A document giving detailed information about the negative list based regime of the service tax.

1. An insight into Negative List based regime
SERVICE TAX
Prepared by
Aniruddha Bhide

2. INTRODUCTION
In this emerging era of cut throat competition, it is inevitable for everyone, to
continuously improve and enhance to stand apart from the crowd
But there are many hurdles in this race and the most complex being the
Taxation Laws and Governmental Compliances
Finance Act, 2012 revamped the entire structure of Taxation of Services in India
2
Finance Act, 2012 revamped the entire structure of Taxation of Services in India
by the introduction of Negative List Based Taxation w.e.f. 1st of July, 2012
Keeping this in mind we have come up with this presentation which is an All in
One Package covering all the changes in the Service Tax Regulation
Kindly invest a few minutes instead of spending hours later !

3. Paradigm Shift: Change in the
approach of taxation from selective to
comprehensive which has brought all
services under service tax net
Reverse Charge: 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
Negative List Explicitly not taxable
Declared Services Explicitly Taxable
Mega Exemption: Exempts
What’s NEW ???
3
Place of Provision of Service
Rules
Mega Exemption: Exempts
certain services from the tax net
Point of Taxation Rules

4. The entire Service Tax Law has undergone a change upside down
Hence the entire system needs to be understood to get inline with the new
laws and regulations without affecting the stability of the organization
Moreover these changes have been made effective from 1st July, 2012
How does it affect you ?
4
Thus there seems to be an urgency for assimilating these into the
organization

5. Itis evident that this is an emerging area of taxation and thus
the department is also on toes
We wish that your organization prospers and reaches to
greater heights
To accomplish this goal you need to focus on the management
of your operations and not on the hurdles of taxation laws and
5
To accomplish this goal you need to focus on the management
of your operations and not on the hurdles of taxation laws and
various compliances….
You focus on the operations
We will take care of the Taxation!!!

6. Take Off
So let us take a ride of the new regulations
and make this journey of change a smoother
one !!!
6

7. NEW SERVICE TAX
REGULATIONS

8. Index
Sr. No. Topic Page No.
01 Introduction 09-11
02 Definition of Service 12
03 Place of Provision of Service 13-17
04 Point of Taxation 18-24
05 Reverse Charge Mechanism 25-28
06 Mega Exemption 29
8
06 Mega Exemption 29
07 Abatement 30-32
08 Valuation of Services 33-34
09 Miscellaneous 35

9. Selective
Approach
(Upto 30th
June,2012)
Comprehensive
Approach
(w.e.f. 1st
July,2012)
Finance Act, 2012Finance Act, 2012
Paradigm Shift
9
There has been a paradigm shift in the approach of taxation of Service Tax
from Selective Approach to Comprehensive Approach. Thus the onus has
been shifted from the department to the assessee
June,2012)
July,2012)

10. Taxability
Not to scale
Illustrative only
10

11. With the advent of Negative List Approach in the taxation of services, any activity
which meets the characteristics of a ‘service’ is taxable unless otherwise specifically
listed in the
Negative List (Sec. 66D),
Mega Exemption Notification (Not.No. 25/2012-ST) or
such other notifications issued by the department from time to time.
Moreover, some services have been explicitly enumerated to be taxable to remove any
Taxability
11
Moreover, some services have been explicitly enumerated to be taxable to remove any
ambiguities. These services are called ‘Declared Services’ defined and listed vide
section 66E.

12. Service
means
Any activity
includes
Declared Services
(Sec.66E)
does not
include
Any activity which
constitutes merely
Provision of service
by employee to
employer
Fees
taken by
court or tribunal
Definition of Service – Sec. 65B(44)
12
Carried out by a
person for another
For consideration
Transfer of title in goods
or immovable property
Transfer which is deemed
to be sale
Transaction in money or
actionable claim
court or tribunal

13. Place of Provision of Service Rules, 2012
Finance Act, 2012, has removed the entire concept of Import and Export of Services and
instead defined the scope of taxation under the charging provision i.e. Sec.66B to be based
on the place of provision of services
Section 66C of the act prescribes rules for determination of place of provision of service by
superseding the ‘Export of Services, Rules, 2005’ and Taxation of Services ( Provided from
outside India and received in India) Rules, 2006
These rules determine the place where a service shall be deemed to be provided
irrespective of the place of performance or consumption of the service
As per these rules, if the services are deemed to be provided in the taxable territory then tax
13
As per these rules, if the services are deemed to be provided in the taxable territory then tax
has to be paid, otherwise no tax is attracted
The rules specify the manner to determine the taxing jurisdiction for a service
This is in line with the principle of service tax being a destination based consumption tax
The general rule provides that the place of provision of service shall be the place of location
of the service receiver. However there are certain exceptions which have been dealt with in
the succeeding slides

