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Krishan Garg & Co. Chartered Accountants

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1 Krishan Garg & Co. Chartered Accountants

2 For private circulation only Krishan Garg & Co. Chartered Accountants

3 Rate of Tax Krishan Garg & Co. Chartered Accountants Rate of service tax has been increased from 10% to 12%. Due to this increase of 20% in basic rate, corresponding changes have been made in composite rate of tax. This will also increase the effective rate of tax where abatement/exemption is available to a service provider/ receiver. Revised rate of tax would be as under:-

4 Krishan Garg & Co. Chartered Accountants Effective date: This change will take effect from 1 st April, S.no.Name of ServiceRate of Abatement (%)Effective Rate of Tax (%) 1.Normal Rate of Tax N.A Goods Transport Agency Service Construction Services Restaurant Services Hotel Room Accommodation Works Contract Service N.A Convention, Mandap Keeper, Pandal Shamiana with catering Outdoor Caterer

5 Common form of registration & return Krishan Garg & Co. Chartered Accountants A common simplified form has been prescribed for excise as well as service tax for registration and filling of return. Return form EST-1 has also been prescribed which will be of one page.

6 Payment of Service Tax Rules relating to payment of service tax has been rationalised. At present only Individuals or Firms are allowed to pay the taxes on quarterly basis. Now this relaxation has been given to every small assessee. The same can be understood with the following table:- Krishan Garg & Co. Chartered Accountants

7 S.No. Amount of tax paid in previous year Individual/Firms & New Assessee (Irrespective of constitution) Other than Individual/Firms 1Upto Rs lacsQuarterly 2More than Rs lacsQuarterlyMonthly Krishan Garg & Co. Chartered Accountants In an another important change, now every Individual or firm (including LLP) can pay service tax on receipt basis provided their turnover in previous year (FY for ) towards taxable service was upto Rs lacs.

8 Periodicity of filling of Return At present service tax assesses are required to file return on six monthly basis. Now for large assesses (not defined) periodicity of filling of return reduced from 6 months to 1 month. Other assesses are required to file return as usual on six monthly basis. Krishan Garg & Co. Chartered Accountants

9 New levy of Service Tax on Railway Passengers Service Tax has been levied on A.C./First Class passengers with an abatement of 70% i.e taxable value would be 30% of ticket value. Considering tax rate of 12.36% the effective rate would be 3.71%. This will increase the travelling cost of a common man. Krishan Garg & Co. Chartered Accountants

10 Cenvat Credit can be availed on Motor Vehicle In the budget 2011, there was a restriction imposed on taking cenvat credit of service tax on motor vehicle. Now from this budget, this restriction has been withdrawn. Therefore now assessee can take cenvat credit of service tax paid on repair or maintenance or Insurance of a motor vehicle except commercial vehicle used for transport and classifiable under chapter heading 8702, 8703, 8704 and Krishan Garg & Co. Chartered Accountants

11 Cenvat Credit reversal for exempted service In accordance with change in rate of tax, cenvat credit reversal required under Rule 6(3) of Cenvat Credit Rules, 2004 towards exempted service is also increased from 5% to 6%. Krishan Garg & Co. Chartered Accountants

12 Negative List A revolutionary change has been made in the concept of service tax. Now taxation will be based on a Negative List. The simple meaning of this newly introduced concept is that apart from the services defined in this Negative List all the other services would be taxable subject to exemption given to the specific service. Now this Negative list along with Exemption notification 12/2012 where list of exempted services are given would become Geeta/Kuran/Bible for a service tax payer. Krishan Garg & Co. Chartered Accountants

13 These Negative list services as prescribed in new section 66D are:- S.no.SERVICE A.Services by Government or Local Authority excluding the following services means these are taxable:- 1.Speed Post, Express Parcel post, Life Insurance provided to other than Government. 2.Services relating to an Aircraft or a vessel 3.Transport of goods or passengers 4.Support services other than (i) to (iii) above. B.Services by RBI C.Services by Foreign Diplomatic Mission located in India D.Services relating to agriculture E.Trading of goods F.Any process amounting to manufacture or production of goods. G.Selling of space or time slots for advertisement other than advertisements broadcast by radio or television. H.Service by way of access to a road or a bridge in payment of toll charges.

