Amendments made effective immediately
· The Clean Energy cess is to be renamed as Clean Environment cess. The effective rate of Clean Energy cess proposed to be increased from Rs.200 per tonne to Rs.400 per tonne .
· Infrastructure cess is to belevied on motor vehicles under heading 8703 subject to certain exceptions. Further, this cess is not CENVATable and CENVAT credit cannot be utilized for its payment.
Amendments to be effective from the date on which Finance Bill receives the assent of the President
Amendments in the Central Excise Act, 1944
· Requirement of publishing and offering for sale any notification issued, by the Directorate of Publicity and Public Relations of CBEC under section 5A proposed to be done away with.
· The time-limit for issuance of show cause notice under section 11A for recovery of service tax not levied/paid/short levied/short paid/erroneously refunded, for non-fraud cases is proposed to be enhanced by 1 year, i.e. from 1 year to 2 years.
· It is proposed to empower the Board under section 37B to issue orders, instructions and directions for the implementation of any other provision of the Central Excise Act, 1944.
Amendments effective from 01.04.2016
Amendments in the CENVAT Credit Rules, 2004
The CENVAT Credit Rules, 2004 have been simplified and rationalized with an endeavor to improve CENVAT credit flow, reduce the compliance burden and associated litigations, predominantly those relating to apportionment of credit between exempted and non-
exempted final products/services. Primary amendments include:
- Banks and other financial institutions are to be allowed to reverse credit in respect of exempted services, on actual basis also, in addition to the option of 50% reversal.
- Inputs and input services used in an activity which is not a ‘service’ under the Finance Act, 1994also to attract reversal provisions under rule 6.
- CENVAT credit of service tax paid on amount charged for assignment by Government or any other person of a natural resource available, over such period of time as the period for which the rights have been assigned.
Amendments in the Central Excise Rules, 2002
The Central Excise Rules, 2002 are proposed to be amended as follows:
(a) Reduction of the number of returns to be filed by a central excise assessee above a specified threshold to 13, that is, 1 annual return and 12 monthly returns.
The said annual return is also required to be filed by the service tax assessees above a specified threshold. Thus, now three service tax returns need to be filed instead of two.
(b) Like under service tax, the facility of revision of return to be available under central excise also.
(c) Manual attestation of copy of invoice, meant for transporter, is not required in cases where invoices are digitally signed.
(d) In case of finalization of provisional assessment, the interest will be chargeable from the original date of payment of duty.
Amendments effective from 01.03.2016
· Exemption with respect to construction, erection, commissioning or installation of original works pertaining to monorail or metro in respect of contracts entered into on/after 01.03.2016, has been withdrawn.
Following services have been exempted:
· Services by way of construction, erection, commissioning, etc. in respect of-
a) housing projects under Housing For All (HFA) (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY)
b) low cost houses up to a carpet area of 60 m2 in a housing project under “Affordable housing in Partnership” component of PMAY
c) low cost houses up to a carpet area of 60 m2 in a housing project under any housing scheme of the State Government.
· Services provided by the Indian Institutes of Management (IIM) to their students, by way of the specified educational programmes.
· CENVAT credit is being allowed to service providers providing services by way of transportation of goods by a vessel from India to abroad
· Rule 5 of the Point of Taxation Rules, 2011 has been amended so as to clarify that this rule shall apply mutatis mutandis in case of new levy on services and new levy or tax shall be payable on all the cases other than specified in said rule.
· Information Technology Software (IT Software) on media bearing RSP is exempted from service tax provided central excise duty is paid on RSP in accordance with section 4A of the Central Excise Act.
Further, IT Software recorded on media which is “NOT FOR RETAIL SALE” is exempted from so much of the Central Excise duty/CVD as is equivalent to the duty payable on the portion of the value of such IT Software recorded on the said media, which is leviable to service tax. In such cases, manufacturer/importer would therefore be required to pay Central Excise duty/CVD only on that portion of value representing the value of the medium on which it is recorded along with freight and insurance.
Thus, levy of excise duty and service tax is mutually exclusive.
Amendments effective from 01.04.2016
With a view to broaden the tax base, following exemptions are to be withdrawn:
· services provided by-
(i) a senior advocate to an advocate or partnership firm of advocates providing legal service; and
(ii) a person represented on an arbitral tribunal to an arbitral tribunal.
Service tax would be payable under forward charge on such services.
