Transcript Finance Act, 2012

Negative list of services & Other Issues
CA Hemant Jajodia
Contents
1
Understanding Service
2
Negative List of Services
3
Declared Services
4
Exempt Services
5
Bundled Services
6
Liability of service recipient
7
Valuation of Service Portion
8
Place of provision of service
9
Point of taxation
Understanding Service
3
Taxation of services based on negative list
A case for negative list?
Positive List
• Detailed description of taxable
services
• Unspecified services not liable to tax
• Neither conducive from point of tax
administration nor tax compliance
Negative List
• Overwhelming support as consonance
with International Taxation
• Views and suggestions of stakeholders
taken into account
• Legal disputes
• Independent appraisal of services
sector prior to introduction of GST
• Possibilites of overlap amongst
definitions
• Smooth transition and significantly
ease challenges on GST
• Service definition useful for Import
/Export of services, POT,CCR
• Clarity to reduce quantum of tax
controversy
• Expectation of seamless credit
mechanism
Negative list based service tax approach may lead to significant jump in tax revenues
as services hitherto not taxed come under tax net
4
Basic Understanding of the Law
•
Taxation of services based on negative list.
•
Shift from a selective system of taxing services to a comprehensive system.
•
Effective from July 1, 2012.
•
Service to be taxed in the jurisdiction of consumption.
•
Finance Act, 2012 has defined:
‒
‒
‒
‒
5
Activity qualifying as service
17 services stated in the Negative List of services – Section 66D
9 services as ‘declared services’ – Section 66E
Exemptions
What is ‘service’
• Not defined
• Includes act
done, deed
done, work
Activity done,
operation
carried out,
execution of
act, provision
of facility
6
For
Conside-ration
• Not defined
• Definition
under the
Indian
Contract
Act, 1872,
could be
adopted
Carried
out by a
person
for
another
• Self-service
excluded,
such as, by
one branch
to another
or HO
• Exception to
this outlined
in
Explanation
2 to clause
44 of
Section 65B
Are you providing a service?
•
Doing an activity for another person.
•
Doing such activity for consideration (Tourist information no
consideration)
•
Contractual Obligation
Excludes : I M A G E
•
Activity does not consist only of transfer of title in goods or
immovable property by way of sale, gift or in any other
manner.
•
Activity does not consist of a transaction in money or
actionable claim.
•
Consideration for activity is not in the nature of court fees for
a court or tribunal.
•
Activity is not in the nature of service provided by an
employee of such person in the course of employment.
•
Deemed sales
7
To determine whether you are providing a service?
8
S.
Question
N
o.
1 Am I doing an activity (including declared service) for another person?
Ans
wer
2
Am I doing such activity for a consideration?
Yes
3
Does this activity consist only of transfer of title in goods or immovable property by way of sale, gift or in
any other manner?
No
4
Does this activity constitute only 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?
No
5
Does this activity consist only of a transaction in money or actionable claim?
No
6
Is the consideration for the activity in the nature of court fees for a court or a tribunal?
No
7
Is such an activity in the nature of a service provided by an employee of such person in the course of
employment?
No
8
Is services in the capacity of M.P., Member of State legislature and Member of other local authorities etc.
No
Finance Act 2012 - Service Tax
Yes
To determine whether service provided by you is taxable
and tax is payable ?
If you are providing a ‘service’ (Step 1) and then pose the following questions
to yourself-
S.
No.
9
Question
Answer
1
Have I provided or agreed to provide the service?
Yes
2
Have I provided or agreed to provide the service in the taxable territory?
