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FAST TRACK MATERIAL

INDIRECT TAXES_ 35e (NEW EDITION THOROUGHLY REVISED & UPDATED WITH FINANCE ACT 2015.

APPLICABLE FOR NOV.2016 IPCC EXAMINATIONS. THIS MATERIAL IS SYNCHRONISED WITH OCTOBER 2015 EDITION OF ICAI SM AND PM)

1

2

Index

1. Service Tax 4 – 28

2. Central Excise Duty 30 – 39

3. Customs Duty 41 – 48

4. CENVAT Credit 50 - 58

Note: All latest amendments, Notifications / Circulars up to 30/04/16, applicable for

Nov - 2016 were included in this material and those were indicated in grey

background.

Students are advised to pay special attention on all such areas

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CA - IPCC

COURSE MATERIAL

Quality Education


SERVICE TAX

Page 3

IPCC |35e |Fast Track | Indirect Taxes 4

98851 25025 / 26 www.mastermindsindia.com

MASTER MINDS

1. INTRODUCTION TO SERVICE TAX

Applicability of Service Tax:

• Service Tax extends to whole of India, except state of Jammu & Kashmir (J & K)

• Taxable Territory (TT) = India – J & K

• Non-Taxable Territory (NTT) = Jammu & Kashmir + Outside India

• India includes territorial waters, subsoil, airspace as well as continental shelf and exclusive economics zone (only installation, structures and vessels located in continential shelf & EEZ for purpose of prospecting / extraction / production of mineral oil & natural gas and supply thereof).

0 12nm 24nm 200nm

High Seas

EEZ

ICW

ITW CZ

Base Line

X

J & K ITW = Indian territorial Water CZ = Contiguous Zone ICW = Indian Customs Water (ITW + CZ) EEZ = Exclusive Economic Zone 1nm = 1.852kms

Service Tax

Meaning Constitutional Authorities Administration

Service means a useful result / product of a labour which is intangible, can’t

be seen through eyes

Vest with Central Govt. Entry No. 97 of union

list of schedule VII

Central Excise Dept. i.e., (CBEC)

Service approach in India

Comprehensive approach (i.e., All services are

taxable except which are given in negative list)


No.1 for CA/CMA & MEC/CEC MASTER MINDS

Significance of above terms:

Activity Means legal obligation to do or not to do an act

By a person for another

Service should be provided by a person to another. For levy of S.T two persons are required one is S.P and another is S.R. So, self service is not taxable.

Exceptions to the above: Exception 1: An establishment of a person located in taxable territory & another establishment of such person located in non-taxable territory are treated as distinct persons and inter provision of services are taxable. Exception 2: An unincorporated AOP/BOI & its members are treated as distinct persons and inter provision of services are taxable.

Person includes An individual, HUF, A company, A society, LLP, A firm, An AOP/BOI whether incorporated or not, Government, A local authority, Every artificial juridical person

For Consideration Means everything received/recoverable in return for a service which includes monetary or non- monetary or deferred consideration

Monetary consideration Non - monetary consideration

Consideration received in the form of money. 'Money' includes not only cash but also cheque, promissory note, bill of exchange, LOC etc

Essentially means compensation in kind & provision of service in return for • Supply of goods & services • Tolerating an act or a situation • Refraining or forbearing to do an act • Doing or agreeing to do an act

Includes But shall not include Service means

• Any activity • Carried out by a

person for another • For consideration

A declared service • IMAGE I - Immovable Property M - Money A - Actionable claim G - Goods (incl. deemed sale) E - Employer & Employee

• Fee taken by a court

Service Sec.65B (44)

Explanations to the definition of Service

Explanation-III

Explanation-II

Explanation-I Explanation-IV

Deemed distinct person

i) Un incorporation association & its members

ii) An establishment in taxable territory and any of his other establishment in a non – taxable territory

iii) Service provided by the members of joint venture to joint venture and vice versa

Branch/ agency/ representational

office to be regarded as

establishment

Considered as service

Transaction in money shall not include

i) money conversion for a separate consideration (or)

ii) Commission charged by a lottery distributor (or)

iii) Commission charged by foreman of chit fund.

Not covered in service

i) Functions performed by MP’S; MLA’S etc.

ii) Duties performed by constitutional functionaries.

iii) Duties performed by chairperson/member of govt. bodies



MASTER MINDS

Implications: i) Activities without any consideration (donations, gifts etc) – not taxable. ii) An act by a charity for consideration would be a service and taxable. iii) Conditions in a grant stipulating merely proper usage of funds & furnishing of accounts – Not a

service. iv) Donations to a charitable organization are not consideration unless charity is obligated to provide

something in return. v) Fines & penalties which are legal consequences of a person's actions are not in the nature of

consideration for an activity.

Declared Services (Sec. 66E)

1. Renting of immovable property; 2. Construction of a complex, building, civil

structure/part thereof, including sale, except when consideration is received after issuing completion certificate by competent authority

3. Temporary transfer/permitting the use / enjoyment of any intellectual property right;

4. Development, design, programming etc. of IT software;

5. Agreeing to refrain from an act, or to tolerate an act / situation, or to do an act;

6. Transfer of goods without transfer of right to use (hiring, leasing, licensing etc)

7. Activities w.r.t. delivery of goods on hire purchase / installment system.

8. Service portion in execution of a works contract; 9. Service portion in an activity wherein goods,

being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied.

10. Assignment by the government of the right to use the radio - frequency spectrum and subsequent transfers thereof.

SERVICE DOES NOT INCLUDE (IMAGE)

1. Transfer of title in Immovable Properties & Goods:

Immovable Property: Things rooted in earth, or embedded in earth or, permanently fastened to anything embedded in earth.

Goods: ‘Every kind of moveable property other than actionable claims and money, and includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under contract of sale’.

2. Deemed sale under article 366(29A) of constitution:

a) Transfer of property in any goods for consideration.

b) Transfer of property in goods involved in works contract.

c) Delivery of goods on hire-purchase / installment system.

d) Transfer of the right to use any goods for consideration. e) Supply of goods by any unincorporated AOP/BOI to its

members. f) Supply of goods, being food or any other article for human

consumption or any drink (whether or not intoxicating), for consideration.

3. Transactions only in money or actionable claims:

The following activities comes under transactions only in money: i) The principal amount of deposits /

withdrawals in a bank account. ii) Advancing/repayment of loan. iii) Conversion of Rs.1,000 currency note into

one rupee coins

The following activities does not include transaction only in money. (So these are taxable): i) Conversion of money from one form to another

for consideration ii) Commission charged by foreman for conduct /

organizing of chit fund.

Actionable Claims includes Any claim to a debt other than a secured debt or beneficial interest in any movable property not in possession. i) Includes unsecured debts, lotteries ii) Not to include coupons and vouchers.

Actionable Claims does not includes Commission charged by lottery distributor / selling agent by way of promotion / marketing or selling of lottery tickets.



4. Provision of service by an employee to the employer:

a) Only those services that are provided in the course of employment by employee to the employer are not taxable.

b) Services provided on contract basis i.e. principal-to-principal basis are taxable. c) Amounts paid by the employer to the employee for premature termination of a contract are in

relation to services provided in the course of employment.

5. Any fee taken by court: Fees taken in any court or tribunal established under any law for the time being in force.

Whether following payments constitute a consideration for provision of service?

S. No. Nature of payment Whether it is consideration for service?

1)

Imposition of a fine or a penalty for violation of a provision of law. Is fine or penalty the consideration for the activity of breaking the law?

In order to be service, an activity has to be carried out for a consideration. Therefore fines and penalties which are legal consequences of a person’s actions are not in the nature of consideration for an activity.

2) Amount received in settlement of dispute.

Would depend on the nature of dispute. Per se such amounts are not consideration unless it represents a portion of the consideration for an activity that has been carried out. If the dispute itself pertains to consideration relating to service then it would be a part of consideration.

3) Amount received as advances for performance of service.

Such advances are consideration for the agreement to perform a service.

4) Deposits returned on cancellation of an agreement to provide a service.

Returned deposits are in the nature of a returned consideration. If tax has already been paid the tax payer would be entitled to refund to the extent specified and subject to provisions of law in this regard.

5) Advance forfeited for cancellation of an agreement to provide a service.

Since service becomes taxable on an agreement to provide a service such forfeited deposits would represent consideration for the agreement that was entered into for provision of service.

6) Security deposit that is returnable on completion of provision of service.

Returnable deposit is in the nature of security and hence do not represent consideration for service. However if the deposit is in the nature of a colorable device wherein the interest on the deposit substitutes for the consideration for service provided or the interest earned has a perceptible impact on the consideration charged for service then such interest would form part of gross amount received for the service. Also security deposit should not be in lieu of advance payment for the service.

7) Security deposits forfeited for damages done by service receiver in the course of receiving a service.

If the forfeited deposits relate to accidental damages due to unforeseen actions not relatable to provision of service then such forfeited deposits would not be a consideration in terms of clause (vi) of sub-rule (2) of rule 6 of the Valuation Rules.

8) Excess payment made as a result of a mistake.

If returned it is not consideration. If not returned and retained by the service provider it becomes a part of the taxable value.

9)

Demurrages payable for use of services beyond the period initially agreed upon e.g. retention of containers beyond the normal period.

This will be consideration.



MASTER MINDS

2. POINT OF TAXATION RULES 2011

Point of Taxation (POT) POT means point in time when service is deemed to be provided.

Invoice Invoice means the invoice referred to in rule 4A of The Service Tax Rules, 1994 and shall include any document as referred to in the said rule.

Date of Payment (DOP) (Rule – 2A)

Normal Case (Rule – 3)

Date of entry in books or Date of crediting in Bank A/c,

Special Case: • When there is a

change in effective rate of tax (Rule – 4) or

• New levy between date of book entry or credited to bank (Rule – 5)

If payment is credited in the bank with in 4 days from the effective date of new rate then date of payment is date of entry in the books. Payment is credited in the bank after 4 days then date of payment is date of crediting in the Bank A/c.

Relevant date for determination of rate of service tax, value and rate of exchange.

Shall be all the time when taxable service has been provided (or) agreed to be provided. Note: Rate of exchange shall be as per GAAP on the when POT arises.

Point of Taxation in case of continuous supply of service:

Continuous Supply of Service - Rule 2 (c) of POT Rules, 2011 Means any service –

a) Which is provided, or to be provided continuously or on recurrent basis, period exceeding 3 months with the obligation for payment periodically or from time to time, or

b) Notified services: The following notified services -

i) Telecommunication service; and

ii) Service portion in execution of a works contract.

In case of continuous supply of services, date of completion of provision of service shall be deemed to be date of the completion of an event.

Due date for Payment of Service Tax:

Assessee is- Payment

For services deemed to be provided (i.e. for services whose Point of Taxation falls) in-

Due date of payment

Quarter other than quarter ending March

a) 6th day of month following that quarter if service tax is paid electronically through internet banking; and

b) 5th day of the month following that quarter, in any other case

A one person company Whose aggregate value of taxable services provided from one or more premises is Rs.50 lakhs or less in the previous financial year, or is an Individual or proprietary firm or partnership firm / HUF

Quarterly (Jan. to Mar.,

April to June, & so on)

Quarter ending March 31st day of March.

Any month (except March)

a) 6th day of next month, if service tax is paid electronically through internet banking

b) 5th day of next month, in other cases Any other assesse Monthly

Month ending March 31st day of March.

Note: Option to pay tax on receipt basis on services of upto Rs. 50 lakh, if services provided last year are ≤ Rs. 50 lakh: In case of individuals, partnership firms and one person companies.

Which ever is

earlier





MASTER MINDS

3. VALUATION OF SERVICE TAX AND ITS RULES 2006

Section Valuation situation Value i. Where total consideration

is monetary consideration Taxable value = Gross amount charged exclusive of ST

ii. Where consideration is partly in kind (non-monetary consideration)

Service Tax (Determination of value) Rules, 2006, Rule 3(b): Taxable value = [Monetary consideration + market value of non-monetary consideration] (but it shall not be less than the cost of provisioning of service)

Sec.67(1)

iii. Where consideration is “not-quantifiable”

Taxable value = Value determined in prescribed manner no manner been prescribed so far but it is practically best judgment assessment

Sec.67(2) Service Tax not collected not charged

Calculate service tax on reverse working:

S.T = ( ))5.114.,e.i(taxserviceofRate100

5.14.,e.itaxserviceofRatexedargchamountGross

+

Sec.67(3) Scope of gross amount charged

Gross amount charged includes: Any amount received towards the taxable service 1. Before 2. During or 3. After provision of such service

Points to be noted:

1. In case of transactions with associated enterprise, payments received shall include any amount credited or debited, to any account, whether called ‘Suspense Account’.

