1. WEBCOM PRESENTATION INDIRECT TAXES 2012
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WEBCOM PRESENTATION INDIRECT TAXES 2012
CA.PRADEEP JAIN

2. BUDGET 2012
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3. Service tax – “Service” new definition
The word “service” is defined in clause (44) of new section 65B, according to the same
“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 the meaning of clause (29A) of article 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;
(c) fees taken in any Court or tribunal established under any law for the time being in force.
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4. Implication of New Service definition
Activity carried out without any consideration like donations, gifts or free charities are therefore outside the ambit of service, however An act by a charity for consideration would be a service and taxable unless otherwise exempted.
Donations to a charitable organization are not consideration unless charity is obligated to provide something in return
Only services provided by employee to employer in the course of employment are mentioned in exclusion list, thus any service provided by employer like Transportation, Food vouchers etc. may be regarded as service.

5. Implication of New Service definition
The six categories of deemed sales as defined in article 366(29A) of the Constitution which are excluded from the definition of service tax are –
transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration
transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract
delivery of goods on hire-purchase or any system of payment by installments
transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration
supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration
supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration.

6. Service tax – Introduction of Negative list
In a major paradigm shift services now shall be taxable based on “Negative list of services”.
Thus if an activity meets the characteristics
of a “service” it is taxable unless specified in
the negative list
Negative list, comprising 17 heads are listed under new section 66D or otherwise are exempted by a notification no.25/ ST
On coming in to force of new provisions from, , the earlier provisions contained in sec 65,65A,66,66A will cease to apply but will remain relevant in respect of services provided prior to coming into force of new provisions.
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7. Service tax – Negative list
Following services are being included in negative list and thus shall not be liable to taxation
(1) Services provided by government or local authority
excluding certain services
(2) Services provided by Reserve Bank of India
(3) Services by a foreign diplomatic mission located in India
(4) Services relating to agriculture
(5) Trading of goods
(6) Any process amounting to manufacture
or production of goods
(7) Selling of space or time slots for advertisement other than advertisements broadcast by radio or television
(8) Service by way of access to road or a bridge or payment of toll charges
(9) Betting, gambling or lottery
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8. Service tax – Negative list
(10) Admission to entertainment events or access to entertainment facilities (11) Transmission or distribution of electricity by an electric transmission or distribution utility (12) Services by way of (a) Pre – school education and education up to higher secondary school or equivalent (b) education as part of curriculum for obtaining a qualification recognised by any law for time being in force (c ) Education as a part of approved educational vocational course (13) Services by way of residential dwelling for use as residence (14) Services by way of (a) Extending deposit, loans or advances in so far as the consideration is represented by way of interest or discount (b) Inter – se sale or purchase of foreign currency among banks or authorised dealers of foreign exchange or amongst bank and such dealers
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9. Service tax – Negative list
(15) Service of transportation of passengers with or without accompanied belongings by (a) by stage carriage (b) railways in a class other than (i) first class (ii)an air conditioned coach (c) metro, monorail or tramway (d) Inland waterways (e) Public transport other than predominantly for tourism purpose in a vessel between places located in India (f) Metered cabs, radio taxis or auto rickshaws (16) Services by way of transportation of goods (a) by road except services of GTA or Courier agency (b) by an aircraft or a vessel from a place outside india (c) by inland water ways (17) funeral, burial, crematorium or mortuary services including transporation of deceased
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10. POSSIBLE TAXABLE SERVICES
Travel by Rail – A/c Coaches
Goods transfer by Rail
Hotel telephone calls
Residential construction of more than one unit
Astrologers
Marriage makers
Activities by trust, if provided in return for consideration, (subject to exemptions provided in negative list
Reality show judges/Actors - Directors

11. Service tax – Exempted service
Service tax exemption has been provided to many services by way of an exemption notification, few services are listed hereunder
(a) Services provided to United nations or specified international organisation
(b) Health care service provided by a clinical establishment,
an authorised medical practioner or para medics
(c) Services by an entity registered under sec 12AA of
Income tax Act,1961 by way of charitable activities
(d) Services provided by-
an individual as an advocate or a partnership firm of advocates by way of legal services to,-
(i) an advocate or partnership firm of advocates providing legal services ;
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to rupees ten lakh in the
Preceding financial year; or
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12. Service tax – Exempted service
Services by way of training or coaching in recreational activities relating to arts, culture or sports;
Services provided to or by an educational institution in respect of education exempted from service tax, by way of,-
(a) auxiliary educational services; or
(b) renting of immovable property;
Services provided to the Government, a local authority or a
governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(b) a historical monument, archaeological site or remains of national importance,
(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or
(f) a residential complex predominantly meant for self-use or the use of their employees

