INDIRECT TAX AMENDMENTS

Transcription

1 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.1 C A - I P C C INDIRECT TAX AMENDMENTS FOR NOV 2016 EXAM A SERVICE TAX A.1 Charge of Service Tax A.1.1 Swachh Bharat Cess [Sec 119 of Finance Act, 2015 w.e.f. 15-Nov-2015] Charging Section Sec 119 of Finance Act, 2015 (Chapter VI) Purpose Financing and promoting Swachh Bharat initiatives or for any other related purpose Date of Applicability 15-Nov-2015 onwards (Notification No. 21/2015 dated 06-Nov-2015) Charge of SBC: As service tax on all or any of the taxable services Relationship with Service Tax under Finance Act, 1994? It is in addition to any cess or service tax leviable under Chapter V of the Finance Act, 1994 or any other law for the time being in force. However there are many provisions which are common. (See Note) Rate As per Finance Act, 2015: 2% of value of services However portion in excess of 0.5% has been exempted by Not. No. 22/2015 dated 06-Nov Hence, Effective Rate of SBC = 0.5% of value of services Note: Following provisions of Service Tax under Finance Act, 1994 are equally applicable to SBC: The provisions and rules related to refund, exemptions, interest, penalty etc. shall apply as they apply to service tax under Chapter V of Finance Act, SBC is not leviable on exempted services (as per Notification issued under Sec 93(1) of Finance Act, 1994) and services not taxable u/s 66B of Finance Act, 1994 Abatement in the value is available as per Notification No. 26/2012 dated 20-Jun Valuation shall be determined as per Service Tax (Determination of Value) Rules, Reverse Charge Notification No. 30/2012 dated 20-Jun-2012 shall be applicable mutatis mutandis. In case of compounding scheme i.e. Rule 6(7) / (7A) / (7B) / (7C) of Service Tax Rules, 1994, the assessee has an option to pay the SBC by calculating (0.5 14) of the value of tax calculated under those rules. This option cannot be changed during a financial year. Service Tax Rate Upto to W.e.f (1) As per Charging Section 66B 12.00% 14.00% 14.00% (2) Education Cess 2% on (1) - - (3) Secondary and Higher Education Cess 1% on (1) - - (4) Swachh Bharat Cess % Effective Rate 12.36% 14.00% 14.50%

2 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.2 A.1.2 Negative List [Sec 66D] (a) Services provided by GOVERNMENT (both Central and State) or a local authority (Amended by Finance Act, 2015 w.e.f. 01-Apr-2016) Exceptions: However, the following services provided by Govt. or a local authority are chargeable to service tax: (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) support services any service, other than services covered under clauses (i) to (iii) above, provided to business entities. Effect of Amendment: Not just the support services, but all services which are provided by the Government to any Business Entity, would be outside the scope of negative list. Support services means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves, but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis. A.2 Valuation A.2.1 Compounding schemes for determination of payment under the Service Tax Rules, 1994 (a) In case of insurer carrying on life insurance business [Rule 6(7A)] Where Investment amount in Gross premium has been intimated to the policy holder Where Investment amount in Gross premium has not been intimated to the policy holder In case of single premium annuity policies, if not already covered above All years First year Subsequent years 14% (12%) on Gross premium less amount allocated for investment, or savings on behalf of policy holder 3.5% (3%) of the gross amount of premium charged 1.75% (1.5%) of the gross amount of premium charged 1.4% of the single premium charged from the policy holder (Inserted w.e.f. 01-Apr-2016) This option not available if the entire premium paid by the policy holder is towards the risk cover in life insurance. A.2.2 Specific Inclusions/ exclusions of certain items from value of taxable service [Rule 6] (2) Exclusions Subject to the provisions contained in sub-rule (1), the value of any taxable service, as the case may be, does not include (iv) interest on delayed payment of any consideration for the provision of services or sale of property, whether moveable or immoveable This clause shall not apply to any service provided by Government or a local authority to a business entity where payment for such service is allowed to be deferred on payment of interest or any other consideration. (Notification No. 23/2016 dated 13-Apr-2016)