14. Place of Provision of Service Rules, 2012
General Rule( Illustration)
SP : Service Provider
SR: Service Receiver
14

15. Place of Provision of Service Rules, 2012
Taxable and Non-Taxable Territory
Taxable Territory
India
15
Indian
Land mass
excluding
Jammu
and
Kashmir
Territorial
Waters
Continent
al Shelf
Exclusive
Economic
Zone
Maritime
Zone
Sea Bed Air Space

16. Whether
registered
in India?
Whether
person has a
business
establishment
in India?
Whether
person has a
fixed
establishment
in India?
Whether
person has
his usual
place of
residence in
India?
Location is
not in India
Location is
N
N N
N
Y
Y
Y
Y
Place of Provision of Service Rules, 2012
Location of Service Receiver / Provider
16
Location is
in India
Whether
person has
another
establishment
abroad?
Location
is in
India
Whether
person has a
fixed
establishment
abroad?
Location will be the establishment more directly concerned
Location will be the
business
establishment
Y
Y Y
N N

17. Rule Description Place of Provision of Service
3 General Rule Location of service receiver. If not available
then location of service provider
4 Services provided in respect of goods that are required to be
made physically available by the service receiver to the service
provider or in the physical presence of an individual, in order to
provide service
Place of Performance
5 Services in relation to immovable property Location of immovable property
6 Services in relation to Events Place where Event is actually held
7 Services provided at more than one location
(overrides rule 4,5,6)
Location in the taxable territory where the
greatest proportion of the service is
Place of Provision of Service Rules, 2012
17
(overrides rule 4,5,6) greatest proportion of the service is
provided
8 When service provider and receiver are in Taxable Territory Location of Service Receiver
9 Specified Services such as Intermediary Services, Banking and
Financial Services, Online information and database access or
retrieval services, Hiring of means of transport
Location of service provider
10 Service of transport of goods Destination of goods
11 Passenger transportation Place of origin
12 On board a conveyance Place of origin

18. Point of Taxation Rules, 2011
Introduction
The Point of Taxation Rules, 2011 were introduced vide Notification 18/2011-ST, dated
01/03/2011
These rules were introduced to enable collection of service tax on accrual of taxable
value of service
However, with advent of new approach w.e.f. 1st July, 2012, amendments were
18
However, with advent of new approach w.e.f. 1 July, 2012, amendments were
introduced in the said rules to be in consonance with the new provisions of the Service
Tax vide Notification No. 04/2012-ST dated 17/03/2012

19. Rule 3
Determination of Point of Taxation- For the purposes of these rules, unless otherwise
provided, 'point of taxation' shall be,
the time when the invoice for the service provided or to be provided is issued
(Provided that where the invoice is not issued within thirty days of the completion of
the provision of the service, the point of taxation shall be date of such completion)
in a case, where the person providing the service, receives a payment before the time
specified above, the time, when he receives such payment, to the extent of such
Point of Taxation Rules, 2011
19
specified above, the time, when he receives such payment, to the extent of such
payment
Explanation.- For the purpose of this rule, wherever any advance by whatever name
known, is received by the service provider towards the provision of taxable service, the
point of taxation shall be the date of receipt of each such advance

20. Rule 3
General rule applies to cases not falling under
Rule 4 - Change in tax rate
Rule 5 - Where the service is taxed for the first time
Rule 7 - Liability under reverse charge mechanism
Transactions with associated enterprises
Rule 8 - Transactions for copyright, patents, trademarks or design
Point of Taxation Rules, 2011
20
In general, POT would be earlier of :
Date of issue of invoice – where invoice is issued within 30 days from completion of
service
Date of completion of service – where invoice is not issued within 30 days from
completion of service
Date of receipt of consideration
Date of receipt of advance

21. Sr Date of
Comp-
letion
Invoice
Date Payment Date Point of Taxation Remarks
1 April
10,2012
April
20,2012
April 30,2012 April 20,2012 Invoice issued in 30 days and before
receipt of payment
2 April
10,2012
May
26,2012
April 30,2012 April 10,2012 Invoice not issued in 30 days and
payment received after completion
Point of Taxation Rules, 2011
Rule 3
21
10,2012 26,2012 payment received after completion
of service
3 April
10,2012
April
20,2012
April 15,2012 April 15,2012 Invoice issued in 30 days but
payment received before invoice
4 April
10,2012
May
26,2012
April 5,2012(part)
and April 25,2012
(remaining)
April 5,2012 and
April 10,2012 for
Respective
amounts
Invoice not issued in 30 days. Part
payment before completion,
remaining later