2. In case if it is composite service, service tax is not levied on such part of service.

3. Service Tax liability will still be there, even if the Service Tax is not paid by the service recipient.

4. Service Tax is payable in the total amount, inclusive of the TDS.

5. Liability will exist even if the service provider has not collected service tax from his client. Service Tax Valuation Rules, 2006:

Rule 2A

Works contract service

Value of the service portion can be determined - Rule 2A(i)

Value of the service portion can not be determined - Rule 2A(ii)

Pay service tax @ 14.5% (including SBC) on value of works contract service:

Gross amount charged for the works contract

Rs.xxx

Less: Value of transfer of property in goods and VAT

(xxx)

Value of works contract service

xxx

Pay service tax at composite rates on gross amount charged for the works contract excluding VAT:

Service Value of the service portion

Original works 40% of gross amount charged

Maintenance and repair of goods (movable)

70% of gross amount charged

Completion and finishing services (blazing, plastering, flooring)

70% of gross amount charged (w.e.f 1-10-2014)

Rule 2B

Purchase / Sale of Forex/ Money changing services: 1. For Purchase: (RBI rate – Buying rate) x Forex units 2. For Sale: (Selling rate – RBI rate) x Forex units 3. If RBI rate not available then value = 1% of gross amount of INR 4. Cross currency (without INR) = Value = 1% of least of amount obtained by coverting

into INR



Rule 2C

Value of service portion in supply of food/article in a restaurant/ outdoor catering:

Value of service portion shall be % of total amount charged In a restaurant 40

As part of outdoor catering 60 Total amount = The sum total of gross amount charged & FMV of all goods and services supplied in or in relation to supply of food/other article less i) Amount charged for such goods/services provided by the service receiver ii) VAT/CST levied.

Rule 3

Determination of Value when consideration is wholly/partly not in money [Rule 3]: a) Value shall be equivalent to the gross amount charged for providing similar service to any

other person. Subject to fulfillment of the conditions. • Such service is in the ordinary course of trade • The gross amount charged is the sole consideration.

b) If value cannot be determined as per (a) – Value shall be such amount in money + equivalent value of in kind consideration (Should not be < cost).

Rule 4

Rejection of Value [Rule 4]: Where CEO is not satisfied with the value determined by the service provider, he shall issue a notice to show cause why the value should not be fixed at the amount specified in notice. After giving reasonable opportunity, CEO shall determine the value of such service.

General Provision: Inclusion / exclusion of certain expenditure/costs: All the expenditure/costs incurred by the service provider in the course of providing taxable service should be included.

Rule 5

Exception to General provision: Concept of Pure Agent: Pure agent cost shall be excluded if the following conditions are satisfied 1. Service provider makes payment to 3rd party for Goods / Services 2. Service recipient uses such goods / services. 3. Service recipient liable to make payment to 3rd party. 4. Service recipient authorizes service provider 5. Service recipient knows that goods / services are procured from 3rd party. 6. Payment indicator in invoice separately. 7. Only actual amount should be recovered. 8. Those goods / services are in addition to the services which he provides on his own A/c. Meaning of Pure Agent: i) Enters into contractual agreement with recipient to incur expenditure ii) Neither intends to hold nor holds any title of Goods iii) Does not use such Goods / Services iv) Receives only actual amount of expenditure (or) cost.

Rule 6

Inclusions Exclusions Stock Broking Brokerage / Commission

Charged by a Broker Tele

communication Initial deposit made by the subscriber

Tele communication

Adjustments from any Deposits Air Travel Agent Air fare collected by Air Travel Agent

Insurance Amount of Premium Rail Travel Agent Rail fare collected by Rail Travel Agent

Air Travel Agent Commission / Brokerage Interest Interest on delayed payment of any consideration

Authorized service station

Reimbursement from manufacturing companies

Accidental Damages

Unforeseen action not related to provision of services

Rail Travel Agent

Amount of commission Subsidy & Grant Not directly effecting value of service

Clearing and forwarding

agency

Remuneration or commission paid to such agent

Government Taxes The taxes levied by any government on any passenger traveling by air, if shown separately on the ticket.

Demurrage Amount realized as demurrage



MASTER MINDS

4. GENERAL PROCEDURE Person liable to pay service tax:

Who is liable to pay Service Tax

Sec.68(1) Sec.68(2)

Every Person providing Taxable services to any person shall pay Service Tax

Reverse charge Mechanism by notification issued by Central Govt.

i.e. Service Provider Other than service provider (i.e. Service Receiver, aggregator)

Full Reverse Partial Reverse

Service Provider Service Receiver

Individual; HUF; Partnership firm;

AOP

Business Entities registered as body

corporate

Service Provider person liable for paying service tax(other than service provider)

Insurance Agent Any person carrying Insurance Business

GTA Services Registered factory societies; dealer other than individual Note: Any Person who pays or is liable to pay freight, is liable to pay S.T

Sponsorship service Body corporate (or) partnership firm

Legal Services i. an arbitral tribunal, or ii. a firm of advocates or

an individual advocate other than senior advocate

Business Entities having turnover in preceding FY > 10 lakhs. (So, ≤ 10 lakhs then no service tax) Note: if S.P is Senior Advocate then reverse charge will not apply. i.e. S.P is liable to pay

Govt. or local authority by way of any service Except i. renting of immovable

property, and ii. services specified in

sub clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994,

Business Entity

Director Company / body corporate Import services Importer Recovery Agent Banking Co. Financial

institutions / NBFC’s Supply of Man power for any purpose or security services (in this case S.P - Individual; HUF; Partnership firm; AOP

Business Entity (body corporate) In this case service receiver must be Business Entities registered as body corporate

a selling or marketing agent of Lottery tickets

Lottery Distributor or selling agent of the state Govt.

Services involving an aggregator Aggregator (other than S.R)

Refer Note

Specified Service SP SR Renting of motor Vehicle on abated value (who is not in the similar line of business)

Nil 100%

Renting of motor Vehicle on Non - abated value (who is not in the similar line of business)

50% 50%

Execution of works contract 50% 50%

Note: Aggregator





MASTER MINDS

Service tax code number (STC):

1. STC is a 15 digit alpha-numeric code.

2. It is a combination of:

Particulars No. of Digits Permanent Account Number (PAN) 10

Alpha-code (ST) 2

Premises code – Numeric 3

3. STC will be allotted within 3 working days, from the date of application.

4. It is mandatory to quote the STC number, on all documents relating to Service Tax.

Procedure for issuance of invoice / bill / challan:

Maintenance of records under the service tax law:

Invoice System

Service provider to Issue an Invoice

Time limit for issuance of Invoice

Contents of Invoice

Option not to issue Invoice

Service provider shall issue an invoice in respect of taxable

services provided (or) agreed to be provided

It should be issued within *30 days from the date of completion

(or) Date of payment

whichever is earlier

a) Name, Address & Registration No. of such person

b) Name and Address of Service recipient

c) Value & description of service.

d) Service tax payable.

For small advance upto Rs.1000/-.

*Incase of banking & other financial institutions including NBFC’s 45 days instead of 30 days

Maintenance of Records

Computerized records acceptable

Details to be given with first return

Records to be preserved for 5 years

All records prepared for Accounting Transactions

All other financial Records

Records including computerized date

maintained by Assessee

5 years, immediately after the financial

year to which such records pertain.

Shall be acceptable

a) For provision of service b) Receipt of Input services c) Receipt; purchase of input & capital goods d) Other activities.



Various composition schemes for payment of service tax:



MASTER MINDS

Provisions relating to filing of returns:

1. Person liable to pay service tax and also an ISD is liable to file service tax return

2. Filing of returns: The returns are to be filed as follows

Assessee Authority to whom filed

Duration of return Form Time of filing return**

All assesses Superintendent Half-yearly ST-3 or ST-3A

By 25th of the month following the end of the said half-yearly

(i.e. 25th Oct & 25th April)

Input service distributor Superintendent Half-yearly ST-3

By the last day of the month following the half-year period.

(i.e. 31st Oct & 30th April)

All assesses Superintendent Annual Return - By the 30th day of November of the succeeding financial year.

Mandatory e- filling: Every assessee shall submit such return electronically.

CBEC may extend such period as deemed necessary under circumstances of special nature to be specified in such order.

3. Contents of the return: The service tax return contains the following major details

a) Particulars of assessee viz. name, registration number, address, etc.

b) Particulars of taxable services viz. nature, classification, etc

c) Particulars of period viz. financial year, half year period.

d) Particulars of value of taxable services viz. amount received, advance received, details of exempted services, abatement/ exemption claimed, etc.

e) Particulars of service tax viz. service tax & education cess payable, details of payment, interest or penalty paid, payment of excess collection of service tax, if any, etc.

f) Particulars of Cenvat Credit viz. opening balance, availed, utilized, closing balance, etc

4. Documents to be submitted along with return: The return shall be accompanied by

a) Copies of GAR-7 challans.

b) In case of provisional assessment, a memorandum in form ST-3A giving full details of the difference between the amount of provisional amount of tax deposited and the actual amount for each month ;

c) In case of first return, a list of all accounts maintained by him in relation to service tax including memoranda received from his branch office.

5. Manner of filing returns:

a) In case of multiple service providers: If an assessee provides more than one taxable service, filing of a single return would be sufficient.

b) Nil Return: If no service has been provided during a half year and no service tax is payable, the assessee has to file a nil return within the prescribed time limit.

c) E-filing of service tax returns: E-filing is a facility for electronic filing of service tax returns by the assessee from his office, residence or any other place of choice, through internet, by using a computer. This facility is available to all service providers.

6. Revision of Return [Rule 7B]:

a) An assessee may submit a revised return, in form ST-3, in triplicate, to correct a mistake or omission, within 90 days from date of submission of original return.

b) An assesse who has filed the annual return referred to in sub rule (3A) of rule 7 by the due date may submit a revised return within a period of one month from the date of submission of the said annual return.



7. Where the return is furnished after the due date CG may collect fee for such late payment, computed as follows:

Period of delay in furnishing return Fees to be paid

15 days from the due date Rs.500

15 days > due date ≤ 30 days Rs.1,000

> 30 days from the due date Rs.1,000 + Rs.100 for every day from the 31st day till the date of furnishing of return subject to a maximum of Rs.20,000**

Delay in furnishing the annual return [Rule7C(2)]:

Where the annual return is filed by the assesse after the due date, the assesse shall pay to the credit of central government,

An amount calculated at the rate of Rs. 100 per day for the period of delay in filing of such return, but subject to a maximum of Rs. 20,000.

LIABILITY OF A SERVICE PROVIDER IN DIFFERENT CASES

In case of excess collection of tax

a) In case his collection is more than his payment, he shall promptly deposit the excess with the Government or refund the amount collected in excess to the customer.

b) Any delay in this regard attracts payment of interest @ 18% p.a.

In case of excess payment of service tax against his

liability

a) The assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.

b) However, self-adjustment of such excess amount paid shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability, valuation or applicability of any exemption notification

In case of An assessee who has collected service tax from a client is unable

to perform the service

The assessee may take the credit of such excess service tax paid by him, if the assessee a) has refunded the payment or part thereof, so received for the

service provided to the person from whom it was received; or b) has issued a credit note for the value of the service not so provided

to the person to whom such an invoice had been issued

advance payment of service tax

Adjust the amount, so paid as advance against the service tax which he is liable to pay for the subsequent period. Such facility shall be available when the assessee: a) intimates the details of the amount of service tax paid in advance, to

the Jurisdictional Superintendent of Central Excise within a period of 15 days from the date of such payment, and

b) Indicates the details of the advance payment made, and its adjustment, if any in the subsequent return to be filed under section 70.(Rule 6(1A))

Copyrights Reserved

To MASTER MINDS, Guntur



MASTER MINDS

Different types of Assessments:

Interest on delayed payment of service tax: In case service tax is not remitted within the due date specified u/s. 68, interest shall be payable at the rates specified in the table below:

Extent of delay Simple interest rate per annum

Up to 6 months 18%

More than 6 months & up to 1 year 18% for first 6 months and 24% for the period of delay beyond 6 months

More than 1 year 18% for first 6 months 24% for second 6 months and 30% for the period of delay beyond 1 year

Note: In case of a service provider, whose value of taxable services provided in a financial year does not exceed Rs. 60 lakhs. Rate of Interest shall be payable at 3% lesser than the above mentioned rates.

5. NEGATIVE LIST & SSP

Negative List Services

1. Services by Govt. (or) Local Authority

2. Services by RBI.

3. Services by Foreign Diplomatic Mission located in India

4. Services relating to agricultural produce.

5. Trading of Goods.

6. Manufacturing of Goods

7. Selling of space for advertisement in print media.

8. Toll Charges

9. Betting; gambling

10. Admission to entertainment event (omitted)

11. Distribution of electricity.

12. Education.

13. Renting of Residential House

14. Finance

15. Transportation of passengers

16. Transportation of Goods.

17. Funeral.

Write a short note on Assessment

Assessment Definition

Self Assessment Provisional Assessment

Best Judgment Assessment

Assessment Includes self Assessment of service tax;

Re-Assessment, provisional Assessment,

Any order of Assessment. In which tax assessed is

NIL

Every person liable to pay service tax shall

himself assess the tax due on services provided by him

a) Assessee unable to correctly estimate service tax liabilities.

b) Make an application to AC / DC

c) Giving reasons for provisional assessment

d) AC/DC on receipt of such request.

e) Allow the payment of service tax on provisional basis

Shall furnish to superintendent of Central

Excise a return in such form; in such manner as

may be prescribed.

