BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY...A chartered accountant in practice, having his office at 1009-1015 Topiwala Centre, 10th floor, Topiwala Theatre Compound, Near Goregaon Station,

th10 Residential Study Course

S E R V I C E T A X & V A T

BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY

Friday, 24th June to Sunday, 26th June 2016Hotel Mercure and International Convention Centre, LAVASA (Pune)

BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY

10th Residential Study Course on

Service Tax & VAT

Friday to Sunday 24th ‑ 26th June, 2016 Hotel Mercure & Lavasa International Convention Centre

LAVASA

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Managing Committee 2015‑16

PresidentRaman H. Jokhakar

Vice PresidentChetan M. Shah

Hon. Joint SecretariesNarayan R. Pasari

Sunil B. Gabhawalla

TreasurerManish P. Sampat

MembersAbhay R. Mehta

Krishna Kumar JhunjhunwalaRutvik R. Sanghvi

Anil D. DoshiMihir C. Sheth

Samir L. KapadiaBharatkumar K. OzaMukesh G. TrivediSaurabh P. Shah

Bhavesh P. GandhiSonalee A. GodboleJagdish T. PunjabiNitin P. Shingala

Suhas S. ParanjpeJayant M. Thakur

Bombay Chartered Accountants’ Society

Indirect Taxation Committee 2015‑16

ChairmanGovind G. Goyal

Ex‑OfficioRaman H. Jokhakar

Chetan M. Shah

ConvenorsMandar U. Telang Saurabh P. Shah

Suhas S. Paranjpe

MembersA. R. Krishnan Ashit K. Shah Bakul B. Mody

Bharat M. Shemlani Bharatkumar K. Oza

Bhavna G. Doshi Chandrakant B. Thakar

Chirag B. Mehta Hasmukh H. Kamdar

Janak K. Vaghani Jayesh M.Gogri Jayraj S. Sheth

Naresh K. Sheth Parind A. Mehta

Pranay H. Marfatia Puloma D. Dalal Rajiv J. Luthia

Rajkamal R. Shah Sagar N. Shah

Samir L. Kapadia Sanjay M. Dhariwal

Santosh M. Jain Shreyas D. Sangoi

Sunil B. Gabhawalla Surendra S. Gupta Uday V. Sathaye Udayan Choksi

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Message

We have great pleasure to welcome you to the 10th Residential Study Course on Service Tax & VAT, being organised by Indirect Taxation Committee of Bombay Chartered Accountants’ Society, from Friday to Sunday 24th June to 26th June 2016 at Hotel Mercure and Lavasa International Convention Centre LAVASA.

This paper book, being presented to you, contains three well researched papers contributed by eminent faculty. We are thankful to our paper writers for kindly accepting our invitation and taking time to share their knowledge and experience.

We wish to acknowledge the efforts put in by the conveners and members of Indirect Taxation Committee who have made this course possible and of course you the participants for joining this course to make it so successful. We are confident that this residential study course will be an enriching and fulfilling experience.

While every effort has been made to take care of the smallest of details, we would be happy to receive your feedback and suggestions for improvements so that future courses can be still better.

Raman H. Jokhakar Govind G. GoyalPresident Chairman

Indirect Taxation Committee

Dated : 15th June 2016

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ABOUT BCASBombay Chartered Accountants’ Society (BCAS) is the oldest voluntary association established over 66 years ago on 6th July, 1949 as a non-profit organisation to serve the profession of chartered accountancy. Today, it has nearly 7,000 members subscribers from across the country and overseas. BCAS through its diversified high quality educational activities ensures that its members keep pace with the challenges of time. Through these ongoing professional educational events on contemporary subjects of importance, the BCAS achieves its vision of disseminating knowledge and harnessing talent.

OUR VISIONBCAS shall be principle-centred and learning oriented organisation to promote quality service and excellence in the profession of Chartered Accountancy and shall be proactive to change.

BCAS shall harness talent of and disseminate knowledge to members, build skills and networks amongst them and encourage them to adhere to highest ethical standards and professional integrity.

BCAS shall provide to students an environment conducive to the pursuit of knowledge and encourage them to achieve their potential to become complete Chartered Accountants. BCAS shall also conduct citizens’ education programmes.

BCAS shall be a catalyst for bringing out better and more effective Government policies and laws for clean and efficient administration and governance.

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10th Residential Study Course on Service Tax & VAT

Friday to Sunday 24th June to 26th June 2016 Venue : Hotel Mercure and Lavasa International Convention Centre LAVASA

Subjects & Paper Writers

Papers for Discussion

Case Studies on Taxation of Services A. R. Krishnan Chartered Accountant

Case Studies on CENVAT Credit S. S. Gupta Chartered Accountant

Case Studies on Sale vs. Service – Composite Transactions (Taxability under VAT and Service Tax)

Parind Mehta Chartered Accountant

Papers for Presentation

Indirect Tax Benefits in Foreign Trade Policy Divyesh Lapsiwala Chartered Accountant

Role of CAs in GST – Realignment Requirements Sagar Shah Chartered Accountant

Group Leaders

Paper‑I Paper‑II Paper‑III

Case Studies on Taxation of Services

Case Studies on CENVAT Credit

Case Studies on Sale vs. Service – Composite Transactions

(Taxability under VAT and Service Tax)

A. R. Krishnan Chartered Accountant

S. S. Gupta Chartered Accountant


Friday, 24th June 2016 Saturday, 25th June 2016 Sunday, 26th June 2016

Ankit Joshi Ganesh Prabhu Balakumar Chirag Mehta

Anil Kumar Beewada Keval Shah Samir Kapadia

Mandar Telang Shreyas Sangoi Sanjay Dhariwal

Manindar Kakarla Shruti Kakaria Vikram Mehta

Nilesh Suchak Vaibhav Jajoo Yash Dhadda

Groups A B C D E

Group Mentors Ashit Shah Bharat Shemlani Naresh Sheth Rajiv Luthia Udayan Choksi

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10th Residential Study Course on Service Tax & VATFriday to Sunday 24th June to 26th June 2016

Venue : Hotel Mercure and Lavasa International Convention Centre LAVASA

PROGRAMME SCHEDULEFriday 24th June 2016

12.00 noon onwards : Welcome & Check-in12.30 to 02.00 pm : Lunch03.30 to 05.30 pm : Group Discussion (Paper I) “Case Studies on Taxation of Services”05.30 to 06.00 pm : High-Tea06.15 to 08.30 pm : General Assembly – 1. Inaugural Session 2. Presentation of paper and Reply to queries by Paper Writer : CA A. R. Krishnan

8.30 to 10.00 pm : Dinner

Saturday 25th June 2016

07.30 to 08.15 am : Breakfast08.30 to 10.30 am : Group Discussion (Paper II) – “Case Studies on CENVAT Credit”10.45 to 01.45 pm : General Assembly – 1. Presentation of Paper IV by : CA Divyesh Lapsiwala “Indirect Tax Benefits in Foreign Trade Policy” 2. Presentation of Paper and Reply to queries by Paper Writer: CA S. S. Gupta01.45 to 02.30 pm : Lunch03.00 to 08.00 pm : Visit LAVASA08.30 to 10.00 pm : Dinner

Sunday 26th June 2016

07.30 to 08.15 am : Breakfast08.30 to 10.30 am : Group Discussion (Paper III) – “Case Studies on Sale vs. Service – Composite Transactions (Taxability under VAT and Service Tax)”10.45 to 01.45 pm : General Assembly – 1. Presentation of Paper V by : CA Sagar Shah “Role of CAs in GST – Realignment Requirements” 2. Presentation of paper and Reply to queries by Paper Writer : CA Parind Mehta01.15 to 02.30 pm : Lunch3.00 pm : Vidai

Address of the VenueHotel Mercure, 3, Dasve Circle, Dasve, LAVASA and Lavasa International Convention Centre,

50, Event Centre Street, Dasve, LAVASA, (District Pune, Maharashtra) 412112, IndiaTel: +91 (20) 67929000/67928000

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Our Faculty

CA A. R. Krishnan

Shri A. R. Krishnan is B.Com. (Hons.), Grad. C.W.A., F.C.A. (22nd rank in Inter CA) and a law graduate practising as a Chartered Accountant since 1981.

His present areas of expertise and practice are Service Tax at both advisory level and litigation [up to Customs, Excise and Service Tax Appellate Tribunal – “CESTAT”]. He has handled some important litigation in the area of service tax at the CESTAT level. He has contributed to the study material on service tax when it was first introduced in CA final as a subject. He has also written a detailed paper on “Service Tax on Cross Border Transactions” for “International Tax & Finance Conference” organised by Bombay Chartered Accountants’ Society (BCAS) in 2006 and 2012. He has been contributing to BCAS Referencer Diary in the area of Service Tax for the past 15 years. He has been writing a regular column on service tax for the newsletter published by the Western India Regional Council of the Institute of Chartered Accountants of India for the past 17 years – readership of over 50,000 professionals. He lectures on Service tax at various Forums, Seminars and Conferences and also contributes articles on service tax in various periodicals. As of now he has spoken over 1,200 places all over India in various forums including at National Academy of Customs, Excise and Narcotics, Bhandup, Mumbai [a training forum for Government Officers] and at departmental forums.

He is regularly providing inputs to the ICAI, Bombay Chartered Accountants Society, Chamber of Tax Consultants and the Government of India in the area of service tax by way of pre-budget and post-budget memorandum.

He is/has been a member of various committees of ICAI, WIRC, Bombay Chartered Accountants’ Society and Chamber of Tax Consultants.

He has been featured as one of the top 10 indirect tax advisors in India based on a survey conducted by International Tax Review – an International journal published from London in April, 2011.

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CA S. S. Gupta

A chartered accountant in practice, having his office at 1009-1015 Topiwala Centre, 10th floor, Topiwala Theatre Compound, Near Goregaon Station, Goregaon (West), Mumbai 400 104.

Being a Chartered Accountant, Cost Accountant as well as Company Secretary, he has to his credit several honours and awards, such as 8th & 26th Rank in Inter & Final Respectively of ICAI and 3rd & 6th Rank in Inter & Final respectively of ICWAI.

He has also been awarded Sydenham Golden Jubilee Scholarship, J.R.D Tata Merit Scholarship, Sir Ibrahim Rahimtoola Scholarship, Maharaja Takthaji of Bhavnagar Scholarship, Narsee Monjee College Merit Scholarship, Institute of Cost & Works Accountants of India Cash Prize & Certificate of Merit and many more.

After serving for 6 years in industry, he started practising as a Chartered Accountant specialising in Central Excise, Customs, Service Tax and EXIM Policy. Being in exclusive practice of indirect taxation for last 25 years he has rich experience in providing practical solutions to each aspect of indirect taxation.

He has contributed articles to various professional journals and has been a faculty member for the seminars, conferences, refresher courses and lectures organized by ICAI, ICWAI, IMA and IMC.

He has also authored the book ‘Service Tax – How to meet your obligations’ which is being published by Taxmanublications.

He has also been involved in various charitable activities as trustee and active member of reputed organisations such as Sankalp (Welfare Trust), Mangesh Vishwastha Mandal (runs school for children), Arogya Foundation of India (ARF), Punarvas Vikalang School and President of Bharat Vikas Parishad, Maharashtra-1 Coastal Plant.

[e-mail : [email protected]] Tel : 022-2875 4127/2876 0161/4002 0689, Fax : 022-2877 8458

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CA Parind Mehta

Function and Specialization

Parind is a Chartered Accountant with the Indirect Tax team specialising in all facets of indirect tax advisory and compliance assignments and litigation support services.

Education

Bachelor of CommerceChartered Accountant

Background

• Parind has over 19 years of experience in consulting and advisory practice.

• His areas of functional expertise include VAT, Service Tax, Central and State VAT Laws.

Representative Industry Experience

• Parind has dealt extensively in the areas of Service Tax, Value Added Tax, Central Sales Tax across an industry spectrum consisting of Manufacturing, Banking and Financial services, Retail, Infrastructure, Construction, Automobile, Healthcare, Engineering, Ports and Shipping, Utilities, etc.

• Committee Member of various Professional and Trade Associations actively involved in discussions, representations, etc. with and before Tax department.

• Regularly speaks at conferences and seminars conducted by Professional and Trade Associations and has authored / co-authored various papers and publications on professional subjects.

• He has supported clients litigations in indirect tax matters at various levels from original adjudicating authorities to the appellate authorities including Tribunals.

• He was involved in transaction structuring of investments, new industry setup, distribution of manufacturing entities, business structuring of automotive, construction, EPC and transaction structuring from indirect tax perspective for construction and Real Estate clients.

• Parind is a Member of sub-committee on GST with Maharashtra VAT Department.

• He also is a Member of Indian Merchants’ Chamber – an Industry body.

• He also is a Member of Indirect Tax Committee of CII, West Zone.• He also is a Member of various professional bodies.

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CA Divyesh Lapsiwala

Fact FileDivyesh has more than 15 years of experience in advising clients on various indirect tax legislations including Service Tax, Excise, Customs, Foreign Trade Policy and Value Added Tax.

Divyesh has assisted clients across various sectors such as IT/ITES, financial services, media & entertainment, logistics, retail, infrastructure, manufacturing, telecom, etc.

Role and position at EYDivyesh has rich experience in advising clients on complex indirect tax issues and suggesting tax planning structures.

He leads the Indirect tax Technology team of EY. This group focuses on designing, developing and implementing technology enabled solutions for tax compliance.

He also is a key member of the EY advocacy team, for representing on complex tax matters to tax regulators on service tax and GST.

Divyesh also champions the Tax Process Review solution to help clients in reviewing tax processes to address ‘tax risks’ from a controls stand point.

Key Technical CredentialsDivyesh has handled advisory, compliance, audit, investigation, litigation, structuring and due-diligence related assignments during his work experience.

Divyesh is regular speaker at Indirect tax conferences and has made several editorial contributions on the subject.

Divyesh is also a member of the Core GST team of EY helping clients in their journey of this transformational change in indirect taxes.

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CA Sagar Shah

Core Area

Indirect Tax & GST

Industry Expertise

• Manufacturing• Information Technology• Real Estate and Infrastructure

Professional Qualifications & Certifications

• B.Com, FCA, DISA (ICA)

Country Experience

• India

Contact Information

Mobile : + 91-9822002890E-mail : [email protected]

Background

Sagar has over 16 years of professional experience and has written and presented various papers on topics of professional interest before various professional bodies like FICCI, CII, ASSOCHAM, ICAI in India and even abroad. His subjects of special interest are Information Technology, Real Estate and those relating to the Special Economic Zones and Export Oriented units.He has been associated with various professional and industrial bodies, like being a member of the Permanent Trade Committee of Customs Commissione rate, a special invitee to the Indirect Tax Committee of the Institute of Chartered Accountants of India; a core group member of the Bombay Chartered Accountant’s Society.He has co-authored a publication on the Indirect taxes on Real Estate Industry in India published by BCAS and also “Captivating Maharastra – A guide on the New Industrial Policy 2013” which is a BDO India publication.He was invited to represent before the Rajya Sabha’s Select Committee to comment on the GST Constitutional Bill in June 2015.He has been to Europe and Malaysia to understand and study the nuances of GST in those economies.

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10th Residential Study Course on Service Tax & VATFriday to Sunday, 24th June to 26th June, 2016


List of Participants

Sr. No.