22. Point of Taxation Rules, 2011
Continuous Supply of Service
Continuous supply of service which was initially defined under Rule 6 now falls under
General Rule w.e.f. 01.04.2012
In case of continuous
supply of service
where the provision
of the whole or part
of the service is
determined
on the completion of
an event in terms of
a contract,
22
determined
periodically
a contract,
which requires the
receiver of service to
make any payment to
service provider,
the date of
completion of each
such event as
specified in the
contract
shall be deemed to
be the date of
completion of
provision of service

23. Issue of Invoice Receipt of Payment Point of Taxation
Provision of Service before change of Rate
After change of rate After Change of rate Date of Invoice or Date of payment, whichever is earlier
– New Rate will apply (Rule 4 (a) (i))
Before change of rate After Change of rate Date of Invoice – Old Rate will apply (Rule 4 (a) (ii))
After Change of Rate Before Change of Rate Date of payment – Old Rate will apply (Rule 4 (a) (iii))
Point of Taxation in case of change of rate
Point of Taxation Rules, 2011
Provision of Service after change of Rate
Before change of rate After Change of rate Date of Payment– New Rate will apply (Rule 4 (b) (i))
Before change of rate Before Change of rate Date of Invoice or Date of payment whichever is earlier–
Old Rate will apply (Rule 4 (b) (ii))
After Change of Rate Before Change of Rate Date of Invoice – New Rate will apply (Rule 4 (b) (iii))
23

24. Point of Taxation Rules, 2011
Rule 5 – Payment of Tax in case of new services
Where a service is taxed for the first time, then
No tax shall be payable to the extent the invoice has been issued and the payment
received against such invoice before such service became taxable
No tax shall be payable if the payment has been received before the service becomes
taxable and invoice has been issued within 30 days of the date when the service is
taxed for the first time
Rule 7 – POT for reverse Charge transactions
24
Rule 7 – POT for reverse Charge transactions
In case of service tax to be paid by the specified persons in case of specified services as
per the partial reverse charge mechanism, the Point of Taxation shall be the date on
which payment is made
Where the payment is not made within a period of six months of the date of invoice, the
Point of Taxation shall be determined as if this rule does not exist

25. Service
Prima facie, liability to
discharge is that of the
service provider
In specified cases, the liability to
discharge service tax is vested
with the recipient of services
Reverse Charge Mechanism
Service
provider Service – AN
ACTIVITY
Recipient
25

26. Reverse Charge Mechanism
Introduction
With effect from 1st July , 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
Usually such liability is affixed either on the service provider or the service recipient, but
in the case of specified services and in specified conditions, such liability shall be on both
the service provider and the service recipient
26
This is termed as Partial Reverse Charge Mechanism which has been provided by
insertion of proviso to Section 68 in the Finance Act, 2012

27. Sr Description of a service % of tax payable by
Provider Recipient
1 Insurance agent Nil 100
2 Transport of goods by road by a GTA Nil 100
3 Sponsorship Nil 100
4 Arbitral tribunal Nil 100
5 Individual advocate Nil 100
Reverse Charge Mechanism
Notification 30/2012
27
6 Support service by Government or local authority excluding renting, and negative list
services
Nil 100
7 Services provided by any person who is located in NTT and received by any person
located in the taxable territory
Nil 100
8 Renting or hiring any motor vehicle designed to carry passenger on abated value Nil 100
9 Renting or hiring any motor vehicle designed to carry passenger on non abated value 60 40
10 Supply of manpower for any purpose ( includes Security Services) 25 75
11 Works contract 50 50

28. Reverse Charge Mechanism
Small Service Provider Exemption
The liability of the service provider and the service recipient are different and independent of each
other
In case the service provider is availing exemption owing to turnover being less than Rs.10 lakhs, he
shall not be obliged to pay any tax
However, the service recipient shall have to pay his portion of service tax which he is required to pay
under the reverse charge mechanism irrespective of the fact that whether the service provider pays
service tax or not
CENVAT Credit
28
CENVAT Credit
The service recipient cannot utilize the CENVAT credit for payment of service tax under Reverse
charge mechanism
However, the service receiver can utilize the amount of service tax paid under this mechanism as
CENVAT credit for payment of his output service tax, subject to the conditions specified in the rules
Point of Taxation
In case of Reverse Charge Mechanism, as stated earlier, the Point of Taxation shall be governed by
the Rule 7 of Point of Taxation Rules, 2011

