Presentation on theme: "Kamdar & Co.1 MALAD - GOREGAON STUDY CIRCLE OF WIRC, ICAI Welcome members and participants Subject : Finance Act, 2011 – Proposals relating to Service."— Presentation transcript:
Kamdar & Co.1 MALAD - GOREGAON STUDY CIRCLE OF WIRC, ICAI Welcome members and participants Subject : Finance Act, 2011 – Proposals relating to Service Tax and Central Excise. Day & Date : Sunday, 13th March, 2011. Venue : Kandivli Recreation Club, Kandivli (West) Mumbai – 400 053 Presenter : CA. Hasmukh Kamdar Email ID : hasmukh49 @ yahoo.co.in T. No. 2883 6998
Kamdar & Co.2 Presentation – Preamble Presentation covers Finance Bill, 2011 proposals impacting service tax and central excise. Introduction of new services / changes in existing services will be effective from date to be notified after enactment of Finance Bill. New Rules, notifications and amendments in Rules etc are / will be effective from the date specified in the presentation. Reference to following in the presentation means: Act – Finance Act, 1994 Rules – Service Tax Rules, 1994 Export Rules – Export of Service Rules, 2004 Import Rules – Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 Valuation Rules – Service Tax (Determination of Value) Rules, 2006
Kamdar & Co.3 Tax Rate and Liability To Pay Effective tax rate remains unchanged @ 10.30%. Point of Taxation Rules, 2011 (POTR) prescribes dates on which services are deemed to be provided. W.e.f. 01.04.2011, service is taxable on point of taxation as provided in POTR. Tax would be payable at the rate prevailing on date on which services are deemed to have been provided [Rule 5B inserted w.e.f. 01.04.2011] Liability to pay service tax : Presently, service tax is payable on realization basis. Liability to pay service tax will arise on accrual or realization of consideration which ever is earlier. No provision for claiming refund / set off of tax paid in case of non-realization of service consideration. Presently, service tax attributable to services provided before effective date of levy is not payable [Second proviso to Rule 6]. This proviso is deleted w.e.f. 01.04.2011.
Kamdar & Co.4 Air Conditioned Restaurants Services [Section 65(105)(zzzzv)] It will be taxable from date to be notified after enactment of Finance Bill. Levy is justified by the government on following grounds: Restaurant sells meals / beverages and also provides various services to customers. Providing ambience, use of space and furniture, music, air conditioning, dance floor etc are services. Sale and services are of equal dominance. Restaurant charges consolidated amount for sale and services. Honorable Delhi High Court in the case of Federation of Hotels and Restaurant of India Vs UOI [AIR 2007 Delhi 137] held that service provided by restaurant is incidental to sale of meals / beverages. Service tax levy might be challenged on the ground that entire consideration is towards the sale and nothing is attributable to services. Taxable service provider would be: Restaurant having air conditioning facility and license to serve alcoholic beverages. Even partly air conditioned restaurant would be covered.
Kamdar & Co.5 Air Conditioned Restaurants Services [Section 65(105)(zzzzv)] Air conditioning facility any time during the financial year would triggered the levy. Restaurant, whether independent or part of hotel, would be covered. Services liable to tax: Serving food and / or beverages in restaurants premises. Serving non-alcoholic and / or alcoholic beverages. Following will be excluded from service tax levy: Take away Home delivery Sale of goods at MRP Finance Minister has announced 70% abatement towards deemed sale of food and beverages. Effective tax rate would be 3.09% on amount charged to customers. VAT is paid by restaurants on full value of meals and / or beverages. Simultaneous levy of service tax might be challenged on double taxation plea.
Kamdar & Co.6 Short Term Accommodation in Hotels, Inn, Guesthouse, Clubs or Campsite [Section 65(105)(zzzzw)] It will be taxable from date to be notified after enactment of Finance Bill. Hotel, Inn, Guesthouse, Clubs or Campsite by whatever name called will be covered under this levy. Above terms are not defined in the service tax legislation. There would be litigation as to persons / establishments covered under this levy. Taxable service would be: Providing accommodation for a continuous period of less than 3 moths; and Where published / declared tariff of accommodation is Rs.1,000/- per day or higher. Tax will be leviable even when tariff actually charged is less than Rs. 1,000/- per day for room having published tariff of Rs.1,000/-. Finance Minister has announced 50% abatement on gross value. Effective tax rate would be 5.15% of gross amount charged. Most of the State levy luxury tax on hotels. Simultaneous levy of service tax might be challenged on the ground of double taxation.
