1. Presentation on Service Tax
By CA Prashant Kumar Barik

2. Point of taxation rules Place of provision of service
HIGHLIGHTS
Rate of service tax : Rate of Service tax 12% and E.Cess+SHEC=3% on 12% resulting to total of 12.36%
Point of taxation rules
Place of provision of service
Negative list of services
Declared list of services
Exempted list of services
Changes in Reverse Charge Mechanism
Due date for Payment of Service tax and interest thereon for delay in payment
Penalties under service tax

3. Point of Taxation(POT)
POT means the point in time when a service shall be deemed to have been provided.
POT to be invoice date(Invoice has to be issued within a period of 30 days, if invoice not issued within 30 days the POT will be deemed to be the date of provision of service) or payment date whichever is earlier,
POT is relevant for payment of service tax.
Date of payment of service tax shall be earlier of the below dates-
Date when the payment is entered into books of account OR
Date on which the same is credited in the bank account of the person liable to pay service tax.

4. Relevant date for ROT/VOS/ROE
The rate of service tax/Value of Service/Rate of exchange shall be applicable at the time when the service has been-
Provided OR
Agreed to be provided
Note: ROE means the rate of exchange referred in Custom Act 1962
Note: In case of some companies the basic value import of service invoice can be accounted as per the average rate of exchange rate keyed into SAP and service tax portion have to be accounted as per Custom exchange rate

5. Example on Point of Taxation
Invoice issued for service on
Cheque received/accounted in BOA on
Amount on cheque credited in bank account
On the above case the point of tax will be (earlier of account in books OR credit in Bank account)
If on the above case the service was not taxable/taxable at a different rate on the date of provision of service i.e. on and the same came under service tax ambit on

6. Example on Point of Taxation
The date of the payment of tax shall be the date of credit in the bank account of the person liable to pay tax if the below 2 conditions are satisfied-
The credit in the bank account is after 4 working days from the date of change in rate of tax/new levy of the service and
The payment is made by way of an instrument (Cheque/DD etc) which is credited to the bank account.
Continuing to the example if the service is came into the ambit of service tax on the point of tax/date for payment of tax shall be (since the bank account is credited after 4 WD from the new levy i.e WD)

7. A Practical Example
SE USA raised a invoice to SE India towards professional fee for commissioning energy operation in India for USD
The invoice had accounted in Aug 2013 when the average exchange rate for USD keyed into SAP was and Custom exchange rate was
Since system will not allow 2 exchange rate in one combined entry-
The basic value has accounted in one entry(J.E No-1) and service tax liability and Service tax credit accounted in a separate entry(J.E No-2)(Since invoice related to plant activity 100% credit taken)

8. A Practical Example
J.E No-1
J.E No-2

9. POT example birds eye view

10. Taxable Territory for service tax
Exclusive Economic Zone(EEZ) means 200 nautical miles from the coastal baseline
Note:(1 Nautical mile =1.852 KM)

11. Main rule for taxability

12. Place of provision of service
Place of service is the place where the services are-
Provided OR
Deemed to have been provided OR
Agreed to be provided OR
Deemed to have been agreed to be provided
Note: Services provided under the territory of non taxable jurisdiction is not affected for the above provision.
Point to remember: If Service provider is situated in non taxable territory however the service receiver is in taxable territory then reverse mechanism will apply resulting to liability to pay service tax goes to service receiver

13. Example of Place of provision of Service
Mr. Rakesh(service provider) situated in Bangalore provided some service to Mr. Sunil(Service receiver) situated in Delhi.
In the above case place of provision of service will be Delhi. The liability of service tax goes to Mr. Rakesh(Service Provider)
Mr. Vijay(service provider) situated in Bangalore provided some service to Mr. Mohan(service receiver situated in J&K(Non taxable territory)
In the above case since J&K is coming under non taxable territory reverse mechanism of service tax will not apply resulting to no one is liable to pay service tax
Note: Service tax will be exempted if Service is provided in a non taxable territory(for example J&K) whether or not either service provider OR service receiver is situated in taxable/non taxable territory

14. Rationale for negative list

15. Rationale for Negative List…
First Concept Paper for Public Debate (August 2011)
“There are advantages in moving towards negative list at an earlier time in order to gain useful experience in its implementation and minimize the impact of the mammoth changes that GST may usher”
Revised Concept Paper on Taxation of Services based on Negative List (November 2011)
“Introduction of Negative List at an earlier stage will pave the way for the smooth transition to the GST, and significantly ease the challenges arising out of implementing the GST.”

16. …Rationale for Negative List
FM’s speech (2012):
“At the end of June this year, this tax will attain adulthood by completing 18 years. It is therefore time to shift gears and accelerate ahead. However, service tax needs to confront two important challenges to sustain the journey. These are:
The share of services in taxes remains far below its potential. There is a need to widen the tax base and strengthen its enforcement;
Service Tax law is complex and sometimes avoidably different from Central Excise. We need to bring the two as close as possible in the light of our eventual goal of transition to GST.”

