Service Tax Presentation

CHANGES BY FINANCE ACT 2012

Service Tax

Service TaxChanges By Finance Act 2012

Before 01.07.2012 119 Services were Taxable Service Provider was Liable To Pay Tax in Full Under Special Condition Service Receiver was Liable

To Pay 1. Import of Services2. Transport of Goods By Road Services3. Sponsorship Service etc.

Service TaxChanges By Finance Act 2012

W.E.F 01.07.2012All Services Are Taxable except under

Negative List. (Important Negative List items Click Here)

Mega Exemption from Service Tax. (Important exemption list Click Here )

Removal of Services Classification prescribed vide Section 65(105).

Pure Services and Declared Services.

Declared Services

Renting of Immovable PropertyWork ContractConstruction of Complex, Building, Civil

StructureTemporary Transfer of Intellectual property

right Transfer of goods by way of hiring, licensing,

hire purchaseService portion in execution of work contract

Services

Banking, NBFC,Electricity Distribution ServicesSupport ServicesConsignment Handling ServicesCourier Agency Restaurant, Food Stand, First food CenterCaterer, Convention Centre etc.

Before 01.07.2012 From 01.07.2012

Erection, Commissioning or Installation Services

Construction Services in respect of Industrial Building or Civil Structure.

Construction of Residential Complex Services

Repair and Maintenance Services

Interior Designer ServicesRenovation, Alternation,

etc.

Now All this services are covered under 1. Work Contract

Service 2. Construction of

Complex.

Service Classification

Classification of Services

Rule 1. Reference to a Main Service shall not include reference to a service which is used for providing main service.

Means Service used for Main Service may or may not classified under same services.

Rule 2 . Most specific description shall be preferred over a more general description.

Rule 3 Taxability of a bundled service (a) if various elements of such service are naturally bundled in the ordinary course of

business, it shall be treated as provision of the single service which gives such bundle its essential character;

(b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax.

Explanation.— For the purposes of sub-section (3), the expression "bundled service" means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.

Negative list of Services

Services by Government or a Local AuthorityServices by the Reserve Bank of IndiaServices by a foreign diplomatic mission located in

IndiaServices relating to agricultureTrading of goods, Activity amounted to ManufacturingTransmission or Distribution of electricity by an

electricity transmission or distribution utilityFuneral, burial, crematorium or mortuary services

including transportation of the deceased

Mega Exempted Services - 1

1. Services provided to the Government or local authority by way of erection, construction, maintenance, repair, alteration, renovation or restoration of :

canal, dam or other irrigation works pipeline, conduit or plant for (i) drinking water supply (ii)

water treatment (iii)sewerage treatment or disposal a historical monument, archaeological site or remains of

national importance, a residential complex predominantly meant for self-use or

the use of their employees

Mega Exempted Services - 2

Services provided by way of erection, construction, maintenance, repair, alteration, renovation or restoration of:

a) Road, bridge, tunnel, or terminal for road Transportation for use by general public

b) building owned by charitable trust and meant predominantly for religious use by general public

c) pollution control or effluent treatment plant, except located as a part of a factory

d) electric crematorium

Mega Exempted Services -3

Services by way of erection or construction of original works pertaining to:-

a) airport, port or railways;b) single residential unit otherwise as a part of a

residential complex;c) low- cost houses up to a carpet area of 60 square

metersd) Post- harvest storage infrastructure for agricultural

produce including a cold storages for such purposes; e) Mechanized food grain handling system, machinery

or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;

Specific Exempted Services:

1. Services to United Nation or Specified International Organization.

2. Service by way of vehicle parking to general public excluding leasing of space.

3. Service by the following persons in respective capacity:

a) Selling or distribution of SIM cards or recharge coupon voucher;

b) Sub-contractor providing services by way of works contract to another contractor providing work contract services which re exempt;

Work Contract

One Contract - one order (Composite Order)

One Contract – Many order (Divisible Order) Supply order Erection order Civil order F & I Repairs & Maintenance

Valuation Method for Service Value of Work Contract

Cost Plus Method / Service Value / Direct Method

Composition Method or Preventive Method

Cost Plus Method / Service Value Method

Gross Amount Charged for Work Contract Less: Value of Supply including Tax thereon

Note: 1. CENVAT credit available for Input, Input Services used in or in relation to execution of Work contract.

2. Service Value determined above must have value for items listed in list – 1.

List - 1

(i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect’s fees; (iv) charges for obtaining on hire or otherwise, machinery and

tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel, used in the

execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of

labour and services; (vii) other similar expenses relatable to supply of labour and

services; and (viii) profit earned by the service provider relatable to supply of

labour and services;

Composition Method or Preventive Method

Gross Value Charged for Execution of Work Contract Add: FMV of Supplies (supplied in same or other

contract for execution of work contract) (i.e. Supplied free of cost or at discounted value) Less Value Charged for that Supplies

Note: 1. Preventive rate 40/60/70 % apply of calculating Service Value

2. CENVAT credit for Input is not available.3. CENVAT credit for Input Services and

capital Goods will be available.

