service taxer

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CA. M. Pandiyan


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INTRODUCTION SERVICE TAX

Finance Act, 1994

Erstwhile positive list based 119 listedcategories

Major swift from 1 July 2012 - Re-birth

Alignment with GST principles

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Service tax - Extent

Extends to whole of India Except Jammu and Kashmir India Includes Territorial waters (up to 12 Nautical Miles),

continental Shelf, EEZ Sea bed and subsoil Air space above it territory and territorial waters No tax High Seas (beyond 200 Nautical Miles) SEZ also covered exempted subject to conditions EOU / STP / EHTP / BTP covered treated similar to

Domestic Tariff Area (DTA)

Indian

Shore

ICW

12 nm

SEA

IEEZ

High

Seas

24 nm 200 nm

ITW

ICZ

ITW = Indian Territorial Waters ICZ = Indian Contiguous Zone

ICW = Indian Customs Waters

IEEZ = Indian Exclusive Economic Zone

ICW = Indian Contiguous Zone

Nm = Nautical mile

0

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Charge of Service tax

Section 66B

- at the rate of fourteen per cent (14%) *- 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

* Swatch Bharat Cess @ 0.5% applicable from 15 Nov 2015

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Service Tax Negative list

Negative list regime

ServicesincludingDeclaredServices

Exemptionsunder MegaNotification

NegativeList

ServicesincludingDeclaredServices

Exemptionsunder MegaNotification(40+Services)

NegativeList (17

Services)

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What is service?

Service means any act i vi t y carried out by a person for another for consideration.

Includes Excludes

Declared services

Services provided by unincorporated

association or body of persons to its

members and vice versa

Services provided by Branch located intaxable territory to Head office located innon-taxable territory and vice versa

Transfer of title in goods or immovableproperty by way of sale, gift or in any othermanner

Deemed sales within meaning of Article366(29A) of the Constitution

Transaction in money or actionable claim

Provision of service by an employee toemployer

Fees taken in any Court or tribunalestablished under any law in force

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Service includes declared service

Declared services as per Section 66EDeclared services as per Section 66E

1. Renting of immovable property

2. Construction of a complex, building, civil structure or a part thereof - except where theentire consideration is received after issuance of completion-certificate(CC)by the competent

authority3. Temporary transfer or permitting use or enjoyment of any IPR

4. Development, design, programming, customization, adaptation, upgradation, enhancement,implementation of IT software

5. Agreeing to an obligation to refrain from an act, or to tolerate an act or a situation, or to doan act e.g. Non-compete fees

6. Transfer of goods by way of hiring, leasing, licensing or in any such manner without transferof right to use such goods e.g. Leasing of JCP/Cabs

7. Activities in relation to delivery of goods on hire purchase or any system of payment byinstallments

8. Works contracts - Service portion in the execution of a works contract

9. Catering - Service portion in an activity wherein goods, being food or any other article ofhuman consumption or any drink (whether or not intoxicating) is supplied in any manner as apart of the activity.

What is Declared Service ?

declared service means any activity carried out by a person for another person for consideration

and declared as such under Section 66E.

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Service or not ?

Activity / Process Service Tax Reason

Bank charges for conversion of $1000

to INR

Yes Exchange of currency would be treated as

transaction in money and not liable toService Tax. However, the chargesreceived would be liable to Service Tax

Bank Guarantee provided byEmployee to his employer, for aconsideration

Yes As it not provided in the course ofemployment

Non-compete fees paid to retiringManaging Director

Yes Agreeing to the obligation to refrain fromany act is a Declared Service

Hair spa services done free of cost No As there is no consideration

Government gives a grant of INR 10Lakhs to an engineer for providing ainnovative design

No As there is no consideration intended

Donations / awards received No As there is no activity done

Amount received as an advance forperformance of service

Yes Services to be performed

Advance forfeited for cancellation ofan agreement to provide a service

Yes Agreement to provide services

Penalty for accidental damages No As it is towards unforeseen actions

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Negative list

Sr.

No.Service head

1Services provided by Government or local authority except speed post, transport ofgoods/passengers, support services

2 All Services provided by Reserve Bank of India (RBI)

3 Services by a foreign diplomatic mission located in India

4Services relating to agriculture no change in the essential character and to rendered theproduce marketable in the primary market

5 Trading of goods including futures market trading

6Any process amounting to production or manufacture of Excisable goods (excludingalcoholic liquor for human consumption)

7 Selling of space for advertisement in print media

8 Access to a road or a bridge on payment of toll charges

9 Betting, gambling or lottery

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Negative list

Sr.

