Service Tax For Nov.2012 (Dev)

CA - IPCC
COURSE MATERIAL
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Service Tax Applicable for November, 2012
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No.1 for CA/CWA & MEC/CEC
MASTER MINDS
PART 1. INTRODUCTION TO SERVICE TAX

NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. QUESTION What is the need for the introduction of Service Tax? Evaluation of Service Tax in India. What is the constitutional back ground of India? How is the Service Tax law administered in India? Explain the applicability of geographical areas of Service Tax. Explain the features of Service Tax. Write short notes on classification of services. What are the statutes governing Service Tax? Special Economic Zone. Determination of point of taxation in case of normal situations Determination of point of taxation in case of continuous supply of service Determination of point of taxation in case of change in tax rate Determination of point of taxation in case of reverse charge, associated enterprises Determination of point of taxation in case of copyrights, etc Determination of point of taxation in other cases Determination of point of taxation in respect of small advance What is the procedure for payment of service tax ABC C C B B A A C B C A B A B B C C B
Q.NO.1. WHAT IS THE NEED FOR THE INTRODUCTION OF SERVICE TAX? It is the prime responsibility of the Government to fulfill the increasing development needs of the country and its people, by way of public expenditure. The Governments primary sources of revenue are direct and indirect taxes. Central Excise Duty on the goods manufactured and produced in India and Customs Duties on imported goods constitute the two major sources of indirect taxes in India. Due to WTO commitments and rationalization of commodity duties, the revenue receipts from customs and excise duties are low. Q.NO.2. EVALUATION OF SERVICE TAX IN INDIA. Dr.Manmohan Singh, the then Union Finance Minister, in his Budget Speech for the year 1994-95, introduced the new concept of Service Tax and stated as under: There is no sound reason for exempting services from taxation, where goods are taxed and many countries treat goods and services alike for tax purposes. I, therefore, propose to make a modest effort in this direction by imposing a tax on services of TELEPHONE, NON-LIFE INSURANCE, AND STOCK BROKERS.
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Therefore, the Service Tax was levied under Chapter V of the Finance Act, 1994.
It was introduced for the first time on 3 services with a nominal rate of 5% advalorem basis. Subsequent Finance Acts have added more and more services to be taxed for Service Tax purposes. As such, today, more than 100 services are chargeable to Service Tax. Q.NO.3. WHAT IS THE CONSTITUTIONAL BACKGROUND OF INDIA? According to Article 265 of the constitution India, no tax of any nature can be levied or collected by Central or State Governments, except by the Authority of Law. According to Article 246, law can be enacted by the Parliament or the State Legislature, if such power is given by the Constitution of India. List I List II List III Union list Parliament has the exclusive right to make law in respect of that entry. State list Any state has exclusive power to make law for such state or any part there of with respect to such an entry. Concurrent list The parliament or the legislature of a state has power to make laws with respect to any matter, enumerated in List III.
There are various matters enumerated in each list. Each matter in the list is known as an entry. Entry 97 of the Union list is the residuary entry and it empowers the Central Government to levy tax on any matters, which are not enumerated in List II (State List) or List III (Concurrent List). In 1994, the Service Tax was levied by the Central Government, under the powers granted under the said Entry 97, of List I. Entry 92C has been inserted to the 1st List, in the VII Schedule so as to make the enactment a subject matter of Union List. Although the Government has amended the Constitution and inserted entry No.92C in the List 1 of Schedule VII no separate Act has been passed yet and Service Tax is still being governed by entry 97 i.e. residuary entry. Q.NO.4. HOW IS THE SERVICE TAX LAW ADMINISTERED IN INDIA? 1. Controlling Authority: The responsibility of administration and collection of Service Tax has also been vested upon the Central Board of Excise and Customs. 2. Administering Authority: The Board administers Service Tax matters, through the Central Excise Zone. Each Zone, in turn works through Central Excise Commissionerate, falling under its territory. 3. Zonal Head: Each zone is headed by a Chief Commissioner of Central Excise, while each Commissionerate is headed by a Commissioner of Central Excise. 4. Role of Zonal Head: The Chief Commissioner of Zone exercises supervision and control over the working of the Commissionerates in the Zone and is mainly responsible for monitoring revenue collection, disposal of pendencies, redressal of grievances of trade, etc. He also ensures coordination among the Commissionerates, within the Zone.
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PICTORAL OVERVIEW OF SERVICE TAX ADMINISTRATION Ministry of Finance (1) Department of Revenue (2) Central Board of Excise & Customs (3) Central Excise Zones headed by chief Commissioners (4) Central Excise Commissionerates headed by Commissioners (5)
Director General of Service Tax (Coordinator between 3 & 5)
Q.NO.5. EXPLAIN THE APPLICABILITY OF GEOGRAPHICAL AREAS OF SERVICE TAX. 1. Destination Based: Service Tax is destination based and service is taxable only if provided in India. Hence, in the following cases, there is no Service Tax liabilitya. Technical Consultancy provided by Foreign Collaborator (Illustrative). Such service is not provided in India. However, if the foreign technicians visit India and provide technical services, tax will be payable (subject to import of service rules -2005). b. If Indian service provider provides services abroad. c. Services consumed for the purpose of Export. 2. Special Consideration for Jammu & Kashmir: The levy of Service Tax extends to the whole of India except Jammu & Kashmir. The following are the observations in this regarda. Services rendered in Jammu and Kashmir will not be liable to Service Tax. b. Service rendered by a person established in Jammu and Kashmir, but rendered outside the state is liable to Service Tax. 3. Service provided in Exclusive Economic Zone and Continental shelf: India includes territorial waters and exclusive economic zone. Therefore Service Tax provisions are applicable to designated areas of continental shelf and exclusive economic zone of India, which extends upto 200 nautical miles inside the sea from the base line. 4. Service rendered in Indian territorial waters upto 12 nautical miles from the Indian land mass is taxable. Q.NO.6. EXPLAIN THE FEATURES OF SERVICE TAX. The salient features for the levy of Service Tax are: 1. Scope: It is leviable on taxable services 'provided' or 'to be provided', by a service provider. The services 'to be provided' in future are also taxed Two separate persons required - Payment to employees not covered: For charging service tax, it is necessary that the service provider and service recipient should be two separate persons, acting on 'principal-to-principal basis'. Services, provided by an employee to his employer, are not covered under Service Tax. Therefore, salaries or allowances paid to the employees are not charged to Service Tax.
2. Rate (12.36%): The rate of service tax specified u/s in section 66 is 12%; Education Cess @ 2% and Secondary and Higher Education Cess @ 1% are chargeable on amount of service tax. Thus, the effective rate of service tax is 12.36% of the value of services. Before 1-4-2012, the effective rate of service tax, on account of exemption notification, was 10.3%; the exemption has been withdrawn. 3. Free services not taxable: Service Tax is not levied upon the services provided free of cost. 4. Services provided by an unincorporated association/body to its members are also taxable [Explanation to Sec. 65]: 'Taxable service' includes any taxable service provided or to be provided, by any unincorporated association or body of persons, to a member thereof, for cash, deferred payment or any other valuable consideration. Hence, the services (falling under any category of taxable service) provided or to be provided by any unincorporated association / body, to a member thereof, shall be liable to Service Tax. This provision is an exception to the 'principle of mutuality'. 5. Performance of statutory activities/duties, not 'service': An activity performed by a sovereign / public authority, under the provisions of law does not constitute provision of taxable service, to a person. Therefore, Service Tax is not levied on such entities. Q.NO.7. WRITE SHORT NOTES ON CLASSIFICATION OF SERVICES. 1. Classification: Classification of taxable services shall be determined according to the terms of Section 65(105) i.e., by the definition of various services. 2. More than one classification: Where the service falls under more than one category of service, a. Prefer specific description to general description. b. In the case of composite service, go by the service, which gives the essential character. c. Where classification is not possible under the above two rules, and the service falls under more than one category U/s 65(105), then it shall be classified under the subclause, which occurs first among the sub-clauses, with equal merit consideration. (Sec. 65A of the Act) Q.NO.8. WHAT ARE THE STATUTES GOVERNING SERVICE TAX? Laws relating to Service Tax: An understanding of the Service Tax law requires the study of the following: 1. Chapter V and V A, of the Finance Act, 1994, amended upto date. 2. Rules on Service Tax. 3. Notifications, issued by the Central Government, from time to time. 4. Circulars and clarifications, issued by Central Board of Excise and Customs (CBEC). 5. Trade Notice, issued by respective Jurisdictional Commissionerate. 6. Definitions given under other statutes. 7. Judicial decisions.
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Q.NO.9. SPECIAL ECONOMIC ZONE (SEZ)?
MASTER MINDS
Special Economic Zone: All earlier Notifications have been withdrawn and the Government of India has introduced Notification No.17/2011 w.e.f. 01.03.2011. The exemption shall be provided by way of refund of Service Tax paid on the specified service received for the authorized operations in a SEZ. Where the specified services received and used for authorized operations are wholly consumed within the SEZ, the provider of such services or the receiver of such services under reverse charge basis as the case may be has the option not to pay Service Tax abinitio instead of a unit or a developer claiming exemption by way of refund in terms of this Notification. Q.NO.10. DETERMINATION OF POINT OF TAXATION IN CASE OF NORMAL SITUATIONS? Determination of Point of Taxation Under Normal Circumstances: As per rule 3 of POT Rules, 2011, point of taxation (point in time when a service shall be deemed to have been provided) under normal situation shall be earlier of the following dates: i. Date of invoice or payment, whichever is earlier: (if the invoice is issued within the prescribed period of 30 days (up to 31.03.2012 it was 14 days) from the date of completion of the provision of service.)
ii. Date of completion of the provision of service or payment, whichever is earlier: (if the invoice is not issued within the prescribed period as above) iii. Date of receipt of advance payment Date of payment means earlier of following: Dates on which the payment is entered in the books of accounts (Or) Dates on which the payment is credited to the bank account of the person liable to pay tax. Q.NO.11. DETERMINATION OF POINT OF TAXATION IN CASE OF CONTINUOUS SUPPLY OF SERVICE Continuous Supply of Service - Rule 2 (c) of POT Rules, 2011 Continuous supply of service means any service which is provided, or to be provided continuously or on recurrent basis, under a contract, for a period exceeding three months with the obligation for payment periodically or from time to time, or where the Central Government, by a notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition. Under above rules, the Central Government, vide NN 28/2011 st dated 01.04.2011, notifies the following services as continuous supply of service, for the purpose of the said rules: a. Commercial or Industrial Construction Services
e. Services in Execution of Works Contract
Therefore it is clear on the basis of above provision that in respect of services which has been notified by Central Govt. as continuous supply of service it is not necessary that these services provided or to be provided continuously for a period exceeding three months. In case of continuous supply of services, date of completion of provision of service shall be deemed to be date of the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider. Q.NO.12. DETERMINATION OF POINT OF TAXATION IN CASE OF CHANGE IN TAX RATE? Actual Position with reference to Service / Provision of Service Taxable service has been provided before the change in effective rate of tax. Taxable service has been provided before the change in effective rate of tax.
Invoice / Payment Status Invoice has been issued and payment received after the change in effective rate of tax Invoice has been issued before the change in effective rate but payment is received after the change in effective rate. Payment has been received before the change in effective rate but invoice has been issued after the change in effective rate. Payment is made after the change in effective rate but invoice has been issued before the change in effective rate. Invoice has been issued and payment received before the change in effective rate. Invoice has been issued after the change in effective rate but payment is received before the change in effective rate.
Effective Rate and Point of Taxation Point of Taxation shall be the date of payment or issue of invoice whichever is earlier. Point of Taxation shall be date of issuing of invoice.
Taxable service has been provided before the change in effective rate of tax.
Point of Taxation shall be the date of payment.
Taxable service has been provided after the change in effective rate of tax.
Point or Taxation shall be the date of payment.
Taxable service has been provided after the change in effective rate of tax. Taxable service has been provided after the change in effective rate of tax.
Point of Taxation shall be the receipt of payment or date of issue of invoice whichever is earlier. Point of Taxation shall be the date of issue of invoice.
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d. Internet Telecommunication Services
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b. Complex Construction Services c. Telecommunication Services
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Effective rate of tax shall include a change in the portion of value on which tax is payable in terms of a Notification issued under the Act or Rules. To illustrate, assuming an abatement of 67% is granted and the same is changed to 70%, that change in value would also be considered as an effective rate change for the purpose of application of point of Taxation Rules. Q.NO.13. DETERMINATION OF POINT OF TAXATION IN CASE OF REVERSE CHARGE, ASSOCIATED ENTERPRISES The point of taxation shall be determined in the following manner under Rule 7: S. No 1 Particulars Reverse Charges Mechanism U/s 68 (2) of Finance Act, 1994 Point of Taxation Shall Be Case 1 Payment is made within a period of six months of the date of invoice Date on which payment is made Case 2 Payment is not made within a period of six months of the date of invoice
Associated Enterprises
Point of Taxation Shall Be
Where the person providing the service is located outside India 1. Date of credit in the books of account of the person receiving the service (or) 2. Date of making the payment whichever is earlier
Date of invoice or payment, whichever is earlier (if the invoice is issued within the prescribed period of 30 days (up to 31.03.2012 it was 14 days) from the date of completion of the provision of service.) Date of completion of the provision of service or payment, whichever is earlier (if the invoice is not issued within the prescribed period as above.) Date of receipt of advance payment POT is determined as per normal rules. Where the person providing the service is located in India
Same as export of service
Q.NO.14. DETERMINATION OF POINT OF TAXATION IN CASE OF COPYRIGHTS, ETC. In respect of royalties & payments pertaining to copyrights, trademarks, designs or patents, Where the whole amount of the consideration for the provision of service is not ascertainable at the time when service was performed, and
Subsequently the use or the benefit of these services by a person other than the provider gives rise to any payment of consideration Then the service shall be treated as having been provided each time when a payment in respect of such use or the benefit is received by the provider in respect thereof, or an invoice is issued by the provider, whichever is earlier. Q.NO.15. DETERMINATION OF POINT OF TAXATION IN OTHER CASES Rule 8A - Determination of Point of Taxation in Other Cases Where the point of taxation cannot be determined as per these rules as the date of invoice or the date of payment or both are not available, then Central Excise officer, may, require the concerned person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account such material and the effective rate of tax prevalent at different points of time, shall, by an order in writing, after giving an opportunity of being heard, determine the point of taxation to the best of his judgment. Q.NO.16. DETERMINATION OF POINT OF TAXATION IN RESPECT OF SMALL ADVANCE Wherever the provider of taxable service receives a payment up to rupees one thousand in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of Rule 3 of point of taxation. Provided also that wherever the provider of taxable service receives an amount upto rupees one thousand in excess of the amount indicated in the invoice and the provider of taxable service has opted to determine the point of taxation based on the option as given in Point of Taxation Rules, 2011, no invoice is required to be issued to such extent. Q.NO.17. WHAT IS THE PROCEDURE FOR PAYMENT OF SERVICE TAX? According to Section 68 of the Finance Act, 1994 read with Rule 6(1) of the Service Tax Rules 1994, the service tax shall be paid to the credit of the Central Government in the following manner Assessee Individual, Proprietary firm, of, a Partnership firm [Partnership firm includes limited liability partnership (LLP) Rule 2(cd).] Payment Duration Quarterly Time of payment 1. If tax is paid electronically through internet banking: by 6th of the month 2. In any other case: by the 5th of the month, immediately following the quarter in which the service is deemed to be provided as per the rules framed in this regard (i.e., as per the Point of Taxation under POT Rules).**
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Option to pay service tax on receipt basis if value of services provided is upto 50 lakhs [W.e.f. 1-4-2012]: In case of individuals and partnership firms (including LLP) whose aggregate value of taxable services provide from one or more premises is 50 lakh 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 50 lakhs in the current financial year, by the dates specified above with respect to the quarter in which payment is received.**
Any other assessee
Monthly
1. If tax is paid electronically through internet banking: by 6th of the month 2. In any other case: by the 5th of the month Immediately following the month in which the service is deemed to be provided as per the rules framed in this regard (i.e., as per the Point of Taxation under POT Rules).**
**Services deemed to be provided in month/ quarter ending on 31st March - Service Tax payable by 31st March itself: The service tax on the service deemed to be provided in the month of March or the quarter ending in March of the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year. Export of Service Service tax to be paid if payment not received within time period specified by RBI [W.e.f. 1-4-2012]: In case of taxable services exported under Rule 3(1) of the Export of Services Rules, 2005, the payment under Rule 6(1) shall not apply if that the payment is received within the period specified by RBI, including such extended period as may be allowed from time to time. Thus, if payment is not received within original time/extended time allowed by RBI, service tax shall be required to be paid under this Rule 6(1) irrespective of the fact that the service was exported. Payment by electronic mode: Further, as per clarification issued by CBEC, where the tax is paid electronically, the same should be paid by 8 p.m. on the due date. If the same is paid later than 8 p.m. on the due date, it shall be deemed to have been paid on the next date.
Illustrations
1. Computation of Service Tax: A service provider provides taxable services valuing Rs. 10,00,000. Compute the amount of Service Tax payable by him. Particulars Service Tax payable @ 12% Add: Education Cess @ 2% of Service Tax Amount Rs.1,20,000 Rs.2,400
Add: SH & EC @ 1% of Service Tax Total Service Tax Payable
2. Computation of Service Tax: A service provider provides taxable services. The gross amount charged, is Rs. 10,00,000. Compute the amount of Service Tax payable by him, if the gross amount so charged in inclusive of Service Tax. Solution: Service Tax payable = 10,00,000 12.36 112.36 = Rs. 1,10,003. 3. Computation of Service tax: A service provider provided taxable services on 1-7-2012, the gross amount charged in respect of which is Rs.10,00,000 (Excluding service Tax). The bill was raised on 28-07-2012 and payment was received on 29-07-2012. Compute the amount of Service Tax payable by him and when?(Assumed to be a Company) Solution: Particulars Gross Amount charged Service Tax payable @ 12% Add: Education Cess @ 2% of Service Tax Add: SH & EC @ 1% of Service Tax Total Service Tax Payable Amount 10,00,000 1,20,000 2,400 1,200 1,23,600
Effective Date = If invoice is issued within 30 days of the completion of service then the point of Taxation shall be the receipt of Payment or Issue of Bill, whichever is earlier. Date of completion = 1-07-2012 and Invoice date = 28-07-2012. Hence, Invoice is issued within 30 days of completion. So, Effective Date = 28-07-12 or 29-07-12 whichever is earlier = 28-07-2012 Due date = on or before 05-08-2012
Rs.1,200 Rs.1,23,600
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NOT APPLICABLE FOR NOV-2012 EXAMS

