CORPORATE KNOWLEDGE FOUNDATION Presents Workshop On Understanding the Amended Law of Service Tax Conducted by Dr. Sanjiv Agarwal FCA, FCS Wednesday, 3 rd September, 2014 @ Mumbai © Dr. Sanjiv Agarwal 1
Jan 17, 2015
CORPORATE KNOWLEDGE FOUNDATION
Presents
Workshop
On
Understanding the Amended Law of Service Tax
Conducted by
Dr. Sanjiv AgarwalFCA, FCS
Wednesday, 3rd September, 2014 @ Mumbai © Dr. Sanjiv
Agarwal
1
Session – I
Overview of Service Taxation
2
OVERVIEW OF SERVICE TAXATION
This presentation covers -
• Origin & concept of Service Tax
• What is Service
• Declared Services
• Negative List
• Exemptions
• Highlights of major changes in Union Budget
2014-15 / Finance Act, 2014
3
4
INDIAN ECONOMY – AN OVERVIEW
• India’s economy is the 11th largest economy in the world and the third fastest
growing even in today’s recession, after China and Indonesia
• Growth rate @ 4.7% in 2013-14 ; 5.7% in Q1 of 2014-15; growth expected > 5%
in 2014-15
• Service sector growth @ 6.8%
• World is presently facing recession-II but Indian economy is still a long term
growth economy
• Inflation – food, lifestyle – growth triggers
• Tax GDP ratio 10.5%; almost flat in last 5 years
• Service tax contributes about 13% of total tax revenue & over one-third of
indirect taxes
• Agriculture, services and industry are 3 major sectors of Indian economy.
• Contribution of different sectors in
March, 2013 March, 2014
Agriculture 19% 20%
Services 59% 57%
Industry 22% 23%
World average @63.6%
5
SHARE OF SERVICES IN GDP
6
SERVICE SECTOR IN INDIA & WORLD WIDE
% of service sector in GDP Country Share of
Services (%)
U.S. 79.2 China 44.6 Japan 72.7 Germany 64.6 U.K. 78.8 Brazil 59.4 India 57.1 South Korea 57.7 World 63.6
7
ORIGIN & CONCEPT OF SERVICE TAX
• Chapter V, VA and VI of the Finance Act, 1994 (section 64 to 114) contains
provision of Service Tax.
• In 1994, Service Tax was introduced by levy on only three services with
selective approach.
• Service Tax is an indirect tax leviable on the provision of service
• Destination based consumption tax recoverable from consumer / recipient.
• Desirable from revenue, equity and economic view point.
• Governed by Finance Act, 1994 and a dozen of rules.
• Legislative dependence on over 25 other laws.
• Selective approach shifted to comprehensive approach in 2012
• Upto 30.06.2012, > 120 taxable services [section 65(105)]
• W.e.f. 01.07.2012, all services other than services specified in negative list
& exempted services liable to service tax.
• Negative List (17 in number) specified through statutory provisions –
section 66D
8
ORIGIN & CONCEPT OF SERVICE TAX
• Service tax is a tax on activity and is a Value added tax. The value
addition is on account of activity which provides value addition. Service
tax is a value added consumption tax wherein the burden of tax is
ultimately borne by the final consumer and business does not bear the
burden of tax. [All India Federation of Tax Practitioners’ v Union of
India (2007) 10 STT 166; (2007) 7 STR 625 (SC)]
• Sale and service are two different and distinct transactions. The sale
entails transfer of property whereas in service, there is no transfer of
property [Ranchi Club Ltd. v Chief Commissioner of CE&ST, Ranchi
(2012) 26 STR 401 (Jharkhand)]
• Service tax is a value added tax , which in turn is a destination based tax
on consumption in the sense that it is levied on commercial activities
and it is not a charge on business but on the consumer. [ Paul
Merchants Ltd v CCE, Chandigarh (2013) 29 STR 257 (Cestat,
New Delhi)]
GROWTH OF SERVICE TAXYear (March) No of new
servicesTotal No of services
Total collection (Rs. in crore)
1994 3 3 426
2001 - 26 2612
2005 13 72 14200
2008 7 103 51301
2010 3 112 58422
2012 0 120 97509
2013 - All 132600
2014 - All 164927(RE)
2015 - All 215973 (BE)9
Tax-GDP Ratio at a Glance
10
Indirect Tax Revenue – At a Glance
11
SERVICE TAX COLLECTIONS
Some Facts• Highest contribution is indirect tax now Service Tax Rs. 215973 Crore Customs Rs. 206356 Crore Central Excise Rs. 201819 Crore• Surpasses all indirect taxes in 2014-15• Second highest tax revenue generator after Income