Name of the Member CityGroups

E‑mail24th 25th 26th

1 Abhishek Agrawal Mumbai A B C [email protected]

2 Abhishek P. Doshi Rajkot B A B [email protected]

3 Aditya Dhanuka Kolkata C A B [email protected]

4 Ajay Vijay Lasiyal Mumbai D D C [email protected]

5 Alok Kumar Pansari Mumbai E A D [email protected]

6 Alpesh Navin Chandaria Mumbai A E D [email protected]

7 Aman Shashikant Haria Mumbai B C D [email protected]

8 Amish Jashvantlal Khandhar

Ahmedabad C B C [email protected]

9 Amit Nitin Hariya Thane D B A [email protected]

10 Anil Kumar Beewada Visakhapatnam B B B [email protected]

11 Ankit A. Nagda Mumbai A C D [email protected]

12 Ankit Anil Joshi Mumbai A A A [email protected]

13 Ankit Bharat Maisheri Mumbai C E D [email protected]

14 Ankit Kishor Chande Mumbai D A B [email protected]

15 Ankur Satish Chaturvedi Mumbai E E A [email protected]

16 Anuj Mehta Mumbai C D B [email protected]

17 Anurag Basu Mumbai B B A [email protected]

18 Arindam Chatterjee Mumbai C D E [email protected]

19 Arvind Kumar Gupta Mumbai D E D [email protected]

20 Arvind Kumar P. Coimbatore E D B [email protected]

21 Ashit K. Shah Mumbai A A A [email protected]

22 Ashutosh Mahendrakumar Thaker

Mumbai B E B [email protected]

23 Atul R. Mathuria Mumbai B E D [email protected]

24 Bhagyashree Bhaveshbhai Bhatt

Ahmedabad D E C [email protected]

25 Bharat Mithalal Shemlani Mumbai B B B [email protected]

26 Bharatkumar K. Oza Mumbai A B E [email protected]

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Sr. No.



27 Bhavik Hasmukh Chandaria

Mumbai B A D [email protected]

28 Bhavin S. Mehta Mumbai C A E [email protected]

29 Biju Chandran Chennai D D E [email protected]

30 Bishan R. Shah Ahmedabad E B D [email protected]

31 Chandrakumar L. Baldota Solapur D E C [email protected]

32 Chintan Tarun Rambhia Mumbai B C D [email protected]

33 Chirag B. Mehta Mumbai A A A [email protected]

34 Darshankumar R. Ranavat

Mumbai D B A [email protected]

35 Darshna Ashwin Jani Mumbai E B E [email protected]

36 Daviender Singh Nagpal New Delhi A C B [email protected]

37 Deepa Haswani Mumbai A E E [email protected]

38 Deepak H. Thakkar Mumbai C C C [email protected]

39 Deepak P. Bengaluru D A C [email protected]

40 Deven B. Shah Mumbai E B A [email protected]

41 Devendra Kataria Kota A D A [email protected]

42 Dharmesh Dhirubhai Vadher

Mumbai E B A [email protected]

43 Dharmesh Jayantilal Dedhia

Mumbai C D B [email protected]

44 Dhruv Seth Lucknow D C D [email protected]

45 Dilip K. Sheth Mumbai E D D [email protected]

46 Dushyant Laxmikant Maharishi

Jamnagar A C E [email protected]

47 Eswaraiah Kakarla Hyderabad B E B [email protected]

48 Foram Navin Gala Mumbai C D A [email protected]

49 G. Yashvanth Chennai D A C [email protected]

50 Ganesh Prabhu Balakumar

Chennai A A A [email protected]

51 Girish Raman Mumbai B B B [email protected]

52 Govind G. Goyal Mumbai A B C [email protected]

53 H. K. Anandraj Nahar Chennai C A B [email protected]

54 Haresh V. Kagrana Mumbai D C E [email protected]

55 Hari Krishan Bhonagiri Hyderabad E A D [email protected]

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Sr. No.



56 Harsha Vardhan Sri Hyderabad A E C [email protected]

57 Harshit Shailesh Thakkar Mumbai B C D [email protected]

58 Hasmukh H. Kamdar Mumbai A A A [email protected]

59 Hemang Ramesh Shah Mumbai D B E [email protected]

60 Hemant Nilkanth Regmi Mumbai E B E [email protected]

61 Hemant R. Shethia Mumbai A C D [email protected]

62 Hemanth Hastimal Bhandari

Chennai A C E [email protected]

63 Hemantkumar V. Shah Mumbai C C D [email protected]

64 Himanshu Mansukhlal Kakkad

Mumbai D A B [email protected]

65 Hukam Singh Ghaziabad E B A [email protected]

66 J. Murali Chennai A D C [email protected]

67 Janam Bharat Oza Mumbai B B E [email protected]

68 Jayesh P. Doshi Jalgaon B D E [email protected]

69 Jitendra Dhanjibhai Patel Thane A E E [email protected]

70 Jugal Narendra Gala Chennai B D B [email protected]

71 Kalpesh S. Doshi Rajkot C A D [email protected]

72 Karan Awtani Mumbai B E D [email protected]

73 Ketan M. Mamania Mumbai C E E [email protected]

74 Keval Shailesh Shah Mumbai B B B [email protected]

75 Kewal Harshad Satra Mumbai E E C [email protected]

76 Kimi Vijay Mamania Mumbai A B E [email protected]

77 Kiran P. Kapadia Mumbai B A C [email protected]

78 Kishan Yashwant Daule Mumbai C A B kisanetmc.co.in

79 Kush Subodh Vora Mumbai D D C [email protected]

80 Leena Ashok Talathi Mumbai E A D [email protected]

81 Mahak Mahnot Mumbai A E A [email protected]

82 Mahesh Bhaskar Pujare Mumbai A C B [email protected]

83 Mandar U. Telang Mumbai C C C [email protected]

84 Manindar Kakarla Hyderabad D D D [email protected]

85 Mohan Babu Mangiri Chennai C B A [email protected]

86 Monil Dipak Parikh Mumbai D C B [email protected]

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Sr. No.



87 Mrinal Ashok Mehta Mumbai B D A [email protected]

88 Naresh K. Sheth Mumbai C C C [email protected]

89 Navesh Moti Totlani Mumbai D A B [email protected]

90 Navin Khandelwal Mumbai E C A [email protected]

91 Neelesh V. Vithlani Hyderabad B D C [email protected]

92 Nilesh D. Shah Mumbai B B C [email protected]

93 Nilesh R. Modi Mumbai C D A [email protected]

94 Nilesh V. Suchak Ahmedabad E E E [email protected]

95 Nirali Mukeshbhai Sanghvi

Ahmedabad E E B [email protected]

96 Nitin M. Furia Mumbai A A B [email protected]

97 Omprakash D. Bihani Mumbai B E B [email protected]

98 Padam Kumar Jain Raipur C E A [email protected]

99 Pankil Javant Mehta Mumbai D E A [email protected]

100 Parimal Kulkarni Goa E E C [email protected]

101 Parth Mahesh Shah Mumbai A B E [email protected]

102 Pooja Ajay Shah Mumbai B A C [email protected]

103 Praful Vijay Kindarle Mumbai C A B [email protected]

104 Pramod D. Rasam Mumbai D D C [email protected]

105 Pranav Prakash Mehta Mumbai E A D [email protected]

106 Prathvi C. Shetty Mumbai A E D [email protected]

107 Preeti Rajesh Singhi Mumbai B E A [email protected]

108 Pritam Ambadas Mahure Pune C B C [email protected]

109 Puloma D. Dalal Mumbai D D D [email protected]

110 Rachitha Kemish Puthran

Mumbai E B C [email protected]

111 Rahul R. Gabhawala Varanasi A C A [email protected]

112 Rahul Rishi Gupta Mumbai B D E [email protected]

113 Rajdatta Shriram Oak Thane C E D [email protected]

114 Rajesh Mangal Agrawal Chhattisgarh D A E [email protected]

115 Rajesh Shridhar Godse Dombivali E C A [email protected]

116 Rajiv J. Luthia Mumbai D D D [email protected]

117 Rajiv Rao Mumbai B B E [email protected]

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Sr. No.



118 Rama Murthy T. Hyderabad E D E [email protected]

119 Raman Jokhakar Mumbai B C A [email protected]

120 Ranganath Shenoy A. K. Mangalore E D B [email protected]

121 Ranjitsingh A. Rajput Thane A A C [email protected]

122 Rashi Jitendra Gupta Mumbai C D B [email protected]

123 Rashmin Shashikant Vaja

Ahmedabad C C A [email protected]

124 Rishabh Singhvi Bengaluru D A C [email protected]

125 Rishit Manishbhai Bagadia

Ahmedabad A D C [email protected]

126 Samba Murthy Pachchalla

Secunderabad A B A [email protected]

127 Samir L. Kapadia Mumbai B B B [email protected]

128 Sanjay M. Dhariwal Bengaluru C C C [email protected]

129 Sanjaykumar S. Burad Nashik D B D [email protected]

130 Santosh M. Jain Mumbai E A B [email protected]

131 Satish Saraf Hyderabad A C D [email protected]

132 Saurabh P. Shah Mumbai D E C [email protected]

133 Shaileen V. Dalal Mumbai C B B [email protected]

134 Shaleen J. Shah Ahmedabad D B A [email protected]

135 Shankar Pawan Rochlani Pune E B E [email protected]

136 Shekhar Madhukar Kulkarni

Thane A C B [email protected]

137 Shital Jatin Gosalia Mumbai B A C [email protected]

138 Shraddha Shashikant Mehta

Mumbai A C D [email protected]

139 Shreyas Dhirendra Sangoi

Mumbai D D D [email protected]

140 Shrikanth S. Shenoy Thane E C A [email protected]

141 Shruti Vipul Kakaria Mumbai C C C [email protected]

142 Smita Dhirendra Thakkar Mumbai B B C [email protected]

143 Sreenivasa Rao Guduru Hyderabad C D E [email protected]

144 Sreenivasan P. R. Kochi D C E [email protected]

145 Srinivas Mohan H. Erra Kakinada E D B [email protected]

146 Srinivasa Rao Bollineni Hyderabad D A B [email protected]

xvii

Sr. No.



147 Suhas S. Paranjpe Mumbai C D D [email protected]

148 Sumit Kedia Chennai C E A [email protected]

149 Sunil B. Gabhawalla Mumbai E E E [email protected]

150 Sunil Kumar R. Chennai E E C [email protected]

151 Tushar Garg Lucknow D C D [email protected]

152 Uday V. Sathaye Mumbai C D E [email protected]

153 Uday W. Prabhupatkar Mumbai C E A [email protected]

154 Udayan Choksi Mumbai E E E [email protected]

155 Umang Parekh Mumbai B A D [email protected]

156 Usha Kadam Mumbai A C E [email protected]

157 Vaibhav Kisanlal Jajoo Ahmedabad E E E [email protected]

158 Vaishali Bhausaheb Kharde

Pune C A B [email protected]

159 Varsha Sudhir Kulkarni Kalyan D C A [email protected]

160 Velayudham Pattabiraman Manavalan

Chennai E B E [email protected]

161 Vignesh Viswanathan Mumbai A E C [email protected]

162 Vijay Anand Viswanath Chennai B C B [email protected]

163 Vijaya Bhaskar Alaram Hyderabad C C E [email protected]

164 Vikram Dhirajlal Mehta Mumbai D D D [email protected]

165 Vinayak S. Datey Pune E C A [email protected]

166 Viren R. Thakkar Mumbai A A E [email protected]

167 Vishal R. Shah Mumbai B D A [email protected]

168 Yash Dhadda Jaipur E E E [email protected]

169 Yash Deepak Parmar Mumbai D D C [email protected]

170 Yogesh Kanakmalji Katariya

Pune E D D [email protected]

Paper Writers

1 A. R. Krishnan Mumbai B C A [email protected]

2 Divyesh Lapsiwala Mumbai C B D [email protected]

3 Parind Mehta Mumbai E A C [email protected]

4 S. S. Gupta Mumbai D E B [email protected]

5 Sagar Shah Pune A D E [email protected]

xviii

From the Archive1ST RESIDENTIAL STUDY COURSE ON SERVICE TAX

Dates: 6th to 8th April, 2007 Venue: Hotel Usha Ascot, Matheran

No. of Participants: 106

President: Himanshu V. Kishnadwala Chairman: Dilip V. Lakhani

Co‑Chairman: Govind G. Goyal

Convenors: Anup P. Shah, Raman H. Jokhakar and Sunil B. Gabhawalla

Topics Paper Writers

Papers for Group Discussion

Import and Export of Services CA Jayraj Sheth

CENVAT Credit Mechanism for Service providers Adv. Vipin Jain

Valuation of Taxable Services CA Puloma Dalal


Impact of VAT on Service Tax : Some Issues CA Parind A. Mehta

Real Estate Transaction Service Tax Implications CA Sunil B. Gabhawalla

2ND RESIDENTIAL STUDY COURSE ON SERVICE TAX

Dates: 7th to 9th December, 2007 Venue: Treasure Island Resort, Lonavala


President: Rajesh S. Kothari Chairman: Pranay H. Marfatia

Co‑Chairman: Govind G. Goyal

Convenors: Raman Jokhakar, Shardul D. Shah and Sunil B. Gabhawalla



Service Tax & VAT on Composite Transactions Adv. P. K. Sahu

Service Tax on Financial Services CA Sunil Kothare

Case Studies in Service Tax CA A. R. Krishnan


Service Tax on Cross Border Transaction Rohan Shah, Solicitor

Applicability of excise provisions and propositions on Service tax CA S. S. Gupta

xix

3RD RESIDENTIAL STUDY COURSE ON SERVICE TAX

Dates: 6th to 8th March, 2009 Venue: Treat Resort, Silvassa


President: Anil Sathe Chairman: Pranay H. Marfatia

Convenors: Raman H. Jokhakar, Satish B. Kanodia and Toral C. Mathuria



Recent issues in CENVAT Credit Rules Service Tax Perspective CA Bakul B. Mody

Case Studies on Information Technology & Software Services – VAT & Service tax perspective

Adv. K. Vaitheeswaran

Case Studies in Service Tax Adv. V. Raghuraman


Adjudication and Appellate Procedure in Service Tax Adv. Naresh S. Thacker Adv. Karthik Sundaram

Service Tax Compliance – Putting Systems & Procedures in Place CA Nihal Kothari

4TH RESIDENTIAL STUDY COURSE ON SERVICE TAX

Dates: 2nd to 4th July, 2010 Venue: Silent Hill Resort, Manor, Palghar


President: Ameet N. Patel Chairman: Pranay H. Marfatia

Convenors: Suhas S. Paranjpe and Toral C. Mathuria



Case Studies on Works Contracts Adv. V. Sridharan

Case Studies on Refunds & Rebates Adv. M. H. Patil

Case Studies on the Topics other than Above Adv. K. S. Ravi Shankar


GST – Way Forward Adv. Santosh Dalvi

SEZ – Indirect Tax Issues Adv. Prasad Paranjpe

xx

5TH RESIDENTIAL STUDY COURSE ON SERVICE TAX & VAT

Dates: 24th to 26th June, 2011 Venue: The Corinthians, Pune


President: Mayur B. Nayak Chairman: Govind G. Goyal

Convenors: Sunil B. Gabhawalla, Toral N. Mehta and Suhas S. Paranjpe



Recent Amendments to CENVAT Credit Rules & Impact thereof Adv. Shailesh Sheth

Indirect Tax Issues in Media & Entertainment Industry CA Parind Mehta

Controversies in Service Tax - Case Studies Adv. G. Shivadass


Dual Taxation and Levy of Service Tax on Hotels & Restaurants CA S. S. Gupta

Practice in Service Tax – Some Musings CA A. R. Krishnan


Dates: 22nd to 24th June, 2012 Venue: Rio Resort, Arpora, Goa


President: Pradip K. Thanawala Chairman: Govind G. Goyal

Convenors: Santosh M. Jain, Sunil B. Gabhawalla and Suhas S. Paranjpe



Negative List based Taxation of Services, Concept Definitions, Exclusions, Exemptions and Valuation

CA Sunil Gabhawalla

Sale versus Service – Overlap of VAT and Service Tax Adv. P. K. Sahu

Case Studies on Point of Taxation Rules, 2011 CA A. R. Krishnan

Indirect Tax issues in Real Estate Industry – Case Studies Adv. K. Vaitheeswaran

Paper for Presentation

Analysis of Place of Provision of Services Rules CA A. R. Krishnan

xxi


Dates: 14th to 16th June, 2013 Venue: Express Inn, Nashik


President: Deepak R. Shah Chairman: Govind G. Goyal

Convenors: Sunil B. Gabhawalla, Suhas S. Paranjpe and Santosh M. Jain



Case Studies on CENVAT Credit Rules Adv. Bharat Raichandani

Case Studies on Negative List and Reverse Charge Mechanism under Service Tax (and Rules of Interpretation)

CA S. S. Gupta

Case Studies – Indirect Taxes on Hospitality Industry (Hotels, Restaurants, Caterers, etc.)

