HR Initiative for Team NeuSource

Service Tax

June 2014

“At Neusource, we always think of building a ‘Great Team’. We want each player of our team as a star player. We wish to grow in terms of a strong team; that is capable enough to mark its stamp on the face of time. Thinking to achieve more sales or profits is just a means to attain our larger goals of a ‘Great Team’.

A group becomes a team when each member is sure enough of its individual roles & work with full capability towards common goals. This ‘Training on the Go’ is also an initiative to develop required working skill to make our each player a star.

Therefore Awake, Arise & Start to develop the Star in You; because weak links don’t become part of a strong chain.”

Welcome….

• Sample of handout

Handout – Grab your Copy

• Origin

• Introduction

• Definition of Service

• Applicability of Service Tax

• Registration

• Point of taxation

• Important dates

• Reverse charge

• Negative list

Index

• Indian economy is the 11th largest economy in the world and the third fastest growing even in today’s recession, after China and Indonesia (Present growth rate around 5.5%)

• World is presently facing recession-II but Indian economy is still a growth economy

• Agriculture, services and industry are the major sectors of Indian economy

Origin

• Continued growth in GDP accompanied by higher rate of growth in service sector

Changing pie of GDP Growth

SECTORAL GROWTH

26%

27%

47%

During 1996-9716%

28%56%

During 2008-09

14%

27%59%

During 2011-12

Agriculture Industry (incld construction)

Service

Service Tax is an indirect tax levied on services. It was imposed by Chapter V of Finance Act, 1994, which was introduced by the then Finance Minister Dr. Manmohan Singh

There is no separate “Service Tax Act”. It is imposed every year by making amendments to the Finance Act, 1994

Service tax is not a tax on profession, trade or employment but is in respect of services rendered.

If there is no service, there is no tax.

Introduction

• Service means

• (i) any activity for consideration

• (ii) carried out by a person for another and

• (iii) includes a declared service

Definition of Service

(A)an activity which constitutes merely,—

 (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

 (ii) such transfer, delivery or supply of any goods which is deemed to be a sale or

(iii) a transaction in money or actionable claim;

 (B) A provision of service by an employee to the employer in the course of or in relation to his employment;

(C) fees taken in any Court or tribunal established under any law for the time being in force

However, a service shall not include:-

Service Tax is applicable to the whole of India except Jammu and Kashmir.

If a service provider provides taxable services in Jammu and Kashmir, then it is not liable to Service tax. However, if a service provider provides taxable services from Jammu and Kashmir to the client any where else in the country, he shall be liable to service tax.

RATE OF TAX

Service tax is 12% + Education Cess 2% + Secondary and Higher Secondary Education Cess @ 1% = 12.36%

Applicability of Service Tax

• Every service provider in whose case, gross receipt has exceeded `9,00,000 shall apply for registration to the Service Tax Department in Form No ST-1 within 30 days from the date of crossing the limit of `9,00,000, however, he will charge service tax after crossing the limit of `10,00,000. He will also submit a copy of Permanent Account Number and proof of residence. Department shall grant him a registration certificate in Form No ST-2 within 7 days from the date of receipt of application otherwise the service provider shall be deemed to be registered.

• The service provider shall be given a Registration Number by the Department which will be called STP code i.e. Service Tax Payer Code and it will be 15 digit PAN based number and first 10 digit shall be that of PAN and remaining 5 digit shall be allotted by Service Tax Department e.g. AAEPC1298D – ST-001

Registration under Service Tax law

Q.Suppose if a person is providing more than one taxable service,

does he required to register him self for each services rendered by him?

Ans. He may give only one application. He should mention in the application all the taxable services provided by him

Question

• A person may apply for voluntary registration at any time and also a person may forgo (reject) the general exemption of `10,00,000.

penalty • Any person who has failed to take registration shall pay

penalty of `200 per day or `10,000 whichever is higher

Other points under registration

A service provider may apply for amendment in registration in the following cases:

1. Change in place of business

2. Change in the name of business

3. Change in services rendered i.e. there may be addition / deletion

4. Any other similar change

If there is any such change, service provider should apply to the department within 30 days for effecting the change.