3 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.3 A.3 Exemptions A.3.1 MEGA EXEMPTION NOTIFICATION No. 25/2012 dated 20-Jun-12 (as amended up to 01-Apr-16) ^Indicates clause amended / inserted by Notification No. 09/2016-ST dated 01-Mar-2016 effective from 01-Apr-2016 (except as otherwise provided) ~ Indicates clause amended / inserted by Notification No. 22/2016-ST dated 13-Apr-2016 effective from 13 -Apr-2016 (except as otherwise provided) 6. Legal Services provided by- (a) an arbitral tribunal to - (i) any person other than a business entity; or (ii) a business entity with a turnover up to Rs. 10 lakh in the preceding financial year; ^(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to- (i) an advocate or partnership firm of advocates providing legal services; (ii) any person other than a business entity; or (iii) a business entity with a turnover up to Rs. 10 lakh in the preceding financial year; or ^(c) a senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. 1. Legal service means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority. 2. Arbitral tribunal means a sole arbitrator or a panel of arbitrators. 3. Senior advocate has the meaning assigned to it in section 16 of the Advocates Act, An advocate may, with his consent, be designated as senior advocate if the Supreme Court or a High Court is of opinion that by virtue of his ability standing at the Bar or special knowledge or experience in law he is deserving of such distinction. Effect of amendments: 1. Legal services provided by a senior advocate shall be exempt only if they are provided to any person not carrying out any activity relating to industry, commerce or any other business or profession. 2. The services provided by a person represented on an arbitral tribunal to an arbitral tribunal shall now be liable to tax. ^9B. Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme, - (a) two year full time residential Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management; (b) fellow programme in Management; (c) five year integrated programme in Management. (Applicable w.e.f. 01-Mar-2016) Note: It has been stated by the Ministry of Human Resource Development (MHRD) and also by associations like Association of Indian Universities, Inter University Board of India etc. that IIMs have been conducting Post Graduate Programmes in Management and Fellowship Programmes which are equivalent to MBA and Ph.D degrees, respectively. Hence, the exemption being given to the above programmes of IIMs is clarificatory in nature and in view of the same, liability to pay service tax in respect of the said programmes for the past period will also become infructuous. ^9C. services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme Ministry of Skill Development & Entrepreneurship (MSDE) coordinates the various skill development efforts fragmented across the country, for building the vocational and technical training framework, skill up-gradation, building of new skills, and innovative thinking not only for existing jobs but also jobs that are to be created. SDI Scheme is launched by MSDE.

4 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.4 DGT, MSDE empanels assessing bodies to assess the competencies of the persons trained under SDI Scheme. Such assessment is done by assessors of high competence, repute and integrity sector wise and area wise. ^9D. services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) is the skilling and placement initiative of the Ministry of Rural Development (MoRD), Government of India, for poor and disadvantaged rural youth. The skill training is imparted under said program by the Project Implementation Agencies which are organisations from specific sector industries, education and training or NGOs who have a reputation in delivering skilling, training and development programs. They are responsible for carrying out skill gap assessment, enrollment, training, counselling, placement, post placement support, career progression and other services. ^#16. Services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre, if the consideration charged for such performance is not more than one lakh one lakh and fifty thousand rupees. Provided that the exemption shall not apply to service provided by such artist as a brand ambassador; Brand ambassador means a person engaged for promotion or marketing of a brand of goods, service, property or actionable claim, event or endorsement of name, including a trade name, logo or house mark of any person. All other activities by an artist in other art forms e.g. western music or dance, modern theatres, performance of actors in films or television serials shall be taxable. Activities of artists in still art forms e.g. painting, sculpture making etc. are also taxable. Effect of Amendment: The scope of the above exemption has been restricted w.e.f. 01-Apr-2015 by fixing a monetary limit of Rs. 1,00,000 in respect of a performance. This limit has been further enhanced to Rs. 1,50,000 w.e.f. 01-Apr Transport of passengers, with or without accompanied belongings, by - (a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; *(b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or ^(c) ropeway, cable car or aerial tramway; 26. Services of general insurance business provided under following schemes - (a) Hut Insurance Scheme; (b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development Programme); (c) Scheme for Insurance of Tribals; (d) Janata Personal Accident Policy and Gramin Accident Policy; (e) Group Personal Accident Policy for Self-Employed Women; (f) Agricultural Pumpset and Failed Well Insurance; (g) premia collected on export credit insurance; (h) Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture; (i) Jan Arogya Bima Policy; (j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana); (k) Pilot Scheme on Seed Crop Insurance; (l) Central Sector Scheme on Cattle Insurance; (m) Universal Health Insurance Scheme; (n) Rashtriya Swasthya Bima Yojana; or (o) Coconut Palm Insurance Scheme; (p) Pradhan Mantri Suraksha Bima Yojna (Notification No. 12/2015 ST dated 30-Apr-2015) ^(q) Niramaya Health Insurance Scheme implemented by Trust constituted under the provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).

