e_EDP thru GOLS Academy PROJECT REPORT ON SERVICE TAX Submitted By Name R!"" N!

# Date $%th Ju"y# &'$( S SABAT

CONTENTS

 )ISTORICAL BAC*GRO+ND APPLICABILIT, -)O .+ST OBTAIN REGISTRATION / TI.E LI.IT GENERAL EXE.PTION 0RO. SERVICE TAX 1SEC#2(3 TAX IS CALC+LATED ON T)E VAL+E -)O IS LIABLE 0OR SERVICE TAX4 OT)ER PROVISIONS RELATING TO SERVICE TAX Pr!5i6i!7a" Payme7t !8 Ser5ice ta9 Due date6 8!r :ayme7t !8 6er5ice ta9 DE0A+LT / EXCESS PA,.ENT O0 SERVICE TAX -he7 ;i"" retur7 be 8i"ed4 Other :r!5i6i!76 re"ati7< t! retur7 S!me im:!rta7t 8!rm6 Pe7a"ty 8!r "ate 8i"i7< !8 retur

)ISTORICAL BAC*GRO+ND Ser5ice Ta9 i6 a7 I7direct Ta9# The :r!5i6i!76 t! "e5y ta9 !7 6er5ice6 are c!7tai7ed i7 the 0i7a7cia" Act= $22%# Ba6ed !7 the rec!mme7dati!7 !8 the Ta9 Re8!rm6 C!mmittee headed by Dr# Ra>a J# Che""iah It ;a6 i7tr!duced i7 $22% by the $'th 0i7a7ce .i7i6ter Dr# .a7m!ha7 Si7<h I7itia""y three 6er5ice6 ;ere ide7ti8ied a7d ta9ed

APPLICABILITY E5ery :er6!7 ;hether I7di5idua" !r S!"e Pr!:riet!r !r Part7er6hi: !r C!m:a7y etc# are "iab"e t! :ay 6er5ice ta9 i8 :r!5ide a7y ta9ab"e 6er5ice6# Sec ?? !8 the 0i7a7ce Act= $22% i6 the char<i7< 6ecti!7 Ser5ice Ta9 i6 "e5ied t! the ;h!"e !8 I7dia e9ce:t the 6tate !8 Jammu / *a6hmir 0r!m $6t A:ri" &'$& it i6 $&#(?@# It i6 bi8urcated by

Ser5ice ta9 i#e# $&@ Educati!7 ce66 i#e#&@ Sec!7dary a7d hi<her educati!7 ce66 i#e# $@

Who must obtain registration & time limit?

Ge7era" e9em:ti!7 8r!m 6er5ice ta9 1Sec# 2(3 Ser5ice6 :r!5ided by u7ited 7ati!7 !r a7 i7 i7ter7ati!7a" !r<a7iAati!76 Ser5ice :r!5ided t! de5e"!:er !r u7it6 !8 6:ecia" ec!7!mic A!7e G!!d6 / materia"6 6!"d by 6er5ice :r!5ider t! reci:ie7t !8 6er5ice Ser5ice :r!5ided by re6er5e ba7B !8 I7dia The 6er5ice :r!5ider ;h!6e tur7!5er i6 "e66 tha7 $' "aBh i7 the :re5i!u6 year ;i"" be e9em:t 8r!m 6er5ice ta9 u: t! R6 $' "aBh i7 7e9t 0,# They ca""ed 6ma"" 6er5ice :r!5ider6 ?# E9em:ti!7 t! tech7!"!<y bu6i7e66 I7cubat!r= Scie7ce a7d Tech7!"!<y E7tre:re7eur6hi: :arB 1STEP3 a7d I7cubate6 E9em:ti!7 i6 <ra7ted t! i7cubate6 6ub>ect t! 8!""!;i7< c!7diti!7 a3 I7cubate6 6h!u"d be "!cated ;ithi7 the :remi6e6 !8 the i7cubat!r b3T!ta" bu6i7e66 tur7!5er !8 i7cubate6 e7tre:re7eur6hi: d!e6 7!t e9ceed R6# C' LaBh duri7< the :recedi7< 8i7a7cia" year# c3The e9em:ti!7 i6 a5ai" t! i7cubate 8!r a :eri!d !8 ( year# D# E# 2# Ser5ice6 :r!5ided by a di<ita" ci7ema 6er5ice :r!5ider Ser5ice :r!5ided by Re6ide7tia" ;e"8are a66!ciati!7 .!7th"y c!7tributi!7 d!e6 7!t e9ceed R6# ('''F.!7th Dru< / .edici7e Pr!duce6 $# &# (# %# C#

