CERTIFICATE COURSE ON INDIRECT TAXES – SERVICE TAX by g. natarajan advocate, swamy associates

 Exemption Notifications under Section 93 of the Finance Act,  Exclusion in the coverage of the levy itself. Eg. Commercial or industrial construction service. Works Contract Service. (roads, railways, port, airport, transport terminal, bridges, tunnels & dam) Construction of residential complex service (personal use). Renting of immovable property service. (vacant land, residential, parking, sports, circus, etc.) BAS / Packaging Services (manufacture)  Abatements. MODES OF EXEMPTIONS

SOME IMPORTANT EXEMPTION NOTIFICATIONS

Notification No. 06/05-ST dated  Intended to exempt small service providers.  Present limit- aggregate value not exceeding Rs.10 lakhs in any financial year.  Not applicable to – services provided under brand name & value of services under reverse charge. Conditions  Option once exercise cannot be withdrawn in a financial year.  No credit on inputs, input services and capital goods.  Previous year turnover to be less than Rs. 10 lakhs.

Notification No. 12/03-ST dated Scope  Exemption to value of goods and materials sold by service provider to recipient during the course of provision of service; ( Eg- authorised service station service). Conditions  Documentary proof indicating value of goods and materials.  Not to avail credit of excise duty paid on such goods and materials.  in case of availment of credit, reversal of same before sale to service recipient. Contra : Decision of LB in Aggarwal Colour Advance Photo System vs. CCE STR 608 (Tri-LB).

Notification No. 17/2011-ST dated  Exemption to taxable services received by unit/developer of SEZ. (Earlier governed by 17/2002, 4/2004 & 9/2009) Conditions  Exemption for ST paid on input services (U/S.66 & 66A) used for authorised operations.  Ab inito exemption for services wholly consumed inside SEZ. Provisions of Export of Service Rules, 2005 to be referred to.  Exemption vide refund for services not wholly consumed in SEZ.  Time limit – one year from date of payment to service provider.  No credit on input services.

Notification No. 8/2005 -ST dated  BAS - Exemption to goods produced on jobwork. Conditions  Raw materials /semi finished goods to be supplied by client.  Goods to be returned to client for use in or in relation to manufacture of excisable goods.  Such final products are liable for appropriate duty of excise.  If production of goods by job worker amounts to manufacture u/s 2 (f) of Central Excise Act, 1944, there is no levy at all.

Notification No. 13/ ST dated  BAS - Exemption to commission agents.  Effective from  Scope restricted to “agricultural produce” from

Notification No. 24/2007 -ST dated  Exemption to component of property tax while paying service tax on renting of immovable property service. Conditions  Interest, penalty etc paid to local bodies on account of delayed payment of property tax not eligible for deduction.  When period for which property tax paid is different from period for which service tax is payable, proportionate property tax to be calculated for deduction.  Rule 6 (4c) - Bonanza for landlords.

Notification No. 34/ ST dated  GTA - Exemption for freight upto Rs.1,500 / Rs.750.

Notification 52/11 dated ST Exemption for exporters.  Earlier Notification 41/2007, Notification 17/2009.  Now replaced by Notification 52/2011.  EDI Refund as per scheduled rate or actual refund.  Time limit for filing refund – one year from date of export.  Notification 18/2009 for commission agent services / GTA services.

Notification No. 30/ ST dated  Health Services – Limited taxability from  Proposed expansion in  Volte facie due to “misery tax” campaign.

Notification No. 53/ ST dated  Information Technology Services – Packaged Software.  Subject to payment of ED / CVD.  Parallel exemption under ED / CVD, if ST is payable.

Miscellaneous Exemptions.  Services provided to United Nations or an international organisation – Notification No. 16/02-ST dated  Services provided or to be provided by Technology business incubator (TBI) Science & Technology Entrepreneurship Park (NSTEDB) – Notification No. 09/07-ST dated  Services provided for official use of foreign diplomatic mission or consular post in India - Notification No. 33/07-ST dated  Services provided for personal use or for use of family members of diplomatic agents or career consular offices posted in foreign diplomatic missions or consular post in India - Notification No. 34/07-ST dated

ABATEMENTS

Notification No. 01/2006-ST dated Scope  Abatement to various taxable services;  Intention to exclude value of goods transferred in course of provision of service. Conditions  No credit of duty paid on inputs and capital goods and service tax paid on input services used for providing taxable service;  Not to avail benefit of Notification No. 12/03-ST dated  Inclusion of value of materials – construction / ECI.  Implication under Rule 6 of CCR, 2004.

EXPORT OF SERVICES

Export benefits under Service tax – background PERIODRELEANT PROVISION CONDITIONS TO AVAIL BENEFIT to Notf. 2/99-ST dated Exemption to all taxable services; Payment in convertible foreign exchange to Notf. 6/99- ST dated Exemption to all taxable service; Payment in foreign exchange; Payment shall not be repatriated from or sent outside India to Circular 56/5/2003- ST dated No ST on exports; to Notf. 21/03-ST dated Exemption to all taxable service; Payment in foreign exchange; Payment shall not be repatriated from or sent outside India From Export of Service Rules, Condition based exemption to all services.

Export of Service Rules 2005 Export of Services Export without payment of tax. Rule 4 Export paying tax and claim rebate of tax paid on output service/ input services. Rule 5. Notification 11 & 12/05- ST dated

Export of Service Rules 2005 Categorization of Services Property based Situs of service Location of service recipient Construction service, Architect service, etc. Event Management service, courier service, etc, Business Auxiliary service, Consulting Engineer service, etc.

Export of Service Rules, PeriodAdditional Conditions to Services are delivered outside India and used for business or any other purpose outside India to Services are delivered outside India and used outside India; Receipt of payment in foreign exchange to Services are provided from India and used outside India; Receipt in Foreign exchange. From Receipt in foreign exchange

Additional conditions – Confusions and Clarifications “ provided from India and used outside India “  Circular 111/5/2009- ST dated – meaning of expression to be understood in context of characteristic of particular category of service ; accrual of benefit outside is sufficient.  Circular 141/10/2011 –TRU dated – accrual of benefit further clarified.

Case laws “used outside India “  TNT India Private Ltd vs. CST 2007 (7) STR 142 (Tri-Bang) – Courier agency delivering consignments outside India.  Blue Star Ltd vs. CCE 2008 (11) STR 23 (Tri-Bang) – Commission for procuring orders in India for foreign principal.  CST vs. BA Research India Ltd 2009 TIOL 1981 CESTAT Ahm- Testing in India, reports sent outside India. Consideration in Foreign exchange  ETA Travel Agency Pvt Ltd vs CCE 2007 (7) STR 454 (Tri-Bang) - Commission received in INR from foreign airlines.  Suprasesh GIS & Brokers P. Ltd vs. CST 2009 (13) STR 641 (Tri-Che)- Reinsurance brokerage in INR.  Nipuna Services Ltd vs. CCE 2009 (14) STR 706 (Tri-Bang) – Agent receiving commission on forex and paying appellant in INR.

IMPORT OF SERVICES

Import of services – Brief history. PeriodStatutory ProvisionPerson liable to Proviso to Rule 6(1) of ST Rules,1994.[omitted w.e.f ] Service provider to Rule 2 (1)(d)(iv) of ST Rules,1994. Service Recipient to Explanation to S.65(105) Fin.Act Service Recipient on wardsS.66A of Fin. Act. 1994,R.2(1)(d)(iv) of S.T.Rules,1994 r./w. Taxation of Services (Provided from outside India) Rules, Service Recipient. Indian National Shipowners Association Case.

Thank you g. natarajan