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    ManualsService Tax
    Whether issuance of SCN under section 73 is mandatory to fix the liability of the assessee? Whether ...
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    ManualsService Tax
    Whether issuance of SCN under section 73 is mandatory to fix the liability of the assessee? Whether ...
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    SCN requirement: absence of a show-cause notice prevents imposition of service tax and interest under revision.
    Issuance of a show-cause notice under the demand provision is a prerequisite to fix service tax and interest; where only a penalty notice was issued under the penalty regime, the revisional authority cannot validly pass an order demanding service tax with interest because the penalty notice cannot substitute for a demand-stage show-cause notice.
    ManualsService Tax
    Whether it is necessary to provide opportunity of being heard before passing order of finalisation ...
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    Right to be heard required before finalising provisional assessment; taxpayer must be told grounds and allowed to respond.
    An assessing authority must inform the taxpayer of the specific grounds for proposed enhanced liability and afford a meaningful opportunity to meet those grounds before finalising a provisional assessment, as a baseline requirement of natural justice in assessment proceedings.
    ManualsService Tax
    Whether appeal can be filed against the provisional assessment?
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    Provisional assessment appeals permitted where statute and rules authorize provisional determinations, allowing aggrieved parties to prefer appeals.
    Provisional assessments are authorized by the Act and Rules, and an aggrieved party retains the right to appeal against such provisional assessments; the provisional nature does not by itself preclude preferring appeals under the applicable appellate procedure.
    ManualsService Tax
    Whether mere non filing of Memorandum in ST-3A means no provisional assessment has been made?
    Show AI Summary
    Non-filing of memorandum for provisional assessment is a procedural omission and does not negate provisional assessment.
    Non filing of the memorandum in Form ST 3A does not by itself negate the existence of a provisional assessment; the form serves to supply date wise details to enable the proper officer to make an accurate final assessment, and omission of that statement does not preclude that assessments were provisional, especially where the taxpayer later requests and the proper officer completes a final assessment.
    ManualsService Tax
    Whether best judgement can be done by assessing authority totally arbitrarily i.e. based on his gues...
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    Best judgment assessment must be reasoned, not arbitrary; it requires material support and more than mere guesswork.
    A best-judgement assessment allows limited estimation but the assessing officer must make an honest, fair and reasoned estimate and cannot act wholly arbitrarily; technical rules of evidence are relaxed but the assessment must be based on more than mere suspicion or pure guesswork and should be supported by adequate material rather than unsupported conjecture.
    ManualsService Tax
    What is the difference between Assessment based on Best Judgement and Assessment based on books of a...
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    Best judgment assessment: courts may not substitute their own estimate if the assessing authority's basis has reasonable nexus.
    Assessment based on accounts is proper where books are genuine and substantially correct, with only minor adjustments; a best judgment assessment is used when accounts are unreliable and the authority estimates liability using available accounts, other information and surrounding circumstances. Courts reviewing a best judgment assessment must first confirm that rejection of accounts was justified and then assess whether the estimating basis has a reasonable nexus to the estimated turnover; if so, the authority's bona fide estimate should not be displaced.
    ManualsService Tax
    What is the meaning of Assessment? What is the meaning of Assessee?
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    Assessment in service tax: scope includes self assessment, reassessment, provisional and best judgement modes and interest determination.
    Assessment for service tax includes self-assessment, reassessment, provisional assessment, best judgement assessment and any order where tax assessed is nil; it also includes determination of interest on assessed or reassessed tax. "Assessee" means a person liable to pay the tax and includes the person's agent.
    ManualsService Tax
    What is the relevance of self declaration given at the end of service tax return regarding to self a...
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    Untrue self-declaration in tax return corroborates suppression and can trigger penalty under self-assessment procedures.
    An untrue declaration in a service tax return asserting that tax has been paid corroborates suppression and attracts penalty; absence of a bona fide statement on the return or with the return renders the declaration faulty and imputes liability under the self-assessment procedure.
    ManualsService Tax
    Whether records can be preserved in electronic form? if yes, what procedure is need to be followed f...
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    Electronic preservation of records permitted subject to every page being authenticated by digital signature and prescribed safeguards.
    Preservation of records in electronic form is permitted provided each page of the record is authenticated by a digital signature, and the Board may prescribe further conditions, safeguards and procedures for maintaining digitally signed records.
    ManualsService Tax
    What will be treatment in case of partial reverse charge if service provider is covered under SSI ex...
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    Partial reverse charge: provider exempt under SSI does not pay; service receiver still liable for receiver's portion of tax.
    Where a service falls under partial reverse charge and the provider is covered by the SSI exemption and not liable to pay service tax, the provider's obligation to pay its share is eliminated while the service receiver remains independently liable to pay the receiver's portion under the reverse charge mechanism.
    ManualsService Tax
    What changes have been made in services by way of supply of manpower for any purpose or security ser...
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    Reverse charge liability now places full service tax responsibility on the service recipient for manpower and security services.
