TaxTMI 
TaxTMI 
Clarification on changes proposed in the Finance Bill, 2006
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....and Service Tax Rules, 1994. Some of the existing notifications have been rescinded and new notifications issued. Notifications relating to abatements are being consolidated into a single notification and reissued. Ø The rate of service tax is being increased from 10% to 12%. The increase in service tax rate will be applicable from the date of enactment of the Finance Bill, 2006. Ø Service tax is being proposed on fifteen individually specified services and the scope of certain existing services is being extended or clarified. These proposals will come into effect from a date to be notified after enactment of the Finance Bill, 2006. Ø Certain other changes relating to the Finance Act, 1994 will come into effect from the date of enactment of the Finance Bill, 2006. Ø Changes have also been proposed in Service Tax Rules, 1994. The procedural changes will come into effect from 1.3.2006. (2) RATE OF SERVICE TAX: The rate of service tax is being increased from 10% to 12%. [section 66 refers] (3) TAXABLESERVICES: 3.1 Taxable services are defined under clause (105) of sect....
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....sorship services provided to any body corporate or firm, other than services in relation to sponsorship of sports events; [sub-clause (zzzn) of section 65(105) refers] 7) Transport of passengers embarking on international journey by air, other than in economy class ; [sub-clause (zzzo) of section 65(105) refers] 8) Transport of goods in containers by rail provided by any person other than Government railway; [sub-clause (zzzp) of section 65(105) refers] 9) Business support services; [sub-clause (zzzq) of section 65(105) refers] 10) Auctioneers' service, other than in relation to auction of property under directions or orders of a court of law or auction by the Government; [sub-clause (zzzr) of section 65(105) refers] 11) Public relations service; [sub-clause (zzzs) of section 65(105) refers] 12) Ship management service; [sub-clause (zzzt) of section 65(105) refers] 13) Internet telephony service; [sub-clause (zzzu) of section 65(105) refers] 14) Transport of persons by cruise ship; [sub-clause (zzzv) of section 65(105) refers] 15) Credit card, debit card,....
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....vertising agencies are taxable under Section 65(105)(e). This entry proposes to levy service tax on sale of time or space for advertisement, excluding sale of space for advertisement in print media. Sale of advert ising time in television and radio by any person other than broadcasting agency or organization is also covered under this sub-clause. Some of the other modes of advertisement covered under this mode are internet advertisement, advertisement on buildings, vehicles, etc., advertisement in motion pictures, television serials, video and music albums, mobile phones, ATMs , films and television serials (known as product placement). It may be noted that advertisement in print media is excluded. 3.10 SPONSORSHIP SERVICE: Body corporates or firms involved in business or commerce sponsor events with an intent to obtain commercial benefit or bringing their name or products or services in public image to public attention by associating with a popular or successful event. This is an alternate form of advertisement. Consideration is normally paid in return for naming of the event after the ....
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....ler of property normally enters into an agreement with an auctioneer to conduct the auction for a consideration. However, services provided in relation to auction of property under direction or orders of a Court of Law or auction by the Government are not taxable. 3.15 PUBLIC RELATIONS SERVICE: Public relation agencies are engaged to provide services relating to image or communication management. These services are proposed to be taxed. The term "public relations" is defined. 3.16 SHIP MANAGEMENT SERVICE: Owners or operators of ships enter into an agreement with ship managers for provision of a wide range of services in respect of running and operations of ships. Indicative list of services provided under this category are mentioned under the definition of "ship management service". 3.17 INTERNET TELEPHONY SERVICE: Presently internet telephony services are taxable under "Online information and data base access and or retrieval services". Proposal is to create a separate service under the name 'Internet Telephony Service'. 3.18 TRANSPORT BY CRUISE SHIPS: Services provided to any person embarking from any port in India fo....
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.... any person or an insurer, including a re -insurer; 7) Insurance auxiliary service concerning life insurance business, to include service provided to a policy holder or any person or an insurer, including a re -insurer; 8) Maintenance or repair service, to be renamed as "management, maintenance or repair" service, and to include management of movable property; 9) Erection, commissioning or installation service, to include erection, commissioning or installation of structures, whether or not pre-fabricated; 10) Consulting engineer service, to include engineering consultancy services provided by any firm or body corporate; 11) Business auxiliary service, to include computerized data processing; 12) Technical testing and analysis service, to clarify that - (i) it includes clinical testing of drugs and formulations; and (ii) excludes testing or analysis for the purpose of determination of the nature of diseased condition, identification of a disease, prevention of any disease or any disorder in human beings or animals. 5.1 In Management consultancy services, different &n....
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.... a Call Centre or a Medical Transcription Centre; 4) Exemption for taxable service provided in relation to Enterprise Resource Planning (ERP) software system provided by a management consultant in connection with the management of any organization; 5) Exemption for catering services provided on a railway train by an outdoor caterer; 6) Exemption for catering services provided within the premises of an academic institution or medical establishment by an outdoor caterer. Refer notification no. 2/2006-Service Ta x dated 01.03.06. 7.1 NEW EXEMPTIONS FROM LEVY OF SERVICE TAX: 1) Exemption from service tax has been provided to financial leasing services including equipment leasing and hire-purchase, both for principal and interest portion of the installments paid. The amount of interest is calculated as 90% of the difference between the installment paid towards the payment of the lease amount and the principal amount in such installment. (Notification No.4/2006 -Service Tax dated 1.3.2006) 2) Exemption from ....
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....de for determination of value of taxable service. At present, service tax is charged on the gross amount received. The proposed section provides determination of taxable value in cases where the consideration received for taxable services provided is not wholly in money terms and the consideration received is in money terms but not known explicitly. Separate valuation rules are proposed for this purpose. (g) provide for conclusion of adjudication proceedings in respect of a person who has voluntarily deposited the service tax demanded along with interest and penalty equal to 25 per cent. of the service tax specified in the demand notice [section 73(1A)]; (h) (i) provide for voluntary payment by an assessee of any amount collected in excess of the service tax leviable but not deposited with the Central Government or recovery of such excess amount. It may be noted that any amount collected as service tax, whether or not legally required to be paid, is to be deposited with the Government under this Section. This section is applicable not only to a person liable to pay service tax but also to any person, even if he is not an a....
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.... least for a period of five years. Rule 5(4) makes it obligatory for an assessee to make available records maintained by him to a Central Excise Officer for the purpose of inspection or examination. However, such inspection or examination can be undertaken only after the written approval of the jurisdictional Assistant/Deputy Commissioner. It may also be noted that the assessee is required to make available the records in his registered premises. 10. General: 10.1 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. 10.2 I would request you to kindly go through the Finance Bill, 2006, amendments in the Rules and notifications carefully and to bring to our notice at the earliest any omissions/errors that might have crept in. It is also felt desirable to have interactive sessions with the field officers and trade and industry associations for their views, comments and suggestions, if any. In particular, v....