PART 2. TAXABLE SERVICES
MASTER MINDS
PART 3. VALUATION OF SERVICE TAX AND ITS RULES

QUESTION ABC A B A
NO. 1. 2. 3.
Explain the valuation of Taxable Service for the charging of Service Tax. When is the value of materials sold, in provision of service, allowed as deduction? Value of taxable service cannot be determined, when the whole of the consideration is in non-monetary form. Comment on the validity of this statement. What are the considerations in the determination of taxable value of services? (Or) Will the payment to a hotelier of Rs.10,000, on behalf of an architect by a service receiver, be included in the value of taxable services? Write about Service Specific Inclusions. What are the service specific exclusions in the valuation of taxable service? Write a note on the Service Tax (Determination of Value) Rules, 2006 What are the conditions incidental to the payment of Service Tax? Is the Service Tax payable by the assessee, even in cases where his clients do not pay for the service rendered or pay only a part of the bill raised in this regard? Determination of value of service in relation to money changing
4.
5. 6. 7. 8. 9.
Q.NO.1. EXPLAIN THE VALUATION OF TAXABLE SERVICE FOR THE CHARGING OF SERVICE TAX. As per Section 66, Service Tax is to be charged @ 12% of the value of taxable service provided or to be provided. Hence, we have to determine the value of such taxable services, so as to pay Service Tax. If the consideration consisting of: a. Where the provision of service is for a consideration in money: The gross amount charged by the service provider for such service provided or to be provided by him. Such amount in money, with the addition of Service Tax charged, as is equivalent to the consideration. In other words, it should be of the value of similar services, provided to a third party. If similar service is not provided to a third party, it should be the market value as determined by the assessee but it cannot be lower than the cost of provision of the same. The amount, as may be determined in the prescribed manner.
b.
Where the provision of service is for a consideration, not wholly or partly, consisting of money:
c.
Where the provision of service is for a consideration, which is not ascertainable:
B C C A B B
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a. Consideration also includes any amount, which is payable for the taxable services provided or to be provided. b. Money includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar instruments, but does not include currency that is held for its numismatic value. c. Gross amount charged include payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment. d. The first basic principle is that, Service Tax is payable on the gross amount, and not on the net amount. e. The second principle, which also flows from Section 67, is that the amount charged has to be in relation to the services rendered. f. Valuation, where billing is inclusive of Service Tax: The assessee is to calculate the Service Tax, based on reverse working. Eg.: If the billing is done inclusive of Service Tax [Consider billing 100 (inclusive), realization 100 (inclusive)] the assessee can claim that the bill amount should be bifurcated into value and Service Tax components. Accordingly the Service Tax payable shall be (100 12.36/112.36) = Rs. 11.03. g. Payment through Suspense Account: In case of transactions with associated enterprise, payments received towards the value of taxable services shall include any amount credited or debited, to any account, whether called Suspense Account or by any other name, in the books of account of a person liable to pay Service Tax. Q.NO.2. WHEN IS THE VALUE OF MATERIALS SOLD, IN PROVISION OF SERVICE, ALLOWED AS DEDUCTION? 1. Material Value: a. Excluded: If the service provider supplies goods and material while providing the service, value of goods and material will be excluded, for the purpose of payment of Service Tax. b. Value vs. Cost: The amount deductible is the value of the materials/goods supplied, and not the cost. Value refers to the worth of a thing in money, whereas cost is the payment required for acquiring such material. Example: In case of commercial training and coaching institutes, deduction will be available only to the sale value of standard text books, which are priced. Any study material or written text, provided by the institute, will not be allowable as deduction. 2. Deduction for materials sold: If the amount charged includes value of goods and materials sold, Service Tax will not be payable on value of goods and materials sold, provided: a. Sale of such goods is evidenced and sale value is quantified, and shown separately in invoice. b. There is documentary proof, specifically indicating the value of the said goods and materials. c. The service provider has not claimed any abatement / exemption benefit, under any notification, and Service Tax is paid at full rate.
3. Treatment of materials consumed: Materials consumed in providing a service cannot be reduced from value, for the purpose of measuring Service Tax payable. Deduction is available only for the value of goods and materials sold, subject to maintenance of documentary evidence of such sale. For example, cost of materials used for cosmetics in beauty parlour or Soap oil in repair and maintenance service cannot be excluded from taxable value as they are consumed and not sold. Q.NO.3. VALUE OF TAXABLE SERVICE CANNOT BE DETERMINED, WHEN THE WHOLE OF THE CONSIDERATION IS IN NON-MONETARY FORM. COMMENT ON THE VALIDITY OF THIS STATEMENT. When the whole of consideration received for provision of service is in non-monetary form, Taxable Value = Money Equivalent to non-monetary consideration, as determined by the service provider, as under Value of similar service is available Taxable value of service = Gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade. Notes: 1. Similar Service: Value of similar service is not available Taxable value of service = Cost of provision of service + Reasonable profit.
a. Meaning: Similar does not mean identical but it means corresponding to or resembling in many respects. It does not mean same in all respects. b. Criterion: Where the Service Tax is charged on the basis of similar services provided by the same person, the same should be based on a: Normal transaction, Between two independent persons (i.e. unrelated parties) & At an Arms length price. 2. Cost + Reasonable Profit: The service provider may ascertain the cost of provision of service based on usual costing principles of normal costs and allocation of normal overheads. A reasonable profit should be added to the cost so determined to ascertain the value of taxable service. However, the value so determined should not be less than the cost of provision of such service. Q.NO.4. WHAT ARE THE CONSIDERATIONS IN THE DETERMINATION OF TAXABLE VALUE OF SERVICES? (OR) WILL THE PAYMENT TO A HOTELIER OF Rs.10,000, ON BEHALF OF AN ARCHITECT, BY A SERVICE RECEIVER BE INCLUDED IN THE VALUE OF TAXABLE SERVICES? (OR) WHETHER FREE SERVICES, AFTER SALE OF MOTOR VEHICLES, GIVEN BY THE AUTHORISED DEALERS, FOR WHICH THEY ARE REIMBURSED BY THE VEHICLE MANUFACTURERS, SUBJECT TO SERVICE TAX?
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1. Service purpose Vs other purpose: Service Tax is payable on taxable value of services i.e., the gross amount charged by the service provider, for the service rendered by him. Amount charged for some other purpose, other than for provision of service, will not be included in taxable value. Example: Interest on delayed payment. 2. Expenditure/costs: Expenditure or costs incurred by the service provider, in the course of providing taxable service: Shall be treated as consideration for the taxable services provided or to be provided, even if such costs or expenditure are recovered separately, by the service provider. 3. Method of billing: (Not relevant): Value of taxable services is the total amount of consideration consisting of all components of the taxable service, irrespective of the fact that details of individual components of the total consideration are indicated separately in the invoice. 4. Costs directly incurred by the service receiver or out-ofpocket expenses: Out-ofpocket expenses (reimbursable separately by the service receiver), incurred by the service provider in the course of providing the service, is includible in the taxable value. Example: Travelling, Hotel, Telephone expenses, etc. 5. Reimbursement: Taxable value includes cost/expenditure incurred by the service provider and recovered from the service receiver. 6. Warranty Period: Service Tax is leviable on service provided during warranty period, even though the customer is not charged any amount. This is because, the amount is paid directly to the service provider, by the manufacturer of automobile/equipment. 7. Charge on anyone: Amount may be charged to anyone, not necessarily to service receiver. Even if the amount is charged to some other person, and not to the receiver of service, Service Tax becomes payable. Example: Authorised service station services service during warranty period, rendered to the vehicle owner Consideration for the same is paid by the manufacturer of vehicles. 8. Consideration of third parties: It is not necessary that the money should be paid to the service provider himself. Amount paid to a third party is includible in value of service, if a. It is for provision of service, and b. At the instance of the service provider 9. Time of receipt of consideration: Consideration for service provided may be received at any time, i.e., before, during or after, provision of service. 10. Composite Service: A service has to be pre-dominantly taxable service, for the levy of Service Tax. Where a composite service, consists of some part which is taxable and some part which is not taxable, Service Tax cannot be levied on non taxable services. A composite contract cannot be vivisected and service portion cannot be subjected to tax Widia GMBH (2006) 5 STT 414 (CESTAT)
11. Indivisible Contracts: In case of indivisible contracts, involving both sale of goods and provision of services, Service Tax can be imposed, only on value of service and not on the material cost at all. 12. Service Tax not paid by recipient: Service Tax liability will still be there, even if the Service Tax is not paid by the service recipient.
Q.NO.5. WRITE ABOUT SERVICE SPECIFIC INCLUSIONS. Service Specific Inclusions [Rule 6(1)) The items to be included in the taxable value of service, which are specific to the concerned service are: Service Classification Stock Broking Services Telecommunication Service Cost/Expenditure/Commission included Commission/brokerage, charged by a broker, on the sale or purchase of securities, including the commission or brokerage paid by the stock-broker, to any sub-broker. Adjustments made by telegraph authority, from any deposits made by the subscriber, at the time of application for Telephone Connection / Pager/ Facsimile / Telegraph / Telex / Leased Circuit, etc. Amount of premium, charged by the insurer, from the policy holder; Commission received by the Air Travel Agent, from the airline; Commission, fee or any other sum: a. Received by an Actuary or Intermediary or Insurance Intermediary or Insurance Agent, from the insurer; b. Paid to such an agent, by the Insurer appointing such an agent, in relation to Insurance Auxiliary Services, provided by an Insurance Agent; Authorized Service Station Reimbursement received by Authorized Service Station, from the manufacturer, for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such a manufacturer; Commission or any amount received by the Rail Travel Agent, from the Railways or the Customer; Remuneration or Commission, by whatever name it is called, paid to such an agent by the client engaging such an agent, for the services provided by a clearing and forwarding agent, to a client, rendering services of clearing and forwarding operations in any manner.
Insurance Services (Life and General) Air Travel Agent Insurance Auxiliary Services
Rail Travel Agent Clearing and Forwarding Agency
Q.NO.6. WHAT ARE THE SERVICE SPECIFIC EXCLUSIONS IN THE VALUATION OF TAXABLE SERVICE? The value of any taxable service does not include the following: 1. Initial deposit made by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or telegraph or telex or for leased circuit; 2. Airfare collected by the Air Travel Agent
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3. Rail fare collected by Rail Travel Agent
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4. Interest on loans
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5. Amount collected for delayed payment of a telephone bill not treated as consideration charged for provision of telecom service and hence not a part of the value of taxable service. 6. Taxes levied by any Government on any passenger traveling by air, if shown separately on the tickets or in the invoice, issued for such ticket. (w.e.f. 27-02-2010) Q.NO.7. WRITE A NOTE ON THE SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006. The provisions of the, Service Tax (Determination of Value) Rules, 2006, are as follows: 1. Determination of Value when consideration is wholly or partly not in money [Rule 3]: Where the consideration received is not wholly or partly consisting of money, the value shall be determined by the service provider, in the following manner: a. the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person, in the ordinary course of trade and the gross amount charged is the sole consideration; b. Where the value cannot be determined in accordance with Clause (a), the service provider shall determine the equivalent money value of such consideration, which shall, in no case, be less than the cost of provision of such a taxable service. 2. Rejection of Value [Rule 4] : The Central Excise Officer has the power to satisfy himself as to the accuracy of any information, furnished or document presented, for valuation. Where the Central Excise Officer is satisfied that the value, so determined by the service provider, is not in accordance with the provisions of the Act or the rules, he shall issue a notice to such a service provider to show cause why the value of such a taxable service for the purpose of charging Service Tax should not be fixed at the amount specified in the notice. After providing a reasonable opportunity of being heard, the Central Excise Officer shall determine the value of such taxable service, in accordance with the provisions of the Act and these rules. 3. Inclusion in or exclusion from value of certain expenditure or costs [Rule 5] : , Where any expenditure or costs are incurred by the service provider, in the course of providing taxable service, all such expenditure or costs shall be treated as consideration, for the taxable service provided or to be provided and shall be included in the value for charging Service Tax on that service. Expenditure or costs incurred as 'pure agent' to be excluded: The expenditure or costs incurred by the service provider, as a pure agent of the recipient of service, shall be excluded from the value of the taxable service, if all the following conditions are satisfied: a. the service provider acts as a pure agent of the recipient of service, when he makes payment to a third party for the goods or services procured; b. the recipient of service receives and uses the goods or services, so procured by the service provider in his capacity as pure agent of the recipient of service; c. the recipient of service is liable to make payment to the third party; d. the recipient of service authorises the service provider, to make payment on his behalf;
e. the recipient of service knows that, the goods and services, for which payment has been made by the service provider, shall be provided by the third party; f. the payment, made by the service provider on behalf of the recipient of service, has been separately indicated in the invoice, issued by the service provider, to the recipient of the service;
g. the service provider recovers, from the recipient of service, only such amount as has been paid by him to the third party; and h. the goods or services, procured by the service provider, from the third party as a pure agent of the recipient of service, are in addition to the services he provides on his own account. Pure agent: "Pure agent" means a person who a. enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs, in the course of providing taxable, service; b. neither intends to hold nor holds any title to the goods or services, so as procured or provided as pure agent of the recipient of service; c. does not use such goods or services so procured; and d. receives only the actual amount incurred to procure such goods or services. Value to include all components even if separately shown: The value of the taxable service is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration are indicated separately in the invoice. Inclusions/Exclusions of certain items: Rule 6 of Valuation Rules specifies certain items to be included in or excluded from the value. Q.NO.8. WHAT ARE THE CONDITIONS INCIDENTAL TO THE PAYMENT OF SERVICE TAX? IS THE SERVICE TAX PAYABLE BY THE ASSESSEE, EVEN IN CASES WHERE HIS CLIENTS DO NOT PAY FOR THE SERVICE RENDERED OR PAY ONLY A PART OF THE BILL RAISED IN THIS REGARD? 1. TDS part of Taxable value: Service Tax is to be paid on the value of taxable service, which is charged by a Service Tax assessee. Income Tax, deducted at source, is included in the charged amount. Service Tax is, therefore payable in the total amount, inclusive of the Income Tax, deducted at source. 2. Payable, even if ST is not collected: Failure to realize or failure to charge the Service Tax, at the prevailing rate, does not absolve the liability of the service provider to pay Service Tax. Liability of the service provider to pay Service Tax subsists, even if it is not collected by him from his client. 3. Due Date: Person a. Individual / Proprietary Firm / Partnership Firm Due Date for Payment General: 5th of the month following the quarter of Determination as per POT Rules,2011, i.e. on or before 5th of July, 5th of October and 5th of January
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Quarter ending in March: Tax should be paid on or before 31st March itself.
b. Other Persons
General: 5th of the month following the month of Determination as per POT Rules, 2011. March: Tax should be paid on or before 31st March itself.
Note: For E-payment of Tax: Due date shall be 6th, instead of 5th. Where the last day is a Public Holiday, payment can be made on the next working day. 4. Form / Challan for Payment: a. Service Tax shall be paid in Form GAR 7 Challan in the Designated Bank Branches. [Note: Payment of Service Tax in Non-Designated Banks does not amount to the payment of Service Tax.] b. A Multiple Service Provider can either use a single GAR 7 Challan for making payment, in respect of all services, or separate challans for each services. 5. Rounding Off [Sec.37D of Central Excise Act]: Amount of Service Tax shall be rounded off to the nearest Rupee. 6. Payment in Cash: Where the amount of Service Tax is paid in Cash, the date of payment is the date, on which cash is tendered to the Designated Bank. 7. Payment in Cheque: a. Date of Deposit = Date of Remittance : Where payment is made in Cheque: It should be deposited with the bank on or before the due date, and If it is realized in the normal course of banking, even after the due date, payment will be deemed to have been made before the due date.
b. Dishonour of Cheque: If the cheque is dishonoured, Service Tax will not be deemed to have been paid. Q.NO.9. DETERMINATION OF VALUE OF SERVICE IN RELATION TO MONEY CHANGING? Determination of value of service in relation to money changing [Rule 2B of the Service Tax (Determination of Value): Subject to the provisions of section 67, the value of taxable service provided, so far as it pertains to purchase or sale of foreign currency, including money changing, shall be determined by the service provider in the following manner:a. For a currency, when exchanged from, or to, Indian Rupees (INR): Value = Difference in the buying rate or selling rate and the RBI reference rate for that currency at that time x Total units of currency. Example 1 Purchase of foreign currency by money-changer: US$1000 are sold by a customer at the rate of 45 per US$ RBI reference rate for US$ is 45.50 at that time. The taxable value = (RBI Rate Buying Rate) x No. of units of foreign currency bought = (45.5 45) per US$ X 1000 US$ = 500.
Example 2 Sale of foreign currency by money-changer: INR 70000 is changed into Great Britain Pound (GBP) The exchange rate offered is 70, thereby giving GBP 1000. RBI reference rate at that time for GBP is 69.
The taxable value = (Selling Rate RBI Rate) x No. of units of foreign currency sold = ( 70 69) per GBP X 1000 GBP = 1,000. If no RBI rate available, Value = 1% of INR : In case 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: b. In the where neither of the currencies exchanged is Indian Rupee (i.e. One foreign currency is exchanged for another foreign currency): Value shall be computed as follows Amount 1 = Foreign Currency sold x RBI Reference Rate of that currency to Indian rupees at that time Amount 2 = Foreign Currency Bought x RBI Reference Rate of that currency to Indian rupees at that time Gross Indian Rupees = Amount 1, or, Amount 2, whichever is less Value = 1% of the Gross Indian Rupees xxx
[Authors Note Service tax payable @ 12.36% on value : The value as computed under (a) or (b) above shall be liable to service tax at the normal rate of 12.36%.]
Illustrations
1. Value of taxable service: Answer the following a. X contracts with Y, a real estate agent, to sell his house and thereupon Y gives an advertisement in television at a cost of Rs. 5 lakhs. Y billed Rs.15 lakhs to X, including charges for television advertisement, showing them separately in the invoice. Mr. Y says that, the value of taxable service in his case is Rs. 10 lakhs only, as he acted as a pure agent of Mr. X, while taking advertisement. Compute the Service Tax to be billed. b. In the course of providing a taxable service, a service provider incurs costs such as traveling expenses, postage, telephone, etc., to the extent of Rs. 20,000. He charges Rs. 80,000 for his services and indicates the said costs separately in the invoice issued to the recipient of the service. Compute the amount of Service Tax, to be billed by the service provider. c. A contracts with B, an architect, for building a house and B's fees is fixed at Rs. 3,00,000. During the course of providing the taxable service, B incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc., totaling Rs. 50,000, to enable him to effectively perform the provision of services to A. Compute the Service Tax liability of B. d. A clearing and forwarding agent charges Rs. 50,000 for his services, which includes octroi charges Rs.10,000, paid on behalf of his client. Compute the value of taxable service and Service Tax liability. e. A cable operator charges Rs. 10,000 for his services, which includes entertainment tax Rs. 2,000, paid on behalf of his client. Compute the value of taxable service and Service Tax liability.
xxx xxx xxx
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Solution: The answers to the aforesaid are as follows:
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a. Since advertising service is an input service for the estate agent, in order to enable or facilitate him to perform his services as an estate agent, Mr. Y doesn't act as an agent of Mr. X in taking advertisement. Hence, the Service Tax = Rs.15 lakhs 12.36% = Rs.1,85,400. b. In this case, the service provider is not acting as an agent of the recipient of service, but procures such inputs or input service, on his own account, for providing taxable service. Such expenses do not become reimbursable expenditure, merely because they are indicated separately in the invoice issued, by service provider to the recipient of service. Hence, the Service Tax = (80,000 + 20,000) 12.36% = Rs.12,300. c. Value of taxable service = 3,00,000 + 50,000 = Rs. 3,50,000, and Service Tax @ 12.36% = Rs. 43,260. d. The clearing and forwarding agent acts as a pure agent of the client while paying octroi charges. Hence, the value of the taxable service = 50,000 - 10,000 = Rs. 40,000, and Service Tax @ 12.36% = Rs. 4,944. e. The cable operator acts as a pure agent of the client, while paying entertainment tax. Hence, the value of the taxable service = 10,000 - 2,000 = Rs. 8,000, and Service Tax @ 12.36% = Rs. 988.8 2. Pure agent: Mr. X, a custom house agent, charges Rs. 1,00,000 from a client. This sum includes Rs. 10,000 towards the payment of customs duty, on behalf of the client. Compute the Service Tax to be charged from the client. Solution: Expenses incurred by the service provider in his capacity as a pure agent do not form the part of the value of taxable service. Here, the custom house agent, Mr. X, has paid Rs. 10,000 towards customs duty on behalf of the client, which is an expenditure incurred by Mr. X in his capacity as the pure agent. Since the sum of Rs.10,000 doesn't include any element of profit, the same will not form a part of the value of taxable service. Hence, the value of taxable service = 1,00,000 10,000 = Rs. 90,000. Service Tax to be charged = 90,000 12.36% = Rs. 11,124. 3. Pure agent: Mr. Y, an architect, finds a client Mr. A, who need the services of an architect, as well as interior decorator. Mr. A asks Mr. Y to find an interior decorator on his behalf, decide the terms of his engagement and also his remuneration, make payment to him on his (Mr. As) behalf, and provide a consolidated bill, showing relevant break-ups, to him (Mr. A). Mr. Y finds an interior decorator, Mr. Z, whose remuneration is fixed at Rs. 2,00,000 (inclusive of all taxes). Mr. Y charges Rs.8 lakhs towards the value of taxable service provided by him. Compute the amount of the Service Tax to be charged in the bill by Mr. Y if ______ a. The bill amount includes an additional amount of Rs. 2,00,000, towards the cost of interior decorator ; or b. The bill amount includes an additional amount of Rs. 2,50,000, towards the cost of interior decorator. Solution: a. In this case, the bill amount includes only the actual cost of interior decorator. Since Mr. Y has acted as the pure agent of Mr. A, he will get deduction of such cost. Therefore, the value of taxable service provided by Mr. Y = 10,00,000 - 2,00,000 = Rs. 8,00,000, on which the Service Tax = 8,00,000 x 12.36% = Rs. 98,880.
b. In this case, bill amount includes amount in excess of the actual cost of interior decorator. Hence, Mr. Y will not be the 'pure agent' of Mr. A, and thus, he will not get any deduction of such cost. Therefore, the value of taxable service provided by Mr. Y = Rs. 8,00,000 + Rs. 2,50,000 = Rs.10,50,000, on which the Service Tax = 10,50,000 x 12.36% = Rs. 1,29,780. 4. Gross amount charged and Value of taxable service: Hotel Grand Nagarjuna Palace charges 10% of bill amount as service charges and the Department has asked them to pay Service Tax on it. The assessee has submitted that, the amount @ 10%, collected from the customers, is subsequently disbursed among the staff. Therefore, it is not the part of their income and cannot be included in gross amount charged by them. Examine the case and advise suitably. Solution: As per Sec. 67, the value of taxable service shall be the gross amount charged by service provider for the taxable service provided or to be provided by him. Since the assessee was charging service charges (@ 10% of the bill amount) from its customers for providing the services, the said amount was liable to be included in the gross amount charged. Therefore, service charges (@ 10% of the bill amount) charged by Hotel Grand Nagarjuna Palace, are includible in gross amount charged by them and will be liable to Service Tax. 5. Determination of Service Tax liability: Y a consulting engineer raised a bill of Rs. 2,24,720 (including Service Tax) on his client, for consultancy services rendered by him, in the month of June, 2012. A partial payment of Rs.1,68,450 was received by Y in the month of March, 2012. Compute the Service Tax amount payable to Y and the due date by which the Service Tax can be deposited.
Solution: 1. Principle:
a. Payment on Service provided basis: Though the service provider charges Service Tax in his bill, raised on his client as and when the service is provided, the Service Tax is to be paid to the government only, when the payment is received or invoice issued between 14 days whichever is earlier. Thus, situs of taxation is on service provided date, but the remittance of Service Tax to the government is deferred, till the date of receipt of the taxable service or invoice issued whichever is earlier. b. Due date of Payment of Service Tax: In general, the tax collected should be remitted on or before the 5th of the month following the quarter of collection. In case of the last quarter ending on 31st March, the tax should be paid on or before 31st March itself.
2. Analysis and Conclusion:
2,24,720 112.36 x 12.36 = 24,720
6. Determination of liability - ST not charged separately: Ms. Priya rendered a taxable service to a client. A bill for Rs. 40,000 was raised on 29.4.2012; Rs. 15,000 was received from the client on 1.5.2012 and the balance on 23.5.2012. No Service Tax was separately charged in the bill. The questions are:
a. Is Ms. Priya liable to pay Service Tax, even if the same has not been charged by her? b. In case, she is liable, what is the value of taxable service and the Service Tax payable?
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Solution:
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1. Service Tax is to be paid, even though the same is not charged separately in the bill.
Date (1) 29.04.2012 01.05.2012 23.05.2012 Nature (2) Bill raised Part Amount Balance Amount Amount received (3) 15000 25000 Taxable service (4) 40000 15000 25000 Service Tax @ 12% (5) 4272 EC @ 3% (6) = (5) x 3% 128 Total Liability (7) 4400 Due date (8) 05.07.2012 -
7. Liability and Extent of Liability: Ms. Smita rendered taxable services to a client. A bill for Rs.50,000 was raised on 27.04.2012; Rs.25,000 was received from the client on 04.05.2012 and the balance on 25.05.2012. No Service Tax was separately charged in the bill. The questions are: a. Is Ms. Smita liable to pay Service Tax, even though the same has not been charged by her? b. In case she is liable, what is the value of taxable service and the Service Tax payable? Solution:
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1. Principles of Law:
a. Payable, even if not collected: This liability is not contingent upon the service provider realizing or charging the Service Tax at the prevailing rate. The statutory liability does not get extinguished, if the service provider fails to realize or charge the Service Tax from the service receiver. 2. Conclusion: Hence, Ms. Smita is liable to pay Service Tax. Case (b): 1. Value of taxable service = 2. Analysis & Conclusion: a. The rate of Service Tax payable = 12% + cess 3% = 12.36%
Gross amount charged (100 + Effective Rate) 100
63.21
Service Tax payable
001
b. Value of taxable service
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63.211 000,05
= Rs. 44,500 = Rs. 5,500
Case (a):
63.211 000,05
8. M/s. Renu consultants are a labour contractor of manpower to M/s. Sanu creations. They charge the principal employer, for the wages of their labour, which amounts to Rs.1,20,000, plus their service charge of Rs.12,000 for arranging the labour. The issue is, whether Service Tax is payable on the gross amount charged by them, or only their charges for labour. Examine the case and advise suitably. Solution: a. Taxable Value: Section 67 states that value of any taxable service is the gross amount charged by the service provider, for the taxable services rendered by him. b. Analysis of given case: Value includes recovery of staff costs from the recipient, eg. salary and other contributions. Even if the arrangement does not involve the recipient paying these staff costs to the supplier (because the salary is paid directly to the individual or the contributions are paid to the respective authority), these amounts are still part of the consideration and hence, for part of the gross amount. c. Conclusion: Service Tax is to be charged on the full amount of consideration, for the supply of manpower, whether full time or part time. Hence, the taxable amount is the entire amount i.e. Rs. 1,32,000. 9. Determination of Liability of Service Tax: MM Ltd. has entered into a contract with OP Ltd. on 31.05.2012 for rendering services. The contract contains clear details of services. Consideration and Service Tax are charged separately. The following information is also available: a. Advances received in June 2012, from OP Ltd., towards all services = Rs. 1,20,000. b. Total value of services billed to OP Ltd. in August 2012, = Rs. 4,20,000. c. Non-taxable services billed to OP Ltd. [including in (b) above] = Rs. 1,40,000. Balance consideration for services is received in December 2012. 1. How many times does the liability to pay Service Tax arise, in such a case and when? 2. What is the Service Tax liability in each case? 3. What are the due dates for payment in each case? Solution: 1. Liability to pay Service Tax arises only on Mercantile basis. 2. In the given case, liability to pay Service Tax is in respect of a. Receipt of advance money, b. Balance portion of money received, in respect of taxable services.
Amt received/ due (3) Towards Taxable service (4) 80,000 June 12 Advance 1,20,000