Yes
3
Is this activity entirely covered in any of the services described in the negative list of services
specified in section 66D of the Act or otherwise exempted by MEGA Notification
No
Finance Act 2012 - Service Tax
Consideration
Monetary or Non monetary
Damages for longer duration of use
i.e. demurrage charges:
Related to provision of service:
Taxable e.g. containers retained
beyond permissible period
Subsidies :
Accidental damages:
Taxable when influence the unit price:
price must change proportionate to Not related to provision of service: not
amount given Deficit subsidies not taxable e.g. damages to a rented
taxable
property
10
Finance Act 2012 - Service Tax
Employer – Employee - Taxability
 Services provided outside the terms of employment will be taxable
 Non-compete agreement taxable
 Expenses recovered from employees for private use of company facilities taxable  Canteen charges (usually exempt unless AC and alcoholic liquor being served)
 To and fro transportation will be taxable;
 Stay in guest house Rs 1000 per day or more taxable
 Charges for private use of official car: taxable unless “right to use”
11
Finance Act 2012 - Service Tax
Negative List of Services
12
Service Tax – Negative List
• Negative List effective from July 1, 2012
‒ Sectors covered in the negative list are:
Entertainment and Amusement
Government or Local
authorities
Agriculture and
Animal Husbandry
Education
Public Transportation
Negative List
for
Sectors
(exhaustive)
Trading of goods
Miscellaneous
Financial
Sector
13
Specified persons
Negative List of Services
 Services by Government or a Local Authority EXCEPT for services:
 by Posts Department by way of speed post, life insurance & agency services to
 Non-Govt. Entity;
 in relation to Vessel/Aircraft;
 transport of Goods/Passengers; &
 support Services to Business entities.
For support services provided by the Govt. to business entities, other than by way of renting of
immovable property, ST would be payable by the service recipient i.e. the business entities
under Reverse Charge Mechanism. However, services which are provided by Govt. in terms of
their sovereign right to business entities are not support services
 Services by RBI;
 Services by a foreign diplomatic mission located in India;
 Services relating to Agriculture or Agricultural Produce;
 Trading of goods [including future contracts in commodities]
14
Finance Act 2012 - Service Tax
Negative List of Services
 Any process amounting to manufacture or production of goods;
 Selling of space/time slots for advertisements EXCEPT advertisements broadcast by radio or
television;
 Sale of space or time for advertisement in print media, bill boards, buildings, cell phones,
internet, ATM, aerial advertising are not taxable. However, services provided by
advertisement agencies for preparing advertisements are taxable.
 Services by way of access to a road or a bridge 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 electrical transmission or distribution authority;
 Services by way of education - (i) pre-school education & education up to higher secondary
school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification
recognized by law & (iii) education as a part of an approved vocational education course;
15
Finance Act 2012 - Service Tax
Negative List of Services
 Services by way of renting of residential dwelling for use as residence;
 Services by way of (i) extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount & (ii) inter-se sale or purchase of foreign currency
amongst banks or authorized dealers of foreign exchange or amongst banks and such
dealers;
 Service by way of transportation of passengers, with or without accompanied belongings, by
(i) a stage carriage; (ii) railways [except for first class & air conditioner coach]; (iii) metro,
monorail or tramway; (iv) inland waterways; (v) public transport, other than predominantly for
tourism purpose, in a vessel between places located in India & (vi) metered cabs, radio taxis
or auto rickshaws;
 Service by way of transportation of goods by (i) road except for goods transportation agency
& courier agency; (ii) an aircraft or a vessel from a place outside India up to the customs
station of clearance in India; or (iii) by inland waterways;
 Funeral, burial, crematorium or mortuary services including transportation of the deceased.
16
Finance Act 2012 - Service Tax
Declared Services
17
Declared Services
•
Declared services means any activity carried out by a person for another person for a consideration.
