Rapid Revision on Service tax - My Thoughts on GST · Rapid Revision on Service tax For CA - Final...

Rapid Revision on Service tax For CA - Final (Nov 2014 Exams)

By

THARUN RAJ B.Com, ACMA

For Queries – [email protected]

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CHAPTER - 1 BASICS OF SERVICE TAX

Finance Act, 1994 Provisions relating to Service tax

Service tax Rules, 1994 Procedures to carry out the provisions of service tax

Point of taxation Rules, 2011 To determine the rate and date of payment of service tax i.e. point of payment of service tax

Service tax valuation Rules, 2006 To determine the value when consideration is nor ascertainable and value in special cases

Place of provision of Services, Rules 2012

To determine the taxable location for the purpose of levy of service tax

Service tax (Compounding of offences) Rules, 2012

Procedure for compounding of offence to get immunity from prosecution

Sec. 66B Levy of Service tax

Sec. 65B Definitions under the Act

Sec. 66C Meaning of taxable territory

Sec. 66D Negative list

Sec. 66E Declared Services

Sec. 66F Principles of interpretation

1.1 What is the meaning of “Service”?

SERVICE - Sec. 65B(44)

MEANS

- Any Service

- Carried out by a person for another

- for consideration

INCLUDES

Declared Services

EXCLUDES

M - Transfer of movable property

A - Actionable claims

I - Transfer of immovable property

L - Legal Fees

E - Employee-Employer relationship

D - Deemed Sales

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Levy Point of payment Collection

Sec. 66B – Date of provision of taxable service

Point of taxation Rules, 2011: Generally, the date of invoice or date of payment received, whichever is earlier

Rule 6 of Service tax Rules, 1994: In case of Individual or Firm NNoorrmmaall ppaayymmeenntt - 5

th of the month following every quarter EE PPaayymmeenntt - 6

th of the month following every quarter In case of others NNoorrmmaall PPaayymmeenntt - 5

th of the month following every month EE PPaayymmeenntt - 6

th of the month following every month

Note: For the month ending march and quarter ending march, the due date of payment is March 31st.

For the purpose of e-payment ,the above amount of ₹10 lakhs has been revised to ₹ 1 lakh vide

Notification No. 16/2013—ST

1.2 What are declared Services?

The following 9 services are covered under declared services

1. Renting of immovable property 2. Construction Services 3. IPR Services 4. IT Software Services 5. Doing an act, Not doing an act & Tolerating an act 6. Hiring & Leasing of goods 7. Hire-purchase or installment transactions 8. Works Contract 9. Restaurant or Catering Services 1.3 What are deemed sales?

The following transactions are deemed to be sales as per Article 366(29A) of the Constitution. 1. Transfer otherwise than in pursuance of contract 2. Works contract 3. Hire purchase or installment transactions 4. Transfer of right to use goods (i.e. Leasing) 5. Supply of goods by an unincorporated association or body to its members 6. Supply of goods as a part of service, being food, drink or any other article for human

consumption

1.4 What is the meaning of ACTIVITY for CONSIDERATION?

Consideration means ―quid pro quo‖ - i.e. something in return. Consideration can be monetary or non monetary Money value of non monetary consideration shall be included in value. There must be a direct link between activity and consideration Such link must be immediate but not remote Activity without consideration is not service Consideration without activity does not constitute service Consideration may be paid by a person other than the person receiving the benefit of

service

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1.5 What is the meaning of “Service provider” and “Service recipient”?

Service provider: Any person who provides taxable service is ―Service provider‖

Service Recipient:Any person who is receiving taxable service provided by a service

provider is ―Service recipient‖.

1.6 What is the Meaning of person?

[Sec. 65B(37)]: Individual, HUF, Firm, LLP, AOP or BOI whether incorporated or not,

Company, co-op society, Government (Central/State), a local authority, or every artificial

juridical person not falling within any of the preceding sub clauses.

1.7 Who is actual service recipient?

Normally, the person who is legally entitled to receive a service and, therefore, obliged to

make payment, is the receiver of a service, whether or not he actually makes the payment

or someone else makes the payment on his behalf.

1.8 What is the meaning of transaction in money or actionable claim?

The principal amount of deposits in or withdrawals from a bank account. Advancing or repayment of principal sum on loan to someone. Conversion of notes into coins to the extent of amount received.

2.1 DECLARED SERVICES VS. DEEMED SALES - HIRING & LEASING OF GOODS

Declared Services – Entry (f) of Sec. 66E: Transfer of goods by way of hiring, leasing,

licensing or in any such manner without transfer of right to use such goods

Deemed sales - Article 366(29A)(d): Transfer of the right to use any goods for any

purpose (Whether or not for a specified period)

2.2 When excluded from Service?

When there involves transfer of right to use goods

When covered under sales tax or VAT laws as ―Deemed sales‖

2.3 When taxable as service?

When there is no transfer of right to use goods

If not covered under sales tax or VAT laws, then covered under declared services and service tax payable.

2.4 What is the test to determine whether a transaction involves transfer of right to use goods?

BSNL V. UOI (2006) (Supreme Court)

There must be goods available for delivery;

There must be a consensus ad idem as to the identity of the goods;

The transferee should have legal right to use the goods consequently

all legal consequences of such use including any permissions or licenses required

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therefore should be available to the transferee;

For the period during which the transferee has such legal right , it has to be the

exclusion to the transferor viz., a ‗transfer of the right to use‘ and not merely a license

to use the goods;

Having transferred, the owner cannot again transfer the same right to others.

2.5 Whether service tax is leviable on the activity by way of erection of pandal or

shamiana?

CBEC vide its circular dated 168/3/2013 clarified that pandal/shamiana erection activities do

not amount to transfer of right to use goods because effective possession and control over

pandal or shaminana remains with the service provider, even after the erection is complete

and the specially made up space for temporary use handed over to customer. Hence the

said activity is declared service under sec. 66E

3.1 DECLARED SERVICES VS. DEEMED SALES - HIRE-PURCHASE OR

INSTALLMENT TRANSACTIONS

Declared Services – Entry (g) of Sec. 66E Activities in relation to delivery of goods on

hire purchase or any system of payment by installments

Deemed Sales - Article 366(29A)(c) - Delivery of goods on hire-purchase or any system

of payment by installments

3.2 When the said transaction is taxable as service?

The delivery of goods on hire purchase or any system of payment on installment is not

chargeable to service tax because as per Article 366(29A) of the Constitution such delivery

of goods is deemed to be a sale of goods. However activities or services provided in relation

to such delivery of goods are covered in this declared list entry.

3.3 What is the value of taxable service?

In equipment leasing/hire purchase agreements there are two different and distinct

transactions, viz., the financing transaction and the equipment leasing/hire-purchase

transaction and that the financing transaction, consideration for which was represented by

way of interest or other charges like lease management fee, processing fee, documentation

charges and administrative fees, which is chargeable to service tax. Therefore, such financial

services that accompany a hire purchase agreement fall in the ambit of this entry of

declared services.

3.4 Whether service tax is payable on the entire value?

In terms of the exemption notification relating to such activities, service tax is leviable only

on 10% of the amount representing interest plus other charges explicitly charged as

mentioned above. An unconditional abatement is available vide notification no. 26/2012 to

the extent of 90% of the value of taxable service.

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4.1 DECLARED SERVICES VS. DEEMED SALES - WORKS CONTRACT

Declared Services – Entry (h) of Sec. 66E Service portion in the execution of works

contract

Deemed Sales - Article 366(29A)(b) - Transfer of property in goods (whether as goods

or in some other form) involved in the execution of a works contract

4.2 What is the meaning of “Works contract”?

A contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any moveable or immoveable property or for carrying out any other similar activity or a part thereof in relation to such property.

4.3 When the said activity is taxable as service?

There will be two elements in a transaction in the nature of works contract, SALE ELEMENT and SERVICE ELEMENT.

ON SALE ELEMENT:

If the transfer of property in goods takes place within the state then VAT shall be levied on

the sale element at the VAT rate applicable in that state. If the transfer of property in goods

takes place from one state to another state then CST shall be levied on the sale element at

the applicable CST rate.

ON SERVICE ELEMENT:

The service tax shall be payable on the value of works contract service.

4.4 How to determine the value of works contract service?

A works contract can be segregated into a contract of sale and contract of provision of

service – BSNL case (2006) (SC).

This declared list entry has been incorporated to capture this position of law in simple

terms.

The value of service portion shall be determined in terms of Rule 2A of valuation rules,

2006

4.5 What is the value of works contract service?

Value in case of Works Contract-Rule 2A

Normal Scheme - Deduction Method:

Gross amount charged for the works contract (-) Value of transfer of property in goods

involved in the execution of said works contract = Value of works contract service on which

service tax is payable.

Normal Scheme - Addition Method: Sum of all labour elements in the contract and appropriate profit margin. [No CENVAT credit on Inputs used in execution of works contract. But credit on Input services and capital goods available]

Composition Scheme: In case of composition scheme, a composite rate on ENTIRE amount is payable as service

tax and CENVAT credit is disallowed on inputs.

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Where works contract is for

Execution of original works

Maintenance or repair or reconditioning or restoration or servicing of any goods

Other works contracts

Value of the service portion shall be

40% of the total amount charged for the works contract



5.1 DECLARED SERVICES VS. DEEMED SALES - RESTAURANT SERVICE

Declared Services - Entry (i) of Sec. 66E 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 in any manner as a part of the activity.

Deemed Sales - Article 366(29A)(f) - Supply, by way of or as part of any service in any

manner whatsoever, of goods, being food or any other article for human consumption or

any drink (whether or not intoxicating)

5.2 What are the activities covered under this entry?

The following activities are illustration of activities covered in this entry

a. Supply of food or drinks in a restaurant;

Supply of foods and drinks by an outdoor caterer.

5.3 How to determine the value of service portion?

A contract involving service along with supply of goods can be dissected into a

contract of sale of goods and contract of provision of service

This declared list entry has been incorporated to capture this position of law in

simple terms

The value of service portion shall be determined in terms of Rule 2C of Valuation

Rules, 2006.

5.4 What is the value of service portion?

Value in case of restaurant or outdoor catering - Rule 2C

The value of service portion is as follows:

Goods being food or any other article for human consumption Supplied in a restaurant —> Value = 40% of total amount charged

Goods being food or any other article for human consumption supplied as a part of outdoor catering —> Value = 60% of total amount charged

CENVAT Credit Implications for above: No CENVAT credit on goods falling under chapter 1 to 22 of CETA (i.e food, edibles or

beverages incl. live animals) CENVAT credit available on other inputs, input services and capital goods subject to the

provision of CENVAT credit rules

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Bundled service of Catering with Renting: - Notification No. 26/2012) Taxable Value = 70% of total amount, without taking CENVAT credit on any goods used for providing service Computation of total amount charged for the purpose of Rule 2C as well as

Notification no. 26/2012.:

Gross amount charged XXX

AddAdd: FMV of all goods and services supplied by the service receiver in or in relation to the supply of food or any other article of human consumption or any drink (whether or not intoxicating), under the same contract or any other contract

XXX

Less: Amount charged for the goods or services provided by the service receiver

(XX)

Less: VAT or Sales tax levied to the extent they form part of the gross amount or the total amount, as the case may be.

(XX)

Total amount charged for the purpose of Rule 2C or Notification no. 26/2012

XXX

6. CASE DIGEST:

Dewan Chand Ram Saran Case (SC)

In case of reverse charge, the liability is on service recipient. But out of a contract, the said

liability can be shifted to service provider. There is nothing in law to prevent them from

entering into agreement regarding burden of tax arising under the contract between them

Cherthala Muncipality Case (HC) Service tax burden can be passed on to the service recipient, even though in the contract or

agreement there is no provision for payment of service tax by service recipient. It is the

statutory right of the service provider to pass service tax liability to service recipient.

TTD Case (HC) Service tax is payable when there is an activity for consideration, unless such activity is

specified in negative list or is exempted. Its does not matter whether such activity is

performed with a profit motive or not. Even though accommodation service is for charitable

purpose, but service tax is payable as there is consideration involved in the transaction.

