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CA Arvind Singh Chawla, ISA, CS.com
18th Jul 2014
“Impact on Service TaxBudget 2014”
Raipur - ICAI
CA Arvind Singh Chawla, ISA, CS.com
SECTORAL CHANGES
CA Arvind Singh Chawla, ISA, CS.com
Sale of Space for Advt.
• Present provision: Sale of space or time slots for advertisements other than advertisements broadcast by radio or television is non-taxable under negative list.
• Budget provision: Sale of space for advertisements in ONLY print media non-taxable
CA Arvind Singh Chawla, ISA, CS.com
Sale of Space for Advt.• Impact: Advt. in internet websites, out-of-home
media, on film screen in theatres, bill boards, conveyances, buildings, cell phones, Automated Teller Machines, tickets, commercial publications, aerial advertising, etc.
• Tax Rate: 12.36%
• Date of Applicability: w.e.f. Finance Bill(No.2),2014 enactment
• Note: Print media includes books and newspapers but excludes business directories
CA Arvind Singh Chawla, ISA, CS.com
Radio Taxi Services
• Present provision: Metered cabs, radio taxis or auto rickshaws not taxable under negative list
• Budget provision: Only metered cabs or auto rickshaws non-taxable
• Impact: Radio taxis will be taxable
• Tax Rate: After abatement of 40%,effective rate 4.944%
• Date of Applicability: w.e.f. FB,2014,enactment
CA Arvind Singh Chawla, ISA, CS.com
Radio Taxi Services• Note: Radio taxi defined u/n 25-2012 as a taxi
including a radio cab, by whatever name called, which is in two-way radio communication with a central control office and is enabled for tracking using Global Positioning System (GPS) or General Packet Radio Service (GPRS)
CA Arvind Singh Chawla, ISA, CS.com
Passenger Transportation by a contract carriage
• Present provision: A contract carriage for transportation of passengers, excluding tourism, conducted tour, charter or hire is exempted.
• Budget provision: Only non-air-conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire will be exempted.
• Impact: Transport of passengers by AC contracts carriage vehicles now taxable
CA Arvind Singh Chawla, ISA, CS.com
Passenger Transportation by a contract carriage
• Tax Rate: Tax on abated value of 40%. Effective rate 4.944%
• Date of Applicability: w.e.f. 11-07-2014 (u/s 25& 26/2012-ST)
CA Arvind Singh Chawla, ISA, CS.com
Rent-a-cab
• Present provision: No cenvat if tax paid at abated rate of 4.944% (40%)
• Budget provision:
Service Provider(Vendor)
Cenvat Allowed to Rent-a-Cab-operator
Effect
Pays tax after claiming abatement (4.944%)
100%
Cenvat of 4.944% of total value allowedPays tax at full rate
(12.36%)40%
CA Arvind Singh Chawla, ISA, CS.com
Rent-a-cab
• Impact: Cascading impact of taxes lowered
• Date of Applicability : w.e.f. 11-Jul-14
CA Arvind Singh Chawla, ISA, CS.com
Tour Operator
• Present provision: Abatement is provided as per existing table if no cenvat is claimed.
Nature of Service
Taxable %
(i)Tour operator in relation to a package tour[Bill inclusive of charges for Tour] 25%
(ii) Solely Arranging accommodation in relation to a tour{Bill inclusive of charges for Accommodation and not only service charges for arranging such accommodation}
10%
(iii) Services, other than services (i) and (ii) above, by a tour operator in relation to a tour[Bill inclusive of gross charges for Tour]
40%
CA Arvind Singh Chawla, ISA, CS.com
Tour Operator
• Budget Provision: The amended provision allows for cenvat credit on input service provided by other tour operator.
• Impact : Cascading impact of taxes lowered
• Date of Applicability: w.e.f. 11-07-2014 (u/n 25/2012-ST)
CA Arvind Singh Chawla, ISA, CS.com
Technical Testing
• Present provision: Services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organization approved to conduct clinical trials by the Drug Controller General of India;
• Budget provision: Exemption rescinded
CA Arvind Singh Chawla, ISA, CS.com
Technical Testing
• Impact: Clinical Drug Trials will become expensive.