•
Following activities are declared services under Section 66 E:
18
‒
Renting of immovable property subject to Municipal Tax deduction
‒
Construction of a complex, building, civil structure or part thereof exclude where consideration is
received after issuance of completion certificate by competent authority
‒
Temporary transfer or permitting use of any IPR excludes copyright
‒
Development, design, adaptation, implementation, etc. of information technology software
•
A mere license to use such canned software, which is not transfer of “right to use” is a provision
of service
•
On-site development of software is service
•
Internet downloads also service
•
Sale of pre-packaged or canned software is sale of goods
Declared Services
19
•
Agreeing to the obligation to refrain from an act or tolerate an act or situation or to do an act
•
Transfer of goods by way of hiring, leasing, licensing 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 the execution of works contract
•
Service portion in an activity wherein food or any other article of consumption or any drink is
supplied
Exempt Services
20
Wholly Exempt Services
• Notification No. 25/2012-ST, dated June 20, 2012, effective from July 1, 2012
‒ Sectors covered in Wholly Exempt Services are:
Health
Business Exhibition
Transport of specified
goods
Hospitality
Copyright
Wholly
Exempt
Services for
Sectors
(exhaustive)
Education
Job work
Miscellaneous
Erection/ Construction/ Maintenance/
Repair/ Renovation Services for specified
purposes
21
Exemption
 Medical Services



Clinical Establishment, an authorised Medical Practitioner or Para-Medics;
Veterinary clinic in relation to health care of animals or birds; &
Approved Clinical Research Organisation engaged in technical testing or analysis of
new drugs on human participants
 Religious & Charitable Services


Charitable activities by an entity registered u/s 12AA of Income Tax Act; &
Renting of precincts of religious place meant for general public or conducting of
religious ceremony.
 Art & Culture


22
Training or coaching in recreational activities in arts or culture; &
Performance by artist in folk or classical art forms of music, dance, or theatre
excluding services provided by such artist as a brand ambassador.
Finance Act 2012 - Service Tax
Exemption
 Sports



Training or coaching in recreational activities in sports;
Services by individual [as player, referee, umpire, coach or team manager] or a
recognised sports body to another recognized sports body; &
Sponsoring of sporting events of specified organization or federation.
 Educational Services


Services to or by an educational institution in respect of education exempted
from service tax, by way of (a) Auxiliary educational services or (b) renting of
immovable property; &
Public libraries by way of lending of books & publications.
 Hospitality Services


23
Renting of hotel, inn, guest house, club or other commercial places meant for
residential or lodging purposes having declared tariff < ` 1,000/day &
Serving of food or beverages by restaurant, eating joint or mess provided it is not airconditioned AND do not hold licence to serve alcohol.
Finance Act 2012 - Service Tax
Exemption
 Construction Services
Construction, erection, repair, maintenance, renovation or alteration of:
For Government , Local Authority & Government Authority
 Civil structure meant for use other than for business or profession;
 Structure meant for use as educational/clinical/cultural establishment;
 Canal, dam, any other irrigation works or pipeline; &
 Residential complex meant for self-use or employees or other persons specified in
Explanation 1 to Section 65B(44).
For any person
 Road, bridge, tunnel, or terminal for road transportation for use by general public;
 Civil Structure pertaining to specified scheme;
 Building of Registered entity [12AA of IT Act ] & used for religious purpose by general
public;
 Pollution control or effluent treatment plant [except when located as a part of factory];
 Airport, port or railways, including monorail or metro [except for repair & maintenance];
Single residential unit other than a part of a residential complex;
Post-harvest storage (incl. cold storage) for agricultural produce & mechanised food grain
handling system for agricultural produce as food stuff excluding alcoholic beverages.
24
Finance Act 2012 - Service Tax
Exemption
 Transportation Services
Transportation by Rail or Vessel within India
 Petroleum & petroleum products, chemical fertilizer and oilcakes;
 Relief materials for victims of natural or man-made disasters;
 Newspaper, defence equipments, mail bags & household effects;
 Railway equipments & agricultural produce & foodstuff (excl. alcoholic beverages).
 Transportation by Goods Transport Agency
 Fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage; or
 Other Goods [amount charged in single carriage ≤ ` 1,500 or all goods for single
consignee ≤ ` 750].
Transport of passengers through (a) Air [embarking from or terminating in an airport located
in North-Eastern State or Bagdogra, West Bengal]; (b) Contract carriage; & (c) ropeway or
cable car or tramway;
Service by way of hire (a) to a state transport undertaking motor vehicle for carrying > 12
passengers or (b) vehicle meant for transportation of goods to a goods transport agency;
Service by way of vehicle parking to general public except leasing of space for parking
facility.