5 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.5 ^26C. Services of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority of India (PFRDA) under the Pension Fund Regulatory And Development Authority Act, ~ 39. Services by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243W of the Constitution; 48. Services provided by Government or a local authority to a business entity with a turnover up to Rs. 10 lakh in the preceding financial year. (Inserted by Notification No. 7/2016-ST dated 18-Feb-16 w.e.f. 01-Apr-16) ^49. Services provided by Employees Provident Fund Organisation (EPFO) to persons governed under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952). ^50. Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999). ^51. Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market. ^52. Services provided by National Centre for Cold Chain Development under Ministry of Agriculture, Cooperation and Farmer s Welfare by way of cold chain knowledge dissemination. ^ Applicable w.e.f. 1-Jun-2016, not relevant for Nov 2016 exam Services provided by Government or a local authority (Common for Sr. No. 54 to 59) ~ 54. to another Government or local authority. This exemption shall not be applicable to services specified in subclauses (i),(ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994; ~55. by way of issuance of passport, visa, driving licence, birth certificate or death certificate; ~ 56. where the gross amount charged for such services does not exceed Rs This exemption shall not be applicable to services specified in subclauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994: In case where continuous supply of service (as per POT Rules) is provided by the Government or a local authority, the exemption shall apply only where the gross amount charged for such service does not exceed Rs in a FY; ~ 57. by way of tolerating nonperformance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority under such contract; ~58. by way of (a) registration required under any law for the time being in force; (b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under any law for the time being in force; ~ 59. by way of assignment of right to use natural resources to an individual farmer for the purposes of agriculture; ~60. Services by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution; ~61. Services provided by Government or a local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Government or the local authority before the 1st April, 2016: Provided that the exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource; This exemption shall not apply to any periodic payment required to be made by the assignee, such as Spectrum User Charges, license fee in respect of spectrum, or monthly payments with respect to the coal extracted from the coal mine or royalty payable on extracted coal which shall be taxable.

6 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.6 ~62. Services provided by Government or a local authority by way of allowing a business entity to operate as a telecom service provider or use radiofrequency spectrum during the financial year on payment of licence fee or spectrum user charges, as the case may be; ~63. Services provided by Government by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges (MOT). A.3.2 Information Technology Software Service (Notification No. 11/2016-ST dated 01-Mar-2016) The service tax is exempted on service in relation to Information Technology Software when such Information Technology Software is recorded on a media bearing retail sale price. Conditions: (i) the value of the package of such media has been determined as per retail sale price under provisions of section 4A of the Central Excise Act, for the levy of: Central Excise Duty if domestically produced Additional Duty of Customs u/s 3(1) of the Customs Tariff Act if imported (ii) the appropriate duties of excise or customs (including CVD) on such value have been paid. (iii) a declaration made by the service provider on the invoice relating to such service that no amount in excess of the retail sale price declared on such media has been recovered from the customer. A.3.3 Services provided by TBI or STEP [Notification No. 32/2012-ST dated 20-Jun-12] Services provided by the following are exempt: Technology Business Incubators (TBI) or Science and Technology Entrepreneurship Parks (STEP) or Bio-incubators recognized by the Biotechnology Industry Research Assistance Council (BIRAC), under Department of Biotechnology, Government of India. (w.e.f. 01-Apr-2016) A.3.4 Services provided under the Power System Development Fund Scheme of the Ministry of Power exempted from service tax [Notification No. 17/2015 ST dated 19-May-2015] Exemption from service tax has been granted vide to taxable services provided under the Power System Development Fund Scheme of the Ministry of Power by way of- (A) re-gasification of Liquefied Natural Gas (LNG)* imported by the Gas Authority of India Limited (GAIL); (B) transportation of the incremental Re-gasified Liquefied Natural Gas (RLNG) (e-bid RLNG) to specified power generating companies or plants subject to fulfillment of certain conditions prescribed in the exemption notification. However, the exemption shall not be available if such RLNG and LNG are used for generation of electrical energy by captive generating plant as defined in section 2(8) of the Electricity Act, Further, the exemption shall be valid only till Re-gasification is a process of converting Liquefied Natural Gas (LNG) back to natural gas at atmospheric temperature. Generally, natural gas is liquefied for ease of transportation.

