Transcript Audit under Indirect Taxes

COMPLIANCE UNDER SERVICE TAX LAW
By Harsha
Chartered Accountant
COMPLIANCES UNDER FA, 1994
• Registration
– Single Premises
– Centralized Registration
• Documents and Accounting Records
• Invoice and Cenvat Documents
• Filing of Returns
• Adjustment of service tax excess paid
• Refund & Rebate of Service Tax
REGISTRATION: PERSONS REQUIRED TO TAKE REGISTRATION
• Persons required to register:
• Service Provider - other than negative list of services
• Service Receiver – Reverse/Joint charge
• Exclusive trading entities
• Companies having Directors
• Input Service Distributor
• SSP - crossing the threshold limit of 9 lacs.
• Registration to be done online through ACES
REGISTRATION
• Time limit: within 30 days from liability/
commencement of business i.e., provision of service
• Application to be filed online through ACES.
• Trade
Notice
issued
by
Hyderabad–III
Commissionerate vide 19/2012 dated 25.09.2012
regarding documents to be submitted for the
centralized and single registration.
• Within 7 days of submission of docs, ST-2 is to be
granted.
SERVICE PROVIDER PROVIDING SERVICES FROM MULTIPLE LOCATIONS
• Has to register separately for each premise
• However if centralized billing or centralized accounting,
then Centralized Registration can be taken at the option
of service provider.
• The Jurisdictional Commissioner would grant
registration through Superintendent
• Single Premise Registration can be amended to
Centralized Registration.
• Registration to be given within 7 days otherwise
deemed to be register.
• Deemed registration not applicable in case of
centralized registration.
ST REGISTRATION THROUGH ACES
•
•
•
•
•
Logon to www.aces.gov.in
Click on Service Tax
Click on New User
Fill the required Details
ACES will send a mail providing the password for the
first time.
• Use the user name and p/w provided in the mail and
log on to ACES
• Fill ST-1
• Submit the filled form online
ST REGISTRATION THROUGH ACES
• Print the Form ST-1
• Affix Signature on the same
• Submit the same to Jurisdictional Supt.
• Documents along with hard copy are
o Self Attested copy of PAN
o Self Attested Partnership Deed/AOA & MOA
o Proof of Address:
o Any one of the following: electricity bill or telephone bill or copy of the
bank account statement of the applicant showing the name and address
(not older than 3 months) and
o In case of Self owned property: Annual tax payment receipt or sale deed
and
o In case of Rented Premises: Rental agreement
o And others as specified in the Trade Notice.
AMENDMENT TO REGISTRATION CERTIFICATE
• RC requires amendment under following situations:
– Change in the status of service provider
– Change in any information furnished in ST-1
– Furnishing of additional information
– Addition of new premises
• Detail to be intimated within 30 days of above changes.
Amendment to be done online – aces.gov.in
• Superintendent to give effect within 7 days – Give the
old ST-2 and take fresh ST-2.
SURRENDER/CANCELLATION OF REGISTRATION
• Registration to be surrendered/ cancelled under
following circumstances:
o On stopping provision of taxable services
o On service being exempted
o Gross turnover not exceeding exemption limit
o Closure of operation
o Transfer of business etc.
• Surrender of registration application to be made on
closure. To be done online.
• Superintendent to check whether all the monies due to
Govt. are paid and then cancel the RC
BELATED REGISTRATION
• Due to confusion/ ignorance, assessee may not have
taken registration.
• Subsequently, assessee become aware that he is
liable to take registration.
• Assessee should arrive at proper “relevant date”. It
could be date of notification or date when taxable
activity was started.
• Service provider may examine availment of SSI
exemption limit.
• He is to calculate the service tax payable from the
relevant date.
BELATED REGISTRATION
• ST should be paid along with interest @ 18% (15% if
taxable service does not exceed 60 lacs during
preceding FY)
• Comprehensive letter detailing the ST payable,
reason for delay, request to allow Cenvat Credit
along with declaration that once registration is
accorded tax along with interest would be paid.
• Letter should be sent through RPAD letter.
• Other registration procedure would be same.
• On registration, ST along with interest should be
paid.
NEW FORM PROPOSED
• Old form required for identifying the classification of
services.
• New Return issued obviating the need of
ascertaining the nature of services.
• Only thing required to check if the services provided
are other than covered by Negative List.
• This form is different from common EST form
proposed at the time of budget proposal.
RECORDS (RULE 5 OF STR)
• Manual records as well as computerized records
maintained under other law is acceptable.