It can be done by CEO if a) Assessee fails to

furnish return b) Furnished return but

fails to assess the tax in accordance with provision.



SERVICE INCLUSION EXCLUSION POINTS TO BE NOTED

1. Services Provided by Govt. or Local Authority [Section 66D (a)]

All services provided by GOVT., in terms of their sovereign right to BUSINESS ENTITIES Examples: • Grant of mining licenses • Audit of C&AG • Election Commission of

India, • Functions of Union or

State Ministers • Defence etc.,

i) Services rendered by the department of posts:

• Speed post, • Express parcel post, • Life insurance and • Agency services to a

person other than Govt. ii) Services in relation to

vessel or an aircraft iii) Transport of goods and

passengers iv) w.e.f. 1-4-2016 Any

service, other than services covered under clause (i) to (iii) above, provided to business entities;

Reverse charge applicable in case of any services (i.e business entity is liable to pay S.T.), except 1) Renting of immovable

property and 2) Services specified in Sec.

–(a)(I),(ii) & (iii)

2. Service Provided By R.B.I [Section 66D (b)]

All type of services provided by R.B.I

Services provided to R.B.I. However, service received by the RBI, from outside India in relation to Management of Forex Reserves are exempt.

3. Services Provided By A Foreign Diplomatic Mission Located In India [Section 66D(c)]

All type of services This exemption is not applicable to any office or establishment of an International Organization.

Service provided to a foreign diplomatic mission located in india is exempt from S.T.

4. Services relating to Agriculture or Agricultural produce

[Section 66D (d)]

• Cultivation, harvesting, testing (All types of testing activities which are directly related to production of any agricultural produce have been covered under the negative list).

• commission on sale or purchase of agricultural produce

• Supply of farm labour • Trimming, sorting bulk

packing etc., thereby marketable in the primary market

• Renting of agro machinery or vacant land

• Loading, unloading, packing, storage and warehousing of agricultural produce

• Agricultural extension services

• Services by any agricultural produce marketing committee

• Cultivation of ornamental Flowers

• Poultry Farm

• Potato chips or tomato ketchup

• Grinding, sterilizing extraction of packaging in retail packs of agricultural products.

• “Agriculture” means cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for foods, fiber, fuel, raw materials or other similar products.

• “Agricultural produce” means any produce of agriculture on which either no processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market, it also includes specified processes in the definition like tending, pruning, grading, sorting etc, which may be carried out at the farm or elsewhere as long as they do not alter the essential characteristics,-sec 65B(5). [definition of agricultural produce covers only ‘paddy’; but excludes ‘rice’]

5. Trading of good (i.e. Movable) [Section 66D (e)]

“Goods” means every kind of movable property other than actionable claims and money and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

• Sale or purchase of goods • Future contracts • Commodity futures • Forward contracts in

commodities or currencies.

• Auxiliary services relating to future contracts of commodity futures provided by commodity exchanges (i.e Commission agents), clearing houses of agents

Exemptions: • Job work in relation to

agriculture, printing or textile processing Cut and polished diamonds, jewellery

• E.D. paid by manufacturer



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6. Process amounting to manufacture or production of goods Excluding Alcoholic Liquor for Human Consumption

[Section 66D (f)]

• Excisable goods for which central excise duty or state excise Act, or Medicinal and Toilet preparation (Excise Duties) Act, will not be liable to service tax.

• Process for which E.D. exempted (i.e. Non-dutiable good).

Process do not amounting to manufacture Even, it ED is wrongly paid on a certain process, service tax would still be leivable.

Carrying out of intermediate production process of alcoholic liquor for human consumption on job work basis attract service tax. However job work in relation to agriculture, textiles and processing are not taxable.

7. Selling of space for advertisement in print media

[Section 66D (g)] Book includes every volume, part of division of a volume, and pamphlet, in any language, and every sheet of music, map chart or plan separately printed.

sale of space for advertisement in print media • Book • Newspaper But excludes: • Business directories • yellow pages • paid catalogues so these are taxable

• Sale of space for adv. on radio or television

• Sale time slot by a broadcasting org

• bill boards • public places, • cell phones • automated teller

machines, internet • aerial advertising • buses, taxis, trains etc.,

• Adv. Agencies relating to making or preparation of adv. are taxable

• Canvassing advertisement for publishing on a commission basis by persons/agencies is taxable.

8. Access to a road of a bridge on payment of toll charges

[Section 66D (h)]

• Toll charges collected to access to National Highways or State Highways

The activity of toll collection outsourced to any third party agency who undertakes the work for consideration.

Example: Intertoll India Consultants was under taken a sub-contract to collect toll on commission basis from Noida Toll Bridge Company (i.e. agency authorized to levy toll). Commission is subject to S.T.

9. Betting, gambling or lottery [Section 66D (i)]

Sale of lottery tickets [UOI v Martin Lottery Agencies Ltd (2009)

• Sale promotion or marketing of lottery tickets shall be liable for S.T.

• Distributor or selling agent has opting to pay S.T. at composition scheme as per Rule 6(7C) of Service Tax Rules, 1994

Services by selling or marketing agent of lottery tickets to a distributor or selling agent. Taxable under reverse charge mechanism.

10. Admission to Entertainment Events of Access to Amusement Facilities [Section 66D (j)] Omitted w.e.f. 1-6-2015. 11. Transmission or

Distribution of Electricity [Section 66D (k)]

Services provided by • The Central Electricity

Authority • A State Electricity Board • A State Transmission

Utility A Transmission licensee of distribution licensee under the Electricity Act.

• Charges collected by a developer or a housing society for distribution of electricity within a residential complex Installation of generator

• If services provided by private contractors, Then taxable.

• Installation of windmill

"Electricity transmission or distribution utility" means the Central Electricity authority; a State Electricity Board; a Central Transmission Utility (CTU) or a State Transmission Utility (STU) notified under the Electricity Act, 2003; or a distribution or transmission licensee, licensed under the said Act, or any other entity entrusted with such function by the Central or State Government - Sec. 65B(23).

12. Education Services [Section 66D (l)]

Services by way of I. Pre-school education

and education upto higher secondary school (i.e. XII standard)

II. Education as a part of a curriculum for obtaining a qualification recognized by any an Indian law.

III. Education as a part of an approved vocational education course.

• Qualification recognised by a law of foreign country.

• Services provided to educational institutions.

• Private tuitions. • Services by educational

institutions for campus recruitments

Approved vocational education course means: • A course run by an

industrial training institute or an industrial training Centre affiliated to the National or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961: or




Exemptions from S.T. • Training relating to arts,

culture or sports. • Auxiliary educational

services.

• A Modular Employable Skill Course, ‘approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment – Sec. 65B(11)

13. Renting Of Residential Dwelling for use as residence

[Section 66D (m)]

I. Govt. Dept. Allots houses to its employees and charges a license fee

II. Flats given on rent for residential purposes

• Residential house taken on rent for commercial purposes

• House is given on rent and the same is used as a hotel or a lodge

• Rooms in a hotel or a lodge are let out

Property tax leived and collected by local bodies shall be deducted from gross amount charged for renting of immovable property for the relevant period.

14. Banking, Financial and Insurance services [Section 66D (n)]

SERVICES BY WAY OF I. Extending deposits,

loans, or advances in so far as the consideration is represented by way of interest or discount

II. Foreign currency exchange amongst banks or authorized dealers or among banks and authorized dealers.

• Interest portion of leasing or hire purchase after claiming an abatement @90%.

• All other services of a banker or financial and insurance services

Abatement is available only for the interest, i.e., (Instalment amount less principal portion). Abatement shall not apply to other items like lease management fees, Processing fees, Documentation charges, etc.

15. Services Relating to Transportation of Passengers

[Section 66D (o)]

Services by • A stage carriage • Railways in a class other

than first class or AC coach

• Metro, Monorail or Tramway

• Inland waterways • Public transport (other

than tourism purpose) in a vessel between places located in India and

• Metered Cabs, Auto rickshaws,

1. Jeeps, Matadors, Tractor etc.,

2. Radio Taxis public transport predominantly for tourism

3. Transportation of passengers by Ropeway, cable car or Aerial Tramway are liable to pay service tax.

• Stage Carriage: A motor Vehicle constructed of adapted to carry more than 6 passengers excluding the driver, for hire or reward, separate fares are paid by or for individual passengers either for the whole journey or for stages of the journey.

• Metered cabs excludes radio taxis.

16. Services Relating to Transportation of Goods [Section 66D (p)]

I. By Road (Except GTA and Courier Agency)

II. By Aircraft or vessel from a place outside India up to the customs station

III. By Inland Waterways

• Goods Transport Agency • Courier agency • Transportation of goods

by rail.

• Transportation of specified goods by a GTA, or by Rail or a vessel from one place in India to another

• Transportation of fruits, vegetables, Eggs, Food grains or pulses by GTA

These are exempted. 17. Funeral, Burial,

Crematorium or Mortuary Services including Transportation of the Deceased.

[Section 66D(q)]

All Relevant Services Nil After Death of a person, all services are not taxable.

Conditions for availing the basic exemption limit (SSP).

Exemption for aggregate value up to 10 Lakhs

1. Eligible small service providers: This exemption applies to a “small service provider”. Small service provider means a service provider, the “aggregate value” of taxable services rendered by whom, from one or more premises, does not exceed Rs 10 lakhs in the preceding financial year.



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“Aggregate value” means

i) The sum total of value of taxable services charged in the first consecutive invoices issued or required to be issued, as the case may be, during a financial year

ii) But does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviable thereon under any other notification.

2. Quantum of exemption: A small service provider is entitled to 100% exemption from service tax during the current financial year.

3. Nature of Exemption:

a) The exemption benefit is optional,

b) Once exercised, shall not be withdrawn, during the remaining part of the financial year.

4. Conditions as to CENVAT Credit: a) Service provider shall not avail the CENVAT Credit b) The service provider can claim CENVAT credit, only in respect of inputs / input services received

after the exemption period.

5. No Basic Exemption for the following persons: a) Persons using Brand / Trade Name of another person can’t avail benefit of threshold exemption. b) Service receivers, who are liable to pay Service Tax cannot avail the benefit of threshold exemption.

THE PRINCIPLES OF INTERPRETATION OF SPECIFIED DESCRIPTIONS OF SERVICES [SECTION 66F]:

Principles of Interpretation of specified Description of service

Reference to main service not to include incidental service Sec.66F(1)

Specific Description shall be preferred over a General Description Sec.66F(2)

Illustration: Access to Road / Bridge on payment of

toll covered in – ve list service

Illustration: Service provided by real estate agent are in the nature of Intermediary services relating

to immovable properties. So, Incidental Service Service provided in relation to collection of

toll is liable for service tax

SSP exemption is not available in respect of

Taxable services provided under brand name, whether registered or not, of another person.

Services taxed under reverse charge mechanism even if the turnover of service provider/ receiver is less than Rs.10 lakh.

If a service provider avails SSP exemption, he cannot claim Cenvat credit on inputs, input services and capital goods.

Other points

Exemption is optional

Service provider has an option not to avail the SSP exemption and pay service tax. Option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year.

Aggregate value of all taxable services provided from all premises to be considered. In case of goods transport agency (GTA), for the purpose of determining the aggregate value not exceeding Rs.10 lakh, the payment received towards the gross amount charged by the GTA on which service tax is payable by the consignor or consignee under reverse charge mechanism shall not be taken into account.



Bundled Service and its principles: “Bundled service” means a bundle of provision of various services of which provision of one service is combined with an element or elements of provision of any other service or services.

Taxability of bundled service: As per Section 66F(3), the taxability of a bundled service shall be determined in the following manner, namely:

1. Natural bundle of Service: Classified as service which gives it the essential character: If various elements of such service are naturally bundled in the ordinary course of business

2. Artificial bundle of service: Classified as one which attracts the highest tax liability: If various elements of such service are not naturally bundled in the ordinary course of business.

6. EXEMPTIONS AND ABATEMENTS

Service Tax Mega Exemptions Notification

[Notification No.25/2012-ST dated 20-06-2012]

Entry No. Exempted Services

1. Services provided to the United Nations or a specified international organization;

2.

i) Health care services by a clinical establishment, an authorised medical practitioner or para-medics;

ii) Services provided by way of transportation of a patient in an ambulance, other than those specified in (i) above;

2A. Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation;

2B. Services provided by operators of the Common Bio-medical Waste Treatment Facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto;

3. Services by a veterinary clinic in relation to health care of animals or birds;

4. Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities; Note: if any service provided for consideration is chargeable to service tax.

5. Services by a person by way of— a) renting of precincts of a religious place meant for general public; or b) conduct of any religious ceremony;

5A.

Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement; Specified organisation means: Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking; or Haj Committee of India

6.

Services provided by— a) an arbitral tribunal to—

i) any person other than a business entity; or ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year;



MASTER MINDS

b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to— i) an advocate or partnership firm of advocates providing legal services; ii) any person other than a business entity; or iii) a business entity with a turnover up to rupees ten lakh in the preceding financial year; or

c) A senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession.

8. Services by way of training or coaching in recreational activities relating to arts, culture or sports;

9.

Services provided,— a) by an educational institution to its students, faculty and staff; b) to an educational institution, by way of,—

i) transportation of students, faculty and staff; ii) catering, including any mid-day meals scheme sponsored by the Government; iii) security or cleaning or house-keeping services performed in such educational institution; iv) services relating to admission to, or conduct of examination by, such institution;]

9A.

Any services provided by,— i) the National Skill Development Corporation set up by the Government of India (NSDC); ii) a Sector Skill Council (SSC) approved by the National Skill Development Corporation; iii) an assessment agency approved by the Sector Skill Council or the National Skill Development

Corporation; a training partner approved by the National Skill Development Corporation or the Sector Skill Council, in relation to (a) the National Skill Development Programme implemented by the National Skill Development Corporation; or (b) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill Development Corporation.

9B.

Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme,— a) two year full time residential Post Graduate Programmes in Management for the Post

Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management;

b) fellow programme in Management; c) five year integrated programme in Management.

9C. Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme.

9D. Services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training.

10.

Services provided to a recognised sports body by— a) an individual as a player, referee, umpire, coach or team manager for participation in a

sporting event organized by a recognized sports body; b) another recognised sports body;

11.

Services by way of sponsorship of sporting events organised,— a) by a national sports federation, or its affiliated federations, where the participating teams or

individuals represent any [district, State, zone or Country]; b) by Association of Indian Universities, Inter-University Sports Board, School Games Federation

of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;

c) by Central Civil Services Cultural and Sports Board; d) as part of national games, by Indian Olympic Association; or e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;

16.

Services by an artist by way of a performance in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre, if the consideration charged for such performance is not more than Rs.1,50,000: Provided that the exemption shall not apply to service provided by such artist as a brand ambassador.



18. Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below Rs. 1,000 per day or equivalent;

21.

Services provided by a goods transport agency, by way of transport in a goods carriage of,— a) agricultural produce; b) goods, where gross amount charged for the transportation of goods on a consignment

transported in a single carriage does not exceed one thousand five hundred rupees; c) goods, where gross amount charged for transportation of all such goods for a single

consignee does not exceed rupees seven hundred fifty; d) milk, salt and food grain including flours, pulses and rice; e) chemical fertilizer, organic manure and oil cakes; f) newspaper or magazines registered with the Registrar of Newspapers; g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or

mishap; or h) defence or military equipments; i) cotton, ginned or baled.

23.

Transport of passengers, with or without accompanied belongings, by— a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh,

Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal;

b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or

c) ropeway, cable car or aerial tramway (omitted)

25.

Services provided to Government, a local authority or a governmental authority by way of— a) water supply, public health, sanitation conservancy, solid waste management or slum

improvement and up-gradation; or b) repair or maintenance of a vessel; Note: This exemption is not applicable incase of Consultation, Designing etc..

26.

Services of general insurance business provided under following schemes— a) Hut Insurance Scheme; b) Agricultural Pumpset and Failed Well Insurance; c) Jan Arogya Bima Policy; d) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana); e) Pradhan Mantri Suraksha Bima Yojana;] f) ‘Niramaya’ Health Insurance Scheme implemented by Trust constituted under the provisions

of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).

26A.

Services of life insurance business provided under following schemes— a) Varishtha Pension Bima Yojana;] b) Pradhan Mantri Jeevan Jyoti Bima Yojana; c) Pradhan Mantri Jan Dhan Yojana;]

26B. Services by way of collection of contribution under Atal Pension Yojana (APY).

26C. Services of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority of India (PFRDA) under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013);

27.

Services provided by an incubatee up to a total turnover of fifty lakh rupees in a financial year subject to the following conditions, namely:— a) the total turnover had not exceeded fifty lakh rupees during the preceding financial year; and b) a period of three years has not been elapsed from the date of entering into an agreement as

an incubatee;

29.

Services by the following persons in respective capacities— a) sub-broker or an authorised person to a stock broker; b) authorised person to a member of a commodity exchange; c) selling agent or a distributor of SIM cards or recharge coupon vouchers; d) business facilitator or a business correspondent to a banking company with respect to Basic

Savings Bank Deposit Account covered by Pradhan Mantri Jan Dhan Yojana in the banking company’s rural area branch, by way of account opening, cash deposits, cash withdrawals, obtaining e-life certificate, Aadhar seeding;



MASTER MINDS

i) any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned in clause (g);

ii) business facilitator or a business correspondent to an insurance company in a rural area; or] e) sub-contractor providing services by way of works contract to another contractor providing

works contract services which are exempt; 33. Services by way of slaughtering of animals;

35. Services of public libraries by way of lending of books, publications or any other knowledge- enhancing content or material;

36. Services by Employees’ State Insurance Corporation to persons governed under the Emp-loyees’ Insurance Act, 1948 (34 of 1948);

38. Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets;

39. Services by Government, a Local Authority or a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243W of the Constitution;

40. Services by way of loading, unloading, packing, storage or warehousing of rice, cotton, ginned or baled;

41. Services received by the Reserve Bank of India, from outside India in relation to management of foreign exchange reserves;

42. Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India;]

43. Services by operator of Common Effluent Treatment Plant by way of treatment of effluent;

44. Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables;

45. Services by way of admission to a museum, national park, wild life sanctuary, tiger reserve or zoo;

46. Service provided by way of exhibition of movie by an exhibitor to the distributor or an association of persons consisting of the exhibitor as one of its members.

47.

Services by way of right to admission to,— i) exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet; ii) recognised sporting event; iii) award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is not more than Rs. 500 per person.

48.

Services provided by Government or a local authority to a business entity with a turnover up to rupees ten lakh in the preceding financial year. Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable to the following services, namely:- a) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994; b) services by way of renting of immovable property.

49. Services provided by Employees’ Provident Fund Organisation (EPFO) to persons governed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952);

50. Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999);

51. Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market;

52. Services provided by National Centre for Cold Chain Development under Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge dissemination;

53. Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India.

54. Services provided by Government or a local authority to another Government or local authority: Provided that nothing contained in this entry shall apply to services specified in sub-clauses (i),(ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994;



55. Services provided by Government or a local authority by way of issuance of passport, visa, driving licence, birth certificate or death certificate to individual;

56.

Services provided by Government or a local authority where the gross amount charged for such services does not exceed Rs. 5000/- : Provided that nothing contained in this entry shall apply to services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994: Provided further that in case where continuous supply of service, as defined in clause (c) of rule 2 of the Point of Taxation Rules, 2011, is provided by the Government or a local authority, the exemption shall apply only where the gross amount charged for such service does not exceed Rs. 5000/- in a financial year;

57. Services provided by Government or a local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority under such contract;

58.

Services provided by Government or a local authority by way of- a) registration required under any law for the time being in force; b) testing, calibration, safety check or certification relating to protection or safety of workers,

consumers or public at large, required under any law for the time being in force;

59. Services provided by Government or a local authority by way of assignment of right to use natural resources to an individual farmer for the purposes of agriculture;

60. Services by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution;

61.

Services provided by Government or a local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Government or the local authority before the 1st April, 2016: Provided that the exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource;

62. Services provided by Government or a local authority by way of allowing a business entity to operate as a telecom service provider or use radio frequency spectrum during the financial year 2015-16 on payment of licence fee or spectrum user charges, as the case may be;

63. Services provided by Government by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges (MOT).

Following taxable services are eligible for abatement from the gross amount in the following manner:

[Notification No. 26/2012-ST dated 20.06.2012]

WHETHER CENVAT credit is (�) – available (x) – not available (�, x) – available but satisfy some conditions

S. No.

Description of taxable service

Abatement portion

(%)

Inputs Capital Goods

Input service

1. Service in relation to financial leasing including hire purchase 90 � � �

2. Transport of goods by rail 70 x x �

2A Transport of goods in containers by any person other than Indian railways.

60 x x �

3. Transport of passengers, with or without accompanied belongings by rail

70 x x �

ABATEMENT IN RESPECT OF VARIOUS TAXABLE SERVICES



MASTER MINDS

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.

30

(�, x)*

�

�

5. Transport of passengers by air, with or without accompanied belongings in i) economy class ii) other than economy class

60 40

x

x

�

6. Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes.

40

x

x �

7. Services of goods transport agency in relation to transportation of goods other than used Household Goods.

70

x

x

x

7A. Services of goods transport agency in relation to transportation of used household goods. 60 x x x

8. Services provided by a foreman of chit fund in relation to chit 30 x x x

9. Renting of motor cab 60 x x (�, x)** 9A. Transport of passengers, with or without

accompanied belongings, by a. a) a contract carriage other than motor cab b) a radio taxi c) Stage carriage (w.e.f 01-06-16)

60

x

x

x

10. Transport of goods in a vessel 70 x x �

11. Services by a tour operator in relation to,- i) a tour, only for the purpose of arranging or

booking accommodation for any person ii) Tours other than (i) above.

90

70

x x

x x

(�, x)***

(�, x)***

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.

70

x

�

�

* - In case of bundled service

Cenvat credit input goods (i.e., food items covered under chapters 1 to 22 of CETA) is not available. However, CENVAT credit of other input goods is available.

** - In case of renting of motorcab, Cenvat credit on input service of renting of motorcab is available as follows

• Full Cenvat credit of such input service received from a person who is paying service tax on 40% of the value

• Upto 40% Cenvat credit of such input service

received from a person who is paying service tax on full value

Thus, service tax paid by sub-contractor in the same line of business (i.e., renting of motorcab) would be eligible credit to the main service provider of renting of motorcab. However, motorcab service provider cannot claim Cenvat credit on any other input service.

*** - In the case of tour operator services,

Service tax paid by the sub-contractor in the same line of business (i.e., tour operator) is eligible credit to the main service provider. However, tour operator service provider cannot claim Cenvat credit on any other input service.

THE END

Cell: 98851 25025 / 26



CA - IPCC

COURSE MATERIAL

Quality Education


CENTRAL EXCISE DUTY

Page 29



1. BASIC CONCEPTS IN CENTRAL EXCISE

Concept of Excise Duty:

1. Excise duty is a duty on production or manufacture of excisable goods in India.

2. The Central Government has a power to levy excise duty

Extent and scope of Central Excise Law: The Central Excise Law extends to the whole of India including the state of Jammu and Kashmir, the territorial waters of India and ‘Designated areas” in the Continental Shelf and Exclusive Economic Zone of India Excluding SEZ.

Note: Government goods are also liable to excise duty.

Charging Section under Central Excise Act, 1944:

Charging Section - 3

Basic Excise Duty Special Duty of Excise On all excisable goods. On excisable goods specified in second schedule.

Produced or manufactured in India except SEZ. Produced or manufactured in India except SEZ.

As, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985;

As, and at the rates, set forth in the Second Schedule to the Central Excise Tariff Act, 1985;

Charge of excise duty

Excise duty leviable when all the 4 conditions are satisfied

Other Provisions

There must be goods.

Such goods must be excisable.

Such goods must result out of production or manufacture.

Such Manufacture is in India except SEZ

No distinction b/w excisable goods produced by Govt. and

those produced by others

C1

C2

C3

C1

Entry No.84 of List I

a) Tobacco

b) Other Goods manufactured or produced in India

c) Includes Medicinal and toilet preparations containing alcohol; opium; Indian Hemp or other narcotic drugs and narcotics.

d) Excludes Alcoholic liquor for Human consumption; opium; Indian Hemp or other narcotic drugs & narcotics.

Entry No. 51 of List II Excise duty on the following goods only

a) Alcoholic liquor for Human consumption

b) Opium; Indian hemp (or) other narcotic Drugs and narotics

Constitutional provisions

Central Excise Duty

State Excise Duty

General rate of Excise Duty = 12.5% (E.C and S.H.E.C are exempted)


MASTER MINDS


Different types of excise duties in India:

Type of Duty Applicable on

Basic Excise Duty General duty (12.5% w.e.f 1-03-2015)

Special Excise Duty Presently exempt as all goods of Schedule II have been merged with Schedule I

Additional Duty of Excise (Goods of Special Importance)

Presently exempt as these duties have been merged with BED

Additional Duty of Excise (Textile and Textile Articles)

Abolished w.e.f. 9.7.2004

National Calamity and Contingency Duty

Imposed wide Sec 136 of FA, 2001. At present, it is payable on branded chewing tobacco, cigarettes, pan masala containing tobacco, domestic crude oil and mobile phones. Note: If Goods are exempt from Excise Duty then NCCD is also exempt.