7 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.7 A.4 Abatement for determining the taxable value [Notification No. 26/2012-ST dated 20-Jun-2012 as amended upto 01-Apr-2016] In case of specific services deductions are allowed from gross receipt received from customer to get the taxable service value. This deduction is called abatement in service tax. (Amendments by Notification No. 08/2016-ST dated 01-Mar-2016 w.e.f. 01-Apr-2016 have been marked in Italics) Sl. No. Description of taxable service Value of taxable service Conditions 2 Transport of goods by rail (other than service specified at Sl. No. 2A below) 30% CENVAT credit on inputs and capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, A Transport of goods in containers by rail by any person other than Indian Railways 40% CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken. 3 Transport of passengers, with or without accompanied belongings by rail 30% CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken. 7 Services of goods transport agency (GTA) in relation to transportation of goods other than used household goods 7A 30% CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider. Abatement of 70%, applicable to GTA service, would also be available to the ancillary services such as loading/ unloading, packing/ unpacking, transshipment, temporary storage etc. if such services are provided by a GTA in the course of transportation of goods and the charges for such services are included in the invoice issued by the GTA, and not by any other person. [Circular No. 186/5/2015 ST dated 05-Oct-2015] Services of goods transport agency in relation to transportation of used household goods. 40% CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider. 8 Services provided by a foreman of chit fund in relation to chit 70% CENVAT credit on inputs, capital goods and input services used for providing the taxable service, has not been taken. 9 New Para BA inserted in Explanation for Sr. No. 9: For the purposes of exemption at Serial number 9, the amount charged shall be the sum total of the amount charged for the service including the fair market value of all goods (including fuel) and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract. Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles. 10 Transport of goods in a vessel 30% CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken. 11 Services by a tour operator in relation to,- (i) a tour, only for the purpose of arranging or booking accommodation for any person 10% (i) CENVAT credit on inputs, capital goods and input services other than the input service of a tour operator, used for providing the taxable service, has not been taken. (ii) The invoice, bill or challan issued

8 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.8 Sl. No. Description of taxable service Value of taxable service Conditions indicates that it is towards the charges for such accommodation. (iii) This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, includes only the service charges for arranging or booking accommodation for any person but does not include the cost of such accommodation. (ii) tours, other than (i) above 30% (i) CENVAT credit on inputs, capital goods and input services other than the input service of a tour operator, used for providing the taxable service, has not been taken. (ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour and the amount charged in the bill is the gross amount charged for such a tour. Effect of amendments w.e.f. 01-Apr-2016: CENVAT Credit on input services shall now be available to all the service providers engaged in: (i) transportation of goods by rail (ii) transportation of passengers by rail (iii) transportation of goods in a vessel Abatement on following services has been reduced from 70% to 60%: (i) transportation of goods by rail by person other than Indian Railways (ii) transportation of used household goods by road Services of foreman of chit fund have been made eligible for abatement of 70% value. In case of renting of motorcab service (Sl. No. 9), some cab operators used to charge separately for the fuel etc. so as to underrate the value of service. Thus, in order to safeguard the interest of revenue, the above explanation has been introduced. The abatement calculation on tour operator services has been rationalized. A.5 Point of Taxation A.5.1 Threshold Limit for Applicability of Rule 3 to Individuals / Partnership Firm / LLPs / OPC In case of individuals / firms / LLPs / One person Companies (OPC) w.e.f. 01-Apr-2016 whose aggregate value of taxable services provided from one or more premises is 50 lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or to be provided by him up to a total of Rs. 50 lakh in the current financial year as per the due dates w.r.t. the quarter, in which payment is received. Thus, these entities will have the option to pay tax on payment basis and not on billing basis. The facility will be available upto a turnover of Rs. 50 lakh in a financial year provided the taxable turnover did not exceed this limit in the previous financial year. Type of Assessee Individual/Firm/LLP/OPC Other Taxable Turnover in Previous Financial Year < 50,00,000 > 50,00,000 Any Amount Taxability in Current Year Upto 50,00,000 Beyond 50,00,000 Option to pay tax on Receipt Basis As per Rule 3 of POT Rules As per Rule 3 of POT Rules As per Rule 3 of POT Rules As per Rule 3 of POT Rules As per Rule 3 of POT Rules

