CA Manish Gadia st January, 2012 - gmjca.com Export Import Valuation STPAM_1_… · 21.01.2012 CA...

21.01.2012 CA Manish Gadia 1

By

CA Manish Gadia

21st January, 2012


Coverage

• Point of Taxation

• Export of Service

• Import of Service

• Valuation of

Services


Point of Taxation


• Applicable from 1-4-11

• Option to assessee to adopt from 1-7-11

• POT not applicable

If the provision of service are completed or

The invoices are issued

Up to 31-3/30-6-11


POT

POT at the earliest of

Invoice issued within 14 days Not issued with in 14 days

Date of Invoice Date of Completion of

Receipt of payment Service


Point of TaxationDate of

complet

ion of

service

Date

of

invoic

e

Date on

which

payment

recd

Point of

Taxation

Remarks

April 20,

11

May 2,

11

May 12, 11 May 2, 11 Invoice issued in 14

days & before receipt of

payment

April 20,

11

May 6,

11

May 10, 11 April 20, 11 Invoice not issued

within 14 days &

payment received after

completion of service

April 20,

11

May 2,

11

April 25, 11 April 25, 11 Invoice issued in 14

days but payment

received before invoice

April 20,

11

May 6,

11

April 5, 11

(part) &

May 2, 11

remaining

April 5, 11

& April 20, 11

for respective

amounts

Invoice not issued in 14

days. Part payment

before completion,

remaining later


Completion of Service• includes

• not only the physical part of providing the service

• but also the completion of all other auxiliary activities that enable the service provider to be in a position to issue the invoice.

• auxiliary activities include

• activities like measurement, quality testing etc which may be essential pre-requisites for identification of completion of service.

• the test for the determination whether a service has been completed would be the completion of all the related activities that place the service provider in a situation to be able to issue an invoice.

• however such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice.

144/13/2011 – ST dated 18th July, 2011


Details on Invoice

• Within 14 days

• Serially numbered

• The name, address and the registration

number of service provider

• The name and address of the person

receiving such taxable service

• Description, classification and value of

taxable service provided or to be provided

• The service tax payable thereon


PROVISION

OF

SERVICE

ISSUE

OF

INVOICE

RECEIPT

OF

PAYMENT

APPLICABLE RATE

Before After After Date of Invoice or Receipt of

Payment, whichever is earlier.

Before Before After Date of Issue of Invoice

Before After Before Date of Receipt of Payment

After Before Before Date of Invoice or Receipt of

Payment, whichever is earlier.

After Before After Date of Receipt of Payment

After After Before Date of Issue of Invoice

Change in the effective rate of Tax


Payment of Tax in case of New

Services

No Service Tax

Invoice is issued and Payment is received

payment for such before introduction &

invoice is received invoice is issued

before introduction within 14 days of

receipt of payment or

provision of service,

whichever is earlier

Date of provision of Services

has no relevance


• Service provided or to be provided continuously

under a contract for a period of more than 3

months or as prescribed

• POT at the earliest of

Issue of Invoice

Receipt of Payment

Invoice not issued within 14 days

Date of Completion of event in terms of a

contract, which requires the service receiver

to make any payment to service provider


• Following taxable services shall be treated

as Continuous Supply of Service

Commercial or Industrial Construction

Residential Complex Construction

Telecommunication Services

Internet Telecommunication Services

Works Contract Services


• Professionals

• Export of Services

• Payment under reverse charge

Mechanism

• Associated Enterprise

Provider outside India

Provider within India


Professionals• POT shall be on receipt of payment in case of

individuals, proprietary firms or partnership firms for providing below-mentioned services

Consulting Engineer’s Services

Architect’s Services

Interior Decorator’s Services

Practicing Chartered Accountant’s Services

Practicing Cost Accountant’s Services

Practicing Company secretary’s Services

Scientific or Technical Consultancy Service

Legal Consultancy Services

LLP?


• POT shall be on receipt of payment for services exported

• if the payment for exports is not received within the period specified by the RBI

• then the point of taxation shall be as per normal rule of POT

• if the services are exported on 1st August, 2011 and up to 31st July, 2012 payment is not received, then the service tax liability would be counted as due in the month of August 2011

• What about Payment of Interest?

• Later on receipt of payment refund is available?


