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F. A. Qs on Service Tax

Q.1) What is Service Tax ?

Ans. The Service Tax is an indirect tax levied on certain services provided by certain categories of persons/firms/agencies. Service Sector which had represented nearly 35-40% of GPD had remained untapped as a source of revenue in India for a considerably long time. For the first time, the services came to be taxed by 1994 Budget through Chapter V of the Finance Act, 1994. It then covered just three services and came into force with effect from the 1st day of July, 1994. The scope of levy of Service Tax was enlarged in the Finance Act, 1996, the Finance Act, 1997 and the Finance Act, 98 by bringing in three, twelve and twelve services resp. However three of services, introduced in 1997 i.e. services of Outdoor Caterers, Pendal or Shamiyana Contractors and Goods Transport Operators were deleted from the list of services in the Finance Act, 1998. Further, the services provided by Tour Operators has been exempted upto 31st march, 2000. Thus, presently Service Tax is levied on twenty-six services.

Q.2) What is the sanction behind the service tax? How is its collection authorized?

Ans. The service tax gains its authority from Item no. 97 in the Union List of the Seventh Schedule to the Construction of India. Sections 64 to 96 of the Finance Act, 1994, as amended from time to time, provide the legal basis for the levy and collection of tax. Section 66 of the Act authorize the charging of Service Tax.

Q.3) What are the services on which Service Tax is leviable?

