TaxTMI 
TaxTMI 
Finance Act, 2006 (No. 21 0f 2006) - regarding
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....nbsp; The following rules have been issued under various provisions of the Finance Act, 1994: (i) Service Tax (Determination of Value) Rules, 2006; (ii) Taxation of Services (Provided from outside India and received in India ) Rules, 2006; and (iii) Export of Services (Amendment) Rules, 2006; 4.1 Service Tax (Determination of Value) Rules, 2006 Section 66 enables levy of service tax @ 12% of the value of the taxable services referred to in sub-clauses of clause (105) of section 65. In addition, education cess is leviable @ 2% of 12% i.e., 0.24%. Taxable services received from outside India are charged to service tax under section 66A. 4.1.2 The new section 67 provides valuation of taxable services for charging service tax. The salient features of the new section 67 are,- Ø Where the consideration received for provision of services is wholly in money, the value shall be the gross amount charged by the service provider for provision of service. Ø Where the consideration received f....
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....t of service tax warrants revision, the issue should be decided after issue of show cause notice and observing the prescribed procedures. Before issuing any show cause notice on matters relating to valuation, concurrence of Commissioner should be obtained. Reimbursable expenditure 4.1.7 Value for the purpose of charging service tax is the gross amount received as consideration for provision of service. All expenditures or costs incurred by the service provider in the course of providing a taxable service forms integral part of the taxable value and are includable in the value. It is not relevant that various expenditure or costs are separately indicated in the invoice or bill issued by the service provider to his client. 4.1.8 The service provider in the course of providing any taxable service may incur certain expenditure or cost as a pure agent of the client. The service provider seeks to exclude such expenditure or cost incurred by him as a pure agent of his client (generally known as reimbursable expenditure) from the value of the taxable services. 4.1.9 There could be situations where the client of the service provider specifically engages the service provider, as ....
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....diately be brought to the notice for consideration. 4.2 Taxation of Services (Provided from outside India and received in India) Rules, 2006 Internationally, services provided by a foreign supplier to a domestic customer are subjected to VAT/GST under reverse charge or tax shift mechanism. Under the reverse charge method, a legal fiction is created treating as if the recipient had himself provided the services domestically and accordingly, the recipient of services is treated as deemed service provider. 4.2.2 Charging of service tax at the hands of the recipient of service where the taxable service is provided from outside the country is required to prevent distortion of competition. Explanation occurring at the end of clause (105) of section 65 of the Finance Act, 1994 and Rule 2(1) (d) (iv) of the Service Tax Rules, 1994 enabled charging of service tax in such cases. 4.2.3 In the Budget for 2006-07, Explanation to clause (105) of section 65 providing for charging of service tax on taxable services received from outside India has been omitted and for this purpose a new section 66A has been incorporated in the Finance Act, 1994. Section 66A is to be rea....
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....ndia fall under rule 3 (iii). 4.2.11 Services provided in respect of air transport of passengers embarking in India for international journey and in relation to transport of persons by a cruise ship embarking in any port in India have not been mentioned under any of the three categories as services tax in such cases is charged from the service provider in India. 4.2.12 The recipient of service, being a taxable person, is required to take registration and comply with other provisions of the Finance Act, 1994 and the rules made there under. Rule 4 specifically states the obligation of the recipient of services. 4.2.13 The treatment of the recipient of service, as the deemed service provider under section 66A is only for the purpose of charging service tax on taxable services received from outside the country. Services provided from outside India and received in India, therefore, not treated as taxable service provided by the recipient for the purpose of CENVAT Credit Rules, 2004. However, where such service is used as an input for providing any taxable output, the service tax paid on such service can be taken as input credit. 4.3. ....