SERVICE TAX PROPOSALS
(I) ADDITIONS TO TAXABLE SERVICE:
(1) Services provided in relation to information
technology software for use in the course, or furtherance, of business
or commerce;
(2) Services provided in relation to management of
investment, under unit linked insurance business, commonly known as Unit
Linked Insurance Plan (ULIP) scheme;
(3) Services provided by a recognised stock exchange in
relation to securities;
(4) Services provided by a recognised association or a
registered association (commodity exchange) in relation to sale or
purchase of any goods or forward contracts;
(5) Services provided by a processing and clearinghouse
in relation to processing, clearing and settlement of transactions in
securities, goods or forward contracts;
(6) Services provided in relation to supply of tangible
goods, without transferring right of possession and effective control of
the tangible goods;
(7) Services provided in relation to internet
telecommunication. Consequently, reference to services provided in
relation to internet telephony, being covered as part of internet
telecommunication, shall be omitted.
The above changes will come into effect from a date to be
notified after the enactment of the Finance Bill, 2008.
(II) SCOPE OF SPECIFIED SERVICES AMENDED:
(1) To include,-
(i) purchase or sale of foreign currency, including
money changing, by an authorized dealer or an authorized money changer,
under banking and other financial service;
(ii) purchase or sale of foreign currency, including
money changing, by an authorized dealer or authorized money changer,
under foreign exchange broker services provided by individual;
(iii) packing together with transportation of cargo or
goods, with or without one or more other services like loading,
unloading, unpacking, under cargo handling service;
(iv) testing or analysis of information technology
software under technical testing and analysis service;
(v) inspection, examination and certification of
information technology software under technical inspection and
certification service;
(vi) services provided in relation to a journey from one
place to another in a contract carriage vehicle, under tour operator
service. However, such services provided for use by an educational body,
other than a commercial training or coaching centre, imparting skill or
knowledge or lessons on any subject or field shall be excluded. Services
provided in relation to a journey from one place to another in a tourist
vehicle is already leviable to service tax under tour operator service;
(2) To exclude,-
(i) from business auxiliary service, reference to
information technology service consequent upon notifying information
technology software service as a separate taxable service;
(ii) from consulting engineer service, exclusion of
computer software engineering consultancy consequent upon notifying
information technology software service as a separate taxable service;
(iii) from 39 specified taxable services, reference to
service recipient as “client” or “customer” and replace with the words
“any person”;
The above changes will come into effect from a date to be
notified after the enactment of the Finance Bill, 2008.
(3) To clarify that services provided by a consulting
engineer in relation to advice, consultancy or technical assistance in
the disciplines of both computer hardware engineering and computer
software engineering shall also be classifiable under consulting
engineer service;
(4) To clarify by way of removal of doubt that,-
(i) “service in relation to promotion or marketing of
service provided by the client” under business auxiliary service
includes any service provided in relation to promotion or marketing of
games of chance, organized, conducted or promoted by the client;
(ii) renting of immovable property service includes
allowing or permitting the use of space in an immovable property,
irrespective of the transfer of possession or control of the immovable
property;
(iii) “properties” referred to in management, maintenance
or repair service includes information technology software.
(III) EXEMPTION FROM SERVICE TAX:
(1) The annual threshold limit of service tax exemption
for small service providers is being increased from the present level of
Rs.8 lakh to Rs.10 lakh. This will come into effect from 1st
April 2008.
(2) Exemption from service tax is being provided to:-
(i) the taxable service provided by a person located
outside India for a customer located outside India, and received by a
hotel located in India, in relation to booking of an accommodation in
the said hotel located in India;
(ii) 75% of the gross amount charged as freight for
services provided in relation to transport of goods by road in a goods
carriage by a goods transport agency (GTA), unconditionally.
Consequently, 75% abatement provided under notification
No.1/2006-Service tax, dated the 1st March, 2006 is withdrawn.
Clause (i) and (ii) will come into effect from 1st March,
2008.
