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GDP(2009 – 2010 ) SERVICE TAX BACKGROUND Service Tax was introduced for first time in 1994. only 3 services with 3,943 Assessees. tax collection was.

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Presentation on theme: "GDP(2009 – 2010 ) SERVICE TAX BACKGROUND Service Tax was introduced for first time in 1994. only 3 services with 3,943 Assessees. tax collection was."— Presentation transcript:



3 GDP(2009 – 2010 )

4 SERVICE TAX BACKGROUND Service Tax was introduced for first time in only 3 services with 3,943 Assessees. tax collection was about Rs. 410 Crores. now covers about 117 services.


6 SERVICE TAX Finance Act, Service Tax Rules. Determination of Value Rules. Export of Services Rules. Import of Services Rules. Cenvat.


8 Constitutional Authority:

9 ENTRY NO 82 – Tax on Income other than Agriculture. ENTRY NO 83 – Duty of Customs including export duties. ENTRY NO 84 – Duties on Excise. ENTRY NO 85 – Corporation Tax. ENTRY NO 92C – Taxes on Services [NOT MADE EFFECTIVE]. ENTRY NO 97 – Residual Entry.(COVERS SERVICE TAX). Residual Entry applies to the matter not enumerated in List II and List III.

10 (State Of West Bengal Vs Kesoram Industries) Residual Entry applies to the matter not enumerated in List II and List III. Same transaction may involve two or more taxable events in its different aspects. Such Overlapping should not be considered. Two aspects of the same Transaction can be utilized by two legislatures for two levies which may be taxes or fees.

11 Is Retrospective Amendment Valid?

12 YES, If it is Reasonable. No, if it is Arbitrary.

13 Extent and Scope of Service Tax extends to the Whole of India Except Jammu and Kashmir. India means: Territorial Waters of India (i.e., up to 12 Nautical Miles from the Coastal Land). Continental Shelf and Exclusive Economic Zone of India, if the service provided for the purpose of construction of installations, structures and vessels for the purpose of extracting or prospecting or production of mineral oil and natural gas and supply thereof. It also covers all the services provided by such installations or vessels or structures with the said activities.




17 Sec 66 (charging section) 12% From the rate of tax is 10%. Education Cess is 2%. Secondary and Higher Education Cess is 1% Therefore Effective Rate is 10.3%




21 Performances of Statutory Duties are not Service.

22 Sharing of expenses is not a provision of service

23 Concept of Mutuality



26 Is There Any Service In The Joint Venture? Accounting Standard 27– three types Jointly Controlled Operations. Jointly Controlled Assets. Jointly Controlled Entities.

27 Sale Or Services?


29 Composite Contract Divisible Value of Goods. Value of Services Indivisible Dominant Nature Test Services or Sales

30 Dominant Nature Test

31 EXAMPLES OF INDIVISIBLE CONTRACTS Works Contract Service. hire purchase/lease contract. catering contracts. A supply of goods by any unincorporated association or body of persons to a member




35 CLASSIFICATION OF SERVICES, WHY? Whether the service provided fall on the category for which the exemption applies. Whether abatement applies for the services provided. Wrong Classification leads to wrong claim of exemption and leads to penalty.

36 Principles of classification: [Sec 65A]: 1.service is prima facie classifiable under one category of service, Classify as Such Category. Eg:

37 Principle 2 (Classifiable Under Two Or More Categories ) Most Specific Description. Eg: Management Consultancy Service Management or Business Consultant ? Service Of Chartered Accountant ? Eg:

38 Principle 3 (Classifiable Under Two Or More Categories ) ESSENTIAL CHARACTER


40 the category which occurs first in Clause(105) of Section65.

41 Section 65A Does not Apply to The Port. Other Port. The Airport Or Civil Enclave. Any Services Provided within the Port Falls Under The Port Services and Not Under Other Services.


43 Valuation of Services:[Section67]: If Consideration is only money, The Gross Amount Charged is the Value.

44 If Consideration is not Wholly or Partly in Money. Value + Service Tax = Fair Market Value Valuation of Services:[Section67]:

45 If Value Not Ascertainable, Determination of Value Rules

46 Value of Service ?


48 Value of similar services in the market. Equivalent money value of consideration, but should not less than cost of provision.

49 Inclusion in or exclusion from value of certain expenditure or costs: Reimbursement of expenses is not includible: - Entry tax paid by carriage and freight forwarding agent on behalf of owner of goods. - Ticket charges paid y Travel Agent and recovered from his customer. Expenditure incurred by service provider as pure agent of service receiver is also not includible.

50 Contractual agreement with recipient of services. Neither intends to hold nor holds any title. Does not use such goods or services. Receives only the actual amount incurred.

51 Exclude from the Value of Taxable Service Conditions: Service provider act as pure agent when he makes payment to third party Recipient of services uses the goods or service The recipient of service is liable to make payment to the third party. The recipient of service authorizes the service provider to make payment on his behalf. Payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued. The goods or services procurred by the service provider from third party.