25
Finance Act 2012 - Service Tax
Exemption
 Intermediary Services

Services by (a) sub-broker or an authorised person to a stock broker………;

Sub-contractor providing services by way of works contract to another contractor
providing works contract services which are exempt;

Job working in relation to (a) agriculture, printing or textile processing; ……..;

goods on which appropriate duty is payable by principal manufacturer….
 International Services
 Services by organiser towards business exhibition held outside India;
 Services by Service Provider located in a non-taxable territory to:(a) Government/individual for purpose except for business or profession;
(b) Registered Entity [Section 12AA] or
(c) Person in a non-taxable territory.
 Public Utility Services
 Services to Government for (a) carrying out activity ordinarily entrusted on municipality public health, sanitation etc. (b) Repair of a vessel or an aircraft;
 Services by departmentally run public telephone or free telephone at airport/hospital;
 Providing of public conveniences like public toilets, lavatories , urinals etc.
26
Finance Act 2012 - Service Tax
Exemption
 Other Services
•
Services provided to UN or a specified international organization;
•
Services provided by (a) an arbitral tribunal or (b) an advocate or firm of advocates by legal services
to (i) person except business entity or (ii) business entity with turnover < ` 10 Lakh in Preceding FY;
•
Services provided by an advocate or firm of advocates by legal services to similar entities;
•
Temporary transfer or permitting the use or enjoyment of a copyright relating to original literary,
dramatic, musical, artistic works or cinematograph films;
•
Services by way of collecting or providing news;
•
Services of general insurance business provided under specified schemes;
•
Services provided by an incubatee up to turnover of ` 50 Lakh subject to the certain conditions;
•
Service by an unincorporated body or a non- profit entity to its own members by way of
reimbursement of charges or share of contribution (a) as trade union ; (b) for carrying out exempt
services or (c) up to ` 5000 /month;
27
Finance Act 2012 - Service Tax
Partially Exempt Services
(NN 26/2012-ST, dated June 20, 2012 effective from July 1, 2012)
Hospitality Services
Particulars
Taxable %
Bundled service by way of supply of food or any other
article of human consumption or any drink, in a
premises, including hotel, convention center, club,
pandal, shamiana or any place specially arranged for
organizing a function together with renting of such
premises
70
Renting of hotels, inns, guest houses, clubs,
campsites or other commercial places meant for
residential or lodging purposes
60
Conditions
No CENVAT credit on goods
classifiable under Chapters 1 to 22
of the Central Excise Tariff Act
Fair Market value of all goods and
services should be included
No CENVAT credit on inputs and
capital goods
Transport Services
Particulars
Taxable %
Conditions
Transport of passengers by air, with or without
accompanied belongings
40
No CENVAT credit on inputs and
capital goods
Transport of goods by road by Goods Transport Agency
25
No CENVAT credit on inputs, capital
goods and input services
Renting of any motor vehicle designed to carry
passengers
40
Same as above
Transport of goods in a vessel
50
Same as above
28
©2012 Deloitte Touche Tohmatsu India Private Limited
Partially Exempt Services
(NN 26/2012-ST, dated June 20, 2012 effective from July 1, 2012)
Tour Operator Services
Particulars
Taxable %
Conditions
Services by a tour operator in
relation to a package tour
25
(i) No CENVAT credit on inputs, capital goods and input
services
(ii) The bill is inclusive of charges for such tour
Services by a tour operator in
relation to a tour, if the tour
operator is providing services
solely of arranging or booking
accommodation for any person in
relation to a tour
10
(i) No CENVAT credit on inputs, capital goods and input
services
(ii) Invoice indicates that charges are towards accommodation
(iii) Exemption not apply if invoice only includes the service
charges for arranging or booking accommodation for any
person and does not include the cost of such accommodation
Services, other than services
specified above, provided or to
be provided to any person, by a
tour operator in relation to a tour
40
(i) No CENVAT credit on inputs, capital goods and input
services
(ii)Invoice indicates that amount charged in the bill is the
gross amount charged for such tour
29
©2012 Deloitte Touche Tohmatsu India Private Limited
Partially Exempt Services
(NN 26/2012-ST, dated June 20, 2012 effective from July 1, 2012)
Construction Services
Particulars
Construction of a complex, building, civil
structure or a part thereof, intended for a
sale to a buyer, wholly or partly except
where entire consideration is received after
issuance of completion certificate by the
competent authority
Taxable %
25
Conditions
(i) No CENVAT credit on inputs
(ii) The value of land is indicated in the
amount charged from the service receiver
Fair Market value of all goods and services
should be included
Leasing /Hire purchase
Particulars
Services in relation to financial leasing
including hire purchase
Taxable %
10
Conditions
(i) Payable on interest portion
(ii) On lease management fee, processing
fee,
documentation
charges
and
administrative fee, service tax is payable on
100% value
30
©2012 Deloitte Touche Tohmatsu India Private Limited
Bundled Services
31
Bundled Services
Meaning
‘Bundle of provision of various services wherein an element of provision of one service is
combined with an element or elements of provision of any other service or services.’