Kamdar & Co.7 Authorized Service Station Service [Section 65(9) read with Section 65(105)(zo)] Present position: Service stations authorized by motor vehicle manufacturers only are taxable under this category. Private garages are out of tax net. Services in respect of motor cars, light motor vehicles and two wheeled motor vehicles are taxable. Services in respect of motor buses, omni buses, goods carriage, road rollers, tractors, auto-rickshaws etc are not taxable. Repairs, re-conditioning, restoration and servicing is taxable. Decoration of such vehicles is not covered under service tax levy. Proposed change: Any person (whether authorized by motor vehicle manufacturer or not) providing impugned services will be liable to service tax. Private garages will also be covered under service tax levy. Services in respect of motor buses, road rollers, tractors and other such vehicles will also be covered in addition to motor car, LMV and two wheeled motor vehicles. Goods carriage and three wheeled auto rikshaws will be out of tax levy. Decoration of motor vehicles and other similar services will be taxable.
Kamdar & Co.8 Life Insurance Service [Section 65(58) read with Section 65(105)(zx)] Present position: Gross premium consists of: oRisk cover oCommission, overheads, interest etc relatable to management and investment of policy holders. Service tax is leviable on risk cover portion of the premium only. Other portion of premium is not taxable. Proposed change: In addition to risk cover, all other services provided by life insurer to policy holder will be taxable. Change in composition rate: Presently Rule 6(7A) of the Rules provides an option of paying tax at composition rate of 1% of gross premium. It is proposed to increase the composition rate to 1.5% of gross premium (Refer TRU Clarification No.D.O.F.No.334/3/2011-TRU dated 28.02.2011). Increase of 0.5% in composition rate is meant to cover services other than risk cover.
Kamdar & Co.9 Commercial Training or Coaching Service [Section 65(27) read with Section 65(105)(zzc)] Present position: Institutes issuing any certificate / diploma / degree or any educational qualification recognized by law are excluded from the definition of Commercial Training or Coaching Centre. View, therefore, was prevalent that coaching or training imparted by such institute in respect of unrecognized course is also out of service tax levy. This view was approved by Honorable Bangalore Tribunal in the case of Institute of Chartered Financial Analysts of India [2009 (14) S.T.R. 220]. Unrecognized course conducted by recognized institute was not taxable but same course conducted by unrecognized institute was taxable. Proposed change: Definition of commercial coaching and training centre is being amended. Consequently, coaching or training in respect of such unrecognized course by any institute (whether recognized or not) will be liable to service tax.
Kamdar & Co.10 Club or Association Service [Section 65(25aa) read with Section 65(105)(zzze)] Present position: Services provided by club or association to its members are liable to service tax. Services provided to non-members are not taxable. Proposed change: Definition of taxable service is amended to cover services provided by club or association to non-members also. Services provided by club or association to non-members, guests or members of affiliated clubs will now be taxable. Exemption to specified associations for past period: Section 96J is inserted to exempt membership fees for the period from 16/06/2005 to 31/03/2008 received by an association or chamber representing industry or commerce. Associations which have paid service tax for such period will be eligible for refund of such tax. Claimant will have to apply for such refund within six months from the date of enactment of the Finance Bill.
Kamdar & Co.11 Business Support Services [Section 65(104c) read with Section 65(105)(zzzq)] Present position: Operational assistance for marketing is taxable service. View was prevalent that operational or administrative assistance is not taxable. Proposed change: Term operational assistance for marketing in the definition of business support service will be substituted by the term operational or administrative assistance in any manner. This expands scope of taxable services to include operational / administrative assistance of any kind. Term operational or administrative assistance, is very wide and will cover most of the activities outsourced by business entities / organizations. Some services which are already taxed under other category may also fall under this category. It is clarified that classification shall be governed by Section 65(A) of the Act in such cases.
