroi is levied and governed under Rules made by the Municipal Corporations LBT is proposed to be introduced by substituting Octroi. Purchase tax is applicable on purchase of specified goods Purchase Tax is a major source of revenue for Punjab and Haryana In Punjab, Purchase Tax is levied under Punjab Value Added Tax Act, 2005 Its pertinent to note that in 2012, Maharashtra has also introduced Purchase Tax on cotton and oil seeds Entertainment tax is applicable on movie tickets, commercial shows etc Entertainment tax is levied by the State Governments The rate of entertainment tax varies from 0% to 110% 16 This source of revenue has grown with the advent of Pay Television Services in India. Since, entertainment is being provided through the services such as Broadcasting Services, DTH Services, Pay TV Services, Cable Services, etc. The component of entertainment is intrinsically intertwined in the transaction of service, that it cannot be separated from the whole transaction. Given the nature of transaction of service, it is being subjected to tax by the Union and the State governments both17 Current Indirect tax implications on various transactions A transaction in an economy can be one of the following type: a. Transaction in goods: o Trading (i.e. buying and subsequently selling the goods) o Manufacturing and subsequently selling of goods b. Transaction is services (such as provision of logistics services, advisory services, courier services etc) c. Transaction involving both goods and services (i.e. works contract such as contract for construction of compound wall wherein material alongwith labour is provided by the contractor) d. Transaction in immovable property e. Other transactions (such as employment, grants etc) Transactions in an economy are subject to indirect taxes. We have given below the typical indirect tax implications on the aforesaid transactions: 16 17 Source www.filmtvguildindia.org Source www.en.wikipedia.org Page 20 of 695
  21. 21. SR Activity 1 Trading – Sale to a customer located in same State (IntraState sale) 2 Trading – Sale to a customer located in different State (inter-State sale) 3 Manufacturing and subsequently intra-State sale of goods 4 Manufacturing and subsequently inter-State sale of goods 5 Provision of services 6 Works contracts (i.e. transaction involving both goods and services) 7 Transaction of sale of an completed20 immovable property 8 Other transactions (such as employment, donation etc) Tax applicable Value Added Tax18 (VAT) would be applicable on the sale to the customer Central Sales Tax (CST) would be applicable on the customer sale to the customer - Excise duty on manufacture of goods - VAT on sale of goods - Excise duty on manufacture of goods - CST on sale of goods Service Tax19 - VAT on ‗goods‘ portion in works contract - Service Tax on ‗service‘ portion in the works contract Stamp duty Income from salary, donation etc is subject matter of Income Tax Apart from the aforesaid taxes, certain States and Municipal Corporations also levy Entry Tax, Octroi for entry of goods for consumption/ sale in their respective jurisdiction. From the aforesaid discussion, it can be observed from the above that currently the indirect tax system in the India is governed by the ‗taxable events‘ (such as manufacture, sale, provision of service etc). However, this approach to levy and collect indirect tax has its own limitations and it results in inefficiency in certain cases due to non-availability of input tax credit. 18 19 20 Also known as Sales tax However, certain specified services such as entertainment, advertisement etc may be liable to State VAT W.e.f. 1 July 2010, Service tax has been made applicable on sale of property before completion certificate is received for the same. Page 21 of 695
  22. 22. 4. SERVICE TAX — STATUTORY PROVISIONS SECTIONS 64 TO 96-I (CHAPTERS V and VA) OF THE FINANCE ACT, 1994 PROVIDING FOR SERVICE TAX) SECTION 64. Extent, commencement and application. — (1) This Chapter extends to the whole of India except the State of Jammu and Kashmir. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. (3) It shall apply to taxable services provided on or after the commencement of this Chapter. 65B. Interpretations21. In this Chapter, unless the context otherwise requires,(1) "actionable claim" shall have the meaning assigned to it in section 3 of the Transfer of Property Act, 1882 (4 of 1882.); (2) "advertisement" means any form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person; (3) "agriculture" means the cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products; (4) "agricultural extension" means application of scientific research and knowledge to agricultural practices through farmer education or training; (5) "agricultural produce" means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market; 21 Applicable wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Page 22 of 695
  23. 23. (6) "Agricultural Produce Marketing Committee or Board" means any committee or board constituted under a State law for the time being in force for the purpose of regulating the marketing of agricultural produce; (7) "aircraft" has the meaning assigned to it in clause (1) of section 2 of the Aircraft Act, 1934 (22 of 1934.); (8) "airport" has the meaning assigned to it in clause (b) of section 2 of the Airports Authority of India Act, 1994 (55 of 1994.); (9) "amusement facility" means a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places but does not include a place within such facility where other services are provided; (10) "Appellate Tribunal" means the Customs, Excise and Service Tax Appellate Tribunal constituted under section 129 of the Customs Act, 1962 (52 of 1962.); (11) "approved vocational education course" means,(i) a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961.); or (ii) a Modular Employable Skill Course, approved by the National Council of Vocational Training or State Council for Vocational Training22, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment; or (iii) a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India;23 (12) "assessee" means a person liable to pay tax and includes his agent; (13) "associated enterprise" shall have the meaning assigned to it in section 92A of the Income-tax Act, 1961 (43 of 1961.); 22 23 Applicable from the date of Presidential Assent i.e. 10 May 2013 Applicable from the date of Presidential Assent i.e. 10 May 2013 Page 23 of 695