Month
Nature
Towards NonTaxable Service (5) 40,000

Service Tax Liability @ 12% (6)
(1)
(2)
2 1,20,000 3
1 1,20,000 3
Cess @ 3% (7) Total Liability @ 12.36% (8) Due date (9) 9,600 288 9,888 5/7/12
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Though not received, it was due as per PTR (4.2 L1.2L) 3,00,000
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Dec. 12
Balance
10. Ms. Priyanka, a proprietress of Royal Security Agency, received Rs.1,00,000 by an account payee cheque, as advance, while signing a contract for providing taxable service. She received Rs.5,00,000 by credit card while providing the service and another Rs.5,00,000 by a pay order, after completion of the service on 31st January, 2013. All three transactions took place, during the financial year 2012-13. She seeks your advice about her liability towards value of taxable service and the Service Tax payable by her. Solution:
Principle: Gross amount charged means Gross amount charged by a service provider
for the taxable service which is inclusive of Service Tax payable. It includes payment by cheque, credit card, deduction from account and any form of payment, by issue of credit notes or debit notes and book adjustment.
Conclusion: In the given case, Service Tax liability = Rs.11,00,000 x 12.36 / 112.36 =
Rs. 1,21,004. 11. Mr. P is a well known interior designer. He has recently designed a 10,000 sq. ft. office of an air conditioner manufacturing company. For this job, he has been paid by the recipient of service, Rs.12,00,000. Besides, the recipient of service has gifted gold ornaments. Service Tax liability (if any) will be met by the recipient of service in addition to the aforesaid payment. Find out the Service Tax liability, under the following two different situations: Situation 1: For a similar job, Mr. P charges at a rate of Rs. 280 per sq.ft. Situation 2: Mr. P has not provided similar service to any other manufacturing company. Equivalent money value of a jewellery is Rs. 9,20,000. The cost of provision of taxable services, provided by Mr. P, in this case is Rs. 22,00,000 Situation 3: In situation 2, assume that cost of provision of taxable services provided by Mr. P in this case is Rs.7,00,000. Solution: Taxable value of service Rs. 28,00,000 Tax liability at 12.36% Rs. 3,46,080
Situation
Valuation For a similar job, Mr. P charges at a rate of Rs.280 per sq.ft. Therefore, for 10,000 Sq.ft. it is Rs.28,00,000
August 12
Bill Raised
2,00,000
2 3,00,000 3
1,00,000
1 3,00,000 3
24,000
720
24,720
5/9/12
Amount received in cash Rs. 12,00,000 Monetary value of consideration, in kind, is Rs.9,20,000 Aggregate amount Rs. 21,20,000 However, cost to Mr. P for providing service is Rs. 22,00,000 The aggregate of monetary consideration and consideration in kind is Rs. 21,20,000. Cost to Mr. P for providing service is Rs. 7,00,000. Taxable value of service will be Rs. 21,20,000.
12. An interior decorator charges Rs. 5,50,000 from a client, for providing professional services. The break up of the bill is: Value of furniture sold to the client Labour and facility charges Value of materials consumed in providing the service Compute the amount of Service Tax to be charged from the client.
Solution:
a. Principles:
conditions specified therein.
Value of furniture sold to client will be exempt under subject to fulfillment of Labour and facility charges are liable to Service Tax. Value of materials consumed in providing the service forms intrinsic part of the
value service, and is not deductible.
b. Analysis and Conclusion:

