Basic of Service tax & Reverse charge by Bhupinder

Basic of Service Tax & Reverse Charge Felix Advisory Private Limited By Bhupinder Madaan Index 1. India’s GDP Components 2. India Tax Revenue in 2014 - 15 3. What is Service tax 4. History of Service tax 5. Rates of Service Tax 6. Applicability 7. Charging of Service tax 8. Declared Services 9. Negative List 10. Valuation of Services 11. POT Rules, 2011 12. POPS Rules, 2012 13. Reverse Charge 14. Registration 15. Payment & Default in Payment 16. Return & Default in Return 17. Exemption Notification 26/2012 18. Exemption Notification 25/2012 19. Export of Service 20. Cenvat 21. Assessment India’s GDP Components (Sector) 19% 22% 59% Agriculture Industry Service sector Gross Domestic Product ( GDP ) is the broadest quantitative measure of a nation's total economic activity . More specifically, GDP represents the monetary value of all goods and services produced within a nation's geographic borders over a specified period of time . India Tax Revenue in 2014 - 15 426,079 278,599 188,713 185,480 168,132 Corporate tax Income tax Customs Excise Service taxRs. In Crores What is Service Tax ? • Tax on Services. • It is an Indirect tax. • It is actually borne by the Consumers. • It came into existence under the Finance Act, 1994. • Service tax is a tax levied by Central Government of India on services provided or to be provided excluding services covered under negative list and considering the Place of Provision of Services Rules, 2012 and collected as per Point of Taxation Rules, 2011 from the person liable to pay service tax . Contd…… • Person liable to pay service tax is governed by Service Tax Rules, 1994 he may be service provider or service receiver or any other person made so liable . • Few services are presently exempt in public interest via Mega Exemption Notification 25 / 2012 - ST as amended up to date & few services are charged service tax at abated rate as per Notification No . 26 / 2012 - ST as amended up to date . • Presently from 15 November 2015 , service tax rate has been increased to @ 14 . 50 % (including 0 . 5 % Swatch Bharat Cess) of value of services provided or to be provided . History of Service tax • Dr . Raja Chelliah Committee on tax reforms recommended the introduction of service tax . The tax collections have grown substantially since 1994 - 95 i . e . from ₹ 407 crore in 1994 - 95 to ₹ 1 , 68 , 132 crore in 2014 - 15 . The total number of Taxable services also increased from 3 (Telephone, Stock Broker & General Insurance) in 1994 to 119 in 2012 . However, from 1 July 2012 the concept of taxation on services was changed from a 'Selected service approach' to a 'Negative List regime' . This changed the taxation system of services from tax on some Selected services to tax being levied on the every service other than services mentioned in Negative list . Service tax rate since 1994 Period Rate From 01.07.1994 to 13.05.2003 5% From 14.05.2003 to 09.09.2004 8% From 10.09.2004 to 17.04.2006 10% From 18.04.2006 to 10.05.2007 12.24%* From 11.05.2007 to 24.02.2009 12.36%* From 25.02.2009 to 31.03.2012 10.30%* From 01.04.2012 to 31.05.2015 12.36%* From 01.06.2015 to 14.11.2015 14% Now At Present 14.50% * * Inclusive of cess Applicability • Section 64 Applicable to the whole of India except Jammu & Kashmir . • India includes Territorial Waters(TWI), Continental Shelf, Exclusive Economic Zone(EEZ) and Union territory . • It will not apply to outside India . Charging of Service tax • Section 66 - B of the Finance Act, 1994 levis a charge of service tax on the “Value of taxable services” provided or to be provided . 9 Declared Services 1. Renting of Immovable Property . 2. Construction of a complex, building, civil structure or a part thereof . 3. Temporary Transfer or permitting the use or enjoyment of any IPR . 4. Development, design programming, customization, adaptation, up gradation, enhancement, implementation of IT Software . 5. Agreeing to the obligation to refrain from an act, or To tolerate an act or a situation, or To do an act ;. Contd…… 6. Transfer of Goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods . 7. Activities in relation to delivery of goods on Hire Purchase or any system of payment by installments . 8. Service portion in the execution of a Works Contract . 9. Service portion an activity where in goods, being food or any other article of human consumption or any drink is supplied in any manner as a part of the activity . NEGATIVE LIST OF SERVICES COVERS SPECIFIED 17 SERVICES 1. Services provided by Government or local authority . 2. Services provided by Reserve Bank of India . 3. Services by a foreign diplomatic mission located in India . 4. Services relating to agriculture or agricultural Produce . 5. Trading of goods . 6. Any Processes amounting to manufacture or production of goods . 7. Selling of space for advertisements in Print Media . 8. Access to a road or a bridge on payment of toll charges . 9. Betting, gambling or lottery . Contd…… 10. Entry to Entertainment Events or Access to Amusement Facilities . 11. Transmission or distribution of electricity . 12. Specified services relating to education . 13. Services by way of renting of residential dwelling for use as residence . 14. Financial sector . 15. Service relating to transportation of passengers . 16. Service relating to transportation of goods (except GTA & Courier Agency) . 17. Funeral, burial, crematorium or mortuary services including transportation of the deceased . Valuation Of Taxable Services • As per the provision of the section 67 of the Act, the value of Taxable Services shall be the “ Gross amount charged” by the services provider for services provided or to be provided . Service tax valuation Rules, 2006 Work Contract • Original Works – 40% of the total amount charged. • All other works contract - 70% of the total amount charged. Restaurant or Outdoor Catering • Restaurant – 40% of total amount charged. • Outdoor Catering - 60% of total amount charged. POT Rules, 2011 Rule - 3 Rule - 7SP SR Invoice raised within 30 days from the date of Completion of Service Invoice not raised within 30 days from the date of Completion of Service Invoice or Payment whichever is earlier Completion or Payment Whichever is earlier Payment made within 3 months from the Invoice date POT shall be the date on which Payment is made Payment not made within 3 months from the Invoice date POT shall be the date immediately following the said period POPS Rules, 2012 • Rule - 3 Default Rule Location of SR(If location of SR is not available then location of SP) . • Rule - 4 Service provided in respect of Goods/ Services provided to an Individual Place of Performance of Service . • Rule - 5 Services in relation to Immovable Property Location of Immovable Property . • Rule - 6 Event Organization Location where event held . • Rule - 7 Provisioning of Service rendered at Multiple Locations Location where the greatest proportion of the service is provided . Contd…… • Rule - 8 (SP+SR)TT Location of SR(i.e. TT). • Rule - 9 HOBI Location of SP. • Rule 10 Transport of Goods Destination of Goods. • Rule - 11 Transport of Passengers Place of Embarkation of Passenger. • Rule - 12 Catering etc. on Board First Scheduled Departure Point of Conveyance. • Rule 13 • Rule 14 Later is better. Full - Reverse Charge 12 cases - 100% ST to be paid by SR Status Person liable to pay ST • Insurance Agent Insurance Company • Recovery Agent Bank/FI/NBFC • Lottery Marketing Agent Lottery Distributor • MF Agent/Distributor Mutual Fund/Asset Management Co. • GTA(Transport of Goods by road) Any person liable to Pay freight • Any Person(Sponsorship) Body Corporate/ Partnership Firm • Arbitral Tribunal Business Entity • Lawyer/Law Firm Business Entity • Govt./Local Authority Business Entity • HIPA(Supply of Manpower/Security Service) • Director Company/Body Corporate • Any Person(Any Taxable Service) • Any Person(Any Taxable Service - Involving Aggregator)Any Person Partial - Reverse Charge 2 cases - ST to be paid by SP and SR HUF/Indl./Partnership/AOP/BOI Business entity registered as Body Corporate  50% Execution of Work Contract 50%  0% 100%(After Abatement 40%) Renting of Passenger Vehicle 50% 50% Procedural Part Registration under Service Tax • Registration – Application for registration is to be made by every person liable for paying the Service Tax . – In Form ST - 1 within 30 days from the date on which Service Tax is levied or within 30 days from the date of commencement of business whichever is later, to the Central Excise Officer having jurisdiction . – Failure to take registration – Maximum Penalty Rs . 