Ans. As indicated already, there are at present twenty-six services on which Service Tax is leviable. Brief details in respect of these services are given below:-
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Services subject to Service Tax Value for the purpose of Service Tax Rate of Service Tax Brought into force Vide Notfn. No. With effect from
I Stock Broker Service provided by a stock broker to an investor in connection with the sale or purchase of securities listed on a recognized stock exchange. Aggregate of the Commissioner or brokerage charged by the stockbroker (including the amount paid by him to any sub-broker). 5% 18/94-ST dt. 01.07.1994
II Telephone Services provided by the telegraph authorities to subscribers in relation to telephone connections. Gross total amount (including adjustments from any deposits) charged by the telegraph authority 5% 1/94-ST dt. 01.07.1994
III Insurance service provide to a policy holder in relation to general insurance business. Total amount of the premium charged by the insurer from policy holder. 5% 1/94-ST dt. 01.07.1994
IV Courier services provided by a courier agency to a customer in relation to door to door transportation of time bound documents/goods or articles. Gross amount charged by courier agency from the customer in relation to such services. 5% 6/96-ST dt. 01.11.1996
V Advertising services provided by an advertising agency (including an advertising consultant) to a client in relation to advertisements in any manner. Gross amount charged by such agency from the client for services in relation to advertisement. 5% 6/96-ST dt. 01.11.1996
VI Pager services provided by the telegraph authorities to subscribers in relation to pagers. Gross total amount (including adjustments from any deposits ) charged by the telegraph authority. 5% 6/96-ST dt. 01.11.1996
VII Consulting engineer's services provided to a client in relation to advice, consultancy or technical assistance in one or more disciplines of engineering Gross amount charged by such engineer from the client for such services. 5% 23/97-ST dt. 07.07.1997
VIII Custom house agent's services in relation to the entry or departure of conveyances or the import or export of goods. Gross amount charged by such agent from the client for such services 5% 17/97-ST dt. 15.06.1997
IX Steamer agent's services to a shipping line in relation to a ship's husbandry or dispatch or any adminis trative work as also booking, advertising or canvassing of cargo, including container feeder services. Gross amount charged by such agent from a shipping line including commission paid to such agent. 5% 17/97-ST dt. 15.06.1997
X Clearing and forwarding agents services in relation to clearing and forwarding operations. Gross amount charged by such agency from the client for such services 5% 26/97-ST dt. 07.07.1997
XI Manpower recruitment agency's services in relation to the recruitment of manpower in any manner. Gross amount charged by such agency from the client for such services. 5% 26/97-ST dt. 07.07.1997
XII Air travel agent's services in relation to the booking of passage for travel by air Gross amount charged by such agent excluding the air-fair but including the commission received from the airline in relation to such booking. 5% 19/97-ST dt. 01.07.1997
XIII Mandap keeper's services in relation to use of a mandap Gross amount charged by such keeper from the client for the use of mandap including the facilities provided to the client in relation to such use and also the charges for catering, if any. 5% 19/97-ST dt. 01.07.1997
XIV Tour operator's services in relation to a tour. Gross amount charged by such operators from the client for services in relation to a tour and include the charges for any other facilities provided in relation to such tour. 5% 37/97-ST dt. 01.09.1997 Exempted till 31.03.2000 by Notification no. 52/98-ST dated 18/07/98.
XV Rent a cab scheme operator's services in relation to the renting of a cab. Gross amount charged by such operator from the client for services in relation to the renting of a cab and includes such rental. 5% 26/97-ST dt. 16.07.1997
XVI Architects services in relation to the field of Architecture. Gross amount charged by such architect from the client for such services rendered in professional capacity in any manner. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XVII Interior Decorator in relation to the planning, design, or beautification of spaces, in any manner. Gross amount charged by such decorator from the client for such services rendered. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XVIII Management Consultant in connection with the management of any organization in any manner. Gross amount charged by such consultant from the client for services rendered in connection with the management of any organization in any manner. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XIX Practicing Chartered Accountant in his professional capacity, in any manner. Gross amount charged by such accountant from the client for services rendered in professional capacity in any manner. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XX Practicing Cost Accountant in his professional capacity, in any manner Gross amount charged by such accountant from the client for services rendered in professional capacity in any manner. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XXI Practicing Company Secretary in his professional capacity, in any manner. Gross amount charged by such secretary from the client for services rendered in professional capacity in any manner. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XXII Real Estate agent in relation to real estate. Gross amount charged by such agent from the client for services rendered. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XXIII Security Agencies in relation to the security of any property or person, by providing security personnel or otherwise. Gross amount charged by such agency from the client for services rendered in connection with the security of any property or person. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XXIV Credit Rating Agencies in relation to credit rating of any financial obligation, instrument or security. Gross amount charged by such agency from the client for services rendered in connection with credit rating of any financial obligation, instrument 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XXV Market Research Agency in relation to market research of any product, service or utility, in any manner. Gross amount charged by such agency from the client for services rendered in connection with market research of any product, service or utility in any manner. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XXVI Under Writer in relation to underwriting in any manner. Gross amount charged by such underwriter form the client for services rendered in relation to underwriting in any manner. 5% 53/98-ST dt. 07/10/98 effective from 16/10/98
XXVII Mechanised Slaughter House in relation to the slaughtering of bovine animals. At the flat rate of Rs. 1000/- per bovine animal. Effective rate of duty is Rs. 100/- per bovine animal Rs. 100/- per animal Effective rate is Rs 100/- per bovine animal. 53/98-ST dt. 07/10/98 effective from 16/10/98

Q.4. What is the rate of service tax?

Ans. For all service provided by Mechanished Slaughter houses, the rate of service tax is 5% of the value of the taxable service. In case of services provided by Mechanished Slaughter House, the statutory rate of Service Tax is one thousands rupees per bovine animal but effective rate of Service Tax is Rs. 100/- per bovine animal.

  1. JURISDICTION

Q.5 Would any person, having his business premises in the State of Jammu & Kashmir provides taxable service to the clients in other parts of the country, be liable for payment of Service Tax on such services.

Ans. Yes, the services provided by a person, having his business premises in the State of Jammu & Kashmir and providing taxable service 1 the clients in other parts of the country would be liable for payment of service tax. Since Section 64 of Chapter V of Finance Act 1994 excludes the applicability of Service Tax to the State of Jammu & Kashmir, the Services provided within Jammu & Kashmir would be outside Service Tax. However, if any service from there to the clients anywhere in rest of the country, he would be liable to pay the Service Tax.

