A Negative List of services has been introduced,
which has brought a shift in the basis of taxation. Before the introduction of
the negative list of services, there was a definition for each and every
“Taxable Service”. This positive list finally gets repealed with introduction
of the Negative List of services.
Therefore, any activity which meets
the definition of a “service” as defined, and does not feature in the negative
list will be chargeable to service tax.
Declared Service – Section 66E
Declared service means any activity
carried out by a person for another person for consideration and declared as
such under section 66E (Section 65B). This section basically is a deeming
section and deems the below activities also to be “service”.
There are nine specific activities
under the List of declared services as given under section 66E as under:
S.No.
|
Description of Service
|
Brief Description
|
1
|
Renting
of immovable property
|
Renting
of immovable property for commercial or industrial use, or for use to any
company.
|
2
|
Construction
activity
|
Construction (including
additions, alterations, replacements or re-modeling of existing civil
structure) of a complex, building, civil structure or a part thereof,
intended for sale wholly or partly to a buyer. However, it will be excluded
in the case where the entire consideration is received after issuance of a
Completion Certificate.
|
3
|
Intellectual
Property Rights
|
Temporary
transfer or permitting use or enjoyment of any IPR
|
4
|
Information
Technology software
|
Development,
design, programming, customisation, adaption, up-gradation, enhancement,
implementation of information technology software.
|
5
|
Non
compete arrangements
|
Agreeing
to the obligation to refrain from an act, or to tolerate an act or a
situation, or to do an act.
|
6
|
Supply of goods
on hire
|
Transfer of
goods by way of hiring, leasing, licensing or in any such manner without
transfer of right to use such goods.
|
7
|
Hire
purchase
|
Activities
in relation to delivery of goods on hire purchase or any system of payment by
installments.
|
8
|
Works contract
|
“Service
portion” in the execution of works contract.
|
9
|
Catering
|
“Service
portion” in an activity wherein goods, being food or any other article for
human consumption or any drink is supplied as a part of the activity.
|
Reverse Charge Mechanism (As per Notification
No. 30/2012 and Notification
36/2012)
For the list of services given below,
the Service Recipient is required to discharge the service tax liability in
full, or both the service recipient and service provider have to discharge the
tax liability as per the prescribed ratio.
S.No.
|
Description
of a Service
|
%
of Service tax payable by Service Provider
|
Percentage
of Service tax payable by Service Recipient
|
1
|
Insurance
agent to insurance agent Not Applicable to Business Development Expenses
|
||
2
|
Transport of
goods by road
|
NIL
|
100%
|
3
|
Sponsorship
service
|
NIL
|
100%
|
4
|
Arbitral
services
|
NIL
|
100%
|
5
|
Legal
services by Individual advocate or a firm of advocates
|
NIL
|
100%
|
6
|
Support
services by Government or local authority (excluding renting of immovable
property and certain other specified services)
|
NIL
|
100%
|
7
|
Renting
of passenger motor vehicles*-
With abatement-
Without abatement
|
Nil
60%
|
100%
40%
|
8
|
Supply of
manpower for any service*
|
25%
|
75%
|
9
|
Works
Contract service*
|
50%
|
50%
|
10
|
Any taxable
service where the Service provider is located in a non taxable territory and
service recipient located in a taxable territory
|
NIL
|
100%
|
*in case where the service
provider is a non corporate entity and the service recipient is a corporate
entity.
“Renting of immovable property” to
extend to include any other service in relation to such renting also.
“Supply of manpower” means supply of
manpower, temporarily or otherwise, to another person to work under his
superintendence or control.
Exempted Services
§ Notification No.
25/2012 – A single consolidated notification issued for exemptions,
called the “Mega Exemption Notification”. It lists 39 services which will be
exempted under service tax.
§ Notification No.
34/2012- Consequential to the Mega list of exemptions, 81 exemption
notifications issued in the past 18 years stand rescinded. There will now be
only one single mega list of exemption from service tax.