Determination of service category
•
•
•
•
Reference to a service not to include reference to a service used for providing main service.
Specific description to be preferred over general description.
If various elements of service are naturally bundled in the ordinary course of business – service
which gives the essential character.
If various elements of service are NOT naturally bundled in the ordinary course of business – service
which gives the highest service tax liability.
Naturally bundled
 Meals and air/rail travel: Air travel is the service
 Breakfast and hotel accommodation: Hotel accommodation is the service
 Meeting, accommodation, food - Convention services
Unnatural bundled
•
32
Renting for both commercial and residential – Service Tax liability ?
Liability of Service Recipient
33
©2012 Deloitte Touche Tohmatsu India Private Limited
Service Recipient – Liability
NN 30/2012 –ST dated, June 20, 2012, effective from July 1, 2012
S.
No
Particulars
Percentage of
service tax payable
by the person
providing service
Percentage of
service tax
payable by the
person receiving
the service
1.
Services by an insurance agent to any person
carrying on insurance business
NIL
100%
2.
Transportation of goods by road services by a
goods transport agency to a factory, society, cooperative society, dealer registered under central
excise, any company and partnership firms
NIL
100%
3.
Sponsorship to any body corporate or any
partnership firm located in the taxable territory
NIL
100%
4.
Services by an arbitral tribunal to any business
entity located in the taxable territory
NIL
100%
5.
Services by an individual/ firm of advocate to any
business entity located in the taxable territory
NIL
100%
6.
Support service by Government or local authority
to any business entity located in the taxable
territory excluding renting,
transport
of
goods/passenger, services in relation to aircraft
or vessel
NIL
100%
7.
*Supply of manpower for any purpose
25%
75%
34
Service Recipient – Liability
NN 30/2012 –ST dated, June 20, 2012, effective from July 1, 2012
S.
No
Percentage of
service tax
payable by the
person
providing
service
Percentage of
service tax payable
by the person
receiving the
service
*Renting or hiring any motor vehicle designed to
carry passenger to any person who is not
engaged in similar line of business:
(a) on abated value
(b) on non abated value
NIL
60%
100%
40%
9.
*Works contract services
50%
50%
10.
Services provided by any person who is located
in a non-taxable territory and received by any
person located in the taxable territory
NIL
100%
11.
*Security services (effective 7th August, 2012)
25%
75%
12.
Services by Director (effective 7th August, 2012)
NIL
100%
8.
Particulars
* These services should be provided by individual, HUF, proprietary firm, partnership firm to any Company or business
entity located in taxable territory
35
Issues under reverse charge mechanism
•
Additional burden of compliance and keeping records
•
In case of services such as Man power recruitment, Security, Works contract and Rent-a-cab service,
knowledge of status of service provider and service recipient is required to ascertain service tax liability.