· transport of passengers, with or without accompanied belongings, by ropeway, cable car or aerial tramway
Exemption has been provided with respect to the following services:
· Services of life insurance business provided by way of annuity under the National Pension System.
· Services provided by SEBI by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market.
· Services provided by Employee Provident Fund Organisation (EPFO) to employees.
· Services provided by Biotechnology incubators approved by Biotechnology Industry Research Assistance Council (BIRAC) approved biotechnology incubators to the incubatees.
· Services provided by National Centre for Cold Chain Development by way of knowledge dissemination.
· Services provided by Insurance Regulatory and Development Authority (IRDA) of India.
· Services of general insurance business provided under Niramaya Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability in collaboration with private/public insurance companies.
· Services provided by way of skill/vocational training by Deen Dayal Upadhyay Grameen Kaushalya Yojana training partners.
· Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development & Entrepreneurship.
Amendments in existing exemptions
· Hitherto, service tax payable on a performance in folk or classical art forms of music/ dance/ theatre is exempt provided the consideration therefor exceeds
Rs. 1,00,000. This limit has been increased to Rs. 1,50,000.
Rationalisation of abatements alongwith the conditions for availing such abatements
· Abatement at the existing rate of 70% will continue to be available on transport of passengers and goods by rail and on transport of goods by vessel, with the CENVAT credit of input services now to be allowed [presently, the credit of
input services is not allowed with the abatement being claimed].
· A lower rate of abatement of 60% for transport of goods in containers by rail by any person other than Indian railway, with the CENVAT credit of input services being allowed.
· Uniform rate of abatement of 70% on services by way of construction of residential complex, building, civil structure, or a part thereof, irrespective of the carpet area of the units and amount charged for such units.
· Abatement on services by a tour operator in respect of a tour only for the purpose of arranging or booking accommodation for any person, retained at the existing rate of 90%. However, abatement in respect of any other tour is rationalised from 75% and 60% to 70%.
· A lower rate of abatement of 60% on shifting of used household goods by a Goods Transport Agency (GTA) without CENVAT credit on inputs, input services and capital goods.
· Abatement of 70% on services of a foreman to a chit fund restored, without CENVAT credit on inputs, input services and capital goods.
Amendments in Service Tax Rules, 1994
· Rule 6 of the Service Tax Rules, 1994 to be amended to extend the benefit of quarterly payment of service tax to One Person Company (OPC) whose aggregate value of services provided is up to Rs. 50 lakh in the previous financial year and an HUF. Further, payment of service tax on receipt basis is also extended to such OPC.
· With respect to services provided by mutual fund agents/distributor to a mutual fund or asset management company, service tax to be payable under forward charge provisions, i.e. service provider to be liable to pay service tax.
· Rule 6(7A) of the Service Tax Rules, 1994 to be amended to provide that an insurer carrying on life insurance business to have an option to pay tax at 1.4% of the total premium charged on single premium annuity (insurance) policies, in cases where the amount allocated for investment/savings on behalf of policy holder is not intimated to such policy holder at the time of providing of service.
· With effect from 01.04.2016, any service (and not only support services) provided by Government or local authorities to business entities are leviable to service tax. Consequently, service tax would be payable on any (and not only support services) service by the service recipient on reverse charge basis from said date.
Amendments to be effective from the date on which Finance Bill, 2015 receives the assent of the President
· Finance Act, 2015 had inserted Explanation 2 to the definition of “service” under section 65B(44) of the Finance Act, 1994 to specifically state that service tax is leviable on activities undertaken by lottery distributors and selling agents, in relation to lotteries.
The said explanation is proposed to be amended to clarify that it is the activity in relation to promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any other manner, of the State Government as per the provisions of the Lotteries (Regulation) Act, 1998, carried out by a lottery distributor/selling agent, which is leviable to service tax.
· The Negative List entry under section 66D(l) covering ‘educational services is proposed to be omitted. The said benefit would continue by way of exemption under mega exemption Notification No. 25/2012 ST dated 20.06.2012.
· Assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof is proposed to be declared as a service.
· Section 67A is proposed to be amended to obtain specific rule making powers in respect of Point of Taxation Rules, 2011.
· The time-limit for issuance of show cause notice under section 73, for recovery of service tax not levied/paid/short- levied/short paid/erroneously refunded, for non-fraud cases is proposed to be enhanced by 1 year, i.e. from 18 months to 30 months.