17. Enactment of Finance Act, 2012
Provisions in Finance Bill enacted as Finance Act, on May 28, 2012
Negative list provisions to come into force from a date to be notified(i.e 01 July 2012)
The Legislative scheme for the levy of Service Tax stands overhauled

18. Approach – Selective Vs Negative List
Negative List – all services are taxable
Selective Approach – selected services are taxable

19. Negative list of Services-17 Nos
Services provided by Government or local authority
Services provided by Reserve Bank of India
Services by a foreign diplomatic mission located in India
Services relating to agriculture
Trading of goods
Processes amounting to manufacture or production of goods
Selling of space or time slots for advertisements other than advertisements broadcast by radio or television

20. Negative list of Services-17 Nos
Access to a road or a bridge on payment of toll charges
Betting, gambling or lottery
Entry to Entertainment Events and Access to Amusement Facilities
Transmission or distribution of electricity
Specified services relating to education
Services by way of renting of residential dwelling for use as residence
Financial sector

21. Negative list of Services-17 Nos
Service relating to transportation of passengers
Service relating to transportation of goods
Funeral, burial, crematorium or mortuary services including transportation of the deceased

22. Declared list of services-9 Nos
Renting of immovable property
Construction of a complex, building, civil structure or a part thereof
Temporary transfer or permitting the use or enjoyment of any intellectual property right
Services in relation to information technology software
Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act

23. Declared list of services-9 Nos
Transfer of goods without transfer of right to use such goods
Activities in relation to delivery of goods on hire purchase or any system of payment by instalments
Service portion in the 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 a part of the activity.

24. Exempted list of Services-31 Nos
Services provided to the United Nations or a specified international organization
Health care services by a clinical establishment
Services by a veterinary clinic
Services by charitable institutions.
Religious services-General public and religious place
Services provided to any person other than a business entity by
an individual as an advocate
a person represented on and as arbitral tribunals

25. Exempted list of Services-31 Nos
Services by way of technical testing or analysis
Services by way of training or coaching in recreational activities relating to arts, culture or sports.
Services in relation to
mid day meals scheme
transportation of students or staff of an educational institution.
Admission to the education institutions
Services received by a recognized sports body
Services by way of sponsorship of tournaments or championships organised by
national sports federation
association of Indian Universities
central Civil Services Cultural and Sports Board

26. Exempted list of Services-31 Nos
Services provided to the Government/local authority/ charitable institution by way of erection, construction, maintenance, repair, alteration, renovation or restoration
Services by way of erection or construction of original works pertaining to airport and other select infrastructure facility
Temporary transfer/permitting the use or enjoyment of a copyright
Services by a performing artist in classical art
News agency services by independent journalist, Press Trust of India or United News of India

27. Exempted list of Services-31 Nos
Services by way of renting of a commercial accommodation having declared tariff of a room below Rs 1000 per day or equivalent
Services provided in relation to serving of food or beverages by a restaurant other than:
those having the facility of AC OR Central air heating conditioner
Services provided by a goods transport agency by way of transportation of perishable fruits and vegetables where gross amount for single goods carriage does not exceed Rs 1500 and where gross amount for a single consignee does not exceed Rs 750

28. Exempted list of Services-31 Nos
Services by way of giving on hire to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers
Transport of passengers whose journey by air embarking or terminating in NESA states
Services by way of motor vehicle parking to general public excluding leasing of space to an entity for providing such parking facility
Services provided to Government/a local authority by way of   repair of a ship, boat or vessel,effluents and sewerage treatment and waste disposal plant or any services relating to water for drinking purpose

29. Exempted list of Services-31 Nos
Services of general insurance business provided for development of general public
Services provided by an incubatee up to a total business turnover of 50 Lakh rupees in a financial year
Service by an unincorporated body(trade union) or an entity registered as a society to own members by way of reimbursement of charges or share of contribution
Services by way of slaughtering of bovine(an animal of the cattle group, which also includes buffaloes and bison) animals
Services by way of transportation by rail or a vessel from one port in India to another port of essential commodities

30. Export of Services..
Transaction to comprise export of service if…

31. If payment not received in 6 months…
Service will remain non-taxable, being provided in a non-taxable territory
…but input tax credits will need to be reversed ……extended period permissible
But if payment received before the period allowed it will comprise exports and it will be exempted from service tax

32. Reverse Charge (Tax Shift)
Normally, service tax is payable by person providing the service
Section 68(2) makes provision for reverse charge i.e. making person receiving the service liable to pay tax
Provision can be made that part of tax will be paid by service receiver and part by service provider(partial reverse charge mechanism)
Case Study: Service receiver and provider can enter into an agreement in regards to who will pay the service tax when reverse mechanism is applicable(RINL Vs Dewan chand Ramsaran)(SC judgment)

33. Issues relating to reverse charge
The small service provider exemption of Rs 10 Lakhs not available when tax is payable under reverse charge
Case Study:ABC firm is a small service provider(Taxable service does not exceed 10 lakh) receives some taxable service from Mr. A(Situated in J&K) cannot deny to pay service tax on reverse mechanism.
Cenvat credit cannot be used to pay tax by service receiver. Service tax as to be paid by cash only.
Once paid, Cenvat credit can be taken if it is his eligible ‘input service’

34. Billing by service provider
Service provider should charge only his part of service tax
Service receiver to pay service tax of his part by GAR-7 challan
Service receiver liable for only his part and not entire amount, even if service provider does not charge his portion of service tax

35. Reverse charge with condition of non-availability of Cenvat
In some services (e.g. GTA, renting of motor vehicle designed to carry passengers), the abatement is subject to condition of non-availment of Cenvat credit by service provider (not by service receiver)
A certificate should be obtained from the service provider about non-availment of Cenvat credit

36. Reverse charge mechanism in a nutshell

37. Reverse charge mechanism in a nutshell

38. Reverse charge mechanism in a nutshell

39. Due date for payment of service tax and interest for delay thereon

40. Penalty for delay in filing of return