Service tax ppt (finance act 2008)


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Service tax ppt (finance act 2008)

  1. 1. Service Tax
  2. 2. IntroductionService Tax was introduced in 1994 vide FinanceAct, 1994 with 3 SERVICES namely, Brokeragecharged by stockbroker, Telephone services &premium on General Insurance Services.Applicable to whole of India except Jammu &Kashmir. 2
  3. 3. Contd…What is Service Tax?• It is a tax levied on the transaction of certain Specified Services, by the Central Government under the Finance Act, 1994.• It is an Indirect Tax, which means that normally the service provider pays the tax and recovers the amount from the recipient of taxable service. 3
  4. 4. Who is liable to pay Service Tax?Generally, the ‘Person’ who provides the taxableservice (on receipt of service charges) isresponsible for paying the Service Tax to theGovernment (Sec.68 (1) of the Act), except thefollowing:•The recipient of services in India is liable to payService Tax, where taxable services are providedby Foreign Service providers with no establishment in India; 4
  5. 5. Contd…• The Service Tax is to be paid by the Insurance Company for the services in relation to Insurance Auxiliary Service by an Insurance Agent.• The person who pays or is liable to pay freight for the taxable services provided by a Goods Transport Agency for transport of goods by road, is liable to pay Service Tax, if the consignor or consignee falls under any of the seven categories viz. (a) a factory (b) a company (c) a corporation (d) a society (e) a co- operative society (f) a registered dealer of excisable goods (g) a body corporate or a partnership firm. 5
  6. 6. Contd…i. The taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund. In this regard, Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service. Refer: Sec. 68(2) of the Act read with Rule 2(d) of the Service Tax Rules, 1994. 6
  7. 7. Contd…i. In case the service provided by a person falls within the scope of the taxable services and if such service is not fully exempted, the service tax is payable on the value of the taxable service received subject to the eligible abatements, if any.Service tax is payable on Gross Amount charged for taxable service provided or to be provided [Section 67]. If consideration is partly not in money, valuation is required to be done as per Valuation Rules. Tax is payable even when advance is received. 7
  8. 8. Assesseeho is an ‘Assessee’ in relation to ServiceTax?Assessee’ means a person liable to payService Tax and includes his agent. 8
  9. 9. REGISTRATION REQUIREMENTS• As per Section 69, every person liable to pay service tax has to get themselves registered with service tax department.• An Input Service Distributor and any provider of taxable services whose aggregate value of taxable service in a financial year exceeds Rs. 9 lacs, has to get themselves registered. 9
  10. 10. Contd…• Application for registration in Form ST-1 to be made to concerned Superintendent of Central Excise.• The application for registration shall be made within 30 days, from the date on which the levy of service tax is brought into force in respect of the relevant services or of the commencement of business where services has already been levied . 10
  11. 11. Contd…• Registration Certificate is granted in Form ST-2 within 7 days from the date of receipt of intimation, if not, then deemed to be granted. In case the registration certificate is not issued within seven days, the registration applied for is deemed to have been granted. (Rule 4(5) of the STR, 1994)• CBEC vide Circular no. 35/3/2003 has made it compulsory for every assessee to obtain the Service Tax Code number which is a 15 digit alphanumeric no. based on the PAN 11
  12. 12. Contd… Assessee providing more than one taxable service should mention in single application, all the taxable services provided by him. Rule 4(4), Service Tax Rule,1994. 12
  13. 13. Provision for Centralized Registrationervice providers having centralised accounting orcentralised billing system, at their option, can haveCentralised registration at one or more places.Commissioner of Central Excise / Service Tax inwhose jurisdiction centralised account or billingoffice of the assesses exists, is empowered togrant centralised registration. 13
  14. 14. Exemption Scheme for Small Service Providers• Central Government, provides the basic exemption to the service providers whose aggregate value of taxable services provided in last financial year is less than Rs. 10 Lacs.• Assessee should not charge the Service Tax if he/she is claiming the benefit of exemption. If charged by mistake the same should be refunded to the service receiver. 14
  15. 15. Contd… Exception• Taxable services provided by a person under Brand Name or Trade Name, whether registered or not, of any other person are not eligible for the threshold limit exemption of Rs. 10 Lacs. [Notification No. 6/2005] 15