9 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.9 A.5.2 Payment of tax in cases of new services [Rule 5] When a service is taxed for the first time, as it was earlier covered under negative list or exemption notification, in such a situation, no tax shall be payable to the extent mentioned below: Case Invoice Raised and Payment received before such service become taxable Payment received before such service become taxable but Invoice raised after such service become taxable but within 14 days of the date when the service is taxed for the first time. Treatment No tax No tax Any other circumstances Taxable Hence if payment is received after service becomes taxable, even though the provision of service and billing was done earlier, the amount would be liable to service tax. The following explanations have been inserted w.e.f. 01-Mar-2016 by Notification No. 10/2016-ST dated 01-Mar-2016: Explanation 1.- This rule shall apply mutatis mutandis in case of new levy on services. Explanation 2.- New levy or tax shall be payable on all the cases other than specified above. Reason for amendment: With the introduction of Swachch Bharat Cess, there was confusion regarding applicability of service tax and rate of tax on provision of service. Therefore, in order to clear this confusion and to define point of taxation in case of new levy, amendment was made in Rule 5. Accordingly, the provisions of rule 5 shall apply in case of new levy on services. A.5.3 POT for reverse charge transactions [Rule 7: Amended w.e.f ] Notwithstanding anything contained in these rules, Rules 3, 4 or 8, the taxable event for the transaction subject to tax under the reverse charge mechanism shall be the date on which payment is made to the service provider. However, where the payment is not made within a period of three months of the date of invoice, the point of taxation shall be the date immediately following the period of three months. Thus, the Point of taxation is, the payment date or the first date that occurs immediately after a period of three months from the date of invoice, whichever is earlier. (Applicable to invoices issued after ) 3 rd Proviso inserted by Notification No. 21/2016 dated 30-Mar-2016: Where there is change in the liability or extent of liability of a person required to pay tax as recipient of service notified under section 68(2), in case service has been provided and the invoice issued before the date of such change, but payment has not been made as on such date, the point of taxation shall be the date of issuance of invoice. 4 th Proviso inserted by Notification No. 24/2016 dated 13-Apr-2016: In case of services provided by the Government or local authority to any business entity, the point of taxation shall be the earlier of the dates on which, (a) any payment, part or full, in respect of such service becomes due, as specified in the invoice, bill, challan or any other document issued by the Government or local authority demanding such payment; or (b) payment for such services is made.

10 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.10 A.6 Payment of Service Tax A.6.1 Due date of payment of service tax [Rule 6(1) of Service Tax Rules, 1994] a) In case of One Person Companies (OPC) [whose aggregate value of taxable services provided in the previous financial year is Rs. 50 lakh or less] or individuals, proprietary concern, partnership firms (including LLP) or HUF the periodicity of payment is quarterly: (Amended w.e.f. 01-Apr-2016) Quarter in which service is deemed to be provided as per Point of Taxation Rules, st April to 30 th June 5 th July* Due date of payment 1 st July to 30 th September 5 th October* 1 st October to 31 th December 5 th January* 1 st January to 31 st March 31 st March b) In case of other persons (Companies, Trusts etc.) the periodicity of payment is monthly: Month in which service is deemed to be provided as per Point of Taxation Rules, 2011 Each month except March March Due date of payment 5 th of the following month* 31 st March *Note: In case of electronic payment, tax can be deposited by the 6 th instead of 5 th. A.6.2 Service tax liability under Reverse Charge Mechanism [Sec 68(2)] (Notification No. 30/2012 ST dated 20-Jun-2012 as amended upto Notification No. 18/2016-ST dated 1-Mar-2016 applicable w.e.f. 01-Apr-2016) Sr. No. Description of a service % of service tax payable by the person providing service % of service tax payable by the person receiving the service any person liable for paying service tax other than the service provider (1) (2) (3) (4) *1B. Services by a mutual fund agent or distributor, to Nil 100% a mutual fund or asset management company (w.e.f ) *1C. Services by a selling or marketing agent of lottery Nil 100% tickets in relation to lottery in any manner to a lottery distributor or selling agent of the State Government under the provisions of the Lottery (Regulations) Act, Legal Services by a firm of advocates or an individual advocate other than a senior advocate to any business entity located in the taxable territory Nil 100% Hence, in case of legal services provided by senior advocates, forward charge would be applicable. 6. Services by Government or Local Authority to any business entity located in the taxable territory by way of support services (Amendment applicable w.e.f. 01-Apr-2016) Nil 100%

