Friday, March 1, 2013

CHANGES IN SERVICE TAX BUDGET 2013-14


on Friday, March 1, 2013

In Budget 2013 ,No change has been proposed to amend basic Service Tax rates it remains at 12% plus 3 % surcharge. However there are amendment in Negative list (addition /deletions) and abatement rates,penalties and a new Amnesty Scheme for service Tax defaulters  has been proposed.

Team Do You Know has made an attempt to summarise various amendments proposed by Finance Bill, 2013. For ease in understanding, the changes are categorized in three categories namely:-

A) Changes applicable from the date of enactment of Finance Bill, 2013,
B) Changes applicable w.e.f. 1st March, 2013, and
C) Changes applicable w.e.f. 1st April, 2013

A) Changes Applicable from the date of Enactment of Finance Bill, 2013:-

I) Scope of Negative List Enlarged:-
  • a. Definition of “approved vocational education courses” is being changed to include a course run by an industrial training institute or an industrial training centre affiliated to State Council for Vocational Training. Further, courses run by an institute affiliated to the National Skill Development Corporation are being excluded from the scope of the definition because National Skill Development Corporation is not an affiliating body.
  • b. The definition of “process amounting to manufacture or production” in section 65B(40) is being expanded to include processes under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.
  • c. The negative list entry in sub-clause (i) of clause (d) of section 66D is being modified by deleting the word “seed”. This will allow the benefit to all other testings in relation to “agriculture” or “agricultural produce.

II) The provisions of section 73 are being modified such that if the grounds for invoking extended period are not found to be sustained by any Appellate authority or tribunal or court, the Central Excise officer will be able to determine the demand for the shorter period of eighteen months.

III) Changes in provisions related Penalty:-
a. Penalty for non-registration is being restricted to Rs. 10,000. Currently quantum of penalty may extend to higher of:-
  • i. Rs. 10,000,
  • ii. Rs. 200 per day of failure
b. A new Section 78A is also being introduced to impose penalty on directors, managers, secretary and other officers of the company for specified offences e.g. evasion of service tax, in cases of willful actions.

IV) New provisions are being introduced to prescribe revised punishments for offences in section 89, make certain offences cognizable and others non-cognizable and bailable.

V) Explanation available under Section 65B is being inserted as an independent provision i.e. Section 65BA w.e.f. 1stJuly, 2012.

To encourage voluntary compliance and broaden the tax base, one time Amnesty Scheme has been introduced by Finance Bill, 2013 called as “Service Tax Voluntary Compliance Encouragement Scheme, 2013 by way of:

  • a. waiver of interest and penalty; and
  • b. immunity from prosecution,
The essence of scheme will be that to get complete waiver from interest and penalty, assessee shall make a declaration about his tax dues and shall pay not less than fifty per cent of the tax dues so declared along with submission of proof of such payment to the designated authority on or before the 31st day of December, 2013. Balance of the tax due declared but not paid shall be required to be paid by the declarant on or before the 30th day of June, 2014.

However, in case a declarant fails to comply with the time limit as mentioned above but pays the same on or before 31.12.2014, interest shall be payable only for the period of delay as starting from 1.7.2014.

This scheme will be benefited to the stop filers, non-filers or non-registrants or service providers (who have not disclosed true liability in the returns filed by them during the period from October 2007 to December 2012) who pay the "tax dues".

read complete proposal of One Time amnesty Scheme or Service Tax Voluntary Compliance Encouragement Scheme, 2013

B) Changes Applicable w.e.f. 1st March, 2012:-

I) 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)

II) The benefit of Advance Ruling Authority is being extended to resident public limited companies.
(Notification No. 04/2013-ST dated 1st March, 2013)

III) In case of removal of inputs or capital goods as such; or removal of capital goods after being used; or written off or provision to written off of inputs or capital goods before being put to use; service provider/manufacturer is liable to pay an amount calculated as per Rule 3(5)/(5A)/(5B) of CCR, 2004. Now explanation has been added after proviso to Rule 3(5B) so as to apply recovery provisions as contained in Rule 14 of CCR, 2004, in cases service provider/manufacturer fails to pay the amount so calculated.

(Notification No. 03/2013-CE(NT) dated 1st March, 2013)

C) Changes in Mega Exemptions (Applicable w.e.f. 1.4.2013)

I. Exemption by way of auxiliary educational services and renting of immovable property by specified educational institutes under will no longer be available. This will have the effect of restricting the scope of exemption to “Auxiliary educational services” and “Renting of immovable property services” only when
  • a. Provided by any person to Educational Institutes;
  • b. Provided by one Educational Institute to another Educational Institute.
II. The benefit of exemption in relation to copyrights for cinematograph films will now be available only to films exhibited in a cinema hall or theatre. TV Channels like Sony will now be liable to pay service tax on their exhibiting of films on Sony Channel.

