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CA – IPC E : Indirect Taxation
(Free Revisionary Notes)
(Relevant for May 2016)
Compiled by:
CA Arpita S. Tulsyan
CA Vinesh R. Savla
Contact: CA Arpita S Tulsyan
9167 082 081 / 022 - 6562 1008
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Commerce Eduworld
CA – IPCE : Indirect Taxation
Index
Unit
No. Particulars
Page No.
1 Basic Concept of Service Tax 1 - 9
2 Point of Taxation 10 - 11
3 Valuation of Service 12 - 13
4 Exemptions and Abatements 14 - 19
5 Service Tax Procedures 20 - 27
6 CENVAT Credit 28 - 36
7 Basic Concepts of IDT 37
8 Central Excise Duty 38 - 45
9 Customs Duty 46 – 51
10 VAT 52 – 59
11 CST 60 – 69
Commerce Eduworld’s Revisionary Notes contains all the Important Provisions relevant
from Exam Point of View.
However, these Notes are meant for REVISION ONLY.
Commerce Eduworld
CA IPCE Indirect Tax Revision Notes
1
Unit 1: Basic Concepts of Service Tax
Service Tax Law:
(a) Finance Act, 1994: Chapter V & VA of the Finance Act, 1994.
(b) Rules on service tax: Rules are made for carrying out the provisions of the Act. The rules
can never override the Act. E.g. Services Tax Rules 1994, Service Tax (Registration of Special
Category of Persons) Rules, 2005, Service Tax (Determination of Value) Rules, 2006, Point of
Taxation Rules, 2011 and Place of Provision of Service Rules, 2012.
(c) Notifications on service tax: Finance Act, 1994 empower the Central Government to
issue notifications to exempt any service from service tax and to make rules to implement
service tax provisions.
(d) Circulars or Offic e Letters (Instructions) on service tax: The Central Board of Excise and
Customs (CBEC) issues circulars to explain the scope of taxable services and the scheme of
service tax administration etc. However, the provisions of any Act cannot be altered or
cont radicted or changed by the circulars.
Persons involved: 1) Service Provider Generally collects & pays ST to the govt. Even if he
fails to collect ST, he has to pay to govt.
2) Service recipient Final burden of service tax is on him.
Extent, Commencement and Application [Section 64]:
The Act extends to whole of India except the state of Jammu & Kashmir (Section 64(1)).
Provisions of the Act do not extend to Jammu & Kashmir:
(a) Service provided in Jammu & Kashmir not liable to service tax.
(b) Services provided from Jammu & Kashmir outside Jammu & Kashmir liable to service tax.
India means: (a) The territory of the Union (States and the Union Territories)
(b) Its territorial waters (up to 12 nautical miles from the Indian land mass), continen tal
shelf, exclusive economic zone or any other maritime zone.
(c) The seabed and the subsoil underlying the territorial waters;
(d) The air space above its territory and territorial waters; and
India includes Continental Shelf and Exclusive Economic Zones (200 NM) for following
purpose: 1) Service provided for construction of installation, structure and vessel for
extraction of mineral oil or natural gas.
2) Any service to such installation, structure and vessel.
Charge of Service Tax [Section 66B]:
- Tax shall be levied at the rate of 14 %
- on the value of all services ,
- other than those services specified in the negative list,
- provided or agreed to be provided
- in the taxable territory ,
- by one person to another ,
- and collected in such m anner as may be prescribed.
Commerce Eduworld
CA IPCE Indirect Tax Revision Notes
2
Definition of service [Section 65B(44)]:
Service means: (i) any activity for consideration (ii) carried out by a person for another and
(iii) includes a declared service.
Exclusions: (Not a Service - So Not taxable)
However, a service shall not include :-
(a) Activity which constitutes merely,
(i) Transfer of title in goods or immovable property, by way of sale, gift etc; or
(ii) Transfer, delivery or supply of any goods which is deemed to be a sale within article 366
of the Constitution; (Eg. Hire Purchase) or
(iii) Transaction in money or actionable claim (Unsecured debts)
(b) S ervice by an employee to the employer in the course of or in relation to his
employment;
(c) Fees taken in any Court or tribunal.
Explanatio n 1:
(Functions performed by below are not considered as service and hence not taxable):
(A) the functions performed by the Members of Parliament / State Legislative / Panchayats
/ Municipalities / local authorities as such member; or
(B) the duties performed by any person who holds any post in pursuance of the provisions
of the Constitution in that capacity; or
(C) the duties performed by any person as a Chairperson or a Member or a Director in a
body established by the Central Government or State Governments or local authority.
Explanation 2: If a transaction is only in money, then it is not a service and hence not
taxable. But any activity relating to the use of money or its conversion from one form,
currency or denomination, to another for which a fee or commission is charged, then it is
not a transaction only in money and hence such fee or commission charged is taxable.
Following are not transaction in money and hence taxable:
Any activity carried out, for a consideration, in relation to, or for facilitation of, a
transaction in money or actionable claim, including the activity carried out
(a) by a lottery distributor or selling agent in relation to promotion, marketing, organising,
selling of lottery or facilitating in organising lottery of any kind, in any other manner;
(b) by a foreman of chit fund for conducting or organising a chit in any manner.
Explanation 3: (Only services provided by one person to another ar e taxable. Therefore
services provided by one branch of a company to another or to its head office or vice -versa
are not taxable as they are not provided by one person to another.)
However for the purposes of this Chapter,
(a) an unincorporated association or a body of persons, as the case may be, and a member
thereof shall be treated as distinct persons; (So Taxable)
(b) an establishment of a person in the taxable territory and any of his other establishment
in a non -taxable territory shall be treated as e stablishments of distinct persons. A person
carrying on a business through a branch or agency or representational office in any territory
shall be treated as having an establishment in that territory. (So Taxable)
Commerce Eduworld
CA IPCE Indirect Tax Revision Notes
3
Monetary consideration and non-monetary consideration:
1. Monetary consideration means any consideration received in the form of money. Money
means legal tender, cheque, promissory note, bill of exchange, letter of credit, draft, pay
order, traveller cheque, money order, postal or electronic remittance or any such similar
instrument but shall not include any currency that is held for its numismatic value.
2. Non- monetary consideration essentially means compensation in kind such as the
following:
{
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