Professional Documents
Culture Documents
FA, 2010 not applicable. So, no discussion under this category.
(M. Imp)
N/N 1/2002: In exercise of the powers conferred by Sec 7(7) of the Territorial Waters,
Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976,
the CG hereby extends the provisions Chapter V of the FA, 1994 to the
DESIGNATED AREAS in Exclusive Economic Zone Of India as declared by the
Notifications of the Government of India.
Subsequently amended in 2009
In exercise of the powers conferred by Sec 7(7) of the Territorial Waters, Continental
Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976,
the CG hereby extends the provisions Chapter V of the FA, 1994 to the
INSTALLATIONS, STRUCTURES AND VESSELS in the Exclusive Economic Zone Of
India.
–
In exercise of the powers conferred by Sec 7(7) of the Territorial Waters, Continental
Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976,
the CG hereby extends the provisions Chapter V of the FA, 1994
to the areas specified in column (2) of the Table below, in the continental
shelf and exclusive economic zone of India
for the purposes as mentioned in column (3) of the said Table:-
supply thereof.
India TWI Continent Shelf & EEZ of India (200 NM) High
Seas
(Land Mass) (12 NM) (Beyond
Sr relating to any activity Sr relating to any activity
concerned with Construction of concerned with Construction
200 NM)
[Installations/ Structures/Vessel of [OTHER KIND OF
– for Exploration / Extraction/ STRUCTURES – e.g., Wind
All the
Supply of MINERAL OIL & Energy Structure] --- ST None of
“Taxable NATUAL GAS] --- ST leviable not leviable the
Services “Taxabl
” are e
chargeab Service
le to ST s” is
in this charge
area able to
ST in
this
area
After such structure has been After such structure has been
set up, following service has set up,
been rendered in such
All the “Taxable Services” are Installation/Sturcture/ vessel --- ANY SERVICE rendered in such
chargeable to ST in this area Installation/ Sturcture/ Vessel
[Except in J&K]
A) Sr of supply of any goods
---
connected with {Exploration
/ Extraction / Production of --- ST not leviable
Mineral oil / Natural Gas} ---
ST leviable
B) Other Services --- ST not
leviable
Consequent to issue of this New N/N 14/2010, consequential amendments have also been made in following set
of rules:
i) Taxation of Service (Provided from outside India and received in India) Rules, 2006
ii) Export of Service Rules, 2005
Under both set of rules, definition of India has been amended to include within India such Installations,
Structures and Vessels.
IMPACT OF THESE AMENDMENTS:
Service provided in such Installations, Structures and vessels from OUTSIDE INDIA shall be
treated as “Service provided from outside India and Received in India” and thus, this will be a
case of “IMPORT OF SERVICE” attracting ST liability in terms of Sec 66-A of FA, 1994.
Service provided in such Installations, Structures and vessels from INDIA shall be treated as
“Service provided in India” and thus, this will not be a case of “EXPORT OF SERVICE”. Thus, this service
will attract ST liability.
Prof Dippak /IDT Amendments/ST- Act, Rules, Exem, Circulars
.
Rule 6 : Manner Of Payment of ST
The assessee shall deposit ST liable to be paid by him with the bank designated by CBEC
for this purpose through Challan.
Provided that
where an assessee has paid -- he shall deposit the ST liable to be paid
by him electronically, through internet
a TOTAL ST of Rs 50 lakhs or more
banking.
(including the amount paid by
utilisation of Cenvat credit),
in the current or preceding Financial Year,
a TOTAL ST of Rs 10 lakhs or more
(including the amount paid by
utilisation of Cenvat credit),
in the preceding Financial Year,
Proviso to Rule 6 has been made amended changing the criteria of mandatory e-payment of
Service Tax. Earlier limit of 50 lakhs has been reduced to 10 lakhs.
[Corresponding amendment has been made in Rule 7 of STR, 1994 making „E-filing of Return‟ also mandatory
for such assesses].
.
Rule 7 : Filing of ST Return
(1) Every assessee shall submit
a HALF-YEARLY RETURN
in Form „ST-3‟ (3 copies), along with Challan Form GAR-7,
for the months/quarter covered therein
.
(2) The return shall be submitted by the 25th of the month following the particular half-year.
Provided that [inserted in 2010]
where an assessee has paid a TOTAL ST -- he SHALL file the return electronically
of Rs 10 lakhs or more (including the
amount paid by utilisation of CENVAT
credit), in the preceding Financial Year,
Proviso to Rule 7 has been made inserted making e-filing of ST-return mandatory for those assesses
for whom e-payment of ST has been made mandatory.
