TaxTMI 
TaxTMI 
Legislative changed made / proposed through Budget 2011
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..... These changes are contained in Notifications No. 1/2011- ST to 17/2011-ST and will take effect on the dates mentioned in the respective notifications. 1.3 A number of changes have also been made in the Cenvat Credit Rules, 2004 vide notification 3/2011-CE (NT) and these changes will take effect on 01.04.2011, barring a few that are being given effect on 01.03.2011. 1.4 The highlights of all these changes are discussed in the following paragraphs. 2. New Services 2.1 The following two new services have been proposed: (i) Services by air-conditioned restaurants having license to serve liquor; and (ii) Short-term accommodation in hotels/inns/clubs/guest houses etc. 2.2 The scope of these services and other relevant details are given in Annexure-A. 3. Alteration or expansion in the scope of existing services A number of existing services are being modified or substituted as follows: 3.1 Authorized Service Station‟s Services [section 65 (105) (zo)]: The existing service is being replaced with a new definition to cover all persons and all motor vehicles other than those meant for g....
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....sult a number of changes have been proposed with the following philosophy: (i) Improve voluntary compliance by encouraging self-correction, wherever the deviations are unintentional omissions; (ii) Reduced penalties may be imposed if the transactions are captured fully and truthfully in records and further abated if timely admission and payment is made; (iii)Intentional and unrecorded violations should be dealt with severely with no concession whatsoever. 4.3 Thus the undue advantage obtained by carrying on surreptious activities at the cost of law-abiding business is sought to be neutralized. The revised system also encourages informed decision-making by the taxpayers at the early stages of investigation or verification by the Department. Changes proposed in the compliance mechanism are given in the following paragraphs. 4.4 The maximum penalty for delay in filing of return under section 70 is proposed to be increased from Rs.2,000/- to Rs.20,000/-. However, the existing rate of penalty is being retained under rule 7C of the Service Tax Rules, 1994. The maximum penalty is presently reached after a delay of 40 days. The new limit wi....
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....n or waiver is summed up in the following table (portion in italics being the changes): Situation Position in records Penalty & Provision Mitigation Complete Waiver No fraud, suppression etc. Captured 1% of tax or Rs 100 per day upto 50% of tax amount: Sec 76 Totally mitigated if tax and interest paid before issue of notice: Section 73(3) On showing reasonable cause under section 80 Cases of fraud, suppression etc. Captured true & complete position in records 50% of tax amount: Proviso to Section 78 (a) 1% per month; max of 25% if all dues paid before notice: Sec 73(4A); (b) 25% of tax if all dues paid within 30 days (90 days for small assesses): Provisos to Section 78 -do- Not so captured Equal amount: Section 78 No mitigation at all Not possible 4.12 Power to issue search warrant under section 82 is proposed at the level of Joint Commissioner and the execution of search warrant at the level of Superintendent. 4.13 Provisions relating to prosecution are proposed to be re-introduced and shall apply in the following situations: (i) Provision of service without i....
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....lowing dates: i. Date on which service is provided or to be provided ii. Date of invoice iii. Date of payment 6.2 Consequential changes have also been made in the Service Tax Rules, 1994 to alter the payment of service tax from receipt of payment to provision of service and also to permit adjustment of tax when service is not finally provided. 7. Amendments to Export of Services Rules, 2005 7.1 Globally the taxation of services across different taxing jurisdictions is increasingly moving towards destination-based levy in respect of B2B services while origin-based levy is largely applicable to B2C services. In tune with this practice, certain services are being rearranged as follows: (i) Service provided by builders [section 65(105)(zzzzu)] is being added to sub-rule 1(i) and will thus be considered as exported, subject to compliance with other conditions, if the immovable property is situated outside India. (ii) Rail travel agent [65(105) (zz)] and health check-up or preventive care [65(105)(zzzzo)] are being added to sub-rule 1(ii) and will thus be considered as exported, subject to compliance with oth....
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....f recharge coupons or prepaid cards or the like, the value shall be the gross amount charged from the subscriber or the ultimate user of the service and not the amount paid by the distributer or any such intermediary to the telegraph authority. This amendment shall come into force on 01.03.2011. 10. Amendments to Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 10.1 A new sub-rule (2A) is being added in rule 3 in the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 vide Notification 1/2011-ST so as to restrict the Cenvat credit to 40% of the tax paid on services relating to erection, commissioning & installation; commercial or industrial construction and construction of residential complex, in case tax has been paid on full value of the service after availing Cenvat credit on inputs i.e. without availing exemption notification 1/2006-ST dated 01.03.2006. This has been done to ensure that the credit on inputs is not availed of indirectly while availing of the composition scheme. 11. Amendments to Cenvat Credit Rules, 2004 11.1 A number of changes have been brought about in Cenvat Credit Rules....
