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India Tax & Customs Team
Service Tax - A Paradigm Shift – Negative List Approach
SE Taxation Team MeetPresented by – Arbind AggarwalLocation – Gurgaon (India)24th Jan,2013 To 25th Jan, 2013
Schneider Electric 2- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Service Tax - A Paradigm Shift
Schneider Electric 3- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Approach – Selective Vs Negative List
Taxable ServicesExempt Services - ThresholdNegative list + exempt
120Taxable Services
Selective Approach – selected services are taxable
Selective Approach – selected services are taxable
Negative List – all services are taxableNegative List – all services are taxable
“There is COST to compliance but non-compliance costs MORE”
Schneider Electric 4- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Taxation of Services – Taxability Test and Valuation
Any Economic activity for consideration is taxable if
It is not mere IMAGE I: Immovable propertyM: MoneyA: Actionable claimG: GoodsE: Employee
And passes through below
filter
Determination of Value of taxable service
Schneider Electric 5- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13BAJAJ ELECTICALS
Taxation of Services – Negative List Approach
“We should not perform as employee looking after TAX but We should perform as TAXMAN working as employee”
Schneider Electric 6- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Cab - Transport: 60%;Manpower : 25%Construction/WC: 50%
“Nil” for following
InsuranceGoods Transport by RoadSponsorshipService by tribunal/advocatesCab – Transport Import of service – Royalty etc.
Avail ITC
Liability to pay to Govt. - Divided- No increase in Tax amount
Cab - Transport: 40%;Manpower: 75%Construction/WC: 50%
“100%” for following
InsuranceGoods Transport by RoadSponsorshipService by tribunal/advocatesCab – Transport Import of service
Independent liabilityAvail Cenvat Credit if eligible
Portion specified for Service provider Portion specified for Service receiver
No cash flow impact (Except tax on royalty – now liability is certain but revenue neutral. Tax amount is approx. 18 MINR per year
Reverse Charge – New Scheme
Points to be taken care1.Portion of Service Tax to be borne, in case you are Service Recipient 2. POT under reverse charge3. Latest Inclusions4. Practical Issues5.Computation of Tax & raising of Invoice
Schneider Electric 7- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
• Whole of India except Non – Taxable Territories
Taxable Non - Taxable
• State of J & K
• SEZ
• Outside India
A. B2B supplies : Location of receiver
A. B2C supplies:
Place of actual performance, or
Location of property /event/ performance/ embarkation of journey
Location of supplier
Ref. – Note on Taxable Territory vs. Non-Taxable Territory
The Territory The rules
Place of Provision of Services – Taxable Territory - 1
“Aggressive tax planning may be aggregating future RISK”
Schneider Electric 8- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Place of Provision of Services – Taxable Territory - 2
Case – 1 [Service provider in Taxable Territory]
Case – 2 [Service provider in Non Taxable Territory]
Schneider Electric 9- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Place of Provision of Services
Schneider Electric 10- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Place of Provision of Services
S.No. Rule POPRule 3 General Rule Location of service receiver
If recipient location is not ascertainable in the ordinary course of business
Location of service provider
Specific RulesRule 4 Service provided in respect of goods that are required to
be made physically available by the service receiver to the service provider to provide the service
Location where the service is performed
Provided when such services are provided from a remote location by way of electronic means
Location where the goods are situated at the time of provision of service
This Rule shall not apply in case of service provided in respect of goods temporarily imported into India for repairs for re-export
Service provided entirely or predominantly in the physical presence of an individual
Location where the service is performed
Rule 5
Immoveable property based services provided directly in relation to an immoveable property (includes grants of right to use immoveable property, services for carrying out or coordination of construction work)
Location or proposed location of immoveable property
Schneider Electric 11- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Place of Provision of Services
S.No. Rule POPRule 6 Services in relation to an event Location of event
Rule 7 If services referred to in Rule 4,5 or 6 provided in many locations including location in taxable territory
Taxable territory
Rule 8 Where service provider and service receiver are located in the taxable territory (for e.g. .A India appoints B India to design a hotel in US – taxable)
Location of service receiver
Rule 9 Services such as specified Banking, Online database, Intermediary services , hiring of means of transport up to one month
Location of service provider
Rule 10 Transport services in relation to goods Destination of goods
Goods transportation agency services Location of service provider
Rule 11 Passenger transport services Where the passenger embarks
Rule 12 Services provided on board a conveyance First schedule point of departure
Rule 14 Order of Application of rules Later Rule to supersede
Schneider Electric 12- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Point of Taxation
Point of Taxation - whichever is
earlier
OR
OR
POT - General POT – Associated Enterprises (import of Services)
OR
Schneider Electric 13- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Export of Services
Service is not a service specified in the negative list
Ref. Detailed Summary
Schneider Electric 14- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Works Contract Service
Ref. Detailed Document
Schneider Electric 15- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
General Rule of Interpretation & Bundled Services
Schneider Electric 16- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Input Service Distribution (ISD)
ISD Distribution – Process Note
Schneider Electric 17- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Make the mostof your energy™
Schneider Electric 18- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13
Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere
Admission to entertainment events or access to amusement facilities
Services provided by the Reserve Bank of India Transmission/distribution of electricity by electricity transmission/ distribution utility
Services by a foreign diplomatic mission located in India
Education upto higher secondary school or equivalent/for obtaining a qualification recognized by Indian laws/ vocational education course
Service relating to agriculture activity Renting of residential dwellings
Trading of goods Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount
Any process amounting to manufacture or production of goods
Service of transportation of passengers by specified modes
(g) Selling of space or time slots for advertisements other than advertisements broadcast by radio or television
Service of transportation of goods by specified modes
Service for access of a road or a bridge on payment of toll charges
Funeral, Burial, Crematorium or mortuary services
Betting, gambling or lottery
Services Covered under Negative ListServices Covered under Negative List
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