  24. 24. (14) "authorised dealer of foreign exchange" shall have the meaning assigned to "authorised person" in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999.); (15) "betting or gambling" means putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring; (16) "Board" means the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963.); (17) "business entity" means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession; (18) "Central Electricity Authority" means the authority constituted under section 3 of the Electricity (Supply) Act, 1948 (54 of 1948.); (19) "Central Transmission Utility" shall have the meaning assigned to it in clause (10) of section 2 of the Electricity Act, 2003 (36 of 2003.); (20) "courier agency" means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles; (21) "customs station" shall have the meaning assigned to it in clause (13) of section 2 of the Customs Act, 1962 (52 of 1962.); (22) "declared service" means any activity carried out by a person for another person for consideration and declared as such under section 66E; (23) "electricity transmission or distribution utility" means the Central Electricity Authority; a State Electricity Board; the Central Transmission Utility or a State Transmission Utility notified under the Electricity Act, 2003 (36 of 2003.); or a distribution or transmission licensee under the said Act, or any other entity entrusted with such function by the Central Government or, as the case may be, the State Government; Page 24 of 695
  25. 25. (24) "entertainment event" means an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, by way of exhibition of cinematographic film, circus, concerts, sporting event, pageants, award functions, dance, musical or theatrical performances including drama, ballets or any such event or programme; (25) "goods" means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale; (26) "goods transport agency" means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called; (27) "India" means,(a) the territory of the Union as referred to in clauses (2) and (3) of article 1 of the Constitution; (b) its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976.); (c) the seabed and the subsoil underlying the territorial waters; (d) the air space above its territory and territorial waters; and (e) the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof; (28) "information technology software" means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment; (29) "inland waterway" means national waterways as defined in clause (h) of section 2 of the Inland Waterways Authority of India Act, 1985 (82 of Page 25 of 695
  26. 26. 1985.) or other waterway on any inland water, as defined in clause (b) of section 2 of the Inland Vessels Act, 1917 (1 of 1917.); (30) "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has been utilised; (31) "local authority" means(a) a Panchayat as referred to in clause (d) of article 243 of the Constitution; (b) a Municipality as referred to in clause (e) of article 243P of the Constitution; (c) a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006 (41 of 2006.); (e) a regional council or a district council constituted under the Sixth Schedule to the Constitution; (f) a development board constituted under article 371 of the Constitution; or (g) a regional council constituted under article 371A of the Constitution; (32) "metered cab" means any contract carriage on which an automatic device, of the type and make approved under the relevant rules by the State Transport Authority, is fitted which indicates reading of the fare chargeable at any moment and that is charged accordingly under the conditions of its permit issued under the Motor Vehicles Act, 1988 (59 of 1988.) and the rules made thereunder; (33) "money" means legal tender, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any similar instrument but shall not include any currency that is held for its numismatic value; (34) "negative list" means the services which are listed in section 66D; Page 26 of 695
  27. 27. (35) "non-taxable territory" means the territory which is outside the taxable territory; (36) "notification" means notification published in the Official Gazette and the expressions "notify'' and "notified" shall be construed accordingly; (37) "person" includes,(i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a society, (v) a limited liability partnership, (vi) a firm, (vii) an association of persons or body of individuals, whether incorporated or not, (viii) Government, (ix) a local authority, or (x) every artificial juridical person, not falling within any of the preceding sub-clauses; (38) "port" has the meaning assigned to it in clause (q) of section 2 of the Major Port Trusts Act, 1963 (38 of 1963.) or in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908.); (39) "prescribed" means prescribed by rules made under this Chapter; (40) "process amounting to manufacture or production of goods" means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944) or the Medicinal and Toilet Preparations (Excise Duties) Act,195524 or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force; (41) "renting" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said 24 Applicable from the date of Presidential Assent i.e. 10 May 2013 Page 27 of 695
