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-By CA R S PAVAN KUMAR B.Com, FCA EXPORT / IMPORT OF SERVICES UNDER NEGATIVE LIST BASED TAXATION 1.

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Presentation on theme: "-By CA R S PAVAN KUMAR B.Com, FCA EXPORT / IMPORT OF SERVICES UNDER NEGATIVE LIST BASED TAXATION 1."— Presentation transcript:

1 -By CA R S PAVAN KUMAR B.Com, FCA EXPORT / IMPORT OF SERVICES UNDER NEGATIVE LIST BASED TAXATION 1

2 ►Until June 30, 2012 the levy of service tax was applicable only on 119 notified services. ►With effect from July 1, 2012, service tax is being levied on all services unless they are covered by any of the entries in the negative list or are otherwise exempted. ►The Export of services and Import of service Rules notified under the earlier regime have been scrapped and place of provision of services has been introduced ►Rule 6A under the Service tax Rules 1994 has been introduced to provide the conditions required to be satisfied for qualifying as an export of service. Service Tax based on Negative List -By CA R S PAVAN KUMAR B.Com, FCA 2

3 Following are the essentials to consider a service as exported: ►The provider of service is located in the taxable territory, ►The recipient of service is located outside India, ►The service is not a service specified in Section 66D of the act, ►The place of provision of the service is outside India, ►The payment for such service has been received by the provider of service in convertible foreign exchange, and ►The provider of service and recipient of service are not merely establishments of a distinct person in accordance with the item (b) of explanation 3 of Section 65B(44) of the act. How to determine exports – Rule 6A -By CA R S PAVAN KUMAR B.Com, FCA 3

4 Section 66B ►There shall be levied a tax(hereinafter referred to as “service tax”) ►At the rate of twelve percent ►On the value of all services(other than those covered under negative list) ►Provided or agreed to be provided in the taxable territory ►By one person to another and ►Collected in such a manner as may be prescribed Charging Section -By CA R S PAVAN KUMAR B.Com, FCA 4

5 Taxable Territory The territory to which Finance Act, 1994 shall apply Finance Act, 1994 extends to whole of India except J&K. Taxable Territory = India India Means= Clauses (2) and (3) of Article 1 of the Constitution. Its territorial waters, continental shelf(CS), exclusive economic zone (EEZ)or any other maritime zone as defined in the Maritime Zones Act, 1976; Seabed and the subsoil underlying the territorial waters; The air space above its territory and territorial waters; and The installations, structures and vessels located in the CS and the EEZ of India, for the purpose of extraction or production of mineral oil and natural gas and supply there of; India Means= Clauses (2) and (3) of Article 1 of the Constitution. Its territorial waters, continental shelf(CS), exclusive economic zone (EEZ)or any other maritime zone as defined in the Maritime Zones Act, 1976; Seabed and the subsoil underlying the territorial waters; The air space above its territory and territorial waters; and The installations, structures and vessels located in the CS and the EEZ of India, for the purpose of extraction or production of mineral oil and natural gas and supply there of; -By CA R S PAVAN KUMAR B.Com, FCA 5

6 ►Service qualifying as export service is not leviable to service tax ►Any service provided not qualifying as an export service but provided outside the taxable territory is also not is not leviable to service tax Implication -By CA R S PAVAN KUMAR B.Com, FCA 6

7 Following are the essentials to consider a service as exported: ►The provider of service is located in the taxable territory, ►The recipient of service is located outside India, ►The service is not a service specified in Section 66D of the act, ►The place of provision of the service is outside India, ►The payment for such service has been received by the provider of service in convertible foreign exchange, and ►The provider of service and recipient of service are not merely establishments of a distinct person in accordance with the item (b) of explanation 3 of Section 65B(44) of the act. How to determine exports – Rule 6A -By CA R S PAVAN KUMAR B.Com, FCA 7

8 Determination of Location Whether registered under service tax laws? YES NO The Premise covered under such registration The location of business establishment / fixed establishment / establishment most directly concerned with the provision of the service The location of business establishment / fixed establishment / establishment most directly concerned with the provision of the service -By CA R S PAVAN KUMAR B.Com, FCA Usual place of residence NO 8