CA Parind Mehta


Implications of Service Tax on Logistic Sector Adv. Prasad Paranjpe

Power to Arrest, Offences, Prosecution and Recoveries under Service Tax law

CA Girish Raman


Dates: 13th to 15th June, 2014 Venue: Khanvel Resort, Silvassa


President: Naushad A. Panjwani Chairman: Govind G. Goyal

Convenors: Mandar U. Telang, Suhas S. Paranjpe, Sunil B. Gabhawalla



Service Tax on Cross Border Transactions Adv. Kaustuv Sen

Critical Issues in Taxation of Works Contracts – Service Tax and VAT

Sr. Adv. N. Venkataraman

Case Studies in Valuation of Taxable Services (including bundled services)

Adv. V. Raghuraman


Landmark Judgments (Indian and European Courts): laying down important concepts and Principles in Indirect Taxation

Sr. Adv. V. Sridharan

Intangibles – Indirect Taxes Issues CA Bhavna Doshi

xxii


Dates: 19th - 21st June, 2015 Venue: Leonia Resort, Hyderabad


President: Nitin Shingala Chairman: Govind Goyal

Convenors: Mandar Telang, Suhas Paranjape & Ravi Shah



Service Tax & VAT on IT, IT Enabled Services and E-commerce Transactions

Adv. K. Vaitheeswaran

Case Studies on CENVAT Credit Adv. L. Badrinarayanan

Case Studies on Taxation of Services(With reference to Valuation, Exemptions, Point of Taxation and Place of Supply Rules)

Adv. S. Thirumalai


Controversies in Service Tax – Burning Issues under Indirect Taxes Adv. J. K. Mittal

GST – Recent Developments and Expectations CA Jayraj Sheth

xxiii

Paper Writer Topics Page No.

1. CA A. R. Krishnan Case Studies on Taxation of Services 1-10

2. CA S. S. Gupta Case Studies on CENVAT Credit 11-20

3. CA Parind Mehta Case Studies on Sale vs. Service – Composite Transactions (Taxability under VAT and Service Tax)

21-44

4. CA Sagar Shah Goods and Service Tax in India – Opportunities and Challenges

45-46

Contents

10th Residential Study Course on Service Tax & VATFriday to Sunday, 24th June to 26th June, 2016


xxiv

10th Residential Study Course on Service Tax & VATLAVASA 24th June to 26th June 2016

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PROLOGUEI have prepared 8 case studies on Taxation of Services in areas not dealt with by my co-paper writers viz., Mr. S. S. Gupta (Cenvat Credit) and Mr. Parind Mehta (Sales vs. Service - composite transactions). The case studies are all ‘live’ ones which I have faced or am still facing. Some of the questions are quite big but they are more for articulation of facts. The issues are quite small and few. Of course some of them [Case Study 4] may test the endurance of many. But we are now in the 10th year of RRC where our approach should be to look at an industry problem comprehensively and holistically instead of looking at individual isolated issues with straight jacket solutions. I hope you find them interesting and stimulating. I am sure you will crack all of them. As in any seminar, the paper writer is the biggest beneficiary. For this, my thanks to BCAS.

Case Study – 11.1. Strict Ltd. has a contract with its employees (by way of an appointment letter) for hiring their services

in consideration for which the company pays a ‘salary’. Under its contract with its employees, either party to the contract (i.e. the employer or the employee) can terminate the contract by giving a prior notice, say, 1 month. However, if either party to the contract terminates the contract of employment by giving a shorter notice period the consequences are generally as under:

(i) If Strict Ltd. terminates the contract of employment at a shorter notice period or without notice, it would pay salary for the notice period not served on the employee after which the contract would come to an end.

(ii) Similarly, if the employee terminates the contract of employment at a shorter period, salary equal to the notice period not served is recovered from the employee. After the ‘notice pay recovery’ is made, the contract of employment comes to an end.

1.2. The department [who is more strict than Strict Ltd.] seeks to recover service tax on the ‘notice pay recovery’ made by Strict Ltd. from its employees on the ground that it is a consideration received by Strict Ltd. for ‘tolerating the act’ of the employee which qualifies as ‘declared service’ u/s. 66E(e) of the Act. Advise Strict Ltd.

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Case Study – 22.1 Griha Nirman Builders Pvt. Ltd. (GNBPL) is a developer mainly engaged in the rehabilitation housing

schemes of Slum Rehabilitation Authority (SRA) – an authority appointed under the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971. Under these housing schemes, GNBPL is required to clear the hutments and construct buildings having standardised flats of 500 sq. fts. which would be allotted by SRA to the hutment dwellers and in consideration for carrying out these construction activity GNBPL would be entitled to free TDR / FSI which it can sell in open market or build flats for open sale.

CASE STUDIES ON TAXATION OF SERVICES

A. R. Krishnan Chartered Accountant

2 10th Residential Study Course on Service Tax & VATLAVASA 24th June to 26th June 2016

2.2 GNBPL is very much worried about its liability to pay service tax under the reverse charge mechanism under Notification No. 30/2012-ST dated 30/6/2012 especially in respect of following payments made by it:

(a) Prior to the commencement of the construction activities it has to make several payments to SRA for obtaining various sanctions such as fees for approval of IOD/CC, scrutiny fees; development charges etc.

(b) For carrying out its construction activities it has availed the services of one M/s. Kadia, LLP, who has supplied manpower to GNBPL to work at its construction project;

(c) It has also availed the services of a contractor, one Mr. Thodphod who would also be carrying out works contract services in GNBPL’s above project.

GNBPL seeks your advice to determine its service tax liability under reverse charge mechanism in respect of the above payments made by it. He is very anxious to know whether he should start the Thodphod!

N.B: The participants need not discuss on the applicability of service tax on the sale/construction of flats.

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Case Study – 33.1 Garam Ltd. is a steamer agent in India of a foreign shipping line (Line Inc.!). Presently, in respect of

its import consignments it pays service tax on THC1 and IHC1 and recovers it from the consignee with service tax. In case the Bill of Lading mentions ‘freight to collect’, prior to 1/6/2016 since no service tax was applicable on import freight it was not collecting service tax on such freight. However, post 1/6/2016 International Ocean Freight for inbound shipments is brought into service tax net. The invoice for the freight is raised by Garam Ltd. as an agent of Line Inc. In this regard please advise whether the service tax on import freight is to be paid -

(i) By Garam Ltd; or

(ii) By the consignee [as recipient of service]; or

(iii) By the ‘notify party’ mentioned in the Bill of Lading [as recipient of service]; or

(iv) By any other person

Please examine the above in 2 scenarios:

(i) where service tax is paid on THC and IHC in the registration number of Garam Ltd who also pays service tax on his steamer agency commission;

1 Terminal Handling Charges (THC) are charges collected from the consignee for moving the cargo through the port. Inland Haulage Charges (IHC) are charges for managing the transport of goods from the port to the consignee’s place.


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(ii) where the service tax is paid on the THC and IHC in the registration number of Line Inc. by Garam Ltd. as its agent and in his own registration Garam Ltd. pays service tax on his steamer agency commission

3.2 Garam Ltd.’s Chartered Accountant has one more apprehension i.e. whether the freight collected outside India by Line Inc. or by its overseas agent in respect of consignment imported into India is liable for Service Tax. Please advise.

3.3 Garam Ltd. also books export cargo from India on behalf of the Line Inc. where in certain cases it charges slightly more than Line Inc’s. mandated rate and hence in the year end it makes a ‘freight surplus’. Whether freight surplus is liable for service tax?

3.4 Lastly, in this chain between Garam Ltd. and the consignee there is freight forwarder who is a ‘notify party’. What would be the Service tax implication to him on the transaction, if the freight he charges the consignee is more than the freight he pays to the Line Inc. / Garam Ltd.? Examine the issue from all perspectives.

NOTE:(i) In all the “Freight to collect” cases, the contract is between the carrier (foreign shipping line or

through his Indian agent) and the consignee or notify party in India.

(ii) ‘Notify party’ is the party mentioned in the Bill of Lading who has to be notified on arrival of the cargo.

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Case Study – 44.1 Timely Ads Ltd. (TAL) is an advertising agency engaged in carrying out creative, media planning

and buying activities in respect of both traditional media (viz., print media and television media) and non-traditional media (viz., outdoor media and digital media). TAL has been approached by a Singapore Ads Ltd. (SAL) an ad-agency based in Singapore for carrying out media buying activities for display of India specific advertisements of its client Pan Asia Ltd. (PAL) a company also located in Singapore. TAL has given the following estimate to SAL:


Estimate for display in Traditional Media (esp. Television Media)

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Bill raised by Media on TAL (marking PAL as advertiser)

Towards media charges 100.00

Less: Discount @15% 15.00

Net chargeable 85.00

Add : Service tax @ (14%+0.5%+0.5%) 12.75

Total 97.75

Bill raised by TAL on SAL

Reimbursement of media cost Broadcaster’s Value 85.00 Add : Broadcaster’s Service tax @15% (14%+0.5%+0.5%) 12.75

Total – A 97.75

Agency commission – 2.5% of Gross spend (i.e. ` 100/-) 2.50 Service tax on agency commission @15% 0.38

Total – B 2.88

Total (A+B) 100.63

Estimate for display in Non‑Traditional Media

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Bill raised by TAL on SAL Towards media charges 100.00 Add : Service tax @ (14%+0.5%+0.5%) –

Total 100.00

4.2 TAL has justified the levy of service tax on its above estimates as follows:

(i) As regards the traditional media TAL is acting as advertising agency i.e., as an agent i.e. purely as an ‘intermediary’ and hence –

a. As per Rule 9 of POP Rules it is charging service tax on its consideration viz., the agency commission of 2.5%; and

b. Seeking reimbursement of actual media cost paid by it to the broadcaster along with broadcaster’s service tax charged thereon.

(ii) As regards the non-traditional media it is acting on a principal to principal basis as it would be procuring the space on its own account and selling it to SAL and hence it would be providing services of sale of space or time for advertisement. Hence Rule 3 of POP Rules by default would apply and since the ‘service recipient’ is situated outside India services would be considered as exports and hence not liable for service tax.


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4.3 As regards display of advertisements in traditional media SAL/PAL are not happy with these estimates since in their view in both the scenarios the service recipient SAL/PAL being located outside India the services would be considered as exports and hence no service tax should be charged to it either by the agency or by the broadcaster. TAL has clearly stated to SAL that in any case broadcaster would be charging service tax on its services since for them TAL is the ‘service recipient’ and further it also does not receive its consideration in convertible foreign currency and hence it would not be able to comply with Rule 6A of Service Tax Rules, resulting in some loss of cenvat credit. However, SAL is not satisfied with this reasoning.

TAL seeks your advice as to how to satisfy SAL/PAL – if you can they will be your PALs for life. But if not they would say ‘kya kaam TAL raaha hai’

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4.4 As regards the display of advertisements in non-traditional media SAL is happy since TAL is not charging service tax. However, TAL’s apprehension is in this case the Revenue officer would be unhappy and would demand service tax on the agency component involved in this media buying activity on the grounds that the activity carried out by TAL in respect of the non-traditional media is not distinct from the activity carried out by it in respect of traditional media and in these transactions some element of consideration is attributable to agency commission which would fall under Rule 9 of POP Rules.

Is the above apprehension of TAL correct?

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4.5 Would the answer in 4.3 and 4.4 be different if TAL is charging its agency commission for only creative work (without media planning and buying) or for both creative work and media planning and buying.

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4.6 Further in respect of media buying activities carried out in Traditional media TAL apprehends that Revenue officer would demand from TAL the broadcaster’s service tax collected by it from SAL and paid to broadcaster on the grounds that TAL has collected this amounts representing as service tax and hence TAL would be liable to pay the same u/s. 73A of the Act, the tax which has already been paid to the broadcaster.

Is TAL’s above apprehension that it would be liable to pay to the department broadcaster’s service tax collected by it from SAL and already paid to the broadcaster correct?

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4.7 At the year end TAL has received, at a pre-agreed upon rate with the Media, volume discounts based on the throughput achieved by it with the Media. These discounts are in the form of credit notes / payments.

TAL seeks your advice as to whether it needs to pay service tax on these discounts received by it.

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4.8 Further TAL has also withheld some amounts received by it from SAL to be paid to the media but which it had not paid to the media on account of certain disputes with the media such as non-display of advertisements at certain scheduled times, poor display etc. These amounts were lying as payables in its accounts which it has written back in its books after 3 years. The revenue officer is of the view that such amounts are in the nature of agency commission and hence liable for payment of service tax.

TAL seeks your advice as to whether it needs to pay service tax on such write-backs.

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4.9 Do you see any other issue or problem in the above scenarios?

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NOTE: While, case study is of ‘Timely Ads Ltd.’, ‘Time’ would be an issue. Watch your ‘watch’!

Case Study – 55.1 M/s. Complicated Ltd, an Indian subsidiary of a US Company M/s. Complicated Holdings Inc. is

engaged in the manufacture of PVC tubes. M/s. Complicated Ltd. pays its parent company M/s. Complicated Holdings Inc. certain amounts under a Cost Contribution Arrangement (CCA). CCA is an arrangement whereby the subsidiaries of M/s. Complicated Holdings Inc. in different countries contribute towards certain costs incurred by M/s. Complicated Holdings Inc. for developing know how, market research, software expenses, Head Office administrative expenses, etc.

Please examine the Service Tax implications.?

