CENVAT CREDIT SCHEME FOR SERVICE PROVIDERS

Transcription

1 CENVAT CREDIT SCHEME FOR SERVICE PROVIDERS By Vishal Agrawal Managing Partner, TLC Legal, Advocates 22 nd November, 2013 Cenvat Credit Rules,2004

2 2 Service tax on employee recoveries Amounts paid by the employer to employee for premature termination (notice pay)/ Mobile Reimbursements etc. can be treated as amounts received for provision of service in course of or in relation to employment, which would not be taxable as excluded from the definition of service.

3 Service tax on electricity charge recovered 3 by housing societies from its members Issue is debatable, in light of the judgment of Delhi HC in the case of Intercontinental but for this judgment the charges recovered would be treated as considerations.

4 4 Whether reversal of CENVAT credit is required on trading of securities Exempted service has been defined to include a service on which no tax is leviable u/s 66B (Rule 2(e) of CCR, 2004). Sec 66B is the charging section excluding services specified in the Negative List. Trading of Goods is one of the entries in the Negative List(S66D(e)). Goods have been defined to include Securities, u/s 65B(25).

5 Service tax on in-room dining in a hotel 5 66E (i) provides that service portion in any activity wherein goods being food or any article of human consumption or any drink is supplied in any manner as a part of an activity the same would be a declared service. The service does not envisage that the service rendered in a restaurant alone would be taxable. Abatement may be available.

6 6 Applicability of Reverse charge on service tax where service provider is from J&K. Section 66B provides that Service Tax shall be levied on all services (except services in Negative List) provided or agreed to be provided in Taxable territory (India other than J&K). Section 66C The Central Government may, by rules made in this regard, determine the place where such services are provided or deemed to be provided. Reverse charge is applicable in respect of any taxable service provided by a person located in a non-taxable territory and received by a person located in a taxable territory.(by virtue of Notification u/s 68(2))

7 7 Service Tax on Sky-Diving Activity The activities of Admission to entertainment events or Access to amusement facilities have been kept in Negative List. The question whether service Tax on sky-diving is leviable or not is debatable.

8 8 Service Tax on Loan Securitization by NBFC The loan securitization may amount to transfer of title in movable property and hence be excludible from the definition of service or it can be an actionable claim which is in excluded from the preview of definition of service.

9 9 Service Tax on Transfer of Copyrights in Perpetuity Activities that are in the nature of only transfer of title by way of sale, redemption, purchase, or acquisition of goods on principle to principle basis are outside the ambit of service

10 10 Service Tax on Packaged Software License to use software which does not involve the transfer of right to use would neither be a transfer of title in goods nor a deemed sale of goods, such an activity would fall in the ambit of definition of service.

11 11 Service Tax on Subsidiary in India If a subsidiary is providing coordination services it would be treated as an intermediary who arranges or facilitates provision of service.

12 12 Courier Services qualify as Export when parcels originate from India? In terms of Rule 7 place of provision of service would be India only.

13 13 Reverse Charge when service provider charges entire service tax. Issue is debatable however in the case of Ms. Katrina the tribunal held that even if the agent has discharged service tax it would be in order.

14 14 Transfer of Business as a whole or part thereof However illogical credit on input service will have to be reversed.

15 CENVAT Credit admissible on expenses incurred for setting up of a new office 15 Though Setting Up has specifically been deleted it can be argued that credit is still admissible.

16 16 Service Tax Credit on Directors sitting fees. In case of an input services where service tax is paid on reverse charge by the recipient of services, the CENVAT credit in respect of such input service shall be allowed on or after the day on which payment is made of the value of input service and service tax paid or payable as indicated in invoice, bill or, as the case may be, challan. (Rule 4(7) condition for allowing CENVAT credit) No conceivable reason why credit would not be admissible.

17 17 Service tax on IPF Contributions collected from members If it is the stock exchange s liability which it collects from the member who in-turn collect it from the investors, service tax would be leviable.

18 18 Service Tax on Advocate Fee prior to Service exempt.