Amendment of Registration Certificate

introduced with effect from 01.04.2011

Point of taxation means the point in time when a service shall be deemed to have been provided

The point of taxation enables us to determine the rate of tax, value of taxable service, rate of exchange and due date for payment of service tax.

POINT OF TAXATION-(from receipt basis to hybrid basis)

• The time when the invoice for the service provided or agreed to be provided is issued;

• If invoice is not issued within prescribed time period (30 days except for specified financial sector where it is 45 days) of completion of provision of service, then the date of completion of service;

• The date of receipt of payment where payment is received before issuance of invoice or completion of service

Point of taxation is

Illustration

• Due date for payment of service tax on the service which is deemed to be provided (as per the Point of Taxation Rules, 2011) by an individual or a proprietary firm or a partnership firm:-

Due date for payment of service tax

• Due date for payment of service tax on the service which is deemed to be provided (as per the Point of Taxation Rules, 2011) in any other cases (company and HUF):-

Due date for payment of service tax

Note: If the last day of payment of service tax is a public holiday, tax can be paid on next working day

• Failure to pay service tax, including a part thereof within the period prescribed, attracts simple interest at a rate not below 10% p.a. but not exceeding 36% p.a. as may be notified by the Central Government

• Currently, the interest rate @ 18% per annum

• Concession of 3% for specified assesses : In case of a service provider, whose value of taxable service provided in a financial year does not exceed ` 60 lakh during any of the financial years covered by the notice or during the preceding financial year, as the case may be, such rate of interest shall be reduced by 3% per annum. 

Interest on delayed payment of service tax

• The most concerning part about Service Tax is the Procedure for Payment of Service Tax. When it comes to Service tax

• we have two options of payment of Service Tax i.e. we can either make payment of Service Tax physically in the specified banks or opt for online payment of service tax.

• for Physical Deposit of Payment of Service Tax in Bank through GAR-7 Challan

• For online or e-payment of service tax, one should have a net banking account with one of the authorized banks which are mentioned in the list of banks authorised on http://www.aces.gov.in/ePayment.jsp

Manner of payment

• every person liable to pay the service tax shall himself assess the tax due on the services provided by him and shall furnish a return in such form and in such manner and at such frequency as may be prescribed. Rule 7 of the Service Tax Rules

• Manner of filing return

FILING OF RETURNS

• Under this scheme, service tax is payable by service recipient instead of service provider. Under this charge service receiver has to register himself under service tax. Further service receiver can not claim general exemption limit of 10 Lakh rupees. So he has to pay even on few rupees of service received

• It will be very harsh on service receiver end where he has received services falls under reverse charge for only few hundred rupees but due to it he has to register himself in service tax and have to file service tax return on prescribed interval. Moreover under service tax act Nil return is also mandatory and every registered person have to file half yearly return

Reverse charge

Due dates for filing of service tax returns

When the due date falls on public holiday: In case the due date of the filing of return i.e., either 25th October or 25th April falls on a public holiday, the assessee can file the return on the immediately succeeding working day

• Insurance Business: In respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business

• Transport of Goods By Road: in respect of services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road

• Sponsorship: In respect of services provided or agreed to be provided byway of sponsorship

• Other services like an arbitral tribunal , an individual advocate or a firm of advocates by way of legal services, Government or local authority by way of support services n etc

Reverse Charge of service tax applicable on following services:

• service tax shall be levied on all services, except the services specified in the negative list there are 17 services covered under this list

Services provided by Government or local authority

Services provided by Reserve Bank of India

Services by a foreign diplomatic mission located in India

Services relating to agriculture

Trading of goods

Processes amounting to manufacture or production of goods

Selling of space or time slots for advertisements other than advertisements broadcast by radio or television

Negative list of services

Transmission or distribution of electricity

Specified services relating to education

Services by way of renting of residential dwelling for use as residence

Financial sector

Service relating to transportation of passengers

Service relating to transportation of goods

Funeral, burial, crematorium or mortuary services including transportation of the deceased

Negative list of services

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