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Case Study – 66.1 Cashback Ltd., is a banking company offering credit and debit card services to its customers. It

has entered into an agreement with Enjoy Ltd. [a travel company selling tour packages], for a joint promotional programme by offering a cashback scheme to its cardholders. Cashback Ltd. in its website has advertised this scheme as ‘Cashback Ltd. in association with Enjoy presents to Cashback Ltd’s. cardholders a cashback offer’. Under the scheme, if Cashback Ltd.’s cardholders uses its credit/debit card to buy specified tour packages from Enjoy worth ` 1,00,000/-, Cashback Ltd. would give them ` 3,000/- back by crediting their credit card or bank account. In certain cashback schemes Enjoy would reimburse the entire ` 3,000/- to Cashback Ltd. and in others it would reimburse only a part of the Cashback, say, ` 1,500/- to Cashback Ltd. Would the amount received by Cashback Ltd. from Enjoy be liable for service tax? Cashback Ltd. has got diverse opinions from two leading consultants – one saying that it is towards services of business promotion and the other saying that it is not liable for service tax.

You are advised to add to the confusion!

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Case Study – 77.1 Foxed Limited is an asset management company of Foxed Mutual Fund. In order to promote the

schemes of the mutual fund, it contracts with brokers/distributors for procuring investments and pays the brokerage to them. Each month’s brokerage is paid by the 10th of next month. Prior to 1/4/2016 Foxed paid service tax on the brokerage as recipient of services and the due date for payment of service tax was based on Rule 7 of the Point of Taxation Rules. Some of the brokers issue invoice to Foxed Ltd, but most of the brokers never issue invoice to Foxed Ltd. W.e.f 1/4/2016 Service Tax Rules were amended to make the brokers/distributors liable to pay service tax on the brokerage [i.e. forward charge instead of reverse charge]. Foxed is foxed as to whether it would be liable to pay service tax on the brokerage of March 2016 paid in April 2016 as service recipient or whether the brokers would be liable to pay service tax on the same.

Advise Foxed.

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7.2 Foxed is further flummoxed by the recent controversy that Krishi Kalyan Cess is payable on all its debtors / outstanding as on 31/5/2016 though it pertains to services rendered prior to 31/5/2016.

Advise Foxed.

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Case Study – 88.1 Mr. Advisor, a tax consultant had on 1/7/2010 entered into an ‘agreement for sale’ with

M/s. Strongarm Builders Pvt. Ltd. (Strongarm) for purchase of a farmhouse in a Project developed by Strongarm at Mahabaleshwar. Under the terms of the said agreement Mr. Advisor was required to pay to Strongarm the purchase price in installments which were linked to stages of completion of construction of his farmhouse. The agreement further stated that the taxes if any as and when levied by the Government on these transactions shall be recovered by Strongarm from Mr. Advisor. At the time of entering into agreement Mr. Advisor had been able to convince Strongarm that the transaction would not be liable for service tax since the farmhouse was intended to be used by Mr. Advisor as his personal residence and hence he would not be paying service tax to Strongarm. Accordingly, Mr. Advisor was making the payment of his installments (excluding Service tax) to Strongarm between the period July, 2010 to March, 2012, by which time the construction of his farmhouse was completed.


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8.2 However, when Mr. Advisor requested Strongarm to hand over the possession of his farmhouse and also execute Sale Deed in March, 2014 Strongarm showed his strong arms and insisted Mr. Advisor to pay service tax since it had already discharged the service tax liability in respect of this construction to the service tax department as and when he had received installments from Mr. Advisor. He further refused to hand over the possession of the farmhouse and execute the sale deed until the service tax amount was paid by Mr. Advisor.

8.3 Mr. Advisor was helpless and had to pay the service tax amount to Strongarm in April 2014 in order to get possession of his farm house. The final sale deed was executed in May, 2014. Then, subsequently somewhere around in December, 2014 Mr. Advisor filed refund claim with the Service Tax Authorities as a ‘service recipient’ on the ground that no service tax was recoverable by the Government on this transaction. To his bad luck even the departmental officers showed him their ‘strong arms’ by rejecting his refund claim on the following grounds:

(i) Service tax was leviable and had correctly been paid on the transaction of Sale of Farmhouse by Strongarm to Mr. Advisor;

(ii) Mr. Advisor himself had not paid the service tax to the department. Hence even if it is assumed that the transaction is not liable to service tax, the refund claim if any can be filed only by Strongarm and not by Mr. Advisor;

(iii) The service tax has been paid by Strongarm during the period July 2010 to March 2012 whereas the refund claim has been filed by Mr. Advisor in December, 2014 and hence the refund claim being filed beyond the limitation period of 1 year is time barred.

Mr. Advisor is confident about the rebutting arguments given in sl. no. (i) above but is unsure as to how he should rebut the arguments given in Sl. No. (ii) and (iii) above.

You are requested to give ‘strong’ advice to Mr. Advisor the possible grounds which he can take to rebut the department’s argument mentioned in sl. No. (ii) and (iii) above.

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NOTES


CASE STUDIES ON CENVAT CREDIT

S. S. Gupta Chartered Accountant

1) Currently, Safe Money Bank Ltd. is following Rule 6(3B) of Cenvat Credit Rules, 2004 & is liable to reverse 50% credit every month. The said rule is now amended w.e.f. 01.04.2016 to provide following options for reversal of credit,

i) Reversal in terms of amended Rule 6(3) i.e. 7% of value of the exempted service or

ii) Proportionate reversal u/r. 6(3A) or

iii) Pay for every month an amount equal to 50% of the Cenvat credit availed on inputs and input services in the month u/r. 6(3B)

Bank is having its major income as interest income i.e. 80% of the total income. Apart from the interest income, bank is having following non-service activities,

• Trading/Investment in Securities (like equity, mutual fund etc.)

• Sale of immovable property

• Sale of any fixed asset

• Provision of service in J&K

• Subsidy received from RBI for installation of capital asset etc.

Questionsa) Whether all the services listed above will be treated as exempted service as per amended Rule

6?

b) If Safe Money Bank avails option i) or ii), whether interest income will be included in exempted value or not?

c) Whether availing options i) or ii) will be beneficial to the banks as against option iii) considering the fact that services presently exempt & non-service activities will amount to exempted service?

d) Assuming Bank is following option iii) as on 1/4/2016 whether they can switch to options i) or ii) on 30/6/2016?

e) If Bank switches to option i) or ii) on 30/6/2016 whether they can again switch to option iii) on 30/9/2016?

2) ABC Ltd. is a company having its registered premises in Gujarat, has availed services of commission agent during the period April 15 to December 15. The department has alleged that the said credit is not an eligible input service in terms of definition of input service u/r 2(l) of Cenvat Credit Rules, 2004. There were conflicting judgments of Hon’ble High Courts in this regard. Hon’ble Gujarat High Court in the case of M/s. Cadila Health Care reported at 2013 (30) STR 3 (Guj.) has disallowed the said Cenvat credit whereas P&H High Court in the case of M/s Ambika Overseas reported at 2012 (25) STR 348 (P&H) has allowed the credit. Later, CBEC had clarified admissibility of Cenvat credit on service tax paid on Sales agency commission service vide Instruction No. 96/85/2015-CX.I dated 7/12/2015. Further, the explanation has been inserted in sub-clause (C) to Rule 2(l) of Cenvat Credit Rules, 2004 w.e.f. 3/2/2016 to allow such service as input service.


Questions a) Whether the said explanation will have retrospective effect i.e. whether ABC Ltd. will be eligible

to claim Cenvat credit for the period April 15 to December 15?

b) Whether the company will be bound by the decision of Gujarat High Court for the purpose of availing credit during the period April 15 to December 15?

3) XYZ Limited in engaged in providing services of “Life Insurance”. The company issues various types of policies including endowment and ULIP. In such policies the premium consist of both risk element and investment portion. Upto 31-03-2016, the company is required to reverse credit under rule 6 of Cenvat Credit Rules, 2004 only on policies as listed in entry 26A of Notification 25/2012-ST dated 20-06-2012.

Rule 6 of Cenvat Credit Rules, 2004 has been amendment w.e.f. 01-04-2016 to expand the meaning of exempted service. As per Explanation 3 to Rule 6(1) exempted service as defined in rule 2(e) of these rules shall also include activities which are not a “service” as defined in section 65B(44) provided that input services or inputs have been utilized for provision of such activities. Explanation 4 to these rules provides the manner to value these activities. As per the said explanation value shall be invoice/agreement/contract value and where such value is not available, such value shall be determined using reasonable means consistent with principle of valuation contained in the Finance Act, 1994.

The company earns the following income from various activities:

i) Investment in securities:

a) Interest;

b) Dividend;

c) Profit or loss on sale of such investments

ii) Profit or loss on sale of immovable property

iii) Insurance Services provided to company’s employee free of cost

Questionsa) Whether these incomes from activities mentioned above shall be considered as exempted

service as per the amended Rule 6?

b) Whether the investment portion in case of ULIP and endowment policies shall also be considered as exempt service?

c) If answer to above is yes, what would be the manner to determine the value in case of sale of securities? Whether the value shall be determined in a manner prescribed in clause d) of explanation I to Rule 6 for trading in securities?

d) What would be the manner to determine the value in case of sale of immovable property.

4) ABC Limited is engaged in providing services of “Construction of residential property”. The company has a project named “Floral” wherein there are two towers “Tower1” and “Tower 2”. The total flats for both the towers is 200. The company has received “Completion Certificate (CC)” for “Tower 1” on 25‑04‑2016. As on 25-04-2016 the unsold flats are as follows:


i) Tower 1 = 20 Flats

ii) Tower 2 = 30 Flats

The company has sold 10 flats of Tower 1 and 20 flats of Tower 2 after 25-04-2016.

The company had a practice to consider the sale of flats after receipt of CC as exempted service and reverse Cenvat credit under rule 6 in proportion to area of unsold flats to the total area. However, w.e.f. 01-04-2016, explanation 4 has been added to Rule 6(1) of The Cenvat Credit Rules, 2004 to provide the manner to value of exempted service as defined in explanation 3 of the said rule. As per explanation 4, value shall be invoice/agreement/contract value and where such value is not available, such value shall be determined using reasonable means consistent with principle of valuation contained in the Finance Act, 1994.

Questions a) Whether reversal shall be required to be made for total unsold flats of Tower 1 as on date of

receipt of CC or reversal shall be made only in respect of flats sold in the respective year of sale.

b) As value of taxable service in case of construction is considered on abated basis, whether the value of exempted service shall also be considered on abated basis?

c) Wether reversal shall be required to be made on Cenvat Credit as availed by the company for the project since inception or reversal shall be made only on Cenvat credit availed for the year in which CC is received?

d) The company does not maintain separate records for Tower 1 and Tower 2; in such case if the reversal is required on total credit since inception; how will the value of exempted and taxable turnover of Tower 1 and Tower 2 be determined?

5) DEF Limited is engaged in providing services of “Works Contract” (Original Works only). Thus the company is making payment of service tax on 40% of the Contract Value as per rule 2A(ii)(A).

Rule 6 of Cenvat Credit Rules, 2004 has been amendment w.e.f. 01-04-2016 to expand the meaning of exempted service. As per Explanation 3 to rule 6(1) exempted service as defined in rule 2(e) of these rules shall also include activities which are not a “service” as defined in section 65B(44) provided that input services or inputs have been utilised for provision of such activities.

As per section 65B(44) sale of any goods which is considered as deemed sale as per clause 29A of Article 366 of the Constitution of India is not a service. As per Article 366(29A) transfer of property in goods in case of works contract is a deemed sale.

Questions :a) Whether the company shall be required to reverse credit in respect of material portion involved

in works contract?

b) If yes whether reversal shall be required to made on 60% of the contract value or the same shall be treated as trading of goods and the value shall be determined as per clause c) to Explanation 1 to Rule 6 of Cenvat Credit Rules, 2004


6) Evershine Ltd. is engaged in manufacture of dutiable product (D) and exempted product (E). Evershine Ltd. has purchased and put to use capital goods on 01/04/2015 with an intention to use the same in the manufacture of both the products i.e. D and E. Evershine Ltd. availed Cenvat credit of excise duty paid on said capital goods. Upto 31/3/2016, the said capital goods are used in the manufacture of product E only.

Now, sub-rule (4) of Rule 6 of Cenvat Credit Rules, 2004 has been amended to provide that where the capital goods are used for the manufacture of exempted goods or provision of exempted service for two years from the date of commencement of commercial production or date of installation of capital goods, whichever is later, no CENVAT Credit shall be allowed on such capital goods. The amended rule reads as follows:

(4) No CENVAT credit shall be allowed on capital goods used exclusively in the manufacture of exempted goods or in providing exempted services for a period of two years from the date of commencement of the commercial production or provision of services, as the case may be, other than the final products or output services which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made or services provided in a financial year:

Provided that where capital goods are received after the date of commencement of commercial production or provision of services, as the case may be, the period of two years shall be computed from the date of installation of such capital goods.

Questions:a) If the company is unable to prove with documentary evidence its intention of using the capital

goods in manufacture of product D also, then whether the company will be eligible for credit?

b) If the said capital goods are not used in manufacture of product D upto 31/3/2017, Whether the company is required to reverse the Cenvat credit on 31/3/2017 according to the amended rule?

c) If the company manufactures one batch of product D in the month of March, 2017 and again manufactures product E continuously for next two years, will the company be liable to reverse the Cenvat credit in the month of March, 2019?

d) If the company at the time of installation of capital goods did not have the intention to use the goods in manufacture of dutiable as well as exempted goods and has not availed Cenvat credit, then whether the company can avail the credit in the following situation:

• From April 2017, uses the capital goods for manufacture of dutiable goods.

• From April 2017, continues to use the capital goods for manufacture of exempted goods.

e) In the queries a & b, if the company is liable to reverse the credit, whether interest will be applicable?

7) M/s. Nonstop Production Ltd. is engaged in the manufacture of product Alpha in its three factories located in Rohtak, Baddi and Pune. Factory situated in Baddi was shut down in May 2014 due to the labour issues while a new factory was started in Cochin in July 2014 to meet the rising demand. The company avails credit of service tax paid on input service at its Head Office in Mumbai and distributes the same under ISD.


Questions:a) If the company is distributing the credit, availed during the period April 2014 to December 2014,

in the month of January 2015, what will be the “relevant period” for the purpose of Rule 7 of the Cenvat Credit Rules, 2004.

8) Company ‘A’ having three units and is registered as an ISD at HO to distribute common Input Cenvat.

Company ‘B’ having two units and is registered as an ISD at HO to distribute common Input Cenvat.

The Company ‘A’ has acquired company B and decided to merge the same with effect from 1/10/2014. The company has filed the scheme of merger with the Bombay High Court for approval. In the said scheme, effective date of transfer of assets and liabilities is 1/10/2014. During the period of pendency of the approval, both the companies have continued to avail and distribute the credit to their respective units through their ISD on the basis of individual previous year turnover, i.e. till November 2015.

The Bombay High Court has approved the merger scheme vide its order dated 30.11.2015. The scheme of merger along with the High Court order has been filed with ROC on 15.12.2015 to complete the merger process.

The merger authorises the tax credit / benefit of Company A to be available to Company B.

