Transcript Slide 1

A Presentation
on
Service Tax
Overview
and
Recent Developments
CA.SACHIN SINGH, IRS
ASST. COMMISSIONER
SERVICE TAX,SURAT-I
© Dr. Sanjiv Agarwal
1
Service Tax Overview & Recent Developments
This Presentation Covers
• What is Service ?
• Negative List and Exempted Services.
• Deemed Service.
2
Service Tax in India (The Past)
 Introduced in India in 1994 as a simple, modest tax with
just three services.
 Approach
to Service
comprehensive one.
Tax
–
Selective
as
against
 Desirable from revenue, equity and economic view point.
 Governed by Finance Act, 1994 and a dozen of rules.
 Legislative dependence on over 25 other laws.
3
Service Tax – The Present
Shift to Comprehensive Approach
 W.e.f. 1st July, 2012
 Finance Act, 2012 – A land mark Act to shift from selective
positive approach to negative approach.
 It took 18 years to shift from selective approach (positive) to
comprehensive approach (negative ) to tax services
 All services to be taxed other than services specified in the
negative list and exempted services – Section 66B.
4
Present Taxation of Services
All Services
(including declared Services
(-)
Specific Exclusions
(-)
Negative List Services
(-)
Exemptions
(=)
Taxable Services
5
New Provisions in Service Tax under
Negative List
 Section 66 B
deals with charge of service tax on
or after Finance Act, 2012.
 Section 66 D
services.
comprises
of negative list of
 Section 66 E
comprises of the services which
constitute declared services.
6
MAJOR CHANGES IN SERVICE TAX IN 2012-13
A GLANCE
AT
 Definition of ‘service’ finds place in statutory provisions
 Place of provision of service rules determine the location of
service and become be basis of taxation.
 Concept of taxable territory and non- taxable territory introduced
 Classification of service criteria replaced by new section 66F on
interpretation principles of specified description of services or
bundled services.
7
What is Service
‘Service' has been defined in clause (44) of the section 65B
and means –
 any activity
 For a consideration
 carried out by a person for another
 and includes a declared service (66E)
8
What is Service
Activity
 In common understanding, activity includes –
 An act done
 A work done
 A deed done
 An operation carried out
 Execution of an act
 Provision of a facility etc.
 Activity could be active or passive and forbearance to act
 Agreeing to an obligation to refrain from an act or to tolerate an
act or a situation - listed as a declared service u/s 66E
9
What is Service
 Activity must be for a consideration (nexus / reciprocity)
 Activity – includes both activity as well as non-activity
 Consideration – includes both monetary and non monetary
consideration.
 Two persons are involved –
Service provider
Service receiver
 Only services provided by one person to another are taxable (
Two separate regn doesn’t mean two distinct person- Mahindra
logistics ltd-SC)
 Person – natural as well as artificial
10
What is Service
Consideration
 Means everything received or recoverable in return for a
provision of service which includes 


Monetary payment
Non-monetary payment
Deferred consideration
 Under Indian Contract Act, 1872, Consideration means “When, at the desire of the promisor, the promisee or any other person
has done or abstained from doing, or does or abstains from doing, or
promises to do or to abstain from doing, something, such act or
abstinence or promise is called a consideration for the promise”
11
What is Service?
Activity for a Consideration
 Activity should be carried out by a person for a
consideration
 Activity without consideration like Donation
 Gifts
 Free charities
outside the ambit of service.
 Charity for consideration would be service and
taxable unless otherwise exempted
12
What is Service : Exclusions
'Service' does not include  any activity that constitutes only a transfer in title of goods or
immovable property by way of sale, gift or in any other manner.
Sale of developed plots is a service (Narne Constructions Pvt.