Q.6 Whether a person, who is having his business in any of the Indian States other than the State of Jammu & Kashmir and provides the services to the client in the State of Jammu & Kashmir, would he be liable to pay Service Tax?

Ans. No, a person, having his business premises in any of the Indian states other than the State of Jammu & Kashmir and provides the services to the persons in the State of Jammu & Kashmir, would not be liable to pay Service Tax.

Q.7 Would the services provided in India for the foreign client be liable for payment of Service tax?

Ans. Yes, the service tax is payable on all taxable services rendered in India, whether to an Indian or foreign client.

Q.8 Would the Services provided abroad be liable for payment of Service Tax?

Ans. No, the services rendered abroad shall not attract service tax levy as service tax extends only to services provided within India.

Q.9 Who is administering the Service Tax?

Ans. Commissionerate of Central Excise all over the country are authorized to administer the Service Tax statute within their jurisdiction. Their work is supervised by the Director General (Service Tax), who is the Chief Commissioner for the whole of Country so far as Service Tax is concerned.

Q.10 How do you describe the expression, "person" appearing in the definations of taxable service?

Ans. The expression refers to a 'legal person' and would include any individual, proprietary firm or partnership firm, company, trust and institution and society etc.

Q.11 Who is liable to pay Service Tax to the Govt.?

Ans. In all cases except one, the person who provides the service is responsible for paying the Service Tax to the Government. Only in respect of the services provided by Clearing and Forwarding Agents, the responsibility to pay the tax is on those who receive the service.

Q.12 What is the time limit for paying the Service Tax to the Govt.?

Ans. In a case, where an assessee is an individual or a proprietary or partnership firm, the service tax on the value of taxable services received during any quarter shall be required to be paid by him to the credit of the Central Govt. By the 25th of the month immediately following the said quarter. However, in all other categories of service tax assessees, the service tax on the value of taxable services received during any calendar month shall be required to be paid by them to the credit of the Central Govt. by the 25th of the month immediately following the said calendar month.

  1. REGISTRATION

Q.13 Whom & where should one approach for registration?

Ans. Generally, all Commissionerates of Central Excise, have a Service Tax Cell, headed by Assistant Commissioner. However, in certain Commissionerates, separate Service Tax Divisions have been constituted with Assistant Commissioners charge. The work has now been delegated to all Central Excise Divisions. A prospective assessee of Service Tax can approach to the Assistant Commissioner in charge of Service Tax cell of the Commissionerates or Central Excise Division for registration depending the arrangement made for the same in the Commissionerate.

Q.14 What is the procedure for registration?

Ans. A prospective Service Tax assessee seeking registration shall file an application in Form ST-I (in duplicate ) before the jurisdictional Central Excise officer/Service Tax Cell officer within thirty days from the date of notification of the taxable service. Department will issue the registration certificate to the assessee within 7 days of the receipt of application. In case of failure to issue registration certificate within 7 days, the registration applied for shall be deemed to have been granted and the assessee can carry on with his activity.

Q.15 Who shall apply for registration under Service Tax law? Is there any provisions for Centralized Registration?

Ans. All persons providing taxable services shall be required to register with the Central Excise department. They would have to take only one registration even if they operate from more than one premises but have centralized billing at one place. However, if they do not have Centralized billing at one place, then they will have to register at each place separately. Besides only one registration is required to be taken even if an individual provides more than one service but from the same premises.

Q.16 What is to be done with the registration when
������� (a) a registered assessee transfers his business to another person, or
������� (b) when a registered assessee ceases to carry on the service activity for which he is registered,

Ans.

(a) When a registered assessee transfers his business to another person, the transferee should obtain a fresh certificate of registration.
(b) When a registered assessee ceases to carry on the service activity for which he is registered, he should surrender his registration certificate immediately to the Central Excise authorities.

