Banking and other Financial services

Transcription

1 CA Pritam Mahure 28 th May 2011 Indirect tax Generics Service tax Banking and other Financial services 1

2 Goods Others Economic Activities Services Immoveable Properties Works Contracts 2

3 1. A manufacturer producing and selling motor cars 2. A person selling his house 3. An agent earning a commission/brokerage 4. A bank lending money 5. An employee working in a multinational company 6. A person cleaning his own house 7. A housewife teaching her child Goods Services 3

4 Governed by Finance Act, 1994 Applicable to whole of India except J&K Bank of J&K providing services to client in Maharashtra Bank of Maharashtra providing services in J&K Applicable to specified 116 taxable services Two separate persons Consideration Being indirect tax, recovered from service recipient 4

5 Provider of taxable service Recipient of taxable service GTA service Sponsorship services Import of service Recipient Provider When to get registered? Service provider Basic exemption of Rs 10 lakhs Service Recipient No exemption Registration Single Registration Centralised Registration Accounting Billing 5

6 Payment Monthly payment Payment - 5 th of the following month E-payment - 6 th of the following month E-payment if ST payment more than 10 lakhs in preceding FY Returns Half yearly before 25 th E-filling of returns if the ST payment more than 10 lakhs in preceding FY 6

7 Interest income Income from value added services Expenses for GTA/Sponsorship/ taxable services by foreign service providers Not taxable Taxable unless exempted Taxable Taxable Service means any service provided or to be provided to <Scope of Service Receiver is defined here> by <Scope of Service Provider is defined here> in relation to <Scope of Service is defined here> 7

8 Taxable Service means any service provided or to be provided to <any person> by <a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern > in relation to <banking and other financial services and the term service provider shall be construed accordingly> Services liable under BFS : Financial leasing including equipment leasing and hire purchase Securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing Asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services Banker to an issue, Merchant banking services, Provision and transfer of information and data processing Advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy Other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility discounting facility, safe deposit locker, safe vaults; operation of bank accounts 8

9 Income Nature Service tax applicable? Bank commission Charges / commission for purchase order, demand draft, letter of credit, bank guarantee, cheque book charges Safe deposit lockers Safe deposit locker charges Yes Money Transfers Charges for transfer of money including telegraphic transfer, mail transfer and electronic transfer Minimum balance charges Charge fee Yes Lending - Processing, pre-closure charges - Interest on loan [Rule 6(2) (iv)] Yes Yes Yes No Income Nature Service tax applicable? Overdraft, cash credit facility, discounting of bills/cheques Interest/ discount No [Not. 29/2004-ST] Appraisers charges Appraise purity of gold 2008 (12) STR 376 Anywhere banking charges To operate account from other branches Opening of account Charges for accounts opening Yes Financial Leasing Commission fro tax collection - Processing charges -Interest Collection of duties or taxes levied by CG/SG Yes Yes Yes [However, exemption to 90% value of interest vide 4/2006-ST] No [Not. 13/2004-ST] 9

10 Governed by Cenvat Credit Rules, 2004 Provider of taxable service is allowed to avail and utilize credit Credit is allowed on Inputs, Input services and Capital goods Credit on input services may be taken only after payment of consideration Credit of service tax paid under reverse charge mechanism available only upon payment of value of input service and service tax Credit shall be utilized only to the extent such credit is available on the last day of the month 10

11 Cenvat credit Separate accounts Provision of taxable and exempt services Pay 6% on the value of exempted services or Avail proportionate credit Full credit available on the services specified in Rule 6(5) of CCR Deleted wef 1 April Whether ST paid on all service incomes? 2. Whether service tax paid as a recipient? 3. Whether Cenvat credit availed? If yes, whether it is in accordance with CCR? 4. Whether other procedures (such as registration, payment, returns, invoicing etc) followed? 11

12 In case of any queries, please revert at /