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....ole proprietor assessees with a turnover upto Rs 60 lakhs shall not be subject to audit. 13.2 Interest rate for all assessees (including firms and corporates) upto a turnover of Rs 60 lakhs shall be 3% less than the prescribed rate. 13.3 The period for making the payment in order to avail the benefit of reduced penalty under the second proviso to Section 78 shall be 90 days for assessees mentioned at paragraph 13.2. 14. SEZ Refunds: 14.1 Notification No. 17/2011-ST has been issued superceding notification 9/2009-ST dated 03.03.2009. The new notification has the following unique features: (a) Criteria for the determination of "wholly consumed" services have been laid down in the notification, borrowing from the Export of Services Rules, 2005. It has also been specified that all services received by an entity in a SEZ, which does not have any other DTA operations, will constitute "wholly consumed" services. (b) No service tax is required to be paid ab-initio if the same are meant to be "wholly consumed" within SEZ, including services liable to tax on reverse charge basis under section 66A. (c) Refund of the remaini....
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....rive home only to leave after a short sleep for another day of arduous work. I can, however, well imagine the tremendous sense of satisfaction and fulfillment they would have had at the end of this engrossing exercise. Sincere regards, Yours sincerely, (V. K. Garg) To All Chief Commissioners/Directors General All Commissioners of Service Tax All Commissioners of Central Excise All Commissioners of Central Excise & Customs Annexure A Scope of New services 1. Services provided by a restaurant 1.1 Restaurants provide a number of services normally in combination with the meal and/or beverage for a consolidated charge. These services relate to the use of restaurant space and furniture, air-conditioning, well-trained waiters, linen, cutlery and crockery, music, live or otherwise, or a dance floor. The customer also has the benefit of personalized service by indicating his preference for certain ingredients e.g. salt, chilies, onion, garlic or oil. The extent and quality of services available in a restaurant is directly reflected in the margin charged over the ....
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....t camp-sites. This service is proposed to be taxed where the continuous period of stay is less than 3 months. 2.2 Actual levy will be restricted to accommodation with declared tariff of Rs 1,000 per day or higher by an exemption notification. Once this requirement is met, tax will be chargeable irrespective of the fact that actually the amount charged from a particular customer is less than Rs 1,000. The tax will also be charged on the gross amount paid or payable for the value of the service. 2.3 Finance Minister has announced 50% abatement from the value of service. Details of the exemption will be announced at the time when the levy is operationalized after the enactment of the Finance Bill. Annexure B Amendments, substitution or expansion of existing services 1. Authorized Service Station's Services [section 65 (105) (zo)]: The existing service is being substituted with a new definition to cover: a) Services provided by any person i.e. whether authorized service station or otherwise; b) All motor vehicles, other than vehicles used for goods transport and three-wheeler auto-rickshaws; and c....
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....ance bill to preschool coaching and training and to coaching or training relating to educational qualifications that are recognized by law. 4. Club or Association [section 65 (105) (zzze)]: 4.1 Services provided by a club or association to its members are already subjected to tax since 2005. When a member avails the facilities for his guest, he is already covered by the existing definition as the services are paid for by the member and not by the guest. However a number of clubs or associations allow non-members to use their facilities in their own capacity for a separate charge. Clubs also entertain members of other affiliated clubs. Such services are proposed to be brought within the revised definition. 5. Business Support Service [section 65 (105) (zzzq)]: 5.1 The scope of the service is being expanded to include operational or administrative assistance of any kind. The scope will cover all support activities for others on a contract or fee, that are ongoing business support functions that businesses and organizations commonly do for themselves but sometimes find it economical or otherwise worthwhile to outsource. 5.2 The words "....
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....ing rate, as the case may be, and the RBI reference rate for that currency for that day multiplied by units of currency exchanged; (ii) If RBI reference rate is not available the value shall be 1% of the value of money exchanged in Indian rupees; (iii) When both the currencies are not Indian rupees, 1% of the lesser of the amounts receivable if the two currencies are converted at RBI reference rate. b) The rate of composition under rule 6(7B) has been lowered from 0.25% to 0.1% of the gross amount of money exchanged. However, the proviso relating to paying tax on billed charges has been deleted. Thus now the assesse will have the option to pay tax @0.1% of gross amount exchanged or else at standard rated on the value of service in terms of rule 2B, as mentioned above. Annexure C Important changes in Cenvat Rules, 2004 1.1 The changes in Cenvat Credit Rules are guided, inter-alia, by the following considerations: a) Describe the scope of eligible inputs and input services more clearly so as to minimize disputes in their interpretations; b) Eliminate distortions and areas of tax avoidance arising from differential treatment of goods and services ....
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.... an input service. A list of specific services has also been given by way of example in the definition. Most of these services constitute a part of the cost-to-company package of the employee and are provided either free of charge or on concessional basis to company employees. 1.10 Expression "activities relating to business" has been deleted and Business exhibition and legal services added in the list of services. 3. Obligation of manufacturer and provider of services 1.11 Definition of exempted goods shall include such excisable goods as are covered by the notification relating to concessional duty with the condition that no credit of input and input service shall be availed. This amendment shall come into effect on 01.03.2011. 1.12 Similarly the definition of exempted services shall include taxable services which are partially exempted with the condition that no credit of input and input service shall be availed. Moreover it has been clarified that exempted service will include trading service. 1.13 Option to maintain separate accounts only in respect of inputs (and not together with input services) has also been given so that allocation as per formula given in ru....