Q.17 What is the time limit with in which the service provider shall register with the Central Excise department for the service Excise department for the service tax purpose once the service is notified or once assessee commences the business of rendering the taxable service?

Ans. Every person liable for paying the service tax shall make an application to the concerned Central Excise Officer for registration within a period of 30 days of the Service Tax having come into force. In cases where a person commences the business of providing a taxable service after such service has been notified, he is required to make an application for registration within a period of 30 days from the date of such commencement.

Q.18 What is to be done if an assessee is providing services from more than one places besides providing more than one services, done he have to obtain registration service-wise or otherwise?

Ans.

  1. When the assessee is providing the service from more than one premises and have centralized billing system When an assessee is providing a taxable service from more than one premises or offices and has a centralized billing system in respect of services rendered to clients from all such premises or offices at any one premises or office, he may opt for registering only the premises or office from where such centralized billing is done. Similarly if the assessee does billing from his regional office in respect of branch office falling within that region he may be permitted to register his regional office(s) only if he opts for the same.
  2. When the assessee is providing a taxable service from more than one premises or offices, and does not have any centralized billing system, When an assessee is providing a taxable service from more than one premises or offices, and does not have any centralized billing system, he shall be required to make separate applications for registration in respect of each such premises or offices to the concerned Central Excise Officer.
  3. Where an assessee is providing more than one taxable service, he may make a single application for registration mentioning therein all the taxable services provided by him, to the concerned Central Excise Officer.

Q.19 Is registration under Service Tax required to be taken in respect of all premises where from service is provided or is Centralized Registration and levy permitted?

Ans. The law on the subject directs that an assessee under the Service Tax have to obtain registrationin respect of all the premises where from the taxable service is provided. However, in respect of Courier Service, an exception was provided in 1997 permitting Centralized Registration. This facility has been extended in respect of other services also. The service provider can opt for Centralized Registration in respect of services provided by him, even if from different premises, if he maintains Centralized Billing pattern. Therefore, it is incumbent on the assessee to show to the Department that their accounting pattern is centralized so as to avail themselves of benefit of Centralized Registration and payment of Service Tax.

RECORDS

Q.20 What are the records to be maintained by the assessee?

Ans. No specific records have been prescribed to be maintained by a service Tax assessee at present. The records, including computerized data if any being maintained by an assessee as required under any other laws in force (Income tax, Sales) from time to time shall be acceptable to the Central Excise Department for the purpose of Service Tax.

1.04 FILING OF TETURNS & PAYMENT OF SERVICE TAX

Q.21 Is any return or statement prescribed for the purpose of Service Tax and if so what are the documents to be submitted along with the returns/statement?

Ans. The Service Tax assessees are required to file a half yearly return in Form ST-3 or ST-3a in triplicate to the Superintendent, Central Excise, dealing with Service Tax work. The return is to be filed within 25 days from the last day of the half-year it relates and should be accompanied by copies of all T.R.6 challans issued in the half year. Further, assessees filling the return for the first time should also furnish to the Department the list of all the accounts maintained by them, relating to the Service Tax.

Q.22 What is to be done when no services are provided in a half-year?

Ans. If no services have been provided during a half-year and no Service Tax is payable then, the assessee may file a Nil Return within prescribed time limit.

Q.23 What is the time limit for payment of Service tax to the Govt.?

Ans. The service tax on the value of taxable services received during any calendar month shall be paid to the credit of the Central Govt. by the 25th of the month immediately following the said calendar month.

However, in cases where the assessee is an individual or proprietary firm or partnership firm, the service tax on the value of taxable services received during any quarter shall be paid to the credit of the Central Government by the 25th of the month immediately following the said quarter.

Q.24 Where should the assessee pay the Service Tax?

