CA Jaikishan Manghani

CA Jai KishanIntroduction:

Service Tax in India is 21 years old now. When it was introduced vide Chapter V of the Finance Act, 1994 (32 of 1994) from 01.07.1994, the rules were also notified from that date, to administer this law, taking authority from section 94 (2) of the said Act. These rules are called the Service Tax Rules, 1994. These rules are the basic rules for administration of service tax and have been amended from time to time according to the need and changes in the economic and other conditions in the country.

Now, let us analyse these rules.

Rules 2 – Definitions: Some of the important definitions are as under:

Rule Clause/Sub-clause Description
2 (1) (aa)

Aggregator: A person who owns and manages a web based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator.

(bca)

Brand name or trade name: A name whether registered or not, that is to say a name or a mark, such as an invented word or writing, or a symbol, monogram, logo, label, signature, which is used for the purpose of indicating or so as to indicate a connection, in the course of trade, between a service and some person using the name or mark with or without any indication of the identity of that person.

(cb)

Input Service Distributor:  An office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be [same as defined under rule 2(m) of the Cenvat Credit Rules, 2004].

(cd)

Partnership Firm: This includes limited liability partnership (LLP).

(d)

Person liable for paying service tax:

(i)

In respect of taxable services notified under section 68(2) means in the following cases, the recipients of following services provided or agreed to be provided by:

(A)

An insurance agent to a person carrying on the insurance business (the recipient);

(AA)

A recovery agent to a banking company or a financial institution or a NBFC (the recipients);

(AAA)

A person to (or involving) an aggregator (the recipient);

[If an aggregator is not situated in the taxable territory (in India except the state of Jammu & Kashmir) any person representing or duly appointed by him in the taxable territory will be liable to pay tax]

(B)

A goods transport agency (GTA) to

(I)          Any factory registered under or governed by the Factories Act, 1948 (the recipient)

(II)        Any society registered under the Societies Registration Act, 1860 or any other law for the time being in force (the recipient)

(III)      Any co-operative society established under any law (the recipient)

(IV)       A dealer of excisable goods registered under the Central Excise Act, 1944 or the rules made there under (the recipient)

(V)        Anybody corporate established by or under any law (the recipients).

(VI)       Any partnership firm whether registered or not under any law including AOPs (the recipients).

(C)

Way of sponsorship to anybody corporate or partnership firm located in the taxable territory (the recipients).

(D)

An arbitral tribunal or an individual advocate or a firm of advocates by way of legal services to any business entity located in the taxable territory (the recipients).

[As per clause (19b) of section 65 of the Finance Act, 1994, the business entity includes an AOP, BOI, company or a firm but does not include an individual]

(E)

Government or local authority, the services [except renting of immovable property or certain services listed in clauses (a) (i), (ii) and (iii) negative list of section 66D of the Finance Act, 1994]   to any business entity located in the taxable territory (the recipients).

(EE)

A director of a company or a body corporate to such company or body corporate (the recipients).

(EEA)

A mutual fund agent or distributor to a mutual fund or AMC (the recipients).

(EEB)

A selling of a marketing agent of lottery tickets to a lottery distributor (the recipient).

(F)

In respect of following taxable services notified under section 68(2), the providers (to the extent notified) as well recipients (to the extent notified) of the services provided or agreed to be provided by an Individual, HUF, Partnership Firm (whether registered or not) including AOPs located in a taxable territory to a business entity registered as body corporate located in the taxable territory:

(a) Renting of any vehicle designed to carry passengers to any person who is not engaged in a similar business or

(b) Supply of manpower for any purpose or security services or

(c)  Service portion in execution of a works contract.

(ii)

In any other case the provider if taxable services.

Rules 4 – Registration: The provisions of this rule are analysed as under:

Rule Description
4 (1)

The application for registration is required to be made to the jurisdictional superintend of central excise/service tax by every person liable to pay tax, in Form ST-1 within a period of 30 from the date on which service tax is levied under section 66B of the Finance Act, 1994 or he commences his business whichever is later.

[As per Notification No. 8/2008-ST dated 01.03.2008 the threshold limit up to which service tax is not payable by the providers of taxable services, is Rs. 10 lacs. Further, as per Notification No. 9/2008-ST dated 01.03.2008, the person whose turnover of taxable services crosses Rs. 9 lacs in a year shall be liable to get registration in terms of section 69(2) of the Finance Act, 1994]

4 (2)

 

 

 

 

When any provider of taxable services provides his services from more than one locations or receives services in more than one locations or more than one offices are engaged in relation to such services and

Such person has centralised billing or accounting system located in one or more premises, then, such person has the option to register such centralised billing or accounting offices.

4 (3)

 

Such registration will be granted by the Commissioner of Central Excise, in whose jurisdiction such centralised billing or accounting offices are located.

4 (3A)

 

 

 

4 (4)

In case of no such centralised billing or accounting office, each of such office/location is required to be registered with the respective jurisdictional superintend of central excise/service tax separately.

In case more than one taxable service is provided by an assessee, he may make a single application, mentioning therein all the taxable services provided by him.

4 (5)

 

 

Within 7 days of making such an application the jurisdictional authority will grant the certificate of registration in Form ST-2. If the registration certificate is not granted within the said period, it will be deemed that the registration has been granted.

4 (5A)

In case of any change or requirement of additional information or any change in the provision of taxable services, the assessee may apply for modification in the certificate of registration within 30 days of such change.

4(6)

Separate registration will be required for transfer of business from one place to another.

4 (7)

 

Every assessee is required to surrender the certificate of registration if he ceases to provide such taxable service.

4 (8)

Before cancellation such certificate, the jurisdictional authority will ensure that the assessee has paid all the dues payable by him under the law.

4 (9)

Such a registration will be subject to conditions, safeguards and procedures as the CBEC may by an order specify.

Rule 4A Issuance of Invoice, Bill, Consignment Note or Challan:

As per the said Rule, a provider of taxable services is required to raise the invoice not later than 30 days of completion of taxable service or receipt of any payment of such taxable service, whichever is earlier.

Such invoice or bill should contain the following information:

  • Name, address and registration number of provider of such service;
  • Serial Number and date of Invoice;
  • Name and address of recipient of such service;
  • Description and value of such service provided or agreed to be provided and
  • Service tax payable thereon

However, this basic rule has certain exceptions:

  • As per the third proviso of sub-rule (1) of Rule 4A, in case of continuous supply service (i.e., the service which is provided or agreed to be provided on continuous or recurrent basis under a contract for a period exceeding 3 months with an obligation of payment to the service provider periodically), the service provider is required to raise the invoice within 30 days of the date when each event specified in the contract which requires the service receiver to make a payment to the service provider, is completed.
  • As per the second proviso to the said sub-rule, in case of goods transport agency, for transport of goods by road an invoice, bill or challan shall include any document, by whatever name called which shall contain the details of consignment note [ a document issued by a GTA against receipt of goods for the purpose of transport by road in a goods carriage, which is serially numbered and contains the name of the consignor, consignee, registration number of the goods carriage in which the goods are transported, details of goods transported, places of origin and destination, person liable for service tax (whether consignor or consignee or the GTA)]
  • As per the fifth proviso, in case of transport of passengers the ticket or invoice or challan or whatever name called, it is not mandatory to mention the registration number of the service provider or address of the recipient of service
  • As per the fourth proviso to the said sub-rule, in case of a banking company, a financial institution or a NBFC, the invoice is required to be raised within 45 days of completion of taxable service or receipt of payment whichever is earlier. As per the first proviso, in such a case on the invoice by whatever name called it is not mandatory to mention the serial number and address of the person receiving the service.

As per the said sub rule (2) in case of invoice to be raise by a service distributor, the invoice or bill should contain the following information:

  • Name, address and registration number of provider of such service;
  • Serial Number (not mandatory in case of a banking company, a financial institution or a NBFC) and date of Invoice;
  • Name and address of input service distributor;
  • Name and address of recipient of the credit distributed;
  • The amount of credit distributed.

As per Rule 4B, the goods transport agency, in relation to transport of goods by road in a goods carriage, shall issue a consignment note to the recipient of service except when the taxable service in relation to transport of goods by road in a carriage is fully exempt under section 93 of the Act.

Rule 4C Authentication by digital signature:

Any invoice, bill, challan or the consignment note as referred to in Rule 4A or 4B may be authenticated by digital signatures and the CBEC may by notification specify the conditions, safeguards and procedure for this purpose.

Rule 5 Records:

Under the Service Tax law the records including computerised data as maintained by the assessee under various laws in force are acceptable.

Under sub-rule (2) the assessee, while filing the return for the first time is required to produce the list of the following to the jurisdictional superintendent in duplicate:

  • All the records prepared or maintained for accounting of transactions with regard to:
    • Providing of any service;
    • Receipt or procurement of input services and payment of such input services;
    • Receipt, purchase, manufacture, storage, sale or delivery with respect to inputs and capital goods;
    • Other activities like, manufacture and sale of goods, if any.
  • All other financial records maintained by him in the normal course of business.
  • Such records are required to be preserved at least for last five years immediately preceding the current financial year [normally under the other legislations the record of last eight years is required to be maintained].
  • The records may be preserved in electronic form with every page to be authenticated with digital signatures.
  • The CBEC may by notification specify the conditions, safeguards and procedures in this regard.

Rule 5A Access to a registered premise:

An officer duly authorised by the commissioner, on his behalf shall have access to any registered premises for the purpose of scrutiny, verification and cheques to safeguard revenue.

On demand, the assessee shall produce such empowered officer or the authorised audit party or a cost accountant or a chartered accountant nominated under section 72A, the records maintained in terms of Rule 5(2), the cost audit reports under section 148 of the Companies Act, 2013, the income tax audit reports under section 44AB of the Income Tax Act, 1961, for scrutiny by such persons or audit party, within the time specified by them.

Rule 6 Payment of service tax:

Rule Clause/ Sub-clause Description
6 (1)

Service tax shall be paid to the credit of central government by

(i)

6th day of the month for the previous month if deposited electronically using internet banking.

(ii)

5th day of the month for the previous month in any other case.

Proviso I

In case of individual, proprietary firm or partnership firm:

(i)

6th day of the month for the previous quarter if deposited electronically using internet banking.

(ii)

5th day of the month for the previous quarter in any other case.

Proviso II

For the month of March or for the quarter ended March by March 31.

Proviso III

In case of individuals, proprietary firms or partnership firms whose aggregate value of taxable services provided from one or more premises during the previous financial year is not more than 50 lacs, then, they shall have the option to pay tax up to Rs. 50 lacs for the current financial year on services provided or agreed to be provided by the dates provided above in the month or the quarter as the case may be in which payment is received.

6 (1A)

Assessees have the option to pay the service tax in advance at their own option and adjust the same in the service tax liability for the subsequent period.

Proviso (i)

In such cases the assessee will have to inform to the jurisdictional superintend within 15 days of the fact of having paid advance payment of tax.

(ii)

Indicate the adjustment of such advance payment in the subsequent returns to be filed under section 70 of the Finance Act, 1994.

6 (2)

The payment of service tax is required to be made through internet banking.

Proviso

The DC or the AC as the case may be after recording the reasons in writing may allow the deposit of tax otherwise than by internet banking.

6 (2A)

In case of payment of tax by cheque, the date of presentation of the cheque at the bank designated by the CBEC shall be deemed to be the date of payment (subject to realisation of such cheque).

6 (3)

Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason, or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract the assessee may take the credit of such excess service tax paid by him, if the assessee,

(a) has refunded the payment or part thereof, so received along with the service tax payable thereon for the service to be provided by him to the person from whom it was received;

(b) has issued a credit note for the value of the service tax not so provided to the person to whom such an invoice had been issued.

6 (4)

Where an assessee is, for any reason, unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter, as the case may be, he may make a request in writing to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, giving reasons for payment of service tax on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, on receipt of such request, may allow payment of service tax on provisional basis on such value of taxable service as may be specified by him and the provisions of the Central Excise (No.2) Rules, 2001, relating to provisional assessment, except so far as they relate to execution of bond, shall, so far as may be, apply to such assessment

6 (4A)

Notwithstanding anything contained in sub-rule (4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.

6 (4B)

The adjustment of excess amount paid, under sub-rule (4A), shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability, valuation or applicability of any exemption notification.

6 (4C)

Notwithstanding anything contained in sub-rules (4), (4A) and (4B), where the person liable to pay service tax in respect of service of renting of immovable property, has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, on account of non-availment of deduction of property tax paid in terms of notification No.29/2012-Service Tax, dated the 20 th June, 2012, from the gross amount charged for renting of the immovable property for the said period at the time of payment of service tax, the assessee may adjust such excess amount paid by him against his service tax liability within one year from the date of payment of such property tax. The details of such adjustment shall be intimated to the Superintendent of Central Excise having jurisdiction over the service provider within a period of fifteen days from the date of such adjustment.

6 (5)

Where an assessee under sub-rule (4) requests for a provisional assessment he shall file a statement giving details of the difference between the service tax deposited and the service tax liable to be paid for each month in a memorandum in Form ST-3A accompanying the quarterly or half yearly return, as the case may be.

6 (6)

Where the assessee submits a memorandum in Form ST-3A under sub-rule (5), it shall be lawful of the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be to complete the assessment, wherever he deems it necessary, after calling such further documents or records as he may consider necessary and proper in the circumstances of the case.

6 (7)

The person liable for paying the service tax in relation of booking of tickets for travel by air provided by an air travel agent, shall have the option, to pay an amount calculated at the rate of 0.7% of the basic fare (the fare on which normally commission is paid by the airline to the commission agent) in the case of domestic bookings, and at the rate of 1.4% of the basic fare in the case of international bookings, of passage for travel by air, during any calendar month or quarter, as the case may be, towards the discharge of his service tax liability instead of paying service tax at the rate of specified in Section 66B of Chapter V of the Act and the option, once exercised, shall apply uniformly in respect of all the bookings of passage for travel by air made by him and shall not be changed during a financial year under any circumstances.

6 (7A)

 

 

 

 

 

 

 

 

 

Proviso

 

An insurer carrying on life insurance business shall have the option to pay tax:

(i)          on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service;

(ii)         in all other cases, 3.5 per cent of the premium charged from policy holder in the first year and 1.75 per cent. of the premium charged from policy holder in the subsequent years; towards the discharge of his service tax liability instead of paying service tax at the rate specified in section 66B of Chapter V of the said Act.

Such option shall not be available in cases where the entire premium paid by the policy holder is only towards risk cover in life insurance.

6 (7B)

 

 

 

 

 

 

 

 

 

 

 

Proviso

 

 

The person liable to pay service tax in relation to purchase or sale of foreign currency, including money changing, shall have the option to pay an amount calculated at the following rate towards discharge of his service tax liability instead of paying service tax at the rate specified in section 66B of Chapter V of the Act, namely:

(a) 0.14 per cent. of the gross amount of currency exchanged for an amount up to rupees 100,000, subject to the minimum amount of rupees 35 and;

(b) rupees 140 and 0.07 per cent. of the gross amount of currency exchanged for an amount of rupees exceeding rupees 100,000 and up to rupees 10,00,000; and (c) rupees 770 and 0.014 per cent of the gross amount of currency exchanged for an amount of rupees exceeding 10, 00,000, subject to maximum amount of rupees 7000.

The person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year

6 (7C)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proviso I

 

 

 

Proviso II

 

 

The distributor or selling agent, liable to pay service tax for the taxable service of promotion, marketing, organizing or in any other manner assisting in organizing lottery, shall have the option to pay an amount at the rate specified in column (2) of the Table given below, subject to the conditions specified in the corresponding entry in column (3) of the said Table, instead of paying service tax at the rates specified in section 66B of Chapter V of the said Act :

T A B L E

Sr.No.

(1)

Rate

(2)

Condition

(3)

1

Rs. 8,200/- on every Rs.10 lakh (or part of Rs.10 lakh) of aggregate face value of lottery tickets printed by the organizing State for a draw.

If the lottery or lottery scheme is one where the guaranteed prize payout is more than 80%.

2

Rs. 12,800/- on every Rs. 10 lakh (or part of Rs. 10 lakh) of aggregate face value of lottery tickets printed by the organizing State for a draw

If the lottery or lottery scheme is one where the guaranteed prize payout is more than 80%

In case of online lottery, the aggregate face value of lottery tickets for the purpose of this sub-rule shall be taken as the aggregate value of tickets sold, and service tax shall be calculated in the manner specified in the said table.

The distributor or selling agent shall exercise such option within a period of one month of the beginning of each financial year and such option shall not be withdrawn during the remaining part of the financial year.

 Rule 6A Export of Services:

Rule Description
6A (1)

The provision of any service provided or agreed to be provided shall be treated as export of service when:

(a) The provider of service is located in the taxable territory,

(b) The recipient of the service is located outside India,

(c) The service is not a service specified in the section 66D of the Act,

(d) The place of provision of the service is outside India,

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

(f) The provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act.

6A (2)

Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification.

Rule 7 Returns:

Rule Description
7 (1)

Every assessee shall submit a half yearly return in From ST-3 or ST- 3A, as the case may be, along with a copy of the Form TR-6, in triplicate for the months covered in the half-yearly return.

7 (2)

Every assessee shall submit the half yearly return by the 25th of the month following the particular half-year.

7 (3)

Every assessee shall submit the half-yearly return electronically

7 (4)

The Central Board of Excise and Customs (CBEC) may, by an order extend the period referred to in sub- rule (2) by such period as deemed necessary under circumstances of special nature to be specified in such order.

7B

An assessee may submit a revised return, in Form ST-3, in triplicate, to correct a mistake or omission, within a period of ninety days from the date of submission of the return under rule 7.

Where an assessee submits a revised return, the “relevant date‟ for the purpose of recovery of service tax, if any, under section 73 of the Act shall be the date of submission of such revised return.

7C

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Where the return prescribed under rule 7 is furnished after the date prescribed for submission of such return, the person liable to furnish the said return shall pay to the credit of the Central Government, for the period of delay of

(i) fifteen days from the date prescribed for submission of such return, an amount of five hundred rupees;

(ii) beyond fifteen days but not later than thirty days from the date prescribed for submission of such return, an amount of one thousand rupees; and

(iii) beyond thirty days from the date prescribed for submission of such return an amount of one thousand rupees plus one hundred rupees for every day from the thirty first day till the date of furnishing the said return:

Proviso I- The total amount payable in terms of this rule, for delayed submission of return, shall not exceed the amount specified in section 70 of the Act (i.e., Rs. 25,000/-)

Proviso II- Where the assessee has paid the amount as prescribed under this rule for delayed submission of return, the proceedings, if any, in respect of such delayed submission of return shall be deemed to be concluded.

Proviso III- Where the gross amount of service tax payable is nil, the Central Excise officer may, on being satisfied that there is sufficient reason for not filing the return, reduce or waive the penalty.

Appeals:

Rule    Section reference Description
8 85

Appeal to the Commissioner of Central Excise (Appeals) [“the CCE(A)] can be filed in Form ST-4 in duplicate along with the copy of the order appealed against as passed by the adjudicating authority subordinate to the Commissioner of Central Excise within 2 months from the date of receipt of the impugned order of the adjudicating authority by the appellant. On sufficient grounds the CCE (A) may allow further period of 2 months for filing of the appeal.

9 (1) 86 (1)

Appeal to the Central Excise and Service Tax Appellate Tribunal [“the CESTAT”)] can be filed in Form ST-5 in quadruplicate along with the certified copy of the order appealed against as passed by the adjudicating authority not below the rank of the Commissioner of Central Excise or CCE (A) the within 3 months from the date of receipt of the impugned order of the adjudicating authority or the CCE (A) as the case may be, by the appellant.

9 (2) 86 (2) & (3)

Department can also file an appeal before the CESTAT against order passed by the Commissioner of Central Excise in Form ST-7 in quadruplicate along with the certified copy of the order appealed against and copy of the order of the CBEC directing the Commissioner to file such an appeal (if applicable). Such an appeal can be filed within 4 months from the date of receipt of the impugned order by the Committee of Commissioners or Chief Commissioners as the case may be.

9 (2A) 86 (2A) & (3)

Department can also file an appeal before the CESTAT against order passed by the CCE (A) in Form ST-7 in quadruplicate along with the certified copy of the order appealed against and copy of the order of the CBEC directing the Commissioner to file such an appeal (if applicable). Such an appeal can be filed within 4 months from the date of receipt of the impugned order by the Committee of Commissioners or Chief Commissioners as the case may be.

9 (3) 86 (4)

The respondents in all the 3 cases as referred to above, can file a Memorandum of Cross Objections in form ST-6 within a period of 45 days from the receipt of notice from the CESTAT duly verified. The same will be disposed off by the CESTAT as if it were the appeal preferred by the other party (the respondents).

The author is a practising CA based at Indore (MP) and can be contacted at jkmanghani@rediffmail.com.

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