Kamdar & Co.12 Health Services [Section 65(25a) read with Section 65(105)(zzzzo)] Present position: Service provider is: oHospital oNursing home; or oMulti-specialty clinic. Service recipient is: oEmployee of business entity; or oPerson covered under medical insurance scheme. Taxable services are: Service tax liability triggers only where service provider receives consideration from employer of service recipient or from insurance company Where service recipient is employee of business entity Health checkup Preventive care Where service recipient is covered under medical insurance scheme Health checkup Treatment
Kamdar & Co.13 Health Services [Section 65(25a) read with Section 65(105)(zzzzo)] Following service are out of service tax net : oService provider is person other than hospital, nursing home; or multi-specialty clinic. oTreatment services provided to employee of business entity. oServices for which consideration is directly received from patient (not from employer or insurance company). Proposed change: Service provided by clinical establishment or by a doctor (not an employee of clinical establishment) providing services from such clinical establishment will be liable to tax. Diagnosis, treatment or care for illness, disease, injury, deformity, abnormality or pregnancy will be liable to service tax. The term clinical establishment would mean: oAny hospital, maternity home, dispensary, clinic, sanatorium or an institution. oSuch establishment should have central air conditioning (either in whole or in part); and more than 25 beds for in-patient treatment any time during financial year; or
Kamdar & Co.14 Health Services [Section 65(25a) read with Section 65(105)(zzzzo)] oAny entity (independent entity or part of above referred clinical establishment) carrying out diagnostic or investigative services with the aid of laboratory or other medical equipments. Government hospitals, primary health centre, ESIC hospitals, Municipal hospitals and autonomous medical institute setup under special Act of Parliament would be outside service tax levy. Private hospitals, corporate hospitals, hospitals owned / controlled by charitable institutions will be liable to tax. Establishment not having central air conditioning (either whole or in part) or 25 beds through out the year will not be liable to tax. Service provided to any person will be liable to service tax irrespective of person making payment for such services. Effective tax rate: It is announced that abatement of 50% on the gross value of services will be provided (Refer TRU Clarification No.D.O.F.No.334/3/2011-TRU dated 28.02.2011). Effective tax rate will be 5.15%.
Kamdar & Co.15 Legal Service [Section 65(105)(zzzzm)] Present position: Any advice, consultancy or assistance in any branch of law provided by a business entity to a business entity is liable to service tax. Legal service provided by an individual to any person is out of tax net. Legal service received by an individual from any person (including business entity) is also not liable to service tax. Representation before any court, tribunal or authorities is not taxable.. Proposed change: Services provided by following will be liable to service tax: oa business entity to any person in relation to advice, consultancy or assistance in any branch of law. oany person to a business entity in relation to representation services before any court, tribunal or authority. oan arbitral tribunal to a business entity in respect of arbitration. Following legal services will still be out of service tax net: oService provided by an individual to an individual oService provided by individual to business entity in relation to advice, consultancy or assistance in any branch of law. oRepresentation services provided by a business entity to an individual.