Ans. The assessee should deposit the Service Tax to be paid during the month/quarter in the specified branches of specified Banks. The list of such Banks & Branches are available with the jurisdictional Commissionerate of Central Excise. The amount should be paid to the credit of the Central Government by the 25th of the following month or quarter as the case may be, in Form TR-6 challan (yellow colour). Different heads of accounts have been specified for different taxable services by the Govt. under which the payment has to be made.

Q.25 What is the procedure for payment of service tax to the Government?

Ans.

  1. Every assessee should make the payment of Service Tax for the month or the quarter as the case may be before the 25th of the following month/quarter, through the designated Banks of the respective Central Excise Commissionerates.
  2. The payment should be made in T.R.6 challans.
  3. T.R.6 challans should be in quintriplicate.

T.R.6 challans should be of yellow colour.

  1. If the payment is made after prescribed date, then assessee is liable to pay the interest at the simple rate of 1.5% per month or part of the month by which payment has been delayed.

Q.26 What are the precautions to be taken by the assessee while payment of Service tax?

Ans. The following precautions should be taken by the assessee at the time of paying the Service Tax.

  1. Service Tax should be paid within the time limit laid down in this regard.
  2. It should be deposited in the designated branches of the banks specified in each Central Excise Commissionerate.
  3. The major head and sub-head should correctly be filled in the tr-6 Challan.
  4. The TR-6 challan should be yellow in color and should be filed in quintriplicate and duly filled.
  5. In case of delay in making payment of service tax in time, the interest is also required to be paid at the simple rate of one and one half percent for each months or part of the months for which payment is delayed.

Q.27 What is the procedure for filing a return?

Ans. The Service Tax returns are to be filed half yearly in the prescribed form ST-3 or form-3 A. The returns are to be submitted in triplicate to the Service Tax cell/Division in the relevant Central Excise Commissionerate or the Central Excise Division. The returns are to be submitted, along with copies of all TR-6 challans within 25 days of the expiry of the half-year i.e. in other words, the return for the half-years i.e. 'April-September', and 'October-March' of the year should be filed by 25th October, & 25th April of the year respectively.

REFUND & ADJUSTMENT

Q.28 Is the Service Tax payable by the assessee, even in cases where his clients do not pay for the service rendered or pay only a part of the bill raised in this regards?

Ans. No. in terms of the present law, the person providing the taxable service to some one is liable to pay the Service Tax on the value of the taxable service realized from the clients. The Service Tax is required to be paid only on the value of taxable services received in a particular month or quarter, as the case may be, and not on the gross amount charged or billed to the client. However, in all such cases where the amount received is less than the gross amount charged/billed to the client, the service tax assessee are required to amend the bills, either by rectifying the existing bill or by issuing a revised bill and properly endorsing such change in the billed amount. In case an assessee does not do so, his liability to pay service tax shall be on the amount billed by him to the client for the services rendered.

Q.29 Can any adjustment of tax liability be made by the assessee on his own in cases where Service Tax has been paid in excess?

Ans. Yes, Facility for adjusting excess payment of service tax by the assessee towards future liability is now provided for in the law. In cases, where an assessee has paid to the credit of Central Govt. service tax in respect of a taxable service which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him calculated on a prorata basis against his service tax liability for the subsequent period, provided that the assessee has refund the value of taxable service and the service tax thereon to the person from whom it was received. However, the assessee is required to file the details in respect of such suo-moto adjustments done by him at the time of filing the service tax returns. In other cases of excess payment, the refund claim have to be filed with the department.

Q.30. What is the procedure for claiming refund?

Ans. The procedure for claiming refund for the amount due from the Department is mentioned here in below:-

  1. Submission of application in prescribed Form-R in triplicate to the jurisdictional Assistant Commissioner (Service Tax).
  2. Application should be filed within the prescribed period i.e. before the expiry of six months from the relevant date as defined in Section 11B of the Central Excise Act, 1944.
  3. Application shall be accompanied by documentary evidences to establish that the amount of Service Tax in relation to which such refund is being claimed has been paid by the assessee in excess and the incidence of such tax had not been passed on by the assessee to any other person.

