Transcript Corporate 2 Template

BUDGET 2012 – Effect on Infra
by
g. Natarajan & p. dwarakanath- swamy associates
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What is New scheme
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Broad definition for ‘service’;
Negative list;
Declared services;
Specific Exemptions;
Place of Provision of Service Rules, 2012;
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• Existing Rules on Valuation, Point of Taxation
and Cenvat credit.
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Service –Definition
Means
• any activity carried out by a person for another for
consideration and includes declared services.
• Levy on services provided or agreed to be provided
in taxable territory.
Excludes
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Transfer of title in goods or immovable property in any manner;
Transaction in money or actionable claims;
Service by employee to employer;
Fees taken in court, tribunal etc.
Duties performed by MPs, MLA and other authorities.
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Declared Services
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Renting of immovable property;
Construction of complex, building, etc.
Temporary transfer of IPR;
IT software services;
Agreeing to refrain from an act or tolerate an act
or do an act;
Leasing transactions;
Hire purchase transactions;
Service portion in execution of works contract;
Service portion in supply of food and drinks
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Negative List
Services by Govt or local authority
Foreign
India
Diplomatic
missions
Services by RBI
in Services relating to agriculture
Trading of goods
Process amounting to manufacture
Selling of space or time slot for Providing access
advertisements
collection of toll
Betting, gambling, lottery etc
to
road
on
Admission to entertainment events
and amusement facilities
Services relating to transmission or Specified Education services
distribution of electricity
Selected financial services
Transportation
exceptions)
of
goods
Transportation
of
passengers
(public transport) with exceptions
(with Funeral services
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Major Exemptions
Exemption to specific services.
Notification 12/2012.
Almost all exemptions under Finance Act, 1994
retained.
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Construction sector: changes at a
glance
• Construction services no where figuring in negative
list;
• Construction specifically covered in declared list;
• Specified construction services exempted vide
Exemption Notification 12/2012-ST;
• Location of immovable property to be place of
provision of service.
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Construction Sector: relevant
definitions
Support
services
means
infrastructural,
operational, administrative, logistic, marketing or
any other support of any kind and includes
advertisement and sales promotion, construction or
works contract, renting of immovable property,
security, testing and analysis.
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Construction Sector: relevant
definitions
‘Works contract’ means a contract wherein transfer of
property in goods involved in execution 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,
improvement, repair, renovation, alteration of any building
or structure on land or for carrying out any other similar
activity or a part thereof in relating to any building or
structure on land;
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Declared list & Construction
Service
Declared service covers:• Construction of complex , building, or civil structure
or part thereof, including a complex or building intended
for sale to a buyer, wholly or partly , except where entire
consideration is received after issuance of completion
certificate by competent authority ; (construction to
include
additions, alterations, replacements, or
remodeling of existing civil structure)
• Service portion in execution of works contract;
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Exemptions for Construction sector
• Sl.Nos.12, 13 & 14 of Notification 12/2012-ST
dt.17.03.2012.
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12. Services provided to the Government or local authority by way of erection,
construction, maintenance, repair, alteration, renovation or restoration of (a) a civil structure or any other original works meant predominantly for a nonindustrial or non-commercial use;
(b) a historical monument, archaeological site or remains of national importance,
archaeological excavation, or antiquity specified under Ancient Monuments and
Archaeological Sites and Remains Act, 1958 (24 of 1958);
(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or
(iii) an art or cultural establishment;
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) drinking water supply (ii) water treatment
(iii)sewerage treatment or disposal; or
(f) a residential complex predominantly meant for self-use or the use of their
employees or other persons specified in the Explanation 1 to clause 44 of
section 65 B of the said Finance Act;
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13. Services provided by way of erection, construction, maintenance,
repair, alteration, renovation or restoration of,(a) road, bridge, tunnel, or terminal for road transportation for use by
general public;
(b) building owned by an entity registered under section 12 AA of the
Income tax Act, 1961(43 of 1961) and meant predominantly for religious
use by general public;
(c) pollution control or effluent treatment plant, except located as a part of
a factory; or
(d) electric crematorium;
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14. Services by way of erection or construction of original works
pertaining to,(a) airport, port or railways;
(b) single residential unit otherwise as a part of a residential complex;
(c) low- cost houses up to a carpet area of 60 square metres per house in
a housing project approved by competent authority empowered under the
‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of
Housing and Urban Poverty Alleviation, Government of India;
(d) post- harvest storage infrastructure for agricultural produce including a
cold storages for such purposes; or
(e) mechanised food grain handling system, machinery or equipment for
units processing agricultural produce as food stuff excluding alcoholic
beverages;
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Definitions U/Exemption
Notification
• Original works :- all new constructions, all types
of additions and alterations to abandoned or
damaged structures on land that are required to
make them workable.