52 Charged by a broker on the purchase or sale of securities. Premium charged by the insurer from the policy holder. The commission received by the air travel agent from the airline. The commission, fee or any sum received by an actuary or insurance agent.

53 The airfare collected by air travel agent. The railfare collected by rail travel agent. Initial deposit made by the subscriber at the time of application for telephone connection or FAX.

54 Taxable Event

55 T AXABLE E VENT It happens when a taxable service is rendered. Tax liability is required to pay as per POT rules,

56 Point of Taxation

57 Determination of Point of Taxation If No If Yes Invoice is issued with in 14 days from the Date of Completion of Service. Date of Completion of Service or Payment Whichever is earlier Date of Invoice Or Payment Which ever is earlier

58 Examples S.No. Date of completi on of service Date of Invoice Date on which paymen t received Point of Taxation Remarks 1 Decembe r 10,2011 Decem ber 20, 2011 Decemb er 30,2011 Decembe r 20,2011 Invoice issued in 14days and before receipt of payment. 2Decembe r 10,2011 Decem ber 26, 2011 Decemb er 30, 2011 Decembe r 10,2011 Invoice not issued within 14 days and payment received after completion of service.

59 No change in rate of service tax till now.

60 Payment of tax in cases of new services: Services become Taxable Before Invoice issued & Payment received No Tax After Payment received Before chage

61 Services provided continuously – exceeding 3 months,or Central Government Notification

62 The following 5 Taxable services have been notified as CSS; Telecommunication service Commercial or industrial construction Construction of residential complex Internet Telecommunication Service Works contract service.

63 POT in case of CSS Invoice is issued with in 14 days If yes, Date of Invoice If No, Date of Completion

64 POT in case of CSS Payment is received with in 14 days If yes, Date of receipt of Payment

65 E XPLANATION FOR THE PURPOSE OF CSS Provision of the whole or part of the service is determined periodically on the completion of event Date of Completion of such event

66 POT IN CASE OF S PECIFIED S ERVICES OR P ERSONS In this case, POT shall be the Date on which payment is received. Specified Services: Export of Services In case of Reverse Charge.

67 I NDIVDUALS OR PROPRIETARY FIRMS OR PARTNERSHIP FIRMS PROVIDING FOLLOWING SERVICES : Architect services Interior Decorator Services Practicing CA/CWA/CS Services Scientific and Technical Consulting Services Legal Consulting Services.

68 POT in case of Copyrights, trademarks Consideration is not ascertainable Date of invoice or receipt of payment Whichever is earlier

69 Export of Service

70 In relation to Immovable Property In relation to location of the recipient of services. In relation to Performance of Services

71 Recipient is Outside India Personal purpose & recipient is located outside india In relation to Business or Commerce Recipient has any office in India In relation to location of the recipient of services Supply of Tangilble goods for Use Services

72 Import of Services Services provided in India from a country outside India. Taxable event is the date of actual import. Importer of services is liable to pay service tax as such he is service provider.(Reverse charge) Only when received in India.

73 Importer of service is liable to pay service tax only when the service provider is not having any: - Place of business in India, or - Establishment in India, or - Permanent address in India. ST will not be attracted as service provider is abroad and renders service outside India,

74 USA PVT LTD,USA S LTD OF USA Subsidiary of H LTD H LTD an Indian Company

75 I MPORT OF S ERVICES R ULES Services in relation to immovable property located in India. Services partly performed in India. Services received by recipient located in India. Services which will never be treated as import of services.

76 FEATURES OF SSI EXEMPTION The exemption of SSI does not apply to taxable services provided by a person under a brand name or trade name, whether registered or not, of another person. This SSI exemption is optional to the Service Provider. Hence, the service provider has the optional not avail the exemption. Exemption to apply service-provider wise,not for each taxable service or each premises.

77 SSI EXEMPTION Eligibility Limit Service Provided in the Preceding Financial Year is less than Rs.10 lakhs. Exemption Limit: First Consecutive Payment Received Exceeds Rs. 10 lakhs. If Exceeds Rs. 10lakhs in the Current Year Service Provider will be liable to pay service tax only on turnover exceeding Rs.10 Lakh

78 :ABATEMENT: Abatement is an exemption granted in respect of the value of taxable service. Name of Service Abatement / deduction Taxable (i) Mandap Keeper40%60%

79 :ABATEMENT:-:conditions :- The assessee has not availed CENVAT Credit. the value of goods and materials sold by the service provider to the recipient of service should not be deducted from the value of goods.

80 PROCEDURES The main procedure to be followed by the service provider are i) Registration ii)Preparation of Invoice iii)Maintenance of Records iv)Payment of Service Tax and v)Submission of Return.