· Interest rates on delayed payment of duty/tax across all indirect taxes are proposed to be made uniform at 15% p.a. However, under service tax, in case where any amount is collected as service tax but amount so collected is not paid to the credit of the Central Government on/before the date on which such payment becomes due, proposed interest rate is 24% p.a.
· Power to arrest under section 91 proposed to be restricted only in case where the tax payer has collected the tax of more than Rs 2 crore, but not deposited it to Government. The monetary limit for launching prosecution under section 89 proposed to be increased to Rs. 2 crore of the amount of service tax collected but not deposited to the credit of the Central Government beyond a period of 6 months from the date on which such payment becomes due.
· Section 93A of the Finance Act, 1994 proposed to be amended so as to allow rebate by way of notification as well as rules.
Amendments to be effective from 01.06.2016
Krishi Kalyan Cess
· It is proposed to levy a Krishi Kalyan Cess on ANY OR ALL the taxable services at the rate of 0.5% of the value of taxable services. It is important to note here that unlike Swachh Bharat Cess, service provider shall be allowed to utilize the CENVAT credit of Krishi Kalyan Cess paid on input services for payment of such cess on the output service provided by it.
· Service tax proposed to be levied on transportation of passengers, with or without accompanied belongings, by a stage carriage by amending Negative List of services. However, transportation of passengers by non-air conditioned stage carriage are being exempted vide mega exemption notification.
|· Service tax proposed to be levied on transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance by omitting the negative list entry to said effect. However, said services are being exempted vide mega exemption notification.|
· Section 2(43) has been amended so as to include Special Warehouse licensed under Section 58A for enabling storage of specific goods under physical control of the department, as control over the other types of warehouses would be only record based.
· Section 25 is being amended so as to omit the requirement of publishing and offering for sale any notification issued, by the Directorate of Publicity and Public Relations of CBEC. To align with it has been proposed to provide the every notification issued shall unless otherwise provided come into force on the date of its issue by the Central Government for publication in the official Gazette.
· The period of limitation has been increased from one year to two years in case of bonafide error assessment.
· In order to simplify and rationalize the tax schemes, the amendment has been proposed in section 28, 47, 51 and 156 of the Customs Act to provide for deferred payment of customs duties for importers and exporters with proven track record. It will reduce the cargo release time and transaction cost of EXIM trade. The details changes in this regard would be prescribed by Rules.
· The Principal Commissioner or Commissioner are proposed to be empowered to license a public and private warehouses in place of Deputy/Assistant Commissioner, subject to such conditions as may be prescribed. Further, they also have been proposed to be empowered for licensing of special warehouse as wherein dutiable goods may be deposited and be locked by the proper officer and no person shall enter the warehouse or remove any goods therefrom without his permission.
· The bond amount for the warehousing bonds submitted by importers availing duty deferred warehousing has been increased to thrice the duty amount as against earlier requirement of twice the duty amount. In addition to bond furnishing of security may also be required. In case of ownership of such goods being transferred to another person, the transferee would need to execute bond and security
· The provisions of Section 61 relating period of warehousing has been extended to all goods used by Export Oriented Undertakings, Units under Electronic Hardware Technology Parks, Software Technology Parks, Ship Building Yards and other units manufacturing under bond. Additionally Principal Commissioners and Commissioners have been empowered to extend the warehousing period upto one year at a time.
· Provisions relating to control over warehousing goods and payment of rent and warehousing charges done away with. Further, free Samples from the warehouse can no longer be taken away.
· The payment of fees to Customs for supervision of manufacturing facilities under Bond is no longer required. Principal Commissioner or Commissioner of Customs empowered to license such activities.
· As a step towards Make in India, the rates of customs and excise duty have been changed on certain inputs to reduce costs and improve competitiveness of domestic industry in sectors like Information technology hardware, capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper, paperboard & newsprint, Maintenance repair and overhauling [MRO] of aircrafts and ship repair.
· Customs Single Window Project to be implemented at major ports and airports starting from beginning of next financial year.
· Increase in free baggage allowance for international passengers. New Simplified Baggage Rules, 2016 has been notified which would be effective from 1st April, 2016. Further Customs Baggage declaration regulation 2013 is also being amended so as to provide for custom declaration only for those passengers who carry dutiable and/or prohibited goods.
· The rate of interest on delayed payment of duty has been revised to 15% from earlier rate of 18%.
1. 1% TCS on purchase of luxury cars over Rs. 10 lakh and in-cash purchase of goods and services over Rs. 2 lakh.