Additional Duty of Excise (Tea and Tea Waste) Abolished w.e.f. 1.3.2005

Who is liable to pay Excise duty? The liability to pay excise duty has been casted on every person-

a) who produces or manufacture of any excisable goods, or

b) who stores such goods in a warehouse

Exception: Procurer of molasses liable to pay excise duty on molasses

Concept of goods under central excise Act:



Concept of Manufacture in Central Excise Act:

SPECIAL CASES

Levy of duties of excise on

“captive consumption”

1. Utilisation of goods produced or manufactured within the factory of production.

2. The goods internally consumed to manufacture the final product are termed as intermediate goods.

Levy of excise duty:

a) The intermediate goods will be chargeable to duty if they arise in the course of manufacture/production

b) If duty is payable on final product, excise duty is not payable on intermediate product used in manufacture of such final products.

MANUFACTURE

Concept

Definition u/s 2(f)

“Manufacture implies a change, but every change is not manufacture and yet change of an article is the result of treatment, labour and manipulation. But something is necessary and there must be transformation; a new and different article must emerge having a distinctive name and character or use”.

Clause I Any process Ancillary (or) Incidental to the

completion of a Manufactured Product.

Manufacture is not complete unless all Ancillary and Incidental Process are complete

Clause II & III: Deemed Manufacture II. Any process specified under section / chapter notes of I schedule to CETA as amounting to manufacture.

III. Goods covered under schedule III of CEA any process such as packing; Repacking; Labeling, Relabelling on the Goods to render the product Marketable

Includes

Who is a manufacturer

a) A manufacturer Who manufactures through hired labour

b) A manufacturer who manufactures on his own account

A person carrying out actual manufacturing process is manufacturer

a) Raw material suppler b) Brand name owner (they

usually exercise quality control)

In both the above cases, the contracts on a principal to principal basis

But Not


MASTER MINDS


“Assembly” would

tantamount to ‘manufacture’

or not

Dutiability of site-related activities

Dutiability of waste and

scrap

RELEVANT DATE FOR DETERMINING THE RATE OF DUTY AND TARIFF VALUE UNDER CENTRAL EXCISE

1. Excisable goods other than khandsari molasses: The rate of duty or tariff value applicable to any excisable goods shall be the rate or value in force on the date when such goods are removed from a factory or a warehouse, as the case may be.

2. Khandsari molasses: The rate in force on the date of receipt of such molasses in the factory.

Particulars Person liable to pay excise duty

Event for the duty payment Relevant date

i) Excisable goods other than khandasari molasses Manufacturer Removal of goods

from the factory Date of removal of

goods from the factory

ii) In the case of Khandasari molasses

Procurer of the khandasari molasses

Receipt of such molasses by the

procurer

Date of receipt of such molasses into factory

iii) Excisable goods produced and cleared for captive consumption

Manufacturer Issuance of goods for further production

Date on which the goods are issued for

such use

iv) Goods stored in a ware house

Warehouse keeper Removal of goods from the ware house

Date of removal of goods from warehouse

Dutiability of site related activities

Goods manufactured at site will be liable to duty if they have a new identity character, and

use then it would amount to manufacture

Further such resultant goods specified in CETA as excisable

Goods as being marketable

Dutiability of waste and scrap

Waste/Scrap can be excisable goods if they are known in commercial parlance, are marketable and specified in CETA

Waste/scrape generated out of manufacture alone is chargeable to duty & generated without any

process is not liable to excise duty

Waste of exempted goods is exempt from excise duty

Assembles Vis A Vis Manufacture

Assembly would not amount to manufacture as much as an

already manufactured item may be put in a readily usable form

However, if the assembly results in new commercial commodity with

distinct name, character and use, then would amount to manufacture

Assembly is a process of putting together a number of items or parts



2. CLASSIFICATION OF EXCISABLE GOODS CLASSIFICATION:

Features of central Excise Tariff Act:

1. The three Schedules to CETA:

a) 1st Schedule: Contains goods on which BED is charged

b) 2nd Schedule: Contains goods on which SED is charged

c) 3rd Schedule: Contains goods covered under MRP provisions

2. Sections and Chapters:

a) The First Schedule has Sections and Chapters. Each Section has various Chapters.

b) The First Schedule to the CETA contains 96 Chapters grouped into 20 Sections and specific code is assigned to each item.

c) A Chapter contains goods of one class.

d) Section Notes and Chapter Notes are given at the beginning of each Section and Chapter.

3. Central Excise Tariff has 4 Columns:

Tariff Item Description of goods Unit Rate of duty 2106 90 20 Pan masala kg 16%

4. Eight digit classification system: (21 06 90 20)

a) First two digits (21): refer to the Chapter Number of the Tariff

b) Next two digits (06): refer to heading of the goods in that Chapter

c) Next two digits (90): indicate Chapter sub-heading

d) Last two digits (20): refer to the Chapter sub-sub- heading. 5. Interpretative Rules for classification: The Central Excise Tariff Act, 1985 incorporates six general

rules of interpretation, which together provide necessary guidelines for classification of various products.

Trade Parlance Theory:

1. It should be classified according to its popular meaning or meaning attached to it by those dealing with it, i.e., in commercial sense.

2. However, where the tariff heading itself uses highly scientific or technical terms, goods should be classified in scientific or technical sense.

Classification

Choosing the right heading/ sub-heading of the tariff and determining the applicable rate for particular goods.

Need for classification

• Harmonized system if nomenclature (HSN) system

• Formulated under Auspicious of GATT

Basics in classification

Determination • Rate of duty • Eligibility of exemption • Deemed manufacture

Scheme of classification

Copyrights Reserved



MASTER MINDS


3. VALUATION OF EXCISABLE GOODS



1. Applicability of Transaction Value - Conditions to be satisfied: As per Section 4(1)(a) of the Central Excise Act, 1944, where duties of excise is leviable with reference to value, then on each removal of such goods, the value shall be the “Transaction Value’ if the following conditions are satisfied –

The above conditions must be satisfied in respect of each removal of excisable goods.

In case any of the above condition is not satisfied then value will be determined in accordance with the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

1. Define the following terms, with respect to Section 4 of Central Excise Act, 1944. (1) Assessee (2) Related person (3) Place of Removal (4) Transaction value.

Assessee

[Section 4(3) (a)] Assessee means the person who is liable to pay the duty of excise under this Act and includes his agent.

Related Person [Section 4(3)(b)]

Persons shall be deemed to be related it

Place of Removal [Section 4(3)(c)]:

Place of removal means -

Time of removal [Section 4(3)(cc)]:

In respect of the excisable goods removed from the place or removal (depot) shall be deemed to be the time at which such goods are cleared from the factory.

Transaction Value [Section 4(3)(d)]

Duty based on transaction value

There should be sale of excisable goods

Price is the sole consideration for sale.

Buyer should not be relative.

C1 C3 C2 C4

Sold by assessee for delivery, at time and place of removal

4 Conditions to be satisfied

A

Transaction value

Means

• Price actually paid or payable for the goods when sold

• And includes in addition to the amount charged as price.

Includes Any amount that the buyer is liable pay by a reason of or in connection with sale. • Advertising/publicity • Marketing • Warranty • Storage • Servicing

But does not include • Duty of excise • sale tax and other taxes.

Place of removal

Factory Warehouse Depot

Where excisable goods are produced / manufactured.

Where Excisable goods are permitted to be deposited without

payment of duty.

Where excisable goods are ordinary sold.

Relative

They are inter connected

undertakings

They are relatives

Buyer is a relative & distributor (or) sub distributor of such distributor.

They have mutual interest.


MASTER MINDS


The concept of ‘price-cum-duty’:

Such price cum duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.

Thus, Assessable value shall be arrived as under from cum duty price-

Assessable value = dutyofRate100

deductionePermissiblicePrCumduty+−

INCLUSIONS/EXCLUSIONS IN/FROM TRANSACTION VALUE

S. No Items of cost Includibility in transaction value or otherwise

1. Outward handling Includible only up to place of removal.

2. Packing » Costs of all forms of packing are includible. » However, cost of durable/reusable packing is not included.

3. Dharmada or charity Includible.

4. Design, development and engineering charge

Includible if they are specific to goods.

5. Bought out parts and accessories

» Parts: Includible as product cannot function without the part. However, the part should be fitted to the main article at the time of removal

» Accessories: Includible only if it makes value-addition and is sold as a package (Accessories provide ease of use of a product).

6. Consultancy charges Includible if it relates to design, layout, etc. of final product; and such activity is done up to place of removal.

7. Testing & inspection Charges Includible(But independent testing done by the buyer himself or through a third party is not includable).

8. Erection, installation and commissioning charges

Includible only if it results in moveable property.

9. Pre-delivery inspection charges and after sales services

Includible only if it is collected by the manufacturer.

10. Discounts (Trade and Cash) Not includable, However it should actually passed to buyer.

11. Notional interest on deposits, advances

Not includible unless it can be proved that price has been lowered on account of receipt of such advance from the buyer.

12. Interest on delayed payment of receivables

Not includible.

13. Bank charges for collection of sale proceeds

Not includible.

14. Delayed payment Charges Not includible

15. Freight Not includible. However, if, sale is from depot, freight from factory to depot will be includible.

16. Transit insurance Not includible as it is a part of transportation cost. However, it should be shown separately in the invoice.

4. SSI EXEMPTION AND GENERAL PROCEDURES

THE PROVISIONS RELATING TO EXEMPTIONS AVAILABLE FOR SSI UNITS UNDER CENTRAL EXCISE ACT.1944.

1. Meaning of SSI unit: Under Central excise, the basis for ascertaining whether a unit is a SSI, is the value of clearances of the unit in the previous financial year.

2. Eligible goods: SSI exemption is restricted to the products listed in the SSI exemption notification.

Note: Few products like tobacco products, pan masala, watches, matches and some textile products are specifically excluded from SSI exemption.



3. Eligible SSI units:

a) The units whose value of clearances of excisable goods for home consumption computed in accordance with the notification does not exceed Rs. 4 crore / 12 crores in the previous financial year are eligible for SSI exemption.

b) The turnover limit is calculated by taking into account the clearances in respect of one manufacturer from one or more factories or from a factory by one or more manufacturers.

4. SSI exemption:

a) SSI exemption In case of jewellery manufacturers: In simple words, a unit whose turnover does not exceed Rs. 12 crores in the previous year is entitled to full exemption from payment of duty on its first clearances of up to Rs. 6 crores in the current financial year.

b) SSI exemption In case of other manufacturers: In simple words, a unit whose turnover does not exceed Rs. 4 crores in the previous year is entitled to full exemption from payment of duty on its first clearances of up to Rs. 150 lakh in the current financial year.

5. Availability of CENVAT credit:

a) A SSI unit can avail CENVAT credit on inputs only after it starts paying duty.

b) However, CENVAT credit of capital goods can be availed (but can be utilized only after the turnover crosses Rs.150 lakh) even if the same have been received during period of exemption.

6. Goods bearing brand name of others:

a) SSI exemption is not available in respect of clearances bearing a brand name of another person. This means that such clearances attract normal rate of duty.

b) Exception: goods manufactured in rural area, packing material, account books, registers, writing pads.

REGISTRATION PROCEDURE UNDER CENTRAL EXCISE ACT.1944

1. Every manufacturer of excisable goods.(Other than specifically exempted goods), is required to get his premises registered under the central excise law.

2. Exemption from registration:

a) The goods manufactured by him attract Nil rate of duty or remain exempt from the whole of the duty of excise leviable thereon.

b) Small scale units availing the benefit of SSI exemption notification.

Note: However, such units are required to give a declaration in a specified form once the value of their clearances touches Rs.90 lakhs.

3. After the assessee applies for the registration in the prescribed manner, he is issued a 15 digit PAN based alphanumeric registration number and a registration certificate on completion of the registration procedure.

PAYMENT RELATED PROCEDURES UNDER CENTRAL EXCISE

Payment of excise duty: The due dates and other provisions relating to payment of duty have been tabulated below:

Due date for payment of duty Type of Assessee Periodicity

In case of e-payment Other than e-payment

6th day of the month following the relevant quarter.

5th day of the month following the relevant quarter. Assessee eligible

for SSI exemption

Quarterly payment of

Duty For goods removed during the quarter ending in March, 31st day of March.

6th day of the month following the relevant month.

5th day of the month following the relevant month.

Other assesses Monthly

payment of duty For goods removed during the month of March, 31st day of

March.


MASTER MINDS


Points to be noted:

a) Every assesse shall electronically pay the duty through internet banking. W.e.f 01.10.2014.

b) Interest @ 15% on delayed payment of duty

c) Duty may be paid in cash or by utilizing CENVAT credit available at the end of the month, even though duty is payable by 5th/6th of following month.

2. State in brief the provisions relating to invoice under Central excise rules.

1. The invoice should be serially numbered. The serial number shall commence from 1st April every

year.

2. Contents: The invoice should contain the registration number, address of the jurisdictional

Central Excise Division, name of consignee, description, classification, time and date of removal, rate of duty, quantity, mode of transport, vehicle registration number and value of goods and the duty payable thereon.