•
As per explanation – II to Notification 30/2012, in case of works contract, service receiver and service
provider can avail different valuation options.
•
A lot of hazels can arise in a case of works contract, where service receiver and service provider opt for
different valuation options.
•
As per rule 7 of POTR, date of payment will be point of taxation in case of service, where service
recipient is liable to pay service tax.
•
If payment not made within six months the point of taxation shall be invoice date
•
In case of partial reverse charge, Cenvat credit of service tax paid by service provider and service
receiver is eligible to avail on different occasions.
36
Valuation
37
Valuation
•
Service tax is payable on the gross amount charged
•
Cum Tax benefit in case of contract inclusive of service tax
•
gross amount charged includes payment by cheque, credit card, deduction from account and any form
of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or
debited, as the case may be, to any account, whether called “Suspense account” or by any other name,
in the books of account of a person liable to pay service tax, where the transaction of taxable service is
with any associated enterprise
•
The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of
service tax or value of a taxable service or rate of exchange, as the case may be, in force or as
applicable at the time when the taxable service has been provided or agreed to be provided.
•
Rate of exchange should be as per Customs
•
Where value of service cannot be determined, comparable value for providing similar service should be
adopted.
•
If comparable value not available, then taxable value cannot be less than the cost of provision of such
taxable service
38
Valuation
•
Where any expenditure or costs are incurred by the service provider in the course of providing taxable
service, all such expenditure or costs shall be treated as consideration for the taxable service provided
or to be provided and shall be included in the value for the purpose of charging service tax on the said
service.
•
The expenditure or costs incurred by the service provider as a pure agent of the recipient of service,
shall be excluded from the value of the taxable service
•
The amount realised as demurrage or by any other name whatever called for the provision of a service
beyond the period originally contracted or in any other manner relatable to the provision of service shall
be included for the purpose of payment of service tax.
Following expenses are not to be included in the value of taxable service:•
interest on delayed payment of any consideration for the provision of services or sale of property,
whether movable or immovable;
•
accidental damages due to unforeseen actions not relatable to the provision of service;
•
subsidies and grants disbursed by the Government, not directly affecting the value of service.
39
Valuation of Service Portion in a
Works Contract
40
Valuation of Service Portion – Works contract
NN 24/2012 –ST dated, June 6, 2012, effective from July 1, 2012
Where actual value of goods transferred in the execution of works contract is
available with the Company
Value of service is:
Gross amount charged for the works contract (excluding value added tax charged)
less
actual value of property in goods transferred in the execution of the works contract.
41
Valuation of Service Portion – Works contract
NN 24/2012 –ST dated, June 6, 2012, effective from July 1, 2012
Where actual value of goods transferred in the execution of works contract is
not available with the Company
Value of service is:
In the case of works contract entered into for
execution of original work
40% of total amount charged for works contract
In the case of works contract entered into for
maintenance or repair or reconditioning or
restoration or servicing of any goods
70% of total amount charged for works contract
In the case of any other type of works contract
60% of total amount charged for works contract
Total Amount
= Gross amount charged for the works contract + Fair market value of all goods and services supplied in
or in relation to the execution of works contract - amount charged for such goods or services - Value added
tax or sales tax
“ ‘original works’ means(i) all new constructions;
(ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them
workable;
(iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or
otherwise;”
42
Valuation of Service Portion in a
Restaurant or as an outdoor
catering
43
Determination of value of service portion involved in supply of food or any other article
of human consumption or any drink in a restaurant or as outdoor catering:-
Sl. No.
Description
(1)
1.
(2)
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 a part of the activity, at
a restaurant
Service portion in outdoor catering wherein goods, being food or
any other article of human consumption or any drink (whether or
not intoxicating) is supplied in any manner as a part of such
outdoor catering
Percentage of the
total amount on
which tax payable
(3)
40
Valuation of Service Portion in a
Works Contract
2.