2. Income tax surcharge for having income Rs. more than 1 crore increased to 15% (previously 12%)
3. Deduction u/s 80GG for RENT payment increased upto Rs. 5,000/- per month (previously Rs.2,000/-)
4. Service tax – 0.50% agriculture development krishi kalyan surcharge cess
5. Rebate u/s 87A increased from Rs.2,000/- to Rs.5,000/- (persons having taxable income upto Rs.5,00,000/-)
6. 10% Dividend tax for dividend receipt over Rs.10,00,000/- per annum
7. Additional exemption o Rs.50,000/- for first time house buyers on housing loan upto Rs.35.00 lakh, provided cost of house in not more than Rs.50.00 lakh
8. Companies with revenue less than Rs. 5 crore to be taxed at 29% plus surcharge and Cess
9. Service tax exemption for housing construction of houses less than 60 sq. mtr.
10. Tax Audit Limit revised to non professional Rs. 2.00 crore from Rs. 1.00 crore ?? – Clarity awaited…
11. Presumption taxation scheme for all professionals with gross receipts upto Rs.50 lakh if income declared @ 50%
12. Corporate tax for new manufacturing companies @ 25.00% + surcharge + cess
13. Withdrawal upto 40% from NPS to be exempted
14. LTCG on unlisted securities limited to 2 years
15. 100% tax deduction for companies building houses upto 30 sq. mtr.
16. TCS on purchase of assets over Rs. 2.00 lakh
17. Penalty for concealment of income reduced to 50% – 200% (previously 100% – 300%)
18. Excise duty on branded garments exceeding Rs. 1,000/-
19. Infrastructure and agriculture cess to be levied.
20. Excise duty raised from 10 to 15 per cent on tobacco products other than beedis
21. SUVs, Luxury cars to be more expensive. 4% high capacity tax for SUVs.
22. Limited tax compliance window from Jun 1 – Sep 30 for declaring undisclosed income at 45% incl. surcharge and penalties
23. Excise 1 per cent imposed on articles of jewellery, excluding silver.
24. 0.5 per cent Krishi Kalyan Cess to be levied on all services.
25. Pollution cess of 1 per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars of certain specifications; 4 per cent on higher-end models.
26. Securities transaction tax on option raised to 0.05%
Memories Photography Studio Vs. Commr. of C. EX. & S.T., Vadodara [2015 (12) TMI 266 – CESTAT AHMEDABAD]
The Department denied Cenvat credit to Memories Photography Studio (“the Appellant”), on the ground that the service provider has not discharged the duty liability. It was alleged that the Appellant should have taken precaution to verify whether the service provider has discharged Service tax liability or not.
The Hon’ble CESTAT, Ahmedabad, held that a service recipient can only see the Cenvatable document under which Service tax paid/ payable has been indicated. However, it is not the case of the revenue that the service provider does not exist. Hence, the Appellant has correctly availed the Cenvat credit and it is not deniable.
CENTRAL EXCISE & SERVICE TAX
For Tamil Nadu: Due date for Paying Service Tax & Excise Duty extended to 20th December 2015
Owing to the floods in Southern India, CBEC has provided that for the state of Tamil Nadu, the due date for paying service tax and excise duty by an assessee for the month of November 2015 has been extended to 20th December 2015.
[Notification No. 26/2015-Service Tax, Dated: December 09, 2015 & Notification No. 25/2015-Central Excise (N.T.), Dated: December 09, 2015]
Service tax rate changed from 14% to 14.5%.
0.5% added towards Swach Bharat Cess.
This is effective from 15.11.2015.
More about the cess –
1. No CENVAT Credit available on payment of Swachh Bharat Cess.
2. Swachh Bharat Cess should be disclosed separately in Invoice.
3. Swachh Bharat Cess has to be paid in CASH only, it can’t be adjusted against CENVAT Credit available.
Q.1 What is Swachh Bharat Cess (SBC)?
Ans. It is a Cess which shall be levied and collected in accordance with the provisions of Chapter VI of the Finance Act, 2015,called Swachh Bharat Cess, as service tax on all the taxable services at the rate of 0.5% of the value of taxable service.
Q.2 What is the date of implementation of SBC?
Ans. The Central Government has appointed 15thday of November, 2015 as the date from which provisions of Swachh Bharat Cess will come into effect (notification No.21/2015-Service Tax, dated 6th November, 2015 refers).
