Thursday, June 21, 2012

ABATEMENT RATE IN SERVICES TAX AMENDED WEF 01.07.2012 NT 20 DT 20.06.12


on Thursday, June 21, 2012

After waiting of Thee months we have just published the new abatement rate in service tax applicable from 01.07.2012 but department think otherwise.They now have changed the rates again and issued a new notification in this regard 26/2012 dated 20.06.2012. After gone through new notification we have noticed that major change is that one service has been added in abatement list and few changes in wording here and there but no other major change has been done. But as these notification is super session to earlier notification 13/2012 so reading old notification is of no use now.

In old system in case of specific services deductions are allowed from gross receipt received from customer to get the taxable service value. This deduction is called abatement in service tax .This has been continued in new system also but with revised rate of abatement.

Generally it is assumed that if abatement is availed then service provider can not claim Cenvat credit . But this is not correct in all cases . So one has to check all the conditions placed against the abatement rules. 

Cenvat credit may be divided in three categories.
  1. Cenavt credit on capital goods
  2. Cenvat credit on Input Goods
  3. Cenvat credit on Input services. 
so while availing your abatement you should ensure that Cenvat credit as allowed under condition is availed .New rat of abatement applicable from 01.07.2012 has already been notified vide notification 13/2012 dated 17.03.2012 but now revised notification has been issued 26/2012 dated 20.06.2012


Notification No. 26/2012- Service Tax
New Delhithe 20th June, 2012
G.S.R….. (E). - In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said  Act), and in supersession of notification number 13/2012- Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 211 (E), dated the 17th March, 2012, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (2) of the Table below, from so much of the service tax leviable thereon under section 66B of the said   Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the said Table, of the amount charged by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the said Table, namely;-
Table
Sl.
No.
Description of taxable
service
Percent-
age
Conditions
(1)
(2)
(3)
(4)
1
Services in relation to financial leasing including hire purchase
10
Nil.
2
Transport of goods by rail
30
Nil.
3
Transport of passengers, with  or without accompanied belongings by rail
30
Nil.
4
Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises ( including hotel, convention center, club, pandal,shamiana or any other place, specially arranged for organizing a function) together with renting of such premises
70
(i) CENVAT credit on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
5
Transport of passengers by air, with or without accompanied belongings
40
CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
6
Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes.
60
Same as above.
7
Services of goods transport agency in relation to transportation of goods.
25
CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
8
Services provided in relation to chit
70
Same as above.
9
Renting of any motor vehicle designed to carry passengers
40
Same as above.
10
Transport of goods in a vessel
50
Same as above.
11

Services  by a tour operator in relation to,-
(i)  a package tour
25
(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour.
(ii)  a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour

10
(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii) The invoice, bill or challan issued indicates that it is towards the charges for such accommodation.
(iii) This exemption shall not apply in such cases where the invoice, bill or challanissued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.
(iii) any services other than specified at (i) and (ii) above.
40
(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii)The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.
12.
Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority
25
(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii)The value of land is included in the amount charged from the service receiver.


Abatement available to developers of complex, building or civil structure is being reduced from the existing 75% to 70% in following cases:-
  • a. Residential properties having a carpet area above 2000 sq ft and where amount charged is equal to or more than Rs. 1 crore,
  • b. Commercial properties. 
(Notification No. 02/2013-ST dated 1st March, 2013 applicable wef 01.03.13)




Explanation. –

A.     For the purposes of exemption at Serial number 1 -

                        (i)      The  amount charged shall be an amount, forming or representing as interest, i.e. the difference between the installments paid towards repayment of the lease amount and the principal amount contained in such installments;

                      (ii)      the exemption shall not apply to an amount, other than an amount forming or representing as interest, charged by the service provider such as lease management fee, processing fee, documentation charges and administrative fee, which shall be added to the amount calculated in terms of (i) above.


B.     For the purposes of exemption at Serial number 4 -

The amount charged shall be the sum total of the gross amount charged and the fair market value of all goods and services supplied in or in relation to the supply of food or any other article of human consumption or any drink (whether or not intoxicating) and whether or not supplied under the same contract or any other contract, after deducting-

(i) the amount charged for such goods or services supplied to the service provider,  if any; and
(ii)  the value added tax or sales tax, if any, levied thereon:             
         Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.           
       C.  For the purposes of exemption at Serial number 12 –
      The amount charged shall be  the sum total of the  amount charged for the service including the fair market value of all goods and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract, after deducting-