60
Total Amount
= Gross amount charged + Fair market value of all goods and services supplied in or in relation to the
supply of food or any other article of human consumption or any drink- amount charged for such goods or services Value added tax or sales tax
Provider of taxable service shall not take CENVAT credit of duties or cess paid on any goods classifiable
under Chapters 1 to 22 of the Central Excise Tariff Act, 1985
44
Place of Provision of Service
45
Determination of place of provision of service
• The Place of provision of Service Rules, 2012 (POPOS Rules) is effective from 1
July 2012
• Power given to the Central Government to make rules for determination of place
of provision of service under Section 66C of the Act
• POPOS Rules are also applicable to a situation where the service provider or
service receiver or both are located outside the taxable territory
• Export of Service Rules, 2005 and Taxation of Services (Provided from outside
India and received in India) Rules, 2006 superseded
• The POPOS Rules determine the exact place of provision of services on the
basis of their consumption
46
Determination of place of provision of service
Place of provision of service is required to be determined by application of following Rules:
Rules
Place of provision of service
R3
Location of the service receiver – Default rule to be
applied in case the place of provision of service is not
determinable under below Rules
Location of service receiver (Example Intellectual
Property Rights)
R4
Performance based services
Location where the services are actually performed
(courier, repair, storage, cargo handling, technical
testing, dry cleaning, beauty treatment, training)
R5
Location of immovable property
Location of immovable property (leasing of building,
construction, maintenance, architect, security)
R6
Services related to events
Place where event is actually held (conferences,
exhibitions, fairs, seminar, weeding, sports)
R7
Part performance of a service at different locations
Location in the taxable territory where the greatest
proportion of service is provided
Even if the services are partly performed in India then
also it is taxable
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Determination of place of provision of service
Place of provision of service is required to be determined by application of following Rules:
Rules
Place of provision of service
R8
Services where the provider as well as receiver is
located in taxable territory
Location of service receiver – Repair undertaken
outside India but both service provider and recipient
located in India
R9
Specified services (Services provided by banking
company or a financial institution or a NBFC to account
holder, Online information and database access or
retrieval services, intermediary services, services
consisting of hiring of means of transport, up to a period
of one month)
Location of service provider (social networking sites,
trade statistics, online newspaper and journal, tour
operator
R 10
Service of transportation of goods (air, vessel, rail or
GTA is covered)
Place of destination of goods
For GTA - Location of person liable to pay tax
R 11
Passenger transportation services
Place where passenger embarks on the conveyance for
continuous journey
R 12
Services provided on board conveyances
First scheduled point of departure of that conveyance
for journey – Movie on demand on a Delhi – Bangkok
flight
• Where more than one Rule merits equal consideration, the later Rule shall apply
• Central Government retains power to notify place of provision of service on the basis of place
of effective enjoyment of service
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Point of Taxation
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Point of Taxation
RULE 3 – General Rule
Determination of point of taxation. — “point of taxation” shall be earlier of (a) the time when the invoice for the service provided or agreed to be provided is issued;
(b) The time when the person providing the service receives a payment, to the extent of
such payment;
Exception:
(i) If invoice not issued within specified time, the point of taxation will be date of completion
of service or payment receipt whichever is earlier.
(ii) in case of continuous supply of service where the provision of the whole or part of the
service is determined periodically on the completion of an event in terms of a contract,
which requires the receiver of service to make any payment to service provider, the date of
completion of each such event as specified in the contract shall be deemed to be the date
of completion of provision of service;
(iii) date of payment” shall be the earlier of the dates on which the payment is entered in
the books of account or is credited to the bank account of the person liable to pay tax.
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Point of Taxation
Rule 4 - Determination of point of taxation in case of change in rate of tax -
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Releva
nt
Rules
Date – Before
change in rate
(10%)
4(a)(i)
Service Provided
4(a)(ii)
Date – After change in rate
(12%)
Effectiv
e Rate
Point of Taxation
Invoice Raised
Payment Received [WEE]
12%
Earlier of date of
invoice or payment
Service Provided
Invoice Raised
Payment Received
10%
Date of issuing invoice
4(a)(iii)
Service Provided
Payment Received
Invoice Raised
10%
Date of payment
4(b)(i)
Invoice Raised
Service Provided
Payment Received
12%
Date of payment
4(b)(ii)
Invoice Raised
Payment Received
[WEE]
Service Provided
10%
Earlier of date of
invoice or payment
4(b)(iii)
Payment Received
Service Provided
Invoice Raised
12%
Date of issuing invoice
Point of Taxation
RULE 5 -
Payment of tax in case of new services i.e. where a service is taxed for
the first time say Directors Services
Sl.