Q.3 Whether SBC would be leviable on exempted services and services in the negative
Ans. Swachh Bharat Cess is not leviable on services which are fully exempt from service tax or those covered under the negative list of services.
Q.4 Why has SBC been imposed?
Ans. SBC has been imposed for the purposes offinancing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.
Q.5 Where will the money collected under SBC go?
Ans. Proceeds of the SBC will be credited to the Consolidated Fund of India, and the Central Government may, after due appropriation made by Parliament, utilise such sums of money of the SBC for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.
Q.6 How will the SBC be calculated?
Ans. SBC would be calculated in the same way as Service tax is calculated. Therefore, SBC would be levied on the same taxable value as service tax.
Q.7 Whether SBC would be required to be mentioned separately in invoice?
Ans. SBC would be levied, charged, collected and paid to Government independent of service tax. This needs to be charged separately on the invoice, accounted for separately in the books of account and paid separately under separate accounting code which would be notified shortly. SBC may be charged separately after service tax as a different line item in invoice. It can be accounted and treated similarly to Education cesses.
Q.8 Whether separate accounting code will be there for Swachh Bharat Cess?
Ans. Yes, for payment of Swachh Bharat Cess, a separate accounting code would be notified shortly in consultation with the Principal Chief Controller of Accounts. These are as follows:-
Q.9 What would be effective rate of service tax and SBC post introduction of SBC?
Ans. Effective rate of service tax plus SBC, post introduction of SBC, would be [14% + 0.5%].
Q.10 Whether SBC is a ‘Cess’ on tax’ and we need to calculate SBC @ 0.50% on the amount of service tax like we were earlier doing for calculating Education Cess and SHE Cess?
Ans. No, SBC is not a cess on Service Tax. SBC shall be levied @ 0.5% on the value of taxable services.
Q.11 Whether SBC is levied on all or selected services?
Ans. The Central Government was empowered to impose SBC either on all or some of the taxable services. Vide , Government has notified that SBC shall be applicable on all taxable services except services which are either fully exempt from service tax under any notification issued under section 93(1) of the Finance Act, 1994 or are otherwise not leviable to service tax under section 66B of the Finance Act, 1994.
Q.12 How will the SBC be calculated for services under reverse charge mechanism?
Ans. In case of reverse charge under section 68(2) of the Finance Act, 1994, the liability has been shifted from service provider to the service recipient. As per section 119 (5) of the Finance Act, 2015, the provisions of Chapter V of the Finance Act, 1994, and the rules made thereunder are applicable to SBC also. Thus, the reverse charge under section 68(2) of the Finance Act, 1994, is made applicable to SBC. In this context, to clarify, Government has issued notification No. 24/2015-Service Tax dated 12th November, 2015 to provide that reverse charge under notification No.30/2012-Service Tax dated 20th June, 2012 shall be applicable for the purpose of levy of Swachh Bharat Cess mutatis mutandis.
Q.13 How will SBC be calculated for services where abatement is allowed?
Ans. Taxable services, on which service tax is leviable on a certain percentage of value of taxable service, will attract SBC on the same percentage of value as provided in the notification No. 26/2012-Service Tax, dated 20th June, 2012. So, this notification would apply for SBC also in the same manner as it applies for service tax.
For example, in the case of GTA, [Service Tax + SBC]% would be (14% Service Tax + 0.5% SBC) X 30% = 4.35% (4.20%+0.15%)
Q.14 Whether Cenvat Credit of the SBC is available?
Ans. SBC is not integrated in the Cenvat Credit Chain. Therefore, credit of SBC cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax.
Q.15 What would be the point of taxation for Swachh Bharat Cess?
Ans. As regards Point of Taxation, since this levy has come for the first time, all services (except those services which are in the Negative List or are wholly exempt from service tax) are being subjected to SBC for the first time. SBC, therefore, is a new levy, which was not in existence earlier. Hence, rule 5 of the Point of Taxation Rules would be applicable in this case. Therefore, in cases where payment has been received and invoice is raised before the service becomes taxable, i.e. prior to 15th November, 2015, there is no lability of Swachh Bharat Cess. In cases where payment has been received before the service became taxable and invoice is raised within 14 days, i.e. upto 29th November, 2015, even then the service tax liability does not arise. Swachh Bharat Cess will be payable on services which are provided on or after 15th Nov, 2015, invoice in respect of which is issued on or after that date and payment is also received on or after that date. Swachh Bharat Cess will also be payable where service is provided on or after 15th Nov, 2015 but payment is received prior to that date and invoice in respect of such service is not issued by 29th Nov, 2015.