  28. 28. immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property; (42) "Reserve Bank of India" means the bank established under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934.); (43) "securities" has the meaning assigned to it in clause (h) of section 2 of the Securities Contract (Regulation) Act, 1956 (42 of 1956.); (44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include(a) an activity which constitutes merely,(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ia) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or". (ii) a transaction in money or actionable claim25; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. 25 In the case of Future Gaming Solutions India Pvt Ltd 2013-TIOL-904-HC-Sikkim-ST, the High Court held that: ―70. In view of the facts and circumstances and the discussions, our conclusions are as under:(i) In the light of Sub-Section (1) to Section 65B read with Sub-Section (44) thereof lottery is excluded from the definition of 'service' being 'actionable claim… (iii) The activity of the Petitioner comprising of promotions, organising, reselling or any other manner assisting in arranging of lottery tickets of the State Lotteries does not establish the relationship of a principal or an agent but rather that of a buyer and a seller and, on principal to principal basis in view of the nature of the transaction consisting of bulk purchases of lottery tick ets by the Petitioner from the State Government on full payment on a discounted price as a natural business transaction and, other related features like there being no privity of contract between the State Government and the stockists, agents, resellers under the Petitioner‖ Page 28 of 695
  29. 29. Explanation 1 For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,(A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (C) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority and who is not deemed as an employee before the commencement of this section. Explanation 1A- For the purposes of this clause, transaction in money shall not include, any activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged:". Explanation 2.- For the purposes of this Chapter,(a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Explanation 3.- A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory; (45) "Special Economic Zone" has the meaning assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005.); (46) "stage carriage" shall have the meaning assigned to it in clause (40) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988.); Page 29 of 695
  30. 30. (47) "State Electricity Board" means the Board constituted under section 5 of the Electricity (Supply) Act, 1948 (54 of 1948.); (48) "State Transmission Utility" shall have the meaning assigned to it in clause (67) of section 2 of the Electricity Act, 2003 (36 of 2003.); (49) "support services" means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis; (50) "tax" means service tax leviable under the provisions of this Chapter; (51) "taxable service" means any service on which service tax is leviable under section 66B ; (52) "taxable territory" means the territory to which the provisions of this Chapter apply; (53) "vessel" has the meaning assigned to it in clause (z) of section 2 of the Major Port Trusts Act, 1963 (38 of 1963.); (54) "works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any moveable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property; (55) words and expressions used but not defined in this Chapter and defined in the Central Excise Act, 1944 ( 1 of 1944.) or the rules made thereunder, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise.' Page 30 of 695
  31. 31. 66B. Charge of service tax on and after Finance Act, 201226. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. 27 Explanation.- For the removal of doubts, it is hereby clarified that the references to the provisions of section 66 in Chapter V of the Finance Act, 1994(32 of 1994) or any other Act, for the purpose of levy and collection of service tax, shall be construed as references to the provisions of section 66B. 28 66BA. (1) For the purpose of levy and collection of service tax, any reference to section 66 in the Finance Act, 1994 or any other Act for the time being in force, shall be construed as reference to section 66B thereof. (2) The provisions of this section shall be deemed to have come into force on the 1st day of July, 2012 66C. Determination of place of provision of service29. (1) The Central Government may, having regard to the nature and description of various services, by rules made in this regard, determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided. (2) Any rule made under sub-section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory. 66D. Negative list of services30. The negative list shall comprise of the following services, namely:–– (a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere— (i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government31; 26 27 28 29 30 31 Applicable wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Omitted from the date of Presidential Assent i.e. 10 May 2013 Applicable from the date of Presidential Assent i.e. 10 May 2013 Applicable wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Applicable wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Only specific services such as speed post etc are liable to Service Tax. Thus, basic mail service, money order service, pension payment etc is not liable to Service Tax Page 31 of 695