  16. 16. Other Exemptions• Services provided to United Nations & International Organizations.• Services provided to developer of SEZs or units of SEZs• Services provided to Diplomatic Missions.• Services exported in terms of Export of Service Rules,2005.• Services provided by RBI 16
  17. 17. Contd…• Services provided by Incubators (used to maintain a constant temperature) are exempt from service tax.• Services provided by digital cinema service provider to producer/ distributor in relation to delivery of content of Cinema in Digital Form are exempt from service tax.• Value of goods and materials sold by service provider are exempt. 17
  18. 18. AbatementIn case of certain services, the benefit of abatement(rebate) is allowed to the service provides. In suchcases, the service providers charges tax from theclient after taking into account the abatementavailable or on net amount (net of abatement).Example: if invoice for servicing is to be raised forRs. 1000/- and abatement of 75% is available (as incase of Goods Transport Agency), then service tax will be imposed only on Rs. 250/- [1000 – 75% of 1000]. 18
  19. 19. Service Tax Rate Period RateFrom 1.7.1994 to 13.05.2003 5%From 14.5.2003 to 09.09.2004 8%From 10.9.2004 to 17.04.2006 10%From 18.4.2006 to 10.05.2007 12.24%*From 11.05.2007 to 24.02.2009 12.36%*From 25.02.2009 10.3%* *Inclusive of cess 19
  20. 20. Payment of Service TaxPayment of Service Tax through G.A.R. 7 Other than Individual/Firm Individual/Firm Quarterly Monthly Payment PaymentI, II & III IV Quarter Ending Months Month of Quarter on 31st March Apr - Feb March5th of the 5th of the Up to 31st Up to 31 st Month Next Month March Marchfollowing Quarter 20
  21. 21. e-Payment of Service Tax E – Payment Optional Mandatory E - Payment E - Payment Rs. 50 Lakhs or MoreLess than Rs. 50 (Cash+CENVAT) Lakhs(Cash+CENVAT) In case of Large Other than LTU Taxpayer Unit Check the Limit Check Cumulative Individually for Every Limit for All Registered Premises Registered Premises 21
  22. 22. Due Date of e-Payment of Service Tax Individual/ Firm 6th of the Month following the Quarter End Other than Individual/ Firm 6th of the following Month Note: 1. e-payment can be made up to 8 p.m. 2. due date of payment will 31st March for the last quarter or month of march as the case maybe 22
  23. 23. Failure to Pay Service Tax• Interest(sec. 75) :- Interest @13% p.a. is payable on the short-fall or unpaid tax for delayed period.• Penalty(sec. 76) :- Rs.200 for every day during which failure continues, or 2% of tax per month, whichever is higher. 23
  24. 24. Service Tax Return Form No. ST-3, Half-Yearly Half-Year Due DateApril – September 25th OctoberOctober – March 25th April 24
  25. 25. How to file Service Tax Returns?• The details in respect of each month of the period for which the half-yearly return is filed, should be furnished in the Form ST-3, separately. The instructions for filing return are mentioned in the Form itself. It should be accompanied by copies of all the GAR-7 (TR-6) Challan for payment of Service Tax during the relevant period.• Filing of return is compulsory, even if it may be a nil return, within the prescribed time limit, failing which penal action is attracted. 25
  26. 26. Service Tax Return Input Service Distributor Half-Year Due DateApril – September 30th OctoberOctober – March 30th April 26
  27. 27. Delay in Filing Return Period Fine/Penalty Up to 15 days Rs.500/- 16 to 30 days Rs.1000/- Rs1000/- plus Rs.100/- perBeyond 30 days day from the 30th day till date of furnishing return 27
  28. 28. Input Service DistributorAn office (of the output service provider) whichreceives invoices for the procurement of inputservices and issues invoices for the purpose ofdistributing the credit of Service Tax paid to suchprovider of output service is an “Input ServiceDistributor”.The credit of the tax amount so distributed tovarious places shall not exceed the total Service Tax amount contained in the original invoice / bill. 28
  29. 29. Large Tax Payer Unit (LTU)A tax-payer means a service provider whohas paid service tax of Rs. 5 Crores or moreduring the year.LTU has Submit Return for each registeredpremises.However, Consolidated Return shall be submitted, if he has obtained centralized registration. 29
  30. 30. RefundsWhere an assessee has paid to the credit of theGovernment in respect of a taxable service, which isnot so provided by him, either wholly or partially forany reason, the assessee may adjust the excessService Tax so paid by him (calculated on a pro-ratabasis) against his Service Tax liability for thesubsequent period, if the assessee has refunded thevalue of taxable service and the Service Tax thereon to the person from whom it was received (Rule 6(3) of the STR, 1994). 30
  31. 31. Contd…n all other cases of excess payment, refund claimshave to be filed with the Department. It is importantto note that any amount of Service Tax paid inexcess of the actual liability, is refundable, only if itis proved that the claimant of refund had alreadyrefunded such amount to the person from whom itwas received or had not collected at all. 31