    W.e.f. notification no. 07/2015-ST the services by way of supply of manpower for any purpose and security services have been placed under a full reverse charge mechanism, making the service recipient exclusively liable to discharge the entire service tax; the earlier partial reverse charge split between recipient and service provider has been removed.
    ManualsService Tax
    What is the meaning of Partial reverse charge? Which services are covered under partial reverse char...
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    Partial reverse charge: service tax liability split between provider and recipient; third-party payers allowed under notification
    A scheme of partial reverse charge allocates service tax between provider and recipient by notifying services and the share payable by the recipient, the provider paying the remainder. As at 01/04/2015 the notification covers renting of passenger motor vehicles to persons not in the same business and the service portion of works contracts. The framework also allows liability to be placed on persons other than provider or recipient, for example a representative of an aggregator, where so notified.
    ManualsService Tax
    What is the meaning of aggregator? Who is liable in the case of aggregator? What will be if aggregat...
    Show AI Summary
    Aggregator liability: platform owners bear service tax responsibility, with representatives appointed if no taxable territory presence.
    An "aggregator" is the owner manager of a web based application enabling customers to connect with service providers under the aggregator's brand; the aggregator is the person liable for paying service tax for services involving the aggregator. If the aggregator lacks physical presence in the taxable territory, a person representing the aggregator in that territory is liable; if there is neither presence nor representative, the aggregator must appoint a person in the territory who will be liable to pay service tax.
    ManualsService Tax
    How the exemption under this notification will be calculated if the service provider has more than o...
    Show AI Summary
    Aggregate value rule: combined turnover across services and premises determines small service provider exemption; co-owners assessed individually.
    Exemption is applied to the aggregate value of all taxable services provided from all premises by a provider, and eligibility is determined by aggregating previous year turnover across all premises; where premises are co-owned, each co-owner may claim the exemption separately if, on individual assessment, their aggregate taxable services fall within the threshold.
    ManualsService Tax
    Whether Small service provider exemption is available to those persons who are covered under reverse...
    Show AI Summary
    Reverse charge excludes recipients from small service provider exemption when they are liable to pay service tax.
    The Small service provider exemption does not extend to persons liable to pay service tax as service recipients under the Reverse Charge Mechanism; values of taxable services for which tax is payable by such person under sub-section (2) of section 68 read with the Service Tax Rules are excluded from the notification's exemption.
    ManualsService Tax
    Whether service provider has the option of not availing the exemption under this notification?
    Show AI Summary
    Option to decline small-provider exemption allows service providers to pay service tax and claim CENVAT credit from that date.
    Service providers may elect during a financial year to forego the small-provider value-based exemption and pay service tax, but the election is irrevocable for that financial year. Upon electing to pay service tax, the provider may avail CENVAT credit only for inputs or input services received on or after the date service tax payments commence and used for taxable services for which service tax is payable.
    ManualsService Tax
    Whether service provided under own brand name or trade name is entitled to the exemption under notif...
    Show AI Summary
    Brand name usage and service tax exemption: services under own brand remain eligible; exclusion covers use of another's brand.
    Exemption for small service providers applies when services are provided under the provider's own brand name or trade name; the notification excludes only taxable services provided under a brand or trade name of another person, whether registered or not.
    ManualsService Tax
    What are the consequences if registration is not granted with in 7 days of the application? Is there...
    Show AI Summary
    Deemed registration applies when the local superintendent delays issuance, but not to centralized registration by the Commissioner.
    Failure of the Superintendent of Central Excise to issue Form ST-2 within seven days triggers deemed registration; that deeming provision applies only to registrations by the Superintendent and not to centralized registrations granted by the Commissioner, where no statutory time limit exists. Registration must nevertheless be granted within a reasonable time, and administrative circulars treating seven days as reasonable impose directory guidance and accountability but do not create deemed registration for the Commissioner.
    ManualsService Tax
    Whether Registration of service tax can be refused ? Whether Service tax authorities can issue regis...
    Show AI Summary
    Registration refusal prohibited: complete service tax applications must be accepted and authorities cannot register suo moto.
    A complete and properly filled application in Form ST-1 and/or ST-2 must be accepted; there is no statutory power under the Finance Act, 1994 or the Service Tax Rules, 1994 for the Superintendent or the Commissioner to refuse registration, nor to grant registration suo moto. Registration is confined to the category specified in the application, and non-alignment with the correct category may attract recovery or penal proceedings.
    ManualsService Tax
    Is it mandatory to surrender/ cancel the registration certificate after ceasing to provide taxable s...
    Show AI Summary
    Surrender of service tax registration required on cessation of taxable services; cancellation follows after dues are cleared and documents submitted.
    Surrender of the registration certificate is mandatory upon cessation of taxable services and must be submitted to the Superintendent, who ensures all dues are paid before cancelling registration. No prescribed format exists; a simple application is acceptable. A trade notice lists common reasons for surrender and requires an application and undertaking, copies of recent ST-3 returns (up to six), profit & loss accounts and balance sheets (up to three years) or income tax returns or bank statements if unavailable, and disclosure of pending show-cause notices, confirmed demands, court cases and audits; waiver of penalty may be applied where returns were not filed but turnover is below the exemption limit.

