A Knowledge Workshop on “New Regime of Service Taxation in India”

1. Corporate Knowledge Foundation
Presents
A Knowledge Workshop
On
“New Regime of Service Taxation in India”
Conducted by
Dr. Sanjiv Agarwal
FCA, FCS
Saturday,
14th July,2012
New Delhi © Dr. Sanjiv Agarwal

2. Corporate Knowledge Foundation
Session IV
Other Legislative and Procedural
Amendments

3. Other Legislative and
Procedural Amendments
This Presentation Covers
• Abatements
• Reverse Charge
• Revision Authority
• Settlement of Cases
• Other amendments

4. Abatements
• Besides full exemption to 39 categories of services vide
Notification No. 25/2012-ST dated 20.06.2012
• Earlier there were a number of exemption notifications that
prescribed the abatements for various categories of services
(including 1/2006)
• Abatements merged into a single Notification No 26/2102 -
ST dated 20/6/12
• Valuation rules contain abatement for Works Contract and
Supply of Food Services

5. Specific Abatements
Sl. No. Description of taxable service Tax Percent- Conditions
age
1 Financial leasing services including 10 Nil
equipment leasing and hire purchase
2 Transport of goods by rail ( now exempt till 30 Nil
30.9.2012)
3 Transport of passengers, with or without 30 Nil
accompanied belongings by rail ( now
exempt till 30.9.2012)
4 Supply of food or any other article of human 70 CENVAT credit on any goods
consumption or any drink, in a premises, classifiable under chapter 1
including hotel, convention center, club, to 22 of the Central Excise
pandal, shamiana or any place specially Tariff Act, 1985 has not been
arranged for organizing a function taken under the provisions
of the CENVAT Credit Rules,
2004.

6. Specific Abatements
5 Transport of passengers by air, with 40 CENVAT credit on inputs or capital goods,
or without accompanied belongings used for providing the taxable service, has
not been taken under the provisions of the
CENVAT Credit Rules, 2004.
6 Renting of hotels, inns, guest 60 Same as above.
houses, clubs, campsites or other
commercial places meant for
residential or lodging purposes
7 Transport of goods by road by Goods 25 CENVAT credit on inputs, capital goods
Transport Agency and input services, used for providing the
taxable service, has not been taken under
the provisions of the CENVAT Credit
Rules, 2004.
8 Services provided in relation to chit 70 Same as above.

7. Specific Abatements
9 Renting of any motor vehicle designed 40 Same as above.
to carry passengers
10 Transport of goods in a vessel from one 50 Same as above.
port to another
11 Tour operator services 25 (i) CENVAT credit on inputs,
(i) provided by a tour operator in relation capital goods and input services,
to a package tour used for providing the taxable
service, has not been taken under
the provisions of the CENVAT
Credit Rules, 2004.
(ii) The bill issued for this
purpose indicates that it is
inclusive of charges for such a
tour.

8. Specific Abatements
(ii) provided by a tour 10 (i) CENVAT credit on inputs, capital
operator in relation to a goods and input services, used for
tour, solely arranging or providing the taxable service, has
booking accommodation not been taken under the provisions
of the CENVAT Credit Rules, 2004.
(ii) The invoice, bill or challan issued
indicates that it is towards the
charges for such accommodation.
(iii) This exemption shall not apply
in such cases where the invoice, bill
or challan issued by the tour
operator, in relation to a tour, only
includes the service charges for
arranging or booking
accommodation for any person and
does not include the cost of such
accommodation.

9. Specific Abatements
(iii) Services, other than 40 (i) CENVAT credit on inputs, capital
services specified above in goods and input services, used for
(i) or (ii) providing the taxable service, has
not been taken under the provisions
of the CENVAT Credit Rules, 2004.
(ii) The bill issued indicates that the
amount charged in the bill is the
gross amount charged for such a
tour.

10. Specific Abatements
12. Construction of a complex, 25 (i) CENVAT credit on inputs
building, civil structure or a part used for providing the taxable
thereof, intended for a sale to a service has not been taken
buyer, wholly or partly except under the provisions of the
where entire consideration is CENVAT Credit Rules, 2004.
received after issuance of
completion certificate by the (ii) The value of land is included
competent authority in the amount charged from the
service recipient.