• Tax Rate: 12.36%
• Date of Applicability : w.e.f. 11-Jul-2014 (u/n 25/2012-ST)
CA Arvind Singh Chawla, ISA, CS.com
Education
Present provision:
Education services of following nature are exempted under Negative list
• Pre-school education and education up to higher secondary school or equivalent, eg. CIE
• Education as a part of a prescribed curriculum for obtaining a qualification recognized by “Indian” law for the time being in force
• Approved vocational course by NCVT and SCVT
CA Arvind Singh Chawla, ISA, CS.com
Education
Other exemptions
• Services provided to an educational institution in respect of education exempted from service tax, by way of,-
• auxiliary educational services; or
• renting of immovable property
CA Arvind Singh Chawla, ISA, CS.com
Education
Budget provision :
• Negative list entry non-taxable as it is.
• Concept of auxiliary education services deleted and scope of exemption redefined to exclude the following:o Services provided by an educational institution
to its students, faculty and staffo Service provided to an educational institution, by
way of,-
CA Arvind Singh Chawla, ISA, CS.com
Education
Transportation of students, faculty and staff catering, including any mid-day meals scheme
sponsored by the Government security or cleaning or house-keeping services
performed in such educational institution
CA Arvind Singh Chawla, ISA, CS.com
Education
• Impact: Conducting entrance and admission tests, providing places and faculty for examination, renting of property to education institutions taxable
• Rate of tax: 12.36%
• Date of Applicability: w.e.f. 11-07-2014 (u/n 25/2012-ST)
CA Arvind Singh Chawla, ISA, CS.com
Services by hotel, inn etc.
• Present provision: Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below Rs. 1,000/- per day or equivalent.
CA Arvind Singh Chawla, ISA, CS.com
Services by hotel, inn etc.
• Budget provision: Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent
CA Arvind Singh Chawla, ISA, CS.com
Services by hotel, inn etc.• Impact: Deletion of word “services by way of
renting of a hotel…” meant for lodging…below Rs. 1,000/- may be interpreted as renting of the hotel property itself will be exempted.
• Deletion of word “commercial” expands the scope of services of renting o rooms by dharamshalas, ashrams and like.
• Rate of tax: 12.36% ; taxable: 60%
• Date of Applicability: w.e.f. 11-07-2014 (u/n 25/2012-ST)
CA Arvind Singh Chawla, ISA, CS.com
Works contractPresent Provision: Presently valuation of works contract u/r 2A of valuation rules is done as :
• Method 1: Gross amount charged (xl. VAT) (-) value of property in goods transferred in execution of works contract [material cost]
• Method 2: If VAT payable then deduction of “actual value adopted” for goods transferred.
• Method 3: If not determined as above then Value as specified %
CA Arvind Singh Chawla, ISA, CS.com
Works contractValue =
% of Amt.Particulars Effective
Rate40% In case of original Works 4.944%
70% For maintenance, repair, reconditioning, restoration of goods
8.652%
60% Other works contract, including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property
7.416%
CA Arvind Singh Chawla, ISA, CS.com
WCT-proposed% of Particulars Effective
Rate40% In case of original Works 4.944%
70% For maintenance, repair, reconditioning, restoration of goods
8.652%
70% Maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property
8.652%
• Impact: Rationalization exercise to avoid confusion• Date of applicability: w.e.f. 01-Oct-2014
CA Arvind Singh Chawla, ISA, CS.com
Repairing of goods in India• Present provision: Place of provision of service w.r.t.
goods is where goods are physically located at the time of service.
• Rule n.a. goods temporarily imported into India for repairs, reconditioning or reengineering for re-export
• Budget provision: The PPs rule will not apply to goods temporarily imported into India for repairs and exported after repairs without being put to use in India.
