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18 th Jul 2014

“Impact on Service Tax Budget 2014” Raipur - ICAI. 18 th Jul 2014. Sectoral Changes. Sale of Space for Advt. Present provision: Sale of space or time slots for advertisements other than advertisements broadcast by radio or television is non-taxable under negative list.

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18 th Jul 2014

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  1. “Impact on Service Tax Budget 2014” Raipur - ICAI 18th Jul 2014

  2. Sectoral Changes

  3. Sale of Space for Advt. • Present provision: Sale of space or time slots for advertisements other than advertisements broadcast by radio or television is non-taxable under negative list. • Budget provision: Sale of space for advertisements in ONLY print media non-taxable

  4. Sale of Space for Advt. • Impact: Advt. in internet websites, out-of-home media, on film screen in theatres, bill boards, conveyances, buildings, cell phones, Automated Teller Machines, tickets, commercial publications, aerial advertising, etc. • Tax Rate: 12.36% • Date of Applicability: w.e.f. Finance Bill(No.2),2014 enactment • Note: Print media includes books and newspapers but excludes business directories

  5. Radio Taxi Services • Present provision: Metered cabs, radio taxis or auto rickshaws not taxable under negative list • Budget provision: Only metered cabs or auto rickshaws non-taxable • Impact: Radio taxis will be taxable • Tax Rate: After abatement of 40%,effective rate 4.944% • Date of Applicability: w.e.f. FB,2014,enactment

  6. Radio Taxi Services • Note: Radio taxi defined u/n 25-2012 as a taxi including a radio cab, by whatever name called, which is in two-way radio communication with a central control office and is enabled for tracking using Global Positioning System (GPS) or General Packet Radio Service (GPRS)

  7. Passenger Transportation by a contract carriage • Present provision: A contract carriage for transportation of passengers, excluding tourism, conducted tour, charter or hire is exempted. • Budget provision: Only non-air-conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire will be exempted. • Impact: Transport of passengers by AC contracts carriage vehicles now taxable

  8. Passenger Transportation by a contract carriage • Tax Rate: Tax on abated value of 40%. Effective rate 4.944% • Date of Applicability: w.e.f. 11-07-2014 (u/s 25& 26/2012-ST)

  9. Rent-a-cab • Present provision: No cenvat if tax paid at abated rate of 4.944% (40%) • Budget provision:

  10. Rent-a-cab • Impact: Cascading impact of taxes lowered • Date of Applicability : w.e.f. 11-Jul-14

  11. Tour Operator • Present provision: Abatement is provided as per existing table if no cenvat is claimed.

  12. Tour Operator • Budget Provision: The amended provision allows for cenvat credit on input service provided by other tour operator. • Impact : Cascading impact of taxes lowered • Date of Applicability: w.e.f. 11-07-2014 (u/n 25/2012-ST)

  13. Technical Testing • Present provision: Services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organization approved to conduct clinical trials by the Drug Controller General of India; • Budget provision: Exemption rescinded

  14. Technical Testing • Impact: Clinical Drug Trials will become expensive. • Tax Rate: 12.36% • Date of Applicability : w.e.f. 11-Jul-2014 (u/n 25/2012-ST)

  15. Education • Present provision: • Education services of following nature are exempted under Negative list • Pre-school education and education up to higher secondary school or equivalent, eg. CIE • Education as a part of a prescribed curriculum for obtaining a qualification recognized by “Indian” law for the time being in force • Approved vocational course by NCVT and SCVT

  16. Education • Other exemptions • Services provided to an educational institution in respect of education exempted from service tax, by way of,- • auxiliary educational services; or • renting of immovable property

  17. Education • Budget provision : • Negative list entry non-taxable as it is. • Concept of auxiliary education services deleted and scope of exemption redefined to exclude the following: • Services provided by an educational institution to its students, faculty and staff • Service provided to an educational institution, by way of,-

  18. Education • Transportation of students, faculty and staff • catering, including any mid-day meals scheme sponsored by the Government • security or cleaning or house-keeping services performed in such educational institution

  19. Education • Impact: Conducting entrance and admission tests, providing places and faculty for examination, renting of property to education institutions taxable • Rate of tax: 12.36% • Date of Applicability: w.e.f. 11-07-2014 (u/n 25/2012-ST)

  20. Services by hotel, inn etc. • Present provision: Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below Rs. 1,000/- per day or equivalent.

  21. Services by hotel, inn etc. • Budget provision: Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent

  22. Services by hotel, inn etc. • Impact: Deletion of word “services by way of renting of a hotel…” meant for lodging…below Rs. 1,000/- may be interpreted as renting of the hotel property itself will be exempted. • Deletion of word “commercial” expands the scope of services of renting o rooms by dharamshalas, ashrams and like. • Rate of tax: 12.36% ; taxable: 60% • Date of Applicability: w.e.f. 11-07-2014 (u/n 25/2012-ST)

  23. Works contract • Present Provision: Presently valuation of works contract u/r 2A of valuation rules is done as : • Method 1: Gross amount charged (xl. VAT) (-) value of property in goods transferred in execution of works contract [material cost] • Method 2: If VAT payable then deduction of “actual value adopted” for goods transferred. • Method 3: If not determined as above then Value as specified %

  24. Works contract

  25. WCT-proposed • Impact: Rationalization exercise to avoid confusion • Date of applicability: w.e.f. 01-Oct-2014

  26. Repairing of goods in India • Present provision: Place of provision of service w.r.t. goods is where goods are physically located at the time of service. • Rule n.a. goods temporarily imported into India for repairs, reconditioning or reengineering for re-export • Budget provision: The PPs rule will not apply to goods temporarily imported into India for repairs and exported after repairs without being put to use in India.