Particulars Value of taxable service Service Tax to be charged Computation Rs.1,50,000 + Rs.1,50,000 Rs.12.36% of Rs. 3,00,000 Rs. 3,00,000 37,080
13. Ram Ltd manufactures Turbo Engines for manufacturing plants and also provides installation services. The value of Turbo Engines supplied to its customer including profit element, is Rs.20,00,000. The installation charges towards labour is Rs. 1,00,000, the cost of consumables is Rs.55,000 and the profit element on installation and consumables is Rs. 1,50,000. What is the value of taxable service? Solution: 1. As per Rule 2 of the valuation rules, the value of taxable services does not include the value of material supplied to the workplace. 2. In the given case, value of taxable service is calculated as under: Particulars Cost of labour Rs. 1,00,000
Rs. 22,00,000 Rs. 2,71,920 Rs. 21,20,000 Rs. 2,62,032 Rs.2,50,000 Rs.1,50,000 Rs.1,50,000
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Cost of consumables Profit Taxable value of services
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55,000 1,50,000 3,05,000
14. Amethyst, Fashion Designers, undertake fashion designing contracts to various events. Services provided to X Ltd. is for Rs. 1,00,000. X Ltd., the manufacturer of cosmetics, gave packs of cosmetics to Amethyst as gift. Find the taxable value of service, if : a. For similar services he charges Rs. 5,00,000.
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Solution: Situation a. Similar services charges are Rs.5,00,000 b. Consideration is not known
Taxable value of service Taxable value of service = Gross amount charged by the service provider to provide similar service, to any other person, in the ordinary course of trade = Rs. 5,00,000 Taxable Value of service will be based on the cost plus reasonable profit. Such cost will have to be worked out, on the basis of usual costing principles, of normal costs and allocation of normal overheads, and including reasonable profit thereon.
15. GSA, an excise agent, charges a sum of Rs. 74,000 from his client vide Bill No. 44, dated February 10th, 2013. This sum includes Rs. 45,000 towards the payment of excise duty, on behalf of his client. Compute the Service Tax to be charged from the client. Solution:
Any expenditure incurred by a service provider in his capacity as a pure agent does not
form the part of taxable services.

In the given problem, GSA acts as a pure agent of his client, and Rs. 45,000 is paid to
the excise department, on behalf of the client, which will not be liable for Service Tax.
Consequently, Service Tax to be charged = (Rs. 74,000 Rs. 45,000) x 12.36% = Rs.
3,584. Problem no. 16 & 17, 19, 21 not required 18. X & Co., is a service provider. It received Rs.19,80,000 during the financial year 2012-13, after the deduction of tax at source, under Section 194J of the Income-tax Act, 1961. The rate of tax deduction being 10% (i.e. after deduction of Rs. 2,20,000). Calculate the Service Tax liability of X & Co. Can a multiple service provider use a single challan for payment of Service Tax, for various services rendered by it? Solution:
a. Service Tax is to be paid on the value of taxable service, which is charged by a Service Tax Assessee. TDS is included in the charged amount. Service Tax is, therefore, payable on the total amount of inclusive of Income tax, deducted at source.
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b. Consideration is not known.
Particulars Taxable Value (Rs.19,80,000 + Rs. 2,20,000) Service Tax @ 12.36%
b. Yes. A Multiple Service Provider can either use single GAR 7 Challan for making payment in respect of all services, or separate challans for each services.
20. Calculate the net Service Tax payable, under the provisions of Rule 2A of the Service Tax (Determination of Value) Rules, 2006, relating to the determination of the value of services in the execution of a works contract, from the following particulars: a. Gross amount for the works contract (excluding VAT) b. Value of goods and materials sold in the execution of works contract c. CENVAT Credit on (b) above d. Service Tax paid on input services Rs.1,00,000 Rs. 70,000 Rs.1,000 Rs.1,000
e. CENVAT Credit on capital goods issued, in the provision of works contract service Rs.1,000 f. Service Tax rate 12.36%
Make suitable assumptions and provide explanations, wherever required. 22. Prahlaad has paid the amount of Service Tax for the quarter ending 30th June, 2012, by cheque. The date of presentation of cheque to the designated bank is 5th July, 2012, and it is realized by the bank on 7th July, 2012. What is the date of payment of Service Tax in this case? Whether any interest and penalty is attracted in this case? Solution: a. Payment in Cheque: a. Date of Deposit = Date of Remittance : Where payment is made in Cheque: It should be deposited with the bank on or before the due date, and If it is realized in the normal course of banking, even after the due date, payment will be deemed to have been made before the due date. b. Dishonour of Cheque: If the cheque is dishonoured, Service Tax will not be deemed to have been paid. b. Due Date: In case of individual 5th of the month following the quarter of collection, i.e. on or before 5th of July, 5th of October, 5th January and in case of March, 31st March itself. c. Conclusion: The date of payment of Service Tax is 5th July 2012, i.e. on the due date itself. Therefore no interest and penalty are attracted in this case. 23. R Ltd. gives the following particulars relating to the service provided by it to its various clients for the month ending 31.03.2013: i. Total bills raised for Rs. 17,50,000 out of which bill for Rs.1,50,000 was raised on an approved International Organization and payments for bills for Rs. 2,00,000 were not received until 31.03.2013
Rs. 22,00,000 2,71,920
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ii. Amount of Rs. 1,00,000 was received as an advance from XYZ Ltd. on 25.03.2013 to whom the services were provided in April 2013. Compute: a. Value of Taxable Services.
Solution:
a. Value of Taxable Services for the month ending 31.03.2013

Sl No. 1. 2. Particulars Total bills raised during the month ending 31.03.2013 Less: Bills raised on an approved International Organization due to Exemption granted. Bills in respect of which payment was not received until 31.03.2013 No adjustment is required because according to Rule 3 of point of Taxation Rules, 2011 where invoice is issued within 30 days from the date of completion of the service, the point of Taxation will be earlier of the following two dates: a. Issue of Invoice for the service provided ; or b. Date of payment to the extent it is received In the absence of my specific information in the question, it is assumed that invoice has been issued within 30 days from the date of completion of the taxable service. Consequently, service Tax is required to be paid on the basis of issue of invoice even if no payment has been received until 31.03.2013 Add: Amount of advance received on 25.03.2013 is to be included in the taxable value of service because according to Explanation appended to rule 3 of point of Taxation rules, 2011 wherever any advance by whatever name known is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance. Value of Taxable Service Amount (Rs.) 17,50,000 1,50,000
3.
4.
b. Amount of service tax payable.

S.No. 1. 2. Particulars Value of Taxable Service Service Tax @ 12.36% Amount 17,00,000 2,10,120
c. Last date of service tax payable: Since the Service Tax is required to be paid for the month of March 2013, last date for making payment of Service Tax payable will be 31.03.2013 in accordance with second proviso to rule 6(1) of Service Tax Rules, 1994.
24. G, a Practicing Chartered Accountants provides the following particulars, for the Quarter ending 31.12.2012. All bills raised by G are Inclusive of Service Tax, if applicable. Date 25.09.2012 Particulars Bill no.1010 in r/o Statutory Audit Fee charged to R. Ltd. Amount 3,00,000
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b. Amount of Service Tax Payable. c. Last date of Service Tax payable.
1,00,000
17,00,0000
05.10.2012 19.10.2012 22.10.2012 28.10.2012 04.11.2012 04.01.2013
Bill no.1011 in r/o Internal Audit Fee charged to S. Ltd Amount Received from R Ltd. In respect of Bill No.1010 Bill no. 1012 in r/o Appearance before Appellate Tribunal against notice issued to T Ltd. Amount received from T Ltd. in r/o Bill No.1012 Amount received from S Ltd against bill no. 1011 Balance Amount Received from S Ltd. against Bill No.1011
Solution:
Value of Taxable Service during the quarter ending 31.12.2012 S.No. 1. 2. 3. Date 19.10.2012 28.10.2012 04.11.2012 Particulars Amount Received from R Ltd. in respect of Bill No.1010 Amount received from T Ltd. in r/o Bill No.1012 Amount received From S Ltd. against Bill No.1011 Total taxable value of Service Value of Taxable Services 2,66,000 [3,00,000 X 100/112.36] 2,31,400 [2,60,000 X 100/112.36] 1,42,400 [1,60,000 X 100/112.36] 6,31,800
a. Amount of Service Tax payable for the quarter ending 31.12.2012

S. No. 1. 2. Particulars Value of Taxable Service Service Tax @ 12.36% Amount 6,39,800 79,079
Note: Assume that value of taxable services provided during the previous year does not exceed Rs.50,00,000
b. Last date of service tax payable: Since the Service Tax is required to be paid for the quarter ending 31.12.2012, last date for making payment of Service Tax will be as under [depending upon the mode of making payment of Service Tax] in accordance with first proviso to rule 6(1) of Service Tax Rule, 1994.
Mode of making payment of Last Date for Depositing Service Service Tax Tax for the quarter ending 31.12.12 Electronically through internet banking 06.01.2013 Any mode other than e-banking such 05.01.2013 as cash/ Cheque / Credit card etc. 25. Kirti Ltd. has entered into contract with H Ltd. on 05.07.2012 for rendering both taxable and non-taxable services for an aggregate amount of Rs.31, 50, 000 consisting of Rs.21, 00, 000 for taxable services and Rs. 10, 50, 000 for non-taxable services. Following further information is given in this respect:
rutnu G ,
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You are required to compute the following for the quarter ending 31.12.2012 a. Value of Taxable Service b. Amount of Service Tax payable c. Last date of Service Tax payable
2,40,000 3,00,000 2,60,000 2,60,000 1,60,000 80,000
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Advance of Rs. 9,00,000 [exclusive of service Tax] received on 05.07.2012 from H Ltd. towards both towards taxable and non-taxable Services
ii. The entire contract was completed on 24.08.2012 and invoice was issued on 02.09.2011 for above mentioned contract amount of Rs.31,50,000 iii. Balance payment of Rs.22,50,000 [Rs 31,50,000 Rs 9,00,000] was, however, received on 19.03.2013. From the above details, please determine the following: a. Point of Taxation as per point of Taxation Rules, 2011. b. Amount of Service Tax payable. c. Last date for making payment of Service Tax without any interest. d. Will there be any change in point of Taxation and last date for making payment of Service Tax without any interest if invoice is issued on 29.09.2012 instead of 02.09.2012. Solution (i) Determination of Point of Taxation. Particulars Receipt of advance of Rs.9,00,000 [exclusive of Service Tax] on 05.07.2012 Point of Taxation Remarks Explanation to Rule 3 of point of Taxation Rules, 2011 provides that wherever any advance by what ever name known is received by the service provider towards the value of provision of taxable service, the point of Taxation shall be the date of receipt of each such advance. According to Rule 3 of point of Taxation Rules.2011 when the invoice is issued within 30 days from the date of completion of the service, point of Taxation will be earlier of the following two dates: i. 02.09.2012 Issue of invoice for the service provided or to be provider. Or
05.07.2012
Issue of invoice for Rs.31,50,000 on 02.09.2012 consequent upon completion of contract on 24.08.2012
ii. Date of payment to the extent it is received. Since in the present case invoice has been issued within 30 days from the date of completion of invoice, point of Taxation shall be date of issue of invoice i.e.2.09.2012 Rs.22,50,000 forms part of total contract of Rs.31,50,000. Point of Taxation in r/o Rs.31,50,000 has already been determined above in two stages i.e. on receipt basis in r/o advance and on issue of invoice basis in r/o remaining Rs.22,50,000.Thus when outstanding payment of Rs.22,50,000 is received, there will be no point of Taxation.
Receipt of balance amount of Rs.22,50,000 on 19.03.2013 after adjusting advance of Rs.9,00,000
ii. Amount of Service Tax payable: Since Taxable Services and Non-Taxable are to be provided for Rs.21,000 for Rs.10,50,000 respectively, the ratio of Taxable to Non-Taxable Services works out to be 2:1 Accordingly, the amount of Service tax payable has been calculated as under:
Total Amount Rs. 9,00,000 Rs.22,50,000 [out of total of Rs.31,50,000, above mentioned advance of Rs.9,00,000 is to be deducted]
Division of Total Amount into Taxable and NonTaxable Portions Taxable Rs.6,00,000 Non- Taxable Rs. 3,00,000 Taxable Rs.15,00,000 Non-Taxable Rs.7,50,000
iii. Last date for making payment of Service Tax without any Interest Taxable Amount Rs. 6,00, 000 Point of Taxation 05.07.2012 Last date for making payment of Service Tax with out any interest 05.08.2012/06.08.2012 depending upon nonelectronic / electronic mode of making payment respectively. 05.10.2012/06.10.2012 depending upon nonelectronic / electronic mode of making payment respectively
Rs.15,00,000
02.09.2012
(D) Consequence of issuing invoice on 29.09.2012 According to Rule 3 of point of Taxation Rules. 2011 where invoice is not issued within 30 days from the date of completion of her service, point of Taxation shall be earlier of the following two dates: 24.08.2012 i. Date of Completion of Service ; or ii. Date of payment of Service to the extent it is received Accordingly in the present case the date of completion of service will be point of Taxation. Last date for making payment of service Tax 05.09.2012/06.09.2012 depending upon nonelectronic/electronic mode of making payment of service Tax. In other words, there is no change in the last date for making payment of Service Tax. As point of Taxation is 24.08.2012, last date for making payment of service Tax has been computed accordingly.
Point of Taxation
26. Raj Ltd. provides the following information for the half year ending 30.09.2012 i. Total bills raised (exclusive of Service Tax) Rs. 68,00,000 which interalia include the following.
Service Tax Payable on Taxable portion @ 12.36% Rs. 74,160 [Rs.6,00,000 X 12.36%] Rs.1,85,400 [Rs.15,00,000 X 12.36%]
2 3 _ ____ ______ ___ ____ ____ ______ 21 02-vo N rof el ba cilp pa xa T eci vr eS _ CCPI
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a. Service provided for the official use of a foreign Diplomatic Mission in India = Rs. 6,00,000 b. Service rendered to a Developer of Special Economics Zone which are wholly Consumed with in SEZ for authorized operations = Rs.4,00,000 ii. Amount of Rs.30, 00, 000 (including Rs. 6, 00, 000 for service rendered to a Diplomatic mission) was received on 18.08.2012. These services were provided on 16.07.2012 and invoice was also raised on the same date. iii. Amount of Rs.32, 00,000 (including Rs.4, 00, 000 for wholly consumed service within SEZ) was received on 22.09.2012. These services were provided on 25.08.2012 & invoice was raised on 29.08.2012 iv. Advance of Rs.6,00,000 [exclusive of Service Tax] was also received on 10.09.2012 against the services which will be provided on 11.10.2012 From the above details, determine the following:
a. Point of Taxation b. Value of Taxable Services and Amount of Service Tax Payable c. Last Date for depositing Service Tax without any interest.
Solution: a. Determination of point Taxation Particulars Issue of invoice for Rs.24,00,000 on 16.07.2012 consequent upon completion of Service on 16.07.2012. It is also worth highlighting that provision of Service to foreign Diplomatic Mission for official use in India has been specifically exempted from levy of Service Tax. Point of Taxation Remarks According to Rule 3 of point of Taxation Rules, 2011 when the invoice is issued with in 30 days from the date of completion of the service, point of Taxation will be earlier of the following two dates. i. Issue of invoice for the service provided or to be provided; or ii. Date of payment to the extent it is received Since in the present case in voice has been issued within 30 days from the date of completion of service, point of Taxation shall be date of issue of invoice i.e.,16.07.2012. Provisions of above-mentioned Rule 3 will apply in the present case also. Since in the present case also invoice has been issued within 30 days from the date of completion of service [25.08.2012], point of Taxation shall be Date of issue of invoice i.e. 29.08.2012.
16.07.2012
Issue of invoice for Rs.28,00,000 on 29.08.2012 consequent upon completion of service on 25.08.2012. It is also worth highlighting that provision of Services [which are wholly consumed in SEZ] to Developer of Special Economic Zone has been
29.08.2012
specifically exempted from levy of service Tax by virtue of Notification No. 17/2011 dated 01.03.2011 Receipt of advance amount of Rs. 6,00,000 on 10.09.2012 against taxable services to be provided on 11.10.2012 10.09.2012
Explanation to Rule 3 of point of Taxation Rules, 2011 provides that wherever any advance by whatever name known is received by the service provider towards the value of provision of taxable service, the point of Taxation shall be the Date of receipt of each such advance. Since in the present case advance has been received on 10.09.2012, point of Taxation shall be receipt of such advance i.e.10.09.2012
b. Value of Taxable Services & Amount of Services Tax Payable Value of Taxable Services Rs.24,00,000 Point of Taxation Amount of Service Tax Payable @ 12.36 Rs.2,96,640 Remarks Specific Exemption to service provided to foreign Diplomatic Mission in India as mentioned above Specific Exemption to service provided to Developer of Special Economic Zone as mentioned above Taxable in accordance with Explanation to Rule 3 of point of Taxation Rules, 2011 as mentioned above.
16.07.2012
Rs.28,00,000
29.08.2012
Rs.3,46,080
Rs.6,00,000
10.09.2012
Rs.74,160
c. Last date for depositing Service Tax without any Interest Taxable Amount Rs.24,00,000 Rs.28,00,000 Rs. 6,00,000 Point of Taxation 16.07.2012 29.08.2012 10.09.2012 Last date for making payments of service Tax without any interest 05.08.2012/06.08.2012 depending upon non-electronic / electronic mode of making payment respectively 05.09.2012/06.09.2012 depending upon non-electronic / electronic mode of making payment respectively. 05.10.2012/06.10.2012 depending upon non-electronic / electronic mode of making payment respectively.
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PART 4. EXPORT & IMPORT OF SERVICES & REFUNDS

