Although, with the government resorting to implement unified taxation regime GST in near future, it was hoped that the number of returns to be filed by an assessee would reduce substantially and this has been done in case of Central Excise Assessees which is highly appreciated by the trade and industry. However, at the same time, service tax assessees will be required to file Annual Return in addition to the half yearly returns presently filed by them. This has been done by amending Rule 7 of the Service Tax Rules, 1994 which will be applicable with effect from 01.04.2016. This article is an attempt to analyse the probable consequences of the amendment.
Glimpse of the Amendment:- Vide notification no. 19/2016-ST dated 01.03.2016, the Central Government has amended the Rule 7 of Service Tax Rules, 1994 by inserting certain new sub rules after sub rule (3) which read as follows:-
“(3A) Notwithstanding anything contained in sub-rule (1), every assessee shall submit an annual return for the financial year to which the return relates, in such form and manner as may be specified in the notification in the Official Gazette by the Central Board of Excise and Customs, by the 30th day of November of the succeeding financial year;
(3B) The Central Government may, subject to such conditions or limitations, specify by notification an assessee or class of assesses who may not be required to submit the annual return referred to in sub-rule(3A).”
Apart from this, amendments have been made in Rule 7B in order to facilitate revision of annual returns and in Rule 7C so as to impose late fees in case of delay in filing of annual return which is specified as amount calculated at the rate of one hundred rupees per day for the period of delay subject to maximum of twenty thousand rupees.
Analysis of the Amendment:-
Although, the requirement of Annual Return is akin to the ER-4 return to be filed by Central Excise assessees, but there will be substantial difference in the details to be submitted in the annual return filed by the service tax assessees. Moreover, in service tax laws, not only service providers but service receivers are also liable to pay service tax under special circumstances which is commonly known as ‘reverse charge mechanism’ or ‘partial charge mechanism’. Consequently, the assessees paying service tax under ‘reverse charge mechanism’ should be exempted from filing Annual Returns as the return would normally require assessees to provide information as regards income/expenditure incurred by them.
(Article is Authored by CA Pradeep Jain, CA Neetu Sukhwani & Neelam Jain)