11 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.11 A.7 Records and Returns A.7.1 New Annual Return w.e.f. 01-Apr-2016 Every assessee shall be required to submit an annual return for the FY to which it relates. This will be in addition to the half yearly return in Form ST-3 or ST-3A. The form and manner of the return will be notified by the CBEC. The due date of filing the return would be 30 th November of the succeeding FY. Central Government has the power to exempt an assessee or class of assessee from the requirement of submitting the annual return. If thereturn is filed within the due date, then the assessee may submit a revised return within 1 month from the date of submission of the said annual return. In case of delay in filing the return, the assessee shall pay a late fee of Rs. 100 per day of delay, subject to maximum of Rs. 20,000. A.8 Miscellaneous Clarifications A.8.1 Incentives received by Air Travel Agents from CCRS It is clarified that incentives received by the Air Travel Agents (ATA) from the Companies providing Computer Reservation System (CCRS) are for using the software and platform provided by the CCRS like Galileo, Amadeus, etc. The CCRS are providing certain incentives either for achieving the targeted booking of air tickets or for loyalty for booking of air tickets using their software system. Thus, Service tax is leviable on the service provided to CCRS by the ATA for promoting the service provided by CCRS to Airlines. A.8.2 A.8.3 Service provided by ILMs The Institutes of Language Management ( ILMs ) provides services to the educational institutions, which helps such educational institutions in providing services specified in the Negative List of services. It is clarified that services provided by the ILMs are not eligible for exemption under Section 66D(l) of the Finance Act or under Sl. No. 9 of the Notification No. 25/2012-ST dated , as they are not providing preschool education or education up to higher secondary school (or equivalent) or education for obtaining a qualification recognized by law. It is the schools/colleges/institutions (in which the students take admissions) which provide such education. Clarification on issues regarding levy of Service Tax on the services provided by Government or a local authority to business entities [Circular No. 192/02/2016 ST dated 13-Apr-2016] Govt = Government ; LA = Local Authority A Services provided by Govt or a LA to another Govt or a LA Status: Such services have been exempted vide Mega Exemption Notification (Entry 54) However, the said exemption does not cover services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, A Services provided by Govt or a LA to an individual who may be carrying out a profession or business Particulars Status Services by way of grant of passport, visa, driving Exempt vide Mega Exemption license, birth or death certificates Notification (Entry 55) Services provided upto a taxable value of Rs See Pt. No. A A Service Tax on taxes, cesses or duties Status: Taxes, cesses or duties levied are not consideration for any particular service as such and hence not leviable to Service Tax. These taxes, cesses or duties include excise duty, customs duty, Service Tax, State VAT, CST, income tax, wealth tax, stamp duty, taxes on professions, trades, callings or employment, octroi, entertainment tax, luxury tax and property tax.

12 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.12 A Service tax on fines and penalties Particulars Fines and penalty chargeable by Govt or a LA imposed for violation of a statute, bye-laws, rules or regulations Fines and liquidated damages payable to Govt or a LA for nonperformance of contract entered into with Govt or LA Status Not leviable to service tax. Exempt vide Mega Exemption Notification (Entry 57) A Services provided in lieu of fee charged by Govt or a LA Particulars Any activity undertaken by Govt or a LA against a consideration (even if such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not) Any payment, in lieu of any permission or license granted by the Govt or a LA. Exceptions: Services provided by the Govt or a LA by way of: (i) registration required under the law; (ii) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under the law Services provided by Govt or a LA where the gross amount charged for such service does not exceed Rs [other than services specified in sub-clauses (i), (ii) and (iii) of section 66D(a) of the Finance Act, 1994] In case of continuous service, where the gross amount charged for such service does not exceed Rs in a financial year. Status It constitutes a service and the amount charged for performing such activities is liable to service tax. As long as the payment is made (or fee charged) for getting a service in return (i.e., as a quid pro quo for the service received), it has to be regarded as a consideration for that service and taxable irrespective of by what name such payment is called. Service tax is leviable Exempt vide Mega Exemption Notification (Entry 58) Exempt vide Mega Exemption Notification (Entry 56) A Services in the nature of allocation of natural resources by Govt or a LA to individual farmers Particulars Status Services by way of allocation of natural resources to Exempt vide Mega Exemption an individual farmer for the purposes of agriculture Notification (Entry 59) Such allocations/auctions to categories of persons Leviable to service tax other than individual farmers A Services in the nature of change of land use, commercial building approval, utility services provided by Govt or a LA Particulars Status Regulation of land-use, construction of buildings and other services listed in the Twelfth Schedule to the Constitution which have been entrusted to Municipalities under Article 243W of the Constitution, when provided by: Governmental authority Exempt vide Mega Exemption Notification (Entry 39) Govt or a LA Exempt vide Mega Exemption Notification (Entry 39)