NO. 1. 2. 3. QUESTION Briefly explain the export of services Briefly explain the import of services Write short notes on rebate, in respect of Service Tax paid on exports vide notification, no.11/2005 st dt. 19-04-2005. ABC A A C
Q.NO.1 BRIEFLY EXPLAIN THE EXPORT OF SERVICES Criteria for decision of Exports, based on the location of immovable property: 1. Export [Rule 3(1)(i) of Export Rules, 2005]: Taxable service will be considered as export, if: a. Nature of Property: Such services are in relation to an immovable property. b. Location of Property: The immovable property is situated outside India. 2. Other Conditions [Rule 3(2) of Export Rules, 2005]: a. Service is provided from India and used outside India, and b. Payment is received in Convertible Foreign Exchange. Criteria based on the performance of service: 1. Export [Rule 3(1)(ii) of Export Rules, 2005]: Taxable service will be considered as export, if such a service is performed outside India. Even if a part of the service is performed outside India, it will be treated as export. 2. Other Conditions [Rule 3(2) of Export Rules, 2005]: a. Service is provided from India and used outside India, and b. Payment is received in Convertible Foreign Exchange. Criteria based on the location of recipient: 1. Recipients: For the purpose of treating a taxable service as export, based on the location of recipients, the recipients are classified as follows: a. Industrial /Commercial Concerns Having an office or commercial establishment in India. Not having office or commercial establishment in India. b. Others (i.e. other than Industrial/Commercial Concerns) 2. Export [Rule 3(1) (iii) (c) of Export Rules, 2005]: Taxable service will be treated as export, as follows based on nature of the recipient:
Recipient Order for Service
Industrial/Commercial Concerns Having an office or Not having office commercial or commercial establishment in establishment in India India Should be located Should be located outside India. outside India. From the Concerns Office/Establishment outside India.
From the recipient.
3. Other Conditions [Rule 3(2) of Export Rules, 2005]: a. Service is provided from India and used outside India, and b. Payment is received in Convertible Foreign Exchange. Q.NO.2 BRIEFLY EXPLAIN ABOUT IMPORT OF SERVICES. Criteria for decision of Imports based on the location of immovable property: 1. Import [Rule 3(i) of Taxation of Service (Provided from outside India and received in India) Rules, 2006): Taxable service will be considered as import, if a. Nature of Property: Such services are in relation to an immovable property. b. Location of Property: The immovable property is situated in India. 2. Other Conditions (Section 66A): a. Service Provider: General: Service provider has established a business or a fixed place of business outside India; Located in more than one country: Where the service provider has business establishments in more than one country, the establishment directly connected with the provision of service shall be treated as the place, from where the service is provided. b. Service Receiver: Service receiver has his place of business, fixed establishment, Permanent Address or usual place of residence, in India. Criteria based on the performance of service: 1. Import [Rule 3(ii) of Taxation of Services (Provided from outside India and received in India) Rules, 2006]: Taxable service will be considered as import, if such a service is rendered, wholly or partly in India.
rutnu G ,
a. Service Provider:
General: Service provider has established a business or a fixed place of business outside India;
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2. Other Conditions [Section 66A]:
Others (i.e. other than Industrial/Commercial Concerns) Should be located outside India, at the time of receipt of service. From the recipient.
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Located in more than one country: Where the service provider has business establishments in more than one country, the establishment directly connected with the provision of service shall be treated as the place, from where the service is provided. b. Service Receiver: Service receiver has his place of business, fixed establishment, Permanent Address or usual place of residence, in India. Criteria based on the location of recipient: 1. Import: Taxable service shall be treated as import, if it is received by a recipient, located in India, for use in relation to business or commerce.
rutnu G ,
a. Service Provider:
General: Service provider has established a business or a fixed place of business outside India; Located in more than one country: Where the service provider has business establishments in more than one country, the establishment directly connected with the provision of service shall be treated as the place, from where the service is provided. b. Service Receiver: Service receiver has his place of business, fixed establishment, Permanent Address or usual place of residence, in India. c. Usage: Service received by the recipient is in relation to his business or commerce. Q.NO.3. WRITE SHORT NOTES ON REBATE, IN RESPECT OF SERVICE TAX PAID ON EXPORTS, VIDE NOTIFICATION No.11/2005 ST Dt. 19-04-2005. 1. Eligible Exports: Exports made to any country, other than Nepal and Bhutan. 2. Rebatable Amount: Whole of Service Tax and Cess, paid on all taxable services exported. 3. Conditions: a. Export: Services are exported in terms of Rule 3 of Export of Services Rules, 2005. b. Convertible Foreign Exchange: Payment for the taxable services has been received in India in Convertible Foreign Exchange. c. Payment of Tax: Service Tax and Cess (EC and SHEC) should have been paid, on the taxable services exported. d. Minimum Rebate: Minimum amount of Rebate of Duty, Service Tax and Cess admissible must be Rs.500 or more. 4. Procedure for claiming rebate: Aspect Application for rebate Description After the services are exported, the claim of rebate should be filed, in Form ASTR-1, to the jurisdictional AC/DC.
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2. Other Conditions [Section 66A]:
The application should be enclosed with: a. Proof of Payment: Evidence for payment of Service Tax/cess, on taxable services exported, for which the rebate is claimed. Enclosures to application b. Proof of Receipt: Evidence of receipt of payment, against taxable services exported. c. Declaration: Declaration, that the taxable service has been exported in terms of Rule 3 d. Evidence of Export: Documents evidencing the export of taxable services. Rebate AC/DC shall sanction the rebate, either in whole or part, if he is satisfied that the claim is in order.
5. Recovery of rebate: Rebate paid shall be recovered, with interest, u/s 73 and 75 under the following circumstances a. Service Taxes and Cess, rebate of which have been claimed, have not been paid by the service provider, b. Taxable service, rebate for which have been claimed, have not been exported.
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PART 5. GENERAL EXEMPTION FROM SERVICE TAX & SSP

NO. 1. 2. 3. 4. 5. QUESTION Explain the conditions to be satisfied, for availing the basic exemption limit of Rs.10 lakhs (SSP). Explain exemption relating to the services, provided by public authorities, while performing statutory functional duties. What are the alternate rates, of tax in Service Tax, as outlined in the Service Tax Rules? Explain composition scheme for payment of service tax on works contract What are the general exemptions, which are applicable to all services? ABC A C A A C
Q.NO.1. EXPLAIN THE CONDITIONS TO BE SATISFIED FOR AVAILING THE BASIC EXEMPTION LIMIT OF Rs.10 LAKHS (SSP). Exemption for aggregate value up to 10 Lakhs 1. Eligible small service providers: This exemption applies to a small service provider. Small service provider means a service provider, the aggregate value of taxable services rendered by whom, form one or more premises, does not exceed 10 lakhs in the preceding financial year. Aggregate value [Explanation (B), as amended w.e.f. 1-4-2012]: Aggregate Value means i. The sum total of value of taxable services charged in the first consecutive invoices issued or required to be issued, as the case may be, during a financial year
ii. But does not include value charged in invoices issued towards such services which are exempt form whole of service tax leviable thereon under any other notification. 2. Quantum of exemption: A small service provider is entitled to 100% exemption from service tax during the current financial year. Exemption shall be operative only for aggregate value not exceeding 10 lakh in any financial year. If the aggregate value in any financial year exceeds 10 lakhs, then such excess over 10 lakhs shall be chargeable to service tax. However, in relation to taxable service provided by a goods transport agency, the payment received towards the gross amount charged by such goods transport agency for which the person liable for paying service tax is a person other than the goods transport agency, shall not be taken into account. a. Nature of Exemption: i. The exemption benefit is optional, and the service provider can choose not to opt for this exemption.
ii. However, the option once exercised, shall not be withdrawn, during the remaining part of the financial year. b. Conditions as to CENVAT Credit: i. Service provider shall not avail the CENVAT Credit of:
Service Tax paid on any input services, used for providing the taxable service, for the exemption limit.
Duty paid on capital goods received, during the period of exemption. ii. Eligible Credit: The service provider can claim CENVAT credit, only in respect of inputs/input services received after the exemption period (i.e., after the receipts exceeds Rs.10 lakhs, during the financial year). Where capital goods have been received during the previous financial year, the service provider can claim the balance credit in respect of such capital goods (i.e. balance of 50% of CENVAT Credit). c. No Basic Exemption for the following persons: i. Brand / Trade Name Users: Persons using Brand Name / Trade Name of another person cannot avail benefit of threshold exemption in respect of the services provided, under such Brand / Trade name.
ii. Service receivers Paying Tax: Service receivers, who are liable to pay Service Tax in terms of Rule 2(1)(d) cannot avail the benefit of threshold exemption, i.e. Importers of Services, Specified Consignors / Consignees in respect of Goods Transport Agency, etc. Q.NO.2. EXPLAIN EXEMPTION RELATING TO SERVICES, PROVIDED BY PUBLIC AUTHORITIES, WHILE PERFORMING STATUTORY FUNCTIONAL DUTIES. a. Statutory activities: Service Tax shall not be leviable on fee collected by Public authorities, while performing statutory functions / duties, under the provisions of a law. If the authority performs a service, which is not in the nature of statutory activity, and the same is undertaken for a consideration not in the nature of statutory fee / levy, then in such cases, Service Tax would be leviable. b. Reason for not levying Service Tax: i. The activities performed by the Sovereign/ public authorities, under the provision of law, are in the nature of statutory obligations, which are to be fulfilled in accordance with the law.
ii. The fee collected by them, for performing such activities, is in the nature of compulsory levy, as per the provisions of the relevant statute, and it is deposited into Government Treasury. iii. It is in the public interest and undertaken as a mandatory and statutory function. iv. The activities are not in the nature of service to any particular individual, for consideration. c. Examples: i. Verification, approval and calibration of weighing and measuring instruments, undertaken by Regional Reference Standards Laboratories (RRSI),
ii. Fitness Certificate, issued to vehicles, by Regional Transport Officer (RTO), iii. Inspection and Certificate for Boilers, issued by Directorate of Boilers,
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iv. Inspection and Certificates, issued for petroleum storage tank, LPG / CNG storage tank by Explosive Department. Q.NO.3. WHAT ARE THE ALTERNATE RATES OF TAX, IN SERVICE TAX, AS OUTLINED IN THE SERVICE TAX RULES? a. Air Travel Agent: i. Applicability: Air Travel Agent has the option to pay Service Tax (monthly), as stated under, instead of paying Service Tax at the normal rates.
ii. Basic Fare: The commission is payable by the Airlines, on this part of fare. iii. Rate: 0.6% of Basic Fare, in case of Domestic Bookings, and 1.2% of Basic Fare, in case of International Bookings. EC @ 3% on ST is payable. Life insurance business - 3% of gross premium in 1st year and 1.5% in others [Rule 6(7A)]: An insurer carrying on life insurance business shall have the option to pay tax: i. On the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of services ; ii. In all other cases, 3% of the premium charged from policy holder in the 1st year and 1.5% of the premium charged from policy holder in the subsequent years; towards the discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of the Finance Act, 1994. However, such option shall not be available in cases where the entire premium paid by the policy holder is only towards risk cover in life insurance. A. Promotion or marketing, etc. of lottery Optional composite payment: The distributor or selling agent (including distributor or selling agent authorized by the lottery organising state), liable to pay service tax for the taxable service of promotion, marketing, organising or in any other manner assisting in organizing lottery, shall have the option to pay service tax as follows instead of paying service tax at normal rate No. Case If the lottery or lottery scheme is one where the guaranteed prize payout is more than 80% If the lottery or lottery scheme is one where the guaranteed prize payout is less than 80% Service Tax (as amended w.e.f 1-4-2012) 7,000/- on every 10 Lakh (or part of 10 Lakhs) of aggregate face value of lottery tickets printed by the organizing State for a draw 11,000/- on every 10 Lakh (or part of 10 Lakh) of aggregate face value of lottery tickets printed by the organizing State for a draw
2.
Aggregate face value in case of online lottery: In case of online lottery, the aggregate face value of lottery tickets shall be taken as the aggregate value of tickets sold.
Option to be exercised within one month & not with drawable: The distributor or selling agent shall exercise such option within a period of one month of the beginning of each financial year and such option shall not be withdrawn during the remaining part of the financial year. In case of new service provider, the option shall be exercised within one month of providing of taxable service. Exemption to marketers of lottery, if this option availed: The persons marketing the lottery tickets, other than the distributors or selling agents appointed or authorized by the lottery organizing State, shall be exempt from service tax if the optional composition scheme under Rule 6(7C) is availed of by such distributor or selling agent, in respect of such lottery. If no such option has been availed of any distributor or selling agent, this exemption shall not apply to the value of service provided to the distributors or selling agents who have not so opted. [Authors Note: The lottery or other games of chance service is taxable as separate service.] B. Money-changing services provided by a foreign exchange broker Option to discharge service tax at specified percentage of gross amount of currency exchanged [Rule 6(7B) of Service Tax Rules, 1994, AMENDED W.E.F. 1-4-2012] : The person liable to pay service tax in relation to purchase or sale of foreign currency, including money changing, provided by a foreign exchange broker, including an authorized dealer in foreign exchange or an authorized money changer shall have the option to pay an amount calculated at the following rate towards discharge of his service tax liability instead of paying service tax at the rate specified in section 66 a. 0.12% of the gross amount of currency exchanged for an amount upto 1,00,000, subject to the minimum amount of 30; and b. 120 + 0.06% of the gross amount of currency exchanged for an amount of rupees exceeding 1,00,000 and upto 10,00,000; and c. 660 + 0.012% of the gross amount of currency exchanged for an amount of rupees exceeding 10,00,000, subject to maximum amount of 6,000. Option once exercised to apply for that financial year and not to be withdrawn : The person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year. Q.NO.4. EXPLAIN COMPOSITION SCHEME FOR PAYMENT OF SERVICE TAX ON WORKS CONTRACT? Composition Scheme - Option to discharge service tax @ 4.8% of gross amount charged [Works Contract (Composition Scheme for Payment of Service Tax): These rules provide for composite payment of service tax. The person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to 4.8% of the gross amount charged for the works contract.
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Gross amount charged: For this purpose, gross amount charged for the works contract shall a. Include : i. the value of all goods used in or in relation to the execution of the works contract, whether supplied under any other contract for a consideration or otherwise; and
ii. the value of all the services that are required to be provided for the execution of the works contract; b. Exclude : i. The value added tax or sales tax as the case may be paid on transfer of property in goods involved; and
ii. The cost of machinery and tools used in the execution of the said works contract except for the charges for obtaining them on hire. No CENVAT credit on inputs: The Provider of taxable service, opting for this option, shall not take CENVAT credit of duties or cess paid on any inputs, used on or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004. Q.NO.5. WHAT ARE THE GENERAL EXEMPTIONS, WHICH ARE APPLICABLE TO ALL SERVICES? The general exemptions, which are applicable to all services, are summarized as below: Services provided to United Nations, or an International Organization. Services provided to Developer/Units in Special Economic Zones. Exemption for goods and materials, sold by the service provider.
Illustrations
1. An unregistered Service provider provides following details in respect of taxable services provided for the half year ended 30-9-2012. Date 30.6.2012 30.6.2012 31.7.2012 31.8.2012 31.8.2012 Particulars Advance received from customer Part payment received against a bill of Rs. 9,50,000 raised on a customer (bill dated 1-10-2012) Money received against taxable services provided during July 2012 Taxable services rendered during August, 2012 Taxable services provided during August, 2012 Amount 1,00,000 5,00,000 3,00,000 1,00,000 2,00,000
The service tax provider complies with the provisions of registration and collection of service tax as per service tax laws. He gets registered during the year. Compute the service tax liability of service provider for the half year ended 30-09-2012 considering the rate of service tax @ 12.36%.
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Solution: Calculation of service tax liability for the half year ended 30-9-2012 Advance received on 30.6.2012 Part payment received upto 30-9-2012 Money received against taxable services during July 2012 Money received against the bills raised during the months August 2012 Less: Exemption limit Value of services attract the service tax Service tax Liability = 2,00,000 x 12.36% = Rs. 24,720.
2. ABC & Co. raised bills and received the following amounts during half year ended 30-092012: Particulars For services performed prior to the date of levy of service tax (Assume service3 tax was levied from a specified date by change of law) Advance amount received in April 2012 (No service ) For free service rendered to customers, amount reimbursed by the manufacturer or such product (exclusive of service tax) Amounts realized and on which service tax is payable (excluding the items (i) to (ii) above) Rs. 3,50,000
a.
b. c. d.
Calculate the service tax liability duty considering the threshold limit. Note: all the above values inclusive of service tax @ 12.36% Solution: Statement showing service tax liability of ABC & Co. for the half year ended 30-9-12. S.No 1. 2. 3. 4. Particulars For services performed prior to the date of levy of service tax Advance amount received in April 2012 Fee received indirectly Amounts realized Total Less: Threshold limit Taxable services Service tax liability Value Rs. 75,000 50,000 14,26,500 15,51,500 10,00,000 5,51,500 60,667 Workings Non taxable service Taxable services Taxable Services Taxable services
= = = = = = = Rs. 1,00,000 5,00,000 3,00,000 3,00,000 12,00,000 10,00,000 2,00,000 75,000 50,000 14,26,500 5,51,500 12.36/112.36 x
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PART 6. GENERAL PROCEDURES

NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. QUESTION Explain the procedure for Registration of Service Tax. What is Service Tax Code number (STC)? Who is liable for Registration? What are the documents to be enclosed with, for Registration? Explain the circumstances that call for multiple registrations. What are the procedures to be followed in case of changes in existing certification of registration? Explain the procedure for surrender of Registration of Certificate. What are the due dates for the payment of Service Tax? What is the liability of a service provider, in case of excess collection of tax? Explain the Service Tax (Provisional Attachment of Property) Rules, 2008. An assessee has paid Service Tax in excess of his liability. Advise him, of the provisions in this regard. Write short notes on e-payment of Service Tax. Can Service Tax be paid in advance? What do you mean by e-filing of returns? Is there any facility of e-filing of Service Tax Returns? If yes, then which of the services are eligible for this facility? Write short notes on (a) person, (b) business entity, (c) taxable service, (d) service provider, (e) service receiver. What is the time limit for the issue of an invoice? What are the documents to be attached with, along with the return? Explain the procedure for filing Service Tax Returns. Explain the penal provisions relating to delayed furnishing of Service Tax Returns. [sec.70 and rule 7c]. Briefly explain Service Tax Return Preparers scheme. ABC A B A A B B B A C C C A B B C B B A A C
15. 16. 17. 18. 19. 20.
Single / Multiple Service Registration

Registration
Single Service
Multiple Service One premises Multiple premises Independent Accounting & Billing
One premises
Multiple premises
Centralized Accounting & Billing
Independent Accounting & Billing
Single Brand Name
Multiple Brand Name
Centralized Accounting & Billing
Single Registration
Centralized Registration
Independent Registration
Single Registration
Multiple Registration
Centralized Registration
Independent Registration
Q.NO.1. EXPLAIN THE PROCEDURE FOR REGISTRATION OF SERVICE TAX 1. Form: The application should be submitted in form No. ST-1 2. Time Limit: Within 30 days, from the date on which
3. Submission: The application should be submitted to the Superintendent of Central Excise or such other person, notified by the Central Government having his jurisdiction over the place of business of the service provider. 4. Documents to be enclosed: a. Proof of address. b. Copy of Permanent Account Number (PAN) card or PAN Allotment Letter. c. Articles of Association and Memorandum of Association (for companies). d. Copy of partnership deed (for partnership firms). e. In case of professionals, like CAs, CS, etc., who are members of professional institutes and have been granted a Certificate of Practice (COP), a copy of such certificate may also be attached. f. Extract of Board resolution, authorizing any of the directors / employees of the company to sign, deal and comply with Service Tax provisions.
g. Residential address of the proprietor/partners. h. Name and address of the Authorized Signatory. 5. Certificate of registration: a. The Jurisdictional Superintendent of Central Excise, after due verification of the application, will issue the certificate of registration, in form ST-2, within 7 days from the date of receipt of application. b. If the registration certificate is not granted within 7 days, the registration applied shall be deemed to have been granted. c. Where the application for registration, submitted by the assessee, contains more than one taxable service, the Certificate of Registration shall also indicate of all taxable services, provided by him. 6. Penalty: a. Rs.200 per day of default (or) Rs. 10,000, whichever is higher. (Rs.5,000 before April 8th, 2011) b. No penalty will be leviable if the assessee proves that there was reasonable cause for such a failure.
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Service tax is levied whichever is later or Business is commenced

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Q.NO.2. WHAT IS SERVICE TAX CODE NUMBER (STC)?
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1. STC is a 15 digit alpha-numeric code, obtained by the service provider, on an application made to the Jurisdictional Superintendent of the Central Excise. 2. It is a combination of: Particulars Permanent Account Number (PAN) Alpha-code (ST) Premises code Numeric Example: AABCC5588K-ST-001. 3. STC will be allotted within 3 working days, from the date of application, in the prescribed format, by the Assistant Commissioner / Deputy Commissioner. 4. It is mandatory to quote the STC number, on all documents relating to Service Tax. 5. In respect of e-filing of Service Tax Returns, STC is referred to as STP code, without which, e-filing is not possible. Q.NO.3. WHO IS LIABLE FOR REGISTRATION? Registration: Persons, who are liable to pay Service Tax, are required to register with the Central Excise Department. These persons of: 1. Service provider. 2. Specified Persons [Rule 2(1)(d)]: In the following cases, the specified person (and not the service provider) is liable to pay Service Tax. Category of Service No. of Digits 10 2 3
a. General Insurance Business. b. Insurance Auxiliary Service, provided Insurance Company by an Insurance Agent. c. Service provided by a Goods Person Liable: Specified Consignor/ Transport Agency, for transport of Consignee who pays or is liable to pay goods by road. freight, should pay the Service Tax.
Specified Person Insurer of Re-insurer
Specified consignor or consignee includes (i) Factory; (ii) Company; (iii) Corporation, (iv) Society; (v) Co-operative Society; (vi) Registered Dealer of Excisable Goods; (vii) Body Corporate;
d. Business Auxiliary Services, provided by Mutual Fund Distributors, in relation to distribution of Mutual Fund.
(viii) Partnership Firm. Service Tax should be paid by the Mutual Fund or the Asset Management Company, receiving such services.
e. Sponsorship Service provided to any Service Tax is to be paid Corporate or Firm, which Body Corporate or Firm. sponsorship service. f. Any taxable service provided by any Person receiving such person, from a country other than accordance with Taxation (provided from outside India India U/s 66A. in India)] Rules, 2006.
3. Persons notified by the Central Government Special Category Persons: a. Input Service Distributor: i. Office: Input Service distributor refers to an office of the
Manufacturer, or Producer of final products, or Provider of output service.
ii. Invoice: Which receives tax paid invoices (under Rule 4A of Service Tax Rules, 1994), towards the purchases of input services and issues invoice, bill or challan. iii. Purpose: For distributing the credit of Service Tax paid, on the said services, to such a manufacturer or producer or provider. b. Aggregate value of taxable services exceeds Rs.9 Lakhs:
Every person, liable to pay Service Tax shall apply for registration, in Form ST-1
within 30 days from the levy of tax. Normally, the applicant will be the service provider.
However, in exceptional cases, the service receiver with tax liability shall also
register himself.
Registration Certificate (RC) is issued in Form ST-2, within seven days. For all the
services provided by a person a single RC will do.

A separate RC is required for every place of business. However, the service
provider may opt for a single RC, if he follows centralized billing or centralized accounting, and wishes to remit the tax centrally. Q.NO.4. WHAT ARE THE DOCUMENTS TO BE ENCLOSED WITH, FOR REGISTRATION? An application for registration has to be enclosed with, along with the following documents: 1. Application in Form ST-1, in triplicate, duly signed. 2. Attested Copy of the PAN Card. 3. Proof of Address of the premises, which is required to be registered. 4. Copy of the document, governing the constitution of the organization (Partnership Deed in case of a partnership firm, Memorandum of Association in case of a company & Trust Deed in case of a trusts or associations). 5. Authority Letters, in favour of the person who is to collect the registration certificate, on the Letter head of the organization applying for the registration. 6. Power of Attorney in case the documents are signed by an authorized representative.
by the Body receives the service [in of Services and received
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Q.NO.5. EXPLAIN THE CIRCUMSTANCES THAT CALL FOR MULTIPLE REGISTRATIONS. 1. Multiple Proprietorship Firms, under different names: The applicant shall register individually, for each of such Proprietary Firm. 2. Multiple services: a. Commencement of services at the same time: The applicant, may mention, all the taxable services provided by him, in a single application. b. Commencement of services at different points of time: If the applicant has already registered for one service, but subsequently becomes liable for another category of service, then he should get his certificate endorsed for that category of service also. 3. Multiple Premises: a. Independent Billing and Accounting: Where taxable services are provided from more than one premises and, billing and accounting are done independently from each of such premises, separate application for registration is to be made in respect of each such premises or office. Certificate issuing authority shall be Jurisdictional Superintendent of Central Excise of the location where such premises are located. b. Centralised Billing and Accounting: Assessee can opt for registering only the premises or office from where such Centralised Billing is done or such Centralised Accounting Systems are located. Certificate issuing authority shall be Commissioner of Central Excise in whose jurisdiction the premises or offices from where centralised billing and accounting is done are located. The Commissioner of Central Excise granting Centralised Registration, shall send a copy of Form ST -2 (Centralised Registration) to all Commissioners in whose jurisdiction the Associated Premises are located. 4. Changes in Existing Certification of Registration: a. Change in information, provided in ST-1: Intimated in writing to the jurisdictional Assistant Commissioner within a period of 30 days of such a change. b. Change of place: A new Registration Certificate should be applied for, and the previous Registration Certificate should be cancelled. c. Transfer of business: Where the assessee transfers his business to another person, the transferee should obtain a fresh Certificate of Registration. Q.NO.6. WHAT ARE THE PROCEDURES TO BE FOLLOWED IN CASE OF CHANGES IN EXISTING CERTIFICATION OF REGISTRATION? 1. Intimation to Authorities: Additions or changes made to the information provided in Form ST -1 should be intimated in writing to the Jurisdictional Assistant Commissioner within a period of 30 days of such change in the following cases:
a. Change in line of taxable service, b. Change in Constitution of the Organisation, and
c. Change in Place of business within the Jurisdictional Area. 2. Multiple Services: a. If an assessee providing multiple taxable services under single registration has opted to discontinue any one or more of such taxable services, then he should bring such cessation to the notice of the concerned Superintendent of Central Excise. b. The Superintendent of Central Excise will make an endorsement to that effect on the Certificate of Registration. Q.NO.7. EXPLAIN THE PROCEDURE FOR SURRENDER OF REGISTRATION OF CERTIFICATE. a. Circumstances:
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b. Procedure for Surrender of Certification of Registration:

The assessee should surrender the Service Tax Registration Certificate (ST-2). Superintendent of Central Excise will cancel the Registration Certificate, after ensuring
that the assessee has paid all Service Tax dues to the Government, under the provisions of the Act. c. Non surrender of certificate:
There is no statutory requirement for the assessee to make an application for the
surrender of certificate.
Non-surrender of certificate does not attract any penalty. However, the assessee should furnish half yearly returns, even if no service is provided.
Q.NO.8. WHAT ARE THE DUE DATES FOR PAYMENT OF SERVICE TAX? 1. Service Tax is to be paid on a monthly / quarterly basis, depending upon the status of the service provider. Mode of Payment Status of Service Provider Last date for making Payment of Service Tax 6th day of the month immediately following the calendar month in which the service is deemed to have been provided as per POTR, 2011. However, for the month of March, Service Tax has to be deposited by 31st March.
Electronically through internet banking i.e. online Payment
Any person other than an individual or proprietary firm or partnership firm
Cessation of services,
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Any person other than an individual or proprietary firm or partnership firm or partnership firm
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5th day of the month immediately following the calendar month in which the service is deemed to have been provided as per POTR, 2011. However, for the month of March, Service Tax has to be deposited by 31st March. 6th day of the month immediately following the quarter in which the service is deemed to have been provided as per POTR, 2011. However, for the month of March, Service Tax has to be deposited by 31st March. 5th day of the month immediately following the quarter in which the service is deemed to have been provided. However, for the month of March, Service Tax has to be deposited by 31st March.
Any mode other than internet banking
Electronically through internet banking i.e. online payment
An individual or proprietary firm or partnership firm
Any mode other internet banking
An individual or proprietary firm or partnership firm
2. Big assesses, with a Service Tax liability of Rs.10 lakhs and above, should pay tax electronically. For electronic payment, Service Tax Reg.No. is mandatory. 3. If the last date for paying tax is a public holiday, tax may be paid on the next working day. 4. Tax is paid by debit, to CENVAT account (if credit available) or through GAR 7 challan. 5. The date of presentation of cheque to the designated bank shall be deemed to be the date of payment of Service Tax (But the cheque should not be dishonoured). 6. Rounding off of tax: The payment of Service Tax should be round off, in multiple of rupees. Where such amount includes 50 paise or more, it should be increased to one rupee and if it is less than 50 paise it should be ignored. Q.NO.9. WHAT IS THE LIABILITY OF A SERVICE PROVIDER, IN CASE OF EXCESS COLLECTION OF TAX? Excess collection of tax Sec. 73A & 73B: 1. The service provider shall not collect tax in excess of what he pays to the Government. 2. In case his collection is more than his payment, he shall promptly deposit the excess with the Government or refund the amount collected in excess to the customer. 3. Any delay in this regard attracts payment of interest @ 18% p.a.
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Q.NO.10. EXPLAIN THE SERVICE TAX (PROVISIONAL ATTACHMENT OF PROPERTY) RULES, 2008. These rules, introduced by Notification No.30/2008 ST dated 01.07.2008, with effect from 01.07.2008, provides as follows: a. The Assistant or the Deputy Commissioner of Central Excise, after due verification of the facts and circumstances of the case, may forward a proposal for provisional attachment of property belonging to a person, on whom a notice has been served under Section 73(1)/73A(3) of the Act, to the Commissioner, in the format prescribed in these Rules. b. The Commissioner may serve a show cause notice on such person who can make a submission, in this regard, within 15 days of service of the notice. c. Upon consideration of submission, the Commissioner may pass an order, to attach the property, provisionally. d. Value of property attached shall be of value, as nearly as, may be equivalent to that of the amount of pending revenue, against such person. e. The movable property of such person shall be attached, only if, the immovable property available for attachment is not sufficient to protect the interest of revenue. f. The said person or his representative shall not mortgage, lease, transfer, deliver or deal with the attached property, in any manner except with the previous approval of the Commissioner of Central Excise.
g. Every such provisional attachment shall cease to have its effect, after the expiry of a period of six months from the date of the service of the order passed. h. However, the Chief Commissioner of Central Excise may grant an extension, for a maximum period of two years. Q.NO.11. AN ASSESSEE HAS PAID SERVICE TAX IN EXCESS OF HIS LIABILITY. ADVISE HIM, OF THE PROVISIONS IN THIS REGARD. Adjustment of excess payment of service tax: Where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month/ quarter, The assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month / quarter, Subject to the condition that the excess amount paid is on account of reasons n not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification.
a. Renting of Immovable Property [Rule 6(C)]: i.

