Service tax basic concepts 2005 2016

Basic Concepts - Service Tax and Open Issues Professional Opportunities Bimal Jain FCA, FCS, LLB, B.Com (Hons) Chairman of IDT Committee of PHD Chamber of Commerce Chairman of Corporate Advisory Committee of IPEM Institution Member of IDT Committee of Assocham/ FICCI Member of IDT Committee of ICAI Member of Indirect tax faculties of ICAI/ICSI/ICMA Authored Book- "Goods and Services Tax – Introduction and Way forward" 4/19/2016 CS Bimal Jain Constitutional ConstitutionalStructure StructureofofIndirect IndirectTax TaxInInIndia India Constitution Union List Excise Duty 84 4/19/2016 Service Tax 97 State List Sales/ Purchase of Goods 54 Excise Duty on Liquor 51 CS Bimal Jain Concurrent List Octroi Duty 52 Entertainment Tax 62 Stamp Duty 63 TAXATION OF SERVICES – NEGATIVE LIST Restoration of Service Specific Accounting codes for Registration & Payment of Service Tax 4/19/2016 CS Bimal Jain Taxable Event - Service Tax  S 66 of Finance Act  There shall be levied a tax on the Value of taxable services referred to in various sub-clauses of (105) of S.65 and collected in such manner as may be prescribed  S 65(105)  Any Service provided or to be provided (16-6-2005)  S 65B (51)  Taxable service means any service on which service tax is leviable under section 66B;  S 66B  There shall be levied a tax at the rate of 14% on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed  Association of Leasing & Financial Service Companies vs UOI 2010 (20) STR 417 SC  Taxable Event  Rendering of Service 4/19/2016 CS Bimal Jain Definition of Service  S 65B (44)  “Service" means Any Activity carried out by a Person for another for Consideration, and includes a Declared service, but shall not include— (a) an activity which constitutes merely,(i) 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 sale within Article 366 (29A) of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; - Employer-Employee / Secondment/ Jt Employment/ Director (c) fees taken in any Court or Tribunal established under any law for the time being in force 4/19/2016 CS Bimal Jain Declared Services –S 66E Activities declared to be Service: • Renting of Immovable Property (Entry 49 – List II) b Construction of a complex, building, civil structure for which consideration received before issuance of completion certificate (Entry 49) • Temporary Transfer/Permitting Use or Enjoyment of Intellectual Property Rights {IPR -10/9/2004} • Development, Design, Implementation etc of Information Technology Software {IT Software Services – 16/5/2008} • Agreeing to the obligation or to refrain from an act, or to tolerate an act or a situation, or to an act; • Transfer of goods by way of hiring/ leasing/ licensing without transfer of right to use such goods {16/5/2008} • Activity in relation to delivery of goods on hire purchase/ any system of payment by instalments h Service portion in the execution of a works contract {A -366 (29A)} • Service portion in an activity involving supply of food/drinks/article of human consumption {A -366 (29A)} 4/19/2016 CS Bimal Jain Page Definition of Service  Explanation 1.— Nothing contained in this clause shall apply to functions performed by MP, MLA, Other Govt Officers or Govt Bodies…  Explanation 2.- For the purposes of this clause, transaction in money shall not include any activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged…  Explanation 3.- For the purposes of this Chapter,(a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) 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; CS Bimal Jain 4/19/2016 TAXATION OF SERVICES – NEGATIVE LIST 4/19/2016 CS Bimal Jain Obligation & POT 4/19/2016 CS Bimal Jain POT - General Rule  -   POT, the earliest of the following: Date of Receipt of Money (Advance) When Invoice is issued within 30 days from Date of Completion of Service Date of Invoice When Invoice is not issued within 30 days from Date of Completion of Service Date of Completion of Service Rule 4A of STR – Invoice to be issued within 30 or 45 days in case of banks and FIs, (14) days from the Date of completion of service or Date of Receipt of payments towards the value of such taxable service, whichever is earlier Rule 4A of STR - proviso inserted - Invoice not required to be issued if amount received is upto Rs 1,000 in excess o f the amount indicated in the Invoice 4/19/2016 CS Bimal Jain 10 Services relating to Stage Carriage – S 66D(O) (i) Bimal Jain 28 Contd… • Further, changes are also made in Sl No 9A of the abatement notification no 26/2012-ST to provide abatement on services provided by stage carriage (w.e.f Sl.01.06.2016) Description of Taxable Service Percent Conditions No 9A age Transport of passengers, with or without accompanied belongings, bya a contract carriage other than motorcab b a radio taxi c a stage carriage Bimal Jain 40 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisionsof the CENVAT Credit Rules, 2004 29 Service of transportation of goods by Aircraft / Vessel Bimal Jain 30 Retrospective Amendment  S 101 of FB, 2016  Entry 12(d) of ME NN 25/2012-ST: Exemption allowed for Services provided by way of Construction, etc