Amount is Amount is not

Ascertainable ascertainable

At the time of Receipt Issue of

Performance Invoice

Whichever is earlier


Adjustment u/r 6(3) assessee is allowed to adjust

against his subsequent period's liability

the excess service tax paid

for services which is not wholly or

partially Provided or amount is

renegotiated

provided he has refunded the amount

charged along with Service Tax

Issue Credit Note

to the client


Export Of Service Rules

Export of Services

Immovable Property Place of Performance Location of recipient

[Rule 3(1)(i)] [Rule 3(1)(ii)] [Rule 3(1)(iii)]

Provided in relation to Wholly / Partly

an Immovable property performed outside

situated outside India India

In relation to business Other than business Recipient of Service Recipient of Service

is located outside India is located outside India

at the time of provision of service

Recipient has office in India than order for provision from service is made from outside India


Location of Goods

• Location of goods or immovable property in respect of following Services

management, maintenance or repair

technical testing and analysis, and

technical inspection and certification

From

1.4.2011

recategorised

under 3(iii)


Australia India

21.01.2012 CA Manish Gadia 2231-01-2010

Australia India

Supply of Tangible

Goods for Use


Services Criterion prior to 1st

April, 2011

Criterion w.e.f. 1st

April, 2011

Special Services

provided by Builders

Location of Recipient Location of Immovable

Property

Credit Rating Agency Place of Performance Location of Recipient

Market Research

Agency

Place of Performance Location of Recipient

Technical Testing and

Analysis


TPT of Goods by

Aircraft


GTA Place of Performance Location of Recipient

Opinion Poll Agency Place of Performance Location of Recipient

TPT of Goods by Rail Place of Performance Location of Recipient

Rail Travel Agent Location of Recipient Place of Performance

Health Check up and

Treatment

Location of Recipient Place of Performance


Export Of Service Rules

• Such service is delivered and used

outside India. And

• Payment for such service Provided out

side India is received by the service

provider in convertible foreign

exchange.

Provided from India

wef 01.03.2007

wef 01.06.2007

Omitted wef 27.2.2010


India Includes (W.E.F. 19-8-2009)


Payment of Tax

• May Export the

Services without

Payment of Service

Tax

• Rebate of Service Tax


Important Judicial

Rulings


Export (Courier)• TNT India Pvt. Ltd. versus CST,

Banglore [2007 (7) S.T.R. 142

(Tri. - Bang.)]

• U.B.Xpress (South) (P.) Ltd. Vs.

Commissioner of Central Excise,

Coimbatore. [2008 (15) STT

242] (AHD-CESTAT)

• PROFESSIONAL COURIERS

Versus COMMR. OF SERVICE

TAX, CHENNAI [2008 (10)

S.T.R. 125 (Tri. - Chennai)]


Export (BAS)

• BLUE STAR LTD. versus CCE, BANGALORE [2008 (11) S.T.R. 23 (Tri. -Bang.)

• ABS INDIA LTD. Versus CST, BANGALORE [2009 (13) S.T.R. 65 (Tri. -Bang.)


Export (Foreign Currency)

• National Engg. Industries Ltd. Versus CCE,

JAIPUR [2008 (11) S.T.R. 156 (Tri. - Del.)]

• Nipuna Services Ltd. Vs. Commissioner of

Central Excise, Cus and ST (A-II)

Hyderabad. [2009 (14) STR 706] (Tri-

Bang).

• M/S Suprasesh General Insurance Services

& Brokers Pvt Ltd Vs Commissioner Of

Service Tax, Chennai [2009-TIOL-338-

CESTAT-MAD]


Export (Performance)

• CST, Ahmedabad Vs M/S

B A Research India Ltd

[2009-TIOL-1981-

CESTAT-AHM]


Import Of Service

Import of Services

Immovable Property Place of Performance Location of recipient

[Rule 3(i)] [Rule 3(ii)] [Rule 3(iii)]

Provided in relation to Wholly / Partly Recipient of Service

an Immovable property performed in India is located in India for

situated in India use in relation to

Business or Commerce

Recipient is an individual and such service is received by him otherwise than for the purpose of use in any business or commerce, he will not be taxed under reverse charge mechanism


Location of Goods

• Location of goods or immovable property in respect of following Services

management, maintenance or repair

technical testing and analysis, and

technical inspection and certification

From

1.4.2011

recategorised

under 3(iii)


Australia India

21.01.2012 CA Manish Gadia 3519-3-2011

Australia India

Supply of Tangible

Goods for Use


Services Criterion prior to 1st

April, 2011

Criterion w.e.f. 1st

April, 2011

Special Services

provided by Builders

Location of Recipient Location of Immovable

Property

Credit Rating Agency Place of Performance Location of Recipient

Market Research

Agency


Technical Testing and

Analysis


TPT of Goods by

Aircraft


GTA Place of Performance Location of Recipient

Opinion Poll Agency Place of Performance Location of Recipient

TPT of Goods by Rail Place of Performance Location of Recipient

Rail Travel Agent Location of Recipient Place of Performance

Health Check up and

Treatment

Location of Recipient Place of Performance


India Includes (W.E.F. 7-7-2009)