14 Krishan Garg & Co. Chartered Accountants S.No. SERVICE I. Betting, Gambling or lottery. J. Admission to entertainment events or access to amusement facilities. K. Transmission or distribution of electricity by an electricity transmission or Distribution agency. L. Services by way of- i.Pre-school education and education upto higher secondary school or equivalent ii.Education as a part of a curriculum for obtaining a qualification recognised by law iii.Education as a part of an approved vocational education course. M. Services by way of renting of residential dwelling for use as residence N. Services by way of- i.Extending deposits, loans or advances for interest or discount. ii.Inter sale or purchase of foreign currency O. Services of transportation of passengers i. by a stage carrier or by railway other than First class or an air conditioned coach ii.Metro/Mono Rail or tramway iii.Inland waterways iv.Public transport in a vessel of less than 15 tonne net (other than for tourism purpose) v.Metered cabs, radio taxi or auto rickshaws P. Services by way of transportation of goods- i.By Road except GTA and a courier agency ii.By an aircraft or a vessel from a place outside India to the first customs station of landing in India iii.By Inland waterways Q. Funeral, burial, crematorium or mortuary services including the transportation of the deceased

15 All the Exempted services listed in single notification At present there are various exemptions given to a service provider either through issuing notification or it is given in the definition itself. Now all these exemptions have been clubbed in one notification no. 12/2012-Service Tax dated There are 34 services listed in the said notification. This list can be called a `General Exemption list. Krishan Garg & Co. Chartered Accountants

16 Interest on loans, advances are considered as exempted services Interest earned on loans and advances given to other party would now be exempted income. This is an important amendment since cenvat credit will also be required to reverse in proportion to such income in proportion to total taxable service. Krishan Garg & Co. Chartered Accountants

17 Special Audit provisions are made applicable to Service Tax also Like Excise Duty special audit provisions have also been made applicable to service tax. Krishan Garg & Co. Chartered Accountants

18 Cenvat Credit for Banks In the last budget, Banks were allowed to take cenvat credit of 50% of total cenvat credit as per Rule 6(3D) if they dont want to maintain separate records for taxable as well as non taxable service. This facility has been withdrawn. Krishan Garg & Co. Chartered Accountants

19 Service word has been defined for the first time Government is collecting tax on service for the last 18 years however there was no definition given to the word `Service. Now government has dared to define the service word under a new section 65(B)(44). Krishan Garg & Co. Chartered Accountants

20 Cenvat Credit Bonanza to Hotels, Restaurant & Outdoor Caterers In the last year budget, service tax was imposed on food and drink served in Restaurants (having liquor license and Air conditioned facility) and on room accommodation provided by hotels. They were allowed abatement in value of service with the condition that they will not be entitled for cenvat credit facility. Similar provisions were there with outdoor catering Service which was already in the list of taxable service since Krishan Garg & Co. Chartered Accountants

21 S.No.Name of Service Present abatement Proposed Present effective rate (%) Proposed effective rate (%) 1. Food or drink served in Restaurant 70%60% Outdoor Catering50%40% Hotel Room Accommodation 50%40% Krishan Garg & Co. Chartered Accountants Now they are being allowed to take cenvat credit on Capital Goods, Specified inputs and input services by slight decrease in rate of abatement as given below:-

22 Time limit for issue of Show Cause Notice Time limit for issuing show cause notice u/s 73 has been increased from 12 months to 18 months. Krishan Garg & Co. Chartered Accountants