  27. Repairing of goods in India • Impact • Repairing at Indian Service Centre-tax free • No exclusion to goods imported during normal course of business. • No exclusion to camera repair of an international tourist • Date of Applicability: w.e.f. 01-Oct-2014 (u/n 14/2014-ST)

  28. Service provided by a broker • Present Provision: Intermediary = a person, who arranges or facilitates a provision of a service between two or more persons. • Budget provision: Intermediary includes a person who facilitates both provision of service or supply of goods.

  29. Service provided by a broker • Impact : Earlier taxability of a broker providing service w.r.t. goods was taxable on the basis of location of client (service receiver as per general Rule 3). After the amendment, the location of broker (service provider) will be the deciding factor for taxability as per Rule 9. • Date of Applicability: w.e.f. 01-Oct-2014 (u/n 14/2014-ST)

  30. Service provided to Government • Present provision: Services provided to Government, a local authority or a governmental authority by way of 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.

  31. Service provided to Government • Budget provision: Services provided to Government, a local authority or a governmental authority by way of water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation. • Impact: The amendment provides clarity and widens scope of exemption • Date of Applicability: w.e.f. 11-07-2014 (u/n 25/2012-ST)

  32. GTA Services • Present provision: Cenvat credit is not allowed if benefit of abatement of 75% is availed. • Budget provision: Abatement is available if cenvat is aviled by service provider.

  33. GTA Services • Impact: Rest to issues regarding disallowance cenvat credit to persons who are discharging their liabilities as service recipients and are otherwise liable to tax either as service provider/manufacturer. • Date of Applicability: w.e.f. 11-07-2014 (u/n 8/2014)

  34. Recovery agent services • Present provision : Services provided by Recovery Agents to Banks, Financial Institutions and NBFC, the recovery agent is liable for tax. • Budget provision : After amendment the Service receiver (Banks, FI.. ) will be liable to tax. • Date of Applicability: w.e.f. 11-07-2014 (u/n 9& 10/2014-ST)

  35. Director services • Present provision : Director Services to a company are covered under reverse charge w.e.f. 07-Aug-12. • Budget Provision: To include body corporate • Impact: Service provided by a director to a body corporate, like RBI will be payable by body corporate. Similarly foreign company directors will be covered in tax net.

  36. Director services • Note:"Body corporate" includes a company incorporated outside India but does not include - • (a) a corporation sole ; • (b) a registered co-operative society; and • (c) any other body corporate as notified by CG, • Tax now payable by body corporate. For prior period, director is responsible subject to threshold exemption of 10 lacs.

  37. Miscellaneous Amendments • ESIC : Service provided by Employees State Insurance Corporation (ESIC) during the period prior to 1.7.2012 exempted. (w.e.f. FB,2014 enactment) • Service provided by ESIC to persons governed under the Employees Insurance Act, 1948 is already exempted under negative list. • Vessel Transport: Abatement on transport of goods by vessel increased from 50% to 60%w.e.f. 01-10-2014 u/n 26/2012-ST).

  38. Procedural Amendments

  39. Interest • Present Provision: Interest rate @ 18% p.a. computed on a daily basis. Interest band 10% to 36% u/s 75. Small service provider-15% • Budget provision: Variable interest rate

  40. Interest • Date of applicability : w.e.f. 01-Oct-14 • Note : Small service provider whose, a) value of taxable services provided in financial year(s) covered under notice or during the last preceding financial year does not exceed sixty lakh rupees, allowed 3% concession in interest.

  41. E-payment • Present provision: Rule 6(2) of STR,1994 provides for payment through internet banking if tax payment (cash+cenvat) exceeds Rs. one lac in previous FY. • Budget provision: E-payment mandatory for ALL assesses. Relaxation granted by AC/DC on a case to case basis. • Impact: Small assesses with no internet banking will suffer • Date of applicability: W.e.f. 01-Oct-14

  42. Compulsory Penalty • Present provision : u/s78, penalty is levied compulsorily to the tune of 100% of tax in case transactions are not recorded in books of records and cannot be waived u/s 80. • Penalty in other cases of suppression (transactions truly recorded in books but tax not paid) can be waived.

  43. Compulsory Penalty • Budget provision: No waiver of penalty in case of suppression • Impact: Only recourse is to prove bonafide in case of non-payment of tax • Date of applicability: w.e.f. FB,2014 enactment

  44. POT: Reverse Charge • Present provision : POT incase of reverse charge mechanism ,(where service receiver is liable to pay tax) Rule 7 is determines as below: • Date of payment of invoice. • In case of non-payment within 6 months of invoice, POT as per date of invoice.

  45. POT: Reverse Charge • Budget provision: The amendment provides for POT as below: • Date of payment of invoice • In case of non-payment within 3 months of invoice, POT immediately after completion of 3 months. • Impact: The amended provision simplifies procedural issues and gives relief from retrospective penal actions in case of non-payment / delay in payment of invoice. • Date of applicability: w.e.f. 01-Oct-2014 (u/n 13/2014-ST)

  46. Reverse Charge: Rent-a-Cab • Present provision: Partial reverse charge is applicable in case of Rent-a-Cab service where: • Service provider (SP) : Individual/HUF/Partnership/ AOP • Service recipient (SR) : Company in Taxable Territory (India) not in a similar business line

  47. Reverse Charge: Rent-a-Cab • Present provision

  48. Reverse Charge: Rent-a-Cab • Budget provision

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