CA Arvind Singh Chawla, ISA, CS.com
Repairing of goods in IndiaImpact
oRepairing at Indian Service Centre-tax free
oNo exclusion to goods imported during normal course of business.
oNo exclusion to camera repair of an international tourist
• Date of Applicability: w.e.f. 01-Oct-2014 (u/n 14/2014-ST)
CA Arvind Singh Chawla, ISA, CS.com
Service provided by a broker
• Present Provision: Intermediary = a person, who arranges or facilitates a provision of a service between two or more persons.
• Budget provision: Intermediary includes a person who facilitates both provision of service or supply of goods.
CA Arvind Singh Chawla, ISA, CS.com
Service provided by a broker
• Impact : Earlier taxability of a broker providing service w.r.t. goods was taxable on the basis of location of client (service receiver as per general Rule 3). After the amendment, the location of broker (service provider) will be the deciding factor for taxability as per Rule 9.
• Date of Applicability: w.e.f. 01-Oct-2014 (u/n 14/2014-ST)
CA Arvind Singh Chawla, ISA, CS.com
Service provided to Government
• Present provision: Services provided to Government, a local authority or a governmental authority by way of carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation.
CA Arvind Singh Chawla, ISA, CS.com
Service provided to Government
• Budget provision: Services provided to Government, a local authority or a governmental authority by way of water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation.
• Impact: The amendment provides clarity and widens scope of exemption
• Date of Applicability: w.e.f. 11-07-2014 (u/n 25/2012-ST)
CA Arvind Singh Chawla, ISA, CS.com
GTA Services
• Present provision: Cenvat credit is not allowed if benefit of abatement of 75% is availed.
• Budget provision: Abatement is available if cenvat is aviled by service provider.
CA Arvind Singh Chawla, ISA, CS.com
GTA Services
• Impact: Rest to issues regarding disallowance cenvat credit to persons who are discharging their liabilities as service recipients and are otherwise liable to tax either as service provider/manufacturer.
• Date of Applicability: w.e.f. 11-07-2014 (u/n 8/2014)
CA Arvind Singh Chawla, ISA, CS.com
Recovery agent services
• Present provision : Services provided by Recovery Agents to Banks, Financial Institutions and NBFC, the recovery agent is liable for tax.
• Budget provision : After amendment the Service receiver (Banks, FI.. ) will be liable to tax.
• Date of Applicability: w.e.f. 11-07-2014 (u/n 9& 10/2014-ST)
CA Arvind Singh Chawla, ISA, CS.com
Director services
• Present provision : Director Services to a company are covered under reverse charge w.e.f. 07-Aug-12.
• Budget Provision: To include body corporate
• Impact: Service provided by a director to a body corporate, like RBI will be payable by body corporate. Similarly foreign company directors will be covered in tax net.
CA Arvind Singh Chawla, ISA, CS.com
Director services
• Note:"Body corporate" includes a company incorporated outside India but does not include -
(a) a corporation sole ; (b) a registered co-operative society; and (c) any other body corporate as notified by CG,
Tax now payable by body corporate. For prior period, director is responsible subject to threshold exemption of 10 lacs.
CA Arvind Singh Chawla, ISA, CS.com
Miscellaneous Amendments
• ESIC : Service provided by Employees State Insurance Corporation (ESIC) during the period prior to 1.7.2012 exempted. (w.e.f. FB,2014 enactment)
Service provided by ESIC to persons governed under the Employees Insurance Act, 1948 is already exempted under negative list. • Vessel Transport: Abatement on transport of goods
by vessel increased from 50% to 60%w.e.f. 01-10-2014 u/n 26/2012-ST).
CA Arvind Singh Chawla, ISA, CS.com
Exemptions u/n 25/2012-ST w.e.f. 11-07-14
Insurance
All life micro-insurance schemes approved by the Insurance Regulatory Development Authority (IRDA), where sum assured <= 50,000
Organic Manure Transport
Transport of organic manure by vessel, rail or road (by GTA) to bring it on par with fertilizer which is already exempted.
Cotton Handling
Services by way of loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled, exempted.