of canal, dam or other irrigation works to Governmental Authority for the period 1-7-2012 to 29-01-2014  Change in definition of Governmental Authority  Refund of ST, if paid during the period, to be filed within months from enactment of FB, 2016 4/19/2016 CS Bimal Jain 31 Retrospective Amendment  S 102 of FB, 2016  Entry 12 of ME NN 25/2012-ST: Exemption withdrawn is restored w.e.f 1-4-2015 for Services (Construction, Erection, etc.) provided to Govt./ Local Authority/ Governmental Authority - Civil Structure/ Original Works for use other than Business - Structure meant for Education, clinical, Art or Cultural - Residential complex for self use or use of employees  Contract entered prior to 01-03-2015 and Stamp Duty, as applicable, paid prior to 01-03-2015  Continue to be exempted till 31-03-2020 and Refund of ST, if paid during the period, to be filed within months from enactment of FB, 2016 4/19/2016 CS Bimal Jain 32 Retrospective Amendment  S 103 of FB, 2016  Entry 14 of ME NN 25/2012-ST: Exemption withdrawn is restored w.e.f 1-4-2015 for Services provided by way of construction, erection, commissioning, installation of - Original Works for Airport/ Port  Contract entered prior to 01-03-2015 and Stamp Duty, as applicable, paid prior to 01-03-2015, subject to production of Certificate by Ministry of Civil Aviation or Shipping  Continue to be exempted till 31-03-2020 and Refund of ST, if paid during the period, to be filed within months from enactment of FB, 2016 4/19/2016 CS Bimal Jain 33 Section 66D - Any services provided by Government or Local Authority to a Business Entity “66D The negative list shall comprise of following services,:– (a) Services by Government or a Local authority excluding the following services to the extent they are not covered elsewhere(i) Services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government; (ii) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) Transport of goods or passengers; or (iv) Any Service other than services covered under clauses (i) to (iii) above, provided to business entities;” 4/19/2016 CS Bimal Jain 34 Amendment in the Mega Exemption Notification to exempt certain Governmental services Entry No Particulars of Exemption Exemption Amended Services by Government, a Local authority or Governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution 39 New Exemptions provided for services provided by Government or a local authority 54 to another Government or local authority except services specified in subclauses (i),(ii) and (iii) of Section 66D(a) of FA, 1994 55 issuance of passport, visa, driving licence, birth certificate or death certificate 56 where the gross amount charged for such services does not exceed Rs 5000/-, except for services specified in sub-clauses (i), (ii) and (iii) of Section 66D(a) of FA, 1994 Continuous supply of service  gross amount charged should not exceed Rs 5000/- in a FY CS Bimal Jain 35 4/19/2016 Amendment in the Mega Exemption Notification Cont… Entry No Particulars of Exemption New Exemptions provided for services provided by Government or a local authority 57 tolerating non-performance of a contract - consideration in form of fines/ liquidated damages is payable 58 (a) registration required under any law for the time being in force; (b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under any law for the time being in force 59 assignment of right to use natural resources to an individual farmer for the purposes of agriculture 4/19/2016 CS Bimal Jain 36 Amendment in the Mega Exemption Notification Cont… Entry No Particulars of Exemption New Exemptions provided for services provided by Government or a local authority 60 any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution 61 assignment of right to use any natural resource where such right was assigned before 01.04.2016 62 to operate as a telecom service provider or use radio frequency spectrum during FY 2015-16 63 deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of MOT 4/19/2016 CS Bimal Jain 37 Issues in CCR, 2004        4/19/2016 Rule 2(k) All goods used for generation of electricity or steam or pumping of water for captive use; All capital goods having value up to Rs 10,000 per piece Full CC in Yr of Purchase and Depreciation Rule 3(4) - Proviso amended/ inserted: Cenvat credit not to be used for payment of Infrastructure Cess [Motor Vehicles – 8703] What happen for motor vehicles returned to factory for remade, refined and reconditioning U/R 16 of CER, 2002? CS Bimal Jain 38 Rule of CCR, 2004    Rule 6: Rationalized and Simplified Explanation &  Exempted Service includes an activity which is not Service U/S 65B(44) of Finance Act – Alarming Rule 6(4): No CC on CG used exclusively for EG/ES for Yrs from date of production or provision of service 4/19/2016 CS Bimal Jain 39 Rule of CCR, 2004   • • 4/19/2016 Distribution of Cenvat Credit by Input Service Distributor (“ISD”) ISD can distribute Credit to it’s manufacturing units, Units providing taxable output Services or Outsourced manufacturing unit – means Job-worker paying duty under 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000; or Contract manufacturer, paying under Section 4A of the Central Excise Act, 1944; CS Bimal Jain 40 Professional Opportunities for CS           4/19/2016 Advise and Consulting Registration Interactions with the Dept Hand Holding: Payment of Taxes/ Preparation of Return Return filing Pre- Audit/ Diagnostic Review/ Health Check Effect of Budgetary Changes – Business Model Litigation Audit Assistance – Internal/ External Investigation & Enquiry CS Bimal Jain 41 Thank You! 4/19/2016 CS Bimal Jain 42 [...]