Snap shots of Budget 2010-11 on Service tax
1. GST to be implemented by April 1, 2011.
2. No change in rate structure – Rate foundation for GST?
3. Introduction of 8 new services into tax net. (To cover Specified Health Service & Electricity Exchanges)
4. Expansion/modification of tax net of eleven services.
5. Addition or reduction of exemptions in various services.
6. Renting Service – Retrospective amendment to supersede decision of Delhi High Court in case of Home Solutions Retail India Ltd. Now activity of ‘Renting’ made taxable.
7. Construction Service – receiving any amount from prospective buyer before completion certificate would be considered as service.
8. Simplification of Export Rules – Condition of ‘provided from India and used outside India’ omitted.
9. Change in refund mechanism for accumulated CENVAT credit to exporters.
10. No penalty – If Service Tax along with interest has been paid before issuance of SCN.
11. CENVAT Credit – Wrong availment or utilization – liable for penalty.
EFFECTIVE DATES OF VARIOUS CHANGES:
| Particulars | Date from when effective |
| New Services & Expansion/modification in existing services | From a date to be notified later (after enactment of Finance Bill, 2010) |
| Addition/reduction in exemptions of existing services | February 27, 2010 (certain on April 1, 2010) |
| Other legislative amendments | From a date to be notified later (after enactment of Finance Bill, 2010) |
| Amendments to Export & Import Rules | February 27, 2010 |
NEW SERVICES:
1. Promotion, Marketing or organizing of Games of Chance (including Lottery, Bingo, Lotto) [Section 65(105)(zzzzn)]
| By who to whom | • • | By any Person
To any other Person |
| Coverage | • • | Earlier covered by explanation to Business Auxiliary Service.
Scope increased into separate service as earlier under BAS, services provided ‘to client’ was taxable. |
2. Health Service [Section 65(105)(zzzzo)]
| By who to whom | • • | By any hospital, nursing home or multi-specialty clinic
To i) An employee of a business entity, where the business entity makes direct payment to the service provider for the health check-up or preventive care of its employees. ii) Any person covered by health insurance scheme, where the insurance company makes direct payment to the service provider for the health check up or treatment. |
| Coverage | • | Medical services partially covered in last budget by including cosmetic |
| & plastic surgery. | ||
| • | This service tends to cover medical services generally called as cashless treatment or check-up. | |
| • | However words ‘health care/preventive care/ treatment’ not defined. |
3. Maintenance of Medical Records of Employees of Business Entity [Section 65(105) (zzzzp) J
| By who to whom | • • | By any other Person To any business entity |
| Coverage | • | Generally such records are maintained by specialized hospitals or independent record keeper. |
| • | Services provided by such persons are intended to be cover – move to tax outsourced activities. |
4. Promotion of a ‘brand’ of goods, services, events, business entity etc. [Section 65(105) (zzzzq)J
| By who to whom | •
• |
By any Person (through a business entity or otherwise under a contract)
To any other person |
| Coverage | • | Under BAS, promotion or marketing – of sale of goods produced, provided or belonging to client and services provided by client is already covered. |
| • | Under proposed service, promotion of ‘BRAND’ is covered and not particular goods or services. | |
| • | Taxable service here is linked with the contract. |
5. Permitting Commercial Use or Exploitation of any event. [Section 65(105) (zzzzr)J
| By who to whom | • • | By any person
To any other person |
| Coverage | • | Granting the right or by permitting commercial use or exploitation of any event including an event relating to art, entertainment, business, sports or marriage, organized by such other person. |
| • | Service seeks to tax amounts received by the person or organization that permits the recording and broadcasting of event from broadcaster or any other person. | |
| • | Telecast rights of events such as IPL matches, awards shows, marriage clips etc. |
6. Electricity Exchange Service. [Section 65(105) (zzzzs)]
| By who to whom | •
• |
By an Electricity Exchange approved by the Central Electricity Regulatory Commission constituted under section 76 of the Electricity Act, 2003
To any person |
| Coverage | • | Services provided by an electricity exchange, by whatever name called in relation to trading, processing, clearing or settlement of spot contracts, term ahead contracts, seasonal contracts, derivatives or any other electricity related contract. |
| • | Services provided by Commodity Exchanges and Processing and Clearing Houses are covered under the Service tax net. Levy did not extend to services provided by Electricity exchanges as these were not in relation to forward contracts covered by the Forward Contract (Regulation) Act, 1952. |
7. Copyright Services. [Section 65(105) (zzzzt)]
| By who to whom | • • | By a person
To any other person |
| Coverage | • | Any:
– temporary transfer; or – permitting the use or enjoyment of any copyright defined in the Copyright Act, 1957. |
| • | There are 3 types classes of work defined under section 13 of Copyright Act, 1957, out of which 2 have been bought to tax net. Viz. Sec. 13(b) – Recording of cinematographic films; & Sec. 13(c) – Sound recordings. | |
| • | Sec 13(a) is kept out of preview of service tax viz.