Tax• Service Tax revenue double in 3 years• >30% growth projected in 2014-15• Indirect Tax revenue 45.80% of GTR , 4.5% of GDP• Service Tax is 34% of indirect tax revenue • Service Tax revenue 12.80% of GTR; 1.31% of GDP• 45% Service Tax paid through Cenvat credit
12
SERVICE SECTOR IN INDIA
• Major contributors
Telecom
Construction & real estate services
Trade, hotels & restaurants
Business auxiliary services
Banking, financial & insurance services
Transport, storage, communication
Renting of immovable property
Manpower recruitment / supply
Maintenance & repairs
• Only 18.71 lakh registered assessees13
• The term ‘service’ was not defined in erstwhile law
(upto 30.6.2012)
• The term ‘taxable service’ was defined under
section 65(105)
• Each taxable service and definitions related to
meaning of service were defined [clause (a) to
(zzzzw)]
• Around 120 definitions were in place
• W.e.f. 1.7.2012, ‘service’ has been defined in
section 65B(44)14
WHAT IS SERVICE
14
‘Service‘ defined in clause (44) of the
section 65B and means –
• any activity
• For a consideration
• carried out by a person for another
and
• includes a declared service (66E)
15
WHAT IS SERVICE
15
• Activity must be for a consideration (nexus / reciprocity)
• Activity – includes both activity as well as non-activity
• Consideration – includes both monetary and non
monetary consideration
• Two persons are involved –
Service provider
Service receiver
• Only services provided by one person to another are
taxable
• Person – natural as well as artificial
16
WHAT IS SERVICE
16
Activity
• Not defined in the Act
• In common understanding, activity includes –
An act done
A work done
A deed done
An operation carried out
Execution of an act
Provision of a facility etc.
• Activity could be active or passive and forbearance to act
• Agreeing to an obligation to refrain from an act or to tolerate an act or a
situation - listed as a declared service u/s 66E
17
WHAT IS SERVICE
17
Consideration
• Means everything received or recoverable in return for a
provision of service which includes -
Monetary payment
Non-monetary payment
Deferred consideration
• Under Indian Contract Act, 1872, ‘consideration’ means -
“When, at the desire of the promisor, the promisee or any
other person has done or abstained from doing, or does or
abstains from doing, or promises to do or to abstain from
doing, something, such act or abstinence or promise is
called a consideration for the promise”18
WHAT IS SERVICE
18
Activity for a Consideration
• Activity should be carried out by a person for a
consideration
• Activity without consideration like-
Donation
Gifts
Free charities
outside the ambit of service
• Charity for consideration would be service and taxable
unless otherwise exempted
19
WHAT IS SERVICE
19
Money- 65B(33)
“Money" means legal tender, cheques, promissory note, bill of exchange,
letter of credit, draft, pay order, traveller cheques, money order, postal or
electronic remittance or any similar instrument but shall not include any
currency that is held for its numismatic value
No service tax on Tax on Money Remittance (Circular No. 163 dated
10.7.2012)
Actionable Claim –Section 3 of Transfer of Property Act, 1882 Claim to unsecured debts Claim to beneficial interest in movable property not in possession of claimant Right to insurance claim Arrears of rent
Service is an activity carried out by a person for another for consideration and
actionable claim is mere a transaction in money [ Delhi Chit Fund Association v
Union of India (2013) 30 STR 347 ; (2013) 39 STT955 (Delhi)]
20
WHAT IS SERVICE
20
Person-65B(37)"person" includes,–
• an individual,• a Hindu undivided family,• a company,• a society,• a limited liability partnership,• a firm,• an association of persons or body of individuals, whether
incorporated or not,• Government,• a local authority, or• every artificial juridical person, not falling within any of the
above
Government – Not defined• Section 3(22) of General Clause Act, 1897• Includes Central/State Government/ Union Territory• Actions taken in the name of President/ Governor• Most of services provided by Government are in Negative List
21
WHAT IS SERVICE
21
'Service' does not include -
• any activity that constitutes only a transfer in title of goods or
immovable property by way of sale, gift or in any other manner.