Q.16 How would the tax (Service Tax and SBC) be calculated on services covered under Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006.?
Ans. The tax (Service Tax and SBC) on services covered by Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006, would be computed by multiplying the value determined in accordance with these respective rules with [14% + 0.5%]. Therefore, effective rate of Service Tax plus SBC in case of original works and other than original works under the works contract service would be 5.8% [(14% + 0.5%)*40%] and 10.15% [(14% + 0.5%)*70%] respectively. Similar, would be the tax treatment for restaurant and outdoor catering services.
Q.17 How would the tax be calculated on restaurant services covered under Service Tax(Determination of Value) Rules, 2006.?
Ans. Swachh Bharat Cess would be calculated on the value arrived at in accordance with the Service Tax (Determination of Value) Rules, 2006. For example, the effective Swachh Bharat Cess in respect of services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, having the facility of air–conditioning or central air-heating in any part of the establishment, would be 0.5% of 40% of the total amount, i .e, 0.2% of the total amount. The cumulative service tax and Swachh Bharat Cess liability would be [14% ST + 0.5% SBC] of 40% of the total amount, i.e., 5.8% of the total amount charged.
Q.18 Whether SBC would be applicable on services covered by Rule 6 of Service Tax Rules (i.e. air travel agent, life insurance premium, purchase and sale of foreign currency and services by lottery distributors/selling agents)
Ans. Sub-rule (7D) to rule 6 has been inserted vide notification 25/2015-Service Tax, dated 12thNovember, 2015 so as to provide that the person liable for paying the service tax under sub‑rule (7), (7A), (7B) or (7C) of rule 6 of Service Tax Rules, shall have the option to pay SBC as determined as per the following formula:-
Service Tax liability [calculated as per sub-rule (7), (7A), (7B) or (7C)] X 0.5%/14%
The option under this sub-rule once exercised, shall apply uniformly in respect of such services and shall not be changed during a financial year under any circumstances.
Q.19 How would liability be determined in case of reverse charge services where services have been received prior to 15.11.2015 but consideration paid post 15.11.2015?
Ans. In respect of reverse charge mechanism, SBC liability is determined in accordance with Rule 7 of Point of Taxation Rules, as per which, point of taxation is the date on which consideration is paid to the service provider. Thus, SBC liability in such case will be 0.5% X Value of taxable service.
Q.20 Does a person providing both exempted and taxable service and reversing credit @ 7% of value of exempted service under Rule 6 of Cenvat Credit Rules, does he need to reverse the SBC also?
Ans. As SBC is not integrated in the Cenvat Credit chain and reversal under Rule 6 is payment of amount equal to 7% of the value of exempted services, hence, reversal of SBC is not required under Rule 6 of Cenvat Credit Rules, 2004.
CBEC vide Circular No. 186/5/2015-ST, Dated: October 05, 2015 has provided a clarification regarding treatment given to various ancillary services provided by GTA’s in the course of transportation of goods by road.
Goods Transport Agency (GTA) has been defined to mean any person who provides service to a person in relation to transport of goods by road and issues consignment note/ invoice/ challan etc. The service provided is a composite service which may include various ancillary services like loading/ unloading, packing/unpacking, transshipment, temporary storage etc., provided in the course of transportation of goods by road. These ancillary services may be provided of self or be sub-contracted, as the case may be. In either case, a consignment note/ invoice/ challan etc. issued by GTA for providing the said service includes the value of ancillary services provided. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road.
Thus, it has been clarified that a single composite service is not required to be fragmented to its components as separate services, if it is provided as such in the ordinary course of business. Thus, a composite service consisting of more than one service would be treated as a single service based on the nature of main or principal service which gives a transaction its essential feature. Thus, if ancillary services are provided in the course of transportation of goods by road and the charges for such services are included in the invoice issued by the GTA, such services would form part of GTA service and, therefore, the abatement of 70%, presently applicable to GTA service, would be available on it.
Further, wherein GTA undertakes to deliver the goods at destination within a stipulated time, such service would also be considered as ancillary to GTA service and abatement benefit would be available for the same.