Composite Contract

Total Value of Composite Contract 100

Value of Supply (Value to be Justified with VAT / Sales Tax return) (Here we may show the Supply Invoice)

80

Value of Service including incidental material for Services

20

Determine the Tax payable (Full Rate i.e. 12.36%) 2.472

Less CENVAT Credit

For Material / Input used in Services (Non-billable items)

1.000

For Input Services used for providing Services

0.400

For Capital Goods (we can take credit 50% & 50% in 1st & 2nd Year but we have to reverse credit when the same is transfer to other site as such on value purchased less deprecation)

0.00

Net Tax payable 1.072

Single Contract – Divisible order

Gross Amount for Supply Order 800

Gross Amount for Erection order 80

Gross Amount for Civil order 100

Gross Value for F & I (except F & I value being integral part of Supply)

20

Total Contract Value 1000

Add: FMV of Free Supply after reducing amount charged 0.00

Value of Work Contract 1000

Taxable Value (40/60/70 %) 400

Tax Livable 49.44

Less CENVAT Credit

For Input Services used for providing Services 0.400

For Capital Goods (we can take credit 50% & 50% in 1st & 2nd Year but we have to reverse credit when the same is transfer to other site as such on value purchased less deprecation)

0.00

Net Tax payable 1.072

Separate Contract for each work without Interdependency clause

Supply Contract Exempted

Erection Contract Tax payable to determined as per clause applicable to Cost Plus Contract / Direct calculation

Civil Contract Tax payable to determined as per clause applicable to Presumptive Taxation / Composition method

Repair & Maintenance Contract

Presumptive Taxation / Composition method

This is not possible to be applied in our case as service provider because we are providing bundle of Services which are normally bundled in business practice.

Most Vital Changes

Service Provided in or from India is Taxable (except provided in Jammu & Kashmir)

Services received in Taxable Territory from any non-Taxable Territory.

In case of change in effective rate of tax date of payment have vital Important.

Enlargement of Reverse Charge Coverage

Reverse Charge Mechanism

Services Covered are (subject to specified condition): Transportation of Goods by Road Support Service by Government or Local Authority Renting or Hiring any Motor Vehicle for carrying passenger. Supply of manpower for any purpose Service by way of works contract Import of ServicesNote: 1. CENVAT credit can be availed on the basis of tax paid

challan for Any Tax paid under Reverse Charge Mechanism. 2. Govt. has clarified in educational guide that Service Receiver

is not liable for Services whose point of taxation has been determined and whole liability affixed before 01.07.2012.

Transportation of Goods by Road

Service Receiver (Who is paying Freight)

Tax @12.36% on 25% Freight Value

CENVAT Credit Can Avail for Service Tax payable against Service Billed.

CENVAT Document Tax paid Challan

Must Note Freight paid does not have element of Loading & Unloading Charges

Support service by Government or Local Authority

Service Provided by Government or local authority

Taxable Value for Service Receiver Tax @12.36% on 100% Service Charges Paid

Services Mainly Covered 1. Testing , 2. Security 3. Construction / Erection 4. R & D or any other Support Services

Following Govt. Support Services are exempted

1. Renting of Immovable property, 2. Postal Services, 3. Services in relation to Aircraft

or Vessel and 4. Transportation of Goods or

Passenger.

Renting or Hiring of Vehicle for Passenger Carrying.

Service Provider 1. Any individual, 2. Hindu Undivided Family3. Proprietary firm 4. Partnership firm,

Service Receiver Liability Tax 12.36% on 40% Value Paid

Mainly Cover 1. CAR 2. Jeep3. Bus etc .

Supply of Manpower for any purpose

Service Provider 1. Any individual, 2. Hindu Undivided Family3. Proprietary firm 4. Partnership firm,

Service Receiver Liability Tax 12.36% on 75% Value Paid

Mainly Cover 1. Labour provided by Agency2. Man power for Loading &

Unloading.3. Security Personal 4. Man power for Material Sifting

Works Contract

Service Provider 1. Any individual, 2. Hindu Undivided Family3. Proprietary firm 4. Partnership firm,

Service Receiver Liability On 50% Value Paid (Method of Calculation of Taxable value is disused above)

Mainly Cover 1. Civil Work order (With or Without Material)

2. Erection work order(With or Without Material)

3. Repair & Maintenance order(With or Without Material)

Import of Services

When Service is called Imported

When a Service is received in Taxable Territory from non-taxable Territory.

Service Receiver liability Tax @12.36% on full value paid subject to available Abetment / Exemption

Abetment & Exemption Taxable Value should be determined considering service is provided from Taxable area by Service Receiver.

Services Covered All Taxable Services

Most Important Action to be taken

All work order to be revised considering Tax implication under reverse charge method,

All Service Provider to be registered with Service Tax department,

All Input Service Bill must complied with provision of CENVTABLE invoice.

First Service Invoice to be supported by Service Tax Registration and subsequent Invoices to be supported by Tax paid challan for Tax paid against earlier bill.(Bill format and check list enclosed)

All Service And Excise Bill to be address to Site address otherwise CENVAT Credit will not available and also billed Site become liable for tax under reverse charge.

Contains of Invoice if Partial Reverse Charge Applicable

Invoice to be issued in compliance of Rule 4A of Service Tax Rule,1994 Name, Address and Registration Number of Service

Provider and Receiver Value of Taxable Service Provided or agreed to be

provided Service Tax payable thereon (Only Service Provider

liability)

Thanks for your Feedback

Prepared By P K Jaiswal & Co56/1/1, King’s Road,Howrah – 711 101Email: [email protected]: 09062000111 033 32515699

Prepared For Techno Electric and Engg. Co. Ltd.

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