Mayo College General Council Case (HC) When service provider permitted other schools to use their name, logo as motto, it clearly

tantamounted to provider franchise service. The asseessee cannot take a stand that it

received collaboration fees as consideration and not franchise fees. For levy of service tax

consideration must be present and the name of consideration is not relevant.

TCS Case (SC) - Land mark Judgment A software, whether customized or non customised , would become goods provided it has

the attributes thereof having regard to (a) Utility (b) Capable og being bought and sold (c)

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Capable of transmitted, transferred, delivered, stored and possessed.

Infotech software dealers association (ISODA) Case (HC) When right to use software has been transferred to the subscribers of software for a

consideration, even though the software is goods, the said transaction may not amount to

sale in all cases and hence service tax shall be levied.

Nahar Industrial Enterprises Ltd. Case (HC) As per the principle of mutuality, there must be two parties for the levy of service tax and

one cannot provide service to himself. There is no service involved when a service provider

stored the goods, in a warehouse owned by him. The position will be same even though

service provider received subsidy from government, as such subsidy received is on account

of loss of interest, cost of insurance etc., incurred for compliance of the directions of

government.

Lincoln Helios (india) Ltd. Case (HC) In a transaction, which involves manufacture and provision of service, excise duty must be

payable on the aspect of manufacture and service tax must be payable on the aspect of

service. It does not amount to payment of tax twice

Can service tax be levied on the services rendered in connection with a

chit fund business?

Delhi Chit Fund Association v. UOI 2013 (30) S.T.R. 347 (Del.)

Good News for Chit fund RUNNER!!!

My dear chit fund runner, run the chit fund without any service tax liability (But

please dont run with chit fund)

The definition of service excludes "Transaction merely in money" and hence

service tax is not leviable on such transaction, even though an exemption or

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abatement has been given. Supreme court vide UOI Vs. Delhi chit fund

assciation, held that the said transaction is not to be covered under service tax

levy and the exemption, abatement related to it should be quashed

Facts of the Case:

In this case, the petitioner is an association of chit fund companies based in Delhi.

As per the petitioner, services rendered in connection with chit fund business are not

taxable.

As per the definition of service under section 65B(44), transaction in money is not a

service.

Further, the exclusionary part of the said definition excludes a transaction in money.

Since, a provision cannot exclude something from the definition unless it is included

in the definition, the intention of legislature would have been to exclude services

rendered in relation to transaction in money.

Therefore, the chit fund business being a transaction in money, the services

rendered in connection with the said business are excluded from the definition.

Explanation 2 in the said section further provides that the only service in relation to a

transaction in money or actionable claim, which is taxable, is the activity relating to

the use of money or its conversion from one form, currency or denomination to

another for which a separate consideration is charged. Resultantly, all other services

rendered in connection with a transaction in money or actionable claim, including the

services rendered by the foreman of a chit business, stand excluded from the

definition.

It further submitted that since chit fund business is not a service, Notification No.

26/2012 dated 30.06.2012 granting an abatement of 30% to services provided in

relation to chit should be quashed as question of exempting a part of the

consideration received for the services in chit fund business could not arise when the

law provided that such services were not taxable at all.

Decision:

The High Court observed that as per the opening words of the definition of ‗service‘, an

activity cannot be charged with service tax unless following four aspects or characteristics

are present:-

(i) the person who provides the service,

(ii) the person who receives the service,

(iii) the actual rendering of the service and

(iv) the consideration for the service.

A ‗mere transaction in money‘ cannot be considered as ‗service‘ as it lacks the above four

constituent elements.

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A clue to proper interpretation of the exclusionary part of the definition is embedded in

Explanation 2 which provides that except an activity for which a separate consideration is

charged and which relates to the use of money or its conversion by cash or by any other

mode, from one form, currency or denomination to another form, currency or

denomination, all other cases of transaction in money shall stand excluded from the charge

of service tax, including the consideration charged for the services of a foreman in a chit

business

The High Court inferred that since in a chit fund business, the subscription is tendered in

any one forms of money as defined under section 65B(33), it would be a transaction in

money and would fall in the exclusionary part of the definition. Otherwise also, in view of

Explanation 2 read along with the exclusionary part, the services rendered by the foreman

of the chit business for which a separate consideration is charged would be out of the

clutches of the definition. Thus, either way, the services of a foreman of a chit business do

not constitute a taxable service. Consequently, the High Court quashed Notification No.

26/2012-S.T. dated 20.06.2012 to the extent of the entry in serial No. 8 thereof.

Note: A brief account of the operations of a chit fund business is provided

hereunder:-

Lets suppose 50 persons, each contributing ` 1,000/- per month, have come together to

organize a chit for a period of 50 months. Number of subscribers should be equal to number

of months for which chit would operate. At the end of each month, an amount of ` 50,000/-

(` 1,000/- × 50) would be available in the kitty of the chit fund. The said amount is put to

auction and those subscribers who are interested in drawing the money early because of

their needs may participate in the auction.

The auction is organized by a foreman who conducts its proceedings. The successful bidder

who is normally the person who offers the highest discount is given the chit amount. From

this discount amount, after deducting a fixed amount representing the commission payable

to the ―foreman‖, balance becomes the dividend which is to be distributed to all the

subscribers. The auction would be repeated in the subsequent months and the same

procedure is followed. Any subscriber who delays the bidding or does not bid at all stands to

gain the maximum discount.

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7. POINT OF TAXATION RULES, 2011

Explanation to the above table:

For point no. 4 –As amount is received prior to starting the work, the point of

taxation shall be the date when payment is received [In such cases the invoice given

shall be known as ―Proforma Invoice‖ or ―Quotation‖]. But Rule 4A of ST Rules, 1994

requires that invoice in case of advance received should be issued within 30 days

from the date of advance received. (This is a procedural requirement but do not

have any bearing on the point of taxation)

For point no. 5 – As amount is received prior to completion of work, the point of

taxation shall be the date when payment is received [In such case, the invoice is not

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necessarily the invoice as per Rule 4A of Service tax Rules, 1994]. But Rule 4A of ST

Rules, 1994 requires that invoice in case of advance received should be issued within

30 days from the date of advance received.

For point no. 7 – There is a mandatory requirement as per Rule 4A of ST Rules, 1994

that an invoice must be issued within 30 days from the date of completion of service

and if the invoice is issued within the stipulated time, then point of taxation shall be

the date of invoice and if not, then the point of taxation shall be the date of

completion of service.

In effect, always remember, point of taxation shall be the date of invoice or date

of payment received, whichever is earlier.

Different situations and the point of taxation in each situation.

Date of Completion of service (note 1)

Date of Invoice

Date of payment received

Rule 3 THE RATE OF DUTY IS SAME ON ALL THE DATES – Normal Service

(i) If payment is received before issuing invoice. (i.e. Advance) [See note 4 below]

POT

(ii) If Invoice is issued within 30 or 45 days from the date of completion of service

POT shall be earlier of these two dates

(iii) If Invoice is not issued within 30 or 45 days from the date of completion of service

POT

Rule 3CONTINUOUS SUPPLY OF SERVICE [See note 2 for meaning]

Same as situation (i) except that deeming fiction regarding the COMPLETION OF SERVICE [See note 3 below]

Rule 4(a) SERVICE PROVIDED BEFORE CHANGE IN RATE

POT shall be EARLIER of these 2 dates

[See note 5 below]

Rule 4(b) SERVICE PROVIDED AFTER CHANGE IN RATE [See note 6 below]

(i) If both invoice and payment are received before change in rate (or) If both invoice and payment are received after change in rate


(ii) In a case other than (i) above POT shall be LATER of these 2 dates

Rule 5 WHEN A SERVICE BECOMES TAXABLE FOR THE FIRST TIME

(i) If invoice is issued and payment is received before the new service becomes taxable

NO TAX PAYABLE to that extent

(ii) If invoice is issued within 14 days after the new service becomes taxable but payment is received before

NO TAX PAYABLE [Provided, invoice is issued to the extent of

payment received]

(iii) Scenario (i) - If invoice is issued before, but payment is received after. (Or)

POT

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Scenario (ii) - If invoice not issued within 14 days after the new service becomes taxable but payment is received before.

(iv) If both invoice and payment date falls after the new service becomes taxable.


Rule 7 REVERSE CHARGE [See note 8]

POT (If payment is not made to SP within 6 months

from invoice date)

POT (If payment is made to SP

within 6 months from Invoice

date)

Rule 7 TRANSACTIONS WITH ASSOCIATED ENTERPRISES (Where person providing service is outside India)[Remember: The liability to pay duty is on the service recipient]

Date of debit in the books of service recipient or date of making

payment, whichever is earlier

Rule 8 Payments pertaining to copyrights and trademarks [See Note 7 below]


Notes to above table:

1. Meaning of completion of Service Not only completion of physical part of

providing service but also the completion of all other auxiliary activities that enable

the service provider to be in a position to issue the invoice [This is the Acid

Test]. Such auxiliary activities could include activities like measurement, quality

testing etc which may be essential pre-requisites for identification of completion of

service. However such activities DO NOT INCLUDE flimsy or irrelevant grounds for

delay in issuance of invoice. – Circular No. 144/13/2011.

2. Meaning of “Continuous supply of Service” MEANS any service which is to be

provided or to be provided continuously or on recurrent basis, under a contract, for a

period exceeding 3 months with the obligation for payment periodically from time to

time. (or) Services notified by central government as continuous supply of service,

irrespective of the period.

Following services are notified by central government for this purpose

Telecommunication service

Works contract service.

3. Date of completion of provision of service in case of continuous supply of

service in case of continuous supply of service, where the provision of whole or

part of the service is determined periodically on the completion of an event in terms

of a contract, which requires the receiver of service to make any payment to service

provider, the date of completion of each such event specified in the contract shall be

deemed to be the date of completion of provision of service.

4. POT in case where payment upto 1,000 received in excess of the invoiced

amount when a service provider receives a payment upto 1,000 in excess of

amount indicated in invoice, the POT to the extent of such excess amount, shall be

a) Date of invoice or date of completion, whichever is earlier.(Or)

b) Date of receipt of payment.

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The service provider can choose either (a) or (b) above as POT. [This is a facilitation

provided to service providers in telecommunications, credit card business who

regularly receive minor excess payments from their customers]

5. As the service is provided before the change in rate, the intention of the department

is to collect old rate. Due to this reason, the POT shall be earlier of Invoice date or

payment received date.

6. In this case, as services are provided after the change in rate, the intention of the

department is to collect new rate. Due to this reason, the POT shall be later of

Invoice date or payment received date. But, in case where all the events fall before

the change in rate, the tax shall be payable as per the old rate (Earlier of two dates

or later of two dates is not relevant, as on both the dates the prevailing rate is old

rate!!!)

7. In case of royalties and payments pertaining to copyrights, trademarks, designs or

patents, the whole amount of the consideration for the provision of service is not

ascertainable at the time when service was performed, and subsequently the use or

benefit of these services by a person other than the provider gives raise to any

payment of consideration.

8. In case where payment is not made by service recipient within 6 months from the

date of Invoice, then Rule 7 will not be applicable and POT shall be determined as

per Rule 3 i.e. Where invoice is issued by the service provider within 30 days from

the date of completion, then POT shall be the date of Invoice or else POT shall be

the date of completion of service

8. PLACE OF PROVISION OF SERVICES RULES, 2012

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Explanation to the above chart:

Case (i) – When both service provider and service recipient are in taxable territory, the

service shall be a taxable service and liability to pay service tax is on the service provider.

Case (ii) – When both service provider and service recipient are in non-taxable territory,

the service shall not be a taxable service and there is no liability to pay service tax on

either party.

Case (iii) – When service provider is in taxable territory and service recipient is in non-

taxable territory, the service shall not be a taxable service as the service is CONSUMED in

non-taxable territory. There is no tax liability on either party.