Applicability: Property owner paying Property Taxes, levied by the Local Authority.
Property Tax is paid, after the payment of Service Tax on the rental.
ii. Situation:
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Property Tax so paid, could not be deducted from rental, at the time of the payment of Service Tax (due to conditions in Notification 24 / 2007 dt. 22.5.2007, i.e. the Actual payment of Property Tax), and consequently excess Service Tax has been paid.
iii. Adjustment: Service Tax paid in excess, due to the payment of Property Tax after the payment of Service Tax can be adjusted in the following manner: Time Limit: Within 1 Year, from the date of payment of Property Tax. Monetary Limit: No limit has been set. Intimation: Details of adjustment should be intimated to the Jurisdictional Superintendent of Central Excise, within 15 days of such an adjustment.
Q.NO.12. WRITE SHORT NOTES ON E-PAYMENT OF SERVICE TAX. WHAT IS THE DUE DATE FOR PAYMENT, IN CASE OF E-PAYMENT OF SERVICE TAX? E Payment
Service Tax Liability Aggregate ST Liability Rs.10,00,000 In Previous Financial Year
Multiple Premises Aggregate ST Liability Rs.10,00,000 for Centralized Registration Aggregate ST Liability Rs.10,00,000 for Independent Registration
In the current financial year, e-payment of Service Tax is mandatory for all months. a. Nature: Mandatory.
Will not apply for each premises.
Will apply for each Independent Registration
b. Name: The System is called Electronic Accounting System in Central Excise and Service Tax (EASIEST). c. Applicability: Assessees, who have paid a Service Tax of Rs.10 lakhs or more during the preceding financial year. d. Due Date: Individuals / Proprietary Firm / Partnership Firm Other persons e. Qualifying Amount: i. Many Registered Premises: Rs. 10 lakhs would apply to each of the premises individually, if each such premises is separately registered for payment of Service Tax. 6th of the month, following the quarter of collection. In case of quarter ending in March, the tax should be paid on or before 31st March itself. 6th of the month, following the month of collection. In case of month ending in March, the tax should be paid on or before 31st March itself.
ii. Service Recipient paying Service Tax: The limit of Rs. 10 Lakhs includes Service Tax paid under Rule 2(1)(d), i.e. tax borne by the service recipients on taxable services, received by him. iii. Large Taxpayer Units: Cumulative Service Tax, paid by all registered premises of such large taxpayer, will be taken into account for the criterion of payment of Service Tax amount of Rs. 10 Lakhs. iv. Amount paid by CENVAT: Rs.10 lakhs limit includes total of Service Tax paid, i.e. by cash and by way of CENVAT Credit. v. Penalty: Upto Rs. 10,000. (Rs.5,000 before April 8th, 2011) Q. NO. 13. CAN SERVICE TAX BE PAID IN ADVANCE? IF SO, WHAT ARE THE INCIDENTAL CONDITION TO BE FULFILLED? (OR) HI-TECH Ltd. IS PROVIDING BUSINESS AUXILIARY SERVICES. IT HAS MADE AN ADVANCE PAYMENT OF SERVICE TAX, DURING THE MONTH OF JANUARY 2011 ON ITS OWN AND WANTS TO ADJUST THE SAME IN THE SUBSEQUENT PERIOD. THE COMPANY HAS APPOINTED YOU AS A CONSULTANT TO KNOW WHETHER IT CAN BE DONE SO. GIVE YOUR OPINION. a. Advance Tax: Every person, liable to pay Service Tax, can pay an amount as Service Tax in advance, to the credit of the Central Government. b. Adjustment on Accrual Basis: The assessee can adjust the advance Service Tax against the Service Tax liability, in the subsequent period, subject to the following conditionsi. Intimation: Assessee intimates the fact of such an advance payment of Service Tax to the Jurisdictional Superintendent of Central Excise within 15 days of the payment.
ii. Disclosure in Return: Indicate the details of advance payment and its adjustment (if any) in the subsequent return filed u/s 70. c. Nature of Payment: Optional. Q.NO.14. WHAT DO YOU MEAN BY e-FILING OF RETURNS? IS THERE ANY FACILITY OF e-FILING OF SERVICE TAX RETURNS? IF YES, THEN WHICH OF THE SERVICES ARE ELIGIBLE FOR THIS FACILITY? a. e-Filing is a facility for the electronic filing of Service Tax Returns by the assessee, through the Internet, by using a computer. b. The facility for e-filing of returns is ACES Automation of Central Excise and Service Tax. c. All services are eligible for e-filing of returns, subject to the general conditions listed. d. W.e.f. 1st October 2011 every Assessee shall subject the Half Yearly return electronically. Q.NO.15.WRITE SHORT NOTES ON (A) PERSON, (B) BUSINESS ENTITY, (C) TAXABLE SERVICE, (D) SERVICE PROVIDER & (E) SERVICE RECEIVER a. Person: Person includes both natural and artificial persons, i.e. Hindu Undivided Family (HUF), Firms, Companies, Corporations, Trusts, Institutions, Societies & Associations (incorporated or otherwise).
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b. Business Entity (w.e.f. 01.07.2010): Business Entity includes an Association of Persons, Body of Individuals, Company or Firm but does not include an individual. c. Taxable Service: Taxable Service means any service, provided or to be provided d. Service Provider:
Meaning: Service Provider is one who provides taxable service, as defined U/s 65(105)
and is generally liable to pay tax.

Exceptions: In the following cases, service receiver is liable to pay tax (i) General
Insurance, (ii) Services like Goods Transport Agency, (iii) Insurance Auxiliary Service, (iv) Sponsorship Services, (v) Asset Management Company or Mutual Fund Services etc. (vi) Import of Services
Constitution: In Service Tax Law, the constitution of the service provider can be (i)
Any Person, (ii) Commercial Concerns, (iii) Agency, (iv) Establishment, etc. e. Service receiver:
Meaning: Service receiver is the person, who receives or avails the service, provided
by the service provider. In some cases, the service receiver is liable to pay tax, and not the service provider.
Inclusions: Service receiver has not been defined under Service Tax Law and is
referred to as (i) Any person, (ii) Policyholder, (iii) Subscriber, (iv) Exhibitor, (v) Franchisee, etc.
Returns
Q.NO.8. EXPLAIN THE PROCEDURE FOR ISSUANCE OF BILL / INVOICE / CHALLAN? The provisions of Rule 4A and Rule 4B of the Service Tax Rules, 1994 for issuance of bill / invoice / challan are as follows 1. Invoice to be issued mandatorily: Every person providing taxable service shall issue and invoice /bill / challan signed by such person or a person or a person authorized by him in respect of such taxable service provided or to be provided. 2. Time limit for issue of invoice/bill/challan [as amended w.e.f. 1-4-2012] : The invoice / bill / challan shall be issued not later than 30 days** from the date of Completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier. Continuous supply of service 30 days to be reckoned from each event obliging payment: In case of continuous supply of service, every person providing such taxable service shall issue an invoice, bill or challan within 30 days** of the date when each event specified in the contract, which requires the service receiver to make any payment of service provider, is completed. [Note: Continuous supply of service of service is already defined in Rule 2(c) of Point of Taxation Rules, 2011.]
3. Contents : Such invoice / bill / challan shall be serially numbered and shall contain the following a. The name, address and the registration number of such person; b. The name and address of the person receiving taxable service; c. Description, classification and value of taxable service provided or to be provided; and d. the service tax payable thereon. **In case of banking and other financial services Time limit of 45 days : The time limit for issue of invoice shall be 45 days instead of 30 days as aforesaid. The invoice / bill / challan may not be serially numbered and may not contain the address of the person receiving taxable service, but, must contain other information as specified above. 4. Option not to issue invoice on receipt of advance of upto 1,000 [W.e.f. 1-4-2012]: Wherever a. The provider of taxable service receives an amount upto 1,000 in excess of the amount indicated in the invoice, and b. The provider of taxable service has opted to determine the point of taxation based on the option as given in Point of Taxation Rules, 2011 (i.e. POT under Rule 3(a) of the POT Rules), No invoice is required to be issued to such extent. Thus, in this case, the invoice is not required to be issued on receipt of advance, but, the invoice shall be required to be issued within 30 days (or 45 days) from the date of completion of service. Q.NO.17. WHAT ARE THE DOCUMENTS TO BE ATTACHED ALONG WITH THE RETURN? The following documents are to be attached, along with ST-3: 1. Copies of GAR-7 challans, for the payments made. 2. Memorandum ST-3A, incase of provisional payment of tax. 3. In case of first return, the details of accounts maintained, in relation to Service Tax should be furnished to Superintendent of Central Excise, at the time of filing the first half yearly return i.e., ST-3, a list of all accounts maintained by him, in relation to Service Tax including the memorandum received from his branch office. Q.NO.18. EXPLAIN THE PROCEDURE FOR FILING SERVICE TAX RETURNS. Periodicity Nature Applicability Half yearly Mandatory. Return to be filed, even if Service Tax Collection is NIL or no service is rendered, in a particular period The persons liable to pay Service Tax to the Government are liable to file Service Tax Return. They are
a. Service provider, i.e. person providing taxable services. b. Specific persons under Rule 2(1)(d) of Service Tax Rules, 1994.
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Due Date
MASTER MINDS
a. 25th October for Half Year ending 30th September b. 25th April for Half Year ending 31st March. If due date is a Public Holiday then the next working day will be the due date.
ST 3 (in Triplicate), indicating month/ quarter wise details for each of the taxable service rendered along with copies of relevant challans. Only one return for all the services. However, details of each taxable service should be shown separately Month wise details of:
Form Many Services
Details to be disclosed
a. Amount received, towards the taxable value b. Amount received, in advance, towards taxable service to be provided c. Amount billed for exempted services and services exported, without the payment of tax d. Amount billed for services on which tax is to be paid e. Abatement claimed value f. Notification number of abatement and exemption g. Service Tax payable h. Education Cess payable i. GAR-7 challan, date and number j. Credit details for Service Tax provider/recipient a. GAR-7 Challans i.e. Proof of payment of Service Tax. b. Memorandum in form ST - 3A in case of provisional assessment.
At the time of filing the 1st Return every assessee should furnish a list of the following:
Enclosures
a. Records prepared / maintained for Provision of services (both taxable and not taxable)
Receipt or procurement of input services First Return Payment for such input services Receipt, purchase, manufacture, storage, etc. of inputs and capital goods Records for other activities such as manufacture and sale of goods.
b. Other Financial records.

Nil Return Revised Return [Rule 7B] Even if no service has been provided during a half-year, and no Service Tax is payable; the assessee has to file a NIL return within the prescribed time limit. An assessee can file a revised return-
a. Time Limit: Within 90 days from the date of filing the original return. b. Reason: To rectify mistakes, if any, in the original return.
Q.NO.19. EXPLAIN THE PENAL PROVISIONS RELATING TO DELAYED FURNISHING OF SERVICE TAX RETURNS. [SEC.70 AND RULE 7C] The penalty for delayed filing of returns is based on the period of delay Period of delay from the prescribed date for furnishing the returns 15 days Beyond 15 days and within 30 days Amount of Penalty Rs. 500 Rs. 1,000 Rs. 1000 + Rs. 100 for every day from 31st day, Or Rs. 20,000 whichever is LOWER. (Rs.2,000 before April 8th, 2011)
Beyond 30 days
Note: CEO empowered to reduce or waive penalty (late fees) for delay in filing return where gross amount of Service Tax is NIL. Q.NO.20. BRIEFLY EXPLAIN SERVICE TAX RETURN PREPARERS SCHEME? a. Definitions:
Service Tax Return Preparer: It refers to an individual, who has been authorized to act
as a Service Tax Return Preparer, under a scheme framed under this section.
Specified Classes of persons: It refers to persons specified in the scheme, who are
required to furnish a return, required to be filed under Section 70. b. Power of Board: The CBEC is empowered to frame a scheme, for furnishing return of income, by any specified classes, through a Service Tax Return Preparer. c. Duty of Service Tax Return Preparer: Every Service Tax Return Preparer should assist the specified classes of persons, to prepare and furnish the Service Tax Return, in the manner specified in the scheme. d. Structure of the Scheme: The scheme, framed by the Board, may provide for the following
Manner, in which and the period for which the Service Tax Return Preparer shall be
authorized,
Educational and other qualifications to be possessed, and the training and other
conditions required to be fulfilled, by a person, to act as a Service Tax Return Preparer,