3. Number of copies: The invoice has to be prepared in triplicate in the following manner, namely:

a) the original copy being marked as ORIGINAL FOR BUYER;

b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER;

c) The triplicate copy being marked as TRIPLICATE FOR ASSESSEE.

3. Briefly discuss purpose and periodicity of various Excise Returns (ERs) to be filed under the Central Excise Rules, 2002.

Form Periodicity Purpose - Last date -

ER-1 Monthly Return for production and removal of goods and CENVAT credit to be filed by every assessee (in duplicate)

10th of every month (for removals during the previous month).

ER-2 Monthly

Return to be filed by 100% EOU in respect of excisable goods manufactured and inputs/capital goods received in unit (in duplicate)

10th of every month (for removals during the previous month).

ER-3 Quarterly

Return for clearance of goods and Cenvat Credit to be filed by SSI units and other units required to file quarterly return claiming clearance based exemption (in duplicate)

SSI units: 10th of the month following the particular quarter and Other Units: 20th of the month following the particular quarter.

ER-4 Annually Annual return to be filed by assessees paying duty of Rs. 1 crore or more.

30th November of the succeeding year

Note: all the above returns have to be filed electronically.

THE END

Cell: 98851 25025 / 26



CA - IPCC

COURSE MATERIAL

Quality Education


CUSTOMS DUTY

Page 40



1. BASICS IN CUSTOMS DUTY

Extent and Scope of Customs Act.

1. The Customs Act, 1962 applies to the whole of India. India includes territorial waters of India.

2. Besides, the Customs Act, 1962 and Customs Tariff Act, 1975 have been further extended to:

a) The notified designated areas in the Continental Shelf of India (CSI) and Exclusive Economic Zone of India (EEZI) and

b) Whole of EEZI and CSI for the purpose of processing for extraction or production of mineral oils and supply of any goods in connection thereto.

Charging section for Custom Duty [Section 12 of the Customs Act, 1962]:

Note:

1. The aforesaid provisions shall apply in respect of all goods belonging to Government also.

2. However, imports by Indian Navy, specific equipment required by police, Ministry of Defence, Coastal Guard etc. are fully exempt from customs duty.

Date for determining rate of duty and tariff value:

Types of Goods Relevant date 1. In case of Imported Goods [Sec. 15]

a) Goods entered for home consumption u/s 46

The date of presentation of Bill of Entry or Entry Inwards, whichever is later

b) Goods cleared from a warehouse u/s 68

The date of presentation of the Ex-Bond Bill of Entry for home consumption.

c) For any other goods On the date of payment of duty. 2. In case of Export Goods [Sec.16]

a) Goods entered for export u/s 50 On the date on which the proper officer makes an order permitting clearance and loading of the goods for exportation.

b) For any other goods On the date of payment of duty.

Provisions of section 15 and 16 not to apply [Section 15(2) & 16(2)]: The provisions of section 15 and 16 section shall not apply to baggage and goods imported / exported by post.

Charging section (Section 12)

Customs duty shall be levied.

At such rates as may be specified under the customs tariff act.

On goods imported into and exported from India.

Ist schedule IInd schedule

Import duty rate. Export duty rate.

i) Preferential rate of duty: If the goods are imported from the preferential areas [as notified by the Central Government],

ii) Standard rate of duty: In any entry, if no preferential rate of duty has been notified, the standard rate of duty shall be applicable.

Basics in customs duty

Meaning Constitutional provision Sources of law

A duty which is levied by C.G. • Import of goods into and • Export of goods from India.

Entry no.83 of union list.

Customs act, 1962; Customs tariff act, 1975; Rules, Trade Notice, Case Laws Notifications, Circulars.


MASTER MINDS


Rate relevant for determination of exchange rate:

For imported goods Notified by CBEC prevalent on the date of filing bill of entry. Rate relevant for determination of exchange rate For export goods Notified by CBEC prevalent on the date of filing shipping bill.

(or) bill of export

Determination of duty where goods consist of articles liable to different rates of duty:

Articles which are liable to duty Shall be chargeable to

with reference to Quantity That duty (specific duty)

with reference to Value (ad - valorem) liable to duty at same rate liable to duty at different rates

Duty at that rate highest of such rates

with reference to Articles not liable to duty Shall be chargeable to duty at the rate at which articles liable to duty with reference to value are liable.

Taxable event in case of Import/ Export:

Exemptions from customs Duty:

Taxable event in case of Import/ Export

Imports Exports

Goods cleared for home consumption

Goods cleared for warehousing

When the goods reach the customs barriers and bill of entry is filed for home consumption

Time when the goods are cleared from the warehouse.

Export of goods is complete when the

goods cross territorial waters of India.

Exemption from customs duty

General exemption Special exemption

Central government may by notification in official gazette exempt generally either absolutely (or) subject to specific conditions.

Central government by special order exempt from payment of duty an goods on which duty is leviable only under circumstances of an exceptional nature to be stated in such order.

Meaning of important terms:

Goods: includes-

a) vessels, aircrafts and vehicles; b) stores;

c) baggage; d) currency and negotiable instruments;

e) Any other kind of movable property [Section 2(22)].

For anything to be called as goods, it must be moveable and marketable.

Jetsam: It refers to goods jettisoned from the vessel to save her from sinking. Such goods got sunk

Flotsam: It means goods jettisoned to save vessel for sinking. In this case goods do not sink. They continue to float.

Derelict: It refers to any cargo, vessel, etc. abandoned in the sea with no hope of recovery.

Wreck: it refers to cargo or vessel or any property which is drifted ashore by tides after ship wreck.



Diagram indicating section 13, 22, 23(1) & (2):

1. Section 13 – Provisions relating to pilfered goods:

a) Duty on pilfered goods: if-

i) any imported goods are pilfered

ii) after the unloading thereof

iii) but before the proper officer has made an order for clearance for home consumption or deposit in a warehouse

iv) the importer shall not be liable to pay the duty

v) Except where such goods are restored to the importer after pilferage.

b) Meaning of Pilfer: Loss of goods in small quantities by reasons of theft etc.

2. Section 23 – Remission of Duty on Lost, Destroyed and Abandoned Goods: Section 23 of the Customs Act 1962, specifically permits remission of duty in the following cases, -

a) Loss or destruction of goods [Section 23(1)]: In case where it is shown to the satisfaction of Assistant or Deputy Commissioner of Customs-

i) that any of the imported goods have been lost (otherwise than as a result of pilferage) or destroyed,

ii) At any time before clearance for home consumption, then he shall remit the duty on such goods.

b) Abandonment or Relinquishment of goods by importer [Section 23(2)]: The owner of the imported goods may at any time before,-

i) An order for clearance of goods for home consumption under section 47; or

ii) An order for depositing the goods in the warehouse under section 60 has been made, relinquish his title to the goods and thereupon he shall not be liable to pay the duty thereon.

A

Before Unloading

B

C

After Unloading

D

E

E F

H

G Examination

Clearance order for ware Housing

Ware House

Clearance order for Home Consumption

Clearance for Home Consumption

Clearance from ware Housing

1. Sec.13: to

2. Sec.23:

Sec.23 (1) – Lost / destroyed to

Sec.23 (2) – Abandoned goods to

3. Sec.22 : – Imported goods (Both categories) to (unconditional)

– Other than warehoused goods to (Damage not attributable to Importer)

– Warehoused goods to

C E

A G

A H

A B

C D

C G


MASTER MINDS


No relinquishment, if offence committed: The owner of any such imported goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under the Customs Act, 1962 or any other law for the time being in force.

3. Sec. 22 – Abatement of duty on damaged or deteriorated goods:

a) Where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs-

i) Damaged or any imported goods had been deteriorated at any time before or during the unloading of the goods in India; or

ii) That any imported goods, other than warehoused goods, had been damaged at any time after the unloading thereof in India but before their examination.

iii) That any warehoused goods had been damaged at any time before clearance for home consumption on account of any accident not due to any willful act, negligence or default of the owner, his employee or agent,

b) Duty liability in case of abatement: Then, such goods shall be chargeable to duty determined in the following manner

Duty chargeable on the goods before the damage or deterioration Duty leviable on

such damaged or deteriorated goods

= Value of the goods before damages or

deterioration

x Value of the damaged or

deteriorated goods

c) Valuation of damaged/deteriorated goods: The following are the two methods of valuation of damaged or deteriorated goods at the option of the owner of the goods-

i) The value of such goods may be ascertained by the proper officer; or

ii) Such goods may be sold by proper officer by public auction or by tender or with consent of owner in any other manner and the gross sale proceeds shall be deemed to be the value of such goods.

Classification of imported / export goods:

Valuation on the basis of Transaction value: [Section 14(1)]:

Classification of imported goods

Need for classification Customs tariff act 1975

Determine the headings/ sub-headings of customs tariff act 1975; under which imported/ exported goods would be covered.

Determines • Rate of applicable duty • Applicability of import controls/ restrictions. • Applicability of anti-dumping duty. • Benefits of duty exemption.

Meaning

Ist schedule (Import duty)

IInd schedule(Export duty)

Valuation of Imported / exported goods

Transaction value 14(1) Tariff value 14(2)

Shall be • Price actually paid/ payable for goods. • Sold for export / import to India • Delivery at the time and place of importation / exportation. • Buyer / sellers should not be relative. • Price must be sole consideration.

CBEC may fix tariff values for any class of imported goods (or) export

goods by notification.

Copyrights Reserved




2. TYPES OF CUSTOMS DUTIES

COMPUTATION OF CUSTOMS DUTY UNDER CUSTOMS ACT

Particulars Rs. Rs.

Assessable value (AV) xxx

Add: Basic Custom Duty (BCD) @10% (AV x BCD@10%)

xxx

Add: Additional custom duty (CVD) u/s 3(1) @ 12.5% i) if it is covered u/s 3(2) of CEA 1944: tariff value x CVD rate ii) if it is covered u/s. 4A of CEA 1944: (RSP – abatement) x CVD rate iii) in general cases u/s 14(1) / 14(2) of Customs Act: (AV + BCD) x 12.5%

xxx

Add: Education cess (EC)@ 3% (BCD + CVD) x 3%

xxx

Add: Additional Customs Duty u/s 3(5) (Special CVD) @ 4% (max rate) (AV + BCD + CVD + E.C) x 4%

xxx

Total Duty Payable (BCD + CVD + EC + SPCVD)

xxx

Different types of Customs duties under CETA 1975:

Protective duty under customs tariff Act, 1975

Protective duties: A duty imposed on imported goods for the protection of the interests of any industry established in India on the recommendation of Tariff Commission.

Safeguard duty under customs tariff Act, 1975

Safeguard duty: 1. Safeguard duty is levied if the Central Government is satisfied that:

a) Any article is imported into India in increased quantities; and b) Such increased importation is causing or threatening to cause serious injury

to domestic industry. 2. Safeguard duty is product specific. This duty is in addition to any other duty.

EC & SHEE is not payable. 3. It shall be in force for a period of 4 years from the date of its imposition

(maximum levy not exceeding 10 years). 4. Safeguard duty shall not apply to articles imported by a 100% EOU undertaking

or a unit in a FTZ or in a SEZ unless specifically made applicable [Sections 8B].

Countervailing duty on

subsidized articles under customs tariff

Act, 1975

1. Countervailing duty on subsidized articles: The countervailing duty on subsidized articles is imposed if: a) Any country or territory, directly or indirectly, pays or bestows subsidy upon

the manufacture or production or exportation of any article. Such subsidy includes subsidy on transportation of such article.

b) Such articles are imported into India. 2. The amount of countervailing duty shall not exceed the amount of subsidy paid

or bestowed as aforesaid. 3. It shall be in force for a period of 5 years from the date of its imposition and can

be extended for a further period of 5 years [Section 9].

Assessable value = Transaction value under section 14(1)/Tariff

value under section 14(2)

CVD U/S 3(1):

• To counter balance the excise duty in India.

• It is levied only on imports.

• Rate of duty = Rate of excise duty leviable on a like article if produced or manufactured in India

Special CVD u/s 3(5):

• To counter balance the VAT

• Rate of duty = Rate as notified by the Central Government, but not exceeding 4%.

BCD: It is levied on imports and exports u/s 12 of customs act 1962


MASTER MINDS


Anti-dumping duty under

customs tariff Act, 1975

1. Anti-dumping duty: Where any article is exported by an exporter to India at less than its normal value, then, upon the importation of such article into India, the Central Government may impose an anti-dumping duty not exceeding the margin of dumping in relation to such article. Margin of dumping = Normal Value – Export Price

2. The duty imposed under this section shall be in force for a period of 5 years from the date of its imposition and can be extended for a further period of 5 years.

3. The antidumping duty shall not be leviable on articles imported by a 100% EOU unless specifically made applicable for such units [Section 9A].

