Service Tax Summary Notes For CS Executive & CA IPCC - CA Spot Exclusive

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SEC.64:

#Gives the extent, commencement and application

#Service tax extends to whole of India except the state of J&K (because consent of state assembly required to this effect, not received till date) i.e. it is not applicable in the State of J&K and any place outside India (foreign countries).

#EEZ=12NM from mainland i.e. TERRITORIAL WATERS + 188NM ahead=200NM  in all.(forms part of taxable territory)

#SERVICE TAX IS A DESTINATION BASED CONSUMPTION TAX i.e place of the service provider (office) is irrelevant, it is important to check only the place where the service is consumed to decide taxability.

E.g. Miss X, an interio0r decorator living in Italy designed the new office in Mumbai.

®     Service tax shall be charged because the place of consumption is Mumbai, a taxable area.

#The extent shall apply to all taxable services provided.

#If the amount of taxable services given includes amount of service provided in non-taxable territory, then such amount shall be deducted from the total value of taxable services.

E.g. Total bills raised for which amounts were received = 18,00,000

#Out of which services of Rs. 1,80,000 were rendered in J&K.

®     Then taxable services  = 18,00,000 – 1,80,000 = 16,20,000.

Section 65B:

#All definitions (meaning) are contained in the clauses of Section 65B.

#As per definition of service given in Sec 65B(44):

#Service provided to another is taxable.

   (a) Service provided to employer - Not Taxable.

   (b) Service provided by unincorporated association(club) to its member - Taxable

   (c) Service provided to associated enterprise - Taxable.

#Services are taxable if provided for consideration, therefore FREE SERVICES are Not Taxable.

#Hence, if service is provided free of cost then do not waste time in reading remaining details of the question the transaction shall not be taxable.

       (i) If consideration is received indirectly, then also taxable.

 E.g   If  bill for the services of a hotel consumed by an architect is met by the architect’s client, still shall be included in the value of taxable services.

       (ii) If consideration is received in kind (gold chain), then also taxable

        [FMV of asset shall be the value of taxable service provided]

 #Transfer of goods is not a service because as per Sec 65B(44), it is not a apart of service.

       E.g. Nawaz beauty parlour provided service of facial to client for                                             Rs. 2,00,000

                   (includes cost price of cosmetics sold worth Rs.1,80,000  )  

®     Value of taxable services provided                                                             = 20,000.

 #No service tax is charged if fees is taken in any court or tribunal.

#No tax is charged in case of deemed sale. E.g. Sale of food only.

SEC.66 B:

#Under this, tax rate prescribed is 12%. (cess separate) , thus, while explaining this section, ensure that you write tax rate 12% and not 12.36%.

#Read the question very carefully that whether the amounts of taxable services given are exclusive of service tax or inclusive of service tax, if inclusive then apply Taxable service x12.36% 

#If nothing mentioned then assume anything, but do not forget to write the assumption.

E.g. Service tax charged separately - exclusive

       Service tax not charged separately – inclusive

       Services ‘billed and received’ – inclusive.

#Do read the question completely because if the rate has been specified in the question, then apply the given rate only.

SEC.67

#It states that service tax is always levied on the GROSS amount.

(e.g. if any TDS is deducted from the value, then, first add it to net amount given and then levy service tax).

#Value of services provided shall also include consideration received in indirectly.

E.g   If  bill for the services of a hotel consumed by an architect is met by the architect’s client, still shall be included in the value of taxable services.

#Consideration received in kind is also taxable. FMV of such consideration received is the value of taxable services provided.

       Note: FMV of asset received in kind is always assumed to be inclusive of tax.

Point of taxation rules,2011

#If invoice is valid (issued within 30 days), then, date of payment or date of issue of invoice, whichever is earlier. 

 #If invoice is not valid then, date of payment or date of completion of service, whichever is earlier.