Kamdar & Co.16 Exemptions Provided for Some Service Categories Business Exhibition Service [Section 65(105)(zzo)]: Services provided by an organizer for holding business exhibitions outside India are exempted w.e.f. 01.03.2011 [Notification No. 5/2011 –ST dated 01-03-2011] Transport of Goods by Rail [Section 65(105)(zz)] : Services provided to a person located in India, in relation to transport of goods from a place outside India to a final destination outside India are exempted w.e.f. 01.03.2011 [Notification No. 8/2011– ST dated 01-03-2011] Transport of Goods by Road [Section 65(105)(zzp)]: Services provided to a person located in India, in relation to transport of goods from a place outside India to a final destination outside India are exempted w.e.f. 01.03.2011 [Notification No. 8/2011– ST dated 01-03-2011] General Insurance Services [Section 65(105)(d)]: Insurance service provided under Rashtriya Swasthya Bima Yojana is exempted w.e.f. 01.03.2011 [Notification No. 7/2011 –ST dated 01- 03-2011]
Kamdar & Co.17 Exemptions Provided for Some Service Categories Transport of Goods by Air [Section 65(105)(zzn)]: Services provided to a person located in India, in relation to transport of goods from a place outside India to a final destination outside India are exempted w.e.f. 01.03.2011 [Notification No. 8/2011– ST dated 01-03-2011] Value of air freight as determined under section 14 of the Customs Act for the purpose of charging customs duty will be exempted w.e.f. 01.04.2011 [Notification No. 9/2011 –ST dated 01-03-2011] Tour Operators Services [Section 65(105)(n)]: Service tax paid on services of inter-state or intra-state transportation of passengers in a vehicle bearing contract carriage permit or a tourist vehicle permit for the period 01/04/2000 to 06/07/2009 will be exempted. Application for such refund can be made within six months from the date of enactment of the Finance Bill. Refund will be subject to provisions of Section 11B of Central Excise Act. (Clause 72 of the Finance Bill read with Notification No. 20/2009-ST dated 07/07/2009)
Kamdar & Co.18 Works Contract Service [Section 65(105)(zzzza)] Services provided in respect of construction, completion and finishing of new residential complex or part thereof under Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana are exempted w.e.f. 01.03.2011 [Notification No. 6/2011 –ST dated 01-03-2011] Works contract services classified as airport services and provided within an airport are exempted w.e.f. 01.03.2011 [Notification No. 10/2011–ST dated 01-03-2011] Services provided wholly within a port or other port for construction, repair, alteration and renovation of wharves, quays, docks, stages, jetties, piers and railways are exempted w.e.f. 01.03.2011 (Notification No. 11/2011 –ST dated 01-03-2011). W.e.f. 01.03.2011, Cenvat credit will be restricted to 40% of service tax paid on following input services where input service provider has charged service tax at full rate after claiming Cenvat credit of inputs: Erection, Commissioning and Installation Service Commercial or Industrial Construction Services Construction of Complex Service - Notification No.1/2011-ST dt 01.03.2011 amending Woks Contract Composition Rules
Kamdar & Co.19 Air travel service [Section 65(105)(zzzo)] Presently, Notification No. 26/2010-ST dated 22.06.2010 is granting service tax exemption over specified amount. This notification is amended w.e.f. 01.04.2011 vide Notification No. 04/2011-ST dated 01.03.2011. This enhances service tax liability as explained below: Tax Payable prior to 31.03.2011 Tax Payable on or after 01.04.2011 Domestic travel i)Economy class ii) Other class Lower of Rs.100 or 10% of gross value Lower of Rs.150 or 10% of gross value Lower of Rs.100 or 10% of gross value 10% of gross value International travel i)Economy class ii) Other class Lower of Rs.500 or 10% of gross value Lower of Rs.750 or 10% of gross value 10.30% of gross value
Kamdar & Co.20 Banking service / Foreign exchange broker service [Section 65(105)(zm) / Section 65(105)(zzk)]: Change in Valuation: Rule 2B is introduced in the Valuation Rules w.e.f. 01.04.2011 for determining value of money changing services which are presently taxable under these categories (Notification No. 2/2011- ST dated 01.03.2011). The valuation of service will have to be done as under: The difference between buying / selling rate and RBI reference rate for the currency bought / sold of the day on which transaction was carried out is to be multiplied by units of currency bought / sold. Sr. No. ParticularsForeign Currency units RateTotal Amount In Rs. a.US $ sold$10004545000 b.RBI reference rate$100045.5045500 Value of taxable service (b – a)$10000.50500
