“A Bird’s eye view on Service Tax Proposals in the Union Budget 2009-10”
- - APURVA MEHTA*
I Following services have been individually specified as Taxable Services:
1. Services provided in relation to transport of goods by rail.
2. Services provided in relation to transport of coastal goods & goods through Inland Water including National Waterways.
3. Legal Consultancy Service. (Not applicable in case the service provider or the service receiver is an Individual)
4. Cosmetic & Plastic Surgery Service.
The taxability of all the above services shall be from a date to be notified after the Finance (No. 2) Bill, 2009 receives assent of the President.
II Following services are proposed to be outside the purview of Service Tax:
1. Exemption from service tax has been granted to inter-state or intra-state transportation of passengers in a vehicle bearing “Contract Carriage Permit” subject to specified conditions.
2. Exemption from service tax which is leviable under club or association service has been granted to the Federation of Indian Export Organizations (FIEO) & other specified export promotions councils till 31.03.2010.
3. Exemption from service tax which is leviable under the category of banking & other financial services or under foreign exchange broking service is being provided to inter-bank purchase & sale of foreign currency between scheduled
All the above changes are notified to come into effect immediately.
III Scope of certain existing services has been amended as under:
1. The definition of stock broker under the purview of stock broker service is being amended to exclude sub-broker from its ambit. Hence forth, all the sub-brokers shall be outside the purview of service tax.
2. The definition of Business Auxiliary Service is being amended to provide exclusions from the purview of Business Auxiliary Service only to those processes which results in the manufacture of “Excisable goods” as per the Central Excise Act.
3. The definition of “Information Technology Software Service” is being amended to replace the word “acquiring” with the word “providing” which appears in Sl. No. (iv) & (v) of the definition. The amendment is proposed to take retrospective effect from 16.05.2008.
All the above proposed changes are expected to come into effect from a date to be notified, after the Finance (No. 2) Bill, 2009 is enacted, i.e. when it receives the assent of the President.
IV Amendments in the Act:
The Finance Act, 1994 has been amended as under:
1. Revision procedure prescribed U/s - 84 has been proposed to be abolished. Further, similar to the Central Excise procedure, procedure for filing departmental appeals before the Commissioner (Appeals) has been prescribed. Therefore, Sec-84 dealing with revision by Commissioner is being modified & consequential changes are being made in Sec-86. All the pending cases are being protected by virtue of a “Saving Clause”.
2. The Central Government has been empowered to frame rules with respect to the place of provision of taxable services & with respect to the relevant date for determining the rate of service tax.
All the above amendments are expected to come into effect from the date the Finance (No. 2) Bill, 2009 is enacted.
V Amendments in the Rules & Existing Notifications:
1. The scope of Notification No. 1/2002 - ST dated 01.03.2002 is being enlarged so as to include installations, structures & vessels in the entire Continental Shelf of India & Exclusive Economic Zones of India within Service Tax ambit.
2. Rules 6(3) of the Cenvat Credit Rules, 2004 is being amended to prescribe that where a service provider provides both taxable & exempted services & who does not maintain separate records of inputs, shall pay an amount equal to 6% of the value of exempted services instead of erstwhile 8%.
3. Rules 3(5B) of the Cenvat Credit Rules, 2004 is being amended so as to provide that a service provider shall be required to pay back the amount of Cenvat Credit taken on inputs / capital goods which are fully written-off.
4. Explanation provided in the Works Contract Rules, 2007 is being modified so as to allow the benefit of optional composition scheme only to such works contracts whereby the taxpayer declares the entire value of goods & services used in the execution of the works contract as the ‘gross value’ charged for the works contract.
All the Current Works Contract whereby either the execution has been commenced or any payment has been made on or before 07.07.2009 would not in any way be affected.
5. Notification No. 1/2009-ST dated 05.01.2009 which relates to Goods Transport Agency Service is been given retrospective effect from 01.01.2005.
The amendments stated in point 1 to 4 will come into effect immediately while that stated in point 5 will come into effect from the date of enactment of the Finance Bill.
VI Revised Service Tax Refund Scheme for Exporters:
With a view to ensure speedier sanction & disbursements of Service Tax Refunds w.r.t. eligible services utilized by exporting communities for export of the goods, the existing refund scheme (announced vide Notification No. 41/2007 - ST dated 06.10.2007) has been revised as under:
1. “Terminal Handling Charges” added to the list of eligible services.
2. Simplified forms for filing refund claims.
3. Time period for filing refund claims increased to one year from the date of exports. Further, there is no need to file quarterly claims. Refund claims can even be filed after each shipment.
4. Self Certification on documents for refund claims upto 0.25% of F.O.B. value of Exports made & C.A. Certification if refund claims exceed 0.25%.
5. Sanction of refunds within one month without any pre-audit.
6. Service Tax payable by exporter himself on reverse charge mechanism basis on ‘Transport of goods by road’ & ‘Commission paid to foreign agents’ have been exempted from levy of S.T. Therefore, the need to deposit S.T. first and then claim refund in such cases has been dispensed with.
- The Finance (No.2) Bill, 2009
- Hon. F.M.’s Budget Speech dated 06/07/2009
- Relevant Circulars / Notifications
* The author is a Chartered Accountant
He can be reached at: email@example.com
+91 94282 33445