Case (iv) – When service provider is in non-taxable territory and service recipient is in

taxable territory, the service shall be a taxable service as the service is CONSUMED in

taxable territory. In such a case, the liability to pay tax is on the service recipient and it is

termed as reverse charge (a.k.a tax shift)

Rule Nature of Services covered Place of Provision Illustration

Rule 3 General rule Location of the Service Recipient

If location of Service recipient not available in the ordinary course of business

Location of the Service provider

Rule 4 Performance based services Services provided in relation to goods that are required to be

Location where services are actually performed

Repair, Reconditioning or any other work on goods (not amounting to

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made physically available manufacture)

Storage and Warehousing

Courier Service

Cargo Handling Service

Technical Testing/ Inspection / Certification

Performance based services Services which require physical presence of receiver or person acting on behalf of receiver

Location where services are performed

Cosmetic or Plastic Surgery

Beauty Treatment Services

Personal Security Services

Rule 5 Services provided directly in relation to immovable property

Location where immovable property is located or intended to be located

construction, reconstruction, alteration, demolition, repair or maintenance (including painting and decorating) of any building or civil engineering work;

Renting of immovable property

Legal services such as dealing with applications for planning permission.

Rule 6 Services relating to events In case of services provided by way of admission to, or organization of, a cultural, artistic, sporting, scientific, educational, or entertainment event, or a celebration, conference, fair, exhibition, or similar events, and of services ancillary to such admission

Location where event is held

An Indian Fashion Designing firm hosts a show at Toronto, Canada. The firm receives services of Canadian Event Manager. Place of Provision of Services of Canadian Event Manager :- Canada

Rule 7 Services provided at more than one location

Location in the taxable territory where the greatest proportion of the service is provided

An Indian firm provides a ‘technical inspection and certification service’ for a newly developed product of an overseas firm (say, for a newly launched motorbike which has to meet emission standards in different states or countries). Say, the testing is carried out in Maharashtra (20%), Kerala (25%), and an international location (say, Colombo 55%). Place of Provision: - Kerala

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notwithstanding the fact that the greatest proportion of a service rendered is outside the taxable territory.

Rule 8 Service provider and service receiver located in taxable territory In case where the place of provision of service provided in the taxable territory may be determinable to be outside taxable territory by applying one of the earlier rules but the service provider and service recipient are located in taxable territory

Location of the Service recipient

A helicopter of PawanHans Ltd (India based) develops a technical snag in Nepal. Say, engineers are deputed by Hindustan Aeronautics Ltd, Bangalore, to undertake repairs at the site in Nepal. Place of Provision: - Within the Taxable Territory. But for this Rule, Rule 4(1) would apply in this case and the place of provision would have been Nepal i.e. outside the taxable territory.

Rule 9 In case of following specified services (a) Services provided by a banking company, or a FI, or a NBFC, to account holders;

Location of the service provider

Services linked to or requiring opening and operation of bank accounts such as lending, deposits, safe deposit locker etc.

(b) Online information and database access or retrieval services;

Digitized content of books and other electronic publications, subscription of online newspapers and journals, online news, flight information and weather reports;

Web-based services providing access or download of digital content.

(c) Intermediary services; Travel Agent (any mode of travel)

Tour Operator

Commission agent for a service [an agent for buying or selling of goods is excluded]

(d) Service consisting of hiring of means of transport, upto a period of one month.

Vehicles designed specifically for the transport of sick or injured persons.

Mechanically or electronically propelled invalid carriages.

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Rule 10

Goods transportation Services Services of transportation of goods, other than by way of mail or courier.

place of destination of the goods

If a consignment of crystal ware is consigned from Paris to New Delhi. Place of Provision:- New Delhi

Goods transportation services Services provided by goods transport agency (GTA)

Location of person liable to pay tax

Rule 11 Passenger transportation services

Place where the passenger embarks on the conveyance for a continuous journey

Rule 12 In case of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board

The first scheduled point of departure of that conveyance for the journey

A video game or a movie-on demand is provided on a Delhi-Kolkata-Bangkok-Jakarta flight during the Bangkok-Jakarta leg Place of Provision :- Delhi

Rule 13

In order to prevent double taxation or non-taxation of the provision of a service, or for the uniform application of rules, the Central Government shall have the power to notify any description of service or circumstances in which the place of provision shall be the place of effective use and enjoyment of a service.

Rule 14

Notwithstanding anything stated in any rule, where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration. Illustration: An architect based in Mumbai provides his service to an Indian Hotel Chain (which has business establishment in New Delhi) for its newly acquired property in Dubai. If Rule 5(Property Rule) were to be applied, the place of provision would be the location of the property i.e. Dubai (outside the taxable territory). With this result, the service would not be taxable in India. Whereas, by application of Rule 8, since both the provider and the receiver are located in taxable territory, the place of provision would be the location of the service receiver i.e. New Delhi. Consequently, service would be taxable in India. By application of Rule 14, the latter of the Rules i.e. Rule 8 would be applied to determine the place of provision.

Whether filing of declaration of description, value etc. of input services used in providing IT enabled services (call centre/BPO services) exported outside India, after the date of export of services will disentitle an exporter from rebate of service tax paid on such input services? Wipro Ltd. v. Union of India (2013) (Del.)

As per notification no. 39/2012 the provider of taxable service to be

exported has to file a declaration with jurisdictional AC/DC of excise

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describing the taxable service intended to be exported with

description, value and the amount of service tax/excise duty and

cess payable on input services or inputs actually required to be used

in providing taxable service to be exported, PRIOR to the date of

export of such taxable service.

Facts of the case:

Wipro Ltd. rendered IT-enabled services such as technical support services, customer-care services, back-office services etc. to clients outside the country.

It involved attending to cross-border telephone calls relating to a variety of queries from existing or prospective customers in respect of the products or services of multinational corporations.

For rendering such services, the appellant used input services such as night transportation, recruitment, training, bank charges etc. The appellant claimed rebate of the service tax paid by it on such input services, used in providing the output services which were exported during a particular time period, under the said notification.

However, the declaration required under the notification was filed only after the export of the services i.e., after the particular time period during which the services were exported and for which the rebate claim was filed.

The rebate claims were rejected by the Department on the ground that the prescribed procedure, as laid down in Notification, for obtaining the rebate was not followed by the appellant.

Decision:

Continuous service: The High Court observed that Since the calls were received and attended to in the call centre on a continuous basis, it was impossible for the appellant to not only determine the date of export but also anticipate the call so that the declaration could be filed ―prior‖ to the date of export.

Incomplete information for declaration: The appellant was also required to describe, value and specify the amount of service tax payable on input services actually required to be used in providing taxable service to be exported. The High Court opined that except the description of the input services, the appellant could not provide the value and amount of service tax payable.

One to one correlation not possible: Further, the High Court also observed that one-to-one matching of input services with exported services was impossible since every phone call was export of taxable service but the invoices in respect of the input-services were received only at regular intervals, viz. monthly or fortnightly etc.

Thus, the High Court was of the view that in the very nature of things, and considering the peculiar features of the appellant's business, it was difficult to comply with the requirement ―prior‖ to the date of the export.

The High Court, therefore, allowed the rebate claims filed by the appellants.

CASE STUDIES: 1 Determine the place of provision of service in each of the following

independent cases and state whether service tax is payable in each of these cases:

a) Mr. A travelled on a Bagdogra-Dibrugarh-Singapore-Dibrugarh-Bagdogra flight where a single ticket with no

Ans: a) No Service tax payable b) POPS = Delhi

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stopover has been issued by Parkinson Airlines. b) Mr. B, a well-known comedian from Delhi, organises a stage-

show in Japan. For organising the stage-show, he takes the services from a Mumbai based event organiser.

[RTP – May 2014]

2 (POT in case of Normal Services) X ltd. is in the business of providing Management consultancy services. Determine the point of taxation and due date of payment of service tax in the following cases and provide reasons supporting your answer.

Case Date of completion of Provision of service

Date of Invoice Date of receiving the payment or advance as the case may be.

(a) 10/4/2012 20/4/2012 30/4/2012

(b) 10/4/2012 15/5/2012 30/4/2012

(c) 10/4/2012 20/4/2012 Date of entry in books: 17/4/2012 Date of actual credit to bank A/C: 15/4/2012

(d) 10/4/2012 16/5/2012 5/4/2012 (part) and 25/4/2012 (Remaining)

(e) 15/8/2012 For advance – 2/8/2012 (for `10,000)

For completion of service – 30/8/2012 (for `15,000)

1/7/2012 – Advance received

(f) 15/8/2012 No Invoice has been raised (Value = `25,000)

1/7/2012 – Advance received for `10,000

(g) Not yet provided

5/8/2012 31/7/2012

(h) Not yet provided

Not raised 31/7/2012

3 (POT in case of continuous supply of Service) Sahil Ltd. entered into a contract with Singla Ltd. for construction of a new building to be used primarily for the purpose of commerce or industry for a total consideration of `300 lakh on July 01, 2012. The said services fall

within the purview of ―commercial or industrial construction services‖. The initial booking amount of `30 lakh was billed and

received on the date of contract itself. It was further agreed that `120 lakh, `70 lakh and `80 lakh would be received on completion

of 50%, 75% and 100% of the construction work of the building as certified by the Chartered Engineer. Determine the point of taxation in respect of each of following stages of completion with the help the relevant details furnished there under:

Stage % of completion

Date of completion

Date of issuance of

Date of payment of

Ans: Stage I – POT = 10.9.2012 Stage II – POT = 20.9.2012 Stage III – POT = 7.12.12

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Invoice stipulated amount

I 50% 15/Aug/2012 10/Sep/2012 29/Sep/2012

II 75% 20/Sep/2012 25/Oct/2012 25/Oct/2012

III 100% 30/Nov/2012 11/Dec/2012 07/Dec/2012

4 (POT in case of new Services) A newly introduced service becomes taxable with effect from 01.05.2012. Determine in each of the following independent cases whether service tax is leviable in accordance with Point of Taxation Rules, 2011?

Case Time of Issuance of Invoice as well as Amount of Invoice

Time of receipt of payment as well as amount of Payment received

(a) 25.04.2012 for `1,00,000/-

26.04.2012 for `1,00,000/-

(b) 25.04.2012 for `1,00,000/-

26.04.2012 for `60,000/-

(c) 25.04.2012 for `60,000/-

26.04.2012 for `1,00,000/-

(d) 25.04.2012 for `2,00,000/-

20.04.2012 for `2,00,000/-

(e) 13.05.2012 for `2,00,000/-

30.04.2012 for `2,00,000/-

(f) 5.06.2012 for `2,00,000/-

30.04.2012 for `2,00,000/-

Ans: a) POT – N.A b)only ` 40,000

taxable, POT – Date of receipt of payment c) If invoice for `40,000 not

issued within 14 days from 1/5/2012 then POT is 26/4/2012 d) POT – N.A e) POT – N.A f) POT – 30.4.2012

5 (Service provided after change in rate) A service provider has provided a taxable service on 5/8/2012 and there is a change in tax rate w.e.f 1/8/2012. When the tax shall be payable in the following cases? (a) Date of Invoice is on 31/7/2012 and Date of receipt of payment is on 1/9/2012 (b) Date of Invoice is on 26/7/2012 and Date of receipt of payment is on 31/7/2012 (c) Date of Invoice is on 5/8/2012 and Date of receipt of payment is on 26/7/2012

Ans: a) POT – 1/9/2012 b) POT – 26/7/2012 c) POT – 5/8/2012

6 Sparsh Ltd. of Mumbai imports business support services from Great Corporation of USA on 14.05.2013. The relevant invoice for $ 1,40,000 is raised by Great Corporation on 19.06.2013. Sparsh Ltd. makes the payment against the said invoice as follows: Case I 23.09.2013 Case II 26.01.2014 Determine the point of taxation in each of the above independent cases. [RTP – May 2014]

Ans: Case I – 23.09.2013 Case II – 14.05.2013

7 Gupta & Gupta Ltd. is located in India and holding 60% shares of Vasu Ltd., a U.K. based company. The latter company [Vasu Ltd.] provides Business Auxiliary Services to former company [Gupta & Gupta Ltd.] The other relevant details are given in the following table: Agreed Consideration £ 2,00,000/- Date on which services are provided by Vasu Ltd. 16.07.2012 Date on which invoice is sent by Vasu Ltd.