Kamdar & Co.21 Banking service / Foreign exchange broker service [Section 65(105)(zm) / Section 65(105)(zzk)]: When RBI reference rate is not available, 1% of the value of money exchanged in Indian Rupee shall be the value. When none of the currencies is Indian Rupee, 1% of the lower of the amount receivable if both the currencies are converted to Indian Rupee at RBI reference rate is to be considered for arriving at the value. Sr.ParticularsUnitsRate Amount In Rs. a.US $ sold$10004545000 b.RBI reference rate--- Value of taxable service 1% of Rs. 45,000/-450 Sr.ParticularsUnitsRate Amount In Rs. a.US $ sold$10004545000 b.GBP purchasedGBP 6107344530 Value of taxable service 1% of 44,530/- (lower of total amount in Rs.) 445.30
Kamdar & Co.22 Banking service / Foreign exchange broker service [Section 65(105)(zm) / Section 65(105)(zzk)]: Change in Composition Rates: Presently Rule 6(7B) of the Rules grants service provider an option to pay the tax at normal rate on the value of service or to pay tax under composition scheme at the rate of 0.25% of gross amount. The said Rule is amended w.e.f. 01.04.2011 to provide for composition rate of 0.1% of gross amount in place of 0.25% (Notification No. 3/2011- ST dated 01.03.2011). Tax working for examples in Para no. 18.1 is tabulated as under: [Note:18.1.3 – Department may treat exchange as buy and sell of foreign currency and include both in transaction value. This is This is debatable issue.] Sr.Transaction Value Value of Service Effective Tax at normal rate @10.30% (including cess) on service value Effective Tax at composition rate @0.103% (including cess) on transaction value 18.1.145,000/- 500/-Rs.51.50Rs.46.35 18.1.245,000/- 450/-Rs.46.35 18.1.389,530/- 445.30/-Rs.45.87Rs.99.22
Kamdar & Co.23 Telecommunication service [Section 65(105)(zzzx)] An explanation is inserted in Rule 5 of Valuation Rules w.e.f. 01.03.2011 providing that the value of taxable service for service provider should be the gross amount paid by service recipient. Consider the following example in respect of SIM card and activation charges: The view was prevalent that value of taxable service for telecom company is Rs. 450/-. This view was affirmed by honorable Mumbai Tribunal in case of Reliance Communications Ltd 2008 (11) S.T.R. 258 (Tri. - Mumbai). Newly inserted explanation clearly provides that value of taxable service for service provider would be Rs. 500/-. This reverses the ratio laid down by Honorable Tribunal in above referred case. An explanation starts with the phrase For the removal of doubts. This might raise the issue whether explanation applies prospectively or retrospectively. Customer paying to distributorRs. 500 Distributors marginRs. 50 Amount received by telecom company from distributorRs. 450
Kamdar & Co.24 Interest and Penalty W.e.f. 01.04.2011, interest for late payment of tax enhanced from 13% to 18% p.a. (Section 75 read with Notification No. 14/2011-ST dated 01.03.2011) Assessee having turnover of Rs. 60 Lacs or less, interest rate for late payment of tax would be @ 15% p.a. Penalty / late fees for delay in filing of return (Section 70 read with Rule 7C) Sr. No. DelayPresent PositionProposed Position 1.First 15 daysRs. 500 2.16 to 30 daysRs. 1000 3.Beyond 30 days Rs. 100/- per day of delay subject to maximum of Rs. 2,000/- Rs. 100 per day of delay subject to maximum of Rs. 20,000/-
Kamdar & Co.25 Interest and Penalty Penalty for late / Non payment of Tax (Section 76): Penalty for suppressing value of taxable services (Section 78): Provisions are made to mitigate penalty U/s 76 and to reduce penalty U/s.78 where assessee captures true and correct position in his records and pays tax and interest before issue of show cause notice or stipulated period. Residuary penalty is increased from Rs.5,000/- to Rs.1,000/- (Section76) Amendments in penalty provisions will be effective from the date to be notified after enactment of Finance Bill, 2011. Present PositionProposed Position Higher of : a) 1% per month of tax payable; or b) Rs. 100 per day of delay. Subject to: Maximum 100% of tax payable. Higher of : a)1% per month of tax payable; or b)Rs. 100 per day of delay. Subject to: Maximum 50% of tax payable. Present PositionProposed Position 100% or 200% of tax sought to be avoided. 100% of tax sought to be avoided. It may be reduced to 50% if tax payer has captured true and correct position in his records.