§ Notification
27/2012- Exemption for services rendered to foreign diplomatic
mission or consular post in India, or for personal use or for the use of the
family members from service tax. Detailed provisions made, including the
invoice issued to such person to carry additional information. (HO to direct
based on case to case basis)
Abatement of Service tax
§ Notification No.
26/ 2012: Abatement will be allowed at the following rates for the
following services on the levy of service tax i.e. Service tax will be charged
on the balance value after abatement.
S. No.
|
Description of Taxable Service
|
Taxable Value
|
1
|
Financial
leasing and Hire purchase
|
10%
|
2
|
Transport of
goods in a vessel
|
50%
|
3
|
Transport
of goods by road
|
25%
|
4
|
Transport of
goods by rail
|
30%
|
5
|
Transport
of passengers by rail
|
30%
|
6
|
Transport of
passengers by air
|
40%
|
7
|
Renting
of passenger vehicles
|
40%
|
8
|
Renting of hotels,
guest houses
|
60%
|
9
|
Bundled
service including food and hotel rent, convention center, etc.
|
70%
|
10
|
Tour operator
|
10%, 25%, 40%
|
11
|
Construction
activity (per Section 66E)
|
25%
|
Amendments to Service tax Valuation
Rules (Notification
no. 24/2012)
Rule 2B
inserted. This Rule states how to determine the service portion in the
execution of a works contract.
Rule 2C
inserted. Thus Rule states how to determine the service portion in supply of
food and drinks in a restaurant or in outdoor catering.
Demurrage
charges liable to service tax.
Interest on delayed
payments is not liable for service tax.
Accidental
damages not related to the service, would not be liable for service tax.
Export of
Service
Rule 6A to
Service Tax Rules, 1994 introduced vide Notification
36/2012. Provision of any service provided to agreed to be provided
shall be treated as export of service when-
(a) The
service provider is located in the Taxable Territory
(b) The
service recipient is located outside India
(c) The
service is not falling under the Negative List
(d) Place of
Provision of Service is outside India
(e) Payment
for such service has been relieved in convertible foreign exchange, and
(f) The
service provider and service recipient are not merely establishments of a distinct
person in accordance with item (b) of Explanation 2 section 65B (44)
If a service
qualifies as an export service, the Central government may by way of
notification grant rebates.
Accordingly,
conditions have been laid down for claiming rebate of service tax on export of
services. Rebate follows a refund method only. There is no outright exemption.
(For further details refer Notification 39/
2012)
Amendments to
Point of Taxation Rules (Notification
No. 4/2012)
a. Definition
of “Continuous service” extended to include where service is provided
continuously or on recurrent basis, under a contract, for a period exceeding
three months with an obligation for periodic payment.
b. Point of
taxation is the date when the invoice for the service provided or agreed to be
provided is issued. Where no invoice is issued within the time period of 30
days, point of taxation will be the date of completion of service.
c. In case
where service tax is payable under the Reverse charge mechanism, point of
taxation will be the date on which the payment is made for the service, or six
months.
d. In case of
“associated enterprises” for import of services, the point of taxation shall be
the date of debit in the books of account or date of payment, whichever is
earlier.
Other Important
Amendments to Service Tax Rules, 1994
Notification No. 3/2012-
Service Tax (Amendment) Rules, 2012:
• Every
person providing a taxable service to issue an invoice within 30 days from the
date of completion of such taxable service or receipt of payment, whichever is
earlier.
• No invoice
to be issued if the excess payment received is up to Rs. 1000 and where the
invoice will be issued subsequently.
• Individual
and partnership firms providing taxable services up to Rs. 50 Lacs, will have
the option to pay service tax on collection basis.
• Excess payment of service tax allowed to be
adjusted against the subsequent month’s service tax liability without
intimation to the jurisdictional Superintendent of Central Excise.