Ans: POT shall be 31.7.2012

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19.07.2012 Date of debit in the books of account of Gupta & Gupta Ltd. 31.07.2012 Date on which payment is made by Gupta & Gupta Ltd. 23.10.2012 Determine Point of Taxation for Gupta & Gupta Ltd.

8 HMV Ltd. is having the copyright of classic songs of Late Kishore Kumar recorded in a Compact Disk [CD]. The company gave the aforementioned copyright to Super Cassettes Industries Ltd. [hereinafter abbreviated as [SCI Ltd.] on 20.04.2011. The consideration payable by SCI Ltd. to HMV Ltd. for acquiring the foregoing copyright has been fixed @ ₹10/- per CD sold by it [SCI Ltd.]. The No. of CDs Sold by SCI Ltd. during different financial years as well as other relevant details is given in the following table:

Relevant Year

No. of CDs sold

Consideration Payable @ ₹10- per CD sold

Date of Issuance of Invoice by HMV Ltd.

Date of Receipt of Payment from SCI Ltd.

2011-12 4,00,000 ₹ 40,00,000 29/7/12 16/8/12

2012-13 6,00,000 ₹ 60,00,000 3/6/13 23/5/13

2013-14 7,00,000 ₹ 70,00,000 16/6/14 16/6/14

Ans: 2011-12 – POT – 29.7.2012 2012-13 – POT – 23/5/2013 2013-14 – POT – 16/5/2014

9 A interior decorator charges ₹5,50,000 from a client for providing professional services. The breakup of the bill is as follows: (a) Value of furniture sold to the client ₹2,50,000 (b) Labour and facility charges ₹1,50,000 (c) Value of materials consumed in Providing the service ₹1,50,000 Compute the amount of service tax to be charged from the client

Ans: Value of Service = ` 3,00,000

10 ABC Co. Ltd. provided services valuing ₹ 8 lakhs during the financial year 2012-13. During 2013-14, it has provided taxable services valuing ₹ 10 lakhs and has received payments towards payable services ₹ 8.5 lakhs. It has also received services in the nature of transport of goods by road valuing ₹ 50,000, in respect of which it is the person liable to pay service tax. Compute the service tax, if any, payable by ABC Co. Ltd. for the financial year 2013-14. It is given that goods transport service is exempt to the extent of 75% of value thereof.

[June 09 – CMA]

Ans: Value of taxable service = `12,500

11 [Value of Taxable Service] M/s. work force group are a labour contractor of manpower to M/s. XYZ. They charge to the principal employer for the wages of their labour which amounts to ₹ 1,20,000 plus their service charges of ₹ 12,000 for arranging the labour. The issue is whether service tax is payable on the gross amount charged by them or only their charges for labour. Advice?

[May 2006]

Ans: ₹ 12,00,000 is incurred in the course of providing service and hence includible in value.

12 IOC has awarded a contract in August, 2012 for ₹140 lakh to M/s Jagjit Construction Ltd. in respect of alterations to one of its

Ans: Amount of

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buildings. The said building was abandoned by IOC five years ago. The materials required for carrying out alterations will be supplied by Jagjit constructions Ltd. itself. The purpose of awarding the foregoing contract is to make the said building workable. Whether the aforesaid services of Jagjit constructions Ltd. are subject to service tax and if so, determine the amount of service tax payable?

service tax payable ₹ 6,92,160/-

13 A&Co. of Srinagar rendered taxable services both within and outside the state of Jammu and Kashmir. It received ₹26,12,000 for the services rendered inside the state of Jammu & Kashmir and ₹18,00,000 for the services rendered outside the state of Jammu & Kashmir. Compute its taxable service value and service tax liability. Answer with reference to the provisions of place of provision of service Rules, 2012. In case, A&Co. was situated in Mumbai what would be the value of taxable service and service tax liability?

Answer as follows

14 State briefly, Whether service tax will be levied in each of the following independent cases: (i) Services provided in the state of Rajasthan by a person having place of business in the state of Jammu and Kashmir. (ii) Agency services provided by Raj Ltd. [located in taxable territory] in October, 2012 for ₹1,00,000 to Preethi Ltd. [Which is also located in taxable territory] (iii) Service provided to an Export oriented unit located in India (iv) Kirti Ltd. [Service Provider] is a German Company. It renders a service to a subsidiary of Tata Ltd. [an Indian company] located abroad. However, payment to Kirti Ltd. has been made by holding Indian company. (v) Nitin Ltd. provided services to Indian Oil Corporation from vessels located in the continental shelf of India for the purposes of prospecting natural gas for ₹50 lakh in September, 2012. [Practice manual]

Answer as follows

15 Determine the place of provision of services as well as their taxability in each of the following independent cases: (i) Mr. A, the owner of an immovable property located in New Delhi gives on rent the said property to Mr. B of UP for commercial purposes. (ii) Mr. Rahul, a Delhi based interior decorator provides his professional services in respect of property which is intended to be located in Punjab. (iii) A USA based company possessing specialization in mineral exploration has been awarded a contract for mineral exploration in respect of specific sites in Canada by Mumbai based Mr. Ram kapoor. (iv) ABC Ltd. agrees to provide [by virtue of single agreement for consolidated consideration] services connected with oil exploration to XYZ Ltd. in respect of specific sites located in Assam, Gujarat and Maharashtra. The proportion of services provided by ABC Ltd. in relation to above states worked out to be 25%, 60% and 15% (v) Rohit, a consulting engineer provides his professional consultancy services to a U.K based company in respect of its three properties located in UK, USA and Dubai. (vi) Yokesh, Chennai based professional valuer provides his professional services of valuation of immovable properties [vide a

Answer as follows

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single contract for consolidated consideration] to Mumbai based Reliance Industries Ltd. in respect of its four properties located in Delhi, Kashmir, Kolkata and London. It is assumed that Yogesh performed 20%, 30%, 15% and 35% of his total services in foregoing four cities respectively. (vii) A Delhi based builder provides construction services to Punjab based company in respect of construction of its new building in Bangladesh.

Answer to Question No. 13:

Reference: Rule 3 of Place of provision of services Rules, 2012

Provision: In ordinary cases, the place of provision of service shall be the location of

service receiver. If service receiver is located in taxable territory, then such service is

taxable. If service recipient is located in non taxable territory, then such service is non

taxable service

Facts & Discussion:

Applicability of Service tax if A&Co. is located in Srinagar:

Service provided within the state of Jammu and Kashmir is not subject to service tax as the

location of service recipient is relevant and service recipient is located in nontaxable

territory. Hence, ₹ 26,12,000 for services rendered in the state of jammu and Kashmir is not

chargeable to service tax. Services rendered outside Jammu & Kashmir are ₹ 18,00,000,

which will be subject to service tax.

Value of taxable Service = ₹ 18,00,000

Service tax payable = Rs. 18,00,000 X 12.36% = ₹ 2,22,480

Applicability of Service tax if A&Co. is located in Mumbai:

The liability would be same even if A&Co. were located in Mumbai, as service provided by

them in J&K will not be taxable. However, in that case, reverse charge will not apply.

Conclusion: Service tax payable by A&Co. in both the cases is ₹ 2,22,480


i. As per Section 64(1) of Finance Act 1994, Service Tax provisions do not extend to

the State of jammu & Kashmir. But in the present case Service Tax is provided in

the state of Rajasthan but not in the state of jammu & Kashmir. As per the point of

taxation rules, 2012 the location of the service recipient is relevant for taxability.

Accordingly Service tax is payable in the present case as services are provided in

taxable territory i.e. Rajasthan.

ii. When both Service provider and Service recipient are located in taxable territory,

the said service shall be taxable service and the value of taxable service shall be

the gross amount charged for service as per Section 67 of Finance Act, 1994. In the

present case service tax shallbe payable at the prevailing rate of 12.36% on

₹1,00,000/-

iii. Services provided to EOU located in India is liable to Service Tax as Service provider

and service recipient are located in taxable territory i.e. India

© Tharun Raj 26

iv. As per the general rule of place of provision of services rules, 2012 the location of

service recipient is relevant in determining the taxability of service. In the present

case as the actual service recipients is located outside the taxable territory, the said

services provided by Kirti Ltd is not taxable.

v. India includes the installations, structures and vessels located in the continental

shelf of India and exclusive economic zone of India. Since in the present case Nitin

Ltd provided services to IOC from vessels located in the continental shelf of India

for the purposes of prospecting natural gas , it implies that services have been

provided in taxable territory by one person to another for consideration. Therefore,

service tax is leviable in the present case.


i. In this case, since the immovable property in question is located in New Delhi,

place of provision of services will be New Delhi which falls within the ambit of

‗Taxable Territory‘ and resultantly these services will be taxable.

ii. In this case, place of provision of services will be Punjab as the concerned property

is intended to be located in Punjab which also falls within the ambit of ‗Taxable

Territory‘ and resultantly these services will be taxable.

iii. In this case, since specific sites in respect of which mineral exploration is to be

carried out are located in Canada, the place of Provision of service will be Canada

which does not fall within the ambit of ‗Taxable Territory‘ and resultantly these

services will not be taxable. The fact that service providing Company is located in

U.S.A and service recipient is located in U.S.A. and service recipient is located in

Mumbai (India) is wholly insignificant.

iv. In this case, place of provision of service shall be Gujarat because greatest

proportion of taxable service (60%) is provided there. The students may tempt to

draw conclusion here as all the locations given in this example fall within the

taxable territory, place of provision of services rules have no applicability. However,

students must keep in mind that POPS, rules, 2012 are useful for those service

providers who operate from multiple locations within India without having

centralized registration for the purpose of determining the precise taxable

jurisdiction applicable to their operations. Therefore, in the present case if it is

assumed that ABC Ltd has decentralized registration, it will pay applicable service

tax in respect of services provided to XYZ Ltd. In Gujarat.

v. Since in this case, consulting engineer‘s services provided by Rohit are in respect of

locations which fall within non-taxable territory, place of provision of the services

provided is U.K., USA and Dubai for the respective services and hence, no service

tax is chargeable by Mr. Rohit [Rule 5 of the PoPS Rules].

[27] © Tharun Raj

CHAPTER - 2 VALUATION UNDER SERVICE TAX

Summary:

Notification Provision

25/2012 All Exemptions under Service tax

26/2012 Abatement under Service tax

30/2012 Services covered under reverse charge

33/2012 Exemption to small service providers

39/2012 Rebate of excise duty/service tax paid on inputs/input

services

41/2012 Refund of Service tax paid on input services, which does

not fall into the definition of input service, which are used

for export of services

40/2012 Exemption with respect to services received by units in SEZ

or SEZ developer

29/2012 Value of renting of immovable property = Gross amount

charged for renting (-) Property tax payable to local

authorities on such property

1. VALUATION UNDER SERVICE TAX (SEC. 67)

If Service is Provided for a consideration in money —> Value = Gross amount

charged by service provider.

If service is provided for a consideration not wholly or partly in Money —> Value =

Money received + Money value of additional consideration. [This value is always

inclusive of service tax].

If the money value of consideration is not ascertainable —> Value as determined

by valuation Rules.

Consideration includes any amount that is payable for the taxable services provided

or to be provided

Gross amount charges shall include any amount received before, during or after

provision of service

Donations not considered in Value.

Points to Remember:

The applicable rate of ST is 12.36% w.e.f 1/4/2012

© Tharun Raj 28

If the POT is before 1/4/2012, apply ST as 10.3%

Unless otherwise specified, consider value as exclusive of tax. (Make a note in that regard)

Always comment on the availability of CENVAT credit.