Does not cover

• Air transport of

passengers

embarking in India for

International journey

• Transport of persons

by a cruise ship

embarking in any port

in India


Reverse Charge Mechanism• Recipient Shall make

an application for registration

• Not applicable otherwise than for the purpose of use in any business or commerce

• When to pay service tax

• Not output service for CENVAT

21.01.2012 CA Manish Gadia 4019-3-2011 CA Manish Gadia 40

IssuesM/s Phantom Ltd. desires to have ECB from a foreign bank. It directly approaches foreign bank to provide support in ECB matters. ECB is issued on 20th June 2005. For this M/s Phantom pays some fees to foreign bank.

•Similarly M/s Phantom raises another ECB in July 2007.

•Is M/s Phantom is liable to pay service tax under reverse charge mechanism, if yes for which period?


• Indian branch of the foreign bank approaches

M/s Phantom for said ECB issue. Foreign bank

arranges to share its fees with Indian branch, in

this case, whether service tax will be payable

under reverse charge mechanism, if Yes, by

whom?

Where a person is carrying on a business through a PE in

India and through another PE outside India, such PE shall be

treated as separate persons for the purposes of this section.

-A person carrying on a business through a branch/agency in

any country shall be treated as having a BE in that country

66A (2)


• Payment of Service tax under Import of Service Rules would be eligible for credit under Cenvat Credit Rule? If we refer to Rule 3(1)(ix) of CENVAT Credit Rules, 2004, it refers to “the service tax leviable under section 66” and not section 66A. Please clarify.

it must be kept in mind that taking of credit and its utilization

is a substantive right of a taxpayer under value added

taxation scheme.

Therefore, in the absence of a clear legal prohibition, this

right cannot be denied.

File No.137/72/2008-CX.4

File No.354/148/2009-TRU


• Travel Agent is engaged in travel and

tourism. It is registered as an air travel

agent and a tour operator. It sells

outbound tour packages to Indian

customers say to US, Europe for a

lumpsum of say Rs. 1,00,000/- (a part

of which is received in convertible

foreign exchange in India from the

travellers’ foreign currency say to the

extent of Rs. 50000/-). Would Travel

agent be entitled to any export

exemption in respect of the above

transaction?117/11/2009-ST


Value of Taxable Service

Wholly in money Not wholly/partly Not ascertainablein money

a. Gross amountcharged to providesimilar service toany other person

Consideration for service is

Gross amount charged

Consideration in money+

Money Value of Consideration in kind

-Service Tax payable

Value cannot bedetermined inaccordance with (a),

Equivalent money value of such consideration which shall, be at least equal to the costCAS -

4

Similar does not mean

identical but it means

corresponding to or

resembling to in many

respects


Some Explanations• Consideration includes any amount that is payable for the

taxable services provided or to be provided.

• Money includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value.

• Gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment and any amount credited or debited, as the case may be, to any account, whether called “Suspense account” or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise .


Value for work contract serviceExcludes:

Value of transfer of property in goods

VAT/sales tax paid

Includes

Labour charges

sub-contractor for labour & Services

planning, designing and architect’s fees

hire Charges of machinery and tools

Cost of consumables such as water, electricity, fuel.

Cost of establishment of the contractor

Other similar expenses relatable to supply of labour

Profit earned relatable to supply of labour and services

Gannon Dunkerley & Co.

v. State of Rajasthan

[1993] 66 Taxman 229(SC)


Service Tax on Forex Dealer• the gross amount of currency exchanged for an

Amount in Rs. Minimum Maximum

Up to 100,000 25 0.1%

100,000 to 10,00,000 Rs. 100 Rs 100+

0.05%

Above 10,00,000 Rs. 550+ 0.01% 5,000


Foreign Currency• RBI reference rate is available

units of foreign currency exchanged multiplied by

the difference in the RBI reference rate for that

currency for that day and the buying rate or the

selling rate.

• RBI reference rate is not available

the value will be 1% of amount in Indian National

Rupees that has been bought or sold.