10 , 000 / - . Contd…… • Any provider of taxable services whose aggregate value of taxable service in a financial year exceeds Rs . 9 lacs, has to get themselves registered . • Up to Rs . 10 lacs, no Service tax to be levied . • Exemption limit is One time benefit in life of assessee not in each year . E - Payment is Mandatory for all assessee • Individuals, Proprietary concern and Partnership Firms. • For all others (like Company, HUF, etc) • Failure to pay ST electronically – Max. 10,000 Penalty. Payable on amounts received during the Quarter Payable on or before 1 st April to 30 th June (Quarter I) 6 th July 1 st July to 30 th September (Quarter II) 6 th October 1 st October to 31 st December (Quarter III) th January 1 st January to 31 st March (Quarter IV) 31 st March Payable on amounts received during the Quarter Payable on or before For April to February 6th of following month For March 31st March Delay in deposit of Payments Period of Delay Applicable rate of Interest Applicable rate of Interest for Small Assessee# First 6 months of delay 18% p.a. 15% p.a. For next 6 months 24% p.a. 21% p.a. For period in excess of 1 Year 30 % p.a. 27% p.a. #Small Assessee – Whose value of taxable services provided during the last preceding financial year up to 60 lakhs. Returns • Every assessee (Provider/Receiver) shall submit the half - yearly return electronically in Form ‘ST - 3 ’ . • Return can be revised within a period of 90 days from the date of submission of the return . For the Half year To be filed on or before 1 st April to 30 th September 25 th October 1 st October to 31 st March 25 th April Delay in Filing Return Period of Delay Late fee Payable Up to to 15 days Rs. 500 16 to 30 days Rs. 1000 Beyond 30 days Rs.1000/ - plus Rs.100/ - per day from the 31 st day till date of filing return # The maximum Late fee shall not be exceeded Rs. 20,000/ - Exemption Notification 26/2012 Sn Taxable Service Abatement Taxable Portion 1 Financial Leasing 90% 10% 2 Transport of Goods by rail 70% 30% 3 Transport of Passengers by rail 70% 30% 4 Bundled service by way of Supply of food, etc in a premise together with Renting of such premise 30% 70% 5 Transport of Passengers by Air 60%/40% 40%(E)/60%(OE) Renting of Hotels, guest house, etc 40% 60% 7 Transport of Goods by road by GTA 70% 30% 8 Omitted 9 Renting of Motor Cab 60% 40% 9A Transport of Passengers by a contract carriage other than motor cab or a radio taxi 60% 40% 10 Transport of Goods in a vessel 70% 30% 11 Tour Operator 75%/90%/60% 25%/10%/40% 12 Construction of a complex, building, civil structure 75%/70% 25%/30% Mega Exemption – 25/2012 • Till date 47 Services specified in Mega Exemption . Export of Service Conditions • The provider of service is located in the TT . • The recipient of service is located outside India . • Not a negative list service . • POPS is Outside India . • The Payment received in convertible foreign exchange . • The provider and recipient should not be associated persons . CENVAT Credit - Some Aspects • CENVAT stands for Central Value Added Tax . • CENVAT Credit Rules, 2004 are made effective from 10 - 09 - 2004 . • These rules deal with both manufacturers and with providers . • The interest and penalty amounts cannot be taken as credit . Assessment • The Act provides for the self - assessment by the Assessee i . e . the assessee shall himself assess and pay the tax . • Thus every Assessee (Service Provider or Service Receiver) has to himself assess his Service Tax provide/paid and thereafter file returns in Form No . ST - 3 on Half yearly basis . Thank you....