2. Valuation Rules: (Service tax valuation rules, 2006)

Gross amount charged by service provider for providing SIMILAR service

Rule 3(a)

If above is not possible, EQUIVALENT money value, which should not be less then cost of provision of service.

Rule 3(b)

AO has power to determine Value by issuing SCN Rule 4

Expenditure incurred in the course of providing service is INCLUDED in value.

Rule 5(1)

Expenditure incurred on behalf of SR as pure agent is EXCLUDED in value.

Rule 5(2)

3. VALUE OF FOREX TRANSACTIONS (INCL. MONEY CHANGING) - RULE 2B

The ―VALUE‖ as per Rule 2B is as follows:

1. When there is purchase or sale of INR and the RBI reference rate is available, Value = (Buying/Selling rate - RBI ref. rate) X Units of currency [Ignore +ve/-ve]

2. When there is purchase or sale of INR and the RBI reference rate is not available, Value = Gross amount of INR provided or received X 1%

3. When the currencies involved in the exchange transaction are foreign currencies, Value = Note: On the value ascertained above , ST @ 12.36% is payable.

4. VALUE IN CASE OF RESTAURANT OR OUTDOOR CATERING - RULE 2C

The value of service portion is as follows:

Goods being food or any other article for human consumption Supplied in a restaurant —> Value = 40% of total amount charged

Goods being food or any other article for human consumption supplied as a part of outdoor catering —> Value = 60% of total amount charged

CENVAT Credit Implications for above: No CENVAT credit on goods falling under chapter 1 to 22 of CETA (i.e food, edibles

or beverages incl. live animals) CENVAT credit available on other inputs, input services and capital goods subject to

[29] © Tharun Raj

the provision of CENVAT credit rules Bundled service of Catering with Renting: - Notification No. 26/2012) Taxable Value = 70% of total amount, without taking CENVAT credit on any goods used for providing service Computation of total amount charged for the purpose of Rule 2C as well as Notification no. 26/2012.:

Gross amount charged XXX

Add: FMV of all goods and services supplied by the service

receiver in or in relation to the supply of food or any

other article of human consumption or any drink

(whether or not intoxicating), under the same contract

or any other contract

XXX

Less: Amount charged for the goods or services provided by

the service receiver

(XX)

Less: VAT or Sales tax levied to the extent they form part of

the gross amount or the total amount, as the case may

be.

(XX)

Total amount charged for the purpose of Rule 2C or

Notification no. 26/2012

XXX

5. SERVICE TAX VS. TDS - IN CASE OF REVERSE CHARGE (MAINLY FOR NOV 2014 EXAMS)

In case of reverse charge the service recipient has to pay service tax and at the

same time has to deduct TDS on the payment made by him to service provider.

There was confusion till 2014 as to whether TDS should be calculated on the amount

including service tax as service tax is paid by the service recipient.

But CBDT vide its circular no. 1/2014 dated 6.1.2014 has clarified that while

computing TDS, service tax element should be excluded as service tax is not the

income part but is a statutory liability.

Service provider under reverse charge will raise invoice only on the service portion

excluding service tax and service recipient has to calculate service tax as well as

TDS on the same amount and pay to the respective authorities accordingly.

Even if service provider charges in his invoice only his part of service tax (in case of

partial reverse charge), TDS should be computed only that service value excluding

the part amount of service tax.

Service tax Vs. TDS CBDT vide Cir. 1/2014 clarified that no TDS is required to be made on service tax component, if service tax is shown separately in invoice. TVS Motor Co. Ltd. V CCE (2012) (CESTAT) Service tax is payable on amount inclusive of income tax TDS Whether tax is to be deducted at source under section 194J of the Income-tax Act, 1961 on the amount of service tax if it is paid separately and is not included

© Tharun Raj 30

in the fees for professional services/technical services? CIT v. Rajasthan Urban Infrastructure 2013 (31) STR 642 (Raj.) The High Court held that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and is not included in the fees for professional services or technical services, the service tax component would not be subject to TDS under section 194J of the Income-tax Act, 1961.1 Note: Section 194J of the Income-tax Act, 1961 provides for deduction of income tax equal to 10% of any sum paid as fees for professional services/technical services, by any person, not being an individual or HUF, who is responsible for paying such sum to a resident, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. Example: Professional services by Mr. A to Mr. B is ₹1,00,000. Service tax payable @ 12.36% is ₹12,360 Invoice by Mr. A to Mr. B = ₹1,12,360 TDS @ 10% should be calculated on ₹1,00,000 but not ₹1,12,360 Payment made by Mr. B to Mr. A = ₹1,02,360 Service tax payable to Govt. is ₹ 12,360 but not on ₹ 1,02,360 (Reverse working should not be done)

6. VALUE OF TELECOMMUNICATION SERVICE

Amendment vide Notification No. 24/2012:

The value of telecommunication service shall be the gross amount paid by the person to whom telecommunication service is actually provided. Exemption vide Notification No. 25/2012: Services by a selling agent or a distributor of SIM cards or recharge coupon vouchers are exempted from service tax. Example: MRP of SIM card = ₹200 Payment by Dealer = ₹150 Value in the hands of telecom company = ₹200

7. VALUE IN CASE OF DIRECTORS’ SERVICES TO COMPANY:

Services of director to company is covered under the provisions of reverse charge by

amending noti. 30/2012 w.e.f 7/8/2012 and remuneration to directors is as follows:

Service Provider - Director (Service Tax liability= 0%)

Service Recipient - Company (Service Tax liability = 100%)

Director INCLUDES Non-executive, Nominee, Public interest and Independent

directors

Director DOES NOT INCLUDE Managing Director, Whole time director and Executive

director, who are in full time employment of the company (Therefore no service tax

as it is contract of service).

Remuneration INCLUDES sitting fees, travelling expenses and incidental expenses for

attending the meetings of Board and their committees and commission or other

remuneration paid.

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Remuneration DOES NOT INCLUDE travelling expenses other than for board

meetings and committee meetings.

Service tax should be paid @12.36% on gross value of services and not by back

calculations.

Service tax should be computed on the amount of remuneration and TDS should be

calculated on the same amount but not after including service tax.

8. PRINCIPLE OF MUTUALITY - MEANING, EXCEPTIONS & EXEMPTIONS:

Meaning:

As per this principle, there must be two parties for levy of service tax i.e. service must be provided by one person to another person. Exceptions [Explanation 3 to Sec. 65B(44)]:

1. An establishment of a person located in taxable territory and another establishment of such person located in non-taxable territory are treated as establishments of distinct persons.

2. An unincorporated association or body of persons and members thereof are also treated as distinct persons.

Exemptions [Notification no. 25/2012]: Service by an registered, unincorporated body or a non- profit entity, to its own members by way of reimbursement of charges or share of contribution–

1. As a trade union; 2. For the provision of carrying out any activity which is exempt from the levy of service

tax; or 3. Up to an amount of ₹5,000 per month per member for sourcing of goods or services

from a third person for the common use of its members in a housing society or a residential complex [i.e. Resident Welfare Association (RWA)]

Circular No. 175/1/2014 (dated: 10/1/14) If per month, per member contribution exceeds ₹ 5,000, the entire contribution

would be ineligible for contribution and service tax would be leviable. Small Service Provider exemption under Notification no. 33/2012 is applicable to

RWA. RWA incurring expenses viz. electricity bill, telephone bill on behalf of members is

excluded as per rule 5(1) of valuation Rules, 2006 for determining the value of taxable services of RWA

RWA can avail CENVAT credit in terms of CENVAT credit rules, 2004

9. COMPOSITION SCHEME:

Air Travel agent - Rule 6(7):

@ 0.6% of the basic fare in the case of domestic bookings, and @ 1.2% of the basic fare in the case of international bookings, during any calendar month or quarter, as the case may be. Life Insurance - Rule 6(7A): Insurer has option to pay service tax on life insurance business on following basis:

If the amount allocated for investment to savings, is intimated to policy holder, at the time of providing service Gross premium charged (-) Amount allocated for investment

© Tharun Raj 32

Other cases For the first year of the policy —> Service tax @ 3% of the gross amount of premium charged. For the subsequent year of the policy —> Service tax @ 1.5% of the gross amount of premium charged.

Distributor/Agent of lotteries - Rule 6(7C):

Where the guaranteed lottery prize payout is > 80% —> ₹ 7000/- on every ₹ 10 Lakhs (or part of ₹ 10 Lakhs) of aggregate face value of lottery tickets printed by the organizing State for a draw.

Where the guaranteed lottery prize payout is < 80% —> ₹ 11000/- on every ₹ 10 Lakhs (or part of ₹ 10 Lakhs) of aggregate face value of lottery tickets printed by the organizing State for a draw.

Sale/Purchase of foreign currency including money changing - Rule 6(7B): Upto ₹ 100,000:

0.12 % of the gross amount of currency exchanged (or) ₹ 30 whichever is higher

Exceeding ₹ 1,00,000 and upto ₹ 10,00,000:

₹ 120 + 0.06 % of the gross amount of currency exchanged (Exceeding ₹ 1,00,000)

Exceeding ₹ 10,00,000:

₹ 660 + 0.012 % of the gross amount of currency exchanged (Exceeding ₹ 10,00,000) (or) ₹ 6,000 whichever is lower.

COMPOSITION SCHEME - SPECIAL POINTS

All the above are service tax payable but not ―value‖.

The above is excluding EC & SHEC.

It is an optional scheme. If SP want to pay ST as per normal provisions, he can do so

The option should be availed in the beginning of every financial year in writing to AC/DC.

The option once availed will be applicable for entire financial year in respect of all transactions. In case of lotteries, it can be availed within one month.

If this option is availed, the SP comes under the category of ―Exempted services‖ for CENVAT credit purpose and accordingly, credit not available.

―In Normal scheme, there involves computation of Value & ST but in Composition scheme, only computation of ST‖

In terms of practice followed, life insurance companies’ issues remainder notices/letters to policy holders to pay renewal premiums. Such reminders notices only solicit furtherance of service which if accepted by policy holder by payment of premium results in a service. Whether service tax needs to be paid on the basis of such reminders? CBEC vide circular no. 166/1/2013 dated 1.1.2013 clarified as follows: Under the point of taxation rules, 2011 the point of taxation generally is the date of issue of invoice or date of receipt of payment whichever is earlier. The invoice mentioned refers to the invoices as issued under Rule 4A of Service tax Rules, 1994. No tax point arises on account of such reminders. Thus, it is clarified that reminder letters/notices for insurance

[33] © Tharun Raj

policies not being invoices would not invite levy of service tax. In case of issuance of any invoice, point of taxation shall accordingly be determined. Comments: In my opinion this circular can be applied in many cases and thus tax can be saved to a larger extent. When it is uncertain that service recipient will not pay services charges, it is not advisable to raise invoice, as raising invoice attracts payment of service tax and if the service recipient does not pay service charges then a credit note should be issued and refund be claimed. There is no concession for bad debts as per the departments circular. Therefore, as per this circular, a service provider can either raise a proforma invoice or remainder in case of continuous supply of service and on receipt of payment the service tax shall be paid and an invoice as per Rule 4A shall be issued within 30 days or 45 days once the payment is received.

© Tharun Raj 34

CHAPTER - 3 SERVICE TAX – EXEMPTIONS

EXEMPTION WITH RESPECT TO SERVICES PROVIDED TO

DEVELOPER (OR) UNITS OF SEZ [NOTIFICATION NO. 12/2013 –

ST] The SEZ unit/Developer can be ―standalone‖ or ―non-standalone‖. Standalone entity refers

to an entity which is carrying out business operations in SEZ, whereas non-standalone entity

will carry out business operations in SEZ and also in DTA. Merely having an office in DTA for

purpose of liaison/business promotion should be considered as standalone entity.

The exemption is revised w.e.f 1/7/2013. Services

received by SEZ unit/developer for authorized operations

in SEZ are exempt under this notification.