• Neither of the currencies exchanged is INR

the value shall be equal to 1% of the lesser of the

two amounts


Sr

No

Particulars Existing From 1st April,

2011

1 Domestic (Economy) Rs. 100 Per

Journey

Rs. 150 Per

Journey

2 Domestic (other than

Economy)

Rs. 100 Per

Journey

10% on Value

of Ticket

3 International (Economy) Rs. 500 Per

Journey

Rs. 750 Per

Journey

Transport of passenger by Air

Service

How to Disclose in the

Return


Composition Schemes

Air Travel Agent Life Insurance


Optional Composition SchemeRate of Tax: 4% on the

gross amount charged

CENVAT

Inputs: No

Input Service: Yes

Capital Goods: Yes

Gross amount Charged =

Value of Goods used

+ Value of service

– VAT/CST

- Cost of M/C & Tools used


Gross amount charged is

inclusive of Service Tax

When the service provided is inclusive of

service tax payable, the value of such

taxable service would be:

Value of = Gross amount charged * 100

taxable service 110.30

Gem Star Enterprises P. Ltd

v. CCE & C, Calicut

2007 (7) STR 342 (Tri.- Bang.)


Power of CEOcall for information and documents

by issuing Show Cause notice

to satisfy himself

After giving reasonable opportunity of being heard

he may determine the value of taxable service

AC/DC written instruction for verification

Show cause notice after commissioner approval

Para 4.1.6 of F.No. B1/4/2006 – TRU 19-4-6


Value of Taxable ServiceInclusions:

All expenditure or costs

Telecommunication

Exclusion:

All expenditure or cost incurred by

service provider as a pure agent

subject to certain conditions


Pure Agent

enters into a contractual agreement

neither intends to hold nor holds any

title to the goods or services

does not use such goods or services

so procured

receives only the actual amount


Exclusion from Value of

Taxable Service Conditions for exclusion from the value

acts as a pure agent while making payment

recipient of service receives and uses the goods or services so procured

recipient of service is liable to make payment to the third party

authorises

Knows payment has been made

separately indicated in the invoice

Actual amount to be recovered

are in addition to the services he provides


Commission, costs, etc.,

will be included or excludedCases which were listed in Rule 6(1) &

(2) were almost similar, except

The cost of unexposed film, unrecorded

magnetic tape sold

The cost of sale of material sold

Notification No.

12/2003 ST 20-6-

03

BSNL V. UOI 2006 (2) STR 161 (SC)

Imagic Creative P. Ltd V. CCT 2008 (9) STR 337

(SC)


Value where Taxable Service

provided from outside

• value of service would be actual amount ofconsideration charged for the serviceprovided or to be provided.

• Where the services listed in Rule 3(ii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 are performed partly in India.

• value of service would be =

total consideration paid by the recipient + the value of service partly performed outside India.


Issues


Issues Vivah charitable trust provides Hall for

marriages on rental basis and issues

receipt of Rs, 25,000 towards rental for

marriage function and Rs. 75,000/-

towards donation to the corpus of the trust.

The trustees of the trust now wants to

know on which amount it should pay the

service tax?

Cultural Society of angamally V. CCE Chochin 2007 (8) STR 25

(Tri-Bang)


Online Stock Broking Ltd. (OSBL) is a brokerage house. OSBL charges following charges to its clients and such charges were separately disclosed in the bill or invoice issued to their clients.

Brokerage 0.500%

Other Charges 0.005%

Transaction Charges 0.010%

Stamp Duty & STT 0.076%

Up to 17.04.2006, Company was paying service tax only on Brokerage. Management wants to know, out of the above component, which component would now attract service tax?

Issues

First Securities Pvt. Ltd. V. CST, Bangalore 2007 (7) STR 690 (Tri-Bang)


Issues

Smart Coaching Classes provides coaching

to Standard V to Standard X. They incur

expenditure towards books, class bag &

food. Theses charges they recover

separately from every student, while they

recover coaching fees. Management is of

the view that service tax would be attracted

only on the coaching fees and not on the

charges recovered for books, bag & food

Circular No. 59/8/2003 ST., Dt 20-6-03

Aditya College of Competitive Exams

Vs CCE, Visakhapatnam [2009(16)

STR154 (Tri. Bang)]


Issue• M/s Tyrevala is engaged in the business of

retreading old used tyres. During the course of

retreading, material such as tread rubber,

vulcanizing solution is used. M/s Tyrevala

collected Rs. 10 Lakhs towards retreading

charges from its customers which included

Rs. 6 Lakhs towards material used in

retreading. What will be the Service Tax

liability of Tyrevala?

Chkita Rajni Udyam Vs CCE, Cus &ST, Mysore [2009(16)STR 172 (Tri.-

Bang)


Questions


Opinions or views

are like wrist

watches.

Every watch shows

different time from

others.

But every one

believes that their

time is right!


CA Manish Gadia

Ph : (022) 61919200

Email: [email protected]

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