13 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.13 A Services provided by Govt, a local authority or a Govtal authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution Status: Such services have been exempted vide Mega Exemption Notification (Entry 60) A When does the liability to pay service tax arise upon assignment of right to use natural resource where the payment of auction price is made in 10 (or any number of) yearly (or periodic) instalments under deferred payment option for rights assigned after ? 4 th Proviso to Rule 7 of POT Rules inserted by Notification No. 24/2016 dated 13-Apr-2016: In case of services provided by the Government or local authority to any business entity, the point of taxation shall be the earlier of the dates on which, (a) any payment, part or full, in respect of such service becomes due, as specified in the invoice, bill, challan or any other document issued by the Government or local authority demanding such payment; or (b) payment for such services is made. If the assignee/allottee opts for Full upfront payment Part upfront and remainder under deferred payment option Then service tax would be payable on the full value upfront as and when the payments are due or made, whichever is earlier. A How to determine the date on which payment in respect of any service provided by Govt or a LA becomes due for determination of point of taxation? The date on which such payment becomes due shall be determined on the basis of invoice, bill, challan, or any other document issued by the Govt or a LA demanding such payment. A Whether service tax is payable on the interest charged by Govt or a LA where the payment for assignment of natural resources is allowed to be made under deferred payment option? Rule 6(2)(iv) of the Service Tax (Determination of Value) Rules, 2006 has been amended vide Notification No. 23/2016 ST dated so as to provide that interest chargeable on deferred payment in case of any service provided by Govt or a LA to a business entity, where payment for such service is allowed to be deferred on payment of interest, shall be included in the value of the taxable service. A When and how will the allottee of the right to use natural resource be entitled to take CENVAT credit of service tax paid for such assignment of right? Particulars Service Tax paid in a financial year, on the onetime charges payable in full upfront or in instalments, for the service of assignment of the right to use any natural resource by the Govt, LA or any other person, Service Tax paid on spectrum user charges, license fee, transfer fee charged by the Govt on trading of spectrum Service tax paid on royalty in respect of natural resources and any periodic payments CENVAT Credit shall be spread evenly over a period of three (3) years. available as credit in the year in which the same is paid available as credit in the year in which the same is paid Note: CENVAT credit can be taken on the basis of the documents specified in rule 9(1) of CENVAT Credit Rules, 2004 even after the period of 1 year from the date of issue of such a document in case of services provided by the Govt or a LA or any other person by way of assignment of right to use any natural resource.

14 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.14 A On basis of which documents can CENVAT credit be availed in respect of services provided by Govt or a local authority? CENVAT credit may be availed on the basis of challan evidencing payment of service tax by the service recipient [Rule 9(1)(e) of CENVAT Credit Rules, 2004]. A.8.4 Taxability of ancilliary activites to testing of seeds All testing and ancillary activities to testing such as seed certification, technical inspection, technical testing, analysis, tagging of seeds, rendered during testing of seeds, are covered within the meaning of testing as mentioned in the negative list, and hence are not liable to service tax. Reason: Seed is not covered under the definition of agriculture produce. All services relating to agriculture by way of agriculture operations directly relating to production of agriculture produce including testing are covered in section 66D(i). Testing and certification can be done as per the Act and rules made thereunder in this regard. Testing cannot stand in isolation of certification and other ancillary activities. Testing cannot be random; somebody has to register for testing. If certificate is not received and seeds are not tagged, testing is irrelevant. Therefore, all processes are a part of the composite process and cannot be separated from testing. A.8.5 Applicability of service tax on the services received by apparel exporters in relation to fabrication of garments There is difference in the nature of manpower supply service and job work service: Manpower Supply Service Job Work Service Taxability would be liable to service tax could be covered under negative list if it Essential characteristics Service Provider s accountability Deployment of manpower Value of service the supplier provides manpower which is at the disposal and temporarily under effective control of the service recipient during the period of contract. to the extent and quality of manpower. normally rests with the service recipient has a direct correlation to manpower deployed, i.e., manpower deployed multiplied by the rate. Manpower supplier will charge for supply of manpower even if manpower remains idle. involves process amounting to manufacture service provider is assigned a job e.g. fabrication/stitching, labeling etc. of garments in case of apparel. for the job he undertakes. It is for the service provider to decide how he deploys and uses his manpower (i.e. service receiver is not concerned about the manpower) function of quantum of job work undertaken, i.e. number of pieces fabricated etc. The exact nature of service needs to be determined on the facts of each case which would vary from case to case. The terms of agreement and scope of activity undertaken by the service provider would determine the nature of service being provided. Further, it may be noted that every job work is not covered under the negative list. Only if the job work involves a process on which duties of excise are leviable u/s 3 of the Central Excise Act, 1944, would it be covered under negative list The issue of applicability of service tax will accordingly be decided taking into account the nature of agreement/contract and the service being provided.