No.Service head

10 Entry to entertainment events and access to amusement facilities

11 Transmission or distribution of electricity only for distribution licensee

12 Service by way of renting of residential dwelling for use as residence

13Specified services relating to education pre-school, up to higher secondary, qualificationrecognized by law, approved vocational educational course

14Interest or discounts; andforeign exchange trading amongst banks / authorized dealers

15Services relating to transportation of passengers railways (other than first class and A/C),metros, inland waterways, taxis, autos

16Services relating to transportation of goods by road (other than courier and GTA), by oceanup to first Customs station, by inland waterways

17 Funeral, burial, crematorium or mortuary services

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Exemptions andabatements


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Mega notification

Legal Services by individual advocate/firm of advocates to any person other than business entity

with turnover more than 10 Lakh

Services to Government, a local authority or a governmental authority by way of construction,

erection, commissioning, installation, etc. for specified purpose like

o construction for non-commercial, educational, clinical, art or cultural use

o canal, dam or other irrigation work or water treatment or sewerage treatment

Construction, erection, etc. of road, bridge, tunnel, port, airport, railways, cold storage, etc.

for Public use

Serving of food or beverages by a restaurant, eating joint or a mess, other than those having Ac

facility or permit to serve alcohol

Serving of food or beverages by a factory canteen, having A/C

Health care services by a clinical establishment or an authorised medical practitioner

Services by way of technical testing or analysis of newly developed drugs, including vaccines and

herbal remedies

Services by an education institution to its students, faculty and staff

Services to an educational Institution by way of transport, catering, security or cleaning

Services exempted by Mega notification

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Mega notification

Services by way of transfer of a going concern, as a whole or an independent part thereof

Services by an organiser to any person in respect of a business exhibition held outside India

Transport of following by a goods transport agency:

o agriculture products, newspapers or magazines, defense or military equipment in a

goods carriage;

o goods where value of services does not exceed INR 1500 / INR 750 in case of single

consignment / single consignee respectively.

Services provided by a person located in a non-taxable territory to the recipient of services

located in a non- taxable territory

Temporary transfer or permitting the use or enjoyment of the copyright of a cinematograph film

in a cinema hall or cinema theatre

sub-contractor providing services by way of works contract to another contractor

providing works contract services which are exempt

Hotel lodging - tariff below one thousand rupees per day

Admission to exhibition of Cinematographic films / sporting events

Notification No. 25/2012 dated 20 June 2012 (amended from time to time)

Services exempted by Mega notification

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Time to recap - Negative list regime Concept

Taxable

3. Not

specificallyexempted

1. Taxableterritory

2. Not inNegative

list

Service defined to mean any activity carried out by a person for

consideration

IMAGE transactions not covered

I: Immovable

property

M: Money

A: Actionable

claim

G: Goods

E: Employee

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Time to recap - Steps to determine leviabilty of Service tax

Whether there is an activity performed

for another for consideration

Whether it is mere IMAGE

Whether provided in taxable territory

Not in Negative list

Not specifically exempted

1

2

3

4

5

Liable to tax

Yes

No

Yes

Yes

Yes

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Abatements

Services Abatement Rate Conditions

Transport of goods/ passengers by rail 70 No restriction on credit

Transport of goods by road by Goods

Transport Agency (GTA)

70 Restriction on CENVAT credit on inputs,

capital goods and input services

Transport of goods in a vessel 70 Restriction on CENVAT credit on inputs,


Transport of passengers by air, with or

without accompanied belongings

40 / 60 Restriction on CENVAT credit on inputs and

capital goods (not on input services)

Renting of hotels, inns, guest houses, etc.

for residential or lodging purposes

40 Restriction on CENVAT credit on inputs and

capital goods (not on input services)

Renting of any motor vehicle designed to

carry passengers

60 Restriction on CENVAT credit on inputs,


Construction of a complex ** 75 / 70 Restriction on CENVAT credit on inputs

Value of land included in consideration

Financial leasing including hire purchase 90 No restriction on CENVAT Credit

Bundled service by way of Supply of food

together with renting of such premises

30 CENVAT on all goods except for goods falling

under excise tariff Chapter 1 to 22

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Abatements

**

Taxable value of 25% is applicable only for residential units where carpet area is less than 2000

square feet AND the amount charged is less than One Crore rupees (cases where entire

consideration is not received after issuance of completion certificate).

For all other constructions, including luxury apartments not falling under the aforesaid criterias,

taxable value would be 30%.

Residential Construction Services

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Valuation Rules

Services Value of Service Conditions

Works Contract

Original works

(i) all new constructions;

(ii) all types of additions and

alterations to abandoned or damaged structures on

land that are required to make them workable;

(iii) erection, commissioning or installation of plant,machinery or Equipment

40% CENVAT on input goods

not allowed

Other contracts 70%

Restaurants 40% CENVAT allowed on all

inputs except for

inputs falling under

Chapter 1 to 22 of

Excise Tariff

Outdoor catering services 60%

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Reverse charge mechanism

Sr.No.