CA Arvind Singh Chawla, ISA, CS.com
Exemptions u/n 25/2012-ST w.e.f. 11-07-14
Bio-Medical Waste Treatment
Services provided by Common Bio-medical Waste Treatment Facility operators by way of treatment, disposal of bio medical waste or processes incidental to such treatment or disposal
RBI
Services received by RBI, from outside India in relation to management of foreign exchange reserves (For eg. External asset management, securities lending etc.)
Tour
Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India
CA Arvind Singh Chawla, ISA, CS.com
PROCEDURAL AMENDMENTS
CA Arvind Singh Chawla, ISA, CS.com
Interest• Present Provision: Interest rate @ 18% p.a.
computed on a daily basis. Interest band 10% to 36% u/s 75. Small service provider-15%
• Budget provision: Variable interest rate
Delayed payment from due date
Rate Rate for SSP
Upto 6 months 18% 15%6 mths to one year 24% 21%
More than one year 30% 27%
CA Arvind Singh Chawla, ISA, CS.com
Interest
• Date of applicability : w.e.f. 01-Oct-14
• Note : Small service provider whose, a) value of taxable services provided in financial year(s) covered under notice or during the last preceding financial year does not exceed sixty lakh rupees, allowed 3% concession in interest.
CA Arvind Singh Chawla, ISA, CS.com
E-payment
• Present provision: Rule 6(2) of STR,1994 provides for payment through internet banking if tax payment (cash+cenvat) exceeds Rs. one lac in previous FY.
• Budget provision: E-payment mandatory for ALL assesses. Relaxation granted by AC/DC on a case to case basis.
• Impact: Small assesses with no internet banking will suffer
• Date of applicability: W.e.f. 01-Oct-14
CA Arvind Singh Chawla, ISA, CS.com
Compulsory Penalty • Present provision : u/s78, penalty is levied
compulsorily to the tune of 100% of tax in case transactions are not recorded in books of records and cannot be waived u/s 80.
• Penalty in other cases of suppression (transactions truly recorded in books but tax not paid) can be waived.
CA Arvind Singh Chawla, ISA, CS.com
Compulsory Penalty • Budget provision: No waiver of penalty in case of
suppression
• Impact: Only recourse is to prove bonafide in case of non-payment of tax
• Date of applicability: w.e.f. FB,2014 enactment
CA Arvind Singh Chawla, ISA, CS.com
POT: Reverse Charge• Present provision : POT incase of reverse charge
mechanism ,(where service receiver is liable to pay tax) Rule 7 is determines as below:
i. Date of payment of invoice.
ii. In case of non-payment within 6 months of invoice, POT as per date of invoice.
CA Arvind Singh Chawla, ISA, CS.com
POT: Reverse Charge
• Budget provision: The amendment provides for POT as below:i. Date of payment of invoiceii. In case of non-payment within 3 months of
invoice, POT immediately after completion of 3 months.
• Impact: The amended provision simplifies procedural issues and gives relief from retrospective penal actions in case of non-payment / delay in payment of invoice.
• Date of applicability: w.e.f. 01-Oct-2014 (u/n 13/2014-ST)
CA Arvind Singh Chawla, ISA, CS.com
Reverse Charge: Rent-a-Cab
• Present provision: Partial reverse charge is applicable in case of Rent-a-Cab service where:
• Service provider (SP) : Individual/HUF/Partnership/ AOP
• Service recipient (SR) : Company in Taxable Territory (India) not in a similar business line
CA Arvind Singh Chawla, ISA, CS.com
Reverse Charge: Rent-a-Cab
• Present provision
% Of Liability Effective Tax Rate Total Tax
Service tax payable on SP SR SP SR
(a) On abated value (40%) 0% 100%
0.000% 4.944% 4.944%
(b) Non abated value (100%) 60% 40%
7.416% 4.944% 12.360%
CA Arvind Singh Chawla, ISA, CS.com
Reverse Charge: Rent-a-Cab• Budget provision
% Of Liability Effective Tax Rate Total Tax
Service tax payable on SP SR SP SR
(a) On abated value (40%) 0% 100%
0.000% 4.944% 4.944%
(b) Non abated value (100%) 50% 50%
6.180% 6.180% 12.360%
CA Arvind Singh Chawla, ISA, CS.com
Reverse Charge: Rent-a-Cab
• Impact: Complicated simplificationSR should obtain a declaration regarding availing/ non-availment of abatement to levy appropriate rate of tax.