– Original literary, dramatic, musical and artistic works. |
|
| • | Use or transfer of copyright was specifically excluded from the purview of the taxable service of ‘Intellectual Property Services’. | |
| • | Entertainment industry bought into tax net. |
8. Preferential Location Services. [Section 65(105) (zzzzu)]
| By who to whom | •
• |
By a builder of residential complex or a commercial complex or any other person authorised by the builder
To buyer |
| Coverage | • | Service of providing Preferential Location or Development of such Complex |
| • | Preference location include choice of floors, direction of flats like
sea facing/park facing, choice of flat numbers, Vastu flats, internal/ external developments of parks, sewage and water pipelines, connecting roads, common lighting, fire fighting installation, power back up, etc. |
|
| • | Charges for providing parking space have been specifically excluded from the scope of this service. |
EXPANSION/MODIFICATION IN SCOPE OF EXSISTING SERVICES:
| Service Category | Expansion/modification |
| Airport service, port service and Other port service |
|
| Auctioneer’s service |
|
| Management of investment
under ULIP service |
|
| Transport of passenger by air Service |
|
| IT software service |
|
| Sponsorship service |
|
| Commercial training or coaching Service |
|
| Commercial or
industrial construction service And Construction of Complex service industrial |
• To be considered as service if the builder or his authorised representative receives any consideration from prospective buyer before obtaining the completion certificate.
• A distinction is proposed to be drawn between: a) Outright sale of immovable property after completion of construction, and b) Booking of premise either before commencement of construction or before completion of construction. • This Explanation has been inserted to streamline the different approaches adopted by assesses resulting in diverging tax positions. |
| Renting of
immovable property Service |
• ‘Renting’ activity itself regarded as taxable service (Retrospectively amended from 1 June, 2007)
• Renting of vacant land for construction of building/temporary structure at later stage for furtherance of business or commerce made taxable. |
| Commercial training or coaching Service |
|
| Commercial or
industrial construction service And Construction of Complex service industrial |
• To be considered as service if the builder or his authorised representative receives any consideration from prospective buyer before obtaining the completion certificate.
• A distinction is proposed to be drawn between: a) Outright sale of immovable property after completion of construction, and b) Booking of premise either before commencement of construction or before completion of construction. • This Explanation has been inserted to streamline the different approaches adopted by assesses resulting in diverging tax positions. |
| Renting of
immovable property Service |
• ‘Renting’ activity itself regarded as taxable service (Retrospectively amended from 1 June, 2007)
• Renting of vacant land for construction of building/temporary structure at later stage for furtherance of business or commerce made taxable. |
OTHER CHANGES IN SERVICES
| Service Category | Expansion/modification |
| Transport of Goods by Rail Service |
|
| Commercial Training or Coaching Service | Exemption will be available only to Industrial Training Institutes or Industrial Training Centers affiliated to National Council of Vocational Training (NCVT) and offering courses in the designated trades covered under Schedule I of the Apprentices Act, 1961. |
| General Insurance Service | Exemption from service tax, presently available to Group Personal Accident Scheme provided by Govt. of Rajasthan to its employees, under General Insurance Service is being withdrawn. |
| Information Technology Software Service |
|
| Transport of Goods by Road Service | Scope of exemption has been widened to include transportation of food grains and pulses along with the existing list of fruits, vegetables, eggs or milk by road. |
| Technical Testing and Analysis Service and Technical Inspection and Certification
Service |
|
| Service provided by Electricity Exchange | Transmission of Electricity |
| Erection, Commissioning or Installation Service | Erection, commissioning and installation of
i) Mechanized Food Grain Handling Systems, ii) Equipment for setting up or substantial expansion of cold storage; and iii) Machinery/ equipment for initial setting up or substantial expansion of units for processing of agricultural, apiary, horticultural, dairy, poultry, aquatic and marine products or meat. |
| Online Information Database Access or Retrieval Service
i) Business subject to certain conditions. |
Exemption to services provided by any notified Indian News Agencies subject to certain conditions. |
• KEY LEGISLATIVE CHANGES
- Amended Section 73:
– Insertion of explanation in Section 73 (3) of the Act
– Clarifies that penalty shall not be imposed in a case where Service tax that is short paid or not
paid and interest thereon is paid by the assessee before the issuance of a Show Cause Notice.
– Thus sub-section provides that if Service tax and interest is paid by the assessee on the basis of his own ascertainment or on the basis of ascertainment by a Central Excise Officer before a Show Cause Notice is served on the assessee and the Central Excise Officer is informed of such payment, he (Central Excise Officer) shall not serve a Show Cause Notice on the said assessee.
- Insertion of a clause (19b) in section 65 – Business Entity:
– “business entity” includes an association of persons, body of individuals, company or firm but does not include an individual.
Note: Other procedural changes mainly related to Import of service & Export of service is not discussed here.
If Sales Tax Bihar deducted from our payment on computer rental.
At this case exemption of service tax ?
Increase in Car prices above 2.5 Lakh Cars was expected. Food is made cheaper in Hotels and Restaurants is good news…..Overall good Budget…