CA Dinesh Singhal

CA Dinesh Singhal

Central Board of Excise & Customs (CBEC) have issued notification No. 03/2017-ST and 04/2017-ST on 12th January, 2017.  We have analysed the changes/ amendments made through the said notifications in this alert.

Notification No. 03/2017 – ST Dated 12.01.2017

Amendment in Service Tax on Services for transportation of goods by vessel from a place outside India 

Through this notification, the service provided or agreed to be provided by way of transportation of goods by vessel from a place outside India up to the custom station of clearance in India shall be covered under complete Reverse Charge Mechanism where service receiver is liable to pay 100% service tax.

For this purposes, Service Receiver shall be the person in India who complies with section 29, 30 or 38 read with section 148 of the Customs Act, 1962 with respect to such goods.  In other words, in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, person liable to pay service tax shall be the person who is getting the goods cleared from Customs.

Notification No. 04/2017 – ST Dated 12.01.2017

Amendment in Service Tax on Tour Operators Services

Through this notification, the abatement available to Tour Operators has been changed effective 22nd January, 2017. Before analysing the above-said change in detail, the existing provisions of abatement available to tour operator (as extracted from notification no.26/2012-ST) are given below:

Sr. No. Description of taxable service % of total value on which tax is payable Condition
11 Services by a tour operator in relation to, –

(i) a tour, only for the purpose of arranging or booking accommodation for any person

10
(i) CENVAT credit on inputs, capital goods and input services other than input services of a tour operator, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii) The invoice, bill or challan issued indicates that it is towards the charges for such accommodation.
(iii) This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, includes only the service charges for arranging or booking accommodation for any person but does not include the cost of such accommodation.
(ii) tours other than (i) above 30
(i) CENVAT credit on inputs, capital goods and input services other than input services of a tour operator, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour and the amount charged in the bill is the gross amount charged for such a tour.”;

Amendments made vide notification no.04/2017 are given below:

S. No Description of taxable service % of total value on which tax is payable Conditions
“11 Services by a tour operator 60
(i) CENVAT credit on Inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii) The bill issued for this purpose indicates that it is inclusive of charges of accommodation and transportation required for such a tour and the amount charged in the bill is the gross amount charged for such a tour including the charges of accommodation and transportation required for such a tour.”.

Analysis of Amendments

♥ Abatement Percentage

Under existing abatement scheme, abatement is available under two-sub categories:

  • 90% abatement in case of Tour Operators who is only arranging and booking accommodation for any person and where the cost of accommodation is included in the Invoice/Bill.
  • 70% abatement in relation to the service of Tour Operator, other than specified above.

Under Revised Scheme, Abatement of Flat 40% is available on the value in respect of All Services provided by the tour operator and there is no sub-category for providing services only in connection with booking of hotel accommodation. Effectively, service tax is to be paid on 60% Value of services.

♥ CENVAT Credit

Under existing scheme, CENVAT Credit on capital goods and Inputs are not available. Further Cenvat credit in respect of Input services is also restricted to the extent of those services on which service tax is paid to other tour operator.

Under Revised Scheme, only credit of Capital Goods and Input used in the provision of taxable service would not be allowed. That means, credit of service tax paid on ALL INPUT SERVICES used in the provision of taxable services shall be available to tour operator.

We would like to mention that taking the benefit of abatement notification is Optional and one may pay the service tax on Gross Value charged and can avail full CENVAT  Credit under CENVAT Credit Rules, 2004 in respect of Input, Capital goods and Input services used in the provision of tour operator services.

Our Comments

Though the amendment in tour operator services looks like an effort to rationalise the Abatement rate of service tax for Tour Operators, however this shall surely disturb the financial models of tours and travel industry in the short term. Further since henceforth credit of all input services taken by Tour operator including from Hotels, guide fee, consultants, etc. would be available and this would reduce the cascading of taxes.

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7 responses to “Analysis of Recent Service Tax Notification No. 03/2017-ST and 04/2017-ST”

  1. VINAY KUMAR BOTU says:

    whether Notification No.3/2017 applies to SEZ units Also ??
    SEZ unit importing raw material from Foreign Country , SEZ unit already avails Form A1 and Service Tax Exemption Letter

  2. ARIJIT PODDAR says:

    Against my gross bill of Rs. 100/- Bank has paid me(service provider) service tax along with payment Rs. 105.25. ie Including 5.25% service tax for works contract. I have deposited the 5.25 to the service tax department now the remaining 5.25 % of serivce tax bank (service receiver) will pay to the Central Service Tax Dept. Ryt?

  3. LEELARAM CHAUDHARY says:

    Respect,
    There is two type Question.

    Direct Dealing:-
    If goods receipt in CIF condition, and invoice issue goods while freight value included in material value invoice.
    Indirect Dealing:- Third party supplier imported goods and issue material Invoice including freight but not show separate freight value.

    Then we are liable for Service Tax under RCM ?

  4. Jignesh Vyas says:

    Please also think about the word ” and ” mentioned in Notification No. 26/2012. As per wordings of notification cenvat credit is available if charges is inclusive for accommodation and transportation. what happened In the situation when bill issue is only for charges of accommodation? there is no charges for transportation. As per wordings of notification both charges should be include in bill. I think there should be word “or” instead of “and”

  5. Aaditya singhal says:

    Great

  6. Aaditya singhal says:

    Its very good and i like to see it.

  7. Deepika goyal says:

    Its really easy to understand and very interesting too……this article helped me to understand the GST rules properly…it covers each and every minute details of GST model which even a small scale businessman understand easily….thanks for providing such valuable information beforehand so that we can easily plan accordingly …..

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