Questionsa) What will be the effective date of merger for the purpose of transfer of Cenvat credit?

b) Whether the merger has impacted the ISD already distributed up to Nov-15. (Oct-14 to Nov -15). Whether any adjustment is required to me made post-merger?

c) What ratio/Turnover needs to be adopted for distributing undistributed credit availed at ISD henceforth for Invoice accounted up to Nov-15 in the respective companies before merger?

d) What ratio/Turnover needs to be adopted for distributing the credit availed in the month of December 2015 at ISD?

e) What ratio/Turnover needs to be adopted for distributing subsequent credit, i.e., for the period January 2016 to March 2016? Whether the units of Company ‘A’ need to be considered as new unit for the merged Company ‘B’?

f) Whether any intimation is required to be given to ST department with respect to ISD distribution and others now and or while filing the ST returns etc.

9) M/s. ABC Private Limited in engaged in manufacturing of excisable goods. The company manufactures the said goods from their own factory as well as get it manufactured from the contract manufacturers viz. A, B & C. The raw-materials required for the manufacture of the excisable goods are supplied by the company to the contract manufacturers. At the time of clearance of goods from the factory of the contract manufacturers, the contract manufacturers are required to pay excise duty on the goods manufactured by them the company. The excise duty as paid by the contract manufacturers is as under:

i) Contract manufacturers ‘A’: Under section 4A of Central Excise Act, 1944ii) Contract manufacturers ‘B’: Under rule 10A of Central Excise (Valuation) Rules, 2000iii) Contract manufacturers ‘C’: On transaction value under section of 4 Central Excise Act, 1944.


The head office of the company is registered as “Input Service Distributor”. Thus the Cenvat credit of input service used commonly is distributed as per the provision of rule 7 of the Cenvat Credit Rules, 2004.

As per the amended Rule 7, input service distributor can distribute credit to its units as well as to “outsource manufacturing units”. The term “outsource manufacturing units” has been defined in Explanation 4 of the said rule as follows:

Explanation 4. “For the purposes of this rule, “outsourced manufacturing unit” means a job-worker who is liable to pay duty on the value determined under Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 on the goods manufactured for the input service distributor or a manufacturer who manufactures goods, for the input service distributor under a contract, bearing the brand name of such input service distributor and is liable to pay duty on the value determined under section 4A of the Excise Act.

Questionsa) Whether as per the amended rule 7 of Cenvat Credit Rules, 2004, the contract manufacturers

A, B & C should be treated at ‘Out Source Manufacturing Units’ for the company.

b) If yes, whether common inputs like service tax paid on audit fees, etc. can be distributed to the above referred job workers.

10) M/s. Roadster Construction Limited is engaged in construction of roads. Thus the company was granted a contract from the government to construct road near Mumbai. As per the said contract, in addition to construction activity the company was also supposed to maintain the road for the next 25 years from the date of completion of construction activity. For the said activity the Government has allowed the company to collect toll charges from public using the said road. The company has been collecting such toll for the past 3 years. The company has now appointed M/s. XYZ Limited to review the system of collection of toll charges. As per the agreement with M/s. XYZ Limited they shall review the various controls setup by the company for collection of toll charges and the manner of accounting the same. M/s. XYZ Limited shall after such review shall also provide a detailed report suggesting the various measures to be implemented by the company for improvement of control, if any.

M/s. XYZ Limited has accordingly conducted the said review and had charged the company for their services as follows:

Sr. No.

Activity Amount charge Service Tax

1. Review of controls for collection of toll charges ` 1,00,000 ` 14,000

2. Review of accounting system for collection of toll charges ` 40,000 ` 5,600

The company has paid M/s. XYZ Limited their charges along with service tax. The report as submitted by M/s. XYZ Limited after review is as follows:

i) Certain improvements have been suggested by them for control setup by the company for the collection of toll charges.

ii) The report also stated that the manner of accounting of toll charges is correct and hence no changes are required in the same.


Questions:Whether the company is eligible to take credit of service tax paid for:

• Review of controls for collection of toll charges• Review of accounting system for collection of toll charges

11) M/s. First Attempt Success Tutorials (M/s. FAST) is engaged in providing services of coaching at their premises in Mumbai. The Mumbai premises of the coaching classes has been taken on rent from Mr. Landlord. As per the agreement with Mr. Landlord, in case M/s. FAST decides to terminate before the expiry of contract, they shall be liable to pay 5% of the annual rent to Mr. Landlord for breach of contract. M/s. FAST decided to move to Gujarat and thus the contract was terminated during the tenure of the contract. Accordingly, M/s. FAST has paid charges towards breach of contract to Mr. Landlord along with service tax.

Questionsa) Whether the above charges shall be treated as penalty or liquidated damages?

b) Whether service tax has been rightly paid on the said charges?

c) If yes, whether M/s. FAST can claim input credit of the service tax so paid?

12) LMN Limited is a company providing event management services. The company had availed Cenvat credit of following services for the period 2011-12 to 2013-14:

i) Rent a cab services;

ii) Hiring of bus for pick and drop of employees;

iii) Hiring of vehicle on contract basis for travel of top management of the company;

The records of the company were audited in the year 2014-15. It was observed that the credit of services as mentioned above is not eligible to the company as the same are not input service as per the definition of “input services” in Rule 2(l) of the Cenvat Credit Rules, 2004 as amended w.e.f. 01-04-2011. Based on this observation the company is issued a show cause notice to demand service tax on above services.

As per the amended definition the services in relation to rent a cab and expenses incurred by the service provider or manufacturer for its employees have been specifically excluded from the definition of input services.

Questionsa) Whether the credit of services as mentioned above is available to the company?

b) If yes, what documents are required to maintain to substantiate the eligibility of credit?

13) PQR Limited in engaged in providing service of “Advertisement Services”. The company has availed following service


Sr. No.

Name of Service Provider

Description of ServiceService Tax charged by

the service provider

1. Ad Designers Designing of advertisement banner ` 1,236

2. Photographers Limited Photoshoot of the advertisement ` 1,400

The company has paid the amount to the above vendors along with service tax. None of the above mentioned service provider has deposited the service tax collected by them with the Government. It has come to the knowledge of the company that Ad Designers have not deposited the service tax collected by them to the government whereas the company is not aware whether Photographers Limited has duly deposited the service tax collected with the government.

Questions

a) Whether the company can take credit of service tax paid to above service provider?


NOTES


NOTES


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CASE STUDIES ON SALE VS. SERVICE – COMPOSITE TRANSACTIONS (TAXABILITY UNDER VAT AND SERVICE TAX)


BackgroundThe objective of this background material is to assist in examination of the various principles for interpreting and, therefore, classifying transactions for the purpose of levy of value added tax and service tax. The principles enumerated are Judge-made law and, therefore, extensive reference to judicial precedents is inevitable.

1. Very often, we are confronted with demands for payment of indirect tax which, at first instance, seem irrational, illegal or an overs-zealous interpretation of the law by tax authorities. Phrases such as “ultra vires, levy”, “beyond powers of the legislature”, “dual or double taxation”, etc. come to mind.

2. The demand for tax by different authorities, service tax and value added tax (VAT) in the present context, is attributed to concepts, principles and doctrines, which appear difficult to fathom. ‘Aspect’, ‘Composite transaction’, ‘Dominant Nature’, etc. are some of the words used and referred to in order to justify the demand for tax by different authorities.

3. However, it is also experienced that Tribunals and Courts have upheld the levy of tax on issues which initially appeared to be obviously not liable to tax.

The questions which come to mind are :

• Is the Legislature competent to levy the tax which has been sought to be demanded?

• Is the classification or meaning attributed to the transaction justified?

• Is the value sought to be taxed, appropriate?

• Do any of the taxes, levies or demands transgress on other fields of taxation?

4. Taxing Powers4.1 The taxing powers of the Parliament and the State Legislatures flow from the Constitution of

India. The relevant Articles of the Constitution may be referred.

A. 245 : Parliament may make laws for the whole or part of the territory of India, and the Legislature of a State may make laws for the whole or part of the State.

A. 246 : Subject matter of law made by the Parliament and the State Legislatures;

• Parliament has the exclusive power to make laws with respect to any of the matters enumerated in List I of Seventh Schedule (Union List).;

• The State Legislature has the power to make laws with respect to the matters enumerated in List II of the Seventh Schedule (State List);

• The Parliament as well as the State Legislatures have the power to make laws with respect to matters enumerated in List III of the Seventh Schedule. (Concurrent List).


• The powers of the Parliament is “notwithstanding” the State List and the Concurrent List. On the other hand the powers of the State Legislature is “subject to” both the other Lists. There is, therefore, Federal Supremacy or Supremacy of the Parliament.

A. 248 : Parliament has the exclusive power to make law with respect to any matter not listed in List II or List III of the Seventh Schedule. This power includes the power of making any law imposing taxes not mentioned in these Lists.

A. 249 : Parliament has the powers to make laws in respect of matters listed in List II if the Council of States, so declare by a resolution to be in the national interest

A. 254 : If the law made by a State Legislature is repugnant to any law made by the Parliament, which the Parliament is competent to enact or any provision of an existing law with respect to matters in the Concurrent List (List III), the law made by the Parliament will prevail.

4.2. Various principles have been laid down by Courts for interpreting the powers of the Parliament and the States to legislate on the matters listed in the Seventh Schedule. Some of these are enumerated below.

• Doctrine of Pith and Substance• Principle of Harmonious Construction• Doctrine of Colourable Legislation• Doctrine of Repugnancy

5. Doctrine of Pith and Substance5.1 In order to ascertain whether a law transgresses the powers of the Parliament or State

Legislature, this doctrine is adopted. ‘Pith’ means the essence of something or the nature thereof. ‘Substance’ means the essential or dominant nature of character of something. ‘Pith and Substance’ has been explained as a legal doctrine used to determine under which head of power a piece of legislation falls

5.2 This principle was adopted and explained by the Supreme Court in the case of State of Bombay vs. F.N. Balsara (1951) AIR 318. The issue before the Supreme Court was the validity of the Bombay Prohibition Act, 1949. It was argued that prohibition on import, export, transportation, possession, assumption, etc. of liquor transgressed the powers of the Union in relation to Import and Export of goods. The Supreme Court observed :

“It is well settled that the validity of an Act is not affected if it incidentally trenches on matters outside the authorised field, and therefore it is necessary to inquire in each case what is the pith and substance of the Act impugned. If the Act, when so viewed, substantially falls within the powers expressly conferred upon the Legislature which enacted it, then it cannot be held to be invalid, merely because it incidentally encroaches on matters which have been assigned to another legislature.

The short question therefore to be asked is whether the impugned Act is in pith and substance a law relating to possession and sale etc. of intoxicating liquors or whether it relates to import and export of intoxicating liquors. If the true nature and character of the legislation or its pith and substance is not import or export of intoxicating liquor but its sale and possession etc. then


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it is very difficult to declare the Act to be invalid. It is said that the prohibition of purchase, use, possession, transport and sale of liquor will affect its import. Even assuming that such a result may follow, the encroachment, if any, is only incidental and cannot affect the competence of the Provincial Legislature to enact the law in question.”

5.3 The Supreme Court also referred to the decision in the case of Subrahmanyam Chettiar vs. Muthuswamy Goundar (1940 – FCR 188) where it was observed as follows.

“It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind observance to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial Committee, whereby the impugned statute is examined to ascertain its ‘pith and substance’, or its true nature and character, for the purpose of determining whether it is legislation with respect to matters in this list or in that.

Wherever legislative powers are distributed between the Union and the States, situations may arise where the two legislative fields may apparently overlap. It is the duty of the courts, however difficult it may be, to ascertain to what degree and to what extent, the authority to deal with matters falling within these classes of subjects exists in each legislature and to define, in the particular case before them, the limits of the respective powers. It could not have been the intention that a conflict should exist; and, in order to prevent such a result, the two provisions must be read together, and the language of one interpreted, and, where necessary modified by that of the other.”

5.4 Similarly, in the case of Prem Chandra Jain vs. RK Chhabra (1984 – AIR 981), it was held that “The legal position is well-settled that the entries incorporated in the lists covered by Schedule VII are not powers of legislation but ‘fields’ of legislation. Such entries are mere legislative heads and are of an enabling character. The language of the entries should be given the widest scope or amplitude. Each general word has been asked to be extended to all ancillary or subsidiary matters which can fairly and reasonably be comprehended. An entry confers powers upon the legislature to legislate for matters ancillary or incidental, including provision for avoiding the law. As long as the legislation is within the permissible field in pith and substance, objection would not be entertained merely on the ground that while enacting legislation, provision has been made for a matter which though germane for the purpose for which competent legislation is made it covers an aspect beyond it. If an enactment substantially falls within the powers expressly conferred by the Constitution upon the legislature enacting it, it cannot be held to be invalid merely because it incidentally encroaches on matters assigned to another legislature.”

5.5 Also see Supreme Court in the case of Southern Pharmaceuticals vs. State of Kerala (1981–AIR 1863).

6. Principle of Harmonious Construction6.1 According to this principle, the provisions of the Constitution should be harmoniously

interpreted and an interpretation which makes a law workable and valid should be preferred over one which invalidates it.


6.2 The following observation in F. N. Balsara’s case (supra) will be relevant.

“Since the enactment of the Government of India Act, 1935, there have been several cases in which the principles which govern the interpretation of the Legislative Lists have been laid down. One of these principles is that none of the items in each List is to be read in a narrow or restricted sense. The second principle is that where there is a seeming conflict between an entry in List II and an entry in List I, an attempt should be made to see whether the two entries cannot be reconciled so as to avoid a conflict of jurisdiction. This principle has been stressed in a number of cases by the Federal Court as well as by the Privy Council. In re The Central Provinces and Berar Act No. XIV of 1938 (2), the question arose as to whether a tax on the sale of motor spirits was a tax on the sale of goods within entry 48 of the Provincial List or a duty of excise within entry 45 of the Federal List. Dealing with the difficulty which arose in that case, Gwyer C.J. observed as follows :

“Only in the Indian Constitution Act can the particular problem arise which is now under consideration; and an endeavour must be made to solve it, as the Judicial Committee have said, by having recourse to the context and scheme of the Act, and a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying, the language of the one by that of the other. If indeed such a reconciliation should prove impossible, then, and only then, will the non-obstante clause operate and the federal power prevail; for the clause ought to be regarded as a last resource, a witness to the imperfections of human expression and the fallibility of legal draftsmanship.”

7. Doctrine of Colourable Legislation7.1 At the same time, it is not permissible for a Legislature to adopt a ‘back door entry’, to taxing

transaction. The Doctrine of Colourable Legislation means that when anything is prohibited directly, it is also prohibited indirectly. The legislature cannot, under the guise of exercising its powers under the Constitution make a law on another matter, which it was otherwise prohibited to do.

7.2 The Supreme Court in the case of Federation of Hotel and Restaurant Association of India vs. Union of India (1989 – 74 STC, 102) has explained as follows.

“If a legislature with limited or qualified jurisdiction transgresses its powers, such transgression may be open, direct and overt, or disguised, indirect and covert. The latter kind of trespass is figuratively referred to as “colourable legislation” connoting that although apparently the legislature purports to act within the limits of its own powers yet, in substance and in reality, it encroaches upon a field prohibited to it, requiring an examination, with some strictness, of the substance of the legislation for the purpose of determining what that legislature was really doing.”

8. Doctrine of Repugnancy8.1 This doctrine emanates from Article 254. It means that if a law made by a State is repugnant to

a law made by the Parliament or to any existing law with respect to matters enumerated in List III, the law made by the Parliament will prevail. (However, if the law of the State has received assent of the President under Article 254(2), the State law will prevail in that State).