... Customs Tax/ Duty Service tax (S 75 of FA, 1994) Rate of Interest on delayed payment (Per Annum) a Any amount 24% collected as Service Tax but not deposited Customs (S 28AA of CA, 1962) Notification No 13 /2016- Enactment of ST dated 01.03 .2016 FB, 2016 15% 15% Notification No 15 /2016- 01.04 .2016 CE(NT) dated 01.03 .2016 Notification No 33 /2016- 01.04 .2016 Cus(NT) dated 01.03 .2016 CS Bimal Jain 4/19 /2016. .. 20.05 .2016 25.05 .2016 04.06 .2016 POT shall be DOI: KKC not applicable 4/19 /2016 CS Bimal Jain 21 Service Provider Vs Service Receiver Date of service Date of invoice (DOI) Date of payment (DOP) Applicable Applicability of Rule KKC Liability of SP under forward charge 20.05 .2016 25.05 .2016 04.06 .2016 Rule 5(a) of KKC applicable POT Rules Liability of SR under reverse charge 20.05 .2016 25.05 .2016 04.06 .2016. .. from Service Recipient?  Umasons Auto Compo Pvt Ltd Vs Commissioner of Central Excise & Customs, Aurangabad [2014 - TIOL – 126 – CESTAT - MUM]  Once the amount of Service Tax is accepted by the Revenue from the provider of GTA service, it cannot be demanded again from the recipient of the GTA service 4/19 /2016 CS Bimal Jain 13 Service – Service Tax  Activity – Economic  Person – 65B (37)  Service. .. applicable from 01.06 .2016 @ 0.5% on value of all taxable service (i.e from 14.5% to 15%)  Let us understand applicability of KKC in the light of amendment made in Rule 7 of the POT Rules 4/19 /2016 CS Bimal Jain 20 Erstwhile Rule 7 Vs Amended Rule 7 Date of service Date of invoice Date of payment Applicability of KKC (DOI) (DOP) As per erstwhile Rule 7 20.05 .2016 25.05 .2016 04.06 .2016 POT shall be DOP:... as compared to SR Taxable event under Service tax is the rendition of service - Association of Leasing & Financial Service Companies Vs Union of India [2010 (20) STR 417 (SC)] 4/19 /2016 CS Bimal Jain 22 Imprisonment & Power to Arrest  Imprisonment Provisions [S.89] - Threshold Monetary Limit increased from Rs 50 Lakh to Rs 2 Crore  Power to Arrest – Non Bailable Offence – Service Tax collected but... Description of Taxable Service Percent Conditions No 9A age Transport of passengers, with or without accompanied belongings, bya a contract carriage other than motorcab b a radio taxi c a stage carriage Bimal Jain 40 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisionsof the CENVAT Credit Rules, 2004 29 Service of transportation... filed within 6 months from enactment of FB, 2016 4/19 /2016 CS Bimal Jain 33 Section 66D - Any services provided by Government or Local Authority to a Business Entity “66D The negative list shall comprise of following services,:– (a) Services by Government or a Local authority excluding the following services to the extent they are not covered elsewhere(i) Services by the Department of Posts by way of... end of 3 months 4/19 /2016 CS Bimal Jain 11 Rule 7 of POT Rules – Contd… • In case of Associated enterprises, where the person providing the service is located outside India: • POT shall be earlier of the following:  Date of debit in the books of account of SR;  Date of Payment 4/19 /2016 CS Bimal Jain 12 SR liability Paid by SP -?  Service Tax - Reverse Charge liability paid by Service Provider, should... Lakh to Rs 2 Crore 4/19 /2016 CS Bimal Jain 23 Period of Limitation for Non-Fraud Cases ST, Excise & Customs Tax/ Duty Relevant Period for issuing SCN Proposed Clause of Prescribed time time period FB, 2016 period Service Tax (S 73 of FA, 1994) 18 mths (w.e.f 28.05.2012) 30 mths Cl 149 Excise Duty (S 11A of CEA, 1944) 1 Yr 2 Yr Cl 140 Customs (S 28 of CA, 1962) 1 Yr 2 Yr Cl 117 4/19 /2016 CS Bimal Jain Effective... house-keeping services performed in such educational institution; (iv) services relating to admission to, or conduct of examination by, such institution; Bimal Jain 27 Services relating to Stage Carriage – S 66D(O) (i) Bimal Jain 28 Contd… • Further, changes are also made in Sl No 9A of the abatement notification no 26/2012-ST to provide abatement on services provided by stage carriage (w.e.f Sl.01.06 .2016) ... Entertainment Tax 62 Stamp Duty 63 TAXATION OF SERVICES – NEGATIVE LIST Restoration of Service Specific Accounting codes for Registration & Payment of Service Tax 4/19 /2016 CS Bimal Jain Taxable Event - Service. .. Any Service provided or to be provided (16-6 -2005)  S 65B (51)  Taxable service means any service on which service tax is leviable under section 66B;  S 66B  There shall be levied a tax at... of Service Tax is accepted by the Revenue from the provider of GTA service, it cannot be demanded again from the recipient of the GTA service 4/19 /2016 CS Bimal Jain 13 Service – Service Tax