[Circular No. 186/5/2015-ST, Dated: October 05, 2015]
CBEC vide Circular No. 185/4/2015-ST, Dated: June 30, 2015 has revised the earlier prescribed procedure for carrying out detailed scrutiny of returns laid down vide Circular No. 113/07/2009-ST dated 23-4-2009. With the introduction of the Point of Taxation Rules, 2011, which shifted the liability of payment of service tax from receipt basis to accrual basis, and the advent of negative list-based comprehensive taxation of services in 2012, need for revision became persistent. Thus, with effect from 01.08.2015, detailed scrutiny of ST-3 returns would be carried out in the prescribed manner.
In order to put in place a strong ‘return scrutiny’ system, a two part system of return was envisaged- a preliminary scrutiny which would be online covering all the returns; and a detailed manual scrutiny of scrutiny returns, identified on the basis of risk parameters, to be done by the Division/Range offices and should be carried out in the manner outlined in the Circular, illustrated as below:
- Preliminary Online Scrutiny
The purpose is to ensure the completeness of the information furnished in the return, arithmetic correctness of the amount computed as tax and its timely payment, timely submission of the return and identification of non-filers and stop-filers. On the basis of validation checks returns having certain errors are marked for Review and Correction (Rnc).
- Detailed manual scrutiny
The purpose is to ensure the correctness of the assessment made by the assessee and this includes checking the taxability of the service and the correctness of the value of taxable services. In doing this Proper Officer must rely mainly on assessment related documents like agreements/contracts and invoices.
- Selection of returns for detailed scrutiny
Core focus would be in respect of such assessees whose total tax paid (Cash + CENVAT) for the FY 2014-15 is below Rs 50 Lakhs. Each Commissionerate has to select equal number of assessees for carrying out returns scrutiny from each of the these three total tax paid bands (Cash + CENVAT) viz. Rs 0 to 10 lakhs, Rs 10-25 lakhs, Rs 25-50 lakhs for the financial year 2014-15.
Detailed scrutiny of returns must be conducted by the Service Tax Range headed by the Superintendent and assisted by a complement of inspectors. However, the Divisional DC/AC shall be responsible for the overall supervision of this business process in respect of his/her division. Before return scrutiny is initiated, the assessee must be given prior intimation of at least fifteen days and the purpose of the exercise must be spelt out in an intimation letter. To begin with, the returns for the financial year 2013-14 should be taken up for detailed scrutiny. One of the important objective of return scrutiny is to ensure validation of the information furnished in the self-assessed ST-3 return. The Validation exercise would require reconciling information furnished in the ST-3 return with ITR Form Nos. 4, 5, 6 and 26AA and any third party information made available.
- Documentation of Findings / Checklist
– Reconciliation for validation of the information furnished in the ST-3 return;
– Taxability in respect of services which may have escaped assessment;
– Classification (for the purposes of due availment of abatement/ exemption benefit);
– CENVAT Credit availment/utilization
Circular further provides for Proforma of Intimation Letter, Assessee Master Information, Checklist, Observation sheet for documenting scrutiny findings, Scrutiny Report, Monthly MIS Report and Draft Scrutiny Report.
[Circular No. 185/4/2015-ST, Dated: June 30, 2015]
Reverse and Partial Reverse Mechanism Chart with effect from 01.04.2015 and The extent of service tax payable thereon by the person who provides the service and any other person liable for paying service tax for the taxable services
|Sl. No.||Description of a service||Percentage of service tax payable by the person providing service||Percentage of service tax payable by any person liable for paying service tax other than the service provider|
|1||in respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business||Nil||100%|
|1A||in respect of services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company (Effective from 01.04.2015)||Nil||100%|
|1B.||in respect of services provided or agreed to be provided by a mutual fund agent or distributor, to a mutual fund or asset management company (Effective from 01.04.2015)||Nil||100%|
|1C.||in respect of service provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent||Nil||100%|
|2||in respect of services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road to Company, Partnership Firm, Registered Factory, Registered Society, co-operative society, AOP, LLP, Person Registered Under Central Excise Act, 1944 including Excise Dealers||Nil||100%|
|3||in respect of services provided or agreed to be provided by way of sponsorship to anybody corporate or partnership firm||Nil||100%|
|4||in respect of services provided or agreed to be provided by an arbitral tribunal to any Business entity||Nil||100%|
|5||in respect of services provided or agreed to be provided by individual advocate or a firm of advocates by way of legal services to any Business entity||Nil||100%|
|5A||in respect of services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate||Nil||100%|
|6||in respect of services provided or agreed to be provided by Government or local authority 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 to any Business Entity||Nil||100%|
|7||(a) in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business by individual, HUF, firm or AOP to Body Corporate||Nil||100%|
|(b) in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business by individual, HUF, firm or AOP to Body Corporate (Revised wef 01.10.2014)||50%||50%|
|8.||in respect of services provided or agreed to be provided by way of supply of manpower for any purpose or security services by individual, HUF, firm or AOP to Body Corporate||Nil||100%|
|9.||in respect of services provided or agreed to be provided in service portion in execution of works contract by individual, HUF, firm or AOP to Body Corporate||50%||50%|
|10||in respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory||Nil||100%|
|11.||in respect of any service provided or agreed to be provided by a person involving an aggregator in any manner to any Business Entity(Effective from 01.03.2015)||Nil||100%|
Explanation-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.
