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Phone:
24330840 Fax:
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Email: chennaiservicetax@dataone.in Website: http://servicetaxchennai.gov.in |
GOVERNMENT OF
MINISTRY OF FINANCE
OFFICE OF THE
COMMISSIONER OF SERVICE TAX
6th Floor,
ST - TRADE NOTICE No. 06/2008
dated 03.03.2008
Sub: Service Tax – Budget
Changes – Finance Bill 2008 – communication of
Explanatory Notes on
Service Tax and Notifications No. 4/2008-ST to
15/2008-ST all dated
10/2008-CE (NT) dated
*****
The Finance Minister has introduced the Finance
Bill, 2008 in the Lok Sabha
on
The copies of the following are enclosed for information and
necessary action.
1.
Explanatory
Notes on Service Tax provisions proposed in the Finance bill 2008.
SALIENT FEATURES OF CHANGES MADE IN
BUDGET 2008.
INCREASE IN THRESHOLD
EXEMPTION LIMIT FOR SMALL SERVICE PROVIDERS
·
The
annual threshold limit of service tax exemption for small service providers is
being increased from Rs.8 lakh to Rs.10 lakh.
·
Consequent
upon the increase in the threshold exemption limit from Rs.8 lakh to Rs.10 lakh, the annual
turnover limit for obtaining service tax registration shall also be increased
from Rs.7 lakh to Rs.9 lakh.
·
Increased
threshold limit of Rs.10 lakh shall be applicable to
small service providers for the financial year 2008-09 onwards.
CLASSIFICATION OF TAXABLE
SERVICES:
·
Taxable
services are defined separately under clause (105) of Section 65 of the Finance
Act, 1994. Services are supplied as a single composite service by bundling
number of different services or disaggregating a single supply into different
components. Tax liability may vary depending upon the treatment of the
transaction either as a single composite service or multiple supply of service.
For the purpose of levy of service tax, a single composite service is to be
classified under any one of the specified taxable services.
·
For
the purpose of classification of a service covering number of separate
services, a view has to be taken as to whether an individual service is merely
a component of the overall supply or is itself a distinct and independent
supply.
·
Section
65A states the principles for classification of taxable services.
Classification of a composite service is based on that component of the service
which gives the essential character.
·
Seven
services are being separately defined as taxable services. Specifying a service
separately as a taxable service does not necessarily mean or suggest that
services falling within the scope of newly specified service were not earlier
classifiable under any one of the existing taxable services. Grouping of
services under a specific taxable service may change.
FOLLOWING SERVICES
(i) Services provided in relation to
information technology (IT) software for use in the course, or furtherance, of
business or commerce [section 65(105)(zzzze) refers];
(ii) Services provided in relation to management of investment,
known as segregated fund, under unit linked life insurance business, commonly
known as Unit Linked Insurance Plan (ULIP) scheme [section 65(105)(zzzzf) refers];
(iii) Services provided by a recognised
stock exchange in relation to securities [section 65(105)(zzzzg)
refers];
(iv) Services provided by a recognised
association or a registered association (commodity exchange) in relation to
sale or purchase of any goods or forward contracts [section 65(105)(zzzzh) refers];
(v) Services provided by a processing and clearinghouse in
relation to processing, clearing and settlement of transactions in securities,
goods or forward contracts [section 65(105)(zzzzi)
refers];
(vi) Services provided in relation to supply of tangible goods,
without transferring right of possession and effective control of said tangible
goods [section 65(105)(zzzzj) refers]; and
(vii) Services provided in relation to internet
telecommunication [section 65(105)(zzzu) refers].
Services provided in relation to internet telephony has been covered within the
scope of the proposed service. Hence internet telephony service shall be
omitted.
SCOPE OF SPECIFIED
TAXABLE SERVICES IS BEING AMENDED:
1.
Foreign
exchange broker service
2.
Cargo
handling service
3.
Tour
operator service
4.
Business
auxiliary service
5.
Renting
of immovable property service
6.
Transactions
between associated enterprises
EXEMPTIONS FROM LEVY OF SERVICE TAX:
·
Taxable
service provided by a person located outside
·
In
the case of services provided for the transport of goods by road in a goods
carriage, service tax is required to be paid by certain categories of persons
who pay the freight instead of the service provider namely Goods Transport
Agency. Taking into account the special nature of the goods transport agency (
·
Simultaneously,
the benefit of Cenvat credit has been withdrawn to
·
Section
78 is being amended so as to provide that penalty for failure to pay service
tax under section 76 shall not apply where penalty is leviable
under section 78.
·
Section
77 is being amended so as to provide specific penalty for specific
contraventions.
OTHER AMENDMENTS IN THE
ACT:
·
Replacement
of “client” or “customer” with “any person”: 39 specified taxable services are
being amended so as to substitute “any person” in place of “client” or
“customer”. This change will come into effect from a date to be notified after
enactment of the Finance Bill, 2008.