9 Following are the essentials to consider a service as exported: ►The provider of service is located in the taxable territory, ►The recipient of service is located outside India, ►The service is not a service specified in Section 66D of the act, ►The place of provision of the service is outside India, ►The payment for such service has been received by the provider of service in convertible foreign exchange, and ►The provider of service and recipient of service are not merely establishments of a distinct person in accordance with the item (b) of explanation 3 of Section 65B(44) of the act. How to determine exports – Rule 6A -By CA R S PAVAN KUMAR B.Com, FCA 9

10 Following are the essentials to consider a service as exported: ►The provider of service is located in the taxable territory, ►The recipient of service is located outside India, ►The service is not a service specified in Section 66D of the act, ►The place of provision of the service is outside India, ►The payment for such service has been received by the provider of service in convertible foreign exchange, and ►The provider of service and recipient of service are not merely establishments of a distinct person in accordance with the item (b) of explanation 3 of Section 65B(44) of the act. How to determine exports – Rule 6A -By CA R S PAVAN KUMAR B.Com, FCA 10

11 Rules for determining the place where the services are provided ►Follows the global practice of consumption based taxation ►Rule 3: Place of provision generally ►Rule 4: Place of provision for performance based services ►Rule 5: Place of provision for immovable property related service ►Rule 6: Place of provision of services relating to events ►Rule 9: Place of provision of specified services ►Rule 10: Place of provision of goods transport services ►Rule 11: Place of provision of transportation services ►Rule 12: Place of provision of services provided on board a conveyance Place of Provision of Services -By CA R S PAVAN KUMAR B.Com, FCA 11

12 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA Provided on Board on a conveyance The place of first scheduled departure of that conveyance(any conveyance) Movies, Music, Entertainment on demand Internet services Health & Fitness Services Some Examples: The place of provision for said services need not be determined if it is provided as part of the fare Rule 12 12

13 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA Goods Transportation Service The place of destination of goods (excluding mail & courier), however in case of GTA, the location of person liable to pay tax The place of destination of goods (excluding mail & courier), however in case of GTA, the location of person liable to pay tax Passenger Transportation The place where the passenger embarks for a continuous journey Rule 10 Rule 11 13

14 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA Specified Services The location of service provider: Following are the specified services: ►Services of following companies to its account holders: ►Banking company ►Financial institution ►NBFC ►Hiring a means of transport upto a period of one month ►Online information and database retrieval services ►Intermediary Service Following are the specified services: ►Services of following companies to its account holders: ►Banking company ►Financial institution ►NBFC ►Hiring a means of transport upto a period of one month ►Online information and database retrieval services ►Intermediary Service Rule 9 14

15 Online Database and Retrieval Services -By CA R S PAVAN KUMAR B.Com, FCA Services provided in relation to online information and database access or retrieval or both, in electronic form through computer network, in any manner. ►Web based services providing trade statistics, legal and financial data, matrimonial services ►Social networking sites ►Services providing access or download of digital content ►Web based services providing trade statistics, legal and financial data, matrimonial services ►Social networking sites ►Services providing access or download of digital content Examples ►Sale of goods ►Telecommunication Services ►Services capable of being rendered over internet. Eg: Consultancy ►Repair of software or hardware ►Internet Access Service ►Sale of goods ►Telecommunication Services ►Services capable of being rendered over internet. Eg: Consultancy ►Repair of software or hardware ►Internet Access Service Exclusions 15

16 Intermediary Service -By CA R S PAVAN KUMAR B.Com, FCA Intermediary means a broker, an agent or any other person who arranges or facilitates a provision of a service between two or more persons but does not include the service provider himself. ►Travel Agent ►Recovery Agent ►Commission Agent for any service ►Travel Agent ►Recovery Agent ►Commission Agent for any service Examples 16

17 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA Events The place where the event is actually held Admission to/organization of: ►Cultural, Artistic ►Sporting, Scientific ►Educational, Fair ►Entertainment Events ►Conference ►Exhibition, etc & ►Services ancillary to above Admission to/organization of: ►Cultural, Artistic ►Sporting, Scientific ►Educational, Fair ►Entertainment Events ►Conference ►Exhibition, etc & ►Services ancillary to above Specifically Included Rule 6 17

