Workshop for Accountants Overview of Service Tax. Baroda Baroda Branch of WIRC of ICAI - By CA. Manilal Parsiya. Charge of Service Tax Sec.66B & Meaning of Service Sec. 66B(44). S ervice Tax rate is twelve per cent plus education cess (12.36%). - PowerPoint PPT Presentation
Workshop for Accountants Overview of Service TaxBaroda Baroda Branch of WIRC of ICAI- By CA. Manilal Parsiya
1Service Tax rate is twelve per cent plus education cess (12.36%).On the value of all services, except specified in the negative list. Provided or agreed to be provided in the taxable territory. By one person to another.It includes declared services. Collected in such manner as may be prescribed.
Charge of Service Tax Sec.66B & Meaning of Service Sec. 66B(44)The definition provides that service does not include
(i)any activity that constitute only a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or(ii)such transfer, delivery or supply of any goods which is deemed to be a sale as per clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim;(iv)a provision of service by an employee to the employer in the course of or in relation to his employment;(v)fees taken in any Court or tribunal established under any law for the time being in force.
Definition of Service - Sec. 65B(44)Explanation 3. For the purposes of this Chapter,an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons;an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons.Explanation 4. A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory;Definition of Service (Sec. 65B(44))Summary of Exemptions NotificationsNotifi. No.Nature of exemption 25/2012Mega Exemptions26/2012Exemptions through abatement to specified services27/2012Exemptions to services to foreign diplomatic mission29/2012Exemption on property tax from renting of immoveable property31/2012Exemption to exporter for transport of goods from place of removal to freight station, container depot, port, airportSummary of Exemptions NotificationsNoti .No.Nature of exemption 32/2012Exemption of services provided by a Technology Business Incubator(TBI) or a Science and Technology Entrepreneurship Park(STEP) 33/2012Exemption to small service provider(up to 10 lakh)39/2012Rebate on service tax on export of services40/2012Exemptions on services provided to SEZ authorized operations41/2012Rebate of service tax i) in case of excisable goods on services used beyond place of removal and in other case taxable service used in such export of goods Summary of Exemptions NotificationsNotification No.Nature of exemption 42/2012Service provided by a commission agent located outside India and engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported by him.43/2012
Service of transportation of passengers, with or without accompanied belongings, by railways in --(A) first class; or(B) an air conditioned coachServices by way of transportation of goods by railwaysUsually, service provider is liable to Service tax.In certain cases, service recipient is obliged to discharge service taxliability. This is popularly known as Reverse Charge MechanismReverse Charge mechanism Applicability will depend on:Nature and description of ServiceStatus of Service ProviderStatus of Service RecipientGovernment derives power to collect Service tax from recipient under:Section 68(2) of the Finance Act, 1994Rule 2(1)(d) of Service Tax Rules, 1994Who is liable to pay Service Tax ?
Sl. No.Description of ServiceLiability ofServiceProviderLiability ofServiceRecipient1Service by Insurance Agents to any person carry on insurance businessNil
100%2Goods Transport Agencies for transportation of goods by road to specified person (person liable to pay freight treated as service recipient)Nil100%3Sponsorship provided to partnership firm / corporate entityNil100%4Services Provided by Arbitral Tribunal to business entityNil100%5Services Provided by Individual Advocates or a firm of advocates by way of legal services to a business entityNil100%Reverse Charge Mechanism Notification No. 30/2012-ST dated 20.06.2012 w.e.f. 01.07.2012Sl. No.Description of ServiceLiability ofServiceProviderLiability ofServiceRecipient5Aservices provided or agreed to be provided by a director of a company to the said companyNil100%6Support service by Government / Local Authority to business entity excludingRenting of immovable propertyPostal servicesServices in relation to an aircraft or vesselTransport of goods or passengersNil100%7(a)Rent-a-Cab (where abatement is availed) provided by non-corporate entity to corporate business entity not in a similar line of businessNil100%Reverse Charge Mechanism Notification No. 30/2012-ST dated 20.06.2012 w.e.f. 01.07.2012Sl. No.Description of ServiceLiability ofServiceProviderLiability ofServiceRecipient7(b)Rent-a-Cab (where abatement is not availed) provided by non-corporate entity to corporate business entity not in a similar line of business60%40%8Supply of manpower for any purpose or security services provided by non- corporate entity to corporate business entity25%75%9Works Contract Service provided by non-corporate entity to corporate business entity50%50%10Services provided by a person in non taxable territory to a person located in taxable territory (popularly know as import of service)Nil100%Reverse Charge Mechanism Notification No. 30/2012-ST dated 20.06.2012 w.e.f. 01.07.2012Explanation-I. - The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.
Explanation-II. - In works contract services, where both service provider and service recipient is the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service.
Reverse Charge Mechanism Notification No. 30/2012-ST dated 20.06.2012 w.e.f. 01.07.2012
Value of Taxable Services:Where consideration is money Gross amount charged by the service providerWhere consideration is not wholly or partly consisting money amount with addition to service tax charged, is equivalent to the considerationWhere consideration is not ascertainable amount may be determined in the prescribed mannerWhere gross amount charged inclusive of ST value shall be such amount as, with addition of tax payable, is equal to the gross amount.Gross amount of taxable service shall include amount received before, during and after provision of such serviceSubject to the provisions sub-sections 1, 2 and 3 of Sec. 67 value shall be determined in such a manner as may be prescribed
Valuation of Taxable Services (Sec 67)
"works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property.Valuation of Works Contract(new system effective from 1-7-2012)New Rule 2A of Service Tax (Determination of Value) Rule, determine the value in case of the works contract as under:The first determination will be the value of service being the total amount charged for the contract reduced by the value of property transferred in goods for State VAT purpose; [Clause (i)]. Even if value of goods is not intimated to State VAT, the assessee can still calculated the actual value of goods and the same will be relevant to deduce the value of the service involved in the works contract.Where the value is not determinable under Clause (i), it shall be determined on the basis of statutorily prescribed percentage.