Sale of developed plots is a service [Narne Constructions Pvt. Ltd. v
Union of India 2013 (29)STR 3 (SC)]
• a transfer, delivery or supply of goods which is deemed to be a sale of
goods within the meaning of clause (29A) of article 366 of the
Constitution
• a transaction only in money or actionable claim
• a service provided by an employee to an employer in the course of the
employment.
• fees payable to a court or a tribunal set up under a law for the time
being in force22
WHAT IS SERVICE : EXCLUSIONS
22
This scope shall not apply to –
• functions performed by M.P., M.L.A., Members of Panchayats /
Municipalities who receive any consideration in performing the
functions of that office as such member; or
• duties performed by any person who holds any post in pursuance of
the provisions of the Constitution in that capacity; or
• duties performed by any person as a Chairperson or a Member or a
Director in a body established by the Central Government or State
Government or local authority and who is not deemed as an
employee before the commencement of this section.
23
WHAT IS SERVICE : EXCLUSIONS
23
24
WHAT IS SERVICE
For the purpose of scope of service -
• an unincorporated association or a AOP and a member
thereof shall be treated as distinct persons;
• an establishment of a person in the taxable territory
and any of his other establishment in a non-taxable
territory shall be treated as establishments of distinct
persons.
• A person carrying on a business through a branch or
agency or representational office in any territory shall
be treated as having an establishment in that territory
Draft Circular (F. No. 354 /127/2012-TRU dated 27.7.2012) issued for clarification on certain activities / facilities / reimbursements to employees by the employers
(a) Treatment of supplies made by the employer to employees Amount deducted from salary / paid for service provided by the
employer to employee is for consideration and hence taxable Employer who provides some services free of cost (e.g. crèche,
gymnasium or a health club) are not liable to tax
(b) Treatment of reimbursements made by the employer to the employee
Reimbursements of expenditure incurred on behalf of the employer in course of employment would not amount to a service, hence non-taxable
(c)Treatment of supplies and reimbursements made by the employer to ex-employees/ pensioners
Same tax treatment for ex- employees of the company –
Reimbursement of expenses on behalf of company – non-taxable ?
Facilities for consideration – taxable
Facilities free of cost - non taxable ?
25
EMPLOYER’S FACILITIES TO EMPLOYEES
25
DIRECTOR’S SERVICES TO COMPANY - TAXABLE
• Director’s services to the company are taxable w.e.f
1.7.2012
• Sitting fees, commission, bonus, etc. are subject to service
tax
• 1.7.2012 upto 6.8.2012 - deposited by the directors
• From 7.8.2012 -deposited by the company under RCM
• W.e.f. 11.07.2014, services provided by the director of body
corporate are also covered under RCM
• WTDs /MDs /EDs who are under contractual employment
with the company and receive salary or remuneration will
not be covered - considered as employees of the company
2626
REMUNERATION TO PARTNER – NOT A SERVICE
• Partnership firm is not a distinct legal entity apart from the
partners under the Partnership Act, 1932
• Partner is not an employee of the firm -contract of employment
requires two distinct firms, viz., employer and employee
• Partners are the real owners of the assets of firm to the extent
of their share
• Salary paid to partner is only profit known by a different name
• It is only a transaction in money
• Incomes received from firm treated as income from Profits and
Gains of Business or Profession under I T Act, 1961
• Partnership Act, 1932 can not be over-looked
2727
28
TAXABILITY OF SERVICES W.E.F. 1.7.2012
All services [section 65B (44)]
Taxable
Declared services (section 66E)
Taxable
Services covered under negative list of services (section 66D)
Not Taxable
Services exempt under Mega Notification No. 25/2012-ST dated 20.6.2012
Exempted
Other specified Exemptions Exempted
28
29
All Services(including declared Services
(-)
Specific Exclusions
(-)
Negative List Services
Exemptions
Taxable Services
(-)
TAXATION OF SERVICES BY FINANCE ACT, 2012
(=)
30
TAXABILITY CONCEPT
Taxable
3. Exemptions (48)
1. Non -
Taxable
territory
(POPS)
2. Negative list (17)
SERVICE FOR A CONSIDERATION
E - MAGIC TEST
E: EmployeeM: MoneyA: Actionable claimG: GoodsI: Immovable propertyC: Court Fee
9 DE
CL
AR
ED
SE
RV
ICE
S
CHARGE OF SERVICE TAX
W.e.f. 1.7.2012
There shall be levied a tax at the rate of
twelve per cent on the value of all
services, other than those services
specified in the negative list, provided or
agreed to be provided in the taxable
territory by one person to another and
collected in such manner as may be
prescribed 3131
CHARGE OF SERVICE TAX
Essential ingredients for charge of Service Tax (Section 66B)
• There should be a service involved.