  32. 32. (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) support services, other than services covered under clauses (i) to (iii) above, provided to business entities; (b) services by the Reserve Bank of India32; (c) services by a foreign diplomatic mission located in India33; (d) services relating to agriculture or agricultural produce by way of — (i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed 34 testing; (ii) supply of farm labour; (iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market35; (iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; (v) loading, unloading, packing, storage or warehousing of agricultural produce; (vi) agricultural extension services36; (vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce; (e) trading of goods37; (f) any process amounting to manufacture or production of goods38; 32 33 34 35 36 37 38 Services provided BY RBI are exempt (and not TO RBI) This exemption seems to be given in view of Vienna Convention (which provides for grants immunity from local laws to the missions) Omitted from the date of Presidential Assent i.e. 10 May 2013 Such as shelling of paddy or cleaning of wheat As per Section 65B (4) "agricultural extension" means application of scientific research and knowledge to agricultural practices through farmer education or training Refer Entry No. 54 to List II (State List) in Seventh Schedule to Constitution of India which reads as ―Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I‖ Refer Entry No. 84 to List I (Union List) in Seventh Schedule to Constitution of India which reads as ―Duties of excise on tobacco and other goods manufactured or Page 32 of 695
  33. 33. (g) selling of space or time slots for advertisements other than advertisements broadcast by radio or television39; (h) service by way of access to a road or a bridge on payment of toll charges40; (i) betting, gambling or lottery41; (j) admission to entertainment events or access to amusement facilities42; (k) transmission or distribution of electricity by an electricity transmission or distribution utility43; (l) services by way of— (i) pre-school education and education up to higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognised by any law44 for the time being in force; (iii) education as a part of an approved vocational education course; (m) services by way of renting of residential dwelling for use as residence; (n) services by way of— (i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount; (ii) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers; (o) service of transportation of passengers45, with or without accompanied belongings, by— 39 40 41 42 43 44 45 produced in India except— (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.‖ Also, refer Entry 51 of State List. Refer Entry No. 55 to List II (State List) in Seventh Schedule to Constitution of India which reads as ―Taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television‖ Refer Entry No. 59 to List II (State List) in Seventh Schedule to Constitution of India which reads as ―Tolls‖ Refer Entry No. 34 to List II (State List) in Seventh Schedule to Constitution of India which reads as ―Betting and gambling‖ Refer Entry No. 62 to List II (State List) in Seventh Schedule to Constitution of India which reads as ―Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling‖ Refer Entry No. 53 to List II (State List) in Seventh Schedule to Constitution of India which reads as ―Taxes on consumption or sale of electricity‖ The legislature has not used the expression "conferred by law" or "conferred by statute". Thus even if the certificate/degree/diploma/qualification is not the product of a statute but has approval of some kind in 'law', would be exempt [2013-TIOL-430HC-DEL-ST] Refer Entry No. 56 to List II (State List) in Seventh Schedule to Constitution of India which reads as ―Taxes on goods and passengers carried by road or on inland Page 33 of 695
  34. 34. (i) a stage carriage; (ii) railways in a class other than— (A) first class; or (B) an airconditioned coach; (iii) metro, monorail or tramway; (iv) inland waterways; (v) public transport, other than predominantly for tourism purpose, in a vessel, between places located in India; and (vi) metered cabs, radio taxis or auto rickshaws; (p) services by way of transportation of goods46— (i) by road except the services of— (A) a goods transportation agency; or (B) a courier agency; (ii) by an aircraft or a vessel from a place outside India up to the customs station of clearance; or (iii) by inland waterways; (q) funeral, burial, crematorium or mortuary services including transportation of the deceased. 66E Declared Services47. The following shall constitute declared services, namely:–– (a) renting of immovable property48; (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completioncertificate by the competent authority. Explanation.— For the purposes of this clause,— (I) the expression "competent authority" means the Government or any authority authorised to issue completion certificate under any law for the time 46 47 48 waterways‖ Ibid Applicable wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Refer Entry No. 49 to List II (State List) in Seventh Schedule to Constitution of India which reads as ―Taxes on lands and buildings‖. Whether collection of Service Tax on ‗Renting of immovable property‘ amounts to ―Taxes on lands and buildings‖ or is it on ‗income‘ arising out of land and building has been long a subject matter of contention – Refer Tamil Nadu Kalyana Mandapam Assn. v. Union of India — 2006 (3) STR 260 (SC) and Home Solutions Retail (India) Ltd 2011 (24) STR 129 (Del) Page 34 of 695