No.
Situation
Tax/No Tax
A
Invoice issued & payment received prior to service became taxable
No Tax
B
Payment received prior to service became taxable and invoice
issued within 14 days of the date when service is taxed for the first
time
No Tax
C
Others
Tax
RULE 7 - Determination of point of taxation in case of specified services or persons.
•
In case of Section 68(2) services i.e. where service recipient is liable to pay tax under reverse
charge, the point of taxation shall be the date of payment
•
Where the payment is not made within a period of six months of the date of invoice, the point of
taxation shall be determined on the basis of date of invoice
•
In case of “associated enterprises”, where the person providing the service is located outside India,
the point of taxation shall be the date of debit in the books of account of the person receiving the
service or date of making the payment whichever is earlier.
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Point of Taxation ………..
Service
Taxable services
20.3.2012
Taxable
Work
contract with no
effective
rate
change
20.6.2012
1.7.2012
10.7.2012
20.6.2012
20th June being earlier of
three events - Rule 3
Taxable
contract
effective
change
20.6.2012
1.7.2012
10.7.2012
1.7.2012
20.6.2012
1.7.2012
10.7.2012
No Tax
Here service provided
after change in rate of
tax
and invoice also
issued after change in
rate of tax , so POT is 1st
July, 2012 - Rule 4(b) (iii)
Payment received before
service became taxable
and invoice also issued
within 14 days so no tax
[Rule 5(B)]
Newly Taxed
Service
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Finance Act 2012 - Service Tax
Invoice
Point of
Taxation
20.3.2012
Remarks
Service
Completion
1.4.2012 10.4.2012
Works
with
rate
Payment
20th March being earlier
of three events - Rule 3
Point of Taxation
RULE 8.
Determination of point of taxation in case of copyrights, etc. — In respect of
royalties and payments pertaining to copyrights, trademarks, designs or patents, where the
whole amount of the consideration for the provision of service is not ascertainable at
the time when service was performed, and subsequently the use or the benefit of these
services by a person other than the provider gives rise to any payment of consideration,
the service shall be treated as having been provided each time when a payment in respect
of such use or the benefit is received by the provider in respect thereof, or an invoice is
issued by the provider, whichever is earlier.
RULE 8A. Determination of point of taxation in other cases. — Residual rule empowers the
Central Excise officer to determine the point of taxation to the best of his judgment if date of
invoice or date of payment or both are not available
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Issues in CENVAT Credit Rules
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Broad overview of the changes
CENVAT Credit Rules
• Dumpers and tippers included in definition of capital goods w.e.f. 1-7-2012
• Duty on removal of capital goods after use or cleared as waste & scrap to be paid at higher of CENVAT
credit as reduced by specified percentage or duty on transaction value w.e.f. 17-3-2012
•
Credit of inputs and capital goods without bringing them into premises allowed to service provider
subject to maintenance of documentary evidence (Rule 4)
•
Amendment to Rule 6(3) wherein the rate of payment increased to 6% for the manufacturer/service
provider who does not maintain separate accounts w.e.f. 1-4-2012
•
Credit allowed on the basis of tax payment challan for Service Tax paid under reverse charge
• Rules relating to distribution of credit of input services by ISD amended (Rule 7)
• Interest not applicable where credit has been wrongly availed but reversed prior to utilisation (Rule 14)
• Unutilized credit of SAD at the end of each quarter can be transferred to another factory of the
manufacturer (Rule 10A)
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THANK YOU
Views expressed herein are personal in nature and any reliance on it is at the recipient’s own risk
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