3. IMPORTATION AND EXPORTATION PROCEDURES IMPORT PROCEDURES:

1. Import report: Person in charge of conveyance is required to submit import manifest before arrival (for vessel / aircraft) or Import report within 12 hours after arrival (for vehicle).

2. Entry inwards / unloading: After delivery of important manifest, the custom officer shall grant Entry Inwards. Unloading of cargo can start only after customs officer grant Entry Inwards. Unloaded the goods under the supervision of the proper officer. Unloaded, during working hours and shall not be on Sunday / on any holiday.

3. Unloaded goods to be in the custody of the Custodian until their clearance: If the imported goods are pilfered after unloading in a customs area, while in the custody of the Custodian, then the Custodian shall be liable to pay duty on such goods.

4. Filing of entry for import, i.e. Bill of Entry:

i) Bill of entry for home consumption: Importer has to electronically submit Bill of Entry giving details of goods being imported, along with required documents. The importer of any goods, other than goods intended for transit or transhipment shall fine bill of entry for home consumption.

ii) Bill of entry for warehousing: However, if the importer does not need the goods immediately, he may request the goods to be warehoused. In that case, an Into-Bond Bill of Entry (for warehousing) would be filed. When subsequently, the goods are clearance from warehouse for home consumption, an Ex-Bond Bill of Entry is required to be filed.

5. Timing of filling of Bill of entry:

Arrival of ship / aircraft / vehicle

Time limit for filing of bill of entry

Before arrival The goods have been shipped for importation into India is expected to arrive within 30 days from the date of such presentation

after arrival No time limit (At any point of time after arrival but within 30 days from the date of unloading of goods at the customs station.

6. Self assessment: Importer has to file Bill of Entry electronically on self-assessment basis. He has to submit documents as per check list and comply with CCR (Compulsory Compliance requirements). In majority of the cases, duty is payable on self assessment basis. Duty can be paid electronically.

7. Payment of Duty: The importer has to pay the duty within 2 days (excluding holidays) of the determination of such duty amount. In case he fails to do so, he is required to pay interest on the duty till the time he actually pays the duty and clears the goods.

8. Imported goods in transit or transhipment:

Basis of Difference

Transit Transhipment

Conveyance In case of transit of goods, goods are allowed to remain on the same conveyance

In case of transhipment of goods, the conveyance changes i.e. the goods are unloaded from one conveyance and loaded in another conveyance.



Documentation

In case of transit, the record already made in the ship’s / aircraft’s manifest continues. Thus, there is continuity in the records and there is no chance of the control over such transit goods being lost.

In transhipment of goods, continuity in the records is not maintained as the goods are transferred to another conveyance.

Supervision No supervision is required for transit goods.

Transhipment takes place under the supervision of the proper officer.

Import Procedure: (Flowchart)

EXPORT PROCEDURES:

The procedure for exportation of goods by air, by sea or by land has been outlined below:-

1. Filing of shipping bill/ bill of export:

a) The exporter is required to present electronically to a proper officer of customs a shipping bill [in case of export by a vessel or by air] and a bill of export [in case of export by a vehicle].

b) An exporter entering any export goods self-assesses and pays the duty, if any, leviable on such goods subject to verification by the proper officer.

2. Order permitting clearance and loading of goods for exportation: Where the proper officer is satisfied that:

a) goods entered for export are NOT prohibited goods and

b) exporter has paid duty, if any, on them,

c) He passes order permitting clearance and loading of goods for exportation called Let Export Order.

3. Grant of Entry Outwards:

a) A vessel intending to start loading of export goods must be first granted an ‘Entry Outwards’ by the proper officer.

b) The master of a vessel shall not permit the loading of any export goods, until the proper officer grants entry-outwards to such vessel.

c) Entry outwards is the permission granted by the Customs authorities to a vessel to go on a foreign voyage to the port of consignment.

Goods arrived at the Indian customs station

Import manifest report by person in charge to proper officer

Entry inwards granted by proper officer to person in charge

Unloading goods at the customs port

Goods under custody of custodian

Electronic filing of bill of entry

Filing by importer with proper officer

Under Supervision of proper officer

at the approved places For home consumption -

File bill of entry

For warehousing – File into - bond bill of entry (Subsequently file and ex- bond bill of entry for home consumption)

Pay the duty within 2 days (excluding holidays)


MASTER MINDS


4. Loading of goods on conveyance for exportation:

a) The export goods shall be loaded on the conveyance for exportation with the permission of person-in-charge.

b) He shall not permit the loading at a customs station unless a shipping bill/bill of export/bill of transshipment, as the case may be, duly passed by the proper officer, has been handed over to him by the exporter.

c) In case of goods exported in a vessel, grant of entry outwards is also mandatory requirement before loading of goods.

5. Delivery of export manifest/report: The person-in-charge of a conveyance carrying export goods shall, before departure of the conveyance from a customs station, deliver to the proper officer in the case of a vessel or aircraft, an export manifest electronically, and in the case of a vehicle, an export report.

6. No conveyance to leave without written order: The person-in-charge of a conveyance which has loaded any export goods at a customs station shall not cause or permit the conveyance to depart from that customs station until a written order to that effect has been given by the proper officer.

Note: There are separate export procedures prescribed for export of baggage and export by post. The same have been discussed at Final level in Paper 8: Indirect Tax Laws.

Export Procedure:

THE END

Exporter

Grants written order permitting the conveyance to leave customs station

Shipping Bill / Bill of Export filed electronically

Delivers Export manifest/report

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Person – in – charge of conveyance

Goods are loaded on conveyance for export with the permission of person-in-charge

PO passes order permitting clearance and loading of goods for exportation

If duty is payable, it is assessed and paid

Proper Officer (PO) Grant of Entry

outwards (in case of export by vessel)

If PO is satisfied that: • goods entered for export are NOT

prohibited goods • Exporter has paid duty, IF ANY, on

them

1

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Cell: 98851 25025 / 26



CA - IPCC

COURSE MATERIAL

Quality Education


CENVAT CREDIT

Page 49


MASTER MINDS


CENVAT CREDIT RULES

Applicability: It apply to Whole of India, however the provisions of CENVAT Credit of service tax shall not apply to the state of J & K.

BASIC FEATURES OF CENVAT SCHEME:

1. Objective – To prevent cascading effect:

2. Person eligible – Manufacturers as well as service providers:

3. Credit is allowed of duties paid on inputs, capital goods and taxes paid on input services:

4. The CENVAT credit can be utilized not only for payment of excise duty on final products, but also for payment of service tax on output services

5. Credit only if final products are dutiable/services provided are taxable:

6. Time limit for taking of Cenvat credit:

a) The Cenvat credit can be taken immediately on receipt of inputs.

b) In respect of capital goods, credit can be taken not exceeding 50% in the financial year in which capital goods are received and balance credit can be taken in subsequent years.

c) In respect of tax paid on input services, Cenvat credit can be taken on receipt of invoice provided payment of such invoice is made within 3 months of the date of invoice.

7. Cenvat Credit can be refunded to manufacturer or service provider, if final products or output services are exported.

8. Cenvat credit can be taken only on the basis of specified documents.

9. Burden of proof shall be on the manufacturer or service provider.

10. Penalty provisions have been made in case the manufacturer or service provider violates the provision of said rules.

RULE - 2

A. RULE 2(k) – INPUTS:

Input means

Service provider Manufacturer

All goods used in factory by the

manufacturer of the final product.

Not used in factory

All goods used for providing any output service

Used in factory

� Any goods including accessories cleared along with the final product, the value of which is included in the value of final product and goods used for providing free warranty for final product.

� All goods used for generation of electricity or stream or pumping of water for captive use.

Excludes

1. Light diesel oil, high speed diesel oil or motor spirit

2. Any goods used for a) Construction of a building b) Laying foundation for support of

capital goods. 3. Capital goods except when

i) Used as parts or components in MFG of final product.

ii) Value of such C.G upto 10,000 per piece

4. Motor vehicle. 5. Any goods such as food items;

used in guest house; residential colony; club or a recreation facility and clinical establishment are used primarily for personal use or consumption of any employee.

6. Any goods which have no relationship with a final product.

All capital goods which have value upto Rs.10,000

per piece



B. Rule 2(l) – INPUT SERVICE DEFINITION

Input service means:

1. Any service used by the provider of output service for providing an output service.

2. Any services used by a manufacturer for producing or manufacturing of final product.

Input service Includes

a) Advertisement or sales promotion,

b) Procurement of inputs,

c) Financing,

d) Computer networking,

e) Security,

f) Market research,

g) Accounting, Auditing

h) Inward transportation of inputs and capital goods

i) Outward transportation upto place of removal

Input service excludes

a) Service portion in the execution of a works contract and construction services.

i) Construction or execution of works contract of a building or a civil structure or a part thereof

ii) Laying foundation for support of capital goods.

b) Services provided by way of renting of a motor vehicle (Non - Capital goods).

c) Service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle (Non-Capital goods).

d) Services used for personal purpose or consumption of any employee.

C. RULE 2(a) – CAPITAL GOODS DEFINITION :

Capital goods means:

1. Goods falling under:

a) Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading 6805, Grinding wheels 6804 & wagons of sub – heading 860692.

b) Pollution control equipment.

c) Components, spares and accessories of the goods specified at (a) and (b).

d) Moulds and dies, jigs and fixtures.

e) Refractories and refractory materials.

f) Tubes and pipes and fittings thereof.

g) Storage tank, and

h) Motor vehicles other than those falling under tariff heading 8702, 8703, 8704, 8711.

Designed for transportation of goods Designed to carry passengers

Renting of Motor Vehicle

Transportation of Inputs and Capital goods

Courier agency

Renting of Motor Vehicle

Transportation of passengers

Imparting Motor driving skills

Motor Vehicle (Registered in the name of the Service Provider)

2. 3.

But including dumpers and tippers, Used: i) In the factory of the manufacturer of the final products, but does not

include any equipment or appliance used in an office; or (omitted w.e.f 01-04-2016)

ii) Outside the factor of the manufacturer of the final products of generation of electricity or for pumping of water for captive use within the factory; or

iii) For providing output service.


MASTER MINDS


4. Components, spares and accessories of motor vehicles or capital goods.

Exempted goods (Rule 2(d)) Exempted services (Rule 2(e)) 1. Excisable goods which are exempt from the

whole of the duty. Taxable service which is exempt from whole of service tax.

2. Goods which are chargeable to Nil rate of duty Service on which no service tax leviable u/s 66B 3. Goods in respect of which benefit of exemption

under notification no. 1/2011 @ 2% (or) notification no. 12/2012 @ 1%.

Taxable service whose part of the value is exempted on the condition that No CENVAT on Inputs & Input services

RULE - 3

A. RULE 3(1) – DUTIES / TAXES ELIGIBLE FOR CENVAT CREDIT:

B. RULE 3(2) – States that a manufacturer shall be allowed to avail CENVAT credit of the duty paid on inputs:

• lying in stock or

• contained in work-in- process or

• contained in the final products lying in stock

on the date on which any goods

• cease to be exempted goods or

• become excisable goods.

This provision is mainly invoked when the aggregate value of clearances of SSI units crosses Rs.150 lakh and they become liable to excise duty.

C. RULE 3(3) - According to Rule 3(3) of the CENVAT Credit Rules, 2004, in relation to a service which ceases to be an exempted service, the provider of the output service shall be allowed to take CENVAT

Duties/ taxes eligible for CENVAT credit

Service tax Custom duty Excise duty

i) BED ii) NCCD iii) *EC and *SHEC on

excisable goods. iv) Additional duty of

excise leviable on pan masala and tobacco.

i) CVD u/s. 3(1) of customs tariff act 1975.

ii) Special CVD u/s. 3(5) of the customs tariff act.

Note: Special CVD is not eligible for Service provider.

i) Service tax ii) *EC and *SHEC on

taxable services.

*A. EC and SHEC paid on inputs or capital goods

i) Credit of EC and SHEC paid on inputs or capital goods received in the factory of manufacture of final product on/after the 1st day of March, 2015.can be utilized for payment of duty of excise specified in first schedule to the Excise Tariff act.

ii) Credit of EC and SHEC paid on inputs or capital goods received in the premises of the provider of output service on or after 01-06-2015 can be utilized for payment of service tax on any output service.

B. EC and SHEC paid on input services i) The credit of EC and SHEC paid on input services received by the manufacturer of final product on or

after the 1st day of March, 2015 can be utilized for payment of duty of excise specified in first schedule to the Excise Tariff act.

ii) The credit of EC and SHEC paid on input services in respect of which the invoice, bill, challan or Service Tax Certificate for Transportation of goods by Rail (referred to in Rule 9), as the case may be is received by the provider of output service on or after the of 1st day of June, 2015 can be utilized for payment of service tax on any output service.



credit of the duty paid on the inputs received and lying in stock on the date on which any service ceases to bean exempted service and used for providing such service.

D. RULE 3(4) – MANNER OF UTILISATION OF CENVAT CREDIT:

1. Eligible payments: As per Rule 3(4), CENVAT credit can be utilized for payment of:

a) any excise duty on any final products; or

b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or

c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or

d) an amount, when goods are cleared after repairs under sub-rule (2) of rule 16 of Central Excise Rules, 2002 or

e) service tax on any output service.

