SERVICE TAX ON CO-OPERATIVE SOCIETY & BANKS

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1 SERVICE TAX ON CO-OPERATIVE SOCIETY & BANKS :PRESENTED BY: MONARCH BHATT ADVOCATE 25 th November, 2012

2 TOPICS TO BE DISCUSSED SR. NO. PARTICULARS 1 Generic provisions under service tax 2 Applicability of service tax on Banks 3 Applicability of service tax on Cooperative Society 4 CENVAT Credit

3 TOPIC 1 GENERIC PROVISIONS UNDER SERVICE TAX No Separate Act Provisions are incorporated under chapter V of the Finance Act, 1994 Applicable to Whole of India except the state of Jammu & Kashmir

4 Essentials of Taxability Service Provider of service Receiver of service Consideration

5 TAXABILITY OF SERVICES Positive list of services Applicable UPTO 30/06/2012 Service tax applicable only on 130 Category of service Receiver of service liable for payment of tax only on selected services such as transport of goods by road, sponsorship, import of services, etc. Negative List of services Applicable FROM 01/07/2012 Other than Negative list of services and services covered under mega exemption notification Receiver of service liable for payment of tax on many more services such as Legal Service, Security service, works contract, cab operator, Supply of Manpower, transport of goods by road, sponsorship, import of services, etc

6 REGISTRATION Single premise Registration Centralised Registration Centralised Accounting system Centralised Billing system

7 Basic Rate of Service Tax w.e.f. 01/04/ % on the value of services provided / received 2% Education Cess on Service Tax 1% Higher & Secondary Education Cess on Service Tax

8 Issue of Invoice Rule 4A of service tax Rules, 1994 Assessee shall issue invoice within 14 days from the date of rendering of service. upto -31/03/2012 Within 30 days - from 01/04/2012 Advance receipt of money are also liable for the payment of service tax in which month it has been received.

9 Invoice, Bill or challan as the case may be issued by the service provider shall contain the following :- Serially number Name and address of the service provider Name and Address of the person receiving such taxable service Registration number PAN based STC No. Description of the services provided Value of taxable service provided or agreed to be provided Service tax payable Signature

10 SPECIAL PROVISIONS FOR BANKING COMPANY Banking Company or Financial Institution (including a Non-Banking Financial Company) The invoice, bill or challan shall include any documents and may issue without Serial Number and address of the person receiving service. It must contain other information. Invoice shall be issued within forty-five days

11 *The proviso does not apply to body corporate or other persons providing similar services. Such persons have to issue invoice, bill or challan which shall contain serial number and address alongwith other details and must be issued within 30 days.

12 Payment of Service Tax By the 5 th of next quarter (April June) (July Sep) (Oct Dec) In case of Proprietor and Partnership firm By the 5 th of next month In any other cases By the 6 th of next month / quarter In case of internet banking By the 31 st March in case of month or quarter ending March

13 Filling of Return (ST-3) Every assessee needs file six monthly return April September (Due date 25 th October) October March (Due date 25 th April) Penalty can be imposed from Rs. 500/- to Rs. 20,000/- for non-filling of ST-3 return on time.

14 TOPIC 2 APPLICABILITY OF SERVICE TAX ON BANKS Transactions / nature of service Interest on Loans services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount Bank Commission - Commission charges charged by bank for issue of pay order, demand draft, letter of credit, bank gaurantee Applicability of service tax Not taxable Covered under negative list of services under section 66D(n)(i) Taxable

15 Transactions / nature of service Operating Bank Account charges Charges charged by the bank to account holder such as for issue of cheque book, for not maintaining minimum balance in account, yearly ATM operating charges Merchant Banking Service Manager, Consultant and Advisor providing services relating to an issue of securities by preparation of prospectus, determining financial structure, final allotment or refund of subscription equity issue, loan restructuring Applicability of service tax Taxable Taxable

16 Transactions / nature of service Safe Deposit Locker Charges recovered against providing locker services. Loan Processing Charges Applicability of service tax Taxable except Refundable security deposit Taxable Transfer of Money Taxable Anywhere Banking Business Taxable