13. Service tax – Exempted service
Services by way of Construction, erection, commissioning or installation of original works pertaining to airport, a single residential unit otherwise than as a part of residential complex, low cost houses up to a carpet area of 60 sq mtr per house
Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below rupees one thousand per day or equivalent;
Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages;
Services by the following persons in respective capacities -
(a) sub-broker or an authorised person to a stock broker;
(b) selling or marketing agent of lottery tickets to a distributer or a selling agent;
(c) selling agent or a distributer of SIM cards or recharge coupon vouchers;
(d) sub-contractor providing services by way of works contract to another
contractor providing works contract services which are exempt;

14. Service tax – Declared services
The following shall constitute declared services as per sec 66E and hence shall be chargeable to taxation, however services other than that specified in declared list are also taxable unless specified in negative list
(a) renting of immovable property
(b) construction of complex,building,civil structure
or a part there of including a complex or building
intended for sale to a buyer, wholly or partly, except
where the entire consideration is received after issuance of completion certificate by the competent authority
(c) temporary transfer or permitting the use or enjoyment of any intellectual property right
(d) development, design, programming, customisation, adaptation, upgradation,
enhancement, implementation of information technology software
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act
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15. Service tax – Declared services
(f) transfer of goods by way of hiring, leasing,licensing or in any such manner without transfer of right to use such goods (g)activities in relation to delivery of goods on hire purchase or any system of payment by instalments (h) service portion in execution of a works contract (i) service portion in an activity where in goods, being food or any other article of human consumption or drink is supplied in any manner as a part of activity
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16. Service tax - Abatements
Certain Changes made in Abatement scheme , moreover now CENVAT credit on Input services is also available for certain services specified as follows
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17. Service tax - Abatements

18. Service tax - Abatements

19. Service tax – Reverse charge provisions
For the first time in service tax provision both service recipient and service provider are being made liable to pay service tax on notified taxable services to the extent specified against each one of them as follows
The scheme is applicable where service provider is individual,LLP,firm,HUF and recipient is body corporate
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20. Service tax – Reverse charge provisions
For some specified services, 100% service tax is to be paid by service recipient as follows -
Services  provided or agreed to be provided  by individual advocate or a firm of advocates by way of legal services
Services  provided or agreed to be provided  by Government or local authority by way of support services excluding,-  (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994
Services  provided or agreed to be provided  by an arbitral tribunal
Services  provided or agreed to be provided  by an insurance agent to any person carrying on insurance business
Services  provided or agreed to be provided  by a goods transport agency in respect of transportation  of goods by road

21. Service tax – Reverse charge provisions
The service provider shall issue an invoice complying with Rule 4A of the Service Tax Rules As per clause (iv) of sub-rule (1) of the said rule 4A ‘’the service tax payable thereon’ has to be indicated. The service tax payable would include service tax payable by the service provider.
The liability of the service provider and service recipient are different and independent of each other. Thus in case the service provider is availing exemption owing to turnover being less than Rs 10 lakhs, he shall not be obliged to pay any tax. However, the service recipient shall have to pay service tax which he is obliged to pay under the partial reverse charge mechanism.
Credit of the entire tax paid on the service received by the service receiver would be available to the service recipient subject to the provisions of the CENVAT Credit Rules 2004.
The credit of tax paid by the service recipient under partial reverse charge would be available on the basis on the tax payment challan, again subject to conditions specified in the said Rules.

22. Service tax – Valuation Rules
New valuation rule being introduced for works contract services
New Rule 2C being introduced for determination of taxable service involved in supply of food and drinks in restaurant or as outdoor catering, the revised taxable portion is as follows
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23. Service tax – Valuation Rules – Works Contract
The definition of works contract has been changed, the revised definition of the same is as follows:-
“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.”
Previously only works contract related to
immovable property was to be regarded as works
contract, now the works contract also related to movable
property shall also be regarded as works contract in view of the changed definition.
Now Maintenance contract for repairing of Air conditioner, Computer shall be considered as works contract, if the same includes good which are supplied inclusive of VAT.

