AN INTRODUCTION TO – SERVICE TAX by g. natarajan advocate, swamy associates

GENESIS OF THE LEVY  Entry 97 of List I – The residual power to tax.  Effective from 2003 – Entry 92 C of the List I.  Finance Act, 1994 – An adhoc Act for 18 years!

Financial Year Revnue Rs. Crores GROWING REVENUE

Challenges to the levy. Renting of immovable property service Home Solutions Retail India Limited Vs Union of India 2009 (14) STR 433 Delhi HC Construction of Residential complex service Maharashtra Chamber of Housing Industry Vs Union of India 2012-TIOL-78 Mum HC

Challenges to the levy. Financial Leasing Services. Association of Leasing and Financial Service Companies Vs Union of India 2010 (20) STR 417 SC Chartered Accountants, etc. service All India Federation of Tax Practitioners Vs Union of India 2007 (7) STR 625 SC

BASIC FEATURES  Levy on service providers. - Exceptions.  Positive List of Taxable service {Section 65 (105) (a) to (zzzzw)}  Move towards negative list.  Value – Gross amount. - Abatements - Reimbursements.  Classification of Services – Section 65 A.  Point of Taxation.

EXPORT / IMPORT OF SERVICES  Export of Service Rules, 2005 – Pre & Post. Property based services. Performance based services. Location based services. - Benefits for Export of Services.  Import of Services. Section 66 A. Indian National Shipowners Association – 2009 (13) STR 235 Bom HC.

CERTAIN IMPORTANT SERVICES Legal services – Born in 2009 & Graduated in Medical services – the story of “misery tax”. Professional services – CAs, ICWAs, CSs, Architects, Engineers, etc. Construction related services. Business Auxiliary service / Business Support Service. “Celebrity” services. Hotels and Bars.

PROCEDURES  Registration.  Issue of Invoice.  Self Assessment.  Monthly / Quarterly Payment.  Half yearly return.  Self Adjustment.  Cenvat Credit.

IMPORTANT EXEMPTIONS  Small Scale Exemption. - Threshold limit – Rs. 10 lakhs. - Eligibility limit – Rs. 10 lakhs.  Notification 12/ Exclusion for value of goods sold. BSNL Vs UOI – 2006 (2) STR 161 SC Agarwal Colour Advance Photo Systems – 2012 (23) STR 608 Tri-LB.  Notification 1/ Abatements.

PENAL PROVISIONS  Penalties. - Section 76 – Rs.100 per day of default or 1 % pm, whichever is higher. - Section 77 - General penalty for specified offences. - Section 78 – Equal penalty. - Section 80 – Power to waive – rarely used!  Prosecution – Section Providing service without issue of invoice. - Irregular availment of cenvat credit. - Maintenance of false records, failure to give information. - Collects service tax and not remitting it.

APPELLATE REMEDIES Show Cause Notice Adjudication below Commissioner Adjudication by Commissioner Appeal to Commissioner (Appeals) Appeal to Tribunal Appeal to SC (Classification, Value, exemption) Appeal to HC (Question of law)

Thank you g. natarajan