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      Bills

      Rationalisation of provisions related to Sovereign Wealth Fund (SWF) and Pension Fund (PF)

      1 February, 2021

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      Budget 2021-22 + FINANCE Bill, 2021

      Rationalisation of provisions related to Sovereign Wealth Fund (SWF) and Pension Fund (PF)

      Clause (23FE) of section 10 of the Act provides for the exemption to specified persons from the income in the nature of dividend, interest or long-term capital gains arising from an investment made by it in India. Specified persons are SWF or PF which fulfils conditions prescribed therein and are specified for this purpose by the Central Government through notification in the Official Gazette. This provision was introduced through the Finance Act, 2020 to encourage investments of SWF and PF into infrastructure sector of India. Subsequent to enactment, a notification was also issued to enlarge the scope of infrastructure activities eligible for investments. One SWF has already been notified under this provision. In order to rationalise the provision of this clause and to remove the difficulties in meeting some of the conditions, the followings amendments are proposed in the Bill:

      • Allowing Alternate Investment Fund (AIF) to invest up to 50% in non-eligible investments

      Presently SWF/PFs may invest in a Category-I or Category-II Alternative Investment Fund, having 100% investment in eligible infrastructure company. It is proposed to:

      (a) relax the condition of 100% to 50%.

      (b) allow the investment by Category-I or Category-II AIF in an Infrastructure Investment Trust (InvIT).

      (c) Exemption under this clause shall be calculated proportionately, in case if aggregate investment of AIF in infrastructure company or companies or in InvIT is less than 100%.

      • Investment through holding company

      Presently, SWF/PFs are not allowed to invest through holding company. It is proposed to allow the same subject to the following conditions:

      (a) Holding company should be a domestic company.

      (b) It should be set up and registered on or after 1st April, 2021.

      (c) It should have minimum 75% investments in one or more infrastructure companies.

      (d) Exemption under this clause shall be calculated proportionately, in case if aggregate investment of holding company in infrastructure company or companies is less than 100%

      • Investment in NBFC- IDF/IFC (non-banking finance company-infrastructure debt fund/Infrastructure finance company)

      Presently, SWF/PFs are not allowed to invest in NBFC-IFC/IDF. It is proposed to allow the same subject to the following conditions:

      (a) NBFC-IDF/IFC should have minimum 90% lending to one or more infrastructure entities.

      (b) Exemption under this clause shall be calculated proportionately, in case if aggregate lending of NBFC-IDF or NBFC-IFC in infrastructure company or companies is less than 100%.

      • Loan or borrowings by SWF/Pension Fund

      Presently, SWF/PFs are not allowed to have loans or borrowings or deposit or investments as there is a condition that no benefit should enure to private person. It is proposed to provide that there should not be any loan or borrowing for the purpose of making investment in India. It is also proposed to provide that the condition regarding no benefit to private person and assets going to government on dissolution would not apply to any payment made to creditor or depositor for loan taken or borrowing other than for the purpose of making investment in India.

      • Commercial activity

      Presently, SWF/PFs are not allowed to undertake any commercial activity. This condition is proposed to be removed and replaced with a condition that SWF/PFs shall not participate in day to day operation of investee. However, appointing director and executive director for monitoring the investment would not amount to participation in day to day operation.The term "investee" is propoed to define to mean a business trust or a company or an enterprise or an entity or a category I or II Alternative Investment Fund or an Infrastructure Investment Trust or a domestic company or an Infrastructure Finance Company or an Infrastrure Debt Fund, in which the SWF or PF, as the case may be, has made the investment, directly or indirectly, under the provisions of this clause.

      • Liable to Tax

      Presently, some PFs are liable to tax in their country though given exemption subsequently. It is proposed to amend this sub-clause to provide that if pension fund is liable to tax but exemption from taxation for all its income has been provided by the foreign country under whose laws it is created or established, then such pension fund shall also be eligible.

      • Rules to prescribe the method of calculation

      It is also proposed to provide that the Central Government may prescribe the method of calculation of 50% or 75% or 90%referred above.

      This amendment will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.

      [Clause 5]

       

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      Budget 2021-22 + FINANCE Bill, 2021

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