CA Manish Gadia 21 st January, CA Manish Gadia 1

Transcription

1 By CA Manish Gadia 21 st January, CA Manish Gadia 1

2 Coverage Point of Taxation Export of Service Import of Service Valuation of Services CA Manish Gadia 2

3 Point of Taxation CA Manish Gadia 3

4 Applicable from Option to assessee to adopt from POT not applicable If the provision of service are completed or The invoices are issued Up to 31-3/ CA Manish Gadia 4

5 POT POT at the earliest of Invoice issued within 14 days Date of Invoice Receipt of payment Not issued with in 14 days Date of Completion of Service CA Manish Gadia 5

6 Date of complet ion of service April 20, 11 April 20, 11 April 20, 11 April 20, 11 Date of invoic e May 2, 11 May 6, 11 May 2, 11 May 6, 11 Point of Taxation Date on which payment recd Point of Taxation Remarks May 12, 11 May 2, 11 Invoice issued in 14 days & before receipt of payment May 10, 11 April 20, 11 Invoice not issued within 14 days & payment received after completion of service April 25, 11 April 25, 11 Invoice issued in 14 days but payment received before invoice April 5, 11 (part) & May 2, 11 remaining April 5, 11 & April 20, 11 for respective amounts Invoice not issued in 14 days. Part payment before completion, remaining later CA Manish Gadia 6

7 Completion of Service includes not only the physical part of providing the service but also the completion of all other auxiliary activities that enable the service provider to be in a position to issue the invoice. 144/13/2011 ST dated 18th July, 2011 auxiliary activities include activities like measurement, quality testing etc which may be essential pre-requisites for identification of completion of service. the test for the determination whether a service has been completed would be the completion of all the related activities that place the service provider in a situation to be able to issue an invoice. however such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice CA Manish Gadia 7

8 Details on Invoice Within 14 days Serially numbered The name, address and the registration number of service provider The name and address of the person receiving such taxable service Description, classification and value of taxable service provided or to be provided The service tax payable thereon CA Manish Gadia 8

9 Change in the effective rate of Tax PROVISION OF SERVICE ISSUE OF INVOICE RECEIPT OF PAYMENT APPLICABLE RATE Before After After Date of Invoice or Receipt of Payment, whichever is earlier. Before Before After Date of Issue of Invoice Before After Before Date of Receipt of Payment After Before Before Date of Invoice or Receipt of Payment, whichever is earlier. After Before After Date of Receipt of Payment After After Before Date of Issue of Invoice CA Manish Gadia 9

10 Payment of Tax in case of New Services No Service Tax Invoice is issued and payment for such invoice is received before introduction Date of provision of Services has no relevance Payment is received before introduction & invoice is issued within 14 days of receipt of payment or provision of service, whichever is earlier CA Manish Gadia 10

11 Service provided or to be provided continuously under a contract for a period of more than 3 months or as prescribed POT at the earliest of Issue of Invoice Receipt of Payment Invoice not issued within 14 days Date of Completion of event in terms of a contract, which requires the service receiver to make any payment to service provider CA Manish Gadia 11

12 Following taxable services shall be treated as Continuous Supply of Service Commercial or Industrial Construction Residential Complex Construction Telecommunication Services Internet Telecommunication Services Works Contract Services CA Manish Gadia 12

13 Professionals Export of Services Payment under reverse charge Mechanism Associated Enterprise Provider outside India Provider within India CA Manish Gadia 13

14 Professionals POT shall be on receipt of payment in case of individuals, proprietary firms or partnership firms for providing below-mentioned services Consulting Engineer s Services Architect s Services Interior Decorator s Services LLP? Practicing Chartered Accountant s Services Practicing Cost Accountant s Services Practicing Company secretary s Services Scientific or Technical Consultancy Service Legal Consultancy Services CA Manish Gadia 14

15 POT shall be on receipt of payment for services exported if the payment for exports is not received within the period specified by the RBI then the point of taxation shall be as per normal rule of POT if the services are exported on 1st August, 2011 and up to 31st July, 2012 payment is not received, then the service tax liability would be counted as due in the month of August 2011 What about Payment of Interest? Later on receipt of payment refund is available? CA Manish Gadia 15

16 Amount is Ascertainable Amount is not ascertainable At the time of Receipt Issue of Performance Invoice Whichever is earlier CA Manish Gadia 16

17 Adjustment u/r 6(3) assessee is allowed to adjust against his subsequent period's liability the excess service tax paid for services which is not wholly or partially Provided or amount is renegotiated provided he has refunded the amount charged along with Service Tax Issue Credit Note to the client CA Manish Gadia 17