18 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA Immovable Property The Place where the immovable property is located or intended to be located ►Estate Agents ►Hotel, Guest House, Inn or Camp Site Accommodation ►Renting ►Construction ►Services by Experts ►Estate Agents ►Hotel, Guest House, Inn or Camp Site Accommodation ►Renting ►Construction ►Services by Experts Specifically Included Rule 5 18

19 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA Performance Based Service The location where the services are actually performed Services in respect goods that are required to be made physically available by Receiver of Service to Provider of Service in order to provide service 1 Example: Repair service, testing service, storage service, etc If the above mentioned services are provided from a remote location by way of electronic means, then the place of provision of service shall be the location where goods are situated. The above mentioned criteria shall not apply in case of goods imported temporarily into India for repairs / reconditioning for re-export Rule 4(a) 19

20 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA The services provided to an individual which require the physical presence of the receiver or his agent for provision of service 2 Example: Health & Fitness, Commercial Training, Photography Rule 4(b) 20

21 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA In General The Location of Recipient of Service Management Consultancy Services Credit Rating Catering Service Some Examples: Rule 3 21

22 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA Provider and Recipient in the same taxable territory The location of recipient of service Rule 8 An Example: An aircraft of Company ABC develops a technical snag in UK, hence Company XYZ deputes its engineers in UK: Rule 8: POP is India An Example: An aircraft of Company ABC develops a technical snag in UK, hence Company XYZ deputes its engineers in UK: Rule 8: POP is India More than one location (Rules 4,5,6) The place where the greatest proportion of service is provided. Rule 7 22

23 Place of Provision of Service -By CA R S PAVAN KUMAR B.Com, FCA Order of Application The rule that occurs later among the rules that merit equal consideration. Rule 14 An Example: An architect based in Mumbai provides his service to an Indian Hotel Chain located in New Delhi to provide his service to newly acquired property in Dubai Rule 4: POP is Dubai | Rule 8: POP is New Delhi Rule 14: POP is New Delhi An Example: An architect based in Mumbai provides his service to an Indian Hotel Chain located in New Delhi to provide his service to newly acquired property in Dubai Rule 4: POP is Dubai | Rule 8: POP is New Delhi Rule 14: POP is New Delhi 23

24 Following are the essentials to consider a service as exported: ►The provider of service is located in the taxable territory, ►The recipient of service is located outside India, ►The service is not a service specified in Section 66D of the act, ►The place of provision of the service is outside India, ►The payment for such service has been received by the provider of service in convertible foreign exchange, and ►The provider of service and recipient of service are not merely establishments of a distinct person in accordance with the item (b) of explanation 3 of Section 65B(44) of the act. How to determine exports – Rule 6A -By CA R S PAVAN KUMAR B.Com, FCA 24

25 Convertible FE – Some Issues -By CA R S PAVAN KUMAR B.Com, FCA According to Rule 6(8) of CCR, 2004 EOS will be considered as exempt service Consequences of not repatriating the funds in CFE or within the time limit allowed by RBI(6 months): Reversal of CENVAT Credit on account of exempt service Following issues will arise: What should be the classification of service while filing ST3? EOS or Exempt? Whether a separate refund application needs to be filed for refund of credit reversed or can the exporters suo moto avail the CENVAT Credit? Following issues will arise: What should be the classification of service while filing ST3? EOS or Exempt? Whether a separate refund application needs to be filed for refund of credit reversed or can the exporters suo moto avail the CENVAT Credit? 25

26 Following are the essentials to consider a service as exported: ►The provider of service is located in the taxable territory, ►The recipient of service is located outside India, ►The service is not a service specified in Section 66D of the act, ►The place of provision of the service is outside India, ►The payment for such service has been received by the provider of service in convertible foreign exchange, and ►The provider of service and recipient of service are not merely establishments of a distinct person in accordance with the item (b) of explanation 3 of Section 65B(44) of the act. How to determine exports – Rule 6A -By CA R S PAVAN KUMAR B.Com, FCA 26

27 ►Availability of CENVAT Credit of Excise Duty / Service Tax / Additional Customs Duty paid on inputs / input services used in the provision of Export of Service ►Refund of Unutilised CENVAT Credit or Rebate ►Rebate of service tax or duty paid on input services or inputs used in providing such service ►Incentive schemes introduced by Services Export Promotion Council Export of Services - Benefits -By CA R S PAVAN KUMAR B.Com, FCA 27