1.07 ADJUDICATION AND APPEAL

� Q.30 Who should be approached when an assessee aggrieved by the order of Assistant Commissioner in charge of Service Tax?

Ans. An assessee aggrieved with the order of Assistant Commissioner in charge of Service Tax, may file an appeal to the Commissioner of Central Excise (Appeals) in Form ST-4, in duplicate along with a copy of order appealed against. The appeal should be presented within three months from the date of receipt of the decision or order of the Central Excise officer.

Q.31 What is the procedure for filing of appeal against the order of Assistant Commissioner of Central Excise?

Ans. Any person aggrieved by any order passed by any assessing officer or adjudicating authority below the rank of Commissioner may file an appeal before the Commissioner, Central Excise (Appeals).

  1. The appeal shall be filed in the prescribed form ST-4.

    It shall be presented within three months from the date of receipt of order which is being appealed against.

  2. It should be filed in duplicate.
  3. It should be accompanied by a copy of the order appealed against.
  4. Period of three months for filing the appeal, can be extended by Commissioner (appeal) for further three months, if he becomes satisfied that sufficient reasons existed, which prevented the appellant from making the appeal in the first three months.

Q.33 Can the time limit of three months for making appeal to the commissioner (appeal) be extended, If yes, under what circumstances?

Ans. Yes. If the Commissioner of Central Excise (Appeals) is satisfied that the appellant was prevented by sufficient cause, for presenting the appeal with the statutory period of three months, he may allow the appeal to be presented within a further period of three months.

Q.34 Can an appeal be filed against the order of Commissioner (Appeals), if the assessee is aggrieved by the order of Commissioner (Appeals)?

Ans. Yes, the law provides provisions for filing an appeal against the order of Commissioner, Central Excise (Appeals). The appeal may be filed with the CEGAT within three of the date of receipt of the order sought to be appealed against.

Q.35 What is the procedure for filing appeal against the order of commissioner of central Excise (appeal)?

  1. Any assessee aggrieved by an order passed by the Commissioner, Central Excise or order passed by the Commissioner (Appeals) may file an appeal before the Appellate Tribunal.
  2. It should be filed within three months from the date of its receipt.
  3. It should be filed in the prescribed form ST-5.
  4. It shall be filed in quadruplicate.
  5. It shall be accompanied by a copy of the order appealed against (one of which shall be certified copy).
  6. It shall be accompanied by a copy of the order appealed against (one of which shall be certified copy).
  7. It shall be accompanied by a fee of Rs. Two Hundred.
    1. PENALTY

Q.36 Under what situations, penalty may be imposed by the Department on the assessee?

Ans. Penalty may be imposed by the Department on the Assessee if he

  1. fails to pay service tax to the government in time.
  2. fails to file half-yearly return to the department in time.
  3. wilfully suppresses or conceals the value of taxable service or furnish inaccurate value of such taxable service.
  4. Fails to comply with a notice requiring him to produce within the specified time limit, such accounts, documents or other evidence as considered necessary by the Central Excise officer for assessment.

Q.37 What is the penalty in case of delay in paying the Service Tax to the Government within the prescribed time limit?

Ans. For failure to pay the Service Tax, the assessee shall be required to pay a minimum penalty from Rs.100/- to Rs.200/- per day as decided by Central Excise Officer. This will be subject to a ceiling of the amount equivalent to Service Tax not paid. Interest shall also be payable at the rate of one and half percent for every month or part of a month by which such paying of the tax or any part thereof is delayed.

Q.38 What is the penalty for non-filing or delayed filing of Half-yearly returns?

Ans. An assessee failing to file half-yearly returns




Category Service Tax, Other Articles by - Garima 



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