18 CA Manish Gadia 18

19 Export Of Service Rules Export of Services Immovable Property Place of Performance Location of recipient [Rule 3(1)(i)] [Rule 3(1)(ii)] [Rule 3(1)(iii)] Provided in relation to Wholly / Partly an Immovable property performed outside situated outside India India In relation to business Recipient of Service is located outside India Other than business Recipient of Service is located outside India at the time of provision of service Recipient has office in India than order for provision from service is made from outside India CA Manish Gadia 19

20 Location of Goods Location of goods or immovable property in respect of following Services management, maintenance or repair technical testing and analysis, and technical inspection and certification From recategorised under 3(iii) CA Manish Gadia 20

21 Australia India CA Manish Gadia 21

22 Supply of Tangible Goods for Use Australia India CA Manish Gadia 22

23 Services Criterion prior to 1 st April, 2011 Special Services provided by Builders Location of Recipient Criterion w.e.f. 1 st April, 2011 Location of Immovable Property Credit Rating Agency Place of Performance Location of Recipient Market Research Agency Technical Testing and Analysis TPT of Goods by Aircraft Place of Performance Place of Performance Place of Performance Location of Recipient Location of Recipient Location of Recipient GTA Place of Performance Location of Recipient Opinion Poll Agency Place of Performance Location of Recipient TPT of Goods by Rail Place of Performance Location of Recipient Rail Travel Agent Location of Recipient Place of Performance Health Check up and Treatment Location of Recipient Place of Performance CA Manish Gadia 23

24 Export Of Service Rules Provided from India wef Such service is delivered and used outside India. And Omitted wef Payment for such service Provided out side India is received by the service provider in convertible foreign exchange. wef CA Manish Gadia 24

25 India Includes (W.E.F ) CA Manish Gadia 25

26 Payment of Tax May Export the Services without Payment of Service Tax Rebate of Service Tax CA Manish Gadia 26

27 Important Judicial Rulings CA Manish Gadia 27

28 Export (Courier) TNT India Pvt. Ltd. versus CST, Banglore [2007 (7) S.T.R. 142 (Tri. - Bang.)] U.B.Xpress (South) (P.) Ltd. Vs. Commissioner of Central Excise, Coimbatore. [2008 (15) STT 242] (AHD-CESTAT) PROFESSIONAL COURIERS Versus COMMR. OF SERVICE TAX, CHENNAI [2008 (10) S.T.R. 125 (Tri. - Chennai)] CA Manish Gadia 28

29 BLUE STAR LTD. versus CCE, BANGALORE [2008 (11) S.T.R. 23 (Tri. - Bang.) ABS INDIA LTD. Versus CST, BANGALORE [2009 (13) S.T.R. 65 (Tri. - Bang.) Export (BAS) CA Manish Gadia 29

30 Export (Foreign Currency) National Engg. Industries Ltd. Versus CCE, JAIPUR [2008 (11) S.T.R. 156 (Tri. - Del.)] Nipuna Services Ltd. Vs. Commissioner of Central Excise, Cus and ST (A-II) Hyderabad. [2009 (14) STR 706] (Tri- Bang). M/S Suprasesh General Insurance Services & Brokers Pvt Ltd Vs Commissioner Of Service Tax, Chennai [2009-TIOL-338- CESTAT-MAD] CA Manish Gadia 30

31 Export (Performance) CST, Ahmedabad Vs M/S B A Research India Ltd [2009-TIOL CESTAT-AHM] CA Manish Gadia 31

32 Import Of Service Import of Services Immovable Property Place of Performance Location of recipient [Rule 3(i)] [Rule 3(ii)] [Rule 3(iii)] Provided in relation to Wholly / Partly Recipient of Service an Immovable property performed in India is located in India for situated in India use in relation to Business or Commerce Recipient is an individual and such service is received by him otherwise than for the purpose of use in any business or commerce, he will not be taxed under CA Manish Gadia 32 reverse charge mechanism

33 Location of Goods Location of goods or immovable property in respect of following Services management, maintenance or repair technical testing and analysis, and technical inspection and certification From recategorised under 3(iii) CA Manish Gadia 33 33

34 Australia India CA Manish Gadia 34

35 Supply of Tangible Goods for Use Australia India CA Manish Gadia 35

36 Services Criterion prior to 1 st April, 2011 Special Services provided by Builders Location of Recipient Criterion w.e.f. 1 st April, 2011 Location of Immovable Property Credit Rating Agency Place of Performance Location of Recipient Market Research Agency Technical Testing and Analysis TPT of Goods by Aircraft Place of Performance Place of Performance Place of Performance Location of Recipient Location of Recipient Location of Recipient GTA Place of Performance Location of Recipient Opinion Poll Agency Place of Performance Location of Recipient TPT of Goods by Rail Place of Performance Location of Recipient Rail Travel Agent Location of Recipient Place of Performance Health Check up and Treatment Location of Recipient Place of Performance CA Manish Gadia 36

