1. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Association of Multimodal Transport Operators of India Post budget Service Tax impact for FF, CB & MTO’s & Importers Kalpesh Shah | Executive Partner Nupoor Agrawal | Joint Partner

2. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Agenda  General Amendments in Budget 2016  Service Tax Provisions covering the industry  Amendments introduced in Budget 2016 affecting the Industry  Amendments to CENVAT Credit Rules, 2004  Industry Specific Issues

3. Copyright (c) 2015. Lakshmikumaran & Sridharan / Confidential. General Amendments in Budget 2016

4. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Krishi Kalyan Cess  Rate - 0.5% on the value of taxable services  Levied over and above the service tax making effective rate to 15%. (Service tax @ 14% + Swachh Bharat Cess @ 0.5%+ Krishi Kalyan Cess @0.5%)  Set-off against input cess paid  Monitoring under Chapter V of Finance Act, 1994

5. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Krishi Kalyan Cess (contd.)  Issues: Treatment in specified cases: Special Economic Zone (SEZ), Rebate in case of exports Applicability – Point of Taxation? Service provided earlier Clarifications/Notification of Swachh Bharat Cess – Applicable?

6. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Point of Taxation RULE 5. Payment of tax in case of new services. — Where a service is taxed for the first time, then, - (a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable; (b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within fourteen days of the date when the service is taxed for the first time. The following explanations were inserted by the Budget after Rule 5(b): Explanation 1 – This rule shall apply mutatis mutandis in case of new levy on services. Explanation 2 – New levy or tax shall be payable on all the cases other than specified above. Issues: Whether Krishi Kalyan Cess, Swachh Bharat Cess, etc are new levy?

7. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Reverse Charge: Government Services  Section 66D excludes any service by Government/local authority to a business entity  Made effective from 1.4.2016  Scope/Coverage:  Licenses?  Statutory fees?  Permissions?

8. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Increase in limitation period Service Tax The time period for assessment in normal periods in section 73 proposed to be increased to 30 months from 18 months Issues: Revised time limit applicable for pending matters? Uttam Steels 2015 (319) ELT 598 (SC)

9. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Increase in limitation period (contd.) Introduced in Finance Act, 1994 as 6 months in S. 73 (value of taxable services escaping assessment) Amended to one year vide Finance Act, 2002 Amended to 18 months vide Finance Act, 2012 Proposed to be amended to 30 months vide Finance Bill, 2016

10. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Proviso to section 75 substituted Where assesse collects service tax but does not deposit the amount with the Central Government then rate of interest on delayed payment may be specified by way of notification. Notification No. 13/2016 provides: Interest payable on delayed payment S. No.SituationRate of interest 1Collection of amount as service tax but failing to pay the amount to Central Government 24% 2Any situation other than above15% Effective from date of assent of Finance Bill, 2016 Issues:  Situations where S. No. 2 will be attracted?  Case where amount is charged as cum-tax?

11. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Interest payable on delayed payment- history 1.5% simple interest per month vide Finance Act, 1994 Amended to 15% per annum vide Finance Act, 2001 Section 75 amended and interest payable reduced to 13% vide Notification No. 26/2014-ST Amended vide Notification No. 12/2014: Up to 6 months: 18% 6 months to 12 months: 24% Beyond 12 months: 30% Amended vide Notification No. 13/2016: Amount collected but not paid: 24% Any other case: 15%

12. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Provisions relating to arrest Section 89 Offences and penalties Monetary limit for prosecution of In sub-section (1), the word “rupees fifty lakhs” is proposed to be substituted with “rupees two hundred lakhs” Section 90 Cognizance of offences Sub-section (2) which provides that offences apart from those under section 89(1)(ii) are non-cognizable and bailable to be omitted Section 91 Power to arrest In sub-section (1), “clause (i) or” to be omitted Sub-section (3) pertaining to power of Assistant/Deputy Commissioner in case of a non-cognizable and bailable offence to be omitted Effective from date of enactment of Bill

13. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Provisions relating to arrest Impact of the amendments  Power to arrest will be extended only where the amount is in excess of Rs. 2 crore instead of Rs. 50 lakhs  Such power of arrest limited to cases where the assesse collects any amount but fails to pay the amount to the Central Government beyond a period of 6 months and will not cover offences under S. 89(1)(a)(b) and (c) Issues  Whether power of arrest for offences under S. 89(1)(a)(b) and (c) will directly be covered by the CrPC? Effective from date of enactment of Bill

14. Copyright (c) 2015. Lakshmikumaran & Sridharan / Confidential. Service Tax Provisions covering the industry

15. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Service Tax Provisions covering FF’s  Section 66D of the Finance Act, 1994 – Inward Ocean/Air Freight Exemption: SECTION [66D. Negative list of services. —The negative list shall comprise of the following services, namely :— (p)services by way of transportation of goods— (i)by road except the services of— (A)a goods transportation agency; or (B)a courier agency; (ii)by an aircraft or a vessel from a place outside India up to the customs station of clearance in India; or (iii)by inland waterways;

16. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Service Tax Provisions covering FF’s (contd.)  Rule 10 of the Place of Provision of Service Rules, 2012 (POPS Rules) – Outward Ocean/Air Freight “RULE 10. Place of provision of goods transportation services. — The place of provision of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of the goods:”  Place of Provision of Transport Service : Destination of Goods

17. Copyright (c) 2015. Lakshmikumaran & Sridharan / Confidential. Budget Amendments affecting the Industry

18. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Amendments to ST Law by Budget 2016  Sub-clause (ii) of clause (p) of Section 66D deleted w.e.f. 01.06.2016  New Section 66D post budget amendment: SECTION [66D. Negative list of services. —The negative list shall comprise of the following services, namely :— (p)services by way of transportation of goods— (i)by road except the services of— (A)a goods transportation agency; or (B)a courier agency; (ii)[deleted w.e.f. 01.06.2016] (iii)by inland waterways;

19. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Amendments to ST Law by Budget 2016 (contd.)  New Entry No. 53 inserted in Mega Exemption Notification No. 25/2012  Services by way of transportation of goods by an aircraft from a place outside India up to the customs station of clearance in India  Services provided by Shipping Lines not exempted w.e.f. 01.06.2016  CENVAT Credit allowed in case of exports  Definition of exempted service amended by Notification No. 13/2016-CE(NT) to exclude transportation of goods by a vessel from customs station of clearance in India to a place outside India

20. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Amendments to ST Law by Budget 2016 (contd.)  Old Provision – Rule 6(7) [(7)The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the taxable services are provided, without payment of service tax, to a unit in a Special Economic Zone or to a developer of a Special Economic Zone for their authorized operations or when a service is exported.  Amended Rule 6(7) w.e.f. 01.03.2016 [(7)The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the taxable services are provided, without payment of service tax, to a unit in a Special Economic Zone or to a developer of a Special Economic Zone for their authorized operations or when a service is exported or when a service is provided or agreed to be provided by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India.

21. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Rationalization of Abatement Credit on input services made available Transport of goods by rail by Indian Railways Transport of goods in a vessel Transport of passengers, with or without accompanied belongings by rail Effective from 01.04.2016

22. Copyright (c) 2015. Lakshmikumaran & Sridharan / Confidential. Amendments to CENVAT Credit Rules, 2004

23. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Rule 6 amended New Rule 6(1) to Rule 6(4) substituted Options of Separate book of accounts removed Two Options available 6% / 7% on value of exempted goods and exempted service respectively Proportionate credit reversal Effective 1.4.2016

24. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Rule 6 amended 6%/7% payable upto maximum of total credit available in the account at the end of period to which payment relates. Total credit available means what? (iv) The maximum limit prescribed in the first option would ensure that the amount to be paid does not exceed the total credit taken. The purpose of the rule is to deny credit of such part of the total credit taken, as is attributable to the exempted goods or exempted services and under no circumstances this part can be greater than the whole credit. (TRU-2) Effective 1.4.2016

25. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Rule 6 amended Effective 1.4.2016 Proportionate Credit Reversal Applicable to Common inputs and input services only and not to exclusively used for dutiable goods or taxable service Thyssenkrupp Industries (I) Pvt. Ltd. 310 ELT 317- taken care of No final products manufactured or no output service provided in preceding financial year, provisional credit admissible upto 50% only

26. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Rule 6 amended No option exercised and Intimation for proportionate credit reversal not filed, option for proportionate credit can be exercised on payment of interest Transition provision provided till 30 th June, 2016 for financial year 2015-2016. Effective 1.4.2016

27. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Rule 6 amended Exempted goods to include non excisable goods (Same as earlier provision) Exempted service to include activity not a service under Section 65B(44) Value to be invoice/ agreement/ contract value and where value is not available, value to be determined by using reasonable means consistent with principle of valuation contained in Finance Act and rules made thereunder Effective 1.4.2016

28. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Rule 6 amended Service under Section 65B(44) defined as under : “service” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include— (a) an activity which constitutes merely,— (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Effective 1.4.2016

29. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Rule 14 : Interest Rule 14 (2) of Credit Rule Deleted “The existing sub- rule (2) of rule 14 prescribes a procedure based on FIFO method for determining whether a particular credit has been utilized. The said sub-rule is being omitted. Now, whether a particular credit has been utilised or not shall be ascertained by examining whether during the period under consideration, the minimum balance of credit in the account of the assessee was equal to or more than the disputed amount of credit”. TRU Circular Effective 1.4.2016

30. Copyright (c) 2016. Lakshmikumaran & Sridharan / Confidential. Contact New Delhi 5, Link Road, Jangpura Extension, Opp. Jangpura Metro Station, New Delhi – 110014 Tel: 011-26192243, 41299800 lsdel@lakshmisri.com iprdel@lakshmisri.com Mumbai 2 nd Floor, B&C Wing, Cnergy IT Park, Appa Saheb Marathe Marg Prabhadevi, Mumbai – 400025 Tel: 022-24392500, 24914384 lsbom@lakshmisri.com Bangalore: 404 WTC, Brigade Gateway Campus, Dr. Rajkumar Road, Malleswaram, Bangalore – 560055 Tel: 080-49331800, 22371759, lsblr@lakshmisri.com Kolkata:2 nd Floor, Kanak Building, 41, Chowranghee Road, Kolkata – 700071, Tel: 033-40055570, lskolkata@lakshmisri.com Ahmedabad: B-334, SAKAR-VII, Nehru Bridge Corner, Ashram Road, Ahmedabad – 380009 Tel: 079-40014500, 40014599, Email: lsahd@lakshmisri.com Pune: 607-609, Nucleus, 1 Church Road, Camp, Pune – 411001 Tel: 020-66801900, lspune@lakshmisri.com www.lakshmisri.com Hyderabad: ‘Hastigiri’, 5-9-163, Chapel Road, Nampally, Hyderabad – 500001 Tel: 040-23234924/25, Email: lshyd@lakshmisri.com Chandigarh: SCO No. 59, 1 st Floor, Sector 26, Madhya Marg, Chandigarh – 160026, Tel: 0172-4921700, Email: lschd@lakshmisri.com Geneva: Lakshmikumaran & Sridharan SARL, 35-37, Giuseppe Motta, 1202 Geneva, Tel: +41-22-919-0430, Email: lsgeneva@lakshmisri.com Chennai 2, Wallace Garden, 2 nd Street, Chennai – 600006 Tel: 044-28334700, 43961600 lsmds@lakshmisri.com