        E.g.  An individual provides service on 28 Mar 2013 and no payment received yet and,

        if issues invoice on:

        (i) 15th April 2013 [VALID BILL]- Then it will be taxed in quarter of Apr-June 2013

        (ii) 30th April 2013 [INVALID BILL]-Then it will be taxed in quarter of Jan-Mar 2013.

#In case of any advance received, the date of receiving advance shall be the point of taxation and no need to check any other date.

#In case of new levy of tax:

#Tax shall not be paid only if payment for services is received before date of new levyand

        (i) Invoice is issued before new levy.

                                         OR

        (ii) Invoice is issued within 14 days from levy of tax.

#NN 33/2012 -Exemption of SSP

#Receipts of ‘preceding year’ are checked; do not confuse it with current year.

#In every financial year, receipts of only immediately preceding year are checked i.e., we are not concerned with the taxable services provided in the remaining years and threshold exemption has to be checked every year.

E.g. Gross value of taxable services provided by D & Co is as following:

            i.  PY 2010-11             =          12 lakhs

ii. PY 2011-12             =          8.75 lakhs

iii.PY 2012-13                         =          13 lakhs

            Exemption of 10 lakhs can be availed for 2012-13 but not for PY 11-12

#If value of services is exactly 10 lakhs in preceding year, then also exemption under NN 33/2012 is to be provided in this FY.

#In the absence of relevant information (i.e., value of services of last year not given), then threshold exemption of 10 lakhs is not to be provided except in the case of newly started business.

#Exemption cannot exceed the value of taxable services of current year and remaining exemption can never be carried forward.

Example: Total value of taxable services for F/Y 12-13 is ` 7,00,000

Exemption under NN33/2012 shall be only 7,00,000.

PAYMENT OF SERVICE TAX (Rule 6 of STR,1994)

®     Individual or firm- 5th of month following the quarter

®     Others- 5th of the month following the calendar month in which the liability arises.

®     Service tax of March shall be paid by 31st March in both the above cases.

®     6th in both cases, if paid electronically.

®     In case of cheque, the date of presentation of cheque, subject to the realization of that cheque.

#Companies do not have option to pay tax on cash basis even if their receipts do not exceed 50 lakhs.

#E-payment

Total service tax paid shall exceed 10 lakhs and not the receipts.

Service tax is taken before adjustment of CENVAT credit.

Service tax of preceding year is checked and it shall be done for every financial year.

#Adjustment of tax paid but amount changed/refunded:

#If the amount of invoice is renegotiated and a credit note has been issued to this effect, OR

If the assessee refunds the payment, in respect of which he has not provided the services, wholly or partially for any reason,

#He may take the credit of excess service tax so paid.

NOTE: Adjustment is not available in case of bad debts.

Section 70 + Rule 7

#As per rule 7, it is mandatory for every assessee to submit half yearly returnelectronically.

#Even if the assessee has provided no service a NIL return shall be filed by the assessee. On non filing a penalty shall be imposed but the CEO may at his discretion reduce or waive the penalty.

#Return shall be submitted within 25 days from the end of half year i.e.,

1st April to 30st September - upto 25th October

1st October to 31st March – upto 25th April (Not 31st March, the only exception in service tax)

#In case return is not filed on time, maximum late fees is 20,000 (can be below 20,000 also)

Revised return Rule 7B

#Assessee shall submit a revised return within a period of 90 days from the date of submission of original return.

#Late return can also be revised.

Section 70

#Every person shall file service tax return if he is liable to pay service tax.

#Return shall be filed even if no service is provided.

SEC.75

#Interest on delayed payment of service tax is to be paid on the amount of tax outstanding @ 18% p.a. , for the period b/w the due date and the date of deposit.

NOTE: If the value of taxable services in the preceding year or during the current year, doesn’t exceed 60 lacs, rate shall be 15%p.a.

Sec.73A

#If the assessee has collected service tax in excess of actual tax, he shall deposit the same immediately with the government.

#This amount will then either be refunded to the person or credited to consumer welfare fund.

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