Explanation-III. Hitherto, support services provided by a Government/Local authority to any business entity was subject to 100% reverse charge. The scope of reverse charge has now been extended in case of all services provided by the Government/Local authority to such business entities. The exclusion from reverse charge on renting of immovable property and some specified services of Sec. 66D of the Act shall continue.
All Service Tax assessees are hereby informed that they will not be able to file ST 3 returns in ACES now and have to wait until the modified version of ST 3 Form is made available in a few weeks.
Please revisit ACES website(http://www.aces.gov.in) for further information. Inconvenience caused is regretted.
Message From CBEC
Aggregate value of Taxable Services provided
Service Tax applicable
Preceding Financial Year
Current Financial year
Less than 10 lakh
Less than 10 lakh
No service tax
Less than 10 lakh
More than 10 lakh
Service tax applicable after 10 lakh
More than 10 lakh
Less than 10 lakh
service tax applicable from Rs one ,No exemption available
- an individual
- a Hindu undivided family
- a company
- a society
- a limited liability partnership
- a firm
- an association or body of individuals, whether incorporated or not
- a local authority, or
- every artificial juridical person, not falling within any of the preceding sub-clauses.
10. Abatement and exempted services is not to be counted for calculation of 10 Lakh: Various services has been exempted from service tax vide notification 25/2012 .If service provider is providing both exempted and taxable services than turnover of exempted services is not be added for calculation of 10 lakh .
Similarly abatement from gross amount charged by service provider has been defined in notification 26/2012 .To calculate 10 lakh part only taxable part after abatement is to be considered.
Relevant notification is given here under
SECTION 66B OF THE FINANCE ACT, 1994 – CHARGE OF SERVICE TAX ON AND AFTER FINANCE ACT, 2012 – EXEMPTION TO SMALL SERVICE PROVIDERS
NOTIFICATION NO. 33/2012-ST, DATED 20-6-2012
[SUPERSESSION OF NOTIFICATION NO. 6/2005-ST, DATED 1-3-2005]
In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Finance Act), and in supersession of the Government of India in the Ministry of Finance (Department of Revenue) notification No. 6/2005-Service Tax, dated the 1st March, 2005, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide G.S.R. number 140(E), dated the 1st March, 2005, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services of aggregate value not exceeding ten lakh rupees in any financial year from the whole of the service tax leviable thereon under section 66B of the said Finance Act:
Provided that nothing contained in this notification shall apply to,-
(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or
(ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules,1994.
2. The exemption contained in this notification shall apply subject to the following conditions, namely:-
(i) the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him and such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year;
(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on any input services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to as the said rules), used for providing the said taxable service, for which exemption from payment of service tax under this notification is availed of;
(iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the said rules, on capital goods received, during the period in which the service provider avails exemption from payment of service tax under this notification;
(iv) the provider of taxable service shall avail the CENVAT credit only on such inputs or input services received, on or after the date on which the service provider starts paying service tax, and used for the provision of taxable services for which service tax is payable;
(v) the provider of taxable service who starts availing exemption under this notification shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification;
(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider after deducting the amount referred to in sub-paragraph (v), if any, shall not be utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts availing the exemption under this notification;
(vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services; and
(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year.
3. For the purposes of determining aggregate value not exceeding ten lakh rupees, to avail exemption under this notification, in relation to taxable service provided by a goods transport agency, the payment received towards the gross amount charged by such goods transport agency under section 67 of the said Finance Act for which the person liable for paying service tax is as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994, shall not be taken into account.
Explanation. – For the purposes of this notification,-
(A) "brand name" or "trade name" means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person;
(B) "aggregate value" means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviable thereon under section 66B of the said Finance Act under any other notification."
4. This notification shall come into force on the 1st day of July, 2012.