CA Varun Dhawan
Background
From the date the Finance Bill 2012 was introduced on March 17, 2012 until date, there have been numerous amendments made in the service tax law. Several notifications have been issued over the last three months and many of them have already been superseded by a fresh set of notifications issued on June 20, 2012. In all 40 Notifications have been issued under service tax over the last three months.
The service tax law has undergone a complete overhaul and with these amendments. The most significant changes being the shift to the new system of taxation popularly known as “Negative List of Services” and the introduction of “Place Of Supply Rules”. These were the two missing links for roll out of the GST law and with introduction of both these we are almost ready as a country for adoption of the GST regime.
Besides these two changes, there are certain changes in the service tax rules, CENVAT credit rules and valuation rules.
Some of major changes in service tax law to the extent relevant to us are as under:
1. Key new sections introduced in Service tax law:
| Section 65B | Definitions | Important definitions include that of “service”, “taxable service”, “taxable territory”, “India” |
| Section 66B | Charging Section | This section says that all services will be taxed at 12% except those services as specified in the Negative List |
| Section 66C | Place of Provision of Service Rules, 2012 (Notification 28/2012) | Determine the place where the service is provided or deemed to have been provided |
| Section 66D | Negative List | Services that would not be considered for service tax |
| Section 66E | Declared Services | This section deems certain types of contract to be deemed services |
2. New Definitions introduced – Section 65 B
♠ Service
For the first time the Act now defines the term “Service” which was not defined earlier. Service “means any activity carried out by a person for another for consideration and includes a declared service but does not include transfer or sale of goods and immovable property and provision of service by employee to employer. All activities other than these will be considered as a “service” liable for service tax.
♠ Taxable Service
Any service on which service tax is leviable under section 66B.
♠ Taxable and non taxable territory
“Taxable territory means the territory to which the provisions of this Chapter apply. Non-taxable territory means the territory which is outside the taxable territory”.
♠ India
Amongst the definition of India, it includes the territorial waters, continental shelf, exclusive economic zone, sea bed, subsoil underlying the territorial waters, air space above India’s territory and air space above the territorial waters.
3. Charge of Service Tax – Section 66B
Service tax to be levied at 12% on the value of all services, other than those specified in the negative list, provided or agreed to be provided in a taxable territory by one person to another.
4. Negative List of Services – Section 66D
Negative List of services introduced which is a shift in the basis of taxation. Before the introduction of the negative list of services, there was a definition for each and every “Taxable Service”. It was a lengthy list of 119 taxable services defined which were serially numbered from (a) to (zzzw). This list was defined under Section 65(105) of the Finance Act 1994. (Commonly referred to as the Positive List). This positive list finally gets repealed with introduction of the Negative List of services.
Therefore, any activity which meets the definition of a “service” as defined, and does not feature in the negative list will be chargeable to service tax.
5. Declared Service – Section 66E
Declared service means any activity carried out by a person for another person for consideration and declared as such under section 66E (Section 65B). This section basically is a deeming section and deems the below activities also to be “service”.
There are nine specific activities under the List of declared services as given under section 66E as under:
|
SN |
Description of Service |
Brief Description
|
|
1 |
Renting of immovable property | Renting of immovable property |
|
2 |
Construction activity | Construction (including additions, alterations. Replacements or remodelling of existing civil structure) of a complex, building, civil structure or a part thereof, intended for sale wholly or partly to a buyer. However it will exclude in case where the entire consideration is received after issuance of a Completion Certificate. |
|
3 |
Intellectual Property Rights | Temporary transfer or permitting use or enjoyment of any IPR |
|
4 |
Information Technology software | Development, design, programming, customisation, adaption, up-gradation, enhancement, implementation of information technology software. |
|
5 |
Non compete arrangements | Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act. |
|
6 |
Supply of goods on hire | Transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods. |
|
7 |
Hire purchase | Activities in relation to delivery of goods on hire purchase or any system of payment by instalments. |
|
8 |
Works contract | “Service portion” in the execution of works contract. |
|
9 |
Catering | “Service portion” in an activity wherein goods, being food or any other article for human consumption or any drink is supplied as a part of the activity. |
6. Reverse Charge Mechanism
Per Notification No. 30/2012 and Notification 36/2012
For the below list of services the Service Recipient is required to discharge the service tax liability in full, or both the service recipient and service provider has to discharge the tax liability as per the prescribed ratio.
