Shashank Saraogi 1

The Government's primary sources of revenue are direct and indirect taxes. Central excise duty on the goods manufactured/produced in India and customs duties on imported goods constitute. The two major sources of indirect taxes in India. However, revenue receipts from customs & excise have been declining due to World Trade Commitments and rationalization of commodity duties. Services are so widespread and encompass almost all activities like management, banking, insurance, hospitality, administration, communication, entertainment, travel, wholesale distribution, retailing, research and development activities, other professional services, etc. 2

Hence, the Government's argument was that substantial revenue should come from the service sector and the tax on goods (excise duty) should be complemented with the tax on services. If the tax on services reduces the degree of intensity of taxation on manufacturing and trade without forcing the Government to compromise on the revenue needs, it will enable better pricing of its products by the manufacturing sector in the global market. 3

The imposition of service tax was in sequel to the Report of the Chelliah Committee on Tax Reforms. On these recommendations, Dr. Manmohan Singh, the then Union Finance Minister, in his Budget speech (year ) introduced the new concept to tax services. Imposing a tax on services of telephones, non-life insurance and stock brokers.Thus, initially service tax was imposed on 3 services. 4

The Government may levy a tax on the citizens only under the authority of the constitution of India. The Constitution, in its Schedule VII, has enumerated the matters on which the Central Government and the State Government can make laws. Such matters are divided into three categories-- a) List – I : Union List (It contains the matters in respect of which only the Central Government has the power of legislation) b) List – II : State List (It contains the matters in respect of which only the State Government has the power of legislation) c) List – III: Concurrent List (It contains the matters in respect of which both the Central and the State Governments have power of legislation). 5

6 Service tax was introduced in the year 1994 but till date, there is no independent statute for levying service tax

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Levy of service tax: Levy of service tax extends to whole of India except Jammu and Kashmir. ‘India’ means,— (a) the territory of the Union as referred to in clauses (2) and (3) of article 1 of the Constitution; (b) its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976; (c) the seabed and the subsoil underlying the territorial waters; (d) the air space above its territory and territorial waters; and (e) the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof [Section 65B(27)]. Indian territorial waters extend upto 12 nautical miles from the Indian land mass. 8

Service means (i) any activity for consideration (ii) carried out by a person for another and (iii) includes a declared service. 9

10 Who must obtain registration & time limit? Person who liable to pay service tax Input Service distributor Small Service Provider Within 30 days from the date on which charge of service tax is bought into force Within a period of 30 days of the commencement of business or 16 th June 2005 whichever is later Within a period of 30 days of the date in FY on which the aggregate value of service exceeds Rs. 9 Lakh REGISTRATION

11 Due dates for payment of service tax Assessee is individual, partnership or proprietorship firm Other than individual, partnership or proprietorship firm 5th of the month succeeding the quarter 5th of the month succeeding the quarter 5th of the month succeeding the month Last quarter & month of March tax has to be paid by 31st March itself.

12 When will return be filed? The return has to be filed for each half year 25 October for april- september 25 april for october – march

13 Penalty for late filing of return Delay Penalty Up to 15 Days 15 to 30 Days 31 Days and Onwards Rs. 500 Rs Rs to Rs. 100/day from 31 st day onwards but the total penalty can not exceed Rs

REVERSE CHARGE MECHANISM 14

What do you mean by RCM? 15

Notification No. 30/2012- ST dated 20/06/2012 Categories covered  Services under full reverse charge mechanism (RCM)Services under full reverse charge mechanism (RCM)  Services under partial reverse charge mechanism (RCM) Services under partial reverse charge mechanism (RCM) 16

17 Sr No. Nature of servicesDescription of services 1)Insurance Agents servicesServices provided or agreed to be provided by an insurance agent to any person carrying on insurance business 2)Goods Transport agency services (GTA) Services provided by GTA in relation to transportation of goods by road 3)Sponsorship ServicesSponsorship services to any Bode corporate or Partnership firm located in taxable territory

18 Sr No.Nature of servicesDescription of services 4)Legal ServicesLegal services by Individual advocate or a firm of advocates including arbitral services to business entity with turnover exceeding Rs.10 lakhs in the preceding year 5)Government services Support services by Government or local authority (excluding renting of immovable property) 6)Director ServicesServices provided or agreed to be provided by a Director of a company to a said company

19 Sr No. Nature of servicesDescription of services 7)Provision of Taxable service from non- taxable territory Any taxable service where the Service provider is located in a non taxable territory and service recipient located in a taxable territory

20 List of services under partial reverse charge mechanism Sr.NoNature of services Description of services % of Ser tax payable by S.P. % of Ser Tax payable by S.R. 1)Manpower Supply Service Supply of manpower for any purpose including security services provided to company 25%75% 2)Rent a cab services Renting of Passenger vehicles  With abatement  Without abatement Nil 60% 100% 40%

21 Sr.NoNature of services Description of services% of Ser tax payable by S.P. % of Ser Tax payable by S.R. 3)Works Contract Service Works Contract service provided to company 50%

22 Service Provider  Individual  HUF  Partnership Firm  AOP Service Receiver  Business entity registered as body corporate  He should be located in taxable territory

23 Taxability 75% Abatement on the Service Amount say On Rs 100 Taxable Amount Rs.25 Liability Recipient Liable to discharge ST Any person who pays freight either himself/Agent POP POP of services of GTA shall be the Location of Person liable to pay tax. Provided that when the person is located in NTT, the provider shall be liable to pay ST Goods Transport Agency

24 PQR A Service receiver ABC A Service provider Providing taxable service to DEF A Service Receiver XYZ A Service Provider Providing Taxable service to Taxable Territory Non Taxable Territory Providing taxable services to

25 Original Works i.e. New Construction, all types of addition & alteration and erection, commissioning or installation of PM/Equipment etc Taxable Amount = 40% of the Total Amount Charged Maintenance or repairs or reconditioning or restoration or servicing of goods eg. Amc Taxable Amount = 70% of the Total Amount Charged Maintenance, repairs, completion & finishing service such as glazing, plastering, floor and wall tiling etc. eg. Interior Decoration Taxable Amount = 60% of the Total Amount Charged ST to be discharge by the Recipient under Reverse Charge will be 50% of the Taxable Liability ST = (40*12.36%)*50% = ST = (70*12.36%)*50% = ST = (60*12.36%)*50% = WORKS CONTRACT

26 Rent a Cab Services Renting of Motor Vehicle If abatement Of 60% claimed S.R. is Liable to 4.944% S.P. is not Liable Pay any tax If abatement is not claimed S.R. is Liable to 4.944% S.P. is Liable to %

27 Thank You