15 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.15 B CENTRAL EXCISE B.1 SSI Exemption [Not. No. 8/2003-CE] [As Amended by Notification No. 8/2016 CE dated 01-Mar-2016] W.e.f. 01-Mar-2016, excise duty of 1% (without CENVAT credit) or 12.5% (with CENVAT credit) has been levied on articles of jewellery [excluding silver jewellery, other than studded with diamonds/other precious stones]. SSI Exemption would be as follows: Goods Eligibility Limit (Turnover of preceding FY) SSI Exemption in Current FY Jewellery Articles Rs. 12 crores Upto Rs. 6 crores Other Specified Goods Rs. 4 crores Upto Rs. 1.5 crores Thus, a jewellery manufacturer will be eligible for exemption from excise duty on first clearances upto Rs. 6 crore during a financial year, if his aggregate domestic clearances during preceding financial year did not exceed Rs. 12 crore. B.2 Basic Procedures under Central Excise B.2.1 Payment of excise duty B Interest on delayed payment of duty (amended w.e.f. 01-Mar-2016) Failure to pay the amount of duty by due date attracts interest at the 18% 15% per annum on the outstanding amount from the first day after the due date till the date of actual payment. B.2.2 Invoice An invoice is the document issued by the manufacturer under cover of which the excisable goods are to be cleared by the manufacturer. Excisable goods can be removed from a factory or a warehouse only under an invoice signed by the owner of the factory or his authorized agent. Authentication of invoices by digital signatures (Notification No. 8/2015 CE(NT) dated 01-Mar-15) An invoice issued under central excise law by a manufacturer may now be authenticated by means of a digital signature. However, where the duplicate copy of the invoice meant for transporter is digitally signed, a hard copy of the duplicate copy of the invoice meant for transporter and self attested by the manufacturer would be used for transport of goods. (w.e.f. 01-Mar-2016) B.2.3 Returns In place of Annual Financial Information Statement [ER-4], an Annual Return will have to be filed by central excise assessees by 30 th November of the succeeding year. (w.e.f. 01-Apr-2016)

16 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.16 C CENVAT CREDIT All amendments are marked in italics and unless otherwise specified, they are made by Notification No. 13/2016-CE (NT) dated applicable w.e.f C.1 Definitions C.1.1 Capital Goods [Rule 2(a)] Capital goods means (A) The following goods, namely :- (i) All goods falling under the First Schedule to the Excise Tariff Act in: Chapter 82 Tools, hand tools, knives, spoons and forks of base metal etc. Chapter 84 Machinery, mechanical appliances and parts thereof Chapter 85 Electrical Machinery and equipments, television image and sound recorders and reproducers, and parts and accessories of such articles Chapter 90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, parts and accessories thereof Heading 6805 Abrasive powder or grain on base of textile material, of paper, of paper board, or other material Heading 6804 Grinding wheels and the like, and parts thereof Wagons of sub-heading (ii) Pollution control equipment; (iii) Components, spares and accessories of the goods specified at (i) and (ii); (iv) Moulds and dies, jigs and fixtures; (v) Refractories and refractory materials; (vi) Tubes and pipes and fittings thereof; (vii) Storage tank, and (viii) Motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis, Heading 8702 Motor vehicles for the transport of 10 or more persons, including the driver. Heading 8703 Motor cars and other motor vehicles principally designed for the transport of persons, including station wagons and racing cars. Heading 8704 Motor vehicles for transport of goods. Heading 8711 Motorcycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side cars. but including dumpers and tippers. used (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or Note: CENVAT credit will be allowed only on those equipment or appliance which are used in an office located within the factory and not outside the factory. (1A) outside the factory of the manufacturer of the final products for generation of electricity or for pumping of water for captive use within the factory; or (2) for providing output service.

17 IPCC Indirect Tax Amendments Applicable for Nov 2016 Exam IDT.17 (B) (i) (ii) (iii) (C) (i) (ii) (iii) (D) Motor vehicle designed for transportation of goods including their chassis registered in the name of the service provider, when used for- Providing an output service of renting of such motor vehicle; or Transportation of inputs and capital goods used for providing an output service; or Providing an output service of courier agency. Motor vehicle designed to carry passengers including their chassis, registered in the name of the provider of service, when used for providing output service of- Transportation of passengers; or Renting of such motor vehicle; or Imparting motor driving skills. components, spares and accessories of motor vehicles which are capital goods for the assessee. C.1.2 Input [Rule 2(k)] Input means- (i) All goods used in the factory by the manufacturer of the final product; or (ii) (iii) (iv) (v) Any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or Free warranty means a warranty provided by the manufacturer, the value of which is included in the price of the final product and is not charged separately from the customer. [Exp. to Rule 2(k)] All goods used for generation of electricity or steam or pumping of water for captive use; or All goods used for providing any output service; or all capital goods which have a value upto Rs. 10,000 per piece (A) but excludes- Light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol; (B) Any goods used for (a) Construction or execution of works contract of a building or a civil structure or a part thereof; or (b) Laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a works contract or construction service as listed under clause (b) of section 66E of the Finance Act, 1994; (C) Capital goods, except when,- (i) used as parts or components in the manufacture of a final product; or (ii) the value of such capital goods is upto Rs. 10,000 per piece; (D) (E) (F) Motor vehicles; Any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and Any goods which have no relationship whatsoever with the manufacture of a final product.