Service tax liability on service recipient Service tax payableby service provider

Service tax payableby service recipient

1 Supply of manpower NIL 100%

2 Works contract service 50% 50%

3 Renting / hiring of motor vehicle forpassenger Non abated value Abated

60%NIL

40%100%

In most cases Service provider is liable to pay service tax. However in few cases exceptions have

been made and the service receiver is liable to pay service tax, this is termed as the reversecharge mechanism

In the following three cases (Table A) Reverse Charge is applicable if 1) service provider isIndividual / HUF / partnership firms/ LLP and 2) service recipient is any company formed orregistered under Companies Act, 1956 or business entity registered as body corporate.

Table A Reverse Charge in specific scenario

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Reverse charge mechanism

SERVICES % OF SERVICE TAXBY SERVICE

PROVIDER

% OF SERVICE TAXBY SERVICE

RECEIVER

Insurance agents services to Insurance co.s Nil 100

GTA Nil 100

Sponsorship Services Nil 100

Arbitral tribunal to Business entity Nil 100

Individual Advocate to Business entity Nil 100

Support Service by govt. or local authority toBusiness entity

Nil 100

Service provided or agreed to be provided bydirector of company to the said company

Nil 100

Import of services Nil 100

Table B Reverse Charge in all cases

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Point of Taxation Rules

General Rule: Point of taxation shall be the earlier of the date of issuance of

invoice or the date of receipt of payment by the service provider

In case the invoice is not issued by the service provider within 30days of completion of service, point of taxation shall be earlier ofthe date of completion of service or the date of receipt ofpayment by the service provider

Service tax is payable by the 5/6th of the succeeding month/quarter inwhich Point of taxation occurs

Generic

Rule

When ?


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Point of Taxation Rules

Date of

completionof service

Date ofinvoice

Date on

whichamountreceived

Point oftaxation

Remarks

01-05-2015 20-05-2015 25-05-2015 20-05-2015Invoice issued within time so POT willbe date of invoice or date of amountreceived whichever is earlier.

01-05-2015 25-05-2015 18-05-2015 18-05-2015

01-05-2015 23-06-2015 10-05-2015 01-05-2015

Invoice issued after prescribed time soPOT will be Date of completion ofservice or payment received whicheveris earlier.

01-05-2015 15-05-2015 25-04-2015 25-04-2015Date on which amount received is POTas it is earlier of other two events.


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Point of Taxation Rules (contd.)

Point of taxation shall be earlier of date of payment/ credit in books of accounts ofperson receiving the service

Point of taxation, if :Payment made within 3 months from date of invoice is the date on which payment ismade to the vendorPayment not made within 3 months from date of invoice next day on which 3 months

period expires

Import of services from Associated Enterprises*

All Reverse charge cases (including GTA)


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Place of provision of service rules

ImportRules

ExportRules

Place ofProvision of

Service Rules(POPS)

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Place of provision of service rules

To determine whether a services is rendered in the taxable territory

Rule 3 - General Rule

- Place of location of service recipient is generally the place of provision of service

Other rules provide the guidelines to determine the PoP in various scenarios

- service in relation to immovable property location of immovable property

- service in relation to goods (Performance) location of goods- service in relation to goods transport place of destination

- service in relation to goods transport (road) location of person liable to pay tax

- service in ration to cultural event place of event

- service in relation to passenger transportation place of embarkation (origin)

- place of provision of services provided at more than one location -location in the taxable territory where greatest proportion of the service is

provided- place of provision of services where provider and recipient are located in taxable

territory location of service recipient

Where..?

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Service Tax - Compliance

Particulars Due date

Monthly Payment

(Challan GAR-7)

E-payment (ACES) the due date is 6th of the following month

Partnership firms / Individuals Quarterly payment (5th or 6th of

the month following the quarter)

ST payment on receipt basis for Partnership firms / Individuals Aggregate value of taxable services in the previous financial

year is INR 50 lakh or less upto INR 50 lakh in current fn year

However, for the month ending 31st march, payment is to be

made by 31st march itself

Interest on delayed payment 18% (for the first 6 months)

24% (for 6 months to 1 yr) 30% (for period beyond 1 yr)

Half Yearly returns

(Form ST-3)

25th day of the month immediately following the half year

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Concept of Small Service providers

Criteria Previous year turnover does not exceed INR 10 lakh Benefit - Exemption up to a turnover of INR 10 lakh in the current

financial year

No Cenvat credit allowed during the period of exemption

This exemption is automatic non-availment should alone becommunicated to the department

Service provided in others brand name not allowed

Exception Reverse charge mechanism

Registration limit upto INR 9 lakhs

Notification No. 33/2012 dated 20 June 2012

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Pandiyan0 98844 61641

service taxer

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