Since, the credit can be utilized for payment of any excise duty on any final product or service tax on output service, ‘one to one’ co-relation between inputs/input services and final product/output services is not required.

2. Non-eligible payments: CENVAT credit cannot be utilized/used for payment of:

a) any duty of excise on goods in respect of which the benefit of an exemption under Notification No. 1/2011 CE dated 01.03.2011 is availed.

b) service tax in respect of services where the person liable to pay tax is the service recipient.

c) clean energy cess.

Points to be noted:

• CENVAT credit available on the last day of the month/quarter only to be utilized.

• NCCD: Credit of NCCD, can be utilized only for payment of NCCD. Besides this, CREDIT OF OTHER DUTIES cannot be utilized for payment of NCCD (W.E.F 01-03-2016).

• Swachh Bharat Cess: Credit of SBC Cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax. So it must be paid in cash.

E. RULE 3(5) – REMOVAL OF INPUTS AND CAPITAL GOODS FROM HIS FACTORY:

Case Amount to be paid

1. Inputs removed as such Rule 3(5) Amount of Cenvat credit availed in respect of such inputs.

2. Capital Goods-

a. removed as such without being used Rule 3(5)

Amount of Cenvat credit availed in respect of such capital goods.

b. removed as such after being used Rule 3(5A)(a)

Higher of the following two (A) or (B) A. Amount of Cenvat credit taken

Less: The following percentage points calculated by straight line method for each quarter of a year or part thereof from the “date of taking the Cenvat credit”-

i. for computer & computer peripherals: For each quarter in the 1st year : @ 10%; For each quarter in the 2nd : @ 8% For each quarter in the 3rd year : @ 5%;and For each quarter in the 4th & 5th year : @ 1%

ii. for capital goods, other than computers and computer peripherals: @ 2.5% for each quarter.


MASTER MINDS


B. Amount equal to the duty leviable on transactional value of such capital goods.

c. Removal of capital goods as waste & scrap Rule 3(5A)(b)

Manufacture shall pay an amount equal to the duty leviable on transaction value

Statutory Notes:

1. No payment, if input/capital goods removed for providing output services.

2. No payment, if inputs removed outside factory for free warranty [W.E.F. 1-4-2011].

3. Removal as such-100% credit in year of receipt.

4. Removal to be under cover of invoice.

5. Facility of monthly/quarterly payment of duty.

F. RULE 3(5B) – GOODS FULLY OR PARTIALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT BEFORE BEING PUT TO USE: Manufacturer or service provider shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods.

However, if

a) The said input or capital goods is subsequently used in the manufacturer of final products or provision of taxable services,

b) The manufacturer or output service provider shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules.

G. Rule 3(5C) - Provides that where on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise Rules, 2002, the CENVAT credit taken on the inputs / input service used in the manufacture or production of said goods shall be reversed.

Note: Reversal of CENVAT credit will not be applicable if the capital goods used for manufacture of final products.

H. RULE 3(6) – AMOUNT PAID ALLOWABLE AS CREDIT IN THE HANDS OF BUYER: As per Rule 3(6), the amount paid as aforesaid shall be eligible as Cenvat credit in the hands of the buyer of such inputs/capital goods as if it was a duty paid by the person who removed such goods.

I. RULE 3(7)(A) – CENVAT CREDIT IN RESPECT OF GOODS PROCURED FROM 100% EOU / STP / EHTP:

Shall be computed as follows:

1. The portion of the excise duty levied u/s 3 of Central Excise Act, as is equivalent to: a) The additional duty of customs leviable u/s 3(1) of Customs Tariff Act (which itself

is equal to the duty of excise u/s 3(1) (a) of the Excise Act) b) The additional duty of customs leviable u/s 3(5) of the Customs Tariff Act

2. The EC & SHEC on excise duty levied on above excisable goods.

xx xx xx

Total Excise Duty liability of EOU [1(a) + 1(b) + 2 ] xx

As per second proviso to Rule 3(7) (a) of CENVAT Credit rules, 2004 the amount of CENVAT Credit eligible will be CVD only

Note: As Per Notification No.23/2003-CE, Dated 31-03-2003, 50% 0f Basic Customs Duty Is Exempt In Case Of Clearance Of Goods By An EOU To DTA.

Copyrights Reserved




RULE – 4

A. RULE 4(1) & 4(7) – TIME LIMIT FOR AVAILMENT OF CENVAT CREDIT IN RESPECT OF INPUTS / INPUT SERVICE:

Points to be noted:

i) Time limit of within one year is not applicable in case of services provided by Government, Local Authority or any other person, by way of assignment of right to use any natural resource.

ii) CENVAT credit of service tax paid on one time charges for assignment of right to use natural resources etc.- To be spread over the period of 3 years

iii) Further assignment of Rights- CENVAT credit to the extent of the service tax payable on for such further assignment to be allowed in the same financial year, however such amount of balance CENVAT credit as does not exceed the service payable on the consideration by him.

NOTES

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

Conditions for allowing CENVAT credit

Inputs (Rule 4(1)) Input services (Rule 4(7))

Under Normal Charge (S.P is liable)

S.P’s portion (Partial)

S.R’s portion (Full or partial)

a) Credit availed on receipt of Invoice.

b) It should be reversed

if value and service tax payable not paid within 3 months.

a) Credit available on Receipt of Inputs in the factory of manufacturer or premises of S.P or premises of job worker.

b) Credit available to output service provider on maintenance of Documentary evidence of delivery and location of Inputs.

Note: CENVAT Credit can take i) Without waiting till the inputs

are actually utilized in the manufacture and

ii) Even if the payment for the inputs to the supplier is pending. Credit of S.T allowed

only after payment of S.T to the Govt. by S.R

Credit of S.T allowed, on or after the day on which

the invoice is received (i.e. normal case)

Under reverse charge (Full or Partial)

S.P allowed to take Cenvat credit in respect of

Time Limit

Within 1 year from the Date of Invoice.

3resourcesnaturalusetorighttheofassignment

theforpayableesargchtheonpaidTaxService

yearfinancialaintakenbeshall

thatCreditCENVATofAmount


MASTER MINDS


B. RULE 4(2) , 4(3) & 4(4) – FEATURES OF THE CENVAT CREDIT SCHEME IN RELATION TO CAPITAL GOODS:

C. RULE 4(5) – PROVISIONS OF CENVAT CREDIT IN RESPECT OF INPUTS & CAPITAL GOODS SENT TO A JOB WORKER:

1. Inputs and/or capital goods sent to job-worker for the further processing, testing, repairing & reconditioning or for the manufacture of intermediate goods eligible for CENVAT Credit [Rule 4(5) (a)]

2. Credit allowed on inputs or capital goods sent directly to job-worker

3. Credit allowed on inputs and capital goods sent to job-worker when the same are received back within 180 days and 2 years respectively

4. Credit to be reversed when inputs and capital goods sent to job-worker are not returned within 180 days and 2 years respectively.

5. Jigs, fixtures moulds & dies or tools falling under Chapter 82 of the First Schedule to the Excise Tariff Act sent to another manufacturer/job worker – Eligible for CENVAT credit [Rule 4(5) (b)]:

D. RULE 4(6) – REMOVAL OF GOODS DIRECTLY FROM JOB - WORKER’S PREMISES (WITHOUT BROUGHT BACK TO THE

MANUFACTURER’S PREMISES: For this prior permission of the jurisdictional Deputy /Assistant Commissioner of Central Excise has to be obtained. Such permission ‘shall be valid for a THREE financial year’.

RULE – 5

A. RULE 5 - REFUND OF CENVAT CREDIT ADMISSIBLE TO EXPORTERS OF GOODS OR SERVICES:

Refund amount = creditCENVATNet

TurnoverTotalservicesofturnoverExportgoodsofturnoverExport( ×+

Note: No refund if exporter avails duty drawback/rebate

B. RULE 5A - REFUND OF CENVAT CREDIT TO UNITS IN SPECIFIED AREAS :

a) Where manufacturer has Cleared goods from a unit located in States of Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh, Sikkim claiming exemption.

b) The Central Government may allow the refund of such credit subject to such procedure, conditions.

Conditions for allowing Capital goods

100% credit on capital goods is allowed in the

year of receipt.

(i) Credit in respect of capital goods received in a factory/ in the premises of the service provider.

(ii) Outside the factory of the

manufacturer of the final products for generation of electricity, steam or pumping of water for captive use with in the factory.

(iii) Premises of job worker.

• SSI units • Capital goods removed as

such • Credit of Special CVD

u/s.3(5)

Possession of capital goods not required in case of components spares; accessories etc.

Balance in one or more subsequent financial years provided the capital goods are still in possession.

Up to 50% in the same financial year.

Other points

1. Rule 4(3) – Legal ownership not necessary, Even if capital goods are acquired on lease, Hire purchase or loan agreement.

2. Rule 4(4) – No CENVAT credit if depreciation availed u/s 32 of I.T act 1961, on duty element.

3. CENVAT credit on capital goods will be available on basis of duty paying documents.

4. No CENVAT credit on capital goods shall be allowed which are exclusively used for the manufacture of exempted goods.



C. RULE 5B - REFUND OF CENVAT CREDIT TO SERVICE PROVIDERS PROVIDING SERVICES TAXED ON REVERSE CHARGE BASIS:

A service provider, rendering services which are taxable under reverse charge basis, can claim the refund of unutilized CENVAT credit on inputs and input services as per the procedure, safeguards, conditions and limitations prescribed in this regard.

Services eligible for refund:

a) Renting of motor vehicle designed to carry passengers on non abated value, to any person who is not engaged in a similar business;

b) Service portion in the execution of a works contract;

Unutilised CENVAT credit = (A) – (B)

Where,

yearhalftheduringservicesinputandinputsontakencreditCENVATA =

yearhalftheduringservicesandgoodsofturnoverTotal

yearhalftheduringeargchreversepartialunderserviceoutputofTurnover

x

B = Service tax paid by the service provider for such partial reverse charge services during the half year.

RULE – 7

RULE – 8

RULE 8 - STORAGE OF INPUTS OUTSIDE THE FACTORY:

1. The Assistant / Deputy Commissioner of Central Excise can permit the inputs in respect of which the CENVAT credit has been taken to be stored outside the factory of the manufacturer concerned.

2. However, such storage of inputs outside the factory shall be allowed only in exceptional circumstances having regard to the nature of the goods and shortage of storage space.

3. If inputs are not used subsequently then pay an amount = CENVAT credit taken.

Input Service Distributor (Rule 7)

Meaning of Input Service Distributor

Manner of Distribution Filling of Return

i) An office of manufacturer or service provider

ii) Receive Invoice for purchase of Input service.

iii) Issue Invoice for the purpose of distribution of credit

iv) To such manufacturer or producer or provider or an outsourced manufacturing unit as the case may be

i) The credit distributed does not exceed the amount of service tax paid thereon

ii) Not distributed – For exempted goods and exempted services

iii) Used wholly to a unit – Distribution only to that unit

iv) the credit of service tax attributable as input service to all the units shall be distributed to all the units pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all the units, which are operational in the current year, during the said relevant period

v) Outsourced manufacturing unit shall maintain separate account and shall use it only for payment of duty on goods manufactured for the input service distributor concerned.

Half yearly Return Form ST-3


MASTER MINDS


CONCEPT OF FIRST / SECOND STAGE DEALERS:

Note: The ”Provisions of this sub-rule will apply to an importer who issues an invoice on which CENVAT credit can be taken.

RECORDS AND RETURNS TO BE FOLLOWED BY A MANUFACTURER / SERVICE PROVIDER TO AVAIL CENVAT CREDIT:

THE END

First / Second Stage Dealers / Reg. Importer

I & II Stage dealer shall

maintain records

Regarding Inputs (or) Capital Goods

Supplied from the stock on which duty was paid

by the manufacturer.

Can Distributed such amount of duty on pro-rata

basis by issuing invoice

Condition: For Distribution of CENVAT Credit FSD / SSD must be registered.

Records and

Returns

Records

Returns

Manufacturer

Service Provider /

I.S.D

FSD/SSD

In case SSI units

Other than SSI units

within 15 days of after the close of quarter (quarterly return)

ST - 3 Within 1 month from the end of half year (half yearly return)

ER-3 within 10 days of after the close of quarter (quarterly return)

ER-1 Within 10 days from the close

of each month (monthly return)

Manufacturer/ service provider maintains records containing following details • Receipt • Disposal • Consumption and • Inventory of inputs and capital goods • Value • Duty paid • CENVAT taken and utilized. • The person from whom the input or capital goods

have been procured

All the returns have to be filed

electonically

rectify mistakes or omission and file revised return within 60 days from the date of filing of original return.

Your mind is a powerful thing when you fill it with positive thoughts your life will start to change A.P.J. Abdul Kalam

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