The tax is calculated on the value. ollo!ing "rovisions are#$ a# I8 c!76iderati!7 i6 char<ed i7 m!7ey the7 the am!u7t char<ed i6 the 5a"ue# b# I8 the c!76iderati!7 char<ed i6 either ;h!""y !r :art"y 7!t i7 m!7ey the7 5a"ue 6ha"" be eGua" t! that :art ;hich i6 7!t i7 m!7ey a"6! ca"cu"ated i7 m!7ey 5a"ue ;hich 6ha"" be deemed t! be 6er5ice ta9# c# c!76iderati!7 i6 7!t a6certai7ab"e the7 the 5a"ue !7 ;hich the ta9 ha6 t! be char<e 6ha"" be the am!u7t a6 :re6cribed u7der Ser5ice Ta9 1Determi7ati!7 !8 Va"ue3 Ru"e6 &''? d# -here the am!u7t char<ed by the 6er5ice :r!5ider i6 i7c"u6i5e !8 6er5ice ta9 the7 the 5a"ue6 ;i"" be treated a6 i7c"u6i5e !8 ta9# e# The <r!66 am!u7t char<ed 6ha"" i7c"ude a7y am!u7t recei5ed t!;ard6 the ta9ab"e 6er5ice either be8!re !r duri7< !r a8ter :r!5idi7< 6uch 6er5ice#

Who is liable or service tax? A6 :er Sec ?E1$3 e5ery :er6!7 ;h! i6 :r!5idi7< a ta9ab"e 6er5ice t! a7!ther :er6!7 i6 "iab"e t! :ay 6er5ice ta9 t! the G!5er7me7t# )!;e5er Sub Secti!7 & !8 Secti!7 ?E em:!;er6 the Ce7tra" G!5er7me7t t! 7!ti8y a7y !ther c"a66 !8 :er6!7 !r :er6!76 ;h! 6ha"" be "iab"e t! :ay 6er5ice ta9# The Ce7tra" G!5er7me7t ha6 7!ti8ied 6uch c"a66 !8 :er6!76 i7 ru"e &1$d3 !8 the Ser5ice Ta9 Ru"e6 $22%# The6e 7!ti8ied :er6!76 are HRecei5er6 !8 Ta9ab"e Ser5ice6I# a3Ge7era" I76ura7ce Bu6i7e66 b3 I76ura7ce Au9i"iary Ser5ice c3 Tra76:!rtati!7 !8 <!!d6 by r!ad d3 Di6tributi!7 !8 mutua" 8u7d i7 bu6i7e66 au9i"iary 6er5ice e3 S:!76!r6hi: Ser5ice 83 Ser5ice6 :r!5ided 8r!m !ut6ide I7dia a7d recei5ed i7 I7dia

%ther "rovisions relating to service tax -he7 6er5ice6 are :r!5ided 8ree !8 c!6t i#e# ;ith!ut recei5i7< a7y c!76iderati!7 i7 ca6h !r i7 Bi7d 7! 6er5ice ta9 i6 :aid# Ser5ice ta9 ha6 t! be :aid !7"y ;he7 the 5a"ue !8 ta9ab"e 6er5ice i6 rea"iAed by the 6er5ice :r!5ider 6er5ice :r!5ider 6h!u"d :ay 6er5ice ta9 !7 ad5a7ce6 recei5ed a"6!# -here a7y :er6!7 ha6 c!""ected a7y am!u7t a6 6er5ice ta9 ;hich i6 7!t 6u::!6e t! c!""ect !r ;here a :er6!7 ha6 c!""ected a7 am!u7t ;hich i6 m!re tha7 the ta9 that i6 char<ed the7 he 6h!u"d immediate"y :ay the am!u7t 6! c!""ected t! the credit !8 the Ce7tra" G!5er7me7t#

