Seminar on Service Tax at Jaipur on 20.4.2013(Session iv)

Agarwal Sanjiv & CompanyChartered Accountants

Presents

A Workshop On

Service Tax

Conducted byDr. Sanjiv Agarwal

FCA, FCS

Saturday,20th April, 2013Jaipur © Dr. Sanjiv Agarwal

1

SESSION – IV

Cross Border Services,

Reverse Charge &

Abatements

2

Cross Border Services, Reverse Charge,

and Abatements

This Presentation Covers

• Cross Boarder Services / Export

• Reverse Charge – Concept , Conditions, Full /

Joint Reverse Charge

• Abatements – Conditions, Services, Rates,

Specific Issues

3

Taxation of Cross Border Services

Peculiar Features in Cross Border Services

Service tax is a destination based consumption tax – International

practice

Double taxation

With export of services, taxes should not be exported (ideally taxed at

point of consumption)

Imports – taxed at the destination

Incentivizing exports of goods and services

Special incentives – rebates, SEZ etc.

4


The concerns

How to tax cross border services

How to determine whether the transaction is export

How to determine whether the transaction is import

How to determine place of provision of services

How to value the services so provided

Availing tax exemptions / refunds

5

Up to 30.6.2012Up to 30.6.2012

Export of Services Rules, 2005

Export of Services Rules, 2005

W.e.f. 1.7.2012W.e.f. 1.7.2012

Rule 6A of Services Tax Rules, 1994

Rule 6A of Services Tax Rules, 1994

Place of Provision of Services Rules,2012

Place of Provision of Services Rules,2012++

6

Taxation of Cross Border Services – Exports


Rule 6A has been inserted in Service Tax Rules 1994 vide Notification

No. 36/2012-ST, dated 20.6.2012

Rule 6A comprises what is export of services

Service will be treated as export if all following conditions are satisfied -

(a) the provider of service is located in the taxable territory ,

(b) the recipient of service is located outside India,

(c) the service is not a service specified in the section 66D of the Act,

(d) the place of provision of the service is outside India,

(e) the payment for such service has been received by the provider of service in

convertible foreign exchange, and

(f) the provider of service and recipient of service are not merely establishments of a

distinct person.7


Rule 6A of Service Tax Rules, 1994

Services provided to / in India + Indian currency = Taxable

Services provided to / in India + Foreign currency =Taxable

Services provided to / in Non-taxable territory + Indian

currency = Taxable

Services provided to / in Non-taxable territory + Foreign

currency = Export / Exempt

8


Taxable Services to qualify as import if -

Service provider located in Non-taxable

Territory

Service recipient located in Taxable Territory

Import of services from outside India - local

taxes paid on reverse charge mechanism

9


How to Determine Taxability i) Which rule applies to the service provided specifically? In case more

than one rules apply equally, which of these come later in the order given in the rules?

ii) What is the place of provision of the service in terms of the above rule?

iii) Is the place of provision in taxable territory? If yes, tax will be payable. If not, tax will not be payable.

iv) Is the provider 'located' in the taxable territory? If yes, he will pay the tax.

v) If not, is the service receiver located in taxable territory? If yes, he may be liable to pay tax on reverse charge basis.

vi) Is the service receiver an individual or government receiving services for a non-business purpose, or a charity receiving services for a charitable activity? If yes, the same is exempted.

vii) If not, he is liable to pay tax.10


Place of Provision of Service Rules, 2012

Purpose is to identify taxing jurisdiction for a service

In earlier regime focus was to determine taxability in case of exports and

imports only.

Present rules replace Export and Import Rules and define local

jurisdiction

Meant for cross border services, services to J & K, service providers

operating from multiple locations, determining services wholly consumed

in SEZ and a precursor to GST.

11

Important Terms of POPS Rules, 2012

Taxable Territory [Section 65B(52)] –Taxable territory means

the territory to which the provisions of this chapter apply.

(Taxable territory = India – J & K State)

Non-taxable Territory [Section 65B(35)] – Non-taxable

territory means the territory which is outside the taxable

territory.

12



13


Location of service provider -

Business establishment – Place where essential decisions concerning the general

management are adopted and functions of its central administration are carried out.