• Such service should not be one included in the negative
list as defined in section 66D.
• Services should be provided or agreed to be provided.
• Services should be provided in the taxable territory only.
• Services should be provided by one person to another
person.
• Tax shall be levied on value of services so provided or
agreed to be provided.
• Collection shall be in prescribed manner [section 68(1) or
(2)].
3232
CHARGE OF SERVICE TAX
Provided or agreed to be provided
• Before actual provision of service is made, all relevant information on
chargeable event must be known
• On account advance payment without any identification of services or
activities may not be liable to service tax
• Services which have only been agreed to be provided but are yet to
be provided are taxable
• Receipt of advances for services agreed to be provided become
taxable before the actual provision of service
• Advances retained by the service provider in the event of cancellation
of contract of service by the service receiver become taxable as these
represent consideration for a service that was agreed to be provided.
3333
DECLARED SERVICES [SECTION 66E]
34
DECLARED SERVICES
35
• Clause 44 of section 65B defines service–it includes a declared service
• What is declared services is defined in section 65B(22) to mean any
activity carried out by a person for another person for a consideration and
declared as such under section 66E of the Act
• There are 9 categories of services or activities as declared services
implying that on all such nine declared services, Service Tax shall be
payable
• Does not include any such transfer, delivery or supply of any goods which
is deemed to be a sale within the meaning of Article 366(29A) of the
Constitution of India
• They are amply covered by the definition of service but have been
declared with a view to remove any ambiguity for the purpose of uniform
application of law all over the country
36
LIST OF DECLARED SERVICES
Following constitute Declared Services (Section 66E)
• Renting of immovable property;
• Construction of a complex, building, civil structure or a part thereof,
including a complex or building intended for sale to a buyer, wholly
or partly, except where the entire consideration is received after
issuance of certificate of completion by a competent authority;
• Temporary transfer or permitting the use or enjoyment of any
intellectual property right;
• Development, design, programming, customization, adaptation, up
gradation, enhancement, implementation of information technology
software;
37
LIST OF DECLARED SERVICES
• Agreeing to an obligation to refrain from an act, or to tolerate an act
or a situation, or to do an act;
• Transfer of goods by way of hiring, leasing, licensing or any such
manner without transfer of right to use such goods;
• Activities in relation to delivery of goods on hire purchase or any
system of payment by installments;
• Service portion in execution of a works contract;
• Service portion in an activity wherein goods, being food or any
other article of human consumption or any drink (whether or not
intoxicating) is supplied in any manner as part of the activity.
DECLARED SERVICES
Agreeing to an obligation to refrain from an Act / to tolerate Act
or situation / to do an Act [section 66E(e)]
Following activities if carried out by a person for
another for consideration would be treated as
provision of service
Agreeing to an obligation to refrain from an act.
Agreeing to an obligation to tolerate an act or a
situation.
Agreeing to an obligation to do an act.
3838
DECLARED SERVICESObligations / ActionsExamples of Taxable Obligations / Actions Non-compete fees for agreeing not to compete compensation on termination of business
agreements advance forfeited for cancellation of agreement to
provide a service. forfeiture of security deposit for damages done by
service receiver in course of receiving of services. cancellation charges being charged by airlines,
hotels etc. consideration for non-appearance in a court of law
or withdrawal of suit. demurrage charges or detention charges
3939
40
DECLARED SERVICES
Works Contract [65B(54) / 66E(h)]
“Works Contract” means a contract wherein
transfer of property in goods involved in the
execution of such contract is leviable to tax as sale
of goods and such contract is for the purpose of
carrying out construction, erection, commissioning,
installation, completion, fitting out, repair,
maintenance, renovation, alteration of any
movable or immovable property or for carrying out
any other similar activity or a part thereof in
relation to such property.
