Budget 2009 (2)
· The rate of service tax remain unchanged
· Basic duty of import remain unchanged
· CST rate has been remain unchanged
· GST comes in 2010
Service Tax
Introduction of New Services:
Transport of Goods Through Rail: Presently, goods transported in containers by rails, other than Govt railways is taxable under Section 65(105) (zzzp) since 2006. Now, it is proposed to impose service tax on goods transported, whether in containers or otherwise, by rails including Govt railways.
Transport of Costal Goods; and goods transported through inland water are brought into service tax net
Legal Consultancy Service: Any consultancy, advice or technical assistance provided in any discipline of law is subject to service tax. This service is limited to only service provided by a business entity to another business entity. But does not includes service provided to any individuals by a business entity. Further, service provided by individual advocate either to an individual or a business entity would be outside the scope of the service tax. Any service of appearance before any court of law or any statutory authority would also be kept outside the service tax net.
Cosmetic and Plastic Surgery service: Service tax is now proposed on cosmetic surgery or plastic Surgery undertaken to preserve or enhance physical appearance or beauty.
Amendment to the existing services:
· Modification in the existing Business Auxiliary Services (BAS) under Section 65 (19): Production or processing of goods for or on behalf of a client is taxable under BAS. However, if any such activity amount to manufacture within the meaning of Section 2(f) of Central Excise Act, 1944 the same is excluded from this preview. This exclusion has been modified to state that it would apply only if the activity results in manufacture of excisable good. Hence, if the manufactured goods are not excisable goods then the activity is covered within the purview of BAS.
· Stock Broker Service [Section 65(105) (a)]: The present definition of a stock broker service includes sub-broker as well. In this budget the sub-brokers have been excluded from the purview of service tax by making amendment in the definition of stock-broker.
· Information Technology Software Service (ITSS) [Sec 65 (105) (zzzze): A correction has been made in the definition of taxable service by replacing the word acquiring by the word providing. Considering the fact that it is providing of right to use and not the acquiring of right to use. This amendment would have retrospective effect from 16.05.2008.
Other Changes in the Finance Act, 1994:
· Amending section 84 Revision of orders by the commissioner of Central Excise in line with section 35E of Central Excise Act, 1944. Further, certain amendments in Section 86, appeal to appellate tribunal have been made.
· Service tax rules having certain deficiency has not having certain provisions relating to (1) relevant date for determination of rate of service tax and (2) place of provision of taxable services. In this regard, section 94 is being amended to empower Central Govt to make rules. This proviso would come into existence from the date of enactment of Finance (2) Bill, 2009.
· Goods Transport Agency (GTA) receives several services from other service provides during the moment of goods. These services are exempt by issuing notification No. 1/2009 dated 05.01.2009. However, the litigation was pending for the past period. In this regard, the notification is being made with retrospective effect 01.01.2005 through changes made in Finance (2) Bill, 2009
Amendment in Rules:
· Changes in Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007: Explanation 3 to the Rule 3 has been amended to provide that the composition scheme would be available only to such works contracts where the gross value of works contracts includes the value of all goods used in or in relation to execution of works contracts whether received free of cost or for consideration under any other contract. This condition would not apply where the works contract is already started on or before 07.07.2009
· Amendment to CENVAT credit Rules, 2004: Presently, Rule 3(5B) is applicable only for manufacturers. The sub-rule (3B) is that if value of any input or capital goods on which CENVAT credit has been taken, is written of fully or where provision to write off has been made in the books of accounts before being put to use, the manufacture shall pay an amount equivalent to CENVAT credit taken on such item. At presently, the similar provision is not available to taxable service providers. The said sub rule is being amended to bring the taxable service provider also.
· Rule 6(3) of CENVAT credit Rules, 2004 provides that an option for provider of taxable services and exempted services, using common inputs or input services, but opting not to maintain separate books of accounts to pay an amount 8% of the value of exempted services. Since the rate of service tax reduced from 12% to 10%, the said amount payable on exempted services is being reduced to 6% from 10% of the value of exempted services.
Exemptions:
· Tour Operator Services: Service provided by tour operators undertaking point to point transportation of passengers in a vehicle bearing a contract carriage permit is being fully exempt from service tax, provided such transportation is not in relation to truism or conducted tours, or charter or hire.
· Sale and purchase of foreign exchange/money changing were liable for service tax. The inter-bank transactions of purchase or sale of foreign currency, when undertaken by schedule banks, is being exempt
· Club or Association of Service [Section 65(105)(zzze): Federation of Indian Export Promotion Organization and Twenty-one specified export promotion councils sponsored by the Department of Commerce or by the Ministry of Textiles are being exempted from levy of service tax under the said service. This exemption would remain valid till 2010.
Refunds:
· Notification No. 41/2007-ST dated 06.10.2007 provides a scheme of refund of service tax paid on taxable services, received and used in connection with export of goods by merchant/manufacture-exporter. The new scheme (vide Notification No. 17/2009 dated 07.07.2009) would consist of two parts;
1. Exemption to taxable service: The two services, Transport of Goods by Road and Service provided by foreign commission agent for procuring orders, are exempted, if they are used for export of goods and where the liability to pay service tax on such services is on the exporter himself, under reverse charge basis.
2. Modification of refund scheme: The refund is granted on self-certification/certification by Chartered Accountant
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