  35. 35. being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:–– (A) architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972.); or (B) chartered engineer registered with the Institution of Engineers (India); or (C) licensed surveyor of the respective local body of the city or town or village or development or planning authority; (II) the expression "construction" includes additions, alterations, replacements or remodeling of any existing civil structure; (c) temporary transfer or permitting the use or enjoyment of any intellectual property right49; (d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software50; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; (f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods; (g) activities in relation to delivery of goods on hire purchase or any system of payment by installments; (h) service portion in the execution of a works contract; (i) service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity. 66F Principles of interpretation of specified descriptions of services or bundled services 51. (1) Unless otherwise specified, reference to a service 49 50 IPR in normal trade parlance means copyright, patents, trademarks, designs, any other similar right to an intangible property. Also, there is no condition regarding the law under which an intellectual right should be registered. Further, permanent transfers do not come under the purview of this entry [Thermax Ltd 201-TIOL1092CESTAT-MUM]. It is a settled position of law that pre-packaged or canned software which is put on a media is in the nature of goods [Supreme Court judgment in case of Tata Consultancy Services vs State of Andhra Pradesh [2002(178) ELT22(SC) refers]. Sale of prepackaged or canned software is, therefore, in the nature of sale of goods and is not covered in this entry. License to use software which does not involve the transfer of ‗right to use‗ would neither be a transfer of title in goods nor a deemed sale of goods. Such an activity would fall in the ambit of definition of ‗service‗ and also in the declared service category specified in clause (f) of section 66E [Refer Para 6.4.4 of Education Guide for details] Page 35 of 695
  36. 36. (herein referred to as main service) shall not include reference to a service which is used for providing main service52. (2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description53. (3) Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely:–– (a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character54; (b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax55. Explanation.— For the purposes of sub-section (3), the expression "bundled service" means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.‘; 51 52 Applicable wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Provision of access to any road or bridge on payment of toll‗ is a specified entry in the negative list in section 66D of the Act. Any service provided in relation to collection of tolls or for security of a toll road would be in the nature of service used for providing such specified service and will not be entitled to the benefit of the negative list entry. [Refer Para 9. 1.1 of Education Guide for details] 53 The services provided by a real estate agent are in the nature of intermediary services relating to immovable property. As per the Place of Provision of Service Rule, 2012, the place of provision of services provided in relation to immovable property is the location of the immovable property. However in terms of the rule 5 pertaining to services provided by an intermediary the place of provision of service is where the intermediary is located. Since Rule 5 provides a specific description of ‗estate agent‗, the same shall prevail [Refer Para 9. 1.2 of Education Guide for details] 54 Eg. A hotel provides a 4-D/3-N package with the facility of breakfast. This is a natural bundling of services in the ordinary course of business. The service of hotel accommodation gives the bundle the essential character and would, therefore, be treated as service of providing hotel accommodation [Refer Para 9.2.1 of Education Guide for details] 55 Eg. A house is given on rent one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is a negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property [Refer Para 9.2.2 of Education Guide for details] Page 36 of 695
  37. 37. SECTION 67. Valuation of taxable services for charging service tax. — (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, — (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation. — For the purposes of this section, — (a) ―consideration‖ includes any amount that is payable for the taxable services provided or to be provided56; 57 (b)… (c) ―gross amount charged‖ includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called ―Suspense 56 Notional interest on security deposit taken for premises rented out on lease basis No evidence led by revenue to show that such security deposit has influenced the rent received and it is only a presumption - Prima facie appellant has made a case in favour - 2013-TIOL-1068-CESTAT-MUM 57 Omitted wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Page 37 of 695
  38. 38. account‖ or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise. 67A. Date of determination of rate of tax, value of taxable service and rate of exchange 58. The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided. Explanation.— For the purposes of this section, "rate of exchange" means the rate of exchange referred to in the Explanation to section 14 of the Customs Act, 1962 (52 of 1962.). SECTION 68. Payment of service tax. — (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66B59 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of such taxable services as may be notified60 by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66B61 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider62. SECTION 69. Registration. — (1) Every person liable to pay the service tax under this Chapter or the rules 58 59 60 61 62 With effect from 28 May 2012 ie date of Presidential assent Substituted vide Service Tax (Removal of Difficulty) Order, 2012 Applicable wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Substituted vide Service Tax (Removal of Difficulty) Order, 2012 Applicable wef 1 July 2012 vide Not. No. 19/2012-ST dated 5 June 2012 Page 38 of 695