SERVICES IN NEGATIVE LIST
[SECTION 66D]
41
42
42
NEGATIVE LIST OF SERVICES
What is Negative List
• Defined in new section 66D
• Section 66D specifies seventeen (17 ) broad
categories of services.
• Effective from 1-7-2012
• If an activity meets the characteristics of service , it
is taxable unless specified in Negative List.
• Based on socio-economic–tax criterion
43
43
NEGATIVE LIST OF SERVICES
(a)Services by Government or local authority excluding services by way of speed post,
express parcel post, life insurance and agency services provided to a person other
than Government; services in relation to an aircraft or a vessel, inside or outside the
precincts of a port or an airport; transport of goods or passengers; or support
services, other than specified services provided to business entities;
(b) Service by Reserve Bank of India
(c) Services by a foreign diplomatic mission located in India
(d)Service relating to agriculture or agricultural produce by way of agricultural
operations like cultivation, harvesting, etc; supply of farm labour; processes like
tending, pruning, cutting, etc. which do not alter essential characteristics of
agricultural produce but make it only marketable for primary market; renting or
leasing of agro machinery or vacant land; loading, unloading, packing, storage or
warehousing of agricultural produce; agricultural extension services; Agricultural
Produce Marketing Committee or Board services
44
NEGATIVE LIST OF SERVICES
(e) Trading of Goods
(f) Any process amounting to manufacture or production of goods
(g)Selling of space or time slots for advertisements in print media
other than advertisements broadcast by radio or television
(w.e.f. 1.10.2014)
(h)Service way of access to a road or a bridge on payment of toll
charges
(i) Betting, Gambling or Lottery
(j)Admission to entertainment events and access to amusement
facilities
(k)Transmission or distribution of Electricity by an electricity
transmission or distribution utility
45
NEGATIVE LIST OF SERVICES
(l) Service by way of pre-school education and education up
to higher secondary school or equivalent; prescribed
curriculum for obtaining a qualification recognized by
law; approved vocational education course
(m) Services by way of renting of residential dwelling for
use as residence
(n) Services by way of extending deposits, loans or
advances in so far as the consideration is represented by
way of interest or discount; inter se sale / purchase of
foreign currency between specified persons
46
NEGATIVE LIST OF SERVICES
O)services of transportation of passengers with or without
accompanied belongings, by a stage carriage; railways in a
class other than first class or an air-conditioned coach; metro,
monorail or tramway; inland waterways; public transport, other
than predominantly for tourism purpose, in a vessel, between
places located in India; and metered cabs, radio taxis (w.e.f.
1.10. 2014 ) or auto rickshaws
(p) Services by way of transportation of goods by road except GTA,
courier services; by aircraft /vessel from outside India upto the customs
station in India ; by inland waterways
(Q)funeral, burial, crematorium or mortuary services including
transportation of the deceased.
EXEMPTIONS [ N. NO. 25/2012-ST DATED 20.6.2012 AS AMENDED TO DATE]
47
GENERAL EXEMPTIONS
• Small Scale Exemption (Notification No. 33/2012-ST dated 20.6.2012)
• Exemption for Exporters/SEZ (Notification Nos. 31 /2012- ST dated
20.6.2012; 39/2012-ST dated 20.6.2012; 41/2012-ST dated 29.6.2012;
42/2012-ST dated 29.6.2012 ; 12/2013-ST dated 01.07.2013 ; 15/2013 –
ST dated 21.11.2013 and 7/2014-ST dated 11.07.2014)
• Exemption to Import of Technology (Notification No. 14/2012-ST dated
17.3.2012)
• Exemption for Services to Foreign Diplomatic Mission (Notification No.
27/2012-ST dated 20.6.2012)
• Exemption to Services by TBI or STEP (Notification No. 32/2012-ST dated
20.6.2012)
• Exemption to Renting of an Immovable Property (Notification No.