23 Settlement Commission Provisions relating to Settlement Commission which are at present available under Excise Act are also made applicable in Service Tax cases which will encourage quick settlement of disputes. Krishan Garg & Co. Chartered Accountants

24 Time limit for filling appeal before Commissioner (Appeal) reduced Time limit for filing the appeal before Commissioner (Appeal) reduced from 3 months to 2 months. This will take effect only on the orders passed after the date on which Finance Bill 2012 receives the assent of the President. Krishan Garg & Co. Chartered Accountants

25 Reverse charge Till now only certain category of persons like in case of GTA, Mutual Funds, service receiver was directly liable to make payment under reverse charge mechanism. Here the total amount of service tax was payable by service receiver. In a surprise move, to curb the evasion of tax four category of service has been identified where service provider and receiver both will have to pay tax at a prescribed percentage. The only condition is that in these cases service provider should be either an individual or a firm or LLP and the recipient should be a body corporate. Krishan Garg & Co. Chartered Accountants

26 S.No.Description of ServiceService RecipientService Provider 1. Hiring of motor vehicle designed to carry passengers (With abatement) 100%Nil 2. Hiring of motor vehicle designed to carry passengers (Without abatement) 40%60% 3.Supply of Manpower75%25% 4.Works Contract Service50% Krishan Garg & Co. Chartered Accountants These four services are:-

27 Big Relief for Service Tax payers under Renting service In a big relief to the Service Tax payers under the category of Renting of Immovable Property Services, no penalty will be levied on the person who pay the service tax due as on 06/03/2012 in full along with interest within six months from the date on which section 80A comes into existence. Krishan Garg & Co. Chartered Accountants

28 Retrospective amendment beneficial to tax payer Normally Government makes certain amendments retrospectively to overcome from the court judgements. Surprisingly for the first time certain retrospective amendment has been proposed to give relief to the tax payer. Some of the important retrospective changes are given below:- Krishan Garg & Co. Chartered Accountants

29 1. In case of service provided to SEZ there is no need to reverse the cenvat credit considering the SEZ service as exempt service. This effect is given from Repair of Road has been exempted from payment of tax from Repair services relating to Non Commercial Government Building has also been exempted from Krishan Garg & Co. Chartered Accountants

30 POT Rules In POT Rules, time period for issue of invoice increased from present 14 days time limit to 30 days. This limit if further increased to 45 days for Banks and Financial Institutions. Krishan Garg & Co. Chartered Accountants

31 POT Rules In POT Rules, time period for issue of invoice increased from present 14 days time limit to 30 days. This limit if further increased to 45 days for Banks and Financial Institutions. Krishan Garg & Co. Chartered Accountants

32 Works Contract Service Residential complex services has also been included in works contract services. Now, the service tax payer of the construction services can get themselves registered under this category of services and can get cenvat credit benefits with certain conditions. Krishan Garg & Co. Chartered Accountants

33 Residential complex service At present, residential complex service is taxable only when a complex consists of more than 12 dwelling units. Now the finance minister has very cleverly defined the residential complex as a complex having more than 1 dwelling unit and have imposed service tax on every such complex. Considering this now every flat purchaser will have to pay service tax. Krishan Garg & Co. Chartered Accountants

34 Abatement on completion and finishing services Till now there was no abatement available on completion and finishing services. An abatement of 40% has been proposed by the finance ministry, which is a welcome step. Krishan Garg & Co. Chartered Accountants

35 Last but not the least Following are some other changes proposed in the budget:- 1. Exemption limit for the members paying maintenance charges to Resident Welfare Society increased from 3000/- p.m. to 5000/- p.m. 2. Further simplified scheme for exporters for getting refund of service tax. 3. Now there is no limit for self adjustment of excess service tax paid. Previously there was a limit of Rs lacs. Krishan Garg & Co. Chartered Accountants

36 Krishan Garg and Co. Chartered Accountants Address: 411, Chetak Centre, R.N.T. Marg, Indore Contact:


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