.
Rule 6 : Inclusions or Exclusion from Taxable Value in certain cases
6(1): The value of taxable service shall include …..
6(2): The value of taxable service shall exclude …..
(1) .. (2) .. (3) .. (4)…
(5) Taxes levied by any Government on any passenger travelling by air,
Prof Dippak /IDT Amendments/ST- Act, Rules, Exem, Circulars
if shown separately on
the ticket, or
the invoice for such ticket, issued to the passenger.
[Inserted in Feb, 2010]
International Air Travel service was already subject to ST. FA, 2010 has amended the definition of
„Air Travel Service‟ to include domestic travel services also.
Following related amendments have been made in this regard:
i) : As per the provisions of Rule 4A of the Service Tax Rules, 1944, invoice/ bill/
challan is required to be issued by the provider of taxable service within 14 days of the provision of the
taxable service or the receipt of the consideration. In case of air-travel, the airlines or the agent may not
issue a separate invoice to the passenger but may issue the ticket showing the price of such ticket as well. In
such a case, the requirement of an invoice would cast an additional compliance burden on the service
provider. Hence the said rule is amended to provide that in case of this taxable service, the ticket (in any
form, including electronic form whatever may be the name) showing the name of the passenger, description
of the journey (details like place of embarking and disembarking, class of travel, flight number, etc.,) and
the amount of service tax collected would be deemed to be the invoice/ bill /challan for the purposes of the
rule (Refer Notification No.39 / 2010-Service Tax as corrected vide corrigendum dated 30 th July 2010).
ii) : It has been amended to provide for exclusion of statutory levies (taxes levied by
Govt) on air travel (international or domestic). Thus, at present, Gross amount charged for ticket (excluding
statutory levies/taxes (levied under a law for time being in force)], shall be the „taxable value‟. The exclusion
shall be admissible only if such taxes are shown separately in the ticket or invoice.
.
Rule 2 : Definitions
“India” includes the Installations, Structures And Vessels
located in the Continental Shelf of India and EEZ of India,
for the purposes of prospecting or extraction or production of
Mineral Oil And Natural Gas and supply thereof
This is a consequential amendment which has been made consequent to issuance of new
notification issued under Maritime Zones Act, 1976 making alterations as to applicability of ST provisions in sea
area. [Please refer discussion above – ‘APPLICABILITY OF SERVICE TAX’]
.
Explanation to Rule 3 :
For the purpose of this rule,
“India” includes the Installations, Structures And Vessels
located in the Continental Shelf of India and EEZ of India,
for the purposes of prospecting or extraction or production of
Mineral Oil And Natural Gas and supply thereof
This is a consequential amendment which has been made consequent to issuance of new
notification issued under Maritime Zones Act, 1976 making alterations as to applicability of ST provisions in sea
area. [Please refer discussion above – ‘APPLICABILITY OF SERVICE TAX’]
Rule 3 has been amended in Feb, 2010 shifting certain services from one category to other
category and thereby, changing their criteria as to determination of their import into India. Since
amendments are important for examination, a question is likely on these services. Student shall keep
these services (and new criteria applicable to them) in mind.
Taxable Service Old Category New Category Impact of Shifting
1) CA Service 3(ii) – 3(iii) – Sr now will be treated as exported
only when recipient is located in
Performance Residuary India
Based Category
2) CS Service 3(ii) – 3(iii) –
Performance Residuary
Based Category
3) CWA Service 3(ii) – 3(iii) –
Performance Residuary
Based Category
4) Mandap 3(ii) – 3(i) – Sr now will be treated as exported
only when Mandap is situated
Keeper Service Performance Immovable outside India.
Based Property
Category
.
Rule 3 has been amended in Feb, 2010 deleting once of the condition which was earlier
necessary for holding export:
3(2) The provision of any taxable service specified in sub-rule (1) shall be treated as
export of service when the following conditions are satisfied, namely:-
(a) Such service is provided from India and used outside India.
[Omitted from Feb, 2010]
(b) payment for such service is received by the service provider in convertible
foreign exchange.
Prof Dippak /IDT Amendments/ST- Act, Rules, Exem, Circulars
The additional condition (a) as mentioned in Rule 3(2) was difficult to comply with and was leading
to lots of disputes. Now this condition being deleted to avoid disputes.
.