  33. 33. What is CENVAT Credit Scheme ?• The CENVAT Credit Rules, 2004, introduced with effect from 10.9.2004, provides for availment of the credit of the Service Tax paid on the input services / Central Excise Duties paid on inputs / capital goods / Additional Customs Duty leviable under the Customs Tariff Act, equivalent to the duties of excise.• Such credit amount can be utilized towards payment of Service Tax by an assessee on their Output Services. (Refer to Rule 3 of CENVAT Credit Rules, 2004). 33
  34. 34. Contd… Duties paid on the inputs, capital goods and the Service Tax paid on the input services can be taken as credit. Education Cess paid on the Excise duty and Service Tax can also be taken as credit only for payment of Education Cess relating to output service. The interest and penalty amounts cannot be taken as credit. 34
  35. 35. InputsAll goods except Light Diesel Oil, High SpeedDiesel Oil and Motor Spirit, commonly known aspetrol, whether used for providing service,irrespective whether used directly or indirectlyand whether contained in the final product ornot. 35
  36. 36. Input ServiceAny service availed by a provider of taxableservice for providing output service.Services availed in relation to;i. setting up, modernization, renovation or repairs of a factory premises of provider of output service or an office relating to such factory or premises;ii. advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, 36
  37. 37. Contd…i. activities relating to business such as accounting, auditing, financing,ii. recruitment and quality control, training, computer networking,iii. credit rating, share registry and security,iv. inward transportation of inputs or capital goods and outward transportation up to the place of removal are also input services Refer:[clause (1) of rule 2]. 37
  38. 38. Capital Goods 38
  39. 39. Contd… 39
  40. 40. When Credit is Available: PreconditionsThe CENVAT credit in respect of inputs may betaken immediately on receipt of the inputs in thepremises of the provider of Output Services.Credit of Service Tax on the input services can beavailed, only after making payment of the amountindicated in the invoice / bill / challans. Thus,Payment of Input Service is a Pre-condition.The above requirement is not applicable in respect of credit of duties paid on inputs and capital goods. 40
  41. 41. Utilization / Application of Credit 41
  42. 42. Utilizing CENVAT Credit - Conditions• Where both exempted as well as taxable services are rendered & Separate Accounts are maintained, then CENVAT Credit is allowed only on inputs / input services utilized for rendering taxable services. (Ref. Rule 6 (2) of CENVAT Credit Rules, 2004). 42
  43. 43. Contd…Example: Ram Associates provides Accounting as wellas Legal services & maintain separate accounts for bothservices rendered. It paid Rs. 15,000 as fees & Rs. 1545as service tax to chartered accountant (input service) forproviding accounting services (output service) to itsclients with a mark-up of Rs. 5000 i.e. for fees of Rs.20000 + 2060 as service tax. As it maintained separateaccounts it can claim CENVAT Credit Rs. 1545 against its liability of Rs. 2060. Thus, it needs to pay Rs. 515 in cash and balance Rs. 1545 will adjusted against CENVAT Credit available. 43
  44. 44. Utilizing CENVAT Credit - ConditionsWhere both exempted as well as taxable services arerendered & No Separate Accounts are maintained,then provider of output services shall utilize creditonly to extent of an amount not exceeding 20% of theamount of service tax payable, on taxable outputservice. (Ref. Rule 6 (3) of CENVAT Credit Rules,2004). 44
  45. 45. Contd…Example:Service tax liability for a specific period is Rs. 1000/- and there is a credit of Rs. 500/- available, the credit can be utilized only to the extent of Rs. 200/- and the balance Service Tax liability (i.e Rs. 1000-200 = 800) has to be paid in cash / cheque. The remaining credit can be carried forward and used for the subsequent period in a similar manner. 45
  46. 46. Contd…W.e.f. 1.4.2008, following additional options are availableto Service Provider (not having separate accounts)instead of utilizing CENVAT credit to the extent of 20% oftheir liability.•pay an amount equal to 8% of value of exemptedservices or•an amount equivalent to the CENVAT credit attributableto input / input services used in, or inrelation to exempted services.[Not.No.10/2008CE (NT) dt. 01.03.2008.)] 46
  47. 47. Contd…However, in terms of Rule 6(5) of CENVAT CreditRules 2004, even though no separate accounts aremaintained in respect of Services listed inAppendix 5, CENVAT credit shall be allowedunless such services are exclusively used in or inrelation to the manufacture of exempted goods orproviding exempted services. 47