• Following list submitted at the time of filing of first
return:
1. All records maintained for accounting of following
transactions:
o Providing of any service
o Receipt, procurement and payment of input service
o Receipt, purchase, manufacture, storage, sale or
delivery of inputs and capital goods
o Other activities i.e. manufacture or sale of goods
2. All other financial records maintained in normal
course of business
RECORDS FOR CENVAT (RULE 9 OF CCR)
• No prescribed format required for availment and
utilization of Cenvat Credit
• Proper records to be maintained for:
o Receipt, disposal, consumption and inventory of
input and capital goods
o Receipt and consumption of input services
• Records to contain following details:
o Value of input, capital goods and input services
o Duty or tax paid
o Cenvat Credit taken and utilised
o Person from whom input, input services and
capital goods are procured.
SUGGESTED RECORD MAINTENANCE
• Vouchers (debit and credit)
• Details about clients
• Copies of bills
• Register of service tax charged, collected and
deposited
• Receipts issued to the clients
• Credit notes detailing the credits allowed, bills
cancelled etc
• Register of receipts, consumption and balance
on input service tax.
RECORD CONT..
• Records to prove the receipt of inputs and capital goods
• Stock record of inputs
• Cenvat Credit listing of inputs
• Memorandum Credit account ( for 50 % CG credit)
• Listing of inputs removed as such/ sold
• Listing of capital goods removed as such/ sold
• Documents for input/ CG credit
INITIAL DECLARATIONS
• As per the Rule 5(2) of STR, 1994 there is requirement
of providing the details of records maintained.
• It is also suggestible to intimate the details of all type of
services and the nature of treatment intended by the
assesses for the same.
• This would avoid the surprise demand later and also
save from invocation of extended limitation period.
IMPORTANCE
• Corrections more expensive
• Unnecessary hassles avoided later
• Increased likely hood of being picked up for audit
• Do It Right The First Time
INVOICING/BILLING
• W.e.f. 10.9.04 it is mandatory for Taxable SP to issue an
invoice/a bill/a challan.
• It should be issued within 30 days (earlier14 days) from
completion of service or receipt of any payment
towards taxable value whichever is earlier.
• Invoice/bill/challan should be serially numbered
(Other than for bank)
• Also to be signed by service provider or his authorized
person.
• Continuous supply service – event enabling the receipt
of payment
• Banks/FI including NBFC’s – 45 days time for
invoice/bill/challan
CONTENTS OF INVOICE
• Invoice/Bill/Challan should contain
o Name and address of TSP
o Registration No. of TSP
o Name & address of such Service Receiver
o Description of taxable service
o Value of taxable service
o Service Tax payable thereon.
• Ensure to avoid credit denial at user/ client
SPECIAL CASES
• Banks – any document having the above info even
without having service receiver address or Si. Nos. is
acceptable
• GTA – any document shall have in addition to above
info, details of consignment note no. & date, gross
weight.
• Air Passenger – ticket in any form with or without
registration no /address of service receiver but with the
above information
SUGGESTED BILL FOR SERVICES
• Reference to Order / Offer/ Quotation
• Service Tax Registration no. TSP
• Goods Involved/ Sold (excluded from the definition of
service)
• Services covered by negative List
• Exempt Services( describe – Notification No.)
• Taxable services
• Abatement (Notification No & extent)
• Reimbursable expenses
• Service tax & Cess specifically mentioned.
INPUT SERVICE DISTRIBUTOR
• The Head Office, Sales Office, Corporate Office may spend
on services centrally.
• These services may be utilised at more than units/offices.
• These may need to distribute the credit, so that it can be
availed at each of the premises of multiple registration
entities.
• Distribution can be done by way of an invoice/ challan.
• Separate Registration. Method of registration same as
discussed above.
ISD - INVOICING
• ISD required to issue serially numbered invoice to each
recipient of credit distributed.
• Invoice should contain following information:
o Name, address and registration number of person
providing input services
o Serial number and date of invoice issued by person
providing input services.
o Name and address of said ISD
o Name and address of the recipient of credit
distributed
o Amount of credit distributed.
INPUT SERVICE DISTRIBUTOR CONTD..
• Conditions for distributing credit
o Credit distributed should not exceed ST Paid
o Exempted units’ credit cannot be distributed
o Services used wholly in a particular unit to be
distributed only to that unit
o In case of common services distribution should be
pro-rata on turnover of the preceding month or
quarter as the case may be
• Turnover to be determined as per formula for refund
COMPILATION OF RETURNS
• E-filing of ST-3 form on half yearly basis. Only for the
period April to June 2012 – quarterly returns
prescribed. Return to be filed through ACES.
• There are two options for filing of Return. Online and
offline. For Apr to June 12 – Only offline.
• Return to be filed within 25th of April & 25th October
every year. For Apr to June 12- 25th November.
• Compulsory to file Returns online only. Declaration to
be filed with Superintendent for User name and pw.