(i) the amount charged for such goods or services supplied to the service provider, if any; and
(ii) the value added tax or sales tax, if any, levied thereon: 
  Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.           
 2.   For the purposes of this notification, unless the context otherwise requires,-

a.       “chit” means a transaction whether called chit, chit fund, chitty, kuri, or by whatever name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to a prize amount,

b.      "package tour" means a tour wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided by the tour operator as part of the package tour to the person undertaking the tour,
c.       “tour operator” means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours,
3.  This notification shall come into force on the 1st day of July, 2012.
[F.No. 334 /1/ 2012-TRU]

(Rajkumar Digvijay)
Under Secretary to the Government of India 

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  1. What about Service Tax where land value is not included..
    (Govt. is issuing notifications reapetatively like news. Dont they have proper method to collect money from the people in some simpler manner instead of forcing people to constantly watching to the TAX NEWS rather than doing business. God, Please Bless..

    ReplyDelete
    Replies
    1. if value of land is not included then no abatement is available and you have to pay tax on full value minus land value.

      Delete
    2. Further you are requested to visit the following link also

      http://www.simpletaxindia.net/2012/07/service-tax-reduced-construction.html

      Delete
  2. hey guys, i wanna know whether are there any amendments in section 68 for "person liable to pay service tax other than service provider"?

    ReplyDelete
    Replies
    1. yes details are available here

      http://www.simpletaxindia.net/2012/06/new-services-under-reverse-charge-in.html

      Delete
  3. Hi i wanna know for association (registered under Members & Clubs)from 01.07.2012 whether service tax applicable if it is applicable supply of Manpower (like House keeping security) what will be rate of tax

    ReplyDelete
  4. Hi,

    I wanna know after taking abatement should I take cenvat credit.

    ReplyDelete
    Replies
    1. You can avail cenvat credit if condition as shown against abatement is says so. To specific pls inform which service you are providing

      Delete
  5. HI I WANNA KNOW , HOW TO CALCULATE WORK CONTRACT SERVICE TAX IN INSTILLATION OF WAIRE BUNDLE

    ReplyDelete
  6. HOW TO CASLCULATE SER TAX ON WORK CONTRACT

    ReplyDelete
  7. IS ABATEMENT & NON ABATEMENT,BOTH CONDITION APPLICABLE UNDER SERVICE TAX IN RENTING OF MOTOR VEHICLE. IF YES , HOW ONE CAN KNOW WHETHER SERVICE PROVIDER IS COVERED UNDER ABATEMENT OR NON ABATEMENT ?

    ReplyDelete
    Replies
    1. Service provider is liable to raise bill ,in which he should mention the service tax payable by service receiver/provider . If nothing in shown in the Bill then you can assume that bill is for unabated value and can deposit 40% of non abated value @ 12.36 % under reverse charge .

      Delete
  8. For Security service agency -Abatement rate

    ReplyDelete
    Replies
    1. No abatement allowed for security services

      Delete
  9. I want to know about service tax liability. Who is payable service tax on bus hired for co. staff whether input credit is available or not. & in what ratio service tax pay. Can i clearfy about what is abated value.

    ReplyDelete
    Replies
    1. Service is liable on 40% value and covered under reverse charge of services if service provider is firm,aop,individual,HUF.

      Further input tax credit is available to you.

      Delete
  10. Sir,I had an agreement with a Construction company for an apartment at Chennai on 06/07/2012 for 42 Lac(For Construction only).Now they asked additional Service tax amount (12.36% of 30% of the agreement amount).Is it possible to avoid this excess payment by this CENvat calculation and how I can explain this to the Construction company.
    Subramanian.

    ReplyDelete
  11. Hi, I am providing Car renting service to a pvt. ltd co. and my Aggregate service charges are under ten lakh for a year and so I am not liable for payment of Service Tax as per Law.
    The service receiver Co. is willing to deduct the 4.94% as service Tax from my payment. Is it valid rule or its their mistake in understanding the Rules? Please advice its quite urgent.

    ReplyDelete
    Replies
    1. as per new rules Company should deposit tax on 40 % Bill @ 12.36 % so rate of 4.94 % is ok.

      But company should not deduct tax from you .as it is directly payable by him.

      So you should contest that the amount is not deductible from you.

      Delete
  12. Sir, Is there any service tax on private tutions/classes?

    ReplyDelete
    Replies
    1. yes applicable ,however he can claim general exemption up to 10 lakh

      Delete
  13. as we know that abatement of Service Tax is 40% in case of Hotel accomodation. In this regard i want to know will the hotel owner should take 60% of Service Tax from the Customer or 100%..

