A Knowledge Master Class On “Understanding New Regime of Service Taxation in India”-Part-III
- 1.Presents A Knowledge Master ClassOn Understanding New Regime
of Service Taxation in IndiaConducted byDr. Sanjiv Agarwal FCA,
FCSWednesday,31thOctober,2012New Delhi Dr. Sanjiv Agarwal1
2. SESSION IVServices under Reverse Charge [N.
No.30/2012-ST]andAbatements in Service Tax [N. No. 26/2012-ST]2 3.
This Presentation Covers Reverse Charge Provisions Conditions for
Reverse Charge Abatements Conditions for Abatements3 4. Authority
for reverse charge u/s 68(2) of Finance Act, 2012 Person liable to
pay tax Rule 2(1)(d) of Service TaxRules, 1994 W.e.f. 1.7.2012, a
new scheme of taxation is applicablewhereby the liability of
payment of service tax shall be bothon the service provider and the
service recipient(Notification No. 30/2012-ST, dated 20.6.2012 )
The extent to which tax liability has to be discharged by
theservice receiver specified in the notification. 5. Creditof tax
paid can be availed by service recipient if it is input service The
credit of tax paid by the service recipient under partial reverse
charge would be available on the basis on the tax payment challan
Service provider under RCM may claim refund of tax paid under rule
5(b) of CCR, 2004 6. Under Partial Reverse Charge (Proportional)
Renting of motor vehicles Manpower supply & security services
Works contractsUnder full reverse charge (100%) insurance business
services by agents goods transportation by road sponsorship
arbitral tribunals legal services company directors services
services provided by Government / local authority excluding
specified services services provided by persons located in
non-taxable territory to persons located in taxable territory. 7.
Governed by Notification No. 30/2012-ST dated20.06.2012 w.e.f.
1.7.2012 Liabilities of both the service provider and
servicereceiver are independent of each other Reverse charge will
not apply where the servicereceiver is located in non-taxable
territory For three specified services provided by businessentities
being company, society, cooperative society,trust etc, reverse
charge will not apply. Reverse charge will also not apply where the
servicerecipient is any person or business entity not being abody
corporate in case of three specified services Small scale benefit
is available only to service provider(not to service receiver), if
entitled 8. Service receiver under reverse charge cannot
availexemption of Rs. 10 lakh under Notification No.33/2012-ST
dated 20.06.2012 Valuation of services by services provider and
servicereceiver can be on different principles, if permitted bylaw
(e.g. works contract - Refer Notification No.30/2012-ST,
explanation II) Liability to pay Service Tax for ongoing contracts
willbe as per Point of Taxation Rules, 2011 Reverse charge shall
not be applicable if provider ofservice was liable before 1.7.2012
Service Tax will not be payable by service receiverunder reverse
charge, if service was provided prior to1.7.2012, even if payment
is made after 30.06.2012 9. In case of proportional reverse charge
(manpowersupply & security, works contract and motor
vehiclehire to carry passengers), service provider shouldcharge
Service Tax only on his portion of Service Taxin the invoice and
mention that Service Tax on balanceamount is payable by service
receiver. It is the statutory obligation on the service recipient
topay Service Tax, whether under full or proportionalreverse charge
Service Tax under reverse charge has to be paid bycash vide GAR
Challan No. 7 and it cannot be paid byway of utilization of Cenvat
Credit. 10. In case of renting of motor vehicles to carry
passengers whereabatement is also available, reverse charge basis
isproportional depending upon the abatement on the conditionthat no
Cenvat Credit has been availed. The service providershould provide
a certificate, either in the invoice itself orseparately. In case
of renting of motor vehicle hire to carry passengers,reverse charge
applies only where the motor vehicle isprovided with driver and
service receiver is not engaged insame business. In case of
directors services, the service provider should notbe employed
(whole time) director. Employees are notcovered under the scope of
Service Tax. 11. In respect of manpower supply and security
services, works contractservices and renting of motor vehicles to
carry passenger, reverse chargeshall be applicable only when
following two conditions are satisfied service receiver is a
business entity registered as a body corporate, and service
provider is any one of the following entities Individual Hindu
undivided family (HUF) Firm (including limited liability
partnerships) Association of personsIf both the above conditions
are not satisfied in respect of these threeservices, Service Tax
shall be payable by the service provider in ordinarycourse.Security
services means services relating to the security of any
property,whether movable or immovable, or of any person, in any
manner andincludes the services of investigation, detection or
verification, of any fact oractivity 12. Service Provider Service
ReceiverIndividual Advocate / Firm / LLP Business entity with
turnover > Rs 10 lakhs in preceding financial yearArbitral
TribunalBusiness entity with turnover > Rs 10 lakh in previous
financial year 13. Sr. No Description of ServiceServiceService
receiver provider1. Services provided by anNil100% insurance agent
to any person carrying on insurance business2. Services provided by
a goods Nil100% transport agency in respect of transportation of
goods by road3. Services provided by way ofNil100% sponsorship 14.
Sr.No Description of ServiceService Service receiverprovider4.