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8.2 Reference may be made to the following observations of the Supreme Court in the case of M. Karunanidhi vs. Union of India [1979 AIR 898 (SC)].

“1. Where the provisions of a Central Act and a State Act in the Concurrent List are fully inconsistent and are absolutely irreconcilable, the Central Act will prevail and the State Act will become void in view of the repugnancy.

2. Where however a law passed by the State comes into collision with a law passed by Parliament on an Entry in the Concurrent List, the State Act shall prevail to the extent of the repugnancy and the provisions of the Central Act would become void provided the State Act has been passed in accordance with Clause (2) of Article 254.

3. Where a law passed by the State Legislature while being substantially within the scope of the entries in the State List entrenches upon any of the Entries in the Central List, the constitutionality of the law may be upheld by invoking the doctrine of pith and substance if on an analysis of the provisions of the Act it appears that by and large the law falls within the four corners of the State List and entrenchment, if any, is purely incidental or inconsequential.

4. Where, however, a law made by the State Legislature on a subject covered by the Concurrent List with the repugnant to a previous law made by Parliament, then such a law can be protected by obtaining the assent of the President under Article 254(2) of the Constitution. The result of obtaining the assent of the President would be that so far as the State Act is concerned, it will prevail in the State and overrule the provisions of the Central Act in their applicability to the State only.

Such a State of affairs will exist only until Parliament may at any time make a law adding to, or amending, varying or repealing the law made by the State Legislature under the proviso to Article 254.

Now, the conditions which must be satisfied before any repugnancy could arise are as follows.

(1) That there is a clear and direct inconsistency between the Central Act and the State Act.

(2) That such an inconsistency is absolutely irreconcilable.

(3) That the inconsistency between the provisions of the two Acts is of such nature as to bring the two Acts into direct collision with each other and a situation is reached where it is impossible to obey the one without disobeying the other.”

9. The principles enunciated in the various decisions were summarised in Kesoram Industries Ltd. [2004 – 266 ITR 721 (SC)] while referring to Hoechst Pharmaceuticals Ltd. vs. State of Bihar (1984–55 STC 1 (SC).

“The principles have been succinctly summarized and restated by a Bench of three learned judges of this court on a review of the available decisions in Hoechst Pharmaceuticals Ltd. vs. State of Bihar (1984) 55 STC 1 (SC); (1983) 4 SCC 45. They are :

(1) The various entries in the three Lists are not ‘powers’ of legislation but ‘fields’ of legislation. The Constitution effects a complete separation of the taxing power of the Union and of the States under Article 246. There is no overlapping anywhere in the taxing power and the Constitution gives independent sources of taxation to the Union and the States.


(2) In spite of the fields of legislation having been demarcated, the question of repugnancy between law made by Parliament and a law made by the State Legislature may arise only in cases when both the legislations occupy the same field with respect to one of the matters enumerated in the Concurrent List and a direct conflict is seen. If there is a repugnancy due to overlapping found between List II on the one hand and List I and List III on the other, the State law will be ultra vires and shall have to give way to the Union law.

(3) Taxation is considered to be a distinct matter for purposes of legislative competence. There is a distinction made between general subjects of legislation and taxation. The general subjects of legislation are dealt with in one group of entries and power of taxation in a separate group. The power to tax cannot be deduced from a general legislative entry as an ancillary power.

(4) The entries in the List being merely topics or fields of legislation, they must receive a liberal construction inspired by a broad and generous spirit and not in a narrow pedantic sense. The words and expressions employed in drafting the entries must be given the widest possible interpretation. This is because, to quote V. Ramaswami J., the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeration of broad categories. A power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse the legislations touching incidental and ancillary matters.

(5) Where the legislative competence of a Legislature of any State is questioned on the ground that it encroaches upon the legislative competence of Parliament to enact a law, the question one has to ask is whether the legislation relates to any of the entries in List I or III. If it does, no further question need be asked and Parliament’s legislative competence must be upheld. Where there are three Lists containing a large number of entries, there is bound to be some overlapping among them. In such a situation the doctrine of pith and substance has to be applied to determine as to which entry does a given piece of legislation relate. Once it is so determined, any incidental trenching on the field reserved to the other Legislature is of no consequence. The court has to look at the substance of the matter. The doctrine of pith and substance is sometimes expressed in terms of ascertaining the true character of legislation. The name given by the Legislature to the legislation is immaterial. Regard must be had to the enactment as a whole, to its main objects and to the scope and effect of its provisions. Incidental and superficial encroachments are to be disregarded.

(6) The doctrine of occupied field applies only when there is a clash between the Union and the State Lists within an area common to both. There the doctrine of pith and substance is to be applied and if the impugned legislation substantially falls within the power expressly conferred upon the Legislature which enacted it, an incidental encroaching in the field assigned to another Legislature is to be ignored. While reading the three Lists, List I has priority over Lists III and II, and List III has priority over List II. However, still, the predominance of the Union List would not prevent the State Legislature from dealing with any matter within List II though it may incidentally affect any item in List I.”

10. Applying the above principles, the obvious overlaps/transgressions have been considered by Courts10.1 With the evolution of the laws, the obvious overlaps or transgressions have been considered

and settled. Some of these have been enumerated below for reference

10.2 ‘Expenditure tax’ is a tax on expenditure and not on luxuries or sale of goods. The distinct aspect, that is ‘expenditure’ of the transaction is sought to be tax and is within the legislative competence of the Union. (Federation of Hotel & Restaurant Association of India vs. Union of India – 1989 (74 STC, 102) (SC).


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10.3 Levy of income tax on income from property and charge of an annual tax on land and buildings are distinct and there is no overlap. [Ralla Ram vs. Province of East Punjab – AIR 1949 FC 81)]

10.4 Levy of Wealth tax and Property tax was upheld. While property tax is on land and buildings, wealth tax is on the interest, ownership or on the capital value of the land and buildings [Sudhir Chandra Naran vs. Wealth Tax Officer – 1968 – 69 ITR 897 (SC)].

10.5 Gift tax is a tax on gift of property including land and building and not a tax directly imposed on land and buildings (Second Gift Tax Officer vs. D H Hezareth – AIR 1970 SC 999).

10.6 Service tax on renting of immovable property is a tax on renting or use of the property and not on land and buildings [Retailers Association of India vs. Union of India – 2011 44 VST, 387 (Bom)].

10.7 Levy of entertainment tax and service tax on direct to home are on different aspects that is on entertainment and rendering of DTH services and are valid (Tata Sky Ltd. vs. State of Uttarakhand – 2013 – 62 VST 5 (Uth) and Tata Sky Ltd. vs. State of Tamil Nadu – 2013 - 62 VST, 69 (Mad).

10.8 Sale of under-construction property is liable to tax under the VAT and Service tax laws and is not a tax on transfer of immovable property. (Larsen & Toubro Ltd. vs. State of Karnataka [(2013) 65 VST, 1].

10.9 Tax on Mandap Keepers is a tax on services and not a tax on sales or hire purchase activities or a tax on land. (Tamil Nadu Kalyana Mandapam Association vs. Union of India [2004–135 STC, 480 (SC)].

11. Not ‘double taxation’11.1 An important aspect to be noticed is that in the above instances the dispute is about the levy

of tax. There is generally no dispute regarding valuation or the measure of tax. Moreover, these are not instances of ‘double taxation’, as popularly perceived.

11.2 ‘Double Taxation’ has been explained by the Supreme Court in the case of Sri Krishna Das vs. Town Area Committee, Chirgaon [1990–77 STC, 395 (SC)]. The Supreme Court has observed that :

“Double taxation, in the strict legal sense, means taxing the same property or subject matter twice, for the same purpose, for the same period and in the same territory. To constitute double taxation, the two or more taxes must have been (1) levied on the same property or subject matter, (2) by the same Government or authority, (3) during the same taxing period, (4) for the same purpose. There is no double taxation, strictly speaking, where (a) the taxes are imposed by different States, (b) one of the impositions is not a tax, (c) one tax is against property and the other is not a property tax, or (d) the double taxation is indirect rather than direct.”

12. Taxation of Sales and Services12.1 The debate regarding legislative competence to enact the “service tax” and “value added tax”

laws is not in real dispute except in respect of specific or special instances only.

12.2 Entry 54 of List II of the Seventh Schedule provides for levy of tax on sale or purchase of goods. ‘Sale’ or ‘Purchase’ has been interpreted as sale within the meaning of the Sale of Goods Act, 1930. [Gannon Dunkerley & Co. vs. State of Madras – 1959 – 9 STC, 353 (SC) ].


12.3 The powers of the States were expanded vide the Forty Sixth Amendment to the Constitution in 1982 with the insertion of clause (29A) to Article 366. This enabled States to levy tax on transfers otherwise pursuant to a contract, works contracts, hire purchase, transfer of the right to use goods, supplies by unincorporated associations and catering contracts, which otherwise did not fall within the meaning of sale under the Sale of Goods Act, 1930

12.4 Service Tax, introduced in 1994, has been introduced under the residuary powers of the Parliament under Article 248 read with Entry 97 of List I of the Seventh Schedule. As a legislation under the residuary entry, any levy would be valid only when the same is not covered under any of the other entries in List I and List II.

12.5 The following observation of the Supreme Court should be referred in the case of Union of India vs. H. S. Ohitton [1973 – 83 ITR 582 (SC)].

“Before exclusive legislative competence can be claimed for Parliament by resort to the residuary power, the legislative incompetence of the State Legislature must be clearly established. Entry 97 itself is specific in that a matter can be brought under that entry only if it is not enumerated in List II or List III and in the case of a tax if it is not mentioned in either of those Lists. In a Federal Constitution like ours where there is a division of legislative subjects but the residuary power is vested in Parliament, such residuary power cannot be so expansively interpreted as to whittle down the power of the State Legislature. That might affect and jeopardize the very federal principle. The federal nature of the Constitution demands that an interpretation which would allow the exercise of legislative power by Parliament pursuant to the residuary powers vested in it to trench upon State legislation and which would thereby destroy or belittle State autonomy must be rejected.”

13. The following could be some instances under the service tax and VAT laws where the principles and doctrines discussed above could be applied :

• Franchise services, which are taxed under the Service tax as well as VAT laws.

• Levy of VAT on ‘Live telecasting rights of events performed in Maharashtra’ under the Maharashtra Value Added Tax Act, 2002.

• Levy of service tax on financial leasing transactions.

• Levy of service tax on foreign exchange.

• Levy of service tax on preferential location in the context of construction of commercial or residential complex.

• Levy of service tax and VAT on software, IPR, etc.

14. Aspect Theory14.1 Although the validity of a legislation may not be in doubt, it representing a distinct pith and

substance, the levy of tax on a transaction may be challenged or justified on the basis of the “aspect” which is sought to be tax. The ‘Aspect Theory’ viewed from the point of view of a transaction, refers to a distinct aspect of the transaction which can be subjected to tax.

14.2 The “Aspect” of a transaction is similar to the Pith and Substance. In essence, different aspects of a transaction can be taxed under different laws. “Aspect” means feature, characteristic, facet or ingredient.


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14.3 However, in order to levy tax, the levy should be on an aspect of a transaction as a whole and not on one of the elements or activities in the transaction.

14.4 The following observations of the Kerala High Court in the case of Escotel Mobile Communications Ltd. vs. Union of India [2002–126 STC, 475 (Ker)] is relevant.

“Every transaction have different aspects. It is open to a Legislature or more than one Legislatures to impose a tax on that particular “aspect” of the transaction which is within its legislative competence. Doing so is perfectly permissible. In Federation of Hotel and Restaurant Association of India vs. Union of India [(1989) 74 STC, 102 (SC)]; (1989) 3 SCC 634 elaborating the theory of “aspects legislation”. the Supreme Court observed : (vide paragraphs 30-32, 37, 38; page Nos. 120, 121 and 123 in STC).

“30. In Lefroy’s Canada’s Federal System, the learned author, referring to the ‘aspects of legislation’ under sections 91 and 92 of the Canadian Constitution, i.e. the British North America Act, 1867, observes that one of the most interesting and important principles which have been evolved by judicial decisions in connection with the distribution of legislative power is that subjects which in one aspect and for one purpose fall within the power of a particular Legislature may in another aspect and for another purpose, fall within another legislative power. Learned author says :

“……. that by “aspect” must be understood the aspect or point of view of the legislator in legislating the object, purpose, and scope of the legislation that the word is used subjectively of the legislator, rather than objectively of the matter legislated upon.”

14.5 Moreover, as held by the Supreme Court in Bharat Sanchar Nigam Ltd. (supra) the aspect theory would not apply to enable the value of the services to be included in the sale of goods or the price of goods in the value of the service.

14.6 Every transaction should be construed as a whole and not the elements or activities comprised therein or the outcome thereof. The Supreme Court in the case of State or Orissa vs. Titagur Paper Mills Co. Ltd. [(1985) 60 STC, 213 (SC)] has observed as follows.

“It is well settled rule of interpretation that a document must be construed as a whole, Just as a document cannot be interpreted by picking out only a few clauses ignoring the other relevant ones, in the same way the nature and meaning of a document cannot be determined by its end-result or one of the results or consequences which flow from it.

“It is true that the nomenclature and description given to a contract is not determinative of the real nature of the document or of the transaction thereunder. These, however, have to be determined from all the terms and clauses of the document and all the rights and results flowing therefrom and not by picking and choosing certain clauses and the ultimate effect or result.”

14.7 Similarly, in the case of G. S. Lamba & Sons vs. State of Andhra Pradesh [(2011) – 43 VST, 323 (AP)] the Andhra Pradesh High Court has observed :

“The agreement or the contract between the parties would determine the nature of the contract. Such agreement has to be read as a whole to determine the nature of the transaction.”


15. Mutual Exclusivity between Service tax and VAT15.1 Mutual exclusivity of the levy of service tax and VAT has been recognized and accepted. This

requires that the Union and the States remain within their respective fields of taxation in terms of the levy as well as the measure of tax or valuation. Courts have held that the levy of Service tax and VAT are mutually exclusive and they cannot overlap.

15.2 The Supreme Court, in the case of Bharat Sanchar Nigam Ltd. vs. Union of India (2006 – 145 STC, 91 – SC) has observed as follows.

“No one denies the legislative competence of States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction.

This does not however allow State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal fiction deemed to be divisible under article 366(29A), the value of the goods involved in the execution of the whole transaction cannot be assessed to sales tax.”

15.3 In Gujarat Ambuja Cements Ltd. vs. Union of India (2005–1 VST 1–SC), the Supreme Court held:

“This mutual exclusively which has been reflected in article 246(1) means that taxing entries must be construed so as to maintain exclusivity. Although generally speaking a liberal interpretation must be given to taxing entries, this would not bring within its purview a tax on subject matter which a fair reading of the entry does not cover. If in substance, the statute is not referable to a field given to the State, the court will not by any principle of interpretation allow a statute not covered by it to intrude upon this field.”

15.4 In Imagic Creative Pvt. Ltd. vs. Commissioner of Commercial Taxes (2008–12 VST, 371–SC), the Supreme Court observed :

“Payments of service tax as also the VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contra distinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy. It is, therefore, difficult to hold that in a case of this nature, sales tax would be payable on the value of the entire contract; irrespective of the element of service provided.”