29. Mega Exemption
The provisions of Service Tax as prevailing before 01/07/2012 contained 88
exemption notifications
The need for exemptions is not obliterated with the introduction of the negative list
While some existing exemptions have been built into the negative list, others,
wherever necessary, have been retained as exemptions
29
In addition, new exemptions are proposed to be introduced in the context of the
negative list. For ease of reference and simplicity most of the exemptions are part
of one single mega exemption notification bearing no. 25/2012-ST dated
20/06/2012

30. Introduction
Notification No. 26/2012-ST, dated 20/06/2012 exempts certain specified taxable
services from service tax leviable thereon as is in excess of the service tax calculated on
a value which is equivalent to a specified percentage of the gross amount charged by
such service provider, for providing the said taxable service, subject to the certain
conditions
Abatement
Sr. Taxable Service Abate-
ment
Conditions
30
ment
1 Financial Leasing service including hire
purchase
90% Nil
2 Transport of goods by rail 70% Nil
3 Transport of passengers, with or without
accompanied belongings, by rail
70% Nil
4 Mandap Keeper 30% CENVAT Credit on goods under Ch.1-22 of
CETA, 1985 cannot be taken

31. Sr. Taxable Service Abate-
ment
Conditions
5 Transport of passengers by air, with or
without accompanied belongings
60% CENVAT Credit cannot be taken of the goods
and capital goods
6 Accommodation Service 40% CENVAT Credit cannot be taken of the goods
and capital goods
7 Goods Transport Agency 75% CENVAT Credit cannot be taken of the goods,
services and capital goods
8 Services provided in relation to chit 30% CENVAT Credit cannot be taken of the goods,
Abatement
8 Services provided in relation to chit 30% CENVAT Credit cannot be taken of the goods,
services and capital goods
9 Renting of any motor vehicle designed
to carry passengers
60% CENVAT Credit cannot be taken of the goods,
services and capital goods
10 Transport of goods in a vessel 50% CENVAT Credit cannot be taken of the goods,
services and capital goods
11 Services by a tour operator in relation
to a package tour
75% i)CENVAT Credit cannot be taken of the goods,
services and capital goods
ii) The bill issued for this purpose indicates
that it is inclusive of charges for such a tour.
31

32. Sr. Taxable Service Abate
-ment
Conditions
12 Services by a tour operator in
relation to a tour, if the tour
operator is providing services
solely of arranging or booking
accommodation for any person in
relation to a tour
90% i)CENVAT Credit cannot be taken of the goods,
services and capital goods
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
Abatement
service charges for arranging or booking
accommodation for any person and does not
include the cost of such accommodation
13 Services by a tour operator in
relation to any services other
than specified at (11) and (12)
above.
60% i)CENVAT Credit on goods cannot be taken
1i)The bill issued indicates that the amount charged
in the bill is the gross amount charged for such a
tour
14 Works Contract Services 75% i)CENVAT Credit cannot be taken of the goods,
services and capital goods
ii)The value of land is included in the amount
charged from the service receiver
32

33. Valuation
Value of Service
can be determined
cannot be
determined
Works Contract
33
Gross Value of
Materials
VAT assessment
acceptable if on
actuals
determined
Execution of original
works
40%
Maintenance or repair
or reconditioning or
servicing of any goods
70%
Other works contract
60%

34. Valuation
The manner of determination of service portion in Restaurant and Outdoor
Catering Services is governed by the Rule 2C of Service Tax (Determination of
Value) Rules, 2006 (amended) w.e.f. 01/07/2012
Sr. Nature of Service Taxability (% of Total Amount)
1 Restaurant Service 40%
Restaurant and Food Services
34
1 Restaurant Service 40%
2 Outdoor Catering Services 60%

35. Miscellaneous
The time limit for issuing an invoice has been increased to 30 days from 14 days
and to 45 days in case of Banking and Financial Services by amending Rule 4A of
Service Tax Rules,1994
Excess amounts paid now 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 by amending Rule 6(4A) and
(4B) of Service Tax Rules,1994
35
Time limit to issue Show Cause Notice has been increased to 18 months

36. THANK YOU