A service provider or receiver can have only one business establishment

Fixed establishment -Place other than Business Establishment which has

permanent presence of human and technical resources to provide or receive service

Usual place of residence –

Body Corporate : place where incorporated

Individual : place where he spends most of his time for the period in question or

where he lives with his family and is in full time employment. An individual cannot

have more than one place of usual residence.

14


Location of the service provider

(a) where the service provider has obtained a single registration, whether centralized or

otherwise, the premises for which such registration has been obtained

(b) where the service provider is not covered under sub-clause (a):

(i) the location of his business establishment; or

(ii) where the services are provided from a place other than the business

establishment or a fixed establishment elsewhere, the location of such

establishment; or

(iii) where services are provided from more than one establishment, whether

business or fixed, the establishment most directly concerned with the provision of

the service; and

(iv) in the absence of such places, the usual place of residence of the service

provider. 15


Location of the service receiver

(a) where the recipient of service has obtained a single registration, whether centralized

or otherwise, the premises for which such registration has been obtained;

(b) where the recipient of service is not covered under sub-clause (a):

(i) the location of his business establishment; or

(ii) where services are used at a place other than the business establishment, a

fixed establishment elsewhere, the location of such establishment; or

(iii) where services are used at more than one establishment, whether business or

fixed, the establishment most directly concerned with the use of the service; and

(iv) in the absence of such places, the usual place of residence of the

recipient of service.

16


India [U/s 65B(27)]

(a) the territory of the Union according to Article 1 clauses (2) and (3) of the

Constitution;

(b) its territorial waters, continental shelf, exclusive economic zone or any other

maritime zone ;

(c) the sea-bed and the sub-soil underlying the territorial waters;

(d) the air space above its territory and territorial waters; and

(e) the installations, structures and vessels located in the continental shelf of India

and the exclusive economic zone of India, for the purposes of prospecting or

extraction or production of mineral oil and natural gas and supply thereof;

17


18

S. No. Conditions Tax Liability

1 Both service provider and service receiver are in taxable territory

Service provider

2 Service provided from taxable territory in non taxable territory (except J & K)

No tax (Export)

3 Service provided from non-taxable territory (including J & K) in taxable territory

Service receiver (Import)

4 Both service provider and service receiver are in non-taxable territory

No service / No tax

POPS - At a GlanceRule Governing Situation Place of Provision of Service

3 General RuleIf recipient's location not available in the ordinary course of business

Location of Service ReceiverLocation of Service Provider

4 Service provided in respect of goods that are required to be made physically available by the service receiver to the service provider t o provide the service When such services are provided from a remote location by way of electronic meansThis rule shall not apply in case of service provided in respect of goods temporarily imported into India for repair or re-export.

Service provided entirely or predominantly in the physical presence of an individual.

Location where service is performed.

Location where the goods are situated at the time of provision of service

Location where service is performed.

5 Immovable property based services provided directly in relation to an immovable property (includes grants of right to use immovable property, services for carrying out or coordination of civil work)

Location or proposed location of immovable property

19

POPS - At a GlanceRule Governing Situation Place of Provision of Service

6 Services in relation to an event Location of event

7If services referred to in Rules 4, 5 & 6 provided in many locations, including location in taxable territory.

Taxable territory in which greatest proportion is provided

8Where service provider and service receiver located in taxable territory

Location of service receiver

9

Specified services of banking, online data base, intermediary services and hiring means of transport up to one month.

Location of service provider

10 Goods transport service Goods transportation agency services

Destination of goods Location of person liable to pay tax

20

POPS - At a Glance

Rule Governing Situation Place of Provision of Service

11

Passenger transport services Where the passenger embarks on the conveyance for continuous journey

12

Services provided on board a conveyance

First scheduled point of departure.

14Order of application of rules Later rule to supersede.

21


Rule 3- Default Rule

The main rule or default rule provides that a service shall

be deemed to be provided , where the receiver is located

In case, when location of the service receiver is not

ascertainable, location of the service provider is the place

of provision of service

This rule is applied when none of the other later rules apply

22

Rule 3- Default Rule

23

‘A’Service Provider

‘X’Service Provider

‘B’Service Receiver

‘Y’Service Receiver

Taxable Territory Non- Taxable Territory

Taxable for A

Taxable for B

Not Taxable


Rule 4- Performance based services

Place of provision is the location where services are actually performed

Goods which are required to made physically available

Services involve movable objects or things that can be touched, felt or

possessed

Services provided from a remote location by electronic means – where goods

located at that time

Not applicable when goods are temporarily imported into India for repairs,

reconditioning or reengineering for re-export (sent back)

Contd……

24


Rule 4- Performance based services

Examples:

Services in respect of goods to be physically made available by receiver (repair,

storage / warehousing, technical testing, dry-cleaning, cargo handling etc).