29/2012-ST dated 20.6.2012)
4848
SPECIFIC EXEMPTED SERVICES
(Vide mega Exemption Notification No. 25/2012-ST dated
20.6.2012)
• W.e.f. 1.7.2012
• Covers 48 specific exemptions
• Negative List services – not taxable at all ; can be
amended only by Parliament
• Exempted services – taxable but exempt under
notification; can be modified by notification.
4949
EXEMPTED SERVICES
• Services provided to the United Nations or a Specified
international organization
• Health care services provided by a clinical establishment,
an authorised medical practitioner or para-medics
• Services provided by cord blood banks by way of
preservation of stem cells or any other service in relation to
such preservation ( w.e.f. 17.2.2014)
• Services provided by operators of Common Bio-medical
Waste Treatment Facility to a clinical establishment by
way of treatment or disposal of bio-medical waste or the
processes incidental thereto (w.e.f. 11.07.2014)
• Services by a veterinary clinic in relation to health care of
animals or birds50
50
EXEMPTED SERVICES
• Services by an entity registered under section 12AA of the
Income tax Act, 1961 by way of charitable activities
• Services of renting of precincts of a religious place meant for
general public or conduct of any religious ceremony
• Services provided by a specified organization
(Kumaon Mandal Vikas Nigam Ltd and Haj Committee) in
respect of a religious pilgrimage facilitated by the Ministry of
External Affairs, Government of India, under bilateral
arrangement (w.e.f. 20.08.2014)
• Services of technical testing or analysis of newly developed
drugs, by an approved clinical research organization ( w.e.f.
11.07.2014)51
51
EXEMPTED SERVICES• Services provided by –
individual advocate / arbitrator to any person other than business
entity
services provided by advocate to advocate;
services provided by advocates and arbitral tribunals to business
entities with a turnover up to rupees ten lakh in the preceding
financial year;
services provided by person represented on an arbitral tribunal to
an arbitral tribunal
• Services by way of training or coaching in recreational activities
relating to arts, culture or sports
• Services provided to a recognised sports body by—
(a) an individual as a player, referee, umpire, coach or team
manager for participation in a sporting event organized by a
recognized sports body;
(b) another recognised sports body
5252
EXEMPTED SERVICES
• Services provided (w.e.f. 11.07.2014)
(a) by an educational institution to its students, faculty and staff;
(b) to an educational institution, by way of,—
(i) transportation of students, faculty and staff;
(ii)catering, including any mid-day meals scheme sponsored by the Government;
(iii)security or cleaning or house-keeping services performed in such educational institution;
(iv)services relating to admission to, or conduct of examination by, such institution;
• Any services provided by specified institutions in relation to National Skill
Development programme, a Vocational Skill Development course, any other
scheme implemented by National Skill Development Corporation ( W.e.f.
10.09.2013)
• Sponsorship services for tournaments and championships organized by
specified bodies 53
53
EXEMPTED SERVICES
• Services provided to Government, a local authority or a governmental
authority by way of construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation, or alteration of –
civil structure or any other original works meant predominantly for
use other than for commerce, industry, or any other business or
profession;
historical monument
a structure meant predominantly for use as (i) an educational, (ii) a
clinical, or (iii) an art or cultural establishment;
canal, dam or other irrigation works;
Specified use pipeline, conduit or plant
a residential complex predominantly meant for self-use or the use of
their employees of specified persons
5454
EXEMPTED SERVICES
• Services provided by way of construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance, renovation,
or alteration of,-
road, bridge, tunnel etc for use by general public ;
civil structure under Jawaharlal Nehru National Urban Renewal
Mission or Rajiv Awaas Yojana;
building owned by an entity registered under section 12 AA of IT
Act, 1961 and meant predominantly for religious use by general
public;
a pollution control or effluent treatment plant, except located as a
part of a factory; or
a structure meant for funeral, burial or cremation of deceased
5555
EXEMPTED SERVICES
• Construction, erection, commissioning, or installation of original
works pertaining to airport, port or railways, including monorail or
metro; a single residential unit; specified low- cost houses; post-
harvest storage infrastructure for agricultural produce, cold
storages; mechanized food grain handling system etc.