  39. 39. made thereunder shall, within such time and in such manner and in such form as may be prescribed, make an application for registration to the Superintendent of Central Excise (2) The Central Government may, by notification in the Official Gazette, specify such other person or class of persons, who shall make an application for registration within such time and in such manner and in such form as may be prescribed. SECTION 70. Furnishing of returns. — (1) Every person liable to pay the service tax shall himself assess the tax due on the services provided by him and shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency and with such late fee not exceeding twenty thousand rupees, for delayed furnishing of return, as may be prescribed. (2) The person or class of persons notified under sub-section (2) of section 69, shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency as may be prescribed. SECTION 71. Scheme for submission of Returns through Service Tax Preparers. — (1) Without prejudice to the provisions of section 70, the Board may, by notification in the Official Gazette, frame a Scheme for the purposes of enabling any person or class of persons to prepare and furnish a return under section 70, and authorise a Service Tax Return Preparer to act as such under the Scheme. (2) A Service Tax Return Preparer shall assist the person or class of persons to prepare and furnish the return in such manner as may be specified in the Scheme framed under this section. (3) For the purposes of this section, — (a) ―Service Tax Return Preparer‖ means any individual, who has been authorised to act as a Service Tax Return Preparer under the Scheme framed under this section; (b) ―person or class of persons‖ means such person, as may be specified in the Scheme, who is required to furnish a return required to be filed under section 70. (4) The Scheme framed by the Board under this section may provide for the following, namely :— Page 39 of 695
  40. 40. (a) the manner in which and the period for which the Service Tax Return Preparer shall be authorised under sub-section (1); (b) the educational and other qualifications to be possessed, and the training and other conditions required to be fulfilled, by a person to act as a Service Tax Return Preparer; (c) the code of conduct for the Service Tax Return Preparer; (d) the duties and obligations of the Service Tax Return Preparer; (e) the circumstances under which the authorisation given to a Service Tax Return Preparer may be withdrawn; (f) any other matter which is required to be, or may be, specified by the Scheme for the purposes of this section. SECTION 72. Best judgment assessment. — If any person, liable to pay service tax, — (a) fails to furnish the return under section 70; (b) having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made thereunder, the Central Excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. 72A Special audit63. (1) If the Commissioner of Central Excise, has reasons to believe that any person liable to pay service tax (herein referred to as ''such person''), (i) has failed to declare or determine the value of a taxable service correctly; or (ii) has availed and utilised credit of duty or tax paid(a) which is not within the normal limits having regard to the nature of taxable service provided, the extent of capital goods used or the type of inputs or input services used, or any other relevant factors as he may deem appropriate; or 63 With effect from 28 May 2012 Page 40 of 695
  41. 41. (b) by means of fraud, collusion, or any wilful misstatement or suppression of facts; or (iii) has operations spread out in multiple locations and it is not possible or practicable to obtain a true and complete picture of his accounts from the registered premises falling under the jurisdiction of the said Commissioner, he may direct such person to get his accounts audited by a chartered accountant or cost accountant nominated by him, to the extent and for the period as may be specified by the Commissioner. (2) The chartered accountant or cost accountant referred to in sub-section (1) shall, within the period specified by the said Commissioner, submit a report duly signed and certified by him to the said Commissioner mentioning therein such other particulars as may be specified by him. (3) The provisions of sub-section (1) shall have effect notwithstanding that the accounts of such person have been audited under any other law for the time being in force. (4) The person liable to pay tax shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilised in any proceeding under the provisions of this Chapter or rules made thereunder. Explanation.— For the purposes of this section,–– (i) "chartered accountant" shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949(38 of 1949.); (ii) "cost accountant" shall have the meaning assigned to it in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959(23 of 1959.).' SECTION 73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. — (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within eighteen months 64 from the relevant date, serve notice on the person chargeable with the service tax which 64 With effect from 28 May 2012 Page 41 of 695