16. Composite and Indivisible Transactions16.1 The challenge arises in respect of transactions which seemingly represent services and sales,

at the same time. These could be transactions of leases, intellectual property rights, works contracts, catering, etc. on one hand. On the other hand, there would be transaction of sale of goods along with transportation and installation, or services of packaging, medical services, management consultant services, advertising services, etc. No challenge would arise in the case of pure sales which are covered under the Sale of Goods Act, 1930 or in the case of services simplicitor which are covered under the provisions of the service tax law.

Here the terms “composite” or “indivisible” transactions may be referred. Since it is difficult to really ascertain the nature of the transactions and classify them for the purpose of levy of service tax or VAT, the guidelines of the Supreme Court may be applied. The Forty Sixth Amendment to the Constitution which introduced Article 366(29A) was explained in the case of Bharat Sanchar Nigam Ltd. vs. Union of India (2006–145 STC, 91) (SC). The Supreme Court has explained :


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“43. All the clauses of Article 366(29A) serve to bring transactions where one or more of the essential ingredients of a sale as defined in the Sale of Goods Act, 1930 are absent, within the ambit of purchases and sales for the purposes of levy of sales tax. To this extent only is the principle enunciated in Gannon Dunkerley limited. The amendment especially allows specific composite contracts, viz., works contracts [clause (b)], hire purchase contracts [clause (c)], catering contracts [clause (f)] by legal fiction to be divisible contracts where the sale element could be isolated and be subjected to sales tax.

“44. Gannon Dunkerley survived the 46th Constitutional Amendment in two respects. First with regard to the definition of “sale” for the purposes of the Constitution in general and for the purpose of Entry 54 of List II in particular except to the extent that the clauses in Article 366(29A) operate. By introducing separate categories of “deemed sales”, the meaning of the word “goods” was not altered. Thus the definitions of the composite elements of a sale such as intention of the parties, goods, delivery, etc., would continue to be defined according to known legal connotations. This does not mean that the content of the concepts remains static. Courts must move with the times. But the 46th Amendment does not give a licence for example to assume that a transaction is a sale and then to look around for what could be the goods. The word “goods” has not been altered by the 46th Amendment. That ingredient of a sale continues to have the same definition. The second respect in which Gannon Dunkerley has survived is with reference to the dominant nature test to be applied to a composite transaction not covered by Article 366(29A). Transactions which are mutant sales are limited to the clauses of Article 366(29A). All other transactions would have to qualify as sales within the meaning of the Sale of Goods Act, 1930 for the purpose of levy of sales tax.

“ 45. Of all the different kinds of composite transactions the drafters of the 46th Amendment chose three specific situations, a works contract, a hire purchase contract and a catering contract to bring within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been constitutionally permitted in clauses (b) and (f) of clause (29A) of Article 366, there is no other service which has been permitted to be so split. For example the clauses of Article 366(29A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the sales tax authorities tax the transaction as a sale? Doctors, lawyers and other professionals render service in the course of which can it be said that there is a sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/her client? Strictly speaking with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both the cases.

“46. The reason why these services do not involve a sale for the purpose of Entry 54 of List II is, as we see it, for reasons ultimately attributable to the principles enunciated in Gannon Dunkerley’s case [1958] 9 STC, 353 (SC), namely, if there is an instrument of contract which may be composite in form in any case other than the exceptions in Article 366(29A), unless the transaction in truth represents two distinct and separate contracts and is discernible as such, then the State would not have the power to separate the agreement to sell from the agreement to render service, and impose tax on the sale. The test therefore for composite contracts other than those mentioned in Article 366(29A) continues to be – did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is as to what is “the substance of the contract”. We will, for the want of a better phrase, call this the dominant nature test.”


16.2 From a close reading of this decision, the following propositions evolve.

(a) There could be various types of composite contracts;

(b) Out of these, only works contracts, hire purchase and catering contracts are treated as divisible contracts, where the sales element could be isolated and subjected to sales tax under Article 366(29A);

(c) All transactions, other than those covered under Article 366(29A) will have to qualify as sales within the meaning of Sale of Goods Act, 1930;

(d) Of the 3 composite transactions which have been deemed to be sales, works contracts and catering involve a kind of service and sale at the same time;

(e) Apart from these two cases where splitting between Supply and Sale is permitted, there is no other service which has been permitted to be so split. (the Supreme Court has given the example of Hospital services);

(f) For all other composite contracts not covered by Article 366(29A), the dominant nature test will have to be applied in order to ascertain whether the transaction represents two distinct and separate contracts and is discernible as such for the purpose of levy of sales tax or VAT.

16.3 In the case of Larsen & Toubro Ltd. vs. State of Karnataka (2013) 65 VST, 1 (SC), the Supreme Court has reiterated that dominant nature test is not applicable in the case of composite contracts covered under Article 366(29A).

16.4. Courts have also classified transactions as “indivisible” transaction to convey that these cannot be split for the purpose of levy of service tax and VAT.

(i) In the case of drilling rig services, the Tripura High Court held that even though there was an element of transfer of the right to use goods, the transaction was not discernible and therefore was to be subjected to service tax (77 VST 547 – Tripura – Quippo Oil and Gas Infrastructure Ltd. vs. State of Tripura).

(ii) The Supreme Court in the case of Imagic Creative Pvt. Ltd. vs. Commissioner of Commercial Taxes (2008–12 VST, 371–SC) has held as follows.

“A distinction must be borne in mind between an indivisible contract and a composite contract. If in a contract, an element to provide service is contained, the purport and object for which the Constitution had to be amended and clause (29A) had to be inserted in article 366, must be kept in mind.

We have noticed hereinbefore that a legal fiction is created by reason of the said provision. Such a legal fiction, as is well known, should be applied only to the extent for which it was enacted. It, although must be given its full effect but the same would not mean that it should be applied beyond a point which was not contemplated by the Legislature or which would lead to an anomaly or absurdity.”

(iii) Similarly, in the case of Viceroy Hotels Ltd. vs. Commercial Tax Officer (2011–43 VST, 424–AP) the High Court has observed as follows.


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“The distinction between an indivisible contract and a composite contract must be borne in mind. If a contract contains an element of service the object for which clause (29A) was inserted in Article 366 of the Constitution of India must be kept in mind. Service tax and VAT are mutually exclusive. They should be held to be applicable having regard to the respective parameters of “service” and “sale” as envisaged in a composite contract as contra-distinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy.”

16.5. Applying the law laid down by the Supreme Court, the following propositions appear to arise.

• If a transaction constitutes a ‘sale’, there can be no levy of service tax even if there is an element of service incidental to the sale;

• In a transaction of service, there should be no levy of value added tax even if there is use of goods or materials, unless the transaction represents ‘composite transaction’;

• Of all the composite transactions, only works contracts, hire purchase and catering contracts can be vivisected and subjected to service tax and value added tax;

• For all other composite contracts as well as for indivisible contracts, the dominant nature test should be applied.

17. Valuation and Measure of Tax17.1 One of the fundamental requirement of a taxing statute is to precisely provide for the charge

or levy, the person liable to pay tax and the quantification or measure thereof. In the absence of these requirements, the levy fails and tax cannot be recovered from the citizens.

17.2 The decision of the Supreme Court in the case of Govind Saran Ganga Saran vs. Commissioner of Sales Tax (1985–60 STC, 1–SC) is relevant. In this case, the Supreme Court has observed as follows.

“The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed, and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity.”

17.3 Similar was the observation of the Supreme Court in the case of Mathuram Agarwal Vs. State of Madhya Pradesh (1999-8 SCC 667).

“The statute should clearly and unambiguously convey the three components of the tax law i.e., the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter.”

17.4 In Commissioner of Income Tax vs. B.C. Srinivasa Shetty (1981–AIR 972), the Supreme Court held :


“All transactions encompassed by section 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by s.45 to be the subject of the charge. This inference flows from the general arrangement of the provisions in the Income-tax Act, where under each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise one would be driven to conclude that while a certain income seems to fall within the charging section there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains to the fundamental integrality of the statutory scheme provided for each head.”

17.5 The Supreme Court applied these principles in the case of Commissioner of Central Excise vs. Larsen & Toubro Ltd. (2015–39 STR, 913–SC), while holding that works contracts could not be taxed prior to 1 June 2007 (tax on work contract services were introduced from 1st June, 2002) under the Commercial Construction, Construction of Complex Services or under Erection, Commissioning and Installation in the absence of clear charging provisions as well as valuation mechanism.

17.6 Recently, the Delhi High Court has also struck down the levy of tax on sale of under-construction properties under the category of Construction of Complex Services citing lack of valuation provision for ascertaining the value of services for the purpose of levy of service tax. The Delhi High Court has held that under the provisions on the statute, tax was sought to be levied on land and on goods, which was not permissible [Suresh Kumar Bansal vs. Union of India – WP(C) 2235/2011 dated 3.6.2016 (Delhi)].

CASE STUDIES FOR CONSIDERATION

Case Study 1• Get Well Soon Hospital renders medical services to inpatients. The Hospital has a pharmacy from

where the medicines are issued. In the normal course, as and when any medicine is required to be administered to a patient, the attendant doctor prescribes the same. The prescription is taken by the nurse to the nurse’s station from where a request is sent to the pharmacy to deliver the medicines. These are then used in the course of the treatment of the patients.

• If any surgical part is required in the course of the treatment, such as stents, pace maker, hip ball, artificial knee, etc. the Hospital gives the patient to choose the type of part to be used. The price of the surgical parts vary from manufacturer to manufacturer, specification, quality and therefore price.

• The Hospital charges the patients for the medicines and the surgical part. The periodical invoices list every medicine as well as surgical part which is supplied in the course of the treatment. This list is also required to enable the patient to claim medical insurance. The medicines and parts are charged at MRP printed on the packaging.


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• In the case of any excess / unused medicines, at the time of discharge of the patients the unused medicines, to the extent of the unopened packs is returned to the pharmacy and deduction towards the same is given in the invoice. However, if any of the medicine is partially used, the same is handed over to the patient.

• The officers of the value added tax department have sought to assess value added tax on the medicines and surgical parts invoiced to the patients. According to the officers, there is a sale of the medicines and surgical parts which is evidenced by separate charges on the invoice as well as the fact that the price of the medicines and parts are invoiced at MRP.

• The Hospital has relied on the decision of the Allahabad High Court in the case of International Hospital (2014–71 VST, 139), in the case of Fortis Hospital [2015 TIOL 466 P&H VAT] and Tata Main Hospital [(2008)–(2) JCR 174 (JHR)]. On the other hand the value added tax officers have relied on the decisions in the case of Comtrust Eye Hospital vs. Additional Sales Tax Officer (2009–20 VST, 532) and in the case of Malankara Orthodox Syrian Church vs. Sales Tax Officer (2004–135 STC, 224)

• During the hearing of the above matter, the officers have enquired about the taxability of meals provided to the patients during their stay and in the course of the treatment. The officers have indicated that they may raise demand for payment of value added tax on the meals provided.

• The Hospital desires to be advised whether the activities undertaken by it are in the nature of services only or also involve sale of goods by it. The Hospital desires to be advised about its liability on the above.

Case Study 2• Mamaji & Co. Ltd. provides Mandap Keepers services. As part of the activities, the company sets up

Mandaps for various functions. The Mandaps, include furnitures, show pieces, air circulators, lighting fixtures, decoration, music system, etc. Catering also forms part of the services.

• The Central Excise and Service Tax Appellate Tribunal, in the case of Sayaji Hotels Ltd. vs. Commissioner of Central Excise, Indore (2013–59 VST, 269) has held service tax on Mandap Keepers services where catering is also provided is payable on the full value less abatement as provided vide Notification No. 21/97-ST. A deduction on account of ‘deemed sale’ of food and drinks is not available at any other value or at actuals.

• The Maharashtra Value Added Tax also treats provision of mandap or tarpaulin along with decoration, furniture, fixtures, lights, floor coverings, utensils and other articles as a transaction of transfer of the right to use good and levied value added tax thereon. In fact, composition at 1.5 per cent of the turnover has been provided under provisions of section 42(4) of the MVAT Act, 2002.

• Mamaji & Co. seeks advice on whether the provisions under the service tax law and/or the value added tax law can be challenged and if yes, on what grounds? And, if not, why?

Case Study 3• Crown Pizzas grants a franchise to Health Foods LLP open a ‘Crown Pizza’ outlet and sell and

supply Pizzas therefrom. Under the agreement, Crown Pizza would

(a) Provide Health Foods LLP with the recipe for making the special Crown Pizzas;

(b) Provide the layout of the ‘Crown Pizza’ outlet with the nature and type of furniture and fixtures, colour combination, type of equipment required, etc.;


(c) Provide training to the kitchen and servers in the preparation and serving of the Pizzas.;

(d) provide management training for running of the outlet;

(e) provide the outlet management and billing software for running the outlet;

(f) grant licence to use the ‘Crown Pizzas’ brand/trademark at the outlet.

• Crown Pizza is entitled to receive a royalty at 2 per cent on the gross sales from Health Foods LLP.

• Crown Pizza is confronted with the provision of the service tax law and the value added tax law and is confused which of the provisions apply to it. It has the following questions.

(a) Whether the franchise granted to Healthy Food LLP would be in the nature of service?

(b) Whether the franshise granted to Healthy Food LLP would be in the nature of ‘goods’ and liable to value added tax ?

(c) Whether the transaction would constitute ‘service’ as well as ‘goods’ ?

• The following provisions may be referred for the purpose :.

– Definition of service under section 65B(44) of the Finance Act, 1994.

– Clause (c) of section 66E of the Finance Act, 1994 (Declared services), which reads as follows.

“66E. Declared Services.

The following shall constitute declared services, namely :-

(c) Temporary transfer or permitting the use or enjoyment of intellectual property right”.

– Definition of ‘Franchise’ under section 65 of the Finance Act, 1994 as they stood up to 30th June, 2012.

65(47) : “franchise” means an agreement by which the franshisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchiser, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved

– Definition of “sale” under section 2(24) of the Maharashtra Value Added Tax Act, 2002 which includes “the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.”

– Schedule Entry C-39 of the MVAT Act, 2002

“39. Goods of intangible or incorporeal nature as may be notified, from time to time, by the State Government in the Official Gazette.

– Entries (2) and (12) of the Notification dated 1st June, 2005 issued under Schedule Entry C-39 of the MVAT Act, 2002.

“(2) Trademarks

“(12) Franchise, that is to say, an agreement by which the franshisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified or associated with the franchiser, whether or not a trade mark, service mark, trade name or logo or any symbol, as the case may be, is involved.”


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Case Study 4• The Forty Sixth Amendment to the Constitution enables levy of sales tax or value added tax on

supply of food as part of any service [Article 366(29A)(f)].

• Service tax under the Finance Act, 1994 is levied on the food supplied by a caterer as well as in a restaurant. Under rule 2C of the Service Tax (Determination of Value) Rules, 2006, supply of food in a restaurant is taxed on 40 per cent of the amount charged. The description of the service under Rule 2C reads as follows.

“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, at a restaurant.”

• The Paralegal of a law firm has come across the following case laws.

- State of Himachal Pradesh vs. Associated Hotels of India Ltd. (1972–29 STC, 474) (SC), where it was held supply of food to resident guests did not amount to a sale of food and was therefore, not liable to sales tax.