• Date of Applicability: w.e.f. 11-Jul-14 (u/n 10/2014-ST)
CA Arvind Singh Chawla, ISA, CS.com
SEZ Provisions a. Basic Provisions:
Exemption to service tax on “specified services” (as approved) received by SEZ Unit/developer granted as follows:
• Ab initio exemption for services used exclusively for authorized operations, or
• Exemption by way of refund for a) ab initio exemption available but not claimed and b) services not exclusively used for SEZ operations
CA Arvind Singh Chawla, ISA, CS.com
SEZ Provisionsb. Ab-Initio Exemption:
• SEZ Unit to furnish a declaration in Form A-1• Authorization issued in Form A-2 within 15 working
days by AC/DC• Authorization valid from the date of verification by
Specified officer of SEZ; if submitted after 15 days then date of submission to AC/DC.
• A-2 provided to service providers to obtain tax-free services.
CA Arvind Singh Chawla, ISA, CS.com
SEZ Provisions
• During pendency of A-2, service provider can provide tax-free services on basis of A-1. If default in providing A-2 to service provider within 3 months , tax payable by service provider
• Invoice to be in the name of SEZ Unit only.
• Quarterly statement (Form A-3) for tax-free services obtained.
CA Arvind Singh Chawla, ISA, CS.com
SEZ Provisionsc. Refund Mode:
• Services used exclusively for SEZ operations but tax paid are allowed in toto
• Common services used for SEZ unit and DTA unit distributed on turnover basis
• Refund to be filed in form A-4 within one year of payment of tax
d. Date of Applicability: Of the amendments w.e.f. 11- Jul-14 (u/n 07/2014-ST)
CA Arvind Singh Chawla, ISA, CS.com
Cenvat ProvisionsTime Limit of taking Credit u/r 4 of CCR
Nature Present Provision Budget Provision
Inputs
May be taken immediately on receipt of inputs
Within 6 months of the date of invoice / bill/ challan
Input Service
On receipt of Invoice
Within 6 months of the date of invoice / bill /challan
S.T. if payment of invoice not made in 3 months , pay cenvat availed and re-avail on payment of invoice
CA Arvind Singh Chawla, ISA, CS.com
Cenvat Provisions
Nature Present Provision Budget Provision
Input Service-100% Reverse Charge
When payment of both, invoice and tax indicated are made
On payment of service tax
Input Service-Partial Reverse Charge
When payment of both, invoice and tax indicated are made
Input Service-Partial Reverse Charge
To avoid any dispute, it is advisable to avail credit of eligible invoices before 01-Sep-14.
CA Arvind Singh Chawla, ISA, CS.com
Cenvat ProvisionsExport Realization• Rule 6(7) of CCR: No reversal of cenvat credit for tax-
free services provided to SEZ unit/ export of services
• Rule 6(8) : Non-realization of export proceeds in time; services cease to be export; proportionate reversal of cenvat.
• NOW provided: If proceeds realized within one year of stipulated time; credit reversed may be taken again.
CA Arvind Singh Chawla, ISA, CS.com
Other amendments• Stay application in CESTATApplication for waiver from pre-deposit and grant of stay before CESTAT can be filed without an application fee of Rs. 500.
• Exchange Rate for servicesExplanation to Sec 67A is amended to enable the Government to prescribe rules for determination of rate of exchange for calculation of taxable value in respect of certain services. Rules will be prescribed in due course, after the Bill receives the assent.
CA Arvind Singh Chawla, ISA, CS.com
ADMINISTRATIVE AMENDMENTSW.E.F. FB,2014 ENACTMENT
CA Arvind Singh Chawla, ISA, CS.com
Time limit for Adjudication• Present provision : No time limit for adjudication
prescribed in law
• Budget provision: Adjudicating SCN :
o SCN with normal period of limitation(18 months period): 6 months of SCN date
o SCN with extended period: one year from date of SCN
• Impact : Timely disposal of cases, low penal burden on assessee, though presently provision is not mandatory.