• Single residential unit :- independent
residential unit with specific facilities for living ,
cooking and sanitary requirements.
• Residential Complex : any complex comprising
of a building or buildings having more than one
single residential unit.
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Amendment to Valuation Rules
• Rule 2 (A) substituted
Implications :
• U/ non composition scheme value shall be gross
amount minus VAT and value of goods sold; value of
goods adopted for VAT basis can be adopted for
exclusion :
• Alternatively value of material can be 40 % of total
amount for original work; 60 % of total amount for
works other than original works. If the value of land
is also included, then the value shall be 25 % of the
total amount; Value of free supply to be included.
• Cenvat on input services and capital goods allowed.
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Reverse charge – Ntf. 15/12-ST
• Applicable for Works contract provided by an
individual, partnership, HUF, proprietary firm
including AOP to a company or business entity in
taxable territory;
• Service provider and recipient to pay 50% each of
total tax liability;
• Service provider and recipient can opt for either
composition scheme or valuation rules.
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Place of Provision of Service
Rules, 2012.
• Purpose is to identify taxing jurisdiction for a service;
• Present rules to replace existing Export and Import
Rules;
• Meant for cross border services, services to J & K,
service providers operating from multiple locations,
determining services wholly consumed in SEZ and A
PRECURSOR TO GST.
• Rules to be applied sequentially;
• To tax only such services provided from taxable
territory.
• Service provider is usually liable unless otherwise
specified (example –import of services);
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PPS Rules, 2012
Location of Service Provider or Recipient means:A. Premises for which registration is obtained in case
of single registration whether centralised or
otherwise;
B. If ‘A’ is not applicable
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Location of business establishment;
If services are provided/received from a place other than
business establishment, location of such fixed
establishment;
When services are provided/received from more than one
establishment – establishment directly concerned with
use or provision of service;
In absence of all above, usual place of residence of
provider/recipient;
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Rule 3- Default Rule
• Place of provision - service is deemed to be
provided where receiver is located;
• Default rule applies when none of later rules apply.
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Rule 4- Performance based
services
Place of provision is location where services are
actually performed;
Applies to:• services in respect of goods to be physically
made available by receiver (repair, cargo
handling etc)
• Services provided in conjunction with supply of
goods under another contract (erection,
commissioning, AMC bundled with sale of
goods)
• Services provided predominantly in physical
presence of receiver (photography, plastic
surgery)
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Rule 5-Services relating to
immovable property
• Place of provision - where immovable property is
located.
• Applicable for services directly connected with
immovable property.
Examples of services covered
• Services in course of construction, alteration, repair
,maintenance etc;
• Renting of immovable property;
• Services of real estate agents, architects, engineers etc
relating to land, building or civil engineering works;
• Services connected with oil/gas/mineral exploration;
• surveying; property management services, hotel
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Rule 5-Services relating to
immovable property
Criteria to determine ‘Direct Connection’
• Services performed or agreed to be performed on
immovable property (maintenance) or property to
come in to existence (Construction)
• Direct object of service is immovable property (which
enhances value of property, affects nature of property,
relates to development of property )
• Purpose of service is transfer or conveyance (as real
estate agent service, lease, legal service to owner or
beneficiary as a result of will or testament) ,
determination of title to property.
• Examples of services not related – advice or
information as to land prices in general,
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Rule 6- Service relating to Events
• Place of provision -Place where event is actually
held.
• Covers admission to events , organizing events and
ancillary services
Examples
• Conventions
• Conferences
• Exhibitions
• Fairs
• Seminar
• Workshops , wedding , sports etc.
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Rules 7 & 8
Rule 7- Part performance of service at different locations
• Applies when actual performance of any service is at
more than one location where one location is outside
taxable territory
• Location in taxable territory where greatest proportion
of service is provided
Rule 8 – where provider and recipient is in taxable
territory - Location of Receiver’.
• Provision of service and consumption in taxable
territory.
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Rules 9 & 10
Rule 9- specified services –location of service
provider;
Example
• Banking service
• Telecommunication service
• Online information and database access or
retrieval;
Rule 10- Transportation of goods –place of
destination of goods -except in GTA by road
where place of provision is location of person
liable to pay tax.
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Rules 11 & 12 & 14
• Rule 11 – Passenger transportation services – place
where passenger embarks on conveyance for
continuous journey.
• Rule 12- services provided onboard conveyances –
First scheduled point of departure of conveyance for
journey
Eg – on board service of provision of movies, music,
games, beauty treatment etc.
Rule 14- Order of application of Rules- where more than
one rule applies, rule that occurs later is relevant rule.
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