Plastic surgery, beauty treatment services, personal security services, health

and fitness services, photography services internet cafe services etc.

Market research reports, CA reports do not fall under this rule

Indian engineers going to US to repair a ship not taxable in India

Foreign engineers coming to India to repair a ship – taxable in India

25


Rule 5-Services relating to Immovable Property

Place of provision is where immovable property is located

Applicable for services directly connected with immovable property.

Immovable property not defined in the Finance Act, 1994.

Immovable property shall include land, benefits to arise out of land, and

things attached to the earth, or permanently fastened to anything attached

to the earth. [ S. 3 (26) of the General Clauses Act, 1897]

Definition is inclusive

Properties such as buildings and fixed structures on land covered under

immovable property.

The property must be attached to some part of earth even if under water.

Contd……26


Rule 5-Services relating to Immovable Property

Examples:

Services in course of construction, alteration, repair, maintenance etc, of immovable

property

Renting of immovable property

Services of architects, engineers etc. relating to land, building or civil engineering works

Services connected with oil / gas / mineral exploration

Surveying, property management services, hotel accommodation

Lease, or a right of use, occupation, enjoyment or exploitation of an immovable property

Real estate services in relation to the actual or proposed acquisition, lease or rental of

property, legal services rendered to the owner or beneficiary or potential owner or

beneficiary of property as a result of a will or testament

27


Rule 6- Service relating to Events

Place of provision is the place where event is actually held

Covers admission to events, organizing events and ancillary services relating to events

Includes cultural, artistic, sporting, scientific, educational, entertainment event, or a

celebration or any other similar event

Examples

Conventions

Conferences

Exhibitions

Fairs , Seminars

Workshops

Weddings

Sports

Cultural Events etc. Contd……28


Rule 6- Service relating to Events

A management school located in UK intends to organize a road show in Mumbai and

New Delhi for prospective students. Any service provided by an event manager, or

the right to entry like participation fee for prospective student will be taxable in India.

An Indian fashion design firm hosts a show at USA. The firm receives the services of

a Canadian event organizer. The place of provision of this service is the location of

the event, which is outside the taxable territory. Any service provided in relation to

this event, including entry fee will not be taxable.

Provision of sound engineering for an artistic event is a pre-requisite for staging of

that event and should be regarded as a service ancillary to its organization. A

service of hiring a specific equipment to enjoy the event at the venue, is ancillary to

admission.

29


Rules 7- Services from Multi locations

The place of provision shall be the location in taxable territory where greatest

proportion of service is provided.

Service is performed at different locations like partly from Mumbai , partly from New

Delhi

Where any service stated in 4, 5 and 6 is provided at more than one location

including a location in taxable territory and one or more location is outside taxable

territory

Example:

• Technical inspection and certification of a product by carrying out testing at two

locations in India and one outside India - Taxable in India where a higher stake is

involved.

30


Rule 8- Both service provider and service receiver located in taxable

territory

Where service provider and service recipient is in taxable territory, the

location of service receiver will be the place of provision

Even when the actual provision takes place outside taxable territory , it

will be taxable in India.

Example

• Indian plane needs repair while in US. Indian maintenance agency

sends its engineers to US for repairs or hires engineers in US to repair

the plane. This transaction will be taxable in India superseding earlier

clauses.

31


Rule 9 - Place of Provision in case of Specified Services

The place of provision of service is location of service provider

Specified services includes

Banking service (to account holders)

Online information and database access or retrieval

Intermediary services

Hiring of means of transport up to a period of one month

Account means an account which bears an interest to the depositor.

Services provided to holders of demand deposits, term deposits, NRE (non-resident

external) accounts and NRO (non-resident ordinary) accounts

Services linked to or requiring opening and operation of bank accounts such as

lending, deposits, safe deposit locker etc.

Transfer of money including telegraphic transfer, mail transfer, electronic transfer etc.