• Temporary transfer or permitting the use or enjoyment of a
copyright covered under clause (a) or (b) of sub-section 91 of
section 13 of the Indian Copyright Act, 1957, relating to original
literary, dramatic, musical, artistic works or cinematograph films
for exhibition in a cinema hall or cinema theatre(w.e.f. 1.04.2013)
• Services by a performing artist in folk or classical art forms of (i)
music, or (ii) dance, or (iii) theatre, excluding services provided by
such artist as a brand ambassador
5656
• Services of collecting or providing news by an independent
journalist/ specified bodies
• Services by way of renting of a hotel, inn, guest house, club,
campsite, by whatever name called or other commercial places
meant for residential or lodging purposes, having declared tariff
of a unit of accommodation below rupees one thousand per day
or equivalent (w.e.f.11.07.2013)
• Services provided in relation to serving of food or
beverages by a restaurant, eating joint or a mess, other
than those having (i) the facility of air-conditioning or
central air-heating in any part of the establishment, at any
time during the year, and (ii) a licence to serve alcoholic
beverages (w.e.f.1.04.2013)57
EXEMPTED SERVICES
57
EXEMPTED SERVICES
• Services provided in relation to serving of food or beverages by a
Canteen maintained in a factory covered under the Factories Act,
1948, having the facility of air-conditioning or central air-heating
at any time during the year.(w.e.f. 22.10.2013)
• Services of transportation of specified goods by rail or a vessel
from one place in India to another place / port
Transportation of chemical fertilizer, organic manure and oil
cakes, cotton, ginned or baled by rail and vessel exempted
from service tax (w.e.f. 11.07.2014)
• Services provided by GTA for transportation of specified goods
Transportation of chemical fertilizer, organic manure and oil
cakes, cotton, ginned or baled by GTA exempted from service
tax (w.e.f. 11.07.2014)
5858
EXEMPTED SERVICES • Services of giving on hire a means of transportation to State transport
undertaking or GTA
• Transport of passengers, with or without accompanied belongings, by —
• air, embarking from or terminating in an airport located in specified area ;
• non-air conditioned contract carriage other than radio taxi, (w.e.f. 11.07.2014)
for the transportation of passengers, excluding tourism, conducted tour, charter
or hire; or
• ropeway, cable car or aerial tramway;
• Services by way of vehicle parking to general public
excluding leasing of space to an entity for providing such
parking facility ( w.e.f. 1.04.2013)
• Specified schemes of general insurance business are exempt
• Services of life insurance business provided under specified
schemes including life micro-insurance product as approved
(w.e.f.11.07.2014)59
59
EXEMPTED SERVICES• Services provided to Government, a local authority or a governmental
authority by way of -
a) carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation; (w.e.f. 11.07.2014) or
b) repair or maintenance of a vessel or an aircraft (w.e.f. 1.04.2013)
• Services provided by an incubatee subject to certain conditions
• Service by an unincorporated body or a non- profit entity registered
under any law to its own members by way of reimbursement of
charges or share of contribution subject to conditions
• Services provided by specified capacities such as sub-broker; mutual
fund agent; selling or marketing agent of lottery tickets / SIM cards or
recharge coupon vouchers; business facilitator/ business
correspondent; sub-contractor providing services by way of works
contract to another contractor providing works contract services
which are exempt 6060
61
EXEMPTED SERVICES• Carrying out an intermediate production process as job work in
relation to agriculture, printing or textile processing, cut and polished
diamonds and gemstones; any goods on which appropriate duty is payable
by the principal manufacturer;
• Services by an organizer to any person in respect of a business
exhibition held outside India
• Services by way of slaughtering of [bovine omitted] animals;
• Services by way of making telephone calls from specified places
like departmentally run public telephone; guaranteed public
telephone operating only for local calls; or free telephone at airport
and hospital where no bills are being issued;
• Services received from service provider located in a non- taxable
territory by specified persons for non-commercial purpose / by
charitable institution / to person located in non-taxable territory
• Services of public libraries by way of lending of books, publications
or any other knowledge- enhancing content or material
EXEMPTED SERVICES• Services by Employees’ State Insurance Corporation to persons
governed under the Employees’ Insurance Act, 1948;
• Services by way of transfer of a going concern, as a whole or an
independent part thereof
• Services by way of public conveniences such as provision of facilities
of bathroom, washrooms, lavatories, urinal or toilets;
• Services by a governmental authority by way of any activity in relation
to any function entrusted to a municipality under article 243 W of the
Constitution
•Services received by RBI from outside India in relation to FOREX
management (w.e.f. 11.07.2014)
•Tour operator service to foreign tourist for tour wholly outside India
(w.e.f. 11.07.2014)62
62
63
HIGHLIGHTS OF MAJOR BUDGET CHANGES AND BY FINANCE ACT, 2014
• No changes in Service Tax rate
• Hints at time line for GST and legislative changes in December 2014
and GST expected in 2015-16; no date announced
• Reverse charge provisions amended / expanded
• Definition of intermediary to include intermediary of goods in its scope.