• Revision within 90 days from date of filing.
COMPILATION OF RETURNS
• The following details shall be required for filling of ST-3:
• Amount received for the taxable service provided
• Amount received for the non-taxable service provided
• Amount received in advance for the taxable/non-taxable
service to be provided
• Details of the abatement claimed if any
• Gross amount billed for taxable service
• Gross amount billed for non-taxable service
• Amounts paid by way of Joint/Reverse Chg
• The details of CENVAT credit availed
• The details of the CENVAT utilized for the payment
• Detail of Cenvat Credit reversible under Rule 6 of CCR.
• Payment by cash in GAR-7
DIFFERENT WORKSHEETS TO BE FILLED UNDER EXCEL UTILITY
• Payable Services: Separate worksheet for each kind of
services provided. Required to show the value of taxable
services received as well as invoiced.
• Advance payment: Any advance payment made under Rule
6(1A) of STR. Detail of GAR/TR6 challan to be given.
• Paid Services: Details of ST paid through cenvat Credit, cash
or adjustment against advance paid earlier.
• Challan Services: Details of challn through which ST is paid.
• Cenvat: Should be filled up properly showing credit taken
on input, input services and capital goods. Similarly, credit
utilised for payment of ST, cesses, clearance of goods as
such and reversal under Rule 6(3) of CCR.
• Distributor: Distribution of credit by ISD.
• Self Assessment Memorandum.: Name, date and place of
assessee.
SPECIFIC ISSUES IN FILING OF RETURN
• Adjustment of tax paid where services not provided either
partially or fully [Rule 6(4) of STR]
• Adjustment of excess payment of tax made.
• Reversal of Cenvat Credit under Rule 6 of CCR.
ADJUSTMENT OF TAX
• Adjustment permissible in following cases
o Invoice issued/payment received - service to be
provided - Not provided - either wholly or partially
for any reason,
o The amount of invoice is renegotiated due to
deficient provision of service, or any terms contained
in a contract
• Excess tax may be adjusted subject to conditions:
o Refunded the payment or part thereof; or
o issued a credit note - value of the service not so
provided
• Adjusted against the subsequent payments
EXCESS PAYMENT ADJUSTMENT
• Any excess amount paid towards a month or quarter, he
may adjust such excess amount paid by him against his
service tax liability for the succeeding month or quarter, as
the case may be
• Condition - the excess amount paid is on account of reasons
not involving interpretation of law, taxability, valuation or
applicability of any exemption notification. (earlier limit of 2
lakh)
• Source Document details to be filled up for adjustment of
advance tax paid. There is separate column in Challan
worksheet. Reference may be given of earlier return, date
and challan through which excess tax was paid.
REVERSAL UNDER RULE 6 OF CENVAT CREDIT RULES
• Cenvat credit on input and input service attributable to
provision of exempted services to be reversed.
• Option under Rule 6:
o Maintenance of separate account for input and input
services used in exempted and taxable services
o Reversal of 6% of the value of exempted services
o Reversal based on proportionate formula
o Trading activity also considered as exempted
services.
• Option to be exercised need to be intimated to
department. Cannot be changed during FY.
• Reversal to be shown separately in the Return.
LATE FILING FEE FOR DELAYED FILING
• Quantum of late fling fee
o Up to 15 days Rs. 500/o 15 – 30 days Rs. 1000/o Above 30 days Rs. 1000/- + 100/day maximum Rs.
20,000/• In case of gross amount payable is nil, AC/DC can
reduce or waive the above fees
• Sec. 77 (2) general penalty Rs. 10K. (eg. no return filed)
BUDGET PROPOSAL FOR REGISTRATION FORM AND RETURN
• New simplified form for common registration of excise
and service tax placed for public comment.
• Similarly, new simplified one page common return with
Central Excise : to be called Excise & Service Tax Return
(EST for short) is introduced.
• Cycle for payment of service tax and filing of return
proposed to be coincide as follows:
Assessee
Period
All Assessee having turnover of Rs. 25 lacs or more
during previous FY
Monthly
New assessee other than individual and firms
Monthly
Individual and firm having turnover of less than 25 lacs Quarterly
during previous FY
Individual and firm registering for first time
Quarterly
NEW ACCOUNTING CODE FOR PAYMENT OF SERVICE TAX
• Circular No. 161/12/2012-ST, Dated: July 6, 2012 issued
providing for accounting code for payment of service
tax.
• a new Minor Head - ‘All taxable Services’ has been
allotted under the Major Head “0044-Service Tax
Name of
Service
Tax Collection
Other receipt
Penalties
All Taxable
Services
00441089
00441090
00441093
Deduct
refunds
00441094
• Service specific accounting code continue to operate
for period prior to July 1,2012
• Cesses to be paid under old accounting codes.