III. Service tax on all AC restaurants :Earlier, to claim the exemption for services provided in relation to serving of food or beverages, Restaurant, eating joint or a mess were required to satisfy dual requirement:
  • a. Not to have the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and
  • b. Not to have a license to serve alcoholic beverages
However, the exemption is being rationalized so that exemption will be now available to all non air-conditioned (non-centrally air-heated) restaurants, eating joint or a mess irrespective of they have a license to serve alcohol or not. Other impact of this amendment will be to impose service tax on restaurants having air-condition facility irrespective of they have a license to serve alcohol or not, example of the same would be KFC, McD. 

IV. The exemptions available to transportation of goods by railway and vessel under S. No 20 and services provided by a goods transportation agency (GTA) under S. No.21 are being harmonized. Thus exemption to transportation of petroleum and petroleum products, postal mails or mail bags and household effects by railways and vessels will not be available while the benefit of transportation of agricultural produce, foodstuffs, relief materials for specified purposes, chemical fertilizers and oilcakes, registered newspapers or magazines, relief materials meant for victims of natural of man-made disasters, calamitites, accidents or mishap and defense equipments will be available to GTAs;


V. Exemption for vehicle parking to general public is now being withdrawn so that all type of parking facility granting whether by way of reserved (i.e. leasing of space to an entity for providing such parking facility) or unreserved (i.e. General Parking) parking will be liable to service tax

VI. Exemption for services provided to Government, a local authority or a governmental authority, by way of repair or maintenance of aircraft is being withdrawn.

VII.Definition of Charitable Activities as given in Clause (k) of Definition Part of Mega Notification No. 25/2012-ST dt. 20.6.2012 is being amended so that there will be no separate threshold limit for granting the exemption to activities relating to advancement of any other object of general public utility and will be governed by provisions as applicable to SSI to claim exemption from payment of service tax.

By :Atul Kumar Gupta,B Com (Hons) FCA, FCMA, MIMA, CIQA, PGDEMM
Mobile : 9810103611,Email : atul@servicetax.net

Download Notification 2/2013,3/2013,4/2013 and Explanation to Service Tax changes By CBEC and claus by clause analysis by Voice of CA


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  1. We are getting bills from service provider as " xxxxx PVT.LTD" Is it mandetatory to have bill with full form like " xxxxx PRIVATE LIMITED"
    to avail tax credit ?

    ReplyDelete
    Replies
    1. It is commonly used abbreviation for private Limited as
      (p) ltd
      Pvt LTD

      and we have not found any rule ,that it can not be used .But if you have doubt then you should show full name

      Delete
  2. Individual who are collecting rent exeeding Rs.10 lacs do they want to collect service tax on the rent. are they wanted to register with excise and service tax and on what name is it in individual name? Please clearify

    ReplyDelete
    Replies
    1. yes, individual is also responsible for service tax on rent and registration is to be done on individual name

      Delete
  3. If an individual receives rent from his immovable property from 2 Sources as 5lacs/annum and 32lacs/year:-

    1. can he pay Service Tax separately for both the Rents received ??
    2. Can you please let us know how much Service tax needs to be paid for the entire year (or every quarter) along with the calculation ? pls keep in mind, last year rent received last year was less than 10 lacs
    3. Can we deduct Property Tax(municipal tax) as a deduction while calculating Service Tax? if yes, the amount of property tax would be of the previous year or the present year?

    regards

    ReplyDelete
    Replies
    1. 1. no, srvice tax is payable on person basis ,
      2. Exemption is available only if the same is also allowed to customers .Means if tax has been collected from tenant then you have to deposit the same to department.I assume the same has been given to customers/tenant
      so tax must be as under (5+32-10)*12.36%=3.3372 lakhs

      3. If property tax paid then it is to taken for current year only .The above formula will be changed as under

      (5+32-10-property tax paid for the year)*12.36%

      Delete
  4. 1. no
    2. Service tax will be paid in monthly on or before 5th day of following month. If u r covered under-Renting of Hotels, inns, guest houses, clubs, campsites or other commercial places meant of residential or lodging purpose the service tax would payable @ 7.416% other than this @ 12.36% payable. Cenvat credit on inputs and capital goods for providing of taxable services has not been taken under the provision of the CENVAT credit rules, 2004 (for lower rate only) calculate your tax liability on above applicable tax.
    3. No.

    ReplyDelete
  5. Sir,

    I am accountant in govt. organisation... we had menpower supplier and we have to pay service tax reverse charge as per norms... but the supplier told us that as they are registered trust no service tax is liable... is it true ?? service tax not liable to pay if ther are trust ??

    ReplyDelete