CA Paras Mehra

4 Amazing tax planning that you must look out for in day to day transactions

Recently, I found that we Chartered Accountants read a lot of judgment and case laws on a daily basis and use them in our day to day working. However, if these verdicts could be used by a common man or a entrepreneur then it could save you a lot of money and you can end up high tax saving.

We know that taxes inflate the things a lot and hence, if we could manage the taxes well, we can really save our hard earned money.

Based on recently delivered verdicts, we were able to create 5 tax hacks that could really be helpful if followed properly.

Here are 5 tax hacks that you must use in your daily transactions:

1. No Service Tax on UNDER CONSTRUCTION FLATS if price Includes Land Value: This is one of the most important hack that you can use to save big amount of Service tax. If you are planning to purchase a new home for you, then you can really save few lakh on your deal.

According to the law and the recent judgment, Delhi High court rules that there is no mechanism in the law to tax the sale of under construction flats if the price includes the value of land.

Practically, every real estate company charge the service tax on sale of under construction flats. Hence, whenever you are reaching to purchase the new house, try to find whether construction of flats includes the value of land or not. If it includes, then you can deny paying the value of service tax levied on that transaction.

Look how much you can save if you don’t have to pay service tax:

House ValueService TaxYou Save
30 Lakh1,35,0001,35,000
40 Lakh1,80,0001,80,000
50 Lakh2,25,0002,25,000
1 Cr4,50,0004,50,000

Hence, be careful in future, your small awareness may save few lakh and can help you to own a better home.

2. No Service Tax on Take Away Foods from Restaurant: Have you ever noticed your food bill when you pay for take away food from a restaurant?

If not, do keep an eye on that because it is totally against the tax principles. Why pay extra when you are not liable for it? According to the rules of Services tax, you need to pay service tax on the transactions only when you use restaurant service, i.e. when you sit there, enjoy the ambience, have your food. Service tax is levied because you not only ate your food, but also enjoy the restaurant services.

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But totally opposite, when you pay for take away food, then you only pays food and nothing for the restaurant services, and hence you are not liable for the service tax.

Do aware next time, when you are ordering food!

3.Take Salary no professional Fees – Avoid taxes: We have a habit of taking adhoc amount from our business to meet our personal expenditure and our accountant very easily clubbed that withdrawal under professional fees without knowing the impact of the transaction.

Do you know you company is liable for Service tax on every penny you take out from your business?

Yes, it is applicable. Whenever, you are taking the adhoc amount, your company needs to pay 15% (14.50% earlier) on every withdrawal. And if your company is not complying with this requirement and then they are seriously under default.

Look how much you are liable (annually), if you are not complying:

ADHOC AMOUNTSERVICE TAX @ 15%REMARKS
300,00045,000Interest + penalty additional, if not complied
400,00060,000Interest + penalty additional, if not complied
500,00075,000Interest + penalty additional, if not complied
600,00090,000Interest + penalty additional, if not complied
700,000105,000Interest + penalty additional, if not complied

 Any hack?

Yes, you can save your service tax amount plus Interest, penalty if you are little aware with the provision. As per law, service tax is levied on the professional services by the director, i.e. this law only applies if you are a director and providing professional services to the company.

The easiest thing you can do to avoid this tax is to take money as salary and not as professional services.

Once, you withdraw amount as salary then you establishes an employer –employee relationship then the provision of this chapter shall not apply.

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Your little awareness can save a lot of service tax.

4. Refund of Service tax if you are an exporter: Do you know that most of the exporter of goods and services does not claim the refund of service tax because they are not aware of the refund provisions.

Whatever taxes (VAT, excise, and Service tax) have been paid by you in your business will be refunded to you if you are exporting the services. The refund provisions are very simple.

But before, you should claim for refund, you must understand the conditions for refund:

a)     The provider of service is located in the taxable territory: Taxable territory means India excluding Jammu and Kashmir.

b)    The recipient of service is located outside India:

c)     The service is not a service specified in section 66D of the Act: Services that are falling under negative list. Click here to see services covered under negative list.

d)    The place of provision of the service is outside India: Understanding the place of provisioning of services rules in a lay man language.

e)     The payment for such service has been received by the provider of service in convertible foreign exchange

If you are complying with the aforesaid conditions, then you are an eligible exporter and you can claim the refund of taxes. Your little awareness can save you a lot of rupees.

This is not an end

We have a lot of verdicts and planning’s as discussed above, but due to the length constraint of a single article, we will be sharing with you some more valuable articles in a near future, till then enjoy the above cases and save your lakh of hard earned money and spend it in something more valuable.

In case of any query, you may reach us at paras@hubco.in

(Author is a service tax expert and associated with hubco.in)

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Category : Service Tax (3162)
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  • AJITH

    Excellent Article BOSS

  • M Ramamurthy

    The author says – Hence, whenever you are reaching to purchase the new house, try to find whether construction of flats includes the value of land or not. – As per apartment laws, the flat owner is entitled to undivided share of common area / land & selling an apartment without this is unlawful.

  • Vimal Kashyap

    Is Service Tax applicable if we go in the restaurent to buy food but we do not eat there, we just paid for it and leave ?