·
Section
66 is being amended so as to include seven newly specified services in the list
of taxable services. This change will come into effect from a date to be notified
after enactment of the Finance Bill, 2008.
·
In
order to facilitate small service taxpayers in filing of service tax returns, a
scheme similar to Tax Return Preparers Scheme in Income Tax is proposed in the Budget,
2008-09. Section 71 is being incorporated for this purpose.
·
Section
72 is being incorporated to authorise Central Excise
Officer to make assessment on the basis of best judgment in certain specified
circumstances.
·
In
order to settle disputes pending as on 01.03.2008 involving tax arrears
(service tax, interest and penalty) not exceeding Rs.25,000/-, Service Tax
Disputes Resolution Scheme is being introduced. The scheme is valid during
·
Section
95 is being amended to empower the Central Government to issue orders for
removal of difficulty in respect of implementing, classifying or assessing the
value of any taxable service incorporated by the Finance Bill, 2008 upto one year from the date of enactment of the Finance
Bill, 2008.
AMENDMENTS IN THE SERVICE
TAX RULES, 1994:
·
PAYMENT
OF SERVICE TAX IN ADVANCE: It is proposed to extend the facility to pay service
tax in advance to all taxable persons subject to the certain conditions. For
this purpose, rule 6 (1A) is being incorporated.
·
Rule
6(4B)(iii) provides self-adjustment of excess amount of service tax paid in
certain circumstances with a monetary limit of Rs.50,000/-. This rule is being
amended to increase the said monetary limit from Rs.50,000/- to Rs.1,00,000/-
·
Rule
7B provides facility to file revised return to correct mistake or omission,
within a period of 60 day from the date of submission of the return. This rule
is being amended to increase the said time limit from 60 days to 90 days
·
Rule
7C empowers the Central Excise Officer to reduce or waive the penalty for
delayed filing of return, where the gross amount of service tax payable is nil.
AMENDMENTS IN CENVAT
CREDIT RULES, 2004:
·
Service
tax payable on
·
Rule
3 is being amended to allow removal of capital goods outside the premises of
the provider of output service without any time restriction, if the same is for
providing output service.
·
Rule
6 is being amended to provide the following options to a provider of output
services, using common inputs or input services for providing taxable as well
as exempted services and opting not to maintain separate accounts, namely:-
o
either
reverse the credit attributable (to be worked out in a manner prescribed in the
rule) to the inputs and input services used for providing exempted service, or
o
pay
8% amount of the value (to be determined in accordance with section 67 of the
Finance Act, 1994) of the exempted service.
·
Rule
7A is being inserted to prescribe a procedure to enable the provider of output
services to take credit on inputs and capital goods on the basis of an invoice,
bill or challan issued by its other office.
·
Rule
15A is being inserted to provide for general penalty upto
Rs.5,000/- in case of contravention of any of the provisions of the CENVAT
Credit Rules, 2004, for which no specific penal provision exists.
·
CROSS
BORDER SERVICES RELATING TO TANGIBLE GOODS:
·
Information
technology is used to provide services in relation to tangible goods located
distantly. In such cases, the actual place of performance of the service is
different from the actual location of the tangible goods (place of consumption
of service).
·
The
place of performance and the physical location of the goods are immaterial when
both places are within a single taxing jurisdiction i.e. country of taxation.
However, if these two places are in two different taxing jurisdictions, the
taxing jurisdiction shall be the place of actual location of the goods at the
time of provision of service.
·
Rule
3(1)(ii) of the Export of Services Rules, 2005 and
rule 3(ii) of Taxation of Services (Provided from Outside India and received in
(a) management,
maintenance or repair,
(b) technical testing and analysis, and
(c) technical inspection and
certification,
These services are also provided remotely through internet or
any electronic network including a computer network, or any other means.
WORKS CONTRACT
(COMPOSITION SCHEME FOR PAYMENT OF SERVICE TAX) RULES, 2007
·
Service
tax payable for works contract service under the Works Contract (Composition
Scheme for payment of Service Tax) Rules, 2007 is being increased from 2% to 4%
of the total value of the works contract. Rule 3(1) of the said rules is being
amended suitably (Notification No.7/2008-ST dated 01.03.2008).
The changes explained above are not exhaustive and are only for
the purpose of providing guidance. Explanations are not to be treated as part
of the statutory provisions and do not over ride them. The statutory provisions
and the relevant notifications have to be read carefully for interpreting the
law.
Assessees are requested to refer to the relevant
notifications for effective dates of new levies, exemptions and amendments
would come into force.
All the Trade associations are
requested to bring the contents of the Trade Notice to the attention of their
member’s, in particular, and the trade and all other concerned in general.
[Issued from file C. No. IV/16/ 04/2008
-
Encl: As above.
(P.K.JAIN)
COMMISSIONER
To
1. As per mailing list. (Both Trade and Department.)
2. Members of
the R.A.C.
3. Copy to: Superintendent, Computer Section for publishing in the Departmental