The one striking note in the budget is the commitment of the Government to carry forward the process of tax reforms and structural changes in Direct and Indirect Taxes. The Direct Tax Code is to be unveiled shortly.
Though the finance Minister has asserted that GST is proposed to be implemented from April 2010, it appears to be doubtful if the deadline would be met considering the lack of preparedness. Consultation with stake holders has not even commenced and the Government should spell out the clear roadmap. Announcement of the reduction of CST rate to 1% would have carried conviction of the commitment of Government to implement GST from April 2010.
Legal Consulting is at last a taxable service. The Finance Minister has overcome the possible nationwide protests by lawyers by exempting legal consulting service provided to/by individuals.
While the exemption to Exporter of Goods from payment of service tax on specified services under reverse charge mechanism is welcome, a similar dispensation for Service exporters should be notified.
We have presented the Budget changes under the following heads
New Services Liable to Tax
Amendment to presently Taxable Services
Amendments to Service Tax Rules
Amendments to Cenvat Credit Rules
Exporter of goods
Import of Services
Note on Section wise amendment to Finance Act,1994
Exemptions
Miscellaneous
Click to view the brief commentary on Budget changes.
Refund of Service Tax to SEZ rationalised
Notification No.09/2009-Service Tax, dated 03/03/2009 providing for refund mechanism to developer / units in SEZ of service tax paid on taxable services provided in relation to the authorised operations had caused resentment and this has been partially addressed in Notification No. 15/2009-Service Tax, dated 20/05/2009.
Notification No. 09/2009-Service Tax, dated 03/03/2009 has been amended providing for
a) Exemption for services wholly consumed within SEZ for authorized operations. The developer/ units in SEZ is required to maintenance of proper account of receipt and utilization of taxable services for authorized operations and otherwise
b) Refund for services partially or wholly consumed outside SEZ for authorized operations where the developer or unit has actually paid the service tax on the specified services.
Click to view Notification No. 15/2009-S.T dated 20/05/2009
CBEC has vide Circular 114/08/2009-ST Dated 20/05/2009 explained the clauses of the Notification. The circular states that
i) Refund claim to be accompanied by
a) list of specified taxable services for authorised operations as approved by the approval committee and
b) evidence for payment of service tax.
ii) The Assistant / Deputy Commissioner may, in select cases, especially where the refund amount claimed is significant cause verification of the end-use of services consumed for which refund claim is filed.
iii) The refund claims would be finalized within a maximum period of 30 days from the date of filing of refund claim and in any case not beyond 45 days from the date of filing of the refund claim.
iv) Pre audit of individual refund claims of Rs.5 lakhs and above (Board's Circular No. 809/06/2005-CX, dated 01.03.2005 read with Circular No.857/15/2007-CX, dated 02.11.2007)
v) Interim refund within 15 days of 80% of the refund claim subject to the condition that refund claim is complete and contains the requisite documents
vi) As regards the issues relating to jurisdiction for the purposes of refund of service tax, STC code to be issued to the developer or unit of a SEZ and document evidencing payment of service tax, Board's Circulars No. 101 /4 /2008-ST, dated the 12th May, 08 and No. 106 /9 /2008-ST dated the 11th December, 08 shall apply mutatis mutandis to the refund scheme
Click to view Circular No. 114/08/2009-ST dated 20/05/2009
Renting of Immovable property not covered under Section 65(105)(zzzz) of the Finance Act, 1994 – Delhi High Court
Section 65(105)(zzzz) of the Finance Act, 1994 defines taxable service of Renting of immovable property to mean any service provided or to be provided “in relation to” renting of immovable property for use in the course or furtherance of business or commerce.
In an interesting interpretation of the expression “in relation to” , the Delhi High Court has ruled that mere renting of the immovable property would not by itself constitute a taxable service and that what can be subject to service tax is some service rendered “in relation to” and the renting of immovable property.Several landlords and tenants had in a batch of Writ Petitions challenged the vires of Service Tax Notification No. 24/2007 dated 22/05/2007 and circular no. 98/1/2008-ST dated 04/01/2008.The petitioners had also challenged the levy contending that service tax on renting of immovable property would be a tax on land and is therefore in the exclusive domain of the State Legislature under the Constitution of India.The basic submission was that section 65(105)(zzzz) contemplates levy of service tax on services “ in relation to “ renting and is not a tax on renting per se.The Delhi High Court referred to the decision on the case or Tamil Nadu Kalyana mandapam (relating to levy or service tax on mandap keepers) and decision in the case of Doypack Systems (relating to interpretation of the expression “in relation to”)The Delhi High Court held that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and that if there is some other service, such as air conditioning service provided alongwith the renting of immovable property, then it would fall within Section 65(105)(zzzz)The High Court did not however examine the alternative plea taken by the petitioners with regard to the legislative competence of the Parliament in the context of Entry 49 of List II of the Constitution of IndiaThe relevant extract from the order is as follows:
“From this analysis, it is clear that we have to understand as to whether renting of immovable property for use in the course or furtherance of business or commerce by itself is a service. There is no dispute that any service connected with the renting of such immovable property would fall within the ambit of Section 65(105)(zzzz) and would be exigible to service tax. The question is whether renting of such immovable property by itself constitutes a service and, thereby, a taxable service. We have already seen that service tax is a value added tax. It is a tax on the value addition provided by some service provider. Insofar as renting of immovable property for use in the course or furtherance of business or commerce is concerned, we are unable to discern any value addition. Consequently, the renting of immovable property for use in the course or furtherance of business of commerce by itself does not entail any value addition and, therefore, cannot be regarded as a service. Of course, if there is some other service, such as air conditioning service provided alongwith the renting of immovable property, then it would fall within Section 65(105)(zzzz).In view of the foregoing discussion, we hold that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. The obvious consequence of this finding is that the interpretation placed by the impugned notification and circular on the said provision is not correct. Consequently, the same are ultra vires the said Act and to the extent that they authorize the levy of service tax on renting of immovable property per se, they are set aside.
Before parting with this batch of cases, we would like to observe that we have not examined the alternative plea taken by the petitioners with regard to the legislative competence of the Parliament in the context of Entry 49 of List II of the Constitution of India. Such an examination has become unnecessary because of the view we have taken on the main plea taken by the petitioners as indicate above”It would have helped settle the issue had the High Court also examined and given a verdict in the context of Entry 49 of List II of the Constitution of India. The decision is semantic in the sense that the decision is based on the wordings of Section 65(105)(zzzz) wherein the taxable service is defined as services “in relation to” renting of immovable property and that section does not levy tax on renting of immovable property itself. The likely scenario, if the decision is not accepted by the department is that (a) the decision may be challenged before the Supreme Court and (b) the definition of taxable service may be amended to make the “renting of immovable property” itself liable to service tax.
There would be a finality only after there is a decision in the context of Entry 49 of List II of the Constitution of India.
source - https://www.servicetaxindia.com/index.asp
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