Code of Conduct, for the Service Tax Return Preparer, Duties and Obligations of the Service Tax Return Preparer, Circumstances, under which the authorization given to a Service Tax Return Preparer
may be withdrawn,
Any other matter, which is required to be specified by the Scheme for the purposes of
this section
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No.1 for CA/CWA & MEC/CEC Illustrations
MASTER MINDS
1. Determination of Service Tax Liability: J.C Professionals, a partnership firm, gives the following particulars relating to the services provided to various clients by them, for the half year ended on 30.09.2011: a. Total bills raised are for Rs. 8,75,000, out of which a bill of Rs. 75,000 was raised on an approved International Organization, and payments of bills for Rs.1,00,000 were not received till 30.09.11. b. An amount of Rs.50,000 was received as an advance from XYZ Ltd., on 25.09.11 to whom the services were to be provided in October, 2011. You are required to work out the (a) Taxable value of services (b) Amount of Service Tax payable. Solution: Computation of Taxable Value of Service and Tax Payable thereon Particulars Total value of bills raised Less: Amount raised on approved International Organization [exempt] Add: Amount of advance received from XYZ Ltd. (See Note) Total Taxable Value Tax Payable on above Service Tax @ 12% Add: Education Cess @ 2% Add: SHEC @ 1% Total Tax Payable 1,02,000 2040 1020 1,05,060 Rs. 75,000 75,000 8,00,000 50,000 8,50,000 Rs. 8,75,000
Note: It is assumed that invoice is raised within 14 days from the date of receipt of the amount i.e. before 8th October, 2011. 2. Mr. Bharat is a registered service provider. He transfers his business to Mr. Rakesh on 31st July, 2011. Explain the requirement to be complied with, by Mr. Bharat and Mr. Rakesh on such a transfer under the provisions of Service Tax. Solution: a. Bharats Duty: Where the assessee transfers his business to another person, he should surrender the Certificate (if he does not provide any other taxable service). In the given case, Mr. Bharat should surrender the Certificate of Registration. b. Rakeshs Duty: Mr. Rakesh, to whom the business is being transferred, has to apply for registration. In the given case, the business is transferred on 31st July, 2011. Assuming that Mr. Rakesh commences the newly acquired business on the same date, he should apply for registration before 30th August, 2011.
3. Y & Co. seeks your advise, for the following, in the context of Service Tax:
It wants to file revised Service Tax Return even though the original return was filed belatedly. Solution: Filing of revised Service Tax Return: Service Tax Return can be revised within 90 days, from the date of filing of the original return. This rule is applicable, even if the original return was submitted belatedly. 4. Suyogya Consultancy Services (SCS) is engaged in providing Management Consultancy Service during the financial year 2011-12. Examine, whether SCS shall be liable to pay the late fee for delay in furnishing the return for the half yearly period ending 30th September 2011 in the following cases: a. It files its return of Service Tax on 26th October, 2011 (25th October was declared as a public holiday) b. It files its return on 15th November 2011. Solution: Due Date for half yearly period ending 30th September, 2011 is 25th October, 2011. Date of filing return
th
Reason Since October 25 is a public holiday, the assessee can file the return on the next immediately succeeding working day i.e., October 26th, 2011 Period of delay is 21 days (26th Oct to 15th Nov 2011)
Oct 26, 2011 Nov 15, 2011
5. Peter is running a sound recording studio and has obtained registration for the purpose of payment of Service Tax. He proposes to transfer his entire business to Akash. It is necessary for Akash to obtain a fresh Certificate of registration. Due reason to your answer. Solution:
a. Change in information provided in ST-1. Additions are changes made to the information provided in form ST-1 should be intimated in writing to the Jurisdictional Assistant Commissioner with in a period of 30 days of such change. b. Multiple Services:
If an assessee providing multiple taxable services under single registration has opted to discontinue any one or more of such taxable services, then he should bring such cessation to the notice of the concerned Superintendent of Central Excise. The Superintendent of Central Excise will make an endorsement to that effect on the Certificate of Registration.
Late Fee No Late Fee Rs.1,000
rutnu G ,
SDNIM RETSAM oT
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No.1 for CA/CWA & MEC/CEC Self Test Questions
MASTER MINDS
1. Discuss, whether the following persons are liable for registration, under Service Tax. If yes, when is the registration required? a. A provider of taxable services, whose aggregate value of taxable services is Rs. 8,00,000 up to December 31st, 2011. b. An input service distributor who starts his business on January 1st, 2012. c. A provider of taxable services, under a brand, which is not yet registered, provided services of Rs.8,00,000, up to January 31st, 2012. 2. Briefly explain the provisions in the Service Tax Rules, 1994 relating to furnishing of list of records at the time of filing of records and at the time of filing of return for the first time. 3. Briefly explain the following, with references to the Service Tax Rules, 1994, and the Finance Act, 1994:
a. Gross amount charged b. e-payment of Service Tax.
4. State briefly, whether the persons are liable to apply for registration, under the Finance Act, 1994, and Service Tax (Registration of Special Category of Persons) Rules, 2005, and if so, from which date: a. An input service distributor, who starts his business, with effect from 1st January, 2011 b. A provider of taxable service, under an unregistered brand name of another person.
Aggregate value of taxable services was Rs. 6,00,000 upto 31.3.2011.
5. When could an assessee surrender his Certificate of Registration under Service Tax Law? 6. What is the due date for monthly / quarterly payment of Service Tax? 7. What do you understand by Centralised Registration? 8. Answer the following, with reference to the Finance Act, 1994, and the Rules made there under, relating to Service Tax: Intimation regarding change in details, furnished by an assessee, in Form ST-1. 9. Calculate the value of taxable service of X Transport Company, engaged in the business of transport of goods by road. Give reasons for taxability or exemption of each item. No freight is received from any of the specified category of Consignor/Consignee. Suitable assumptions may be made, wherever required. X does not avail CENVAT credit:
a. Total freight charges received by X, during the year b. Freight charges received for transporting fruits Rs.13,50,000 Rs.1,25,000
c. Freight collected for transporting small consignment for persons, who paid less than Rs. 750 for each such consignment Rs. 75,000 d. Freight collected for transporting goods in small vehicles for persons, who paid less than Rs. 1,500 per trip. Rs.1,50,000
10. With references to the Finance Act, 1994, as amended and the rules made there under, relating to Service Tax, state whether registration is required or not, in the case of the following persons or class of persons: a. Input service distributor. b. Small service provider whose aggregate value of taxable service is Rs. 3,50,000 per annum. c. Indian based recipient of taxable services, provided from abroad, by a non-resident not having any place of business in India. 11. An assessee, who has collected Service Tax from a client, is unable to perform the service. Briefly explain the situations in which and the conditions subject to which, he can adjust the Service Tax relating to above, against his forthcoming Service Tax liability.
Hint: Adjustment against excess Service Tax paid.
rutnu G ,
SDNIM RETSAM oT
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MASTER MINDS
PART 7. ASSESSMENT
NO. 1. 2. 3. 4. 5. 6. 7. 8. QUESTION Write short notes on self assessment. What are the conditions for provisional assessment? Discuss the provisions as to show cause notice (sec.73). Write short notes on deposit of excess duty / tax collected. Write short notes on interest on amounts collected in excess of duty (sec. 73B). Write short notes on the payment of the interest on duty demanded. Write short notes on penalty for the failure to pay tax (sec.76). Write short notes on the levy of penalty for suppression. ABC B A A B C C B B
Q.No.1. WRITE SHORT NOTES ON SELF ASSESSMENT. 1. Applicability: All Assessees. 2. Assessment: Assessee should assess the tax due, on the services provided by him. 3. Form: The half-yearly return, in Form ST-3, is both a return and a self assessment form. 4. Submission: The return should be furnished to the Superintendent of the Central Excise in the prescribed manner (i.e. in Form ST 3, before 25th April or 25th October, as the case may be). Q.No.2. WHAT ARE THE CONDITIONS FOR PROVISIONAL ASSESSMENT? 1. Circumstance for Provisional Assessment: Provisional Assessment is made, when a. Situation: The assessee is not in a position to correctly calculate the tax payable for the month or quarter b. Time: on the date of deposit of tax. 2. Condition:
a. Request to AC / DC: The assessee should make a request to the jurisdictional AC / DC, for making provisional assessment. b. Reasons: Request should be supported by reasons, for payment of Service Tax, on provisional basis. c. Granting of Permission: AC / DC, on receipt of such request, may allow payment of Service Tax on provisional basis. He shall specify the value to be considered, for provisional assessment. 3. Filing of Memorandum: a. Memorandum: The assessee, who has opted for provisional assessment, has to file a memorandum in Form ST-3A along with the half yearly return in Form ST-3.
SDNIM RETSAM oT
b. Contents of Memorandum: ST-3A provides the details of the difference between the Service Tax deposited and Service Tax liable to be paid for each month or quarter. c. Calling for Documents: AC / DC can call for documents etc., to verify the details of Form ST-3A. d. Order of Assessment: AC / DC shall pass the final assessment order, within 6 months from the date of communication of provisional assessment. 4. Tax Payable / Refundable on Final Assessment: a. Order of Assessment: The Final Assessment Order may Require the assessee to pay Service Tax in addition or Entitle him to refund of excess tax paid, if any, any
b. Interest on Tax Payable:

Situation: Additional Service Tax payable on final payment. Rate of Interest: @18% p.a Amount on which payable: Additional Service Tax payable. Period of Interest: From the first day of the month, succeeding the month for which
such amount is determined, till the date of payment there of. c. Interest on Tax Refundable:
Situation: Assessee is entitled for refund, as per final assessment order. Rate of Interest: @ 6% p.a. Amount on which interest determined: Amount of refund due. Period of Interest: From the first day of the month, succeeding the month for which
refund is determined, till the date of refund. Q.NO.3. DISCUSS THE PROVISIONS AS TO SHOW CAUSE NOTICE (SEC.73). 1. Where any Service Tax has not been levied or paid, or has been short levied or short paid or erroneously refunded, then the Central Excise Officer can issue a show cause notice, requiring, as to why the person should not pay the amounts specified in the notice. 2. The show cause notice can be issued, even if the non-levy etc. was on the basis of any approval, acceptance or assessment, relating to rate of the Tax or valuation. 3. The show cause notice has to be issued within one year from the relevant date. 4. Where the tax has not been levied or paid or short levied or short paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement, suppression of facts, or contravention of any of the provisions of the Act or Rules made there under, with an intention to evade payment of tax, the show cause notice can be issued, within five years from the relevant date. 5. Where the service of the show cause notice is stayed by an order of a court, the, period of stay shall be excluded, while computing the limitation period. 6. The officer, after considering the representation, if any, made by the person on whom the notice is served, shall determine the amount of tax, which shall not be in excess of the amount specified in the notice.
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7. Where any notice has been served by the Central Excise Officer,
MASTER MINDS
a. If the demand is on account of fraud, suppression, collusion, willful misstatement or contravention of the act or rules with an intention to evade the payment of tax, etc., where it is possible to do so, the officer shall determine the amount, within a period of one year from the date of service of notice. b. In any other case, where it is possible to do so, officer shall determine the amount within a period of six months, from the date of service of notice. Q.NO.4. WRITE SHORT NOTES ON DEPOSIT OF EXCESS TAX / TAX COLLECTED. Sec. 73A Excess tax collected from the buyer, to be deposited with the Government: 1. Every person, who is liable to pay tax under the Act or Rules, and has collected any amount in excess of the tax assessed or determined and paid on any taxable services under the Act or Rules from the buyer, in any manner as representing tax on service, shall forthwith pay the amount collected, to the credit of the Central Government. 2. Where any amount so required is to be paid, has not been paid, the Central Excise Officer may serve a show cause notice on the person liable, to pay such amount. 3. The Officer, after considering the representation, if any, made by the person, on whom the notice is served, shall determine the amount due from, and thereupon such person shall pay the amount so determined. 4. The amount paid to the Government, under this provision, shall be adjusted against the tax payable by the person on finalisation of assessment or any other proceeding for the determination of tax. Where, after such adjustment there is any surplus, the amount shall be credited to the Consumer Welfare Fund or refunded to the person, who has borne the incidence of tax, in accordance with the provisions of Sec. 11B. Such a person is required to make an application, within 6 months from the date of public notice, to be issued by the Assistant Commissioner of Central Excise, for the refund of such surplus amount. Q.NO.5. WRITE SHORT NOTES ON INTEREST ON AMOUNTS COLLECTED IN EXCESS OF TAX (SEC. 73B).
1. Where any amount is collected in excess of tax, the person, who is liable to pay such an amount in terms of Sec.11D, shall also be liable to pay interest at such a rate not less than 10% as may be notified by the Government in the Official Gazette (Government has notified 18% w.e.f 1st April 2011). 2. Where the amount becomes payable consequent to an order passed by the Board U/s 37B and the assessee pays the amount in full, without reserving any right of appeal, within 45 days from the date of order, no interest is payable. 3. Where the amount determined, U/s 11D, is increased or decreased by the Appellate Authorities, the interest shall vary accordingly.
Q.NO.6. WRITE SHORT NOTES ON PAYMENT OF INTEREST ON TAX DEMANDED. Interest (Section 75): Where a person liable to pay tax fails to credit the tax or any part thereof to the account of the Central Government, he shall, pay by simple interest, at such rate not less than 10% as may be fixed by the Central Government by notification in the Official Gazette. Interest is calculated for the period, by which crediting of the tax or any part thereof, is delayed. As of now Government has notified 18% (w.e.f. 1st April 2011) as the applicable rate of interest. Note: W.e.f. 8th April, 2011 the rate of interest U/s.73B & U/s.75 for delay in payment of tax to be reduced by 3% in case the value of taxable services provided by service provider during the preceding financial year or during any of the financial years covered by the Show Cause Notice, as the case may be, does not exceed Rs.60 Lacs. Q.NO.7. WRITE SHORT NOTES ON PENALTY FOR THE FAILURE TO PAY TAX (SEC.76). Where any person liable to pay Service Tax, fails to pay such a tax, he shall, in addition to such tax and interest under Section 75, pay a penalty a. Rs.100 per day during which the failure continuous (Rs. 200 before April 8th, 2011) b. 1% per month during which the failure continuous (2% per month before April 8th, 2011), which ever is higher. However, penalty cannot exceed 50% of Service Tax payable (it is 100%, before April 8th, 2011) c. If penalty is levied U/s 78, no penalty can be levied U/s 76. Example: X fails to pay Service Tax of Rs. 10,00,000 by the 5th of March. The amount is paid on 15th of March. Default is 10 days and the penalty is calculated as under: 1 x Rs.10,00,000 x 10/31 = Rs. 3,226 (2 x Rs.10,00,000 x 10/31 = Rs.6,452 before April 8th) or Rs. 100 per day for 10 days i.e. Rs.1,000 (Rs.2,000 before April 8th, 2011) whichever is higher i.e., penalty Rs.3,226. Q.NO.8. WRITE SHORT NOTES ON LEVY OF PENALTY FOR SUPPRESSION. General Penalty (Section 77): 1. Failure to take Service Tax registration. 2. Failure to furnish information called by CEO, produce document called by CEO or appear before CEO in response to Summons or produce documents in an inquiry. Penalty (for 1, 2 points): At discretion of CEO upto Rs.10,000/- or Rs.200/- for every day during which such failure continues, whichever is higher. 3. Failure to maintain / retain books of accounts & other documents. 4. Failure to pay tax electronically through internet banking when mandatory. 5. Incorrect and incomplete details on the invoice or failure to account invoice in the books of accounts. 6. Any contravention of the provisions or rules for which no separate penalty is provided.
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MASTER MINDS
Penalty (for 3, 4, 5, 6 points): Upto Rs.10,000/- for each default, maximum limit Rs.10,000/-. Penalty for suppression etc. (Section 78): 1. Where Service Tax has not been levied or paid or is short levied or short paid or has been erroneously refunded by reason of fraud, collusion, willful misstatement, suppression of fact or contravention of the provisions of the Act or Rules, with an intention to evade the payment of tax, then the person shall also be liable to pay a penalty, which shall not be less than the tax amount. 2. Where true & completed details of the transactions are available in the specified records, penalty shall be reduced to 50% of Service Tax. Such penalty is restricted to 25% of Service Tax, if the amount of Service Tax, interest and such penalty is paid within 30 days of the date of communication of the adjudicating order. In case the value of taxable services provided by service provider during the preceding financial year or during any of the financial years covered by the Show Cause Notice, as the case may be, does not exceed Rs.60 Lacs, the period of 30 days for such payment is extended to 90 days. No penalty in certain cases (Section 80): No penalty can be imposed under Section 76 or Section77 or Section 78, where the assessee proves that there was a reasonable cause for the failure.
Illustrations
1. Mr. Saravanan has collected a sum of Rs.15,000, as Service Tax from a client mistakenly, even though no Service Tax is chargeable for such a service. Should the amount so collected be remitted to the credit of the Central Government? Solution: a. Excess Collection [Sec.73A]: The assessee who has collected an amount in excess of the amount required to be collected, under Service Tax Law, should deposit such an amount with the Government. If not paid, the Central Excise Officer (CEO) shall serve a show cause notice. b. Interest on Amount collected in Excess [Sec.73B]: Where excess amount has been collected from the recipient of services, the person liable shall pay the excess amount together, with interest at the rate of not less than 10% and not exceeding 24%. It shall be payable from the 1st day of the month succeeding the month in which amount should have been paid till the date of actual payment. c. Conclusion: Mr. Saravanan should deposit Rs.15,000 collected as Service Tax with the Government which can be adjusted against Service Tax Liability at a later point of time. 2. X Ltd. has obtained a CENVAT credit of Rs. 55,000 by fraud. The fraud is detected by the Central Excise Officer on March 13th, 2011. A show cause notice is issued to X Ltd. on March 15th, 2011. The Central Excise Officer (after consideration represented by X Ltd.) Determine the quantum of tax payable on May 16th, 2011: Tax payable (i.e., CENVAT credit obtained by fraud) Interest Penalty (at the rate of 200% of Rs. 55,000) Amount payable The above order is communicated to X Ltd. on May 20 , 2011.
55,000 7,200 1,10,000 1,72,200

th
Solution: If X Ltd. pays the following amount on or before June 19th, 2011 (i.e., 30 days from May 20th, 2011), the quantum of penalty will be reduced to 25% of Rs. 55,000 (i.e., Rs. 13,750) Tax payable (i.e., CENVAT credit obtained by fraud) Interest Penalty (at the rate of 25% of Rs. 55,000) Amount paid on or before June 19 , 2011
th
If the payment is not made up to June 19th, 2011 (or the amount paid up to June 19th, 2011 is lower than Rs.75,950), the quantum of penalty will not be reduced to 25%. In such a case, the penalty will be Rs.1,10,000, as determined by the concerned officer.
THE END
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55,000 7,200 13,750 75,950

Service Tax For Nov.2012 (Dev)

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CA - IPCC

Service Tax Applicable for November, 2012

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No.1 for CA/CWA & MEC/CEC

PART 1. INTRODUCTION TO SERVICE TAX

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Director General of Service Tax (Coordinator between 3 & 5)

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e. Services in Execution of Works Contract

Point of Taxation shall be the date of payment.

Point or Taxation shall be the date of payment.

d. Internet Telecommunication Services

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b. Complex Construction Services c. Telecommunication Services

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Point of Taxation Shall Be

Same as export of service

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Any other assessee

Add: SH & EC @ 1% of Service Tax Total Service Tax Payable

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NOT APPLICABLE FOR NOV-2012 EXAMS

PART 3. VALUATION OF SERVICE TAX AND ITS RULES

Where the provision of service is for a consideration, which is not ascertainable:

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Rail Travel Agent Clearing and Forwarding Agency

3. Rail fare collected by Rail Travel Agent

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553 24 22 3680 :hP

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Service Tax payable

b. Value of taxable service

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Towards NonTaxable Service (5) 40,000

Service Tax Liability @ 12% (6)

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value service, and is not deductible.

b. Analysis and Conclusion:

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form the part of taxable services.

b. Consideration is not known.

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Particulars Taxable Value (Rs.19,80,000 + Rs. 2,20,000) Service Tax @ 12.36%

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a. Value of Taxable Services for the month ending 31.03.2013

b. Amount of service tax payable.

b. Amount of Service Tax Payable. c. Last date of Service Tax payable.

05.10.2012 19.10.2012 22.10.2012 28.10.2012 04.11.2012 04.01.2013

a. Amount of Service Tax payable for the quarter ending 31.12.2012

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Receipt of balance amount of Rs.22,50,000 on 19.03.2013 after adjusting advance of Rs.9,00,000

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PART 4. EXPORT & IMPORT OF SERVICES & REFUNDS