Valuation of Works Contract(new system effective from 1-7-2012)Valuation of Works Contract(new system effective from 1-7-2012)Valuation of service portion of a works contract on the basis of statutorily prescribed percentage:
Type of works contractPercentage of value of the service portion(A) Execution of original works40 % of the total amount charged for the works contract(B) Maintenance, repair, reconditioning, restoration or servicing of any goods70 % of the total amount charged for the works contract
(C) In case of other contracts including contracts for maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings 60 % of the total amount charged for the works contract
Valuation of Works Contract(new system effective from 1-7-2012)Explanation 1: "original works" means all new constructions; all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;"total amount" means the sum total of the gross amount charged for the works contract and the fair market value of all goods and services supplied in or in relation to the execution of the works contract, whether or not supplied under the same contract or any other contract, after deductingthe amount charged for such goods or services, if any; and the value added tax or sales tax, if any, levied thereon.Explanation 2:CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, shall not be availableValuation of service portion in supply of food, beverages, etc. by restaurant or outdoor caterersRule 2C provides for Determination of value of service portion involved in supply of food or any other article of human consumption or any drink in a restaurant or as outdoor cateringAt restaurant Value of Service40%As Outdoor Catering Value of Service60%
CENVAT will not be available on goods classifiable under Chapter 1 to 22 of Central Excise tariff (live animals, animal products, vegetable products, prepared food stuffs, beverages, spirits and vinegar or animal or vegetable fats and oils and their cleavage products, prepared edible fats, animal or vegetable waxes) Service Tax (Determination of Value) Rules, 2006Rule 3 where such value is not ascertainable shall be determine by service provider Value of similar serviceif it cannot be determined as (a) the equivalent money, which shall in no case be less than cost of provision of serviceRule 5 Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration.Except the expenditure or cost s incurred as pure agentService Tax (Determination of Value) Rules, 2006Rule 6 New Inclusions added The amount realized as demurrage for the provision of service beyond the period originally contracted Exclusions Initial deposit made by the subscriber of telephone/mobile Air fair collected by air travel agentRail fair collected by rail travel agentInterest on delayed payment of any consideration for the provision of services etc.Taxes levied by any Govt. on air travelling and shown separately.Accidental damages due to unforeseen actions not relatable to provision of servicesSubsidy and grants disbursed by Govt. Abatement to Specified Services w.e.f. 1.7.2012(Notification No. 26/2012-ST) as Amended by Notification. No. 3/2013 ST w.e.f. 01.03.2013)Description of taxable service Taxable PercentConditionsfinancial leasing including hire purchase 10NilTransport of goods by rail 30NilTransport of passengers by rail 30NilBundled service by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention centre, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises 70CENVAT on any goods classifiable under Chapter 1 to 22 of Central Excise Tariff Act, 1985 has not been takenTransport of passengers by air40CENVAT credit on inputs and capital goods has not been takenAbatement to specified services w.e.f. 1.7.2012(26/2012-ST) as amended by Notification. No. 3/2013 ST w.e.f. 01.03.2013)Description of taxable service Taxable PercentConditionsRenting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes. 60CENVAT credit on inputs and capital goods has not been takenServices of goods transport agency 25CENVAT has not been takenServices provided in relation to chit 70Same as aboveRenting of any motor vehicle designed to carry passengers 40Same as aboveTransport of goods in a vessel 50 Same as abovePackage tour by tour operator25Same as aboveservices solely of arranging or booking accommodation for any person in relation to a tour10Same as above
Abatement to Specified Services w.e.f. 1.7.2012(Notification No. 26/2012-ST) as Amended by Notification. No. 3/2013 ST w.e.f. 01.03.2013)Description of taxable service Taxable PercentConditionsServices by a tour operator in case other than above25Same as aboveConstruction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority CENVAT credit on inputs used has not taken.
The value of land is included in the amount charged from the service receiver.(i) For residential unit having carpet area up to 2000 square feet or where the amount charged is less than rupees one crore;25(ii) For other than the (i) above30Point of Taxation Rules (POTR) prescribes the point of taxationPoint of Taxation (POT) means the point of time when service shall be deemed to have been provided (occurrence of taxable event) [Rule 2(e)]Due date for tax payment linked with POT (Rule 6(1) of Service Tax Rules)Pre POTR, tax obligation was on realization of consideration (Cash basis)Post POTR, tax obligation generally arises on accrual or realization of consideration, whichever is earlier (subject to few exceptions)POT under reverse charge mechanism U/s 68(2) / Rule 2(1)(d) shall be the date of payment and where payment for service is not made within period of 6 months of date of invoice, POT shall be determined as per General Rule - 3 (Rule 7)
In case where service provider is located outside India and is an associated enterprise of service recipient, POT will be earlier of (Proviso to Rule 7):Date of paymentDate of debit in books of account of person liable to pay taxThis Proviso does not apply to an Indian service provider providing service to associated enterp...