  42. 42. has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : 65 Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of — (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words ―eighteen months 66 ‖, the words ―five years‖ had been substituted. Explanation. — Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of eighteen months67 or five years, as the case may be. (1A)68 Notwithstanding anything contained in sub-section (1) (except the period of eighteen months of serving the notice for recovery of service tax), the Central Excise Officer may serve, subsequent to any notice or notices served under that sub-section, a statement, containing the details of service tax not levied or paid or short levied or short paid or erroneously refunded for the subsequent period, on the person chargeable to service tax, then, service of such statement shall be deemed to be service of notice on such person, subject to the condition that the grounds relied upon for the subsequent period are same as are mentioned in the earlier notices. 65 Once the Commissioner (Appeals) has come to a finding that for the relevant period, there was genuine cause for confusion regarding the correct legal position and also scope for doubt about the service tax liability on GTA as the 'Commercial concern' for non-imposition of penalty then the same cause is also to be factored in to conclude that extended period of limitation cannot be invoked - The Saswad Mali Sugar Factory Ltd 2013-TIOL-898-HC-MUM-ST 66 With effect from 28 May 2012 With effect from 28 May 2012 With effect from 28 May 2012 67 68 Page 42 of 695
  43. 43. (1A) * * * * (2) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined : * * * * * 69 (2A) Where any appellate authority or tribunal or court concludes that the notice issued under the proviso to sub-section (1) is not sustainable for the reason that the charge of,— (a) fraud; or (b) collusion; or (c) wilful misstatement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or the rules made thereunder with intent to evade payment of service tax, has not been established against the person chargeable with the service tax, to whom the notice was issued, the Central Excise Officer shall determine the service tax payable by such person for the period of eighteen months, as if the notice was issued for the offences for which limitation of eighteen months applies under sub-section (1) (3) Where any service tax has not been levied or paid or has been short- levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid : Provided that the Central Excise Officer may determine the amount of shortpayment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, 69 Applicable from the date of Presidential Assent i.e. 10 May 2013 Page 43 of 695
  44. 44. and the period of ―eighteen months 70 ‖ referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation.1 — For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise Officer, but for this sub-section. Explanation 2. — For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service tax under this sub-section and interest thereon. (4) Nothing contained in sub-section (3) shall apply to a case where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of — (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax. (4A) Notwithstanding anything contained in sub-sections (4), where during the course of any audit, investigation or verification, it is found that any service tax has not been levied or paid or has been short-levied or shortpaid or erroneously refunded, but the true and complete details of transactions are available in the specified records, the person chargeable to service tax or to whom erroneous refund has been made, may pay the service tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded along with interest payable thereon under section 75 and penalty equal to one per cent. of 70 With effect from 28 May 2012 Page 44 of 695
  45. 45. such tax, for each month, for the period during which the default continues, up to a maximum of twenty-five per cent. of the tax amount, before service of notice on him and inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under sub-section (1) in respect of the amount so paid and proceedings in respect of the said amount of service tax shall be deemed to have been concluded : Provided that the Central Excise Officer may determine the amount of service tax, if any, due from such person, which in his opinion remains to be paid by such person and shall proceed to recover such amount in the manner specified in sub-section (1). Explanation. — For the purposes of this sub-section and section 78, ―specified records‖ means records including computerised data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of account shall be considered as the specified records. (5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003. (6) For the purposes of this section, ―relevant date‖ means, — (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid — (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Page 45 of 695
  46. 46. Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund. SECTION 73A. Service tax collected from any person to be deposited with Central Government. — (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made thereunder from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. (2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government. (3) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (2) and the same has not been so paid, the Central Excise Officer shall serve, on the person liable to pay such amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government. (4) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom the notice is served under sub-section (3), determine the amount due from such person, not being in excess of the amount specified in the notice, and thereupon such person shall pay the amount so determined. (5) The amount paid to the credit of the Central Government under sub-section (1) or sub-section (2) or sub-section (4), shall be adjusted against the service tax payable by the person on finalisation of assessment or any other proceeding for determination of service tax relating to the taxable service referred to in sub-section (1). (6) Where any surplus amount is left after the adjustment under sub-section (5), such amount shall either be credited to the Consumer Welfare Fund Page 46 of 695

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