11. Changes in Reverse
Charge Mechanism
W.e.f. 1.7.2012 a new scheme of taxation is being brought into
effect whereby the liability of payment of service tax shall be both on
the service provider and the service recipient (Notification No. 30/
2012 dated 20.6.2012 )
The extent to which tax liability has to be discharged by the service
receiver specified in the notification.
Credit of tax paid by service recipient
The credit of tax paid by the service recipient under partial reverse
charge would be available on the basis on the tax payment challan

12. Reverse Charge Mechanism under
various services
Sr.No Description of Service Service provider Service receiver
1. Services provided by an insurance Nil 100%
agent to any person carrying on
insurance business
2. Services provided by a goods Nil 100%
transport agency in respect
of transportation of goods by road
3. Services provided by way of Nil 100%
sponsorship

13. Reverse Charge Mechanism
under various services
4. Services provided by an arbitral tribunal Nil 100%
5. Services provided by individual advocate Nil 100%
or a firm of advocates by way of legal
services
6. Services provided by Government or Nil 100%
local authority by way of support services
excluding,-
(1) renting of immovable property,
(2) postal services
(3) transport of goods / passengers
(4) air craft or vessel

14. Reverse Charge Mechanism under
various services
7. Hiring of Motor Vehicle Nil 100 %
(a) renting of a motor vehicle
designed to carry passengers on
abated value to any person not
engaged in the similar line of
business 60% 40%
(b) renting of a motor vehicle
designed to carry passengers on non
abated value to any person who is
not engaged in the similar line of
business
8. Services provided by way of supply 25% 75 %
of manpower for any purpose

15. Reverse Charge Mechanism under various
services
9. Services provided in service portion in
execution of works contract 50% 50%
10. Services provided by any person who
is located in a non-taxable territory Nil 100%
and received by any person located in
the taxable territory

16. Appeal before Commissioner
(Appeals)
Time Period for Appeal
Prior to 28.5.2012 (sub-section 3)
 To appeal within three months from date of communication of
order appealed against

Period of 3 months can be extended by further 3 months (total 6
months) by Commissioner (Appeals)
 Condonation of delay/ extension beyond 3 months is beyond the
power of Commissioner (Appeal)
to be contd……….

17. Appeal before Commissioner
(Appeals)
w.e.f. 28.5.2012 (sub-section 3A)
 To appeal within two months from date of communication of
order passed after 28.05.2012

Period of 2 months can be extended by further 1 month (total 3
months) by Commissioner (Appeals)

Condonation of delay/ extension beyond 1 month is beyond the
power of Commissioner (Appeal)

18. Revision Mechanism
Introduced by Finance Act, 2012
Section 35EE of Central Excise Act, 1944 made applicable to
Service Tax w.e.f. 28.05.2012
All appeals against Commissioner (Appeals) orders lied before
Tribunal prior to 28.05.2012.
Like Excise, in Service Tax also, revision authority shall hear
matters relating to –
 Cenvat Credit

Rebate of Exports
to be contd……..

19. Revision Mechanism
Revision by Central Government (Joint Secretary in MOF)
Revision application to be heard and order passed
Order may be annulled or modified
Minimum amount of dispute Rs. 5000
To be filed within 3 months of communication of order
Revision can be sought by CCE/ assessee
Central Government can also suo moto revise
No provisions for appeal against revisionary order
Only remeady is writ Jurisdiction
Quasi judicial proceedings

20. Settlement Provisions in
Service Tax
Introduced by Finance Act, 2012 w.e.f. 28.5.2012
Sections 31, 32 and 32A to 32P of Central Excise Act, 1944 made
applicable to Service Tax (section 83 of Finance Act, 1994)
Service Tax (Settlement of Cases) Rules, 2012 notified (N.No.
16/2012-ST dated 28.05.2012)
Objective to encourage quick settlement of disputes and save
business from prosecution / penalties
Principal bench at Delhi (benches at Mumbai, Calcutta, Chennai)