(IV) AMENDMENTS IN ACT AND RULES:
(1) Finance Act, 1994 is being amended to: -
(i) specify the scope of seven individually specified
taxable services and also certain other existing taxable services
[section 65]; This will come into effect from a date to be notified
after enactment of the Finance Bill, 2008
(ii) include seven services which are individually
specified as taxable services in this year’s Finance Bill in section 66
pertaining to “Charge of service tax”; This will come into effect from a
date to be notified after enactment of the Finance Bill, 2008
(iii) include any amount credited or debited, as the case
may be, to any account, in the books of account of a person liable to
pay service tax under “gross amount charged” where the transaction of
taxable service is with any associated enterprise [section 67];
(iv) insert section 71 so as to empower the Board to
frame a Scheme by notification in the Official Gazette to enable
preparation and filing of service tax returns through a person or class
of persons known as Service Tax Return Preparer authorized to act for
the said purpose;
(v) insert section 72 so as to authorize the Central
Excise Officer to make assessment on the basis of best judgement after
allowing assessee to represent his case where assessee has failed to
make service tax returns or failed to assess the tax;
(vi) substitute section 77 so as to provide specific
penalty for specific contraventions;
(vii) provide that where penalty for suppressing value
of taxable service under section 78 is payable, penalty for failure to
pay service tax under section 76 shall not apply [section 78];
(viii) provide that in case the Committee of Chief
Commissioners of Central Excise differs in its opinion regarding the
legality and propriety of the order of the Commissioner of Central
Excise, it shall refer the matter to the Board [section 86(2)];
(ix) provide that in case the Committee of Commissioners
differs in its opinion regarding the legality and propriety of the order
of the Commissioner (Appeals), it shall refer the matter to the
jurisdictional Chief Commissioner [section 86(2A)];
(x) provide that the rules for framing the Scheme for
filing service tax returns through a Service Tax Return Preparer shall
be laid before each House of Parliament [section 94];
(xi) 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 [section 95].
Changes mentioned in clauses (iii) to (xi) will come into
effect from the date of enactment of the Finance Bill, 2008.
(2) Service Tax Rules, 1994, are being amended to:
(i) insert sub-rule (1A) in rule 6 to enable payment of
an amount as service tax in advance to the credit of the Central
Government and adjust such amount paid towards payment of service tax
for the subsequent period;
(ii) increase the monetary limit from Rs.50,000/- to
Rs.1,00,000/- for self-adjustment of excess service tax paid [Rule
6(4B)(iii)];
(iii) increase the time limit from 60 days to 90 days for
rectification of mistakes and file revised return [Rule 7B];
(iv) empower 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 [Rule 7C];
The above changes will come into effect from 1st March,
2008.
(3) CENVAT Credit Rules, 2004 are being amended to,—
(a) exclude goods transport agency service from the
scope of “output service” [Rule 2(p)]; This change will come into effect
from 1st March, 2008.
(b) allow removal of capital goods outside the premises
of the provider of the output service without any time restriction, if
the same is for providing output service [Rule 3]; This change shall
come into effect from 1st April, 2008.
(c) provide 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.
Such provider of output services can,-
(i) 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
(ii) pay 8% amount of the value (determined in terms of
section 67 of the Finance Act, 1994) of the exempted services [Rule 6];
This change shall come into effect from 1st April, 2008.
(d) Insert a new rule 7A 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/challan/bill issued by its
other office w.e.f 1st April, 2008.
(4) Export of Services Rules, 2005 are being amended so
as to treat the following services provided remotely through internet or
any electronic network including a computer network, or any means in
relation to goods or material or any immovable property situated outside
India at the time of provision of service as export of services, namely
management, maintenance or repair, technical testing and analysis and
technical inspection and certification w.e.f 1 March 2008
(5) Taxation of Services (Provided from Outside India
and Received in India) Rules, 2006 are being amended so as to treat the
following services provided remotely through internet or any electronic
network including a computer network, or any means in relation to goods
or material or any immovable property situated in India at the time of
provision of service as import of services and leviable to service tax
under reverse charge method, namely management, maintenance or repair,
technical testing and analysis, technical inspection and certification
w.e.f. 1st March, 2008.
(6) Works Contract (Composition Scheme for Payment of
Service Tax) Rules, 2007 are being amended to enhance the rate
prescribed for optional scheme for payment of service tax under works
contract service from 2% of the total value of the contract to 4% of the
total value of the contract w.e.f 1st March, 2008.
(V) SCHEME FOR DISPUTE RESOLUTION
A Scheme for resolution of dispute relating to service
tax arrears pending as on 1.3.2008 and involving amount not exceeding
Rupees twenty five thousand is being introduced (Service Tax Dispute
Resolution Scheme, 2008). The scheme is valid during 1st July, 2008 to
30th September, 2008.
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