Exemptions and abatements

Report
CERTIFICATE COURSE ON INDIRECT TAXES –
SERVICE TAX
by
g. natarajan
advocate, swamy associates
MODES OF EXEMPTIONS
 Exemption Notifications under Section 93 of the Finance Act, 1994.
 Exclusion in the coverage of the levy itself.
Eg. Commercial or industrial construction service.
Works Contract Service.
(roads, railways, port, airport, transport terminal, bridges, tunnels & dam)
Construction of residential complex service (personal use).
Renting of immovable property service.
(vacant land, residential, parking, sports, circus, etc.)
BAS / Packaging Services (manufacture)
 Abatements.
SOME IMPORTANT
EXEMPTION NOTIFICATIONS
Notification No. 06/05-ST dated 01.03.2005
 Intended to exempt small service providers.
 Present limit- aggregate value not exceeding Rs.10 lakhs in any financial
year.
 Not applicable to – services provided under brand name & value of
services under reverse charge.
Conditions
 Option once exercise cannot be withdrawn in a financial year.
 No credit on inputs, input services and capital goods.
 Previous year turnover to be less than Rs. 10 lakhs.
Notification No. 12/03-ST dated 20-06-03
Scope
 Exemption to value of goods and materials sold by service provider to
recipient during the course of provision of service; ( Eg- authorised service
station service).
Conditions
 Documentary proof indicating value of goods and materials.
 Not to avail credit of excise duty paid on such goods and materials .
 in case of availment of credit, reversal of same before sale to service
recipient.
Contra : Decision of LB in Aggarwal Colour Advance Photo System
vs. CCE 2011 23 STR 608 (Tri-LB).
Notification No. 17/2011-ST dated 01.03.2011
 Exemption to taxable services received by unit/developer of SEZ.
(Earlier governed by 17/2002, 4/2004 & 9/2009)
Conditions
 Exemption for ST paid on input services (U/S.66 & 66A) used for authorised
operations.
 Ab inito exemption for services wholly consumed inside SEZ. Provisions of Export of
Service Rules, 2005 to be referred to.
 Exemption vide refund for services not wholly consumed in SEZ.
 Time limit – one year from date of payment to service provider.
 No credit on input services.
Notification No. 8/2005 -ST dated 01-03-2005
 BAS - Exemption to goods produced on jobwork.
Conditions
 Raw materials /semi finished goods to be supplied by client.
 Goods to be returned to client for use in or in relation to manufacture of excisable
goods.
 Such final products are liable for appropriate duty of excise.
 If production of goods by job worker amounts to manufacture u/s 2 (f) of Central
Excise Act, 1944, there is no levy at all.
Notification No. 13/2003 - ST
dated 20-06-2003
 BAS - Exemption to commission agents.
 Effective from 01.07.2003.
 Scope restricted to “agricultural produce” from 09.07.2004.
Notification No. 24/2007 -ST dated 22.05.2007
 Exemption to component of property tax while paying service tax on renting of
immovable property service .
Conditions
 Interest, penalty etc paid to local bodies on account of delayed payment of property
tax not eligible for deduction.
 When period for which property tax paid is different from period for which service
tax is payable , proportionate property tax to be calculated for deduction.
 Rule 6 (4c) - Bonanza for landlords.
Notification No. 34/2004 - ST dated 03.12.2004
 GTA - Exemption for freight upto Rs.1,500 / Rs.750.
Notification 52/11 dated 30.12.11
ST Exemption for exporters.
 Earlier Notification 41/2007, Notification 17/2009.
 Now replaced by Notification 52/2011.
 EDI Refund as per scheduled rate or actual refund.
 Time limit for filing refund – one year from date of export.
 Notification 18/2009 for commission agent services / GTA services.
Notification No. 30/2011 - ST dated 25.04.2011.
 Health Services – Limited taxability from 01.07.2010.
 Proposed expansion in 2011.
 Volte facie due to “misery tax” campaign.
Notification No. 53/2010 - ST dated 21.12.2010.
 Information Technology Services – Packaged Software.
 Subject to payment of ED / CVD.
 Parallel exemption under ED / CVD, if ST is payable.
Miscellaneous Exemptions.
 Services provided to United Nations or an international organisation – Notification
No. 16/02-ST dated 02-08-02.
 Services provided or to be provided by Technology business incubator (TBI) Science
& Technology Entrepreneurship Park (NSTEDB) – Notification No. 09/07-ST dated
01.03.07.
 Services provided for official use of foreign diplomatic mission or consular post in
India - Notification No. 33/07-ST dated 23.05.07.