24. Service tax – Valuation Rules – Works Contract
Value of Works Contract = Gross amount charged – Value of transfer of property in goods. However, VAT or Sales Tax is not includible in the value of material supplied.
In the cases where VAT has been paid on ACTUAL value of transfer of property in goods, then this value will considered while calculating the value of Works Contract.
If the VAT is not paid on the ACTUAL value, the assessee will calculate the same for the purpose for service tax and it will be deductible from the gross value.

25. Service tax – Valuation Rules – Works Contract – Last option
However if any of the above option is not possible, than only as last recourse, following valuation method is to be adopted

26. Service tax – Valuation Rules
Rule – 3 of Valuation rules shall now be applicable only in cases where valuation is “not ascertainable” instead of current situation i.e where consideration received is not wholly or party consisting of money
Rule – 6 prescribes inclusions and exclusions to the taxable value , now value of taxable service shall include “any amount realized as demurrage, or by any other name, for the provision of a service beyond the period originally contract or in any other manner relatable to provision of service
It shall exclude “accidental damages due to unforeseen actions not relatable to the provision of service”
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27. Bundle services
Bundled services have been defined in the said section as provision of one type of service with another type or types of services.
If such services are bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle.
If such services are not bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which attracts the highest liability of service tax.

28. Service tax – Other Changes
Penalty is waived for those taxpayers who pay the service tax due on renting of immovable property service in full along with interest within six months (from )
Service tax refunded will be recoverable, without any time bar from exporter, against whose shipping bill, sale proceeds have not been received from abroad.
New Rules known as “Place of provision of service rules,2012” are being proposed and draft has been released for comment and feedback. The new rules will replace the existing export of services rules,2005 and Taxation of services (Provided from Outside India and received in India) Rules,2006.
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29. Changes in CENVAT Credit Rules
Rule – 3(5) and 3(5A) are being amended to prescribe that in case the capital goods on which CENVAT credit has been taken are cleared after being used then the amount payable shall be either the amount calculated on the basis of CENVAT credit taken at the time of receipt reduced by a prescribed percentage or the duty on transaction value whichever is higher.
Sub Rule – 4(1) and 4(2) have been amended to allow credit of goods without bringing them in to premises subject to due documentation regarding their delivery and location.
Changes are being made in Rule 7 relating to distribution of credits of input services by an input service distributer (ISD) to ensure their scientific allocation to only such units where they have been put to use and proportionate to turnover.
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30. Changes in CENVAT Credit Rules
Rule (9)(1)(e) is being amended to allow availment of credit on tax payment challan in case of payment of service tax by all service receivers on reverse charge
Rule 10A is being inserted to permit transfer of unutilized credit of SAD lying in balance at the end of each quarter to another factory of the manufacturer
Rule 14 amended to substitute word “or” with “and”. So now interest shall be payable when credit is taken and utilized wrongly. Decision of Ind Swift laboratories (2011 – TIOL – SC –CX) nullified.
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31. Changes in CENVAT Credit Rules
Rule – 5 of CENVAT Credit Rules relating to refund of CENVAT credit is simplified now, the new scheme does not require the kind of correlation that is needed at present between exports and inputs used in such exports. Duties or taxes paid on any goods or services that qualify as inputs or input services will be entitled to refund in the ratio of export turnover to total turnover.
New Formula is as follows
Refund amount = (Export turnover of goods+ Export turnover of services) x Net CENVAT credit
Total turnover
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32. Other Provisions
The government has replaced Current Import of service and Export of service rules, which are replaced with new rules called Place of Provision Rules,2012
Government has also introduced new notifications no. 39/2012 and 41/2012 for claiming rebate on GTA services used for export and foreign commission agent used for export of services
However , there is no provision pertaining refund of service tax, if paid for export of services.

33. SUGYAN “H” – 29,SHASHTRINAGAR, Visit us at – www.capradeepjain.com
CONTACT US
CA.PRADEEP JAIN
SUGYAN “H” – 29,SHASHTRINAGAR,
JODHPUR –
TEL – 0291 – , M –
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