Provisional Pa&ment o 'ervice tax I8 a66e66e6 i6 u7ab"e t! c!rrect"y e6timate the am!u7t !8 ta9 :ayab"e by him= he ca7 reGue6t i7 ;riti7< t! the c!mmi66i!7er !8 CBSE 8!r :ayme7t !8 6er5ice ta9 !7 :r!5i6i!7a" ba6i6# i7I7 6uch ca6e6= the a66e66e6 ha6 t! 6ubmit a mem!ra7dum 8!rm STJ(A <i5i7< detai" !8 di88ere7ce bet;ee7 6er5ice ta9e6 de:!6ited a7d 6er5ice ta9 t! be :aid 8!r each m!7thFKuarter# (ue dates or "a&ment o service tax

thr!u<h I7ter7et =Ba7Bi7< the due date i6 ?th i76tead !8 Cth# Ta9 ha6 t! be :aid by u6i7< a cha""a7 GARJD#

(e ault in "a&ment o service tax -here ta9 i6 7!t :aid !7 !r be8!re due date the a66e66ee 6ha"" be "iab"e t! :ay i7tere6t 8r!m the date a8ter the due date ti"" the actua" date !8 :ayme7t !8 ta9# The curre7t rate !8 i7tere6t i6 $(@# )xcess "a&ment o service tax I8 the a66e66ee ha6 :aid e9ce66 6er5ice ta9 6h!u"d that e9ce66 be re8u7ded !r ca7 the a66e66ee ad>u6t the e9ce66 a<ai76t 8uture "iabi"itie6# I8 the a66e66ee ha6 :aid e9ce66 am!u7t a6 6er5ice ta9 tha7 ;hat i6 reGuired t! :ay the7 6uch e9ce66 ca7 be ad>u6ted !7"y i8 the e9ce66 i6 due t! retur7 !8 the 6er5ice :r!5ided#

When !ill return be iled? The retur7 ha6 t! be 8i"ed 8!r each ha"8 year

The 6er5ice ta9 retur7 ha6 t! be 8i"ed i7 8!rm STJ(# I8 the a66e66ee i6 :r!5idi7< m!re tha7 !7e ta9ab"e 6er5ice !7e retur7 i6 6u88icie7t

0!r a"" ta9ab"e 6er5ice6# 8i"i7< 7i" retur7 i6 a"6! a mu6t# %ther "rovisions relating to return -here the a66e66ee ha6 7!t 8i"ed the retur7 !7 !r be8!re the due date the retur7 ca7 be 8i"ed a8ter :ayi7< "ate 8ee= ;hich i6 :re6cribed by the G!5er7me7t# E5ery retur7= ;hich i6 8i"ed= ca7 be re5i6ed ;ithi7 2' day6 8r!m the date !8 8i"i7<# Re5i6ed retur7 ca77!t be 8i"ed i8 the re5i6i!7 i6 !7 acc!u7t !8 a7y c"a66i8icati!7= 5a"ue !r ce75at credit# 8i"i7< the retur7 i6 h!"iday the 7e9t ;!rBi7< day ;i"" be treated a6 the due date# 'ome im"ortant orms