Services provided by an arbitral Nil100% tribunal5. Services
provided byindividual Nil100% advocate or a firm of advocates by
way of legal services5A.in respect of services provided or Nil100%
agreed to be provided by a director of a company to the said
company ( w.e.f 7.08.2012)6. Services provided by Government or
Nil100% local authority by way of support services excluding,- (1)
renting of immovable property, (2) postal services (3) transport of
goods / passengers (4) air craft or vessel 15. Sr.N Description of
ServiceServiceServiceoprovider receiver7. Hiring of Motor
VehicleNil 100 % (a) renting of a motor vehicle designed to carry
passengers on abated value to any person not engaged in the similar
line of business60% 40% (b) renting of a motor vehicle designed to
carry passengers on non abated value to any person who is not
engaged in the similar line of business8. Services provided by way
of 25% 75 % supply of manpower for any purpose or security services
( w.e.f 07.08.2012) 16. Sr.No Description of ServiceServiceService
receiverprovider9.Servicesprovided in serviceportion in execution
of works50% 50%contract10. Services provided by any personwho is
located in a non-taxableNil100%territory and received by anyperson
located in the taxableterritory 17. 17 18. Besides full exemption
to 39 categories of services videNotification No. 25/2012-ST dated
20.06.2012 Earlier there were a number of exemption notifications
thatprescribed the abatements for various categories of
services(including 1/2006) Abatements merged into a single
Notification No 26/2102 -ST dated 20/6/12 Valuation rules contain
abatement for Works Contract andSupply of Food Services 19. Sl.
No.Description of taxable serviceTaxable Conditions value(%)1
Financialleasing servicesincluding 10Nilequipment leasing and hire
purchase2 Transport of goods by rail (exempted upto30Nil30.9.2012)3
Transport of passengers, with or without 30Nilaccompanied
belongings by rail ( exemptedupto 30.9.2012)4 Supply of food or any
other article of 70 CENVAT credit onanyhuman consumption or any
drink, in
agoodsclassifiableunderpremises,includinghotel,conventionchapter 1
to 22 of thecenter, club, pandal, shamiana or any place Central
Excise Tariff Act,specially arranged for organizing a function1985
has not been takenunder the provisions of theCENVAT Credit Rules,
2004. 20. Sl.Description of taxable service Taxable
ConditionsNovalue(%)5 Transport of passengers by air, with40 CENVAT
credit on inputs or capital goods,or without accompanied
belongingsused for providing the taxable service, has not been
taken under the provisions of the CENVAT Credit Rules, 2004.6
Renting of hotels, inns,guest 60 Same as above.houses, clubs,
campsites or othercommercial placesmeantforresidential or lodging
purposes7 Transport of goods by road by 25 CENVAT credit on inputs,
capital goodsGoods Transport Agency and input services, used for
providing the taxable service, has not been taken under the
provisions of the CENVAT Credit Rules, 2004.8 Services provided in
relation to chit 70 Same as above. 21. Sl. Description of taxable
service Taxable ConditionsNo value(%)9 Renting of any motorvehicle
40 Same as above.designed to carry passengers10Transport of goods
in a vessel from 50 Same as above.one port to another11Tour
operator services25 (i) CENVAT credit on inputs, capital(i)
provided by a tour operator in relationgoods and input services,
used for to a package tour providing the taxable service, has not
been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii) The bill issued for this purpose indicates that it is
inclusive of charges for such a tour. 22. Sl. No Description of
taxable Taxable Conditionsservice value(%) (ii) provided by a tour
operator in 10(i) CENVAT credit on inputs, capital goods relation
to a tour, solely arrangingand input services, used for providing
the or booking accommodationtaxable service, has not been taken
under the provisions of the CENVAT Credit Rules, 2004. (ii) The
invoice, bill or challan issued indicates that it is towards the
charges for such accommodation. (iii) This exemption shall not
apply in such cases where the invoice, bill or challan issued by
the tour operator, in relation to a tour, only includes the service
charges for arranging or booking accommodation for any person and
does not include the cost of such accommodation. 23. Sl. No
Description of taxable service Taxable Conditionsvalue(%) (iii)
Services, other than 40 (i) CENVAT credit on inputs, capital
services specified above in (i) goods and input services, used for
or (ii) providing the taxable service, has not been taken under the
provisions of the CENVAT Credit Rules, 2004. (ii) The bill issued
indicates that the amount charged in the bill is the gross amount
charged for such a tour. 24. Sl. No Description of taxable service
TaxableConditionsvalue(%)12.Construction of a complex, 25 (i)
CENVAT credit on inputs used building, civil structure or afor
providing the taxable service part thereof, intended for ahas not
been taken under the sale to a buyer, wholly orprovisions of the
CENVAT Credit partly except where entireRules, 2004. consideration
is received after issuanceofcompletion(ii) The value of land is
included certificate by the competentin the amount charged from the
authorityservice recipient. 25. Draft Circular F. No.354 /146/2012
TRU dated 27.09.2012(Air Travel)Charges which are directly related
to journey such as re-confirmationfee, date change fee, seat
upgrade fee, preferred seat charges etc. willbe covered by
abatementCharges which are not related to journey such as meal
charges, escortcharges etc. will not be covered by abatement.Excess
baggage charge may be leviable to service tax withoutabatementPet
charges may be leviable to service tax without abatementFor
cancellation charges billed separately as administrative
charge,abatement will not be applicable 25 26. THANK YOUFORYOUR
PRECIOUS TIMEAND ATTENTIONDr. Sanjiv Agarwal FCA, FCS, Jaipur
[email protected]@gmail.com