Services provided from DTA to SEZ

(units/developer) in relation to authorized

operations1 of SEZ Exemption available

Services provided from DTA to SEZ

(units/developer), otherwise than in relation to

authorized operations Taxable (if not exempted

under any other notification)

Services provided from SEZ to DTA Taxable

vide circular no. 105/8/2008 (if not exempted

under any other notification)

Services provided from SEZ (unit or developer) to

SEZ (unit/developer) in relation to authorized

operations Exempt from service tax

Services provided from SEZ (unit or developer) to SEZ (unit/developer), otherwise

than in relation to authorized operations Taxable (if not exempt under any other

notification)

1 Authorised operations? - The SEZ Unit or the Developer shall get an approval by the

Approval Committee of the list of the services as are required for

the authorised operations (referred to as the ‗specified services‘) on which the SEZ Unit

or Developer wish to claim exemption from service tax.

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2

PROCEDURE FOR AVAILING EXEMPTION:

2 If the services are in relation to authorized operations and if ab-initio exemption is not availed, refund of service tax can be obtained.

Services received by SEZ (unit or developer)

Exclusively used for DTA

Not eligible for exemption

Exclusively used for authorized operation

Exemption ab-initio (prior authorization required)

Not exclusively used for authorized operations (i.e.

common services distributed between SEZ and DTA)

Exemption available by way of refund

[Refund calulated in the manner prescribed as per

Rule 7 of CCR, 2004]

Form A-1

•the SEZ (Unit or Developer) shall furnish a declaration verified by the Specified Officer of the SEZ, along with the list of specified services i.e. authorized operations

Form A-1

•shall furnish an undertaking, that in case the specified services on which exemption has been claimed are not exclusively used for authorised operation, it shall pay to the government an amount that is claimed by way of exemption from service tax along with interest as applicable on delayed payment of service tax

Form A-2

•an authorisation shall be issued by the jurisdictional AC/DC of Central Excise, as the case may be to the SEZ (Unit or Developer)

Form A-3

•the SEZ (Unit orDeveloper) shall furnish to the jurisdictional Superintendent of CE a quarterly statement,furnishing the details of specified services received by it without payment of service tax; (applicable in case of exemption ab-initio)

Form A- 4

•the SEZ Unit or Developer who is registered as an assessee under the Central Excise Act, 1944, shall file the claim for refund to the jurisdictional AC/DC Central Excise

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SPECIAL POINTS:

1. In case of exemption ab-initio the SEZ Unit or the Developer shall provide a

copy of said authorization (obtained as above) to the provider of specified services.

On the basis of the said authorisation, the service provider shall provide the specified

services to the SEZ Unit or the Developer without payment of service tax

2. Service tax paid on the specified services that are common to

the authorised operation in an SEZ and the operation in DTA units shall be

distributed amongst the SEZ Unit or DTA Units in the manner as prescribed in rule 7

of the Cenvat Credit Rules. For the purpose of distribution, the turnover of the SEZ

Unit or the Developer shall be taken as the turnover of authorised operation during

the relevant period.

3. Refund is available, only after payment of service tax – (on the basis of invoice, bill

or challan as the case may be)

4. The claim for refund shall be filed within one year from the end of the month in

which actual payment of service tax was made by such Developer or SEZ Unit to the

registered service provider or such extended period as AC/DC of Central Excise, as

the case may be, shall permit;

5. The SEZ Unit or the Developer shall submit only one claim of refund under this

notification for every quarter:

6. The SEZ Unit or the Developer who is not so registered under the provisions referred

to in clause (c), shall, before filing a claim for refund under this notification, make an

application for registration under rule 4 of the Service Tax Rules, 1994.

7. If there are more than one SEZ Unit registered under a common service tax

registration, a common refund may be filed at the option of the assessee.

8. The SEZ Unit or Developer, who intends to avail exemption or refund under this

notification, shall maintain proper account of receipt and use of the specified

services, on which exemption or refund is claimed, for authorised operations in the

SEZ.

9. Notwithstanding anything contained in this notification, SEZ Unit or the Developer

shall have the option not to avail of this exemption and instead take CENVAT credit

on the specified services in accordance with the CENVAT Credit Rules, 2004.

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SMALL SERVICE PROVIDER EXEMPTION [NOTIFICATION NO.

33/2012] a) To whom exemption is available?

Any person who is in the business of providing taxable services.

b) When exemption is available?

Previous Year Current Year

Aggregate value of

taxable services

provided

≤ `10 lakhs (Not exceeding `10

lakhs)

Exemption available

Aggregate value of

taxable services

provided

>`10 lakhs Exemption not available

c) What is the period of Exemption?

During the current year only. (For every subsequent year, the aggregate value of

taxable services provided during the previous year relevant to that subsequent

year has to be considered)

d) What is the Amount of Exemption?

During the current year, service tax is exempt to the extent of aggregate value

not exceeding Rs. 10 lakhs (i.e. Upto 10 lakhs). ―Aggregate value not exceeding

` 10 lakhs‖ means the sum total of value of taxable services charged in the first

consecutive invoices during the financial year (i.e. Upto 10 lakhs of services

provided and invoice issued (or) to be issued)

e) What is the meaning of aggregate value?

Aggregate value means the sum total of value of taxable services charged in

the first consecutive invoices issued during a financial year but does not include

value charged in invoices issued towards such services which are exempt from

whole of service tax leviable thereon under section 66B of the said Finance Act

under any other notification.

f) Is this exemption compulsory?

No, it is an option for the service provider. The service provider may opt out of

the exemption and pay service tax as per the normal provisions.

© Tharun Raj 38

g) When this exemption not available?

Taxable services provided by a person under a brand name or trade

name, whether registered or not, of another person.

SSP exemption is not available to such value of taxable services in respect

of which service tax is payable on reverse charge mechanism by a person.

h) What are the consequences of availing small service provider exemption?

(i) CENVAT credit on input services

(a) The provider of taxable service shall not avail the CENVAT credit1 of

service tax paid on any input services used for providing the said taxable

service, for which SSP exemption is availed of.

(b) The provider of taxable service shall avail the CENVAT credit only on such

input services received, on or after the date on which the service provider

starts paying service tax, and used for the provision of taxable services

for which service tax is payable.

(ii) CENVAT credit on inputs

(a) Service provider shall avail the CENVAT credit only on such inputs

received, on or after the date on which the service provider starts paying

service tax, and used for the provision of taxable services for which

service tax is payable.

(b) A service provider who starts availing SSP exemption shall be required to

pay an amount equivalent to the CENVAT credit taken by him, if any, in

respect of such inputs lying in stock or in process on the date on which

he starts availing the said exemption. Balance credit shall not be utilised

in terms of rule 3(4) of the CENVAT Credit Rules, 2004 and shall lapse on

the day such service provider starts availing SSP exemption.

(iii) CENVAT credit on capital goods: Service provider shall not avail the

CENVAT credit on capital goods received, during the period in which the service

provider avails SSP exemption.

Aggregate value of taxable services in case of Goods Transport Agency: In case of

goods transport agency (GTA), for the purposes of determining the aggregate value not

exceeding ` 10 lakh, to avail exemption under this notification, the payment received

towards the gross amount charged by the GTA under section 67 of the said Finance Act for

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which the person liable for paying service tax is the consignor or consignee shall not be

taken into account.

EXEMPTION FROM SERVICE TAX EQUAL TO R&D CESS PAYABLE ON

IMPORT OF TECHNOLOGY [NOTIFICATION NO. 14/2012] The amount of Research and development cess payable shall be allowed as a deduction

from the service tax payable on the taxable service involving the import of technology.

Conditions to be fulfilled:-

(a) The Research & Development Cess is paid at the time of or before payment for the

service subject to maximum of 6 months period from the date of invoice*.

*In case of associated enterprises, the date of credit in the books of account.

(b) Necessary records will have to be maintained so as to establish a linkage between the

invoice or the credit entry (as the case may be) and the cess payment challan.

Research and development cess

Research and Development cess is levied, on the payment of technical fees/consultancy/

royalty or know-how etc. involving the ‗import of technology‘, under section 3 of the

Research & Development Act, 1986. The purpose of levying this cess is to encourage the

commercial application of indigenously developed technology.

Rate of cess: Rate of research and development cess is 5%.

© Tharun Raj 40

MEGA EXEMPTION NOTIFICATION 25/2012: The Central Government vide amended Notification No. 25/2012-ST dated June 20, 2012, exempts the following taxable services from the whole of the service tax leviable under section 66B of the Finance Act, 1994, namely:

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

2 Health care services3 by a clinical establishment, an authorised medical practitioner or

para-medics;

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;

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;

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;

(b) an individual as an advocate or a partnership firm of advocates 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 person represented on an arbitral tribunal to an arbitral tribunal;

7 Services by way of technical testing or analysis of newly developed drugs, including

vaccines and herbal remedies, on human participants by a clinical research organisation

approved to conduct clinical trials by the Drug Controller General of India;

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

or sports;

3 ―health care services‖ means any service by way of diagnosis or treatment or care for illness, injury,

deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not

include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to

reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma;

[41] © Tharun Raj

9 Services provided to or by an educational institution in respect of education exempted

from service tax, by way of,

(a) auxiliary educational services; or

(b) renting of immovable property;

[Entry 9 has been amended vide Notification No. 3/2013-ST dated 1st March, 2013 ]

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 ANY COUNTRY4;

(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;

12 Services provided to the Government, a local authority or a governmental authority5 by

way of construction, erection, commissioning, installation, completion, fitting out, repair,

maintenance, renovation, or alteration of

(a) a civil structure or any other original works meant predominantly for use other than

for commerce, industry, or any other business or profession;

4 services provided by way of sponsorship of sporting events organized by a national sports federation, or its affiliated federations were exempt from service tax where the participating teams or individuals represent any district, State or zone. The said exemption has been extended even in a case where the participating teams or individuals represent any COUNTRY. [Notification No. 01/2014-ST dated 10.01.2014] 5 ―Governmental authority‖ means an authority or a board or any other body; (i) set up by an Act of Parliament or a State Legislature; or (ii) established by Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution. Thus, the scope of the definition has been enhanced. Henceforth, an authority or a board or any other body established by Government with 90% or more participation by way of equity or control need not be set up under an Act of Parliament or a State Legislature to qualify as Governmental authority. [Notification No. 02/2014-ST dated 30.01.2014]

© Tharun Raj 42

(b) a historical monument, archaeological site or remains of national importance,

archaeological excavation, or antiquity specified under the Ancient Monuments and

Archaeological Sites and Remains Act, 1958 (24 of 1958);

(c) a structure meant predominantly for use as

(i) an educational,

(ii) a clinical, or

(iii) an art or cultural establishment;

(d) canal, dam or other irrigation works;

(e) pipeline, conduit or plant for

(i) water supply

(ii) water treatment, or

(iii) sewerage treatment or disposal; or

(f) a residential complex predominantly meant for self-use or the use of their employees

or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said

Act;

13 Services provided by way of construction, erection, commissioning, installation,

completion, fitting out, repair, maintenance,

renovation, or alteration of,

(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;

(b) a civil structure or any other original works pertaining to a scheme under Jawaharlal

Nehru National Urban Renewal

Mission or Rajiv Awaas Yojana;

(c) a building owned by an entity registered under section 12 AA of the Income tax Act,

1961(43 of 1961) and meant

predominantly for religious use by general public;

(d) a pollution control or effluent treatment plant, except located as a part of a factory;

or

a structure meant for funeral, burial or cremation of deceased;

14 Services by way of construction, erection, commissioning, or installation of original works

pertaining to,

(a) an airport, port or railways, including monorail or metro;

(b) a single residential unit otherwise than as a part of a residential complex;

(c) low- cost houses up to a carpet area of 60 square metres per house in a housing

[43] © Tharun Raj

project approved by competent authority empowered under the ‗Scheme of Affordable

Housing in Partnership‘ framed by the Ministry of Housing and Urban

Poverty Alleviation, Government of India;

(d) post- harvest storage infrastructure for agricultural produce including a cold storages

for such purposes; or

(e) mechanised food grain handling system, machinery or equipment for units processing

agricultural produce as food stuff excluding alcoholic beverages;