Kamdar & Co.26 Prosecution Section 89 provides for prosecution for following offences: Provision of service without issue of invoice in accordance with the provisions of Act and Rules. Availment and utilization of Cenvat credit without actual receipt of inputs or input services; Maintaining false books of accounts or failure to supply any information or submitting false information; and Non-payment of amount collected as service tax for a period of more than six months. Prior sanction of Chief Commissioner is mandatory to launch prosecution. Imprisonment prescribed for offence: Involving amount exceeding Rs.50 Lacs – 6 months to 3 years. Other cases – term extending to 1 year. Second and subsequent office – 6 months to 3 years
Kamdar & Co.27 Reclassification of Service under Export / Import Rules Following services are reclassified w.e.f. 01.04.2011 [Notification No. 12/2011 – ST & 13/2011 – ST dated 01.03.2011]. Reclassification will impact export exemption eligibility and reverse charge liability on import of relevant services. SectionServiceExisting Criteria Proposed Criteria 65(105)(zzzzu)Provision of Preferential Location Recipient based Property situs based 65(105)(x)Credit Rating Agency Services Performance based Recipient based 65(105)(y)Market Research Agencys Services Performance based Recipient based 65(105)(zzh)Technical Testing and Analysis Services Performance based Recipient based 65(105) (zzn)Transport of goods by Air Services Performance based Recipient based
Kamdar & Co.28 Reclassification of Service under Export / Import Rules SectionServiceExisting Criteria Proposed Criteria 65(105)(zzp)Transport of goods by Road Services Performance based Recipient based 65(105)(zzs)Opinion Poll ServicesPerformance based Recipient based 65(105)(zzzp)Transport of goods by Rail Services Performance based Recipient based 65(105)(zz)Rail Travel Agents Service Recipient based Performance based 65(105)(zzzzo)Health Check – Up and Treatment Service Recipient based Performance based
Cenvat Credit Rules The important changes pertain to:- Change in the definition of inputs and input services. Scheme for Proportionate credit in cases where output is both taxable as well as exempted from payment of service tax. Changes in Definitions of Inputs and Input Services. The term Input to include, all goods used in a factory by the manufacturer and goods used for providing any output service. Exclusions- petroleum items, any goods used for construction of a civil structure (by a manufacturer as well as a service provider) excepting when they are used in the provision of any of the specified construction services. Kamdar & Co.29
Kamdar & Co.30 food items, goods used in a guesthouse, residential colony, club or recreational facility or a clinical establishment which are primarily meant for the personal use of consumption of the employees. goods which have no relationship whatsoever with the manufacture have also been excluded. Input services The definition of input service under Rule 2(l) has been substituted to impart clarity and to achieve congruence between goods and services so that the services related to any goods excluded from the definition of inputs are also excluded from the definition of input services. For example, goods used for construction have been excluded from inputs while construction services, works contract service, and other specified services in so far as they are used for construction have been kept out of the purview of input services. Similarly, services provided in relation to outdoor catering, health service, membership of a club, life insurance, etc. has been specifically excluded from the category of input service
Cenvat credit cont…. Rule 3(5B) has been amended to require a manufacturer or service provider to pay an amount equivalent to the CENVAT credit taken in respect of inputs or capital goods even where the value of such inputs or capital goods is written off partially before being put to use. Currently, this is required only when the value is written off fully. Scheme of Proportionate credit Rule 6(1): Credit not Available for Exempted Goods (EG) or Services (ES) Rule 6(2): Specific Identification and claim for taxable goods/services- OPTION I.- Take credit for use in taxable goods/services Kamdar & Co.31
Cenvat credit cont.. Rule 6(3)(i): No identification – composite scheme for manufacturers/service providers based on output (ad hoc payment)- OPTION II- Take credit.pay 5% for Exempted goods/services. Rule 6(3)(ii): No identification – Composite scheme for manufacturers/service providers based on input & input services (proportionate payment) – OPTION III- Take credit. Reverse in the proportion of EG-ES / Total. Rule 6(3)(iii): No identification – composite scheme for manufacturers/service providers based on input services (proportionate payment) OPTION-IV ES/Total service. Kamdar & Co.32
Cenvat Credit cont. Other important changes- Services which are granted abatement should be treated as exempted services to the extent of the value of abatement. Services which are under the composition option should be treated as taxable services to the extent of the corresponding value of taxable services. Trading should be considered as exempted services to the extent of the difference in the sale price and purchase price. The concept of specified services under Rule 6(5) is removed. Kamdar & Co.33
Kamdar & Co.34 Point of Taxation Rules, 2011 (POTR) Point of Taxation (POT) means the time when service shall be deemed to have been provided. POTR prescribes the point of taxation. POTR comes into force w.e.f. 01.04.2011. POTR does not apply to invoices issued before 01.04.2011 [Rule 9 of POT]. Due date for tax payment linked with point of taxation. Continuous supply of service, POT will be earlier of: Payment due date as per contract. Date of issue of invoice. Date of receipt (including advance receipt). In transaction with associated enterprises, POT will be earlier of: Date of receipt (payment in case of reverse charge mechanism). Date of invoice. Date of debit / credit in books of account of person liable to pay tax.