- Northern India Caterers (India) Ltd. vs. Governor of Delhi (1978 – 42 STC, 386) (SC), where it was held that when food is supplied to in-house guests, at a composite charge, there is no sale of food. Further, supply of food to visitors in the restaurant for a lumpsum charge or even when calculated per dish did not amount to a transaction of sale. The reasoning given by the Supreme Court was that the supply of meals must be regarded as ministering to a bodily want or to the satisfaction of a human need. The Supreme Court, in this case, had heavily relied on the proposition that the food is provided to satiate the hunger of the guest, the guest has the right to consume food he needs and no more, he has no right or ownership in the food and he cannot take the food with him.

- Northern India Caterers (India) Ltd. vs. Lt. Governor of Delhi (1980–45 STC, 212–SC) where review of the above mentioned case was rejected. The grounds for review was that the fundamental assumption that, in restaurant, a guest could not be the owner of the food ordered and may not have the option to take away the unfinished meal or do anything with it as he pleases. The Supreme Court, however observed that “we have no hesitation in saying that where food is supplied in an eating house or restaurant, and it is established upon the facts that the substance of the transaction, evidenced by its dominant object, is a sale of food and the rendering of services is merely incidental, the transaction would undoubtedly be exigible to sales tax. In every case it will be for the taxing authority to ascertain the facts when making an assessment under the relevant sales tax law and to determine upon those facts whether a sale of the food supplied is intended.”

Further it was observed that – “The substance of the transaction, the dominant object, the life-style and other telling factors must determine whether the apparent vendor did sell the goods or only supply a package of services. Was there a right to take away any eatable served, whether it be bad manners to do so or not ? in the case we have, the decision went on the ground that such right was absent. In cases where such a negative is not made out by the dealer – and in India, by and large, the practice does not prohibit carrying home – exigibility is not repelled.”

- The Supreme Court, in the case of K. Damodarswamy Naidu & Bros vs. State of Tamil Nadu (2000–117 STC, 1–SC) has held that in the case of sales in a restaurant, the full price of the food is liable to sales tax. The observation of the Supreme Court is as follows. :


“The provisions of sub-clause (f) of clause (29A) of Article 366 need to be analysed. Sub-clause (f) permits the States to impose a tax on the supply of food and drink. The supply can be by way of a service or as part of service or it can be in any other manner whatsoever. The supply or service can be for cash or deferred payment or other valuable consideration. The words of sub-clause (f) have found place in the Sales Tax Acts of most States and, as we have seen, they have been used in the said Tamil Nadu Act. The tax, therefore, is on the supply of food and drink and it is not of relevance that the supply is by way of a service or as part of a service. In our view, therefore, the price that the customer pays for the supply of food in a restaurant cannot be split up as suggested by learned counsel. The supply of food by the restaurant owner to the customer though it may be a part of the service that he renders by providing good furniture, furnishing and fixtures, linen, crockery and cutlery, music, a dance floor and a floor show, is what is the subject of the levy. The patron of a fancy restaurant who orders a plate of cheese sandwiches whose price is shown to be ` 50 on the bill of fare knows very well that the innate cost of the bread, butter, mustard and cheese in the plate is very much less, but he orders it all the same. He pays ` 50 for its supply and it is on ` 50 that the restaurant owner must be taxed.”

– Indian Hotels and Restaurant Association vs. Union of India (2014–71 VST 386–Bom), where the Bombay High Court, while upholding the levy of service tax on restaurant services has held that service tax is a tax on serving food or beverage by the restaurant within its premises and cannot be equated to a tax on sale or purchase of goods.

– On the other hand, the Kerala High Court in the case of Kerala Classified Hotels and Resorts Association vs. Union of India [2013–64 VST, 462 (Ker)] has struck down the levy of service tax on the ground that service formed part of the sale of goods.

• The clients of the firm are engaged in the following businesses .

(i) Client – A runs a restaurant where buffet and unlimited thali are served for a lump sum price. The restaurant is a Grade I restaurant with music, elegant ambience, soft lighting, imported cutlery and immaculate service.

(ii) Client – B runs a restaurant which only offers a-la carte menu. The restaurant is in a five star hotel with personalized server, fine wine list, live music, dance floor, etc.

(iii) Client – C owns a franchise of a popular burger outlet where burgers, fries, etc. are supplied. The outlet is a self service outlet and provides place for seating as well. The patrons can take away the food or enjoy the same at the outlet.

(iv) Client – D runs a popular coffee shop which serves variety of coffee with seating facility. Option to take away is also available at the outlet.

All the above restaurants, outlets and coffee shop are air conditioned.

The Paralegal is unsure about the treatment of the supplies made by clients A to D and seeks your assistance in ascertaining the levy of service tax and /or value added tax in each of the above cases.

Case Study 5• High-Rise Constructions undertook a project to construct residential properties in Maharashtra in

2006. The project comprised of 1000 apartments. High Rise Constructions has been selling the apartments to buyers since 2006, though all the apartments were not sold even up to 2016.


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• High Rise Constructions has not discharged its liability for payment of VAT as well as service tax since inception and has been receiving show cause notices and orders in respect of the same. The notices and orders have been received for the following periods.

I. Service Tax

(a) From 1st July 2010 to 30th June 2012 under the category of construction of complex services on 25 per cent of the payment received towards the price of the apartments.

(b) From 1st July 2012 to 31st Match 2015 as a Declared Service under section 66E(b) of the Finance Act, 1994 on 25/30 per cent of the payment received towards the price of the apartments.

II. VAT

(a) From 20th June 2006 to 31st March 2010 at 5 per cent of the payment received towards the price of the apartments.

(b) From 1st April 2010 to 31st March 2015 at 1 per cent of the agreement value.

• High Rise Constructions also charges floor-rise, and preferential location charges. In the above orders under the service tax law, service tax at the full rate has been charged on preferential location charges though the floor rise has been added to the consideration for the apartment.

• High Rise Constructions desires to be advised whether the demands can be defended and grounds for the same.

• High Rise Constructions has received Occupation Certificate for the project in May 2016 when 90 apartments had remained unsold. High Rise Constructions expects to sell these apartments soon. The sale considerations may be structured as follows.

(a) Sale Price for the apartment plus floor rise plus preferential location charges charged separately.

(b) Lump sum price for the apartment including floor rise and preferential location charges.

• High Rise Constructions needs advice on whether they will be liable to pay service tax on VAT on the sale of the 90 apartments.

Case Study 6• Deep Sea Drilling Services has received an order from the country’s oil exploration leader for

undertaking Drilling of oil wells at Bombay High. The contract is for a period of 3 years and monthly charges are payable by the client. During this time :

(a) Deep Sea Drilling will be required to deploy its Oil Rig named ‘Stand Alone’ at Bombay High;

(b) The Rigs will be manned by the crew of Deep Sea Drilling during the tenure of the contract;

(c) Deep Sea Drilling is required to undertake the drilling in accordance with the instructors of the client;

(d) The Master and Crew will receive instructions from the client directly and they have to follow the same;


(e) Deep Sea Drilling is not allowed to move the Rig or de-mobilise the same without clearance from the client;

(f) Deep Sea Drilling is allowed 2 days a month for maintenance and the charges are deducted if the Rig is not available beyond the 2 days permitted.

• Since the work is to be undertaken at Bombay High, the contract provides that Water and Diesel required for the operation of the Rigs would be provided free of charge by the client.

• Deep Sea Drilling pays service tax on the monthly charges received from the client under the category of ‘supply of tangible goods’.

• The audit / assessments under the service tax and VAT have been undertaken.

- In the service tax audit, the audit party has raised an issue regarding non-payment of service tax on the value of the Diesel and Water provided by the client. According to them. diesel and water are fundamental to provision of the service and therefore the value of these have to be added to the value of the services.

- In the VAT assessment, the VAT authorities have treated the transaction as ‘transfer of the right to use’ the Rig and have assessed VAT on the total monthly charges received.

• Deep Sea Drilling Services advice whether the stand of the authorities is appropriate ?

• What would be the liability, if the client, instead of providing diesel and water free to Deep Sea Drilling deducts the cost of the same from the invoices raised by Deep Sea Drilling ?

Case Study 7• Antimated Data System (ADS) sells software packages. It also provides services of implementation

as well as development or upgradation of software.

• ADS has received an order from Z-Back Ltd., an Indian Company for providing its ERP solution to it. The project also involves customization and implementation. Z-Back Ltd. has a separate software for Customer and Vendor Management, which it has asked ADS to upgrade to suit its requirements. The project will be undertaken by ADS in the following manner.

(i) ADS will supply the ERP software to Z-Back and raise its invoice for the same;

(ii) The ERP software will be downloaded by Z-Back using a ‘ftp’ link;

(iii) ADS will depute its software team at the office of Z-Back. The software team will customise and implement the software.

- Customisation refers to development of the data entry screens, reports and outputs, etc. required by Z-Back.

- Implementation refers to defining and configuring the software in tune with various aspects of Z-Back’s business.

Customisation and Implementation will take 2 months at Z-Back’s office.


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(iv) ADS will deploy a separate team to work on the Customer and Vendor Management Software. This team will :

- meet the procurement and marketing/distribution teams to understand the requirement of the business of Z-Back;

- Study the existing system and undertake a gap analysis;

- Prepare a blue-print of the required system, its features, etc.;

- Once approved by Z-Back, undertake modification and upgradation of the system in line with the blue-print.

This project will take 4 months.

• ADS will invoice Z-Back as follows.

(i) On supply of the software ` 100 lakhs

(ii) On Implementation ` 40 lakhs

(iii) On upgrade to Customer and Vendor

Management System ` 65 lakhs

• ADS has received demands from the service tax as well as the VAT authorities.

- The service tax authorities have asked ADS to pay service tax on all amounts recovered. According to them, electronic supply of software is a service which is liable to tax. Further Customisation, Implementation and Upgrade is in the nature of services only.

- The VAT authorities have concluded that the ERP is ‘sold’ and therefore attracts VAT. Customisation and Implementation amounts to development and sale of a new software, according to the VAT authorities. Similar conclusion is drawn for the Customer and Vendor Management. (The VAT department has relied on the decisions of the Maharashtra Sales Tax Tribunal in the case of Mastek Ltd. (Appeal No. 175 of 2004 dated 15th March 2013) and Atos Origin Pvt. Ltd. (VAT Appeal No. 171 of 2012 dated 3rd February 2015).

Case Study 8• Big Town Builders owns a plot of land, admeasuring 30,000 sq. meters. It desires to develop a

residential project on this land. The Government has announced a scheme with a view to develop infrastructure in the city. Under this scheme, Big Town Builders would develop a public car park covering 10,000 sq. metres on the plot. After the completion of the construction, Big-Town Builders would transfer and hand over the car park to the State Government. Against this, Big-Town Builders would be granted Transferable Development Rights (TDR) of 20,000 sq. meters. Accordingly, Big-Town Builders constructs the residential project covering 40,000 sq. meters and sells the same.

• The details are as follows.

1. Date of MOU with the State Government 1st January 2015

2. Date of Completion of Construction of Car Park 30th September 2015

3. Cost of Construction ` 20 crores


4. Date of receipt of TDR 15 October 2015

5. Value of TDR according to stamp duty valuation (` 20,000/- sq. meter) ` 40 crores.

6. Cost of Construction of the Project ` 60 crores

7. Sale price of the flats (` 30,000/- / Sq. meter) ` 120 crores

• Big-Town Builders has the following questions.

(i) Whether the arrangement with the State Government would amount to transaction of works contract / sale / service ?

(ii) If tax is payable, how should the transaction be valued ?

(iii) Whether Big-Town Builders would be entitled to claim credits of taxes paid on any of the above ?

Case Study 9The Funders, an NBFC leases assets to Companies. It has entered into an agreement for lease of assets upto a limit of `10 crores with Online Sales Corporation. Online Sales Corporation has requested The Funders to provide the office Interiors on financial lease basis. Online Sales Corporation has identified the vendors, supplies and contractors who have undertaken the work and have invoiced The Funders for ` 7 crores. The invoices are for the following.

• Supply of furniture ` 2.0 crores

• IT equipment ` 3.5 crores

• Interiors and civil work including Pantry,

Washrooms, False ceiling, Painting, etc. ` 1.5 crores

The Funders will raise its invoice for monthly rental of ` 25 lakhs on Online Sales Corporation for the above.

The Funders seek advice on the taxes to be charged on the invoice and the valuation thereof.


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NOTES


NOTES


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Introductory:India is on the cusp of a massive tax reform with movement from the existing multiplicity of indirect taxes to a Dual Goods and Services Tax Regime (Dual GST Regime). With the political air becoming better, there is renewed optimism that the most important piece of India’s tax reform initiative, is on course and introduction of GST looking possible.

The much awaited GST Regime announced way back in 2006 had missed several deadlines in the past due to lack of political consensus. The groundwork on GST implementation got a fresh impetus with the new Federal Government taking charge in 2014. The new Government laid down a strong intent statement of implementing GST in the Union Finance Budget in May 2014. The intent statement was followed up with introduction of the revised Constitutional Amendment Bill in the Parliament on 19th December 2014 post hectic parleys with the States to evolve a consensus. In the Union Budget 2015, the Union Finance Minister had underlined the importance of GST to be a game changing reform for the Indian Economy and reiterated their commitment to make it a reality from 1st April 2017. The Dual GST Model proposed to be implemented is a unique one, which increases the uncertainties around the effectiveness thereof in the long run.

One of the key factors that will be critical for success of Dual GST model will be an efficient and robust tax administration system. It is imperative to have an effective administration system not only for collection of due revenues but also to ease compliance burden; facilitate voluntary compliance; reduce corruption; strengthen the legal and regulatory framework; broaden the tax base; ensure strict action against defaulters etc. The quality of tax administration will be the single biggest factor contributing to broadening of the tax base, which is being looked at by the Government in the GST scenario.

Historically, the state tax administrations are familiar with taxing goods only. Taxing services is an alien world for most of the state tax officials. By its very intangible nature taxing services is far more complicated vis-à-vis goods. It has always been difficult to define the time and place where services have been rendered which are the fundamentals for taxing a service. Even the developed economies across the globe with VAT/GST Systems in place for decades, have witnessed regular changes in the mechanism for taxation of services. Services effortlessly crossing borders with greater use of information technology and thus poses greater challenge to the tax officials. It is important for the tax officials to keep pace with the ever intensifying complex service transactions.

At the same time, it would open an ocean of opportunities and challenges to professionals to tackle the GST law efficiently, keep abreast with the developments across various sectors, latest technological changes through a continuous tracking and training mechanism. This would also mean that a thorough know how about business processes like pricing, policy decisions on procurement, manufacturing, supply chain along with the taxes on goods and services would be something everyone would have to take a holistic picture for the business. Probably it would mean more professionals should look more deeply in the business rather than merely focusing on one tax.

An efficacious implementation of GST and twin policy objectives of “Ease of Doing Business” and “Make in India Campaign” go hand-in-hand and success of GST would launch the economy and the twin policy objectives in an entirely different orbit.

GOODS AND SERVICE TAX IN INDIA – OPPORTUNITIES AND CHALLENGES

Sagar Shah Chartered Accountant


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BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY...A chartered accountant in practice, having his office at 1009-1015 Topiwala Centre, 10th floor, Topiwala Theatre Compound, Near Goregaon Station,