    ReplyDelete
  14. EFFECTIVE TAX RATE FOR SALE OF UNDER
    CONSTRUCTION FLATS / UNITS – w.e.f. 01.07.2012

    I've booked my flat on Oct'11 for amount of 55 lacs and paid 72% before 30-06-12 and for bal amount of 28% builder demands additional money of 4.94% from 1-7-12.Any notification to support my case not to pay this additional amount shall be very much greatful.


    _ What is the applicable Service tax rate in following situations:
    • Progress payment installment was due from customer before
    30.06.2012, but payment is received after 01.07.2012

    ReplyDelete
    Replies
    1. Service Tax On under construction house is 3.09 % wef 01.07.2012 and before 01.07.2012 it was 2.575(10.30%*25%).So on 72% payment 2.575 is applicable and on balance 28% ,3.09% is applicable.

      Delete
  15. Dear Mr.Raja Babu,

    Thanks for your reply about my query posted on 20-Dec-12.

    I've booked my flat by Oct'11,which is not more than 12 flats and my builder himself told me that there is no tax up to 12 flats construction.

    I want a clarification from you that,whether 72% payment made before 1-7-12 shall attracts 2.575% ST for 12 flats apartment construction or not and bal 28% money payable to builder demands 4.94% ST.

    Pl.help me with notification reference.

    ReplyDelete
    Replies
    1. now ,service tax is applicable on flat complex of more than one houses ,so service tax is applicable, but it should not be applicable on payment received up to 30.06.2012.so in our view it is not applicable on payment made before 01.07.2012.

      Delete
  16. Dear Sir

    Kindly help me in understanding how to calculate the exemption limit in service tax for works contract services

    ReplyDelete
  17. Dear Sir

    What is the abatement available in works contract services ? Upto what value of total aggregate turnover can the exemption be taken for service tax payments in works contract services?
    Regards

    ReplyDelete
  18. as per GOMS no.11 dated 29/7/2005 when material portion is < 10% of the total estimate no provision towards VAT be made
    in the estimates and no recovery also needs be made in respect of such work payments.
    whether the above rule position is in force now or any amendments are there in this regard? please clarify.

    ReplyDelete
  19. Dear Sir,

    Is abatement applicable to Renting of Immovable property services ?If i paid Property Tax, then will i deduct that amount in abatement column from Gross Rent Received.

    ReplyDelete
  20. No abatement available on renting of immovable property .However property tax is deductible from rent to calculate service tax read details here

    http://www.simpletaxindia.net/2012/06/exemption-on-property-tax-paid-on.html

    ReplyDelete
  21. Dear Sir,

    Can you guide me on the below-

    If a travel agent buys an International holiday package from an Indian supplier @ Rs. 100000 & the Indian supplier charges 3.09 % GST on that,the package cost for him now is Rs. 103090.

    Now he sells the same package at Rs. 110000/ and charges GST of 3.09 % from the customer ie. 113399/
    Now when he is going to deposit the GST to Govt. how much has to deposit-
    (1) Rs. 3399- Rs. 3090 = Rs.309, as he has already paid the balance
    of Rs. 3090,to other Supplier.
    or

    (2) Rs. 3399/ in full as the first supplier has taken the abatement,and can not be taken again, in this case on the services of Rs. 110000,the service tax is charged Rs. 6489.

    What is the correct way.

    ReplyDelete
    Replies
    1. In our view he has to pay 3399 in full as he can not claim cenvat credit.

      Best is if he can do like this
      Get direct billing to client from indian supplier to client for 110000 plus s.tax @ 3.09=113399 and get commission from supplier in shape of credit note etc =10000 so you can save 3399/-

      Delete
  22. Sir Pls reply my query in a case of Oil Mill:

    (i) Freight on the following itemsis exempt or not and if yes then relevant notification/circular/amendment:-
    1. Oil seeds
    2. Agricultural commodities like Wheat, etc
    3. By products like Oil Cakes, etc
    (ii) If in addition to above these, the oil mill pays freight on some other items like bardana, etc what would be treatment of such item?

    Please give your expert opinion.

    ReplyDelete
  23. Sir,

    There are four owners of one property. The annual rental income of each owner is Rs. 700000/- per annum and every owner is receiving cheque of payment in his own name for his own share, is he liable to pay service tax as his receipts are below Rs. 9/- lacs but the total receipts of one premise (of all owners taken together) is above Rs. 9/- lacs.

    ReplyDelete
    Replies
    1. No , tax not applicable .As service tax exemption is available to person not to a business or location

      Delete