Rule 5 : Refund of Cenvat Credit
Where any INPUT is providing output service which is
or INPUT SERVICE EXPORTED (in accordance with
Export Of Service Rules, 2005)
[substituted in 2010]
the Cenvat credit i.r.o. the input or input service so used shall be allowed to
be utilised by the output service provider towards payment of service tax on
output service
And where for any reason such adjustment is not possible,
the output service provider shall be allowed refund of such
amount
subject to such safeguards, conditions and limitations as may be specified by the CG
by notification in the Official Gazette.
.
.
„Transport of goods by road Service [GTA Service]‟
(1) : Service of transport of following in goods carriage (i.e., GTA Service) shall
be fully exempt
-- Fruits, Vegetables, Eggs, Milk, Food Grains or Pulses (*Newly added).
.
.
Transport of goods by rail Service.
(1) : ‘Transport of goods by rail service’ provided to any person in relation to
transport of SPECFIED GOODS shall be wholly exempt.
[Specified Goods:-
i) Defence/Military Equipments,
ii) Railway Equipments/materials,
iii) Postal mail bags,
iv) Relief materials meant for victims of natural or manmade disasters, calamaties, accidents
and mishaps,
v) Luggage of train passenger, whether carried as PERSONAL LUGGAGE in the train
compartments or booked separately in the luggage vain/ Household effects;
vi) Kerosene Oil, Petroleum Products (including LPG Cylinder – filled or empty) booked by
PUBLIC SECTOR OIL MARKETING COMPANIES and transported in INDIAN
RAILWAYS.
vii) Certain other goods]
booked (taken) immediately OR whether cenvat credit will be available only after the ACTUAL
PAYMENT of the value of input service has been made in money terms .
Clarification
When the substantive law i.e. Sec 67 of the Finance Act, 1994 treats such book adjustments
etc., as DEEMED PAYMENT, there is no reason for denying such extended meaning to the
word ‘payment’ for availment of credit.
As far as the provisions of Rule 4(7) are concerned, it only provides that the cenvat credit
shall be allowed, on or after the date on which payment is made of the value of the input
service and of service tax. The form of payment is not indicated in the same and the rule does
not place restriction on payment through debit in the books of accounts. Therefore, if the
service charges as well as the ST have been paid in any prescribed manner which is entitled
to be called „gross amount charged‟ then credit should be allowed under said rule 4 (7).
Thus, in the case of “Associate Enterprises”, credit of service tax can be availed of when the
payment has been made to the service provider in terms of section 67 of Finance Act, 1994 and
the service tax has been paid to the Government Account.
Leviability of service tax on tour operator service in connection with Haj & Umrah
Pilgrimage
CBEC Circular No. 117/11/2009
Issue: Whether tour operator service in connection with Haj & Umrah Pilgrimage shall be treated as
“Export of service” not liable to ST in India?
Clarification
The amount charged to the pilgrims in India undertaking Haj and Umrah pilgrimage, is for
services provided by the Government of Saudi Arabia and the tour takes place outside India. As
per Rule 3 (1) (ii) of the Export of Services Rules, 2005, the service in respect of tour operator
is export if such service is PERFORMED OUTSIDE India. It is also provided therein that
where such taxable service is partly performed outside India, it shall be treated as performed
outside India.
Therefore, it is clarified that ST is not chargeable on the services provided in respect of
tour undertaken for carrying out Haj and Umrah Pilgrimage in Saudi Arabia by Indian
pilgrims considering these as export of service, provided they fulfill the other conditions of
export as provided in Export of Service Rules.
’ : The other condition to be fulfilled is that the payment for the said service shall be received in
convertible foreign exchange.
(Imp)
SHARING OF EXPENSES BY Insurance Company WITH Re-Insurance Co. – Not subj to ST
As per the provision of the FA, 1994 (relating to INSURANCE SERVICE), insurance as well as
reinsurance are subject to service tax. The Board has received representations that notices have
been issued demanding service tax on the amounts deducted by the insurance company (in other
words paid by the reinsurance company) on the ground that it is the consideration for the
insurance company providing BUSINESS AUXILIARY SERVICE (BAS) to the re-insuring company.
The notices alleged that the insurance companies are promoting the business of re-insurers
thereby providing them the BAS?