Contd…..32



Banking services provided to persons other than account holders will be covered under the

main rule (Rule 3- location of receiver).

Services not covered under this rule

financial leasing services including equipment leasing and hire-purchase;

merchant banking services;

Forex, broking, and purchase or sale of foreign currency, including money changing;

asset management including portfolio management, all forms of fund management,

pension fund management, custodial, depository and trust services;

advisory and other auxiliary financial services including investment and portfolio research

and advice, advice on mergers and acquisitions and advice on corporate restructuring

and strategy;

banker to an issue service.

Contd……33



Online information and database access or retrieval services are services in relation to

online information and database access or retrieval or both, in electronic form through

computer network, in any manner.

Essentially delivered over the internet or an electronic network which relies on the

internet or similar network for their provision.

Completely automated, and require minimal human intervention.

Examples

i) online information generated automatically by software from specific data input by

the customer, such as web-based services providing trade statistics, legal and

financial data, matrimonial services, social networking sites

ii)digitized content of books and other electronic publications, subscription of online

newspapers and journals, online news, flight information and weather reports

iii)Web-based services providing access or download of digital content.

Contd………… 34



Online information and database retrieval does not includes –

Sale or purchase of goods, articles etc. over the internet;

Telecommunication services provided over the internet, including fax, telephony,

audio conferencing, and videoconferencing;

A service rendered over the internet, such as an architectural drawing, or

management consultancy;

Repair of software, or of hardware, through the internet, from a remote location;

Internet back-bone services and internet access services.

Contd………

35



Intermediary means -

- broker,

- agent, or

- any other person, by whatever name called

- who arranges or facilitates a provision of a service

- between two or more persons

- but does not include a person who provides the main service on

his account

Contd……….36



Hiring of means of transport

Land vehicles such as motorcars, buses, trucks;

Vessels;

Aircraft;

Vehicles designed specifically for the transport of sick or injured persons;

Mechanically or electronically propelled invalid carriages;

Trailers, semi-trailers and railway wagons.

Non- transport means

Racing cars;

Containers used to store or carry goods while being transported;

Dredgers, or the like.37


Rule 10- Transportation of Goods

Place of destination of goods

Except in GTA by road where place of provision is location of person

liable to pay tax

Example -

GTA (ABC) located in Delhi transports a consignment of new

motorcycles from the factory of XYZ in Gurgaon (Haryana), to the

premises of a dealer in Bhopal, (MP). XYZ is a registered assessee and

is also the person liable to pay freight and hence person liable to pay

tax. 38


Rule 11 – Passenger Transportation Services

Place where passenger embarks on conveyance for continuous journey

Continuous journey means a journey for which:-

(i) a single ticket has been issued for the entire journey; or

(ii) more than one ticket or invoice has been issued for the journey, by one service

provider, or by an agent on behalf of more than one service providers, at the same

time, and there is no scheduled stopover in the journey

Stopover means a place where a passenger can disembark either to transfer to another

conveyance or break his journey for a certain period in order to resume it at a later point

of time.

All stopovers do not cause a break in continuous journey. Only such stopovers will be

relevant for which one or more separate tickets are issued.

Contd…..

39


Rule 11 – Passenger Transportation Services

Example -

A travel on Delhi-London-New York-London- Delhi on a

single ticket with a halt at London on either side, or even

both, will be covered by the definition of continuous journey.

If a separate ticket is issued, New York-Boston-New York,

the same will be outside the scope of a continuous journey.

40


Rule 12- Services provided on board conveyances

First scheduled point of departure of conveyance for journey

On board service of provision of movies, music, games, beauty treatment etc.

Example –

A video game or a movie-on-demand is provided as on-board entertainment

during the Kolkata-Delhi leg of a Bangkok-Kolkata-Delhi flight. POP will be

Bangkok (outside taxable territory, hence not liable to tax).

If the same service is provided on a Delhi-Kolkata-Bangkok-Jakarta flight

during the Bangkok-Jakarta leg, POP will be Delhi in the taxable territory,

hence liable to tax.

41


Rule 14- Order of application of Rules

Where more than one rule applies, rule

that occurs later is relevant rule

42


Rebate of inputs/input services for export of services (Notification No.