Penalt& or late iling o return

C)ANGES IN RATE O0 SERVICE TAX $#$ Cha7<e i7 mai7 rate !8 6er5ice ta9 Notification No. 08/2009 dated 24.02.2009 was issued to reduce rate of service tax from 12% to 10%. The said notification has been rescinded b Notification no. 02/2012 dated 1!.0".2012 w. e. f. 01.04.2012. Thus# now# w. e. f. 01.04.2012# effective rate of service tax $inc%udin& education cess and '. (. )ess* has been increased to 12."+%. $#& Rate !8 6er5ice ta9 u7der c!m:!6iti!7 6cheme Notification No. 10/2012 dated 1!.0".2012 increases the rate of service tax w. e. f. 01.04.2012 from 4% to 4.8% under ,or-s )ontract $)om.osition 'cheme for /a ment of 'ervice Tax* 0u%es# 200!. $#( O:ti!7a" rate !8 Ser5ice Ta9 !7 "i8e i76ura7ce :remium Notification +$!1*$ii* of 'ervice Tax 0u%es# 1994 .rovides the s.ecia% rate of service tax for in res.ect of %ife insurance .remium consistin& of investment .ortion a%so. 'aid s.ecia% rate is a..%icab%e on% where the entire .remium .aid b the .o%ic ho%der is not on% towards ris- cover in %ife insurance. The chan&e in rate .rovided in said ru%e has been amended b Notification No. "/2012. The said chan&e is summarised as under2

$#% O:ti!7a" Rate !8 Ser5ice Ta9 6a"e= :urcha6e i7c"udi7< .!7ey Cha7<i7< !8 0!rei<7 curre7cy 0u%e +$!3* of 'ervice Tax 0u%es# 1994 has been amended b Notification no."/2012 to chan&e the rate of service tax in res.ect of forei&n exchan&e2 4am.5am.5%t5.4am.5am.5&t54am.5am.5am.5am.5am.5am.5%t5.4am.5am.5am.5am.5am.5am.5&t5 4am.5am.5am.5am.5am.5am.5am.5nbs.54am.5am.5am.5am.5am.5am.5%t5/.4am.5am.5am.5am.5 am.5am.5&t54am.5am.5%t5/.4am.5am.5&t5 $#C Rate !8 Ser5ice Ta9 8!r Di6tribut!r !r Se""i7< A<e7t !8 L!tterie6 u7der Ru"e ?1DC3 !8 Ser5ice Ta9 Ru"e6= 1994 0u%e +$!3* of 'ervice Tax 0u%es# 1994 has been amended b Notification no."/2012 to chan&e the rate of service tax in res.ect of forei&n exchan&e2 4am.5am.5%t5.4am.5am.5&t54am.5am.5am.5am.5am.5am.5%t5.4am.5am.5am.5am.5am.5am.5&t5 4am.5am.5am.5am.5am.5am.5am.5nbs.54am.5am.5am.5am.5am.5am.5%t5/.4am.5am.5am.5am.5 am.5am.5&t54am.5am.5%t5/.4am.5am.5&t5 $#? I7tr!ducti!7 !8 abateme7t 8!r tra76:!rtati!7 !8 :a66e7<er by Air Ser5ice6 1batement has been .rovided under Notification No.+/2012 dated 1!.0".2012 for the taxab%e cate&or 6Trans.ortation of /assen&er b 1ir 'ervices7. '.ecia% concession of service tax for econom c%ass is withdrawn. 4am.5am.5%t5.4am.5am.5&t54am.5am.5am.5am.5am.5am.5%t5.4am.5am.5am.5am.5am.5am.5&t5 4am.5am.5am.5am.5am.5am.5am.5nbs.54am.5am.5am.5am.5am.5am.5%t5/.4am.5am.5am.5am.5 am.5am.5&t54am.5am.5%t5/.4am.5am.5&t5

'ervice tax was initia%% introduced in the ear 1994# when service tax was made a..%icab%e on on% three services. The sco.e of a..%icabi%it of service tax has been widened over the ears# coverin& a%most 119 services under the ambit of taxabi%it b 2012. (owever# the conce.t was based on the .ositive %ist of services# wherein the services s.ecified under 'ection +8$108* of the 9inance 1ct# 1994 $as amended* were taxab%e. :nder this scenario# one had to ana% ;e the various services and to see- whether the service .rovided is covered under an of the taxab%e service under the %ist. 1 new service tax re&ime has been introduced with the announcement of bud&et 2012 wherein a%% services wi%% be taxed un%ess the are s.ecified under the ne&ative %ist entr or are otherwise exem.ted. :nder the new s stem# the services wi%% be taxed com.rehensive% # exce.t the few ones which have been s.ecified under the ne&ative %ist. The )entra% 3oard of <xcise and )ustoms =)3<)> has further issued ?@e&a <xem.tion Notification? vide Notification No. 28/2012A'ervice Tax dated 20th Bune# 2012# en%istin& the services which sha%% be exem.t from the .a ment of service tax with effect from 1st Bu% # 2012. ,ith the enforcement of 9inance 1ct 2012# 'ection +8 re%atin& to the ?definitions" of the various terms re%atin& to the service tax has been omitted. (owever# two im.ortant sections which have been introduced definin& the new service tax code are 'ection +83 which .rovides for a who%e new set of definitions in context of taxab%e services under the head ?Interpretations? and 'ection ++C which states the ?Negative list of service?. 9urther# for the .ur.ose of .a ment of service tax under the new a..roach# a new @inor (eadA ?1%% taxab%e 'ervices? has been a%%otted under the @aDor (ead ?0044A'ervice Tax?.1

