According to the Finance Act, 2009 following quick sketches were introduced in Chapter V and VA of the Finance Act, 1994
3 new services brought under the service tax net [Section 65]: With effect from September, 2009, service tax has been levied on the following three new categories of services:-
A – Service provided in relation to transport of coastal goods and goods transported through inland water including National Waterways. Inserted sub clause (zzzzl) in Section 65(105).
B – Cosmetic and plastic surgery service. Inserted sub clause (zzzzk) in Section 65(105).
C – Legal consultancy service. Inserted sub clause (zzzzm) in Section 65(105). Effective from 1.09.2009
Scope of existing taxable services [Section 65]:
A –Business auxiliary service, prior to amendment, the service/process that amounts to manufacture as defined under section 2(f) of the Central Excise Act, 1944 was excluded which has been amended to exclude any activity that amounts to manufacture of excisable goods. Therefore manufacture of non-excisable goods for or on behalf of the client shall attract service tax.
B – Stock broker services, prior to amendment, the definition of a stock broker included the sub broker as well which has been amended to exclude sub broker and sub brokers would be outside the purview of service tax.
C – Information technology software services, prior to amendment, acquiring the right to use the information technology software is taxable which has been amended to providing the right to use the information technology with retrospective effect from 16.05.2008.
D – Transport of goods in containers by rail services, service tax has been imposed on goods transported by railways including Government railways, whether in containers or otherwise, effective from 1.09.2009
Here are important NOTIFICATIONS/CIRCULARS ISSUED BETWEEN 1.5.2008 AND 30.04.2009:
1. Notification No. 26/2009 (19.7.2009) has notified 1.9.2009 as the date on which the services introduced by the Finance Act, 2009 have become effective including revisions brought in the existing services.
a. Notification No. 41/2007 (6.10.2007) simplified by Notification No. 17/2009 (7.7.2009), according to which,refund scheme has been revamped to ensure speedier grant of refunds to the exporters. It exempts certain taxable (specified) services received by an exporter and used for export of goods (said goods) from the whole of the service tax leviable thereon under Section 66 and 66A subject to the specified conditions.
b. Notification No. 18/2009 (7.7.2009), Services in relation to transport of goods by road and commission paid to foreign agents exempted from service tax subject to certain conditions.
c. Exemption from service tax leviable on taxable services provided to GTA for use in transportation of goods by road:
Notification No. 1/2009 (5.1.2009), has exempted from the whole of the service tax, the following mentioned services, provided to a goods transport agency for transportation of goods by road in the said goods carriage, subject to the condition that the invoice issued by such service provider, providing services should mention the name and address of the goods transport agency and also the name and date of the consignment note, by whatever name called, issued in this behalf:-
(1) Services provided by a clearing and forwarding agent in relation to clearing and forwarding operations.
(2) Services provided by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise
(3) Services provided by a cargo handling agency in relation to cargo handling services
(4) Services provided by a storage or warehouse keeper in relation to storage and warehousing of goods
(5) Services provided by any person in relation to business auxiliary service
(6) Services provided by any other person, in relation to packaging activity
(7) Services provided by any other person, in relation to support services of business or commerce, in any manner
(8) Services provided by a processing and clearing house in relation to processing, clearing and settlement of transactions in securities, goods or forward contracts including any other matter incidental to, or connected with such securities, goods and forward contracts.
3. Amendments in Service Tax rules, 1994:
1. Amendments in Rule 6: According to the explanation to third proviso to rule 6(1), transaction of any taxable service with any associated enterprise, any payment received towards the value of taxable service shall include any amount credited or debited to any account, whether “suspense Account” or by any other name, in the books of account of a person liable to pay service tax. [Notification No. 19/2008 (10.5.2008)]
2. Rule 6(7B) –option to pay 0.25% of the gross mount n case of services provided in relation to purchase or sale of foreign currency. However such option shall not be available in cases where the consideration for the service provided or to be provided is shown separately in the invoice, bill or, as the case may be, challan issued by the service provider. [Notification No. 19/2008 (10.5.2008)]
3. Amendment of Form ST-3: Notification No. 31/2008 (2.9.2008) has amended service tax return Form ST-3.Notification No. 10/2009 (17.3.2009) has amended Form No.ST-3 in Service tax rules, 1994 to furnish the details of name and identification of service tax return preparers in case the return has been prepared by them.
4. Conditions specified for exemption to services provided to a developer or units of special economic zone – Notification No. 4/2004 (31.3.2004) simplified by Notification No. 9/2009 (3.3.2009) exempting service tax paid on the services provided in relation to the authorized operations in a SEZ, and received by a developer or units of a SEZ, whether or not the said taxable services are provided inside the SEZ subject to specified conditions.
5. Twenty two export promotion councils exempted under ‘club or association services’: Federation of Indian Export Organizations, Engineering Export Promotion Council, Project Exports Promotion council of India, Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council, Chemicals and Allied Products Export Promotion Council, World Trade Centre, Council for Leather Exports, Sports Goods Export Promotion Council, Gem and Jewellery Export Promotion Council, Shellac Export Promotion Council, Cashew Export Promotion Council, The Plastics Export Promotion council, Export Promotion Council for Export Oriented Units and Special Economic zones Units, Pharmaceutical Export Promotion Council, Apparel Export Promotion council, Carpet Export Promotion Council, Cotton Textile Export Promotion Council, Export Promotion Council for Handicrafts, Handloom Export Promotion Council, Indian Silk Export Promotion council, Power loom Development Export Promotion Council, Synthetic and Rayon Textile Export Promotion Council, Wool and Woollens Export Promotion Council. The exemption shall remain in force till 31.3.2010 [Notification 16/2009 (7.7.2009).
6. Amendment in Tour Operator Services: According to Notification No. 20/2009 (7.7.2009), In order to bring parity between the two, the services provided by the tour operators undertaking point-to-point transportation of passengers in a vehicle bearing contract carriage permit has been fully exempted from service tax, provided such transportation is not in relation to tourism or conducted tours, charter or hire service.
7. Amendment in banking and other financial services: According to Notification no. 19/2009 (7.7.2009) In respect of such services, exemption has been granted when such services are provided by one Scheduled bank to another Scheduled bank.
8. Rate of service tax reduced from 12% to 10%: According to Notification No. 8/2009 (24.2.2009)
Please note: The above summary of the changes introduced and information newly provided by way of Notifications/circulars in the form of amendments of the previous notifications/circulars are applicable for May and Nov 2010 Chartered Accountancy examinations only. The above content is a short analysis of the ‘Amendments by the Finance Act, 2009’ in Service Tax and hence readers should refer the details with the Government of India Finance Bill, financial year, 2009, for detailed understanding.