81 "Person liable for paying service tax Notified by Government (Examples) Telecommunication Service The Director General of Posts and Telegraphs The Chairman-cum-Managing Director, Mahanagar Telephone Nigam Ltd, Delhi, Any other person who has been granted a licence by the Central Government General Insurancethe insurer or re-insurer Insurance Auxiliary Service by an insurance agent person carrying on the general insurance business or the life insurance business in India Import of ServiceService Receiver (Reverse Charge)

82 REGISTRATION The Person liable to pay service tax/ Input Service Distributor/ Whose value of Services exceeds Rs.9 Lakhs – Apply in Form ST-1 to the Superintendent of Central Excise. Made within 30 Days from the date which the Service provider becomes liable under Service Tax. A Single Application is enough for all taxable services.

83 Documents Required For the Registration A Copy of PAN. Proof Of Address. Constitution Of The Applicant. The Application Must Be Signed By The Applicant/ The Authorized Person OF Such Applicant.

84 REGISTRATION CERTIFICATE Is issued in ST – 2. Granted within 7 Days. STC(Service Tax Code) – 15 digit number Eg : AIJPS8765B ST 002 Premises Code Commissionerate + Division + Range + Serial Number.

85 CENTRALIZED REGISTRATION the person provides/receives service from more than one premises or offices (and) has centralized billing system or centralized accounting system in respect of such service and such centralized billing system are located in one or more premises. ALL THE PROCEDURES ARE SAME ST-2 IS ISSUED BY THE COMMISSIONER 7 DAYS DEADLINE IS NOT APPLICABLE.


87 PREPARATION OF INVOICE Contents of the Invoice In case of Service ProviderIn case of Service Distributor a.the name, address and the registration number of such person. b.The name and address of the person receiving taxable service.* c.Description, classification and value of taxable service provided or to be provided. d.The service tax payable thereon. a.The name, address and registration number of the person providing input services and the serial number and date of invoice by such provider of input service. b.The name, and address of the said input services distributor. c.The name and address of the recipient of the credit distributed. d.The amount of the credit distributed. a.The consignment note number, and date and gross weight of the consignment (if transported by road transport) In case the provider of taxable service is aircraft operator providing service or air transport of passenger, the invoice shall include ticket in any form by whatever name called. If the service provider is a Goods Transport Agency, then he should issue consignment note to the recipient of the service. However, where any taxable service is wholly exempted, the goods transport agency shall not be required to issue the consignment note.

88 III. MAINTENANCE OF RECORDS:[RULE 5]: a list of duplicate of all records prepared or maintained by the assessee for accounting of transactions in regard to – – providing of any service, whther taxable or exempted; – receipt or procurement of input services and payment for such input services; – receipt, purchase, manufacture, storage, sale, or delivery, as the case may be, in regard of inputs and capital goods; – other activities, such as manufacture and sale of goods, if any. all other financial records maintained by him in the normal course of business.

89 PAYMENT OF SERVICE TAX Assessee Duration of Payment Time of Payment Individual, Proprietary firm, or a Partnership firm Quarterly 1.Electronic Payment - 6 th of the month 2.Other Cases – 5 th of the month immediately following the quarter in which the service is deemed to be provided(i.e., Point Of Taxation Rules) Any Other Assessee Monthly 1.Electronic Payment - 6 th of the month 2.Other Cases – 5 th of the month immediately following the month in which the service is deemed to be provided(i.e., Point Of Taxation Rules) Services deemed to be provided in month/quarter ending on 31 st March – Payable by 31 st March itself.

90 Filing of Returns:[Section70 Of Finance Act,1994 and Rules 7, 7B and 7C of the Service Tax Rules,1994]: Assessee Authority to whom filed Duration of Return Form No Of Copies Time of Filing Return All AssesseesSuperintendentHalf-Yearly ST – 3 or ST – 3A Triplicate By 25 th of the month following the end of the said Half – Year. Input Service Distributor SuperintendentHalf - YearlyST - 3Single By the last day of the month following the Half – Year period. When the due date for filing return of service tax is a public holiday, then, the return may be filed on the succeeding working day. e-filing is mandatory if the gross service tax liability is Rs.10Lakhs or more including the amount paid by utilization of CENVAT credit, in the preceding financial year.

91 Documents to be submitted along with return: Copies of GAR – 7 challans. full details of the difference between the amount of provisional amount of tax deposited and the actual amount payable for each month;

92 The return may be filed by hand delivery or by registered post. In case of multiple service providers, a single return is enough but should give all the details of services. Even if no service has been provided and no service tax is payable during a half year, the assessee has to furnish Nil Return.

93 Fees for delayed furnishing of returns:: [Rule 7C]: Period delay in furnishing return Fees to be Paid 15 days from the due dateRs.500 Beyond 15 days but upto 30 days from the due date Rs.1,000. Beyond 30 days from the due date Rs.1,000 + Rs.100 for every day from the 31 st day till the date of furnishing of return; subject to a maximum of Rs.2,000.


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