21. Benefits of Settlement
Quick settlement of disputes to avoid prolonged litigation
A one time tax evader or an un-intending defaulter can make clean
his affairs through Settlement
Any defaulting person can admit his guilt, pay taxes with applicable
interest and avoid further liabilities
Settlement Commission can grant waiver/ reduction of penalty, fine
or interest
Settlement Commission can grant immunity from prosecution to
assessee, its directors and partners

22. Settlement of Cases
Any assessee can approach the Settlement Commission
The proceedings / cases should be pending with aggregate amount
of more than Rs 3 lakh involved
Application to Settlement Commission should be made with
prescribed fee and in prescribed form
Application once made, can not be withdrawn
Application can be made by any assessee including directors or
partners of firms
Application can also be filed by two or more
assessees and joint / co - noticees
proceedings or case must be pending before the adjudicating
authority on the date of application.
A show cause notice should have been issued

23. Settlement of Cases
Application must make full and true disclosures before the
Settlement Commission which is the very basis of settlement.
Issues relating to recovery of Cenvat credit can also be taken up
before the Settlement Commission
Cases involving only penalty or cases which are pending before
court or Appellate Tribunal shall not be entertained by the
Settlement Commission.
Cases involving interpretation of classification and valuation can not
be taken up by Settlement Commission .

24. Retrospective Amendments
• Special provision for exemption in certain cases relating
to management etc of roads (Section 97)
• Special provision for exemption in certain cases relating
to management etc of non-commercial Government
buildings (Section 98)
• Exemption to club & association including cooperative
societies for projects meant for treatment of effluents /
solid waste w.e.f. 16.6.2005 (Section 145)

25. Place of Provision of Services Rules, 2012
(Section 66C)
These rules are primarily meant for persons who deal in cross-border services and
state of Jammu and Kashmir.
The service providers operating within India from multiple locations, without
having centralized registration and services that are wholly consumed within a
SEZ, to avail the outright exemption will find them useful in determining the
precise taxable jurisdiction.
What is the place of provision of services
Performance based services – Location of performance
Immovable property related services – Location of immovable property.
Services relating to events – Location of event held.

26. Place of Provision of Services Rules,
2012 (Section 66C)
Services provided at more than one location – Location in the taxable territory
where the greatest proportion of service is provided.
Services where both service provider and receiver are located in the taxable
territory – Location of service receiver
Specified services – Location of service provider.
Goods transportation services – Place of destination of goods. (In GTA Service –
Location of the person liable to pay tax
Passenger Transportation service – Place were the passenger embarks.
Services provided on board a conveyance – Location of first scheduled point of
departure.

27. Amendment in Valuation Rules
(Notification 24/2012 dated 06.06.2012)
Determination of value of service portion in the execution of
a works contract (rule-2A)-
1. Value of works contract service –
[Gross amount charged less the value of property in goods
transferred in the execution of works contract]
2. Where the value has not been determined as above, the
person liable to pay tax on the service portion involved in
the execution of the works contract shall determine the
service tax payable in the following manner, namely-

28. Service Tax Rules - Changes effective
from 01.04.2012
Invoice to be issued within 30 days (earlier 14 days)
In case of Banking & Financial Services – Invoice within 45 days
No Invoice for minor receipts-
If an amount upto Rs.1, 000/- is received in excess of the amount
indicated in the invoice and the provider has opted to determine
Point of Taxation based on the option in Point of Taxation Rules,
no invoice is required to be issued.

29. Service Tax Rules - changes effective
from 01.04.2012
Self adjustment of excess tax paid
Excess amount can be adjusted without any monetary limits provided
excess payment is not on account of interpretation of law, taxability,
classification, valuation or applicability of any exemption Notification.
(Rule 6 (4A))
Small service providers to pay tax on receipt basis
In respect of individual / firms whose value of taxable services from
multiple locations is Rs.50 lakhs or less in the previous financial year
option available to pay tax upto Rs.50 lakhs in the current financial year
based on receipt of payment.

30. Amendments in Finance Act, 1994-
changes effective
from 28.05.2012
Special audit in service tax (Section 72A)
If Commissioner has reasons to believe that tax payer
has failed to declare the correct value of service,
taken CENVAT by fraud, services in multiple locations
etc, he can order special audit by CA/CWA even if it
is already audited under any other law.

31. THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com