39/2012-ST dated 20.06.2012)

Rebate is granted of whole of duty paid on excisable inputs or whole of

service tax and cess paid on all input services used in providing service

exported

Exported to any country other than Nepal and Bhutan

Subject to conditions, limitations and procedure as prescribed in the

said Notification.

Form ASTR-2 is to be used.

43


Rebate of Service Tax on the taxable service which are received by an exporter of goods and used for exports of goods (Notification No. 41/2012-ST, dated 29.06.2012 )

In suppression to Notification No. 52/2011-ST dated 30.12.2011

Applicable w.e.f. 1.7.2012.

Rebate shall be granted by way of refund of service tax paid on the specified services

Specified services would mean —

(i) in the case of excisable goods, taxable services that have been used beyond the

place of removal, for the export of said goods;

(ii) in the case of goods other than (i) above, taxable services used for the export of

said goods;

but shall not include the following input services, viz, - construction, works contracts,

renting of motor vehicles, general insurance, servicing, repair & maintenance, outdoor

catering, health, life insurance etc. meant for employees etc.

Contd……44


Rebate of Service Tax on the taxable service which are received by an exporter of goods and used for exports of goods (Notification No. 41/2012-ST, dated 29.06.2012)

Rebate can be claimed on the basis of rates as mentioned in schedule or as per procedure (Para 2) or based on documents (Para 3)

Cenvat Credit of service tax paid on specified services used for export of goods should not be taken.

No rebate can be claimed under this notification by developer of SEZ or unit in SEZ.

If export proceeds are not received within time allowed or within extended time, such rebate shall be deemed to have never been allowed and shall be recovered back in terms of recovery provisions.

Forms used –

Form A1 – Application for claiming rebate of Service Tax on specified services used for export of goods.

Form A2 – Declaration by exporter for obtaining Service Tax code.45

46

Refund of Cenvat Credit (Rule 5)

Refund of cenvat credit allowed Who can take –

manufacturer who clears final product for exports without payment of duty

Service provider who provides output service which is exported without payment of Service Tax

(Export turnover of goods + Export turnover of

Service ) x Net Cenvat Credit Refund amount = --------------------------------------------

Total turnover To be claimed within one year Subject to procedure / conditions / limitations [Notification No.

27/2012-CE(NT) dated 18.06.2012] Form 'A' to be used


Determination of point of taxation in case of specified services or persons

(Rule 7 of POT Rules, 2011)

POT shall be the date on which payment is made

When the payment is not made within a period of six months of the date of

invoice, the POT shall be determined as per normal provision

In case of associated enterprises, where the person providing the service is

located outside India, POT shall be the date of debit in the books of account

of the person receiving the service or date of making the payment whichever

is earlier.

47

48

Reverse Charge Mechanism

Changes in Reverse charge Authority for reverse charge u/s 68(2) of Finance Act, 2012

Person liable to pay tax – Rule 2(1)(d) of Service Tax Rules, 1994

W.e.f. 1.7.2012, a new scheme of taxation is applicable whereby the liability of payment of service tax shall be both on the service provider and the service recipient (Notification No. 30/2012-ST, dated 20.6.2012 )

The extent to which tax liability has to be discharged by the service receiver specified in the notification.

49

Changes in Reverse Charge Mechanism

Credit of tax paid can be availed by service recipient if it is input service

The credit of tax paid by the service recipient under partial reverse charge would be available on the basis on the tax payment challan (but invoice required)

Service provider under RCM may claim refund of tax paid under rule 5(b) of CCR, 2004

50

Liability to pay tax under Reverse Charge by Service Receiver

Under Partial Reverse Charge (Proportional)

Renting of motor vehicles Manpower supply & security services Works contracts

Under Full Reverse Charge (100%)

Insurance related services by agents goods transportation by road sponsorship arbitral tribunals legal services company director's services services provided by Government / local authority excluding specified services services provided by persons located in non-taxable territory to persons

located in taxable territory.

51

Important Points in Reverse Charge Mechanism

Governed by Notification No. 30/2012-ST dated 20.06.2012 w.e.f. 1.7.2012

Liabilities of both the service provider and service receiver are independent of each other

Reverse charge will not apply where the service receiver is located in non-taxable territory

For three specified services provided by business entities being company, society, cooperative society, trust etc, reverse charge will not apply.