Ltd. v UOI 2013 (29)STR 3 (SC)
 a transfer, delivery or supply of goods which is deemed to be a
sale of goods within the meaning of clause (29A) of article 366 of
the Constitution
 a transaction only in money or actionable claim
 a service provided by an employee to an employer in the course
of the employment.
 fees payable to a court or a tribunal set up under a law for the time
being in force
13
What is Service
Person-65B(37)
"person" includes,––
• an individual,
• a Hindu undivided family,
• a company,
• a society,
• a limited liability partnership,
• a firm,
• an association of persons or body of individuals, whether
incorporated or not,
• Government,
• a local authority, or
• every artificial juridical person, not falling within any of the
above
14
The New Taxability Concept
SERVICE FOR A CONSIDERATION
E - MAGIC TEST
1. Non Taxable
territory
(POPS)
2. Negative
list (17)
3.
9 DECLARED SERVICES
E: Employee
M: Money
A: Actionable claim
G: Goods
I: Immovable property
C: Court Fee
Exemptions
(39)
Taxable
15
 Clause 44 of section 65B defines service – it includes a declared service.
 There are 9 categories of services or activities as declared services implying that
on all such nine declared services, Service Tax shall be payable
 Does not include any such transfer, delivery or supply of any goods which is
deemed to be a sale within the meaning of Article 366(29A) of the Constitution of
India.
 What is declared services is defined in section 65B(22) to mean any activity
carried out by a person for another person for a consideration and declared as
such under section 66E of the Act.
 They are amply covered by the definition of service but have been declared with a
view to remove any ambiguity for the purpose of uniform application of law all
over the country
16
Following constitute Declared Services (Section 66E)
 Renting of immovable property;
 Construction of a complex, building, civil structure or a part thereof,
including a complex or building intended for sale to a buyer, wholly or partly,
except where the entire consideration is received after issuance of certificate
of completion by a competent authority;
 Temporary transfer or permitting the use or enjoyment of any intellectual
property right;
 Development,
design, programming, customization, adaptation, up
gradation, enhancement, implementation of information technology
software;
17
 Agreeing to an obligation to refrain from an act, or to tolerate an act or
a situation, or to do an act;
 Transfer of goods by way of hiring, leasing, licensing or any such
manner without transfer of right to use such goods;
 Activities in relation to delivery of goods on hire purchase or any
system of payment by installments ;
 Service portion in 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 part of the activity.
18
Declared Services
Agreeing to an obligation to refrain from an Act / to tolerate Act or situation
/ to do an Act [section 66E(e)]
Following activities if carried out by a person for another for
consideration would be treated as provision of service  Agreeing to an obligation to refrain from an act.
 Agreeing to an obligation to tolerate an act or a situation.
 Agreeing to an obligation to do an act.
19
Declared Services
Obligations / Actions
Examples of Taxable Obligations / Actions
 Non-compete fees for agreeing not to compete
 compensation on termination of business agreements
 advance forfeited for cancellation of agreement to provide a
service.
 forfeiture of security deposit for damages done by service receiver
in course of receiving of services.
 cancellation charges being charged by airlines, hotels etc.
 consideration for non-appearance in a court of law or withdrawal
of suit.
 demurrage charges or detention charges
20
W“Works Contract” means a contract wherein transfer of
property in goods involved in the execution of such contract is
leviable to tax as sale of goods and such contract is for the
purpose of carrying out construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance,
renovation, alteration of any movable or immovable property
or for carrying out any other similar activity or a part thereof in
relation to such property.
21
Alternative valuation model (Rule 2A of Valuation Rules)
Where works contract is for…
Value of the service portion shall be…
(A) execution of original works
forty percent of the total amount charged
for the works contract
(B)
maintenance
or
repair
or seventy per cent of the total amount
reconditioning or restoration or servicing charged including such gross amount
of any goods
(C) in case of other works contracts, not sixty percent of the total amount charged
included in serial nos. (A) and (B) above, for the works contract
including contracts for maintenance,
repair, completion and finishing services
such as glazing, plastering, floor and wall
tiling, installation of electrical fittings.