 Services provided for personal use or for use of family members of diplomatic agents
or career consular offices posted in foreign diplomatic missions or consular post in
India - Notification No. 34/07-ST dated 23.05.07.
ABATEMENTS
Notification No. 01/2006-ST dated 01.03.2006.
Scope
 Abatement to various taxable services;
 Intention to exclude value of goods transferred in course of provision of service.
Conditions
 No credit of duty paid on inputs and capital goods and service tax paid on input
services used for providing taxable service;
 Not to avail benefit of Notification No. 12/03-ST dated 20-06-2003.
 Inclusion of value of materials – construction / ECI.
 Implication under Rule 6 of CCR, 2004.
EXPORT OF SERVICES
Export benefits under Service tax – background
PERIOD
RELEANT
PROVISION
CONDITIONS TO AVAIL BENEFIT
28.02.99 to
08.04.99.
Notf. 2/99-ST dated
28.02.99
•Exemption to all taxable services;
•Payment in convertible foreign
exchange.
09.04.99 to
28.02.03.
Notf. 6/99- ST dated
09.04.99
•Exemption to all taxable service;
•Payment in foreign exchange;
•Payment shall not be repatriated from or
sent outside India.
01.03.03 to 19.11.03. Circular 56/5/2003ST dated 25.04.03.
• No ST on exports;
20.11.03 to 14.03.05
Notf. 21/03-ST dated
20.11.03.
•Exemption to all taxable service;
•Payment in foreign exchange;
•Payment shall not be repatriated from or
sent outside India
From 15.03.05
Export of Service
Rules, 2005.
•Condition based exemption to all
services.
Export of Service Rules 2005
Export of Services
Export without payment
of tax . Rule 4
Export paying tax and
claim rebate of tax paid
on output service/ input
services. Rule 5.
Notification 11 & 12/05ST dated 19.04.05.
Export of Service Rules 2005
Categorization of Services
Property based
Situs of service
Construction service,
Architect service, etc.
Event Management
service, courier
service , etc,
Location of service
recipient
Business Auxiliary
service, Consulting
Engineer service, etc.
Export of Service Rules, 2005.
Period
Additional Conditions
15.03.05 to 18.04.06
•Services are delivered outside India and used for
business or any other purpose outside India.
19.04.06 to 28.02.07
•Services are delivered outside India and used
outside India;
•Receipt of payment in foreign exchange.
01.03.07 to 27.02.2010
•Services are provided from India and used
outside India;
•Receipt in Foreign exchange.
From 01.03.2010
•Receipt in foreign exchange
Additional conditions – Confusions and Clarifications
“ provided from India and used outside India “
 Circular 111/5/2009- ST dated 24.02.09 –
• meaning of expression to be understood in context of characteristic of
particular category of service ;
• accrual of benefit outside is sufficient.
 Circular 141/10/2011 –TRU dated 13.05. 2011 –
• accrual of benefit further clarified.
Case laws
“used outside India “
 TNT India Private Ltd vs. CST 2007 (7) STR 142 (Tri-Bang) – Courier agency delivering
consignments outside India.
 Blue Star Ltd vs. CCE 2008 (11) STR 23 (Tri-Bang) – Commission for procuring orders
in India for foreign principal.
CST vs. BA Research India Ltd 2009 TIOL 1981 CESTAT Ahm- Testing in India, reports
sent outside India.
Consideration in Foreign exchange
 ETA Travel Agency Pvt Ltd vs CCE 2007 (7) STR 454 (Tri-Bang) - Commission
received in INR from foreign airlines.
 Suprasesh GIS & Brokers P. Ltd vs. CST 2009 (13) STR 641 (Tri-Che)- Reinsurance
brokerage in INR.
Nipuna Services Ltd vs. CCE 2009 (14) STR 706 (Tri-Bang) – Agent receiving
commission on forex and paying appellant in INR.
IMPORT OF SERVICES
Import of services – Brief history .
Period
Statutory Provision
Person liable
28-02-99 to 15-08-02
Proviso to Rule 6(1) of ST Service provider.
Rules,1994.[omitted w.e.f
16-08-02]
16-08-02 to 15-05-05
Rule 2 (1)(d)(iv) of ST Service Recipient.
Rules,1994.
16-05-05 to 17-04-06
Explanation to S.65(105) Service Recipient.
Fin.Act.1994.
18-04-06 on wards
S.66A of Fin. Act.
1994,R.2(1)(d)(iv)
of
S.T.Rules,1994
r./w.
Taxation of Services
(Provided from outside
India) Rules, 2006.
Service Recipient.
Indian National
Shipowners Association
Case.
Thank you
g. natarajan
93400 54477
[email protected]

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