Reverse charge will also not apply where the service recipient is any person or business entity not being a body corporate in case of three specified services

Small scale benefit is available only to service provider (not to service receiver), if entitled

52


Service receiver under reverse charge cannot avail exemption of Rs. 10 lakh under Notification No. 33/2012-ST dated 20.06.2012

Valuation of services by services provider and service receiver can be on different principles, if permitted by law (e.g. works contract - Refer Notification No. 30/2012-ST, explanation II)

Liability to pay Service Tax for ongoing contracts will be as per Point of Taxation Rules, 2011

Reverse charge shall not be applicable if provider of service was liable before 1.7.2012

Service Tax will not be payable by service receiver under reverse charge, if service was provided prior to 1.7.2012, even if payment is made after 30.06.2012

53


In case of proportional reverse charge (manpower supply & security, works contract and motor vehicle hire to carry passengers), it is advisable that service provider should charge Service Tax only on his portion of Service Tax in the invoice and mention that Service Tax on balance amount is payable by service receiver.

It is the statutory obligation on the service recipient to pay Service Tax, whether under full or proportional reverse charge

Service Tax under reverse charge has to be paid by cash vide

GAR Challan No. 7 and it cannot be paid by way of utilization of Cenvat Credit.

54


In case of renting of motor vehicles to carry passengers where abatement is also available, reverse charge basis is proportional depending upon the abatement on the condition that no Cenvat Credit has been availed. The service provider should provide a certificate, either in the invoice itself or separately.

In case of renting of motor vehicle to carry passengers, reverse charge applies only where the motor vehicle is provided with driver and service receiver is not engaged in same business.

In case of director's services, the service provider should not be employed (whole time) director in a company. Employees are not covered under the scope of Service Tax.

Body corporates are not covered under reverse charge for director’s services

55


In respect of manpower supply and security services, works contract services and renting of motor vehicles to carry passenger, reverse charge shall be applicable only when following two conditions are satisfied –

service receiver is a business entity registered as a body corporate, and service provider is any one of the following entities –

○ Individual ○ Hindu undivided family (HUF) ○ Firm (including limited liability partnerships) ○ Association of persons

If both the above conditions are not satisfied in respect of these three services, Service Tax shall be payable by the service provider in ordinary course.

Security services means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity

56

Reverse Charge for Legal Services

Service Provider Service Receiver

Individual Advocate / Firm / LLP **Business entity with turnover > Rs 10 lakhs in preceding financial year

Arbitral Tribunal **Business entity with turnover > Rs 10 lakh in previous financial year

** Business entity may be an individual also

Reverse Charge Mechanism under various services

Sr. No Description of Service Service provider Service receiver

1. Services provided by an insurance agent to any person carrying on insurance business

Nil 100%

2. Services provided by a goods transport agency in respect of transportation of goods by road

Nil 100%

3. Services provided by way of sponsorship

Nil 100%

57


Sr.No Description of Service Service provider Service receiver

4. Services provided by an arbitral tribunal Nil 100%

5. Services provided by individual advocate or a firm of advocates by way of legal services

Nil 100%

5A. in respect of services provided or agreed to be provided by a director of a company to the said company ( w.e.f 7.08.2012)

Nil 100%

6. Services provided by Government or local authority by way of support services excluding,- (1) renting of immovable property, (2) postal services (3) transport of goods / passengers (4) air craft or vessel

Nil 100%

58



7. Hiring of Motor Vehicle (a) renting of a motor vehicle designed to carry passengers on abated value to any person not engaged in the similar line of business(b) renting of a motor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business

Nil

60%

100 %

40%

8. Services provided by way of supply of manpower for any purpose or security services ( w.e.f 07.08.2012)

25% 75 %

59



9. Services provided in service portion in execution of works contract 50% 50%

10. Services provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory

Nil 100%

60

61

Reverse Charge Obligations for three Specified Services

Service Provider Service Receiver Service Tax Payable by

Individual /HUF/ Partnership firm /AOP

Business entity – body corporate

Joint


Individual /HUF/ partnership firm /AOP

100 % by service provider

Business entity –Body Corporate / Company



Business entity –Body Corporate

Business entity – Body Corporate


62

Abatements in Service Tax

• Over and above full exemption to 39 categories of services vide Notification No. 25/2012-ST dated 20.06.2012

• Earlier there were a number of exemption notifications that prescribed the abatements for various categories of services (including 1/2006)