17 Sale and Purchase of foreign Currency Transactions / nature of service inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers Other than inter sale and purchase of foreign currency Applicability of service tax Not taxable Covered under negative list of services under section 66D (n) (ii) Taxable

18 Valuation in case of exchange of foreign currency OPTION I Rule 2B of Service Tax (Determination of Value) Rule, 2006 when exchanged from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI), reference rate for that currency at that time, multiplied by the total units of currency

19 Example I : US $ 1000 are sold by a customer at the rate of Rupees 45 per US $. RBI reference rate for US $ is Rupees for that day. The taxable value shall be Rupees 500. Example II : INR is changed into Great Britain Pound (GBP) and the exchange rate offered is Rupees 70, thereby giving GBP RBI reference rate for that day for GBP is Rupees 69. The taxable value shall be Rupees 1000

20 Cases where the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received, by the person changing the money Cases where neither of the currencies exchanged is Indian Rupee, the value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI

21 OPTION II Rule 6(7B) of Service Tax Rules, 1994 Gross Amount of currency exchanged 0-30,000 Rs , % Rate of Service Tax (Education cess and Higher & Secondary Education rate remains same) 1,00,000 10,00,000 Rs % of the currency exchanged above Rs. 1,00,000 Above 10,00,000 Rs % of the currency exchanged above Rs. 10,00,000 Maximum Rs. 6,000

22 TOPIC 3 APPLICABILITY OF SERVICE TAX ON CO- OPERATIVE SOCIETY Principle of Mutuality Ranchi club ltd. Versus Chief Commr. of C. Ex. & S.T., Ranchi zone 2012 (26) S.T.R. 401 (Jhar.)

23 In view of mutuality, if club provides any service to its members, it is not a service by one legal entity to another, and is not liable to Service tax taxable service includes any taxable service provided or to be provided by any unincorporated association or body or persons to a member Sale and service - Sale entails transfer of property whereas service does not - However, both transactions requires existence of two parties - Sale requires seller and buyer, and Service requires service provider and service receiver

24 Exemption to Resident welfare Association Position upto 30/06/2012 Person is member of residential complex or locality Total consideration received from an individual member by the said association for providing the said services does not exceed three thousand rupees per month Exemption Does not Apply to Commercial Society

25 Position from 01/07/2012 Person is member of residential society or complex Total consideration received by the housing society from sourcing of goods or services from third person for common use of its members does not exceed five thousand rupees per month Exemption Does not Apply to Commercial Society

26 Transactions / nature of service Municipal Tax Sinking Fund Common Area Maintenance Charges Water Charges Common Repairs & Maintenance Charges Applicability of service tax Not Taxable Not Taxable Taxable Taxable Taxable

27 TOPIC 3 TOPIC 4 CENVAT CREDIT CENVAT CREDIT CENVAT credit can be availed of Input Service Inputs Capital Goods Banks & Society both are providing taxable as well as exempted services

28 Rule 6 of CENVAT Credit Rules, 2004 OPTION I Maintenance of Separate Records Separate records to be maintained for Receipt, consumption and stock of Inputs and input services used for providing taxable output service and used for providing the exempted output service

29 OPTION II To pay an amount equal to 6% of the value of exempted goods and exempted services provided OPTION III To pay an amount equivalent to the cenvat credit attributable to inputs and input services used in or in relation to the manufacture of exempted goods or for provisions of exempted services

30 SPECIAL PROVISIONS FOR BANKS Rule 6(3B) of CENVAT Credit Rules, 2004 w.e.f. 01/04/2011 (3B) Notwithstanding anything contained in subrules (1), (2) and (3), a banking company and a financial institution including a non-banking financial company, engaged in providing services by way of extending deposits, loans or advances, shall pay for every month an amount equal to fifty per cent of the CENVAT credit availed on inputs and input services in that month

31 THANK YOU In Case Of Any Queries You May Revert At In case of any queries you may revert at / monarchbhatt@gmail.com monarchbhatt@gmail.com

APPLICABILITY OF SERVICE TAX:

APPLICABILITY OF SERVICE TAX: SERVICE TAX It is an indirect tax. Service tax is a tax on services provided.the provisions of service tax are contained in chapter V of the Finance Act, 1994 and administered by the Central Excise Department.