Kamdar & Co.35 Point of Taxation Rules, 2011 (POTR) In case of royalty for copyrights, patents, trademark and designs (where consideration is not ascertainable at the time of service performance), POT will be earlier of: Issue of invoice. Date of receipt by service provider. In all cases (other than those referred above), POT will be earlier of: Date of providing service. Date of issue of invoice. Date of receipt (including receipt of advance). For import of services (where tax is payable service recipient U/s. 66A), POT will be earlier of: Date on which invoice is received. Date of payment. This does not apply to import from associated enterprise and import of copyright, patents, trademark and design services. New service (other than continuous service), tax is not payable if: Invoice raised and payment received before effective date; or Payment received and invoice raised within 14 days from effective date.
Kamdar & Co.36 Point of Taxation Rules, 2011 (POTR) POT in case of change of tax rate: Provision of service Date of Invoice Date of payment POT Before rate change After rate change Invoice date or payment date, whichever is earlier Before rate change After rate change Date of invoice Before rate change After rate change Before rate change Date of payment After rate change Before rate change After rate change Date of payment After rate change Before rate change Invoice date or payment date, whichever is earlier After rate change Before rate change Date of invoice
Changes in Central Excise Section !1A 11AA and Section 11AC redrafted Demand, Penalty and interest In cases involving fraud, collusion, willful misstatement, or suppression of facts – mandatory penalty reduced from 100% to 50 % of the duty payable if transactions are found recorded in specified records. At present if duty and interest is paid within 30 days of the Order, penalty equal to 25% of duty is levied. Now If duty and Interest is paid before issue of Show Cause Notice, the penalty would be equal to one percent per month not exceeding 25% of duty. Kamdar & Co.37
Demand, Interest, penalty cont----- At present if Appellate Authority, Tribunal, or Court concludes that charges of fraud suppression etc is not proved and the demand fails. Now in such cases, the duty will be determined as if the original Show Cause Notice is issued for one year and duty will be payable for one year. At present,in case duty short paid is deposited with interest voluntarily interest is payable for the period from 1 st date of the month succeeding the month on which duty aught to have been paid and in case duty short paid is deposited after determination by the CEO, interest is payable from the expiry of three months from the date of determination. Now in all the cases, interest will be payable from the date on such duty becomes due to the date of actual payment. Kamdar & Co.38
First Charge Section 11E inserted Create first charge on the property of defaulter in favour of Excise Department subject to provisions of Companies Act, 1956,the Recovery of Debt Due to Banks and Financial Institutions Act,1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002. Kamdar & Co.39
Excise Rates In respect of 130 products Exemption from the central excise duty is withdrawn. Duty of one percent ad valorem is imposed on these items. No Cenvat credit of duty paid on input and input services is allowed. Credit of duty paid on items that has been subject to the levy of 1% would not be available to a manufacturer or a service provider who use them. Significant goods which will be subject to 1% ad valorem duty are- Ready –mix concrete (RMC), Coffee or tea pre- mixes, Sauces, ketchup, ready to eat packaged foods, Ink for fountain pen, ball pen and drawing instruments, Tooth powder, mobile hand sets, branded articles of jewellery, recorded audio CD, video CD, and DVD, bicycles, spectacles and spectacle lenses. Kamdar & Co.40
Excise rates ----- Excise duty at the rate of 10% is levied on - Readymade garments and made up articles manufactured or sold under a brand name. SSI exemption however, will be available. The Tariff value is fixed at 60% of RSP. The present system of optional payment of excise duty will continue for unbranded readymade garments and textile made ups. Excise duty at the rate of 10% is levied on - Jewellery, made of gold, silver or the precious metal and articles of these metals manufactured or sold under brand name. Full exemption from excise duty is retained on un- branded products. Kamdar & Co.41
Kamdar & Co.42 Words of Caution Views expressed are the personal views of faculty based on his interpretation of law. Application of various provisions and its implications will vary on facts of the case and law prevailing on relevant time. Members are advised to be cautious while using the contents of this presentation. This educational meeting is arranged with a clear understanding that neither Faculty nor Study Circle will be responsible for any error, omission, commission and result of any action taken by a member or anyone on the basis of this presentation.