Need 8!r the 7e; 6y6tem

There have a%wa s been dis.utes about taxabi%it of a .articu%ar activit and a%so its c%assification in a .articu%ar taxab%e head. The .rovisions of the )ha.ter E of the 9inance 1ct# for %ev in& service tax on various activities had been cha%%en&ed under different &rounds before the )ourts in Fndia. 'ome of the maDor &rounds u.on which the va%idit had been cha%%en&ed inc%udes vio%ation of 1rtic%e 14 of the )onstitution of Fndia# noncom.etenc of the /ar%iament to %ev tax on the activit within the domain of the 'tate .ower# discriminator nature of the .rovisions etc. 1%so# the definitions of each service as .rovided under )ha.ter E were often va&ue and broad. Fn order to miti&ate the administrative difficu%ties in definin& a service and administerin& the service tax# the conce.t based on ne&ative %ist of service was first f%oated %ast ear. (owever# the fina% set of notifications has come out on 20th Bune# 2012. This new a..roach towards the service tax a..%icabi%it has sim.%ified and reso%ved the issue re%atin& to whether an .articu%ar service is %iab%e to be taxed.

Ne; c!7ce:t6
The new conce.ts introduced under the new 'ervice Tax 0e&ime based are bein& discussed be%ow.

$# .ea7i7< !8 Ser5ice
<ar%ier the word ?'ervice? was not defined an where in )ha.ter E of the 9inance 1ct# 1994. Fn order to ensure wide covera&e of services under the ambid of service tax# the term G'erviceG has been defined under the new inserted section +83$44* in the 9inance 1ct# 2012# which reads as fo%%owsA "Service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include a* an activity which constitutes merely, i* a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or ii* such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause !"#$ of article %&& of the 'onstitution; or iii* a transaction in money or actionable claim( b* a provision of service by an employee to the employer in the course of or in relation to his employment; c* fees ta)en in any 'ourt or tribunal established under any law for the time being in force("! The definition .rescribes the fo%%owin& three essentia% in&redients that must be .resent in order to ca%% an activit as Gservice*A a* it must be an activit 5 b* it must be .erformed b a .erson for another .erson5 c* the activit is .erformed for a consideration. Fn the absence of an of these essentia% in&redients# the activit wi%% be not be considered as service. 1%so# the activities which are covered under the dec%ared service cate&or wi%% automatica%% become service. Thereafter# the definition ex.ress% exc%udes the activities from the .rovision of ?'ervice?. Thus# exce.t for the activities as mentioned in the definition of the term ?'ervice?# a%% other activities sha%% be covered which invo%ves the above three essentia% in&redients.

&# .ea7i7< !8 Dec"ared Ser5ice6

1s .er the definition of ?'ervice? as contained under 'ection +83 $44* of the 9inance 1ct# the term service inc%udes dec%ared services. The .hrase ?Cec%ared 'ervice? has a%so been defined under

section ++< as ?an activity carried out by a person for another for consideration?. 9urther# the section s.ecifica%% mentions the fo%%owin& nine services as Gdeclared services*2 a* rentin& of immovab%e .ro.ert b* construction of a com.%ex# bui%din&# civi% structure or a .art thereof# inc%udin& a com.%ex or bui%din& