Dr. Sanjiv Agarwal

With the enactment of Finance Act, 2014 on 6th August, 2014, all the provisions of Service Tax which were amended in Union Budget this year have come into force. Moreover, Government has notified the date of 1st October, 2014 as the date from which taxability of enhanced scope of Service Tax, new services and changes in exemptions will come into force.

Service Tax assessees, therefore, may find it difficult, at least initially to cope up with these changes as some of them are indeed game changers and party spoilers.

Assessees who wish to file appeal against demand orders before Commissioner or Tribunal will now have to deposit atleast 7.5 or 10 percent of total demand in advance so as to get the appeal admitted. This has been mandatory. It implies that Government will, in any case, get this much of the amount recovered in advance at time of filing the appeal. However, if assessee wins the case or appeal, he will get interest @ 6 percent p.a. from the date of deposit which is too low looking to the fact that when payment is delayed by the assessee, he has to cough out interest @ 18 percent or even upto 30 percent if delay is more than a year. Higher interest rate is applicable from October 1, 2014.

Hitherto service providers were allowed input tax credit on taxes paid on inputs and input services without any time limit. W.e.f. September 1, 2014, there is a cap of six months from the date of invoice, after which one cannot take such credit. Effectively, cenvat credit of invoices prior to 1st March, 2014 cannot be taken now which is going to be a huge loss to the assessee (and wind fall tax revenue for the Department).

Come October 1, 2014 and one will have to pay Service Tax on use of radio taxis; sale of space for advertisements in any form or any media except print media (i.e. books and news papers); commission earned on sale of goods or procurement of orders; reconditioning or re-engineering of imported goods which are exported back without being used in India; technical testing of drugs, vaccines etc; transportation in air-conditioned contract carriages; hiring of accommodation in places such as ashrams, dharmshalas. However, in some cases, exemptions have been expanded or new exemptions granted from October 1, 2014. These includes services for bio medical waste treatment, haj and kailash mansarovar pilgrimage, forex services used by RBI, services by tour operator to foreign tourists for foreign tour etc.

All in all, there are going to be very stringent provisions applicable to assessees on Service Tax issues. One need to get himself familiar with these changes lest they may fall in the trap of contraventions which attract very high interest burden, monetary penalties, criminal prosecution and even arrest. One ought to accept the principle that if compliance has a cost, non compliance is even more costlier.

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  1. Ashis says:

    Myself running a small shop of jewellery, used to take order from Customers-and deliver them items on completion of job work, whether the said procurement of orders will be liable to levy of service tax ? Please clarrify…

  2. jay says:

    Mr. Sam,

    In reference to your query regarding finding out the service tax registration, it seems that your service prvider is not issuing a valid invoice. The invoice of the party should clearly mention the registration number.
    It is not clear from your query whether the service provider is issuing an invoice or simply issuing a receipt only. In case he is issuing an invoice w/o mentioning the service tax no, you should not make the payment of tax amount.

    1. Sam says:

      Mr Jay,

      Thanks for your reply.
      Service tax provider is providing Maintenance service for our housing complex that has many apartments.
      He DOES NOT give invoice.
      In the receipt that he gives , he mentions maintenance and service tax component as two figures.
      Receipt DOES NOT indicate service tax registration number.
      How are we to know whether he deposits the service tax amount to Government?
      Please guide us.

  3. CA. Sanjeev Singhal says:

    Dr. Aggarwal,

    Cenvat Credit under rule 4(7) of CENVAT,2004 within six months from the date of invoice or challan applicable from 1.9.2014. I am not able to understand how the invoice raised before 1.3.2014 shall not be able to get the credit. Since this rule is applicable from 1.9.2014 , the invoice issued before 1.9.2014 can be claimed any time. limitation under this rule shall be applicable only since 1.9.2014. Please clarify as the transit provision has not been explained.

  4. Sam says:

    Please reply me earlier query on service tax which is as below

    Our service provider is charging service tax.
    His receipt DOES NOT give service taxation registration number.
    How to find out whether he is depositing the money collected to Government or keeping it ?
    Is there any web site that lists registered service tax assesses?
    Please reply soon.

  5. Somnath Bhattacharya says:

    Dr.Sanjiv Agarwal
    At the outset,I would convey my deepest regards to you for your continuance articles which certainly enriched us on day to day basis. Correctly you have raised a point that while an assessee are entitled to get refund he will be entitled to get 6% simple interest only and on contrary he has to pay 18% to 30% interest.This is clearly a case of disparity which I think protected by our constitute. I wonder if the chambers of commerce of our country will take up the matter to remove the ambiguity either with Government directly or through writ in hon’ble Supreme court.
    I would like to draw the attention of eminent official of chambers of commerce of our country.
    With regards.
    Ual Industries Ltd,
    16,May Fair Road,
    Kolkata 70019

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