Rate of service tax is proposed to be raised from 5% to 8% (from the
date of enactment of the Finance Bill).
Service tax @ 8% is proposed to be imposed on the following services
(to be effective from a date to be notified) :-
Commercial vocational institutes, coaching centers and private
tutorials.
Technical testing and analysis (excluding health and diagnostic
testing), technical certification.
Maintenance and repair services namely, annual maintenance contracts
(AMC) and other maintenance services, authorized repair services.
Commissioning and installation services.
Business promotion and support services including customer care
services. These services include launching of products, customer education programmes,
conduct of seminars, data warehousing, help desk services, managing front offices, enquiry
bureaus, etc. However computer enabled services, namely, data processing, networking, back
office processing, computer facility management shall not be subjected to service tax.
Internet café
Franchise services
Extension of service tax on port services to minor ports
Extension of service tax on authorized automobile services to
multi-utility vehicles.
Extension of service tax on banking and other financial services to
all forex brokers. Presently the services provided by banks and body corporates in
relation to foreign exchange are covered under service tax. The proposal is to extend the
same to proprietorship, partnership and other individual concerns providing such services.
The present exemption from service tax on hotels has been extended
beyond 31.3.2003.
Provision has been made for allowing credit of service tax only when
the payment has been made by the service user in respect of services provided.
Retrospective amendment to notification No.43/97-ST dated 5.11.1997
has been made so as to exempt service tax on services provided by Goods and Transport
Operators to small scale units, traders and private limited trading companies for the
period 16.11.1997 to 1.6.1998.
It may be recalled that with regard to payment of service tax in
respect of Goods and Transport Operators (GTO) and C&F services, certain amendments
were made in section 65 and 66 of the Finance Act, 1994 to validate the collection of
service tax. Certain further amendments are being made in section 68 and 70 of the Finance
Act, 1994 retrospectively along with insertion of a new section 71A for the period
16.7.1997 to 16.10.1998. This change will require the assessees (service receiver in
respect of GTO and C&F services) to file a fresh return within 6 months from the date
of enactment of Finance Bill which can then be assessed. This is a validating provision.
The Board vide its telexes F.No.No.356/91/97-TRU dated 3.2.97 and
9.2.98 had directed to hold in abeyance the payment of service tax on Goods Transport
Operator in respect of factories registered as SSI industries in State Government,
companies which are solely and exclusively trading companies registered as private limited
companies and dealers registered with any sales tax authority and whose turnover had
exceeded Rs.50 lakhs in the preceding financial year. Exemption from payment of service
tax for these categories is now being given a legal backing through suitable amendments in
the provisions of Finance Act, 1994.
A new section 65A has been inserted to specify norms for
classification of taxable services under section 65 of the Finance Act, 1994. The basic
principles of classification of a taxable service, which prima .facie is
classifiable in two or more categories, would be as follows :-
A taxable service would be classified in the category which provides
the most specific description;
In case the taxable service is a composite service consisting of
combination of services, such taxable service will be classified in the category which
gives it the essential character;
Where a taxable service can not be classified in above manner, such
taxable service will be classified in the category which occurs first in clause 104 of
section 65 (i.e. definition of taxable service) among those categories which equally merit
consideration.
Section 67 is proposed to be amended to specifically provide that in
case of service provided by the authorized service station, cost of any consumable sold
during the course of providing taxable service will not form part of value of such taxable
service. This amendment is only clarificatory in nature.
Section 73 has been amended so as to provide for suo-moto dropping of
proceeding and no issuance of show cause in a case where the amount of services tax short
paid or not paid is paid voluntarily along with interest thereon by the assessee, except
cases covered under section 73 (1) A of Finance Act, 1994. These provisions will not apply
to such cases where the duty becomes payable or ought to have been paid before the date on
which Finance Bill, 2003 receives the assent of the President.
Section 78 has been amended so as to make following changes :-
To do away with the requirement of taking prior approval of the
Commissioner of Central Excise for imposing penalty in cases where the value of taxable
service involved exceeds Rs. 2 lakhs. Accordingly, the Assistant Commissioner! Deputy
Commissioner of Central Excise would henceforth adjudicate penalty up to any limit of the
value of taxable service without seeking prior approval of the Commissioner of Central
Excise.
In cases covered under section 78 (suppression of value), where
service tax is paid by the assessee along with interest within thirty days of
communication of adjudication order, the penalty would be 25% of the service tax involved,
provided the said amount of penalty is also paid within the said period of thirty days.
Section 83 is being amended so as to make applicable section 11C and
12 of the Central Excise Act, 1944 to the Service Tax.
Section 85 is proposed to be amended to specifically provide for
filing of appeal against any order denying refund claim.
Section 94 is proposed to be amended to empower the Government to
prescribe the manner of availing credit of service tax on all input services and central
excise duties on input goods used in the course of providing output services. Hitherto,
the power was limited only to prescribe the manner of availing credit only on such
services where both the input and output services fall within the same category of taxable
service.
Section 95 has been amended to empower the Government to issue orders
for removal of difficulties arising in the implementation of new services within a period
of 2 years from the date of imposition of service tax on new services.
A new Chapter "VA" has been inserted in the Finance Act,
1994 to provide for advance ruling in service tax. These provisions are similar to the
provisions contained in the Central Excise Act and Customs Act.
Notification No. 6/99-ST dated 9.4.97 has been rescinded. This
notification exempted the taxable service for which payment was received in foreign
convertible currency provided such foreign exchange was not repatriated outside India.
Consequently, service tax would be leviable on all such taxable service irrespective of
whether the payment of taxable service is received in foreign exchange or not.
Service Tax Credit Rules 2002, have been amended to make following
changes :-
Output service provider shall be allowed to take credit of the tax
paid on the input services only after he makes the payment for the value of input service
and the service tax payable thereon as indicated in invoice or bill or challan of input
service provider;
Restrict the utilization of service tax credit, only to the extent
such credit as is available on the last day of a month, for payment of service tax
relating to the month or in case where the assessee is an individual or proprietary firm
or partnership firm, to the extent such credit is available on the last day of the quarter
for payment of service tax relating to the quarter;
To allow transfer of unutilized credit, in case the service provider
shifts his establishment on account of sale, merger, amalgamation, lease or transfer of
establishment provided there is a specific provision for transfer of liabilities to such
transferred, sold, merged or amalgamated establishment.