28 Notification No. 27/2012 – CE(N.T.) ►Certain Conditions and Limitations ►Only 1 refund claim per quarter (period of 3 months from 01 st April) ►Refund shall not exceed the balance lying in the CENVAT credit register as at the end of quarter or at the time filing application w.e.l ►A debit to the CENVAT credit register ►In case the refund sanctioned is lesser than the claim, then corresponding credit to the register. ►Submission of application in Form A to CCEx or DCEx ►Time limit = time limit under Section 11B of CEA, 1944 ►Refund claim supported by certificate of statutory or other auditor in Form A1. Refund of CENVAT Credit – A Glimpse -By CA R S PAVAN KUMAR B.Com, FCA 28

29 Notification 39/2012 – Service Tax ►Certain Conditions and Limitations: ►Service has been exported in terms of Rule 6A ►All the duties, service tax and cess has been paid ►No CENVAT Credit has been claimed ►File declaration with ACCEx or DCEx with specifiying description, value, amount of service tax & cess to be used in EOS ►Verification of declaration by the ST Authorities ►File of rebate claim in Form ASTR -2 after the service has been exported Rebate of Service Tax – A Glimpse -By CA R S PAVAN KUMAR B.Com, FCA 29

30 ►Taxable service exempt from whole of service tax ►Service on which no service tax is leviable ►Services whose part of the value is exempted by on the condition that no CENVAT Credit shall be availed on inputs and input services (Notification 01/2011 – C.E.) ►Excluding services exported in terms of Rule 6A of STR, Definition of Exempt Service -By CA R S PAVAN KUMAR B.Com, FCA 30

31 ►Import of Services Rules, 2005 is now redundant ►Any service provided from outside the Taxable Territory and received by a person within the Taxable Territory, then recipient is liable to pay service tax – Notification No 30/2012 Import of Services -By CA R S PAVAN KUMAR B.Com, FCA 31

32 Case Study 1 -By CA R S PAVAN KUMAR B.Com, FCA Company ABC 1: Contract for providing on call support services in relation to products of ABC Outside India India Company XYZ Clients of ABC 1 2: XYZ to provide on call support services to clients of ABC located outside India 2 32

33 Case Study 2 -By CA R S PAVAN KUMAR B.Com, FCA 1: ABC sends drug samples for testing to XYZ at its facility in India 2: XYZ conducts tests and provides reports to ABC Company ABC Outside India India Company XYZ

34 Case Study 3 -By CA R S PAVAN KUMAR B.Com, FCA 1: Contract for supply of manpower by XYZ for development of software under the direction of ABC 2: Manpower deployed at the facility of XYZ in India Company ABC Outside India India Company XYZ Manpower of XYZ

35 Case Study 4 -By CA R S PAVAN KUMAR B.Com, FCA Situation 1: The goods sent by ABC to XYZ for repairs Company ABC Outside India India Company XYZ 1 35

36 Case Study 5 -By CA R S PAVAN KUMAR B.Com, FCA Situation 1: The goods were repaired remotely by Company XYZ Company ABC Outside India India Company XYZ 1 Server 36

37 BBB Parent BBB Parent AAA-X Subsidiary AAA-X Subsidiary AAA-X Subsidiary AAA-X Subsidiary BBB-X Subsidiary BBB-X Subsidiary BBB-X Subsidiary BBB-X Subsidiary AAA Parent AAA Parent Agreement 2 [Service 1] Agreement Framework Outside India Country Y Service 2 Agreement 3 Agreement 4 Service 3 Outside India Country X Actual Rendition Case Study 6 37

38 BBB Parent BBB Parent AAA-X Subsidiary AAA-X Subsidiary AAA-Y Subsidiary AAA-Y Subsidiary BBB-X Subsidiary BBB-X Subsidiary BBB-Y Subsidiary BBB-Y Subsidiary AAA Parent AAA Parent Country X Service 1 Service 2 Service 3 Service 4 Service 5 OutsideIndia Outside India India Actual Rendition Outside India Country Y Case Study 7 38

39 ? Questions? -By CA R S PAVAN KUMAR B.Com, FCA 39

40 Thank You Mobile: Phone: 080 – /


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