37 India Includes (W.E.F ) CA Manish Gadia 37

38 Does not cover Air transport of passengers embarking in India for International journey Transport of persons by a cruise ship embarking in any port in India CA Manish Gadia 38 38

39 Reverse Charge Mechanism Recipient Shall make an application for registration Not applicable otherwise than for the purpose of use in any business or commerce When to pay service tax Not output service for CENVAT CA Manish Gadia 39

40 Issues M/s Phantom Ltd. desires to have ECB from a foreign bank. It directly approaches foreign bank to provide support in ECB matters. ECB is issued on 20th June For this M/s Phantom pays some fees to foreign bank. Similarly M/s Phantom raises another ECB in July Is M/s Phantom is liable to pay service tax under reverse charge mechanism, if yes for which period? CA Manish Gadia 40 40

41 Where a person is carrying on a business through a PE in India and through another PE outside India, such PE shall be treated as separate persons for the purposes of this section. -A person carrying on a business through a branch/agency in any country shall be treated as having a BE in that country 66A (2) Indian branch of the foreign bank approaches M/s Phantom for said ECB issue. Foreign bank arranges to share its fees with Indian branch, in this case, whether service tax will be payable under reverse charge mechanism, if Yes, by whom? CA Manish Gadia 41 41

42 Payment of Service tax under Import of Service Rules would be eligible for credit under Cenvat Credit Rule? If we refer to Rule 3(1)(ix) of CENVAT Credit Rules, 2004, it refers to the service tax leviable under section 66 and not section 66A. Please clarify. File No.137/72/2008-CX.4 it must be kept in mind that taking of credit and its utilization is a substantive right of a taxpayer under value added taxation scheme. Therefore, in the absence of a clear legal prohibition, this right cannot be denied. File No.354/148/2009-TRU CA Manish Gadia 42 42

43 Travel Agent is engaged in travel and tourism. It is registered as an air travel agent and a tour operator. It sells outbound tour packages to Indian customers say to US, Europe for a lumpsum of say Rs. 1,00,000/- (a part of which is received in convertible foreign exchange in India from the travellers foreign currency say to the extent of Rs /-). Would Travel agent be entitled to any export exemption in respect of the above transaction? 117/11/2009-ST CA Manish Gadia 43 43

44 CA Manish Gadia 44

45 Value of Taxable Service Consideration for service is Wholly in money Not wholly/partly Not ascertainable in money Gross amount charged Consideration in money + Money Value of Consideration in kind - Service Tax payable Similar does not mean identical but it means corresponding to or resembling to in many respects CAS - 4 a. Gross amount charged to provide similar service to any other person Value cannot be determined in accordance with (a), Equivalent money value of such consideration which shall, be at least equal to the cost CA Manish Gadia 45

46 Some Explanations Consideration includes any amount that is payable for the taxable services provided or to be provided. Money includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value. 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 CA Manish Gadia 46

47 Value for work contract service Excludes: Value of transfer of property in goods VAT/sales tax paid Includes Labour charges sub-contractor for labour & Services planning, designing and architect s fees hire Charges of machinery and tools Cost of consumables such as water, electricity, fuel. Cost of establishment of the contractor Other similar expenses relatable to supply of labour Profit earned relatable to supply of labour and CA Manish Gadia 47 services Gannon Dunkerley & Co. v. State of Rajasthan [1993] 66 Taxman 229(SC)

48 Service Tax on Forex Dealer the gross amount of currency exchanged for an Amount in Rs. Minimum Maximum Up to 100, % 100,000 to 10,00,000 Rs. 100 Rs % Above 10,00,000 Rs % 5, CA Manish Gadia 48

49 Foreign Currency RBI reference rate is available units of foreign currency exchanged multiplied by the difference in the RBI reference rate for that currency for that day and the buying rate or the selling rate. RBI reference rate is not available the value will be 1% of amount in Indian National Rupees that has been bought or sold. Neither of the currencies exchanged is INR the value shall be equal to 1% of the lesser of the two amounts CA Manish Gadia 49

50 Transport of passenger by Air Sr No Particulars Existing From 1 st April, Domestic (Economy) Rs. 100 Per Journey 2 Domestic (other than Economy) Service Rs. 100 Per Journey 3 International (Economy) Rs. 500 Per Journey Rs. 150 Per Journey 10% on Value of Ticket Rs. 750 Per Journey How to Disclose in the Return CA Manish Gadia 50