REFUND OF SERVICE TAX
• Refund of excise duty on inputs and service tax paid on the input
services used for export of service can be claimed as per Rule 5
of Cenvat Credit Rules, 2004 read with Notification No. 27/2012CE (NT) dated 18.06.12.
• Refund amount = Export t/o (goods + services)*Net CC
Total turnover
– Export of service is as per Rule 6A of the Service Tax Rules, 1994
– Export Turnover of goods, Export turnover of services and total turnover
are defined in the Rule itself
– Net CC = CC on inputs and input services.
• Conditions, Limitations and other safeguards are given
in the Notification 27/2012.
REFUND CONT..,
• Refund Claim shall be on quarterly basis- one claim for one
quarter.
• Amount claimed as refund shall be debited to CENVAT Credit
account at the time of making the refund claim.
• If subsequently, refund is granted for lower amount, the SP can
avail the difference amount as credit
• Refund to be applied vide Form A to AC/DC in whose jurisdiction
the premises of output service provider is situated (from where
export is taken place)
• The time limit for filing the Form A is before the expiry of time
specified in Section 11B of the Central Excise Act that is one year.
• One year from the date of payment to the input service vendor
(conservative mode).
REFUND CONT.,
• Refund claim should be signed by:
– Individual or Proprietor
– Karta - HUF
– Partner – Partnership Firm
– Person authorised by BOD – Limited Company
– Person authorised to file refund claim – any other case
• Refund claim to be accompanied by the CA certificate (statutory
or any other) certifying the correctness of refund claimed – Form
given in the Annexure – I to the Notification 27/2012 – CE (NT).
• AC/DC may ask further docs and info for processing the refund
claim.
REBATE OF SERVICE TAX
• Rebate of service tax paid on the input services and excise duty
paid on the inputs can be claimed as per Rule 6A of the Service
Tax Rules, 1994 read with Notification No. 39/2012 – ST dated
20.06.12
• Conditions:
– Service has to be exported as per Rule 6A of STR, 94
– duty on inputs, ST on input services has to be paid to the
vendors
– Claim greater than Rs. 1000/– No Cenvat Credit to be availed for the amount for which
Rebate is claimed
REBATE CONTD.,
• Procedure:
– Declaration to be filed with AC/DC before the export of
service stating the amount of inputs and input services
actually required for export of service (description, quantity,
value, rate of duty, amount of service tax)
– AC/DC shall verify the declaration filed, if necessary call for
relevant info or inputs for verification and accept the
declaration if he is satisfied that there is no likelihood of
evasion of duty/service tax
• Filing of Rebate Claim:
– Claim to be made to AC/DC vide Form ASTR-1
REBATE CONTD.,
– Claim to be accompanied by:
• Invoices for Inputs and Input Services
• Documentary evidence for receipt of CFE and payment
details of input and input service vendors
• Declaration that such service has been exported in terms
of Rule 6A along with documentary evidence.
• AC/DC shall grant the rebate if he is satisfied that the rebate
claim is in order.
REFUND OF ST - SEZ
• Unit located in SEZ or developer of SEZ is exempted from the
whole of service tax leviable thereon subject to conditions
specified in Notification No. 40/2012- ST dated 20.06.12
• Exemption of Service tax either by way:
– Ab-intio – if wholly consumed within SEZ
• Rule 4 – Performance based services
• Rule 5 – Immovable Property based services
• Other Rules – if exclusive SEZ operations
– Refund – If not wholly consumed within SEZ
• Formula for determining the refund amount and the terms
involved are defined in the Notification.
REFUND – SEZ CONTD.,
• Conditions:
– List of specified services for AO – UAC approval
– For ab-intio exemption – Form A-1 to be filed by the Unit or
developer – verified by specified officer of SEZ. Unit or
developer shall also certify that they are not having other
business outside SEZ in the same Form
– Should pay the input service tax to the vendors
– No Cenvat Credit shall be claimed of the refund amount
– No refund for the services wholly consumed outside SEZ
• Procedure:
– If regd under CE- Claim to be filed with AC/DC – Form A-2
– If not regd under CE- File declaration with AC/DC in Form A-3
– AC/DC shall allot STC after 7 days of filing of Form A-3
REFUND – SEZ CONTD.,
• Claim shall be made within one year from the end of the month
in which payment to the input service vendor is made or AC/DC
shall extend the period
• Docs to be filed along with Refund claim:
– Form A-1
– Invoices of input services along with proof of payment
– Declaration that services are used for AO
• AC/DC may grant the refund if he is satisfied
TTHANK
HANK
YOU
YOU
THANK YOU
[email protected]