CA Arvind Singh Chawla, ISA, CS.com
Search & Recovery
Officers authorizing search and seizureApart from JC/ADC search and seizure can now be authorized by any specified by CBEC u/s 82
Recovery of amount dueSec 87 provides for recovery of any sum (including tax) due from predecessor of a business or trade from its successor to whom the business or trade is disposed in whole or part, by attaching and selling the goods so transferred.
CA Arvind Singh Chawla, ISA, CS.com
Calling Information • Sec 15A and Sec 15B inserted in CEA,1944)• Information to be provided to dept.• Within such time as prescribed• By various classes of persons who are maintaining
various information and records.
• Defect in information provided to be corrected in 30 days/extended time as allowed.
• Non- provision of the information as desired, notice to furnish the same within 90 days is served failing which penalty of Rs. 100/- per day.
CA Arvind Singh Chawla, ISA, CS.com
information provider• An assessee
• Local authority or other public body or association
• Any authority of the State Government responsible for the collection of VAT/sales tax
• Income tax authority
• A banking company
CA Arvind Singh Chawla, ISA, CS.com
information provider • A Registrar within the meaning of the Companies
Act, 2013
• The registering authority empowered to register motor vehicles under Motor Vehicles Act, 1988
• State Electricity Board; or an electricity distribution or transmission licensee
• Any other entity entrusted, with such functions by the Central Government or the State Government
CA Arvind Singh Chawla, ISA, CS.com
information provider• Registrar or Sub-Registrar appointed under
Registration Act,1908
• Collector referred to in clause (c) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013
• Recognized stock exchange
• A depository as per Depositories Act, 1996
• An officer of RBI
CA Arvind Singh Chawla, ISA, CS.com
AppealNew indirect tax proposal provides for pre-deposit of % of amount demanded (tax / penalty or both) before filing an appeal subject to maximum Rs. 10 crore.
oFirst appeal before Comm. (Appeals): 7.5% oFirst appeal before CESTAT: 7.5%oSecond appeal before CESTAT: 10%
The provision in not applicable to applications filed before enactment.
CA Arvind Singh Chawla, ISA, CS.com
ADVANCE RULINGScope of obtaining advance ruling under the provisions of indirect tax extended to a resident private limited company also, for both service tax and excise.(u/n 15/2014-ST).
CA Arvind Singh Chawla, ISA, CS.com
OTHER INDIRECT TAX PROPOSALS
CA Arvind Singh Chawla, ISA, CS.com
Appeals• Time limit for filing appeals : Before CESTAT: 3
months further extended by one month for department.
• CESTAT may refuse to admit an appeal where penalties are less than Rs. 2,00,000 (earlier 50,000)
• Appeal to Supreme Court against order by CESTAT lies for• Determination of rate of duty of excise • Valuation of goods• Determination of taxability or excisability of goods
(FB,2014 proposal) Above provisions w.e.f. FB,2014 enactment.
CA Arvind Singh Chawla, ISA, CS.com
Tax payment
• W.e.f. 01-10-2014, e-payment of duty is mandatory subject to relaxation from AC/DC on a case to case basis.
• In case of delay beyond payment of excise duty within one month from due date, penalty of 1% for each month or part of month till the default continues
• The erstwhile provision of payment of duty for each consignment without availing Cenvat in case of default is done away with.
CA Arvind Singh Chawla, ISA, CS.com
Other Indirect tax proposals3. Valuation
• In case of sale below cost of production, the value for purpose of levy of duty will be transaction value only.( FB,2014 enactment)
• No other consideration, directly or indirect should be flowing to the manufacturer.
• Amendment nullifies Supreme Court case of Fiat India Ltd. wherein it was held that revenue could reject transaction value where it was below cost of production.
CA Arvind Singh Chawla, ISA, CS.com
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