• Abatements merged into a single Notification No 26/2012 - ST dated 20/6/12

• Valuation rules contain abatement for Works Contract and Supply of Food Services

Specific AbatementsSl. No. Description of taxable service Taxable

value(%)

Conditions

1 Financial leasing services including

equipment leasing and hire purchase

10 Nil

2 Transport of goods by rail (exempted upto

30.9.2012)

30 Nil

3 Transport of passengers, with or without

accompanied belongings by rail

( exempted upto 30.9.2012)

30 Nil

4 Supply of food or any other article of

human consumption or any drink, in a

premises, including hotel, convention

center, club, pandal, shamiana or any place

specially arranged for organizing a

function

70 CENVAT credit on any

goods classifiable under

chapter 1 to 22 of the

Central Excise Tariff Act,

1985 has not been taken

under the provisions of the

CENVAT Credit Rules, 2004.

63

64

Specific AbatementsSl.

No

Description of taxable service Taxable

value(%)

Conditions

5 Transport of passengers by air, with

or without accompanied belongings

40 CENVAT credit on inputs or capital goods,

used for providing the taxable service, has

not been taken under the provisions of the


6 Renting of hotels, inns, guest

houses, clubs, campsites or other

commercial places meant for

residential or lodging purposes

60 Same as above.

7 Transport of goods by road by

Goods Transport Agency

25 CENVAT credit on inputs, capital goods

and input services, used for providing the

taxable service, has not been taken under

the provisions of the CENVAT Credit

Rules, 2004.

8 Services provided in relation to chit 70 Same as above.

65

Specific Abatements

Sl.

No

Description of taxable service Taxable

value(%)

Conditions

9 Renting of any motor vehicle

designed to carry passengers

40 Same as above.

10 Transport of goods in a vessel from

one port to another

50 Same as above.

11 Tour operator services

(i) provided by a tour operator in relation

to a package tour

25 (i) CENVAT credit on inputs, capital

goods and input services, used for

providing the taxable service, has not

been taken under the provisions of the


(ii) The bill issued for this purpose

indicates that it is inclusive of charges

for such a tour.

66

Sl. No Description of taxable

service

Taxable

value(%)

Conditions

(ii) provided by a tour operator in

relation to a tour, solely arranging

or booking accommodation

10 (i) CENVAT credit on inputs, capital goods

and input services, used for providing the

taxable service, has not been taken under

the provisions of the CENVAT Credit Rules,

2004.

(ii) The invoice, bill or challan issued

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, only includes the service charges for

arranging or booking accommodation for

any person and does not include the cost

of such accommodation.

Specific Abatements

67

Sl. No Description of taxable service Taxable

value(%)

Conditions

(iii) Services, other than

services specified above in (i)

or (ii)

40 (i) CENVAT credit on inputs, capital

goods and input services, used for

providing the taxable service, has not

been taken under the provisions of

the CENVAT Credit Rules, 2004.

(ii) The bill issued indicates that the

amount charged in the bill is the gross

amount charged for such a tour.

Specific Abatements

68

Sl. No Description of taxable service Taxable

value(%)

Conditions

12. Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority -

(i) For residential unit having carpet area upto 2000 sq. ft. or where the amount charged is less than rupees one crore;

(ii) For other than the (i) above

25 (upto 28.02.2013)

25 ( w.e.f. 1.03.2013)

30 ( w.e.f. 1.03.2013)

(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004.

(ii) The value of land is included in the amount charged from the service recipient.

Specific Abatements

69

Specific Abatements

Draft Circular F. No.354 /146/2012 – TRU dated 27.09.2012 (Air Travel)

Charges which are directly related to journey such as re-confirmation fee, date change fee, seat upgrade fee, preferred seat charges etc. will be covered by abatement

Charges which are not related to journey such as meal charges, escort charges etc. will not be covered by abatement.

Excess baggage charge may be leviable to service tax without abatement

Pet charges may be leviable to service tax without abatement

For cancellation charges billed separately as administrative charge, abatement will not be applicable

70

THANK YOU

FOR

YOUR

PRECIOUS TIME

AND

ATTENTION

Dr. Sanjiv Agarwal

FCA, FCS, Jaipur

[email protected]

[email protected]

Education

Seminar on Service Tax at Jaipur on 20.4.2013(Session iv)