|
SN |
Description of a Service |
Percentage of Service tax payable by Service Provider |
Percentage of Service tax payable by Service Recipient |
|
(1) |
Insurance agent to insurance agent |
NIL |
100% |
|
(2) |
Transport of goods by road |
NIL |
100% |
|
(3 ) |
Sponsorship service |
NIL |
100% |
|
(4) |
Arbitral services |
NIL |
100% |
|
(5) |
Legal services by Individual advocate or a firm of advocates |
NIL |
100% |
|
(6) |
Support services by Government or local authority (excluding renting of immovable property and certain other specified services) |
NIL |
100% |
|
(7) |
Renting of passenger motor vehicles *- With abatement-Without abatement |
Nil 60% |
100% 40% |
|
(8) |
Supply of manpower for any service * |
25% |
75% |
|
(9) |
Works Contract service * |
50% |
50% |
|
(10) |
Any taxable service where the Service provider is located in a non taxable territory and service recipient located in a taxable territory |
NIL |
100% |
* in case where the service provider is a non corporate entity and the service recipient is a corporate entity.
“Renting of immovable property” to extend to include any other service in relation to such renting also.
“Supply of manpower” means supply of manpower, temporarily or otherwise, to another person to work under his superintendence or control.
7. Exempted Services
♠ Notification No. 25/2012 – A Single consolidated notification issued for exemptions. Called as the “Mega Exemption Notification”. It lists 39 services which will be exempted under service tax.
♠ Notification No. 34/2012– Consequential to the Mega list of exemptions, 81 exemption notifications issued in the past 18 years stand rescinded. There will now be only one single mega list of exemption from service tax.
♠ Notification 27/2012- Exemption for services rendered to foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members from service tax. Detailed provisions made, including the invoice issued to such person to carry additional information. (HO to direct based on case to case basis)
8. Abatement of Service tax
♠ Notification No. 26/ 2012: Abatement will be allowed at the following rates for the following services on the levy of service tax. i.e. Service tax will be charged on the balance value after abatement.
| SN | Description of Taxable Service |
Abatement (standard Deduction of value) |
| 1 | Financial leasing and Hire purchase |
10% |
| 2 | Transport of goods in a vessel |
50% |
| 3 | Transport of goods by road |
75% |
| 4 | Transport of goods by rail |
30% |
| 5 | Transport of passengers by rail |
30% |
| 6 | Transport of passengers by air |
40% |
| 7 | Renting of passenger vehicles |
40% |
| 8 | Renting of hotels, guest houses |
60% |
| 9 | Bundled service including food and hotel rent, convention center, etc. |
70% |
| 10 | Tour operator |
10%, 25%, 40% |
| 11 | Construction activity (per Section 66E) |
25% |
9. Amendments to Service tax Valuation Rules (Notification no. 24/2012)
- Rule 2B inserted. This Rule states how to determine the service portion in the execution of a works contract.
- Rule 2C inserted. Thus Rule states how to determine the service portion in supply of food and drinks in a restaurant or as outdoor catering.
- Demurrage charges liable to service tax.
- Interest on Delayed payments not liable for service tax
- Accidental damages not related to the service, would not be liable for service tax
10. Export of Service
♠ Rule 6A to Service Tax Rules, 1994 introduced vide Notification 36/2012. Provision of any service provided to agreed to be provided shall be treated as export of service when,-
(a) The service provider is located in the Taxable Territory
(b) The service recipient is located outside India
(c) The service is not falling under the Negative List
(d) Place of Provision of Service is outside India
(e) Payment for such service has been relieved in convertible foreign exchange, and
(f) The service provider and service recipient are not merely establishments of a distinct person in accordance with item (b) of Explanation 2 section 65B (44)
♠ If a service qualifies as an export service, the Central government may by way of notification grant rebates.
♠ Accordingly, conditions have been laid down for claiming rebate of service tax on export of services. Rebate follows a refund method only. There is no outright exemption. (For further details refer Notification 39/ 2012)
11. Amendments to Point of Taxation Rules (Notification No. 4/2012)
a. Definition of “Continuous service” extended to include where service is provided continuously or on recurrent basis, under a contract, for a period exceeding three months with an obligation for periodic payment.
b. Point of taxation is the date when the invoice for the service provided or agreed to be provided is issued. Where no invoice is issued within the time period of 30 days point of taxation will be the date of completion of service.
c. In case where service tax is payable under the Reverse charge mechanism, point of taxation will be the date on which the payment is made for the service, or six months.
d. In case of “associated enterprises” for import of services, the point of taxation shall be the date of debit in the books of account or date of payment, whichever is earlier.