Clarification
The issue has been examined. As explained above, the arrangement between the insurance
company and the reinsurer is only sharing of expenses and there is no service provided by
the insurance company to the re-insurer for a consideration. Since the policy holder may
not even be aware of the operations of the re-insurer, it cannot be said that the payment made
by the re-insurer to the insurance company is for its business promotion or a service on behalf
of the re-insuring company (i.e. Business Auxiliary Service). In fact, it is the reinsurer which
provides insurance service to the insurance company. As both the insurance company and
reinsurer pay service tax on the entire amount of premium charged by them, the question of
charging service tax under any other taxable service does not arise.
Clarification
The issue has been examined. To retain the container beyond the pre-holding period is
neither a service provided on behalf of the client (BUSINESS AUXILIARY SERVICE) nor
is it an infrastructural support in the business of either the shipping lines or the customer
(BUSINESS SUPPORT SERVICE). Such charges can at best be called as „penal rent‟ for
retaining the containers beyond the pre-determined period.
Therefore, the amount collected as ‘detention charges’ is not chargeable to ST..
Issue was raised at the initial stage itself as to whether the charges, which are said to be paid by the
CHAs and later recovered from the customers (i.e. REIMBURSABLE CHARGES) should be added to the
value for charging service tax from CHAs.
Prof Dippak /IDT Amendments/ST- Act, Rules, Exem, Circulars
Through the Circular F. No. B-43/1/97-TRU, dated 6-6-1997 the Board had clarified
that the service tax would be charged on the ‘service charges only’ and statutory levy and other
reimbursable charges would not be included in the taxable value. It was also provided that in case
there are lump sum payments towards the reimbursable as well as service charges, service tax would be
charged on 15% of the gross value only.
In 2006 (w.e.f. 19-4-2006) the Service Tax (Determination of Value) Rules were
prescribed. Consequently all previous circulars relating to valuation were withdrawn. The said rules
brought in the concept of „PURE AGENT‟ and provided that expenditure or costs incurred by the
service provider as pure agent alone will be eligible for exclusion from taxable value.
With a view to resolve the disputes and to bring it clarity, the issue has been
examined. It is clarified that essentially, the exclusion should be allowed to such charges from
the taxable value of CHA services, where all the following conditions are satisfied, -
(a) The activity/service for which a charge is made, should be in addition to provision of CHA
service;
Author’s Remarks: Activities shall be in addition to his basic job of customs clearance
(b) There should be arrangement between the customer & the CHA which authorizes or allows the
CHA to (i) arrange for such activities/services for the customer; and (ii) make payments to
other service providers on his behalf;
Author’s Remarks: Written agreement is preferable. Service contract shall detailed out such
additional services
(c) The CHA does not use the activities/services for his own benefit or for the benefit of his other
customers;
(d) The CHA recovers the reimbursements on „actual‟ basis i.e. without any mark-up or margin. In
case of CHA includes any mark-up or profit margin on any service, then the entire charge
(and not the mark-up alone) for that particular activity/service shall be included in the
taxable value;
Author’s Remarks: No „Attendance or Agency Charges‟ shall be claimed by CHA. Just cost shall be
recovered.
(e) CHA should provide evidence to prove nexus between the other (than CHA) services provided
and the reimbursable amounts. It is not necessary such evidence should bear the name or
address of the customer. Any other evidence like BE No./Container No./BL No./ packing lists
is acceptable for the establishment of such nexus. Similar would be the case for statutory
levies, charges by carriers and custodians, insurance agencies and the like;
Author’s Remarks: For claiming exclusion of additional services, invoice of those services need not be
in name of client. It is sufficient if nexus of those services with the client [This is a major relief provided by
Circular].
(f) Each charge for separate activities/services is to be covered either by a separate invoice or by a
separate entry in a common invoice (showing the charges against each entry separately) issued
by the CHA to his customer. In the latter case, if certain entries do not satisfy the conditions
mentioned herein, the charges against those entries alone should be added back to the taxable
value;
Author’s Remarks: Invoice shall not be consolidated invoice. (i.e., CHA shall either do split-up
invoicing or separate invoicing for additional recoveries)].
(g) Any other miscellaneous or out of pocket expenses charged by the CHA would be includable in
the taxable value for the purposes of charging tax on CHA services.
Author’s Remarks: Recovery not meeting aforesaid criteria shall remain includible
The conditions mentioned at paragraph above would be applicable for services provided with effect
from 19th April, 2006, i.e. after the introduction of the valuation rules. For the prior period, the
taxable value should be determined in accordance with the instructions prevailing at that point of time.
Prof Dippak /IDT Amendments/ST- Act, Rules, Exem, Circulars