15 Services provided by way of temporary transfer or permitting the use or enjoyment of a

copyright,

(a) covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957

(14 of 1957), relating to original literary, dramatic, musical or artistic works; or

(b) of cinematograph films for exhibition in a cinema hall or cinema theatre;

[Entry 15 has been substituted vide Notification No.3 /2013-ST dated 1st March, 2013]

16 Services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or

(iii) theatre, excluding services provided by such artist as a brand ambassador;

17 Services by way of collecting or providing news by an independent journalist, Press Trust

of India or United News of India;

18 Services by way of renting of a hotel, inn, guest house, club, campsite or other

commercial places meant for residential or

19 Services provided in relation to serving of food or beverages by a restaurant, eating joint

or a mess, other than those having the facility of air-conditioning or central air-heating in

any part of the establishment, at any time during the year;


19A services in air- conditioned canteen of factory – [ notification No.14/2013-ST,dated

22-10-2013]

20 Services by way of transportation by rail or a vessel from one place in India to another of

the following goods

(a) petroleum and petroleum products falling under Chapter heading 2710 and 2711 of

the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(b) relief materials meant for victims of natural or man-made disasters, calamities,

accidents or mishap;

(c) defence or military equipments;

(d) postal mail or mail bags;

(e) household effects;

(f) newspaper or magazines registered with the Registrar of Newspapers;

© Tharun Raj 44

(g) railway equipments or materials;

(h) agricultural produce;

(i) foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible

oil, excluding alcoholic beverages; or

(j) chemical fertilizer and oilcakes;

[The items (a), (d) and (e) has been omitted vide Notification No.3/2013-ST dated March 1, 2013]

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 Rs. 1,500;

(c) goods, where gross amount charged for transportation of all such goods for a single

consignee does not exceed Rs. 750;

(d) foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible

oil, excluding alcoholic beverages;

(e) chemical fertilizer and oilcakes;

(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;


22 Services by way of giving on hire

(a) to a state transport undertaking, a motor vehicle meant to carry more than twelve

passengers; or

(b) to a goods transport agency, a means of transportation of goods;

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) a contract carriage for the transportation of passengers, excluding tourism,

conducted tour, charter or hire; or

(c) ropeway, cable car or aerial tramway;

24 Services by way of vehicle parking to general public excluding leasing of space to an

entity for providing such parking facility;

[45] © Tharun Raj

[Entry 24, has been omitted vide Notification No.3 /2013-ST dated 1st March, 2013]

25 Services provided to Government, a local authority or a governmental authority by way

of

(a) carrying out any activity in relation to any function ordinarily entrusted to a

municipality in relation to water supply, public

health, sanitation conservancy, solid waste management or slum improvement and

upgradation; or

(b) repair or maintenance of a vessel or an aircraft;

[In entry 25, in item (b), for the words, ―a vessel or an aircraft‖, the words ―a vessel‖ shall be

substituted vide Notification No.3/2013-ST dated 1st March, 2013]

26 Services of general insurance business provided under following schemes

(a) Hut Insurance Scheme;

(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as

Integrated Rural Development Programme);

(c) Scheme for Insurance of Tribals;

(d) Janata Personal Accident Policy and Gramin Accident Policy;

(e) Group Personal Accident Policy for Self-Employed Women;

(f) Agricultural Pumpset and Failed Well Insurance;

(g) premia collected on export credit insurance;

(h) Weather Based Crop Insurance Scheme or the Modified National Agricultural

Insurance Scheme, approved by the Government of India and implemented by the

Ministry of Agriculture;

(i) Jan Arogya Bima Policy;

(j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);

(k) Pilot Scheme on Seed Crop Insurance;

(l) Central Sector Scheme on Cattle Insurance;

(m) Universal Health Insurance Scheme;

(n) Rashtriya Swasthya Bima Yojana; or

(o) Coconut Palm Insurance Scheme;

26A) Services of life insurance business provided under following schemes -

(a) Janashree Bima Yojana (JBY); or

(b) Aam Aadmi Bima Yojana (AABY);

[Entry 26A has been inserted vide Notification No.49 /2012-ST dated 24th December, 2012 ]

27 Services provided by an incubatee up to a total turnover of fifty lakh rupees in a financial

© Tharun Raj 46

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;

28 Service by an unincorporated body or a non- profit entity registered under any law for

the time being in force, to its own members by way of reimbursement of charges or

share of contribution -

(a) as a trade union;

(b) for the provision of carrying out any activity which is exempt from the levy of service

tax; or

(c) up to an amount of five thousand rupees per month per member for sourcing of

goods or services from a third person for the common use of its members in a housing

society or a residential complex;

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) mutual fund agent to a mutual fund or asset management company;

(d) distributor to a mutual fund or asset management company;

(e) selling or marketing agent of lottery tickets to a distributer or a selling agent;

(f) selling agent or a distributer of SIM cards or recharge coupon vouchers;

(g) business facilitator or a business correspondent to a banking company or an

insurance company, in a rural area; or

(h) sub-contractor providing services by way of works contract to another contractor

providing works contract services which are exempt;

30 Carrying out an intermediate production process as job work in relation to

(a) agriculture, printing or textile processing;

(b) cut and polished diamonds and gemstones; or plain and studded jewellery of gold

and other precious metals, falling under Chapter 71 of the Central Excise Tariff Act ,1985

(5 of 1986);

(c) any goods on which appropriate duty is payable by the principal manufacturer; or

(d) processes of electroplating, zinc plating, anodizing, heat treatment, powder coating,

painting including spray painting or auto black, during the course of manufacture of parts

of cycles or sewing machines upto an aggregate value of taxable service of the specified

[47] © Tharun Raj

processes of one hundred and fifty lakh rupees in a financial year subject to the condition

that such aggregate value had not exceeded one hundred and fifty lakh rupees during

the preceding financial year;

31 Services by an organiser to any person in respect of a business exhibition held outside

India;

32 Services by way of slaughtering of bovine animals;

[The word ―bovine‖ has been omitted vide Notification No. 44/2012-ST dated 7th August,

2012]

33 Services received from a provider of service located in a non- taxable territory by

(a) Government, a local authority, a governmental authority or an individual in relation to

any purpose other than commerce, industry or any other business or profession;

(b) an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for

the purposes of providing charitable activities; or

(c) a person located in a non-taxable territory;

34 Services of public libraries by way of lending of books, publications or any other

knowledge- enhancing content or material;

35 Services by Employees‘ State Insurance Corporation to persons governed under the

Employees‘ Insurance Act, 1948 (34 of 1948);

36 Services by way of transfer of a going concern, as a whole or an independent part

thereof;

37 Services by way of public conveniences such as provision of facilities of bathroom,

washrooms, lavatories, urinal or toilets;

38 Services by a governmental authority by way of any activity in relation to any function

entrusted to a municipality under article

243 W of the Constitution.

Miscellaneous Exemptions

Any service provided by,

(i) the national skill development corporation setup by government of India

(ii) a sector skill council approved by the National sector skill development corporation;

(iii) an assessment agent approved by the sector skill council or the National skill

development Corporation;

(iv) a training partner approved by the National skill development Corporation or the

sector Skill Council,

In relation to-

© Tharun Raj 48

(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, shall

be exempt.

[Notification No. 13/2013 – ST dated 10.9.2013]

Services provided by cord blood banks by way of preservation of stem cells or any other

service in relation to such preservation have been exempted from service tax.

[Notification No. 04/2014-ST dated 17.02.2014]

Services by way of loading, unloading, packing, storage or warehousing of rice have

been exempted from service tax.

[Notification No. 04/2014-ST dated 17.02.2014]

CBEC vide Circular No.177/03/2014 – ST dated 17.02.2014, has clarified that the

definition of agricultural produce under section 65(5) of the Finance Act, 1994 covers

‗paddy‘; but excludes ‗rice‘. It implies that benefits available to agricultural produce in the

negative list [Section 66D(d)] are not available to rice.

However, many such benefits have been extended to rice by way of appropriate entries

in the mega exemption notification as follows:-

(i) Services by way of transportation of food stuff by rail/vessel/goods transport agency

is exempt from service tax. Food stuff includes rice.

(ii) Services by way of loading, unloading, packing, storage or warehousing of rice are

exempt from service tax.

(iii) Carrying out an intermediate production process as job work in relation to agriculture

is exempt from service tax. It is clarified that paddy milled into rice, on

job work basis is also exempt from service tax since such milling of paddy is an

intermediate production process in relation to agriculture.

[49] © Tharun Raj

CHAPTER - 3 SERVICE TAX – PROCEDURES

Rule 5A(2) of the Service Tax Rules, 1994 stipulates that every assessee shall, on

demand, make available to an officer authorised by the Commissioner or the audit party

deputed by the Commissioner or CAG, within a reasonable time not exceeding 15 working

days from the day when such demand is made, or such further period as may be allowed by

such officer or the audit party, as the case may be, -

(i) the records as mentioned in rule 5(2);

(ii) trial balance or its equivalent; and

(iii) the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961, for

the scrutiny of the officer or audit party, as the case may be.

Further, as per section 72A, the Commissioner of Central Excise may direct a person to get

his accounts audited by a chartered accountant or cost accountant nominated by him, to the

extent and for the period as may be specified by him in certain specified cases. Chartered

accountant or cost accountant would submit an audit report duly signed and certified by him

to the said Commissioner and shall give an opportunity of being heard to such person

(whose accounts are being audited) in respect of any material gathered on the basis of the

audit.

Is rule 5A(2) of the Service Tax Rules, 1994 ultra vires the Finance Act, 1994?

A.C.L. Education Centre (P) Ltd. v. UOI 2014 (All.)

Facts of the case: Central Excise Department issued intimation under rule 5A(2) of the

Service Tax Rules, 1994, demanding necessary documents from the petitioners for making a

reference to conduct an audit. The petitioners objected and also challenged the vires of rule

5A(2), inter alia, on the ground that the provisions of rule 5A(2) are contrary to the

provisions of section 72A of the Finance Act, 1994.

The petitioner further submitted that as per rule 5A(2), assessee is required to provide

record for audit to the audit party deputed by Commissioner or by CAG for carrying out audit

of the records of assessee. However, there is no provision in the Finance Act, 1994 which

empowers Central Government to frame rules in respect of the audit of the accounts of

private person or companies or firms who are paying service tax by self assessment. Thus,

rule 5A(2) empowering the departmental officers as auditor is arbitrary, illegal and ultra

vires to the provisions of the Finance Act, 1994.

Observations of the Court: The High Court observed that in case of private assessee, the

Commissioner will refer the matter to an officer or Chartered Accountant, to collect the

material for the purpose of audit. Thus, the material can be collected either by the officer

authorized by the Commissioner or by the auditor himself, but audit will be conducted by

the audit party headed by the Chartered Accountant/Cost Accountant, as deputed by the

© Tharun Raj 50

Commissioner. The manner for conducting the audit is as per the accounting standards

provided by the Institute of Chartered Accountant of India and the audit report will be made

available to the assessee, as per law.

So, it is pious duty of every assessee to make available, to the authorized officer/ audit

party, the records, trial balance and income-tax audit report, if any, for the scrutiny of the

officer or the audit party.

Decision: In the light of the aforesaid discussion, the High Court held that section 5A(2) is

not ultra vires. It is in consonance with section 72A of the Finance Act, 1994.

Whether best judgment assessment under section 72 of the Finance Act, 1994 is

an ex-parte* assessment procedure?

N.B.C. Corporation Ltd. v. Commissioner of Service Tax 2014 (Del.)

The High Court held that section 72 could per se not be considered as an ex parte

assessment procedure as ordinarily understood under the Income-tax Act, 1961. Section 72

mandates that the assessee must appear and must furnish books of account, documents

and material to the Central Excise Officer before he passes the best judgment assessment

order. Thus, said order is not akin to an ex parte order.

Such an order will be akin to an ex parte order, when the assessee fails to produce records

and the Central Excise Officer has to proceed on other information or data which may be

available.