12. Other Important Amendments to Service Tax Rules, 1994
Notification No. 3/2012- Service Tax (Amendment) Rules, 2012:
• Every person providing a taxable service to issue an invoice within 30 days from the date of completion of such taxable service or receipt of payment, whichever is earlier.
• No invoice to be issued if the excess payment received is upto Rs. 1000 and where the invoice will be issued subsequently.
• Individual and partnership firms providing taxable services utp Rs. 50 Lacs, will have the option to pay service tax on collection basis.
• Excess payment of service tax allowed to be adjusted against the subsequent month’s service tax liability without intimation to the jurisdictional Superintendent of Central Excise.
(Author Varun Dhawan is a Chartered Accountant by profession having a rich experience of over 14 years in Tax laws across varied service industries of transportation, logistics, telecom and hospitality sectors and currently working as VP – Taxation in Blue Dart Express Ltd.)
I want to know what are the amendments in service tax laws which is applicable in CA Final may 2013 exame.
description of taxable service receiver in ST-3 Return Filling Time A9 No. For witch Tax is being paid
Dear sir,
I want to know that, from july 1st the service tax on manpower recuriement agenecy has been changes. So when we prepare our bill we have to charge 25% of service tax, whereas other 75% Service Tax has been paid by the other party direcftly. that s it i want to know please reply me.?
kalpesh patel
I want to know that, from july 1st the service tax on manpower recuriement agenecy has been changes. So when we prepare our bill we have to charge 25% of service tax, whereas other 75% Service Tax has been paid by the other party direcftly. that s it i want to know please reply me.?
SIR, I WANT TO CLARIFICATION REGARDING MANPOWER REQUITMENT AGENCY. SIR, I AM PAY SERVICE TAX ON 75% OF TOTAL VALUE. SIR, PLEASE CONFIRM ANY ABATMENT OF ALLOW THIS RULES/NOTIFICATION ETC.
SERVICE PROVIDER IS NOT REGISTERED WITH BUT WE HAVE PAID SERVICE ON 75% VALUE ,
PLEASE ALSO INFORM US ABOUT 25% VALUE WHICH WE HAVE NOT PAID SERVICE ON 25% VALUE
SIR, I WANT TO CLARIFICATION REGARDING MANPOWER REQUITMENT AGENCY. SIR, I AM PAY SERVICE TAX ON 75% OF TOTAL VALUE. SIR, PLEASE CONFIRM ANY ABATMENT OF ALLOW THIS RULES/NOTIFICATION ETC.
Dear Sir,
I need a fresh filled ST-3 return format, our company is a manufacturing company, and manufactures exempted and dutiable both goods and receives services of Security and manpower contract worker’s service from a registered contractor under Service tax rules. Accordingly I require a dummy filled format of ST-3 new return for the period of July,2012 to September, 2012. Your kind reply will be highly solicited.
Thanks with regards.
Ramesh Kumar
Require Notification no.
Is fully cenvat credit allowed to be taken of the service tax fully billed by the service provider and fully paid by a service provider under the Reverse Charge Mechanism
Sir, if service receiver is not registered under the category i.e. Rent-C-Cab,Work Contract, Manpower Supply.. etc.Then how he can despoite the service tax liability. If there is any common service, please name that service. and Can we take total input Credit. (paid by service provider 25% and Service Receiver 75%) please give reply.
thanks
Dear Sir
I am a communications and content service provider to the largest FMCG company in India. Besides communication work, i also do some creative errands for them.
Till end last year, i was not aware that I come under the ambit of Service Tax from june 2012 itself, which I actually discovered the end of last year when the company sent me a communication in this regard.
While I have promptly registered and go a Service Tax No. beginning of this month, I am in a quandary. I have till Dec’12, not claimed any service tax from the above company. But as per the mandatory requirement of ST act, I have to pay the Service tax with interest and penalty thereof. I am a small vendor who works on very small margins and to pay a huge tax over 2.5 lacs is a big burden on me which has really been giving sleepless nights.
From january, 2012, I have been receiving their purchase order with a comment of 12.36% ST without any abatement. What does this mean? should I now pay up all the service tax liability and then claim from them?
Please help me with your advice and a proper insight.
Thank you in anticipation.
Warmest
BI
Dear CA. Varun
In point No. 8 of your article, you have referred to Abatement Notification No. 26/2012. The percentages mentioned have been shown as abatements/deductions. However, with due respect, the rates are incorrect. The rates mentioned in that notification are actually taxable rates and not abatement rates. Eg. In case of GTA, abatement is 75% and not 25%. Plz correct.