22
Service liable to Service Tax
All services are liable to service tax except –
a) Activities specifically excluded in definition of service.
b) Services covered under the negative list
Services covered under Mega Exemption notification.
d) Services provided outside the taxable territory.
e) Services received by a unit located in SEZ (subject to conditions).
c)
Negative List of Services
There are 17 categories of services which are not chargeable to service tax ––
1. Services provided by Government or local authority. [Except (a) services by
Dept of post by way of speed post, express parcel post, life insurance, and
agency services, (b) services in relation to an aircraft or a vessel, inside or
outside the precincts of a port or an airport, (c) transport of goods or
passengers, (d) support services]
2. Services provided by RBI
-
23
Service liable to Service Tax
Negative List of Services
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Contd….
Services provided by a Foreign diplomatic mission located in India
Services relating to agriculture
Trading of goods (commission agent or clearing agent)
Any process amounting to manufacture or production of goods.
Selling of space or time slots for advertisement other than advertisements
broadcast by radio or television.
On payment of toll charges
Betting, gambling or lottery
Admission to entertainment events or access to amusement facilities.
Transmission or distribution of electricity by an electricity transmission or
distribution utility
A few of services relating to education.
Services by way of renting of residential dwelling for use as residence
-
24
Service liable to Service Tax
Negative List of Services
Contd….
14. A few financial services like deposits, loans advance, foreign currency sale
or purchase by banks or authorised dealers etc)
15. Service of transportation of passengers, with or without accompanied
belongings.
16. Services by way of transportation of goods
17. Funeral services
Exemptions from Service Tax–Mega Notifications –
Notification No. 12/2012-S.T.
1.
2.
3.
4.
Services provided to UNO
Health care services
Services by a veterinary clinic
Services by charitable trust
-
25
Service liable to Service Tax
Exemptions from Service Tax–Mega Notifications –
Notification No. 12/2012-S.T. Contd…
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Religious services
Legal or arbitral service
Technical testing of drugs etc.
Coaching in recreational activities
Educational institution
Services provided to a recognized sports body
Sponsorship of sporting events
Construction service to Government
Construction of road, bridge etc.
Other construction service – airport, single residential units, low-cost
houses up to a carpet area of 60 sqmt etc.
Copyright service
-
26
Service liable to Service Tax
Exemptions from Service Tax–Mega Notifications –
Notification No. 12/2012-S.T. Contd…
17. Services in folk or classical art forms
18. Services of collecting or providing news
19. Services of renting of a hotel etc for residence
20. Services of providing food or beverages
21. Services of transportation by rail or a vessel of specified goods –
22.
23.
24.
25.
petroleum, relief materials, defence equipment, postal mail, household
effects, newspaper/magazines, railway equipment, agricultural produce,
chemical fertilizers
Goods transport agency for fruits etc.
Hiring motor vehicle for transport of more than 12 passengers
Transport of passengers
Vehicle parking to general public
-
27
Service liable to Service Tax
Exemptions from Service Tax–Mega Notifications –
Notification No. 12/2012-S.T. Contd…
26. Specific services to government – water supply, public health, sanitation, solid
27.
28.
29.
30.
31.
waste management, slum improvement repair & maintenance of
vessel/aircraft
Specific general insurance service – hut insurance scheme, cattle insurance,
insurance of tribal, Janata Personal Accident Policy, Group Personal Accident
Policy, Agricultural Pumpset & Failed Well Insurance, Export credit insurance,
National Agricultural Insurance etc.
Services provided by an incubate – provided turnover is below 50 lakh &
within three years from date of the agreement.
Services by an unimcorporated body to its members
Financial services – sub-broker to broker, mutual fund agent to MF, distributor
to a M.F. Selling agent of lottery to a distributor, selling agent or distributor of
a sim card etc.
Specific job work services – agriculture, printing, cutting & polishing of
diamond etc.
-
28
Service liable to Service Tax
Exemptions from Service Tax–Mega Notifications –
Notification No. 12/2012-S.T. Contd…
32. Business exhibition service outside India
33. Specific telephone service – departmentally run public telephones, free
34.
35.
36.
37.
38.
39.
40.
41.
calls at airport, hospital where no bills are being issued.
Slaughtering service
Services provided from non-taxable territory
Public library service
Services by Employees’ State Insurance Corporation
Transfer of a going concern
Public conveniences
Municipality services by government
Services provided outside taxable territory.
-
29