*Note: The term ex-parte means of the one part; from one party. This term is applied in

law to a proceeding by one party in the absence of, and without notice to, the other.

CASE STUDIES: 1 MNO Ltd. was required to deposit service tax of ` 20,000/- by

5th May, 2011. It actually deposited it on 5th June, 2013. Compute the amount of penalty payable by MNO Ltd. under section 76 of the Finance Act, 1994.

Ans: Penalty payable = `10,000

2 A Ltd. starts an advertising agency on April 1, 2013. The details of the bills raised by it during April to June, 2013 are given as under:

Bill No. Date Value of taxable Service

1 5.4.2013 82,500

2 11.04.2013 95,000

3 18.04.2013 1,65,000

4 28.04.2013 95,000

5 13.05.2013 2,75,000

6 15.05.2013 1,68,000

7 30.05.2013 1,07,000

8 01.06.2013 82,500

9 17.06.2013 89,500

Ans: There is a delay in filing application for registration by 54 days. Therefore penalty will be `10,000 or `200X54

days, whichever is greater. Penalty = ` 10,800

[51] © Tharun Raj

10 25.06.2013 47,600

A Ltd. applies for registration on 22.08.2013. Is A Ltd. at any default? If yes, what are the penal consequences?

3 Discuss the prosecution, arrest and bail implications, if any, in respect of the following cases pertaining to the period June, 2013: (i) ‗A‘ avails CENVAT credit of `52 lakh without actual receipt of

excisable goods. However, he is yet to utilize the same. (ii) ‗B‘ willfully evades payment of service tax of `55 lakh. .

(iii) ‗C‘ knowingly supplies false information sought by the Central Excise Officer. The amount of service tax involved is ` 10 lakh. (iv) ‗D‘ collects `65 lakh as service tax from its clients but

deposits only ` 5 lakh with the Central Government.

(v) ‗E‘ collects ` 55 lakh as service tax from its clients and

deposits ` 51 lakh with the Central Government.

See Answer Below


Person Offence Prosecution Arrest Bail

A No offence as both availment and utilization of credit without actual receipt of excisable goods constitutes an offence

N.A N.A N.A

B Non cognizable offence

6 months to 3 years

Arrest can be ordered by commissioner of central excise

Bailable offence

C Non cognizable offence

Upto 1 year No Arrest Bailable offence

D Cognizable offence 6 months to 7 years

Arrest can be ordered by commissioner of central excise without arrest warrant

Non bailable/ bailable offence

E Non cognizable offence

Upto 1 year No arrest Bailable offence

© Tharun Raj 52

CHAPTER – 5 NEGATIVE LIST OF SERVICES

1. COMMERCIAL COACHING OR TRAINING SERVICES

Negative list – Entry (l) of Sec. 66D Services by way of – 1. Pre-school education and education up to higher secondary school or equivalent;

2. Education as a part of a curriculum for obtaining a qualification recognized by law;

3. Education as a part of an approved vocational education course6. Education as a part of curriculum for obtaining a qualification recognized by law

MEANS that only such educational services are in the negative list as are related to delivery

of education as ‗a part‘ of the curriculum that has been prescribed for obtaining a

qualification prescribed by law. It is important to understand that to be in the negative list

the service should be delivered as part of curriculum. Conduct of degree courses by

colleges, universities or institutions which lead grant of qualifications recognized by law

would be covered. Training given by private coaching institutes would not be covered as

such training does not lead to grant of a recognized qualification.

Approved vocational education course MEANS,— (i) a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961; or

(ii) Courses in designated trades offered by industrial training institute (ITI)/ industrial training centre (ITC) affiliated to state council of vocational training have been included in

the definition7

(iii) 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; or

4. a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India (Removed from the definition and hence not exempt from service tax)

Activity Taxable / Not taxable

1. Services provided by international schools giving certifications like IB (international Baccalaureate)

Not taxable

2. Private tuitions Taxable

3. Boarding schools (provides service of education coupled with other services like providing dwelling units for residence and food)

It is a case of Bundled services as per Sec. 66F

4. Services provided by way of education as a part of a prescribed curriculum for obtaining a qualification

Taxable

6 Approved or recognized by any entity established under a central or state law including delegated legislation, for the purpose of granting recognition to any course including a vocational education course.- Circular no. 164/15/2012 7 W.e.f 10.5.2013, Courses offered by ITI/ITC affiliated to national council or state council of vocational training shall be EXEMPT

[53] © Tharun Raj

recognised by a law of a foreign country.

5. A course in a college which leads to dual qualification, only one of which is recognized by law.

Service in respect of each qualification shall be assessed separately. By application Sec. 66F,taxability of a service which is not bundled in the ordinary course of business, it is liable to be treated as a course which attracts the highest liability of service tax.

6. IIT‘s, IIM‘s charge a fee from companies, who come to institutes for campus recruitments.

Taxable

7. Admission tests for admissions to colleges Not Taxable, provided such educational institutions are providing qualification recognized by law.

8. Courses offered by ITI/ITC affiliated to state council of vocational training

Exempt w.e.f 10.5.2013

9. Courses run by institute affiliated to the National skill development corporation

Exempted

2. CENTRAL EXCISE VS. SERVICE TAX Even though excise and service tax are administered by same department, both are independent taxes.

Payment of service tax is not same as payment of excise duty

Excise duty is payable on ―manufacture‖ and service tax is payable on ―Service‖

As excise duty is a ―duty‖, it is payable irrespective of whether revenue has been realized. But service tax being ―tax‖, it is payable only when there is consideration. It would be appropriate to say ―NO CONSIDERATION – NO SERVICE TAX‖ Negative list – Entry (f) of Sec. 66D Any process amounting to manufacture or production of goods. Process amounting to manufacture or production of goods MEANS ₰ Process as specified in section 2(f) of Central Excise Act,1944 as ―Manufacture‖ [i.e. which satisfies IDENTITY test and UTILITY test]

₰ Process of manufacture of alcoholic liquors for human consumption, opium and other narcotic drugs, on which states shall levy excise duty

₰ Any process amounting to manufacture or production of goods has been expanded by the Finance Act, 2013 so as to include a process on which excise duty is leviable under the Medicinal and Toilet preparations (Excise Duties) Act, 19558

8 Inserted w.e.f 10.5.2013 and thus now service tax is not leviable on a process on which excise duty is leviable under the medicinal and toilet preparations (Excise duties) Act.

© Tharun Raj 54

Special aspect related to job work

Special aspect related to exempted process

Jobworker engaged in Processing of goods

Such process amounts to manufacture under

excise

Covered under Excise, therefore not covered

under Service tax

Such process does not amount to manufacture

under excise

Covered under service tax

Process covered under sec. 2(f)

Such process is dutiable under excise

Covered under Excise, therefore not covered

under Service tax

Such process is exempt under excise

Not Covered under service tax, even though exempted

under excise

[55] © Tharun Raj

3. SERVICES IN RELATION TO AGRICULTURE OR AGRICULTURE

PRODUCE

Services relating to agriculture or agricultural produce by way of – (i) Agricultural operations directly related to production of any agricultural produce

including cultivation, harvesting, threshing, plant protection or seed9 testing; (ii) Supply of farm labour; (iii) Processes carried out at an agricultural farm including tending, pruning, cutting,

harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading,

(iv) Cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but make it only marketable for the primary market;

(v) Renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;

(vi) Loading, unloading, packing, storage or warehousing of agricultural produce; (vii) Agricultural extension services; (viii) Services by any Agricultural Produce Marketing Committee or Board or services

provided by a commission agent for sale or purchase of agricultural produce.

CASE STUDY:

9 The Finance Act, 2013 has expanded the scope of the said negative list entry by deleting the word ‘Seed’. As a result, all types of testing activities which are directly related to production of any agricultural produce have been covered under the negative list.

© Tharun Raj 56

ANSWER:

[57] © Tharun Raj

4. CONSTRUCTION SERVICES

Abatement under Notification no. 02/2013

The above abatement is available subject to the following conditions:

(i) The value of land was included in the amount charged from the service

receiver and

(ii) CENVAT credit had not been taken on inputs used for providing such

service.

Nature of Construction

Commercial Construction

Abatement = 70%

Residential Construction

Highend residential construction

Carpet Area ≥ 2000 Sq. ft

(or)

Amount charged ≥ 1 crore

Abatement = 70%

Residential units

Carpet area < 2000 Sq. ft

AND

Amount charged < 1 crore

Abatement = 75%

© Tharun Raj 58

[59] © Tharun Raj

5. AMENDMENTS IN MEGA EXEMPTION NOTIFICATION

Particulars Past Present

1. Services by way of slaughtering of ALL animals exempted

The exemption was restricted to the slaughtering of bovine animals only

Exemption to services by way of slaughtering of ALL animals.

2. Life insurance services provided under Janashre Bima Yojana and Aam Aadmi Bima Yojana exempt

These two schemes were not exempt

Life insurance business provided under JBY and AABY are exempt

3. Exemption to auxiliary educational services and renting of immovable property service provided By an educational institution withdrawn

Auxiliary educational services and renting of immovable property provided TO or BY an educational institution in respect of education exempted from service tax were exempted from service tax

The said exemption is now withdrawn

4. All restaurants with air conditioning or central air heating liable to service tax

Serving of food or beverages by only those restaurants, eating joints or mess were liable to service tax which had: (i) the licence to serve alcohol, and (ii) the facility of air conditioning/ central air heating in any part of the establishment, at any time during the year.

Only non air conditioned/ non centrally air heated restaurants are eligible for exemption

Exemption to services in relation to serving of food/ beverages by an air conditioned canteen maintained in a factory

The said services are taxable Services provided, in relation to serving of food or beverages, by a canteen have been exempted from service tax provided such canteen:-

© Tharun Raj 60

(i) is maintained in a factory covered under the Factories Act, 1948, and (ii) Has the facility of air-conditioning or central air-heating at any time during the year.

5. Exemption to parking of vehicles withdrawn

Services by way of motor vehicle parking to general public excluding leasing of space to an entity for providing such parking facility were exempt

The said exemption has been withdrawn

6. Exemption upto ` 25 lakh

available to entity registered under sec. 12AA of the IT Act, 1961 providing services for advancement of ―any other object of general public utility‖ withdrawn

Previously, the said exemption is applicable

Now as the exemption is withdrawn under sec. 12AA so the said activity is now not exempted But SSP exemption is available in such case.

7. Exhibition of filims in a place other than a cinema hall or theatre liable to service tax

Temporary transfer or permitting the use or enjoyment of a copyright of cinematograph films was exempt from service tax

However, the benefit of exemption in relation to copyrights for cinematograph films will now be available only to films exhibited in a cinema hall or theatre

8. Exemption to services provided by NSDC or by an approved sector skill council/assessment agency/training partner In relation to: (a) National skill development programme implemented by NSDC (b) Vocation skill development course (c) Any other scheme implemented by NSDC

With effect from 10.05.2013, the Finance Act, 2013 made the courses run by an institute affiliated to NSDC liable to service tax by amending the definition of approved vocational courses.

Said services have been exempted from service tax by incorporating them in the mega exemption notification. Hence, such services were taxable only during the period between 10.05.2013 and 09.09.2013.

[61] © Tharun Raj

6. SERVICES IN RELATION TO TRANSPORTATION OF GOODS Negative list – Entry (p) of Sec. 66D Services by way of transportation of goods – (i) by road except the services of –

(A) a goods transportation agency; or (B) a courier agency;

(ii) by an aircraft or a vessel from a place outside India up to the customs station of clearance in India; or by inland waterways;

Exemption available to transportation of goods – Notification No. 25/2012

© Tharun Raj 62

Abatement – Notification No. 26/2012 1. Transportation of goods by rail – 70% abatement – No restriction on CENVAT credit

2. Services of goods transport agency – 75% abatement – CENVAT credit on Inputs, Input services and Capital goods not available.

3. Transport of goods in a vessel – 50% abatement – CENVAT credit on Inputs, Input services and Capital goods not available

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