CA. Nitesh Gupta
dear sir
IN BUSINESS AUXILLERY CODE ANY CHANGES IN NEW ABENTMENT/NOTIFICATION.[50% – 50%]
TYPE OF SERVICE-AUTHORISED SERVICES PROVIDERS
CANE SERVICE TAX EXEMPTION ON AGE OF ABOVE 65 YEAR
ASSESSEE HAS PROVIDE MANAGEMENT CONSULTANCY SERVICE AND AGE HAS BEEN ABOVE 65 YEAR CAN SERVICE TAX EXEMP.
I am in a confusion regarding travel agency for passenger cars, what is the defination of Renting of passenger motor vehicles *- With abatement-Without abatement
pl. confirm outdoor LCD advertisement include under service tax act or not ?
Sir,
We require information about service Tax laws on Services of Man Power supply Agencies.
If a Non corporate firm supplying Man power to a corporate firm by collecting total service tax from Service receiver through a bill,what is the liability of service receiver under the service tax law ?
Please Provide advise.
Man power supply agencies are collecting service tax from the service receiver with fully.
In this case what is the position of service receiver and what is his liability under the service tax laws.
In reverse charge mechanism, under point 7(b), 8, 9, If the service provider belongs to non-taxable territory then will the service receiver be liable to pay the whole amount?
Or,
If the service provider opts for composite scheme what will be the scenerio?
Sir
I want to know weather any amendment made in ST of transport of Goods through water or service tax had waived off after June 2012.
I provide services on contract basis for catering, care taking and housekeeping of guest houses owned by companies,located in their townships.According to our contract norms we have to maintain the entire premises and provide housekeeping services with material,supervision services,cooked food on fixed rates and washing of linen etc. The company pays for the above including deployment of manpower and related services as per our quoted contract rates. kindly guide us about what is the applicability of service tax for the above.
i am a contractor & pay service tax under construction industrial/commercial and claim 67 % abatement from gross receipt and pay service tax on balance 33 % till 30-06-2012. Pl tell me the abatement to be claimed w.e.f 01-07-2012
Sir
I want how to calculate TDS on Service providers bill bill+25% Service tax-TDS or Bill+100% service tax-TDS,please explain with example.
sir i want to know whether a govt contractor is liable to service tax or he will be exempt under negative list .
Can Some one please Revert to the Above Queries..
SIR, I WANT TO CLARIFICATION REGARDING MANPOWER REQUITMENT AGENCY. SIR, I AM PAY SERVICE TAX ON 75% OF TOTAL VALUE. SIR, PLEASE CONFIRM ANY ABATMENT OF ALLOW THIS RULES/NOTIFICATION ETC.
Hi,
I want to know that in the invoice or billing whether to charges 25% or 100% of service tax?. Kindly request you to clarify for the same…
I want to know that, from july 1st the service tax on manpower recuriement agenecy has been changes. So when we prepare our bill we have to charge 25% of service tax, whereas other 75% Service Tax has been paid by the other party direcftly. that s it i want to know please reply me.?
I do not know why my comments are ignored. without criticism there is no debate. further we cannot conclude. please insert my comments regularly. we hope this site is impartial.
Sir,
Individual and partnership firms providing taxable services utp Rs. 50 Lacs, will have the option to pay service tax on collection basis. Really this is appreciable.
Thanks
para 8 regarding.. NTFN 26instead of value exempt percentage is given for taxable component..better give two colomns one for portion taxable and other for exempted portion..
sir,
i am receiving manpower supply from contractor, as per new amendment, service received will pay 75% of Total liability. But i am not registered with the depatment in that category. Then how can i deposite the tax for that category… Please advise.
Sir, if service receiver is not registered under the category i.e. Rent-C-Cab,Work Contract, Manpower Supply.. etc.Then how he can despoite the service tax liability. If there is any common service, please name that service.
Your opinion on 8th point of your article seems wrong, according to the procedure of law. Please re-check the same.
Thank you for your Service Tax Amendments June 2012 is very useful for me. thanks
sir i was going through the above in which you have specified the abtement as 60% in Hotel Rent however according to the circular this represents the taxable component.
a good compilation of all amendments w.e.f 01072012. – thanks for the effort.
howevr, pl chk
sl no.6 – 6. Reverse Charge Mechanism – w.r.t insurance, the % rows are blank
and the words ” NOT APPLICABLE TO BDE ” is not clear. what is BDE