51 Composition Schemes Air Travel Agent Life Insurance CA Manish Gadia 51

52 Optional Composition Scheme Rate of Tax: 4% on the gross amount charged Gross amount Charged = Value of Goods used + Value of service VAT/CST - Cost of M/C & Tools used CENVAT Inputs: No Input Service: Yes Capital Goods: Yes CA Manish Gadia 52

53 Gross amount charged is inclusive of Service Tax When the service provided is inclusive of service tax payable, the value of such taxable service would be: Value of = Gross amount charged * 100 taxable service Gem Star Enterprises P. Ltd v. CCE & C, Calicut 2007 (7) STR 342 (Tri.- Bang.) CA Manish Gadia 53

54 Power of CEO call for information and documents by issuing Show Cause notice to satisfy himself After giving reasonable opportunity of being heard he may determine the value of taxable service AC/DC written instruction for verification Show cause notice after commissioner approval Para of F.No. B1/4/2006 TRU CA Manish Gadia 54

55 Value of Taxable Service Inclusions: All expenditure or costs Telecommunication Exclusion: All expenditure or cost incurred by service provider as a pure agent subject to certain conditions CA Manish Gadia 55

56 Pure Agent enters into a contractual agreement neither intends to hold nor holds any title to the goods or services does not use such goods or services so procured receives only the actual amount CA Manish Gadia 56

57 Exclusion from Value of Taxable Service Conditions for exclusion from the value acts as a pure agent while making payment recipient of service receives and uses the goods or services so procured recipient of service is liable to make payment to the third party authorises Knows payment has been made separately indicated in the invoice Actual amount to be recovered are in addition to the services he provides CA Manish Gadia 57

58 Commission, costs, etc., will be included or excluded Cases which were listed in Rule 6(1) & (2) were almost similar, except The cost of unexposed film, unrecorded magnetic tape sold The cost of sale of material sold Notificatio n No. 12/2003 ST BSNL V. UOI 2006 (2) STR 161 (SC) Imagic Creative P. Ltd V. CCT 2008 (9) STR 337 (SC) CA Manish Gadia 58

59 Value where Taxable Service provided from outside value of service would be actual amount of consideration charged for the service provided or to be provided. Where the services listed in Rule 3(ii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 are performed partly in India. value of service would be = total consideration paid by the recipient + the value of service partly performed outside India CA Manish Gadia 59

60 Issues CA Manish Gadia 60

61 Issues Vivah charitable trust provides Hall for marriages on rental basis and issues receipt of Rs, 25,000 towards rental for marriage function and Rs. 75,000/- towards donation to the corpus of the trust. The trustees of the trust now wants to know on which amount it should pay the service tax? Cultural Society of angamally V. CCE Chochin 2007 (8) STR 25 (Tri-Bang) CA Manish Gadia 61

62 Issues Online Stock Broking Ltd. (OSBL) is a brokerage house. OSBL charges following charges to its clients and such charges were separately disclosed in the bill or invoice issued to their clients. Brokerage 0.500% Other Charges 0.005% Transaction Charges 0.010% Stamp Duty & STT 0.076% Up to , Company was paying service tax only on Brokerage. Management wants to know, out of the above component, which component would now attract service tax? First Securities Pvt. Ltd. V. CST, Bangalore 2007 (7) STR 690 (Tri-Bang) CA Manish Gadia 62

63 Issues Aditya College of Competitive Exams Vs CCE, Visakhapatnam [2009(16) STR154 (Tri. Bang)] Smart Coaching Classes provides coaching to Standard V to Standard X. They incur expenditure towards books, class bag & food. Theses charges they recover separately from every student, while they recover coaching fees. Management is of the view that service tax would be attracted only on the coaching fees and not on the charges recovered for books, bag & food Circular No. 59/8/2003 ST., Dt CA Manish Gadia 63

64 Issue M/s Tyrevala is engaged in the business of retreading old used tyres. During the course of retreading, material such as tread rubber, vulcanizing solution is used. M/s Tyrevala collected Rs. 10 Lakhs towards retreading charges from its customers which included Rs. 6 Lakhs towards material used in retreading. What will be the Service Tax liability of Tyrevala? Chkita Rajni Udyam Vs CCE, Cus &ST, Mysore [2009(16)STR 172 (Tri.- Bang) CA Manish Gadia 64

65 Questions CA Manish Gadia 65 65

66 Opinions or views are like wrist watches. Every watch shows different time from others. But every one believes that their time is right! CA Manish Gadia 66

67 CA Manish Gadia Ph : (022) manish@gmj.co.in CA Manish Gadia 67