• Place of Provision of Service Rules amended so as to reduce tax
incidence on transport of goods through coastal vessels to promote
Indian shipping industry.
• POT for reverse charge will be the payment date or the first day that
occurs immediately after a period of 3 months from the date of invoice,
whichever is earlier.
• Rate of interest increased upto 30 percent w.e.f 01.10.2014 based on
period of delay.
64
HIGHLIGHTS OF MAJOR CHANGES IN FINANCE ACT, 2014
• Renting of motor vehicle – service recipient and service provider, both
to pay 50% each under reverse charge instead of 60 : 40 (change w.e.f
01.10.2014)
• Under works contract services, value of service portion in repair,
maintenance or reconditioning or restoration or servicing activities
increased from 60% to 70% by merging two categories
• E-payment of service tax made mandatory for all assessees from
1.10.2014. Relaxation permitted by discretion of the DC /AC on case
to case basis.
• Resident Private Limited Company eligible to make an application for
Advance Ruling.
• Retrospective exemption to ESIC on the services provided prior to
1.07.2012
• Certain provisions of CEA made applicable to ST (15A, 15B) –
obligation to furnish information and consequences for not doing so
• Procedural simplification in exemption to SEZ developer / unit
• SCN’s to be adjudicated within stipulated time
65
• No more stay application as mandatory fixed pre-deposit of 7.5% and
10% of the duty, in case where duty or duty and penalty are in
dispute, or penalty, where such penalty is in dispute imposed or both,
for filing of appeal at first / second stage appeal has been prescribed
• Ceiling for mandatory pre-deposit fixed at 10 Crore rupees.
• Section 80 benefit not to be applicable for serious offences
• Cenvat Credit shall be taken within six months from the date of the
invoice or challans or other documents specified (change w.e.f
01.09.2014)
• Cenvat credit allowable when Service tax paid under full reverse
charge without waiting for the payment of invoice value to the service
provider.
• Service tax paid by sub-contractor in the same line of business would
be allowed as eligible credit to the main service provider to avoid
double taxation, subject to certain conditions (change w.e.f
01.10.2014)
HIGHLIGHTS OF MAJOR CHANGES IN FINANCE ACT, 2014
66
GOODS & SERVICE TAX (THE FUTURE)GST: A Common Tax
on
Goods Services
67
•Need to find a solution to issue of surrendering tax jurisdiction
by States
•Consensus on CST compensation to be emphasized (States
want a 5 year relief for loss due to reduction in CST rate)
•Constitutional Amendment Bill, 2011- Report of Standing
Committee received; legislative scheme to be introduced
•Tussle between legal powers / administrative powers.
•No clear road map and commitment on time lines on GST
implementation
•Hope for consensus in next few months and GST being
introduced in 2015-16
•Phased roll out of GST likely
GST – WHAT NEXT
68
•Time to wrap up loose ends
•Consensus required at Empowered Committee on GST to abolish small
taxes
•States want octroi / entry tax not to be subsumed in GST
•Agreement on dropping Dispute Settlement Body
•States may be empowered to raise GST rates in case of distress
(flexibility in tax rate)
•Too many items can not be kept out of GST as larger object would get
defected
•Inclusion / exclusion of alcohol / petroleum products to be decided
•Revenue sharing mechanism to be rationalized
•Composition scheme likely, besides threshold exemption ( may be Rs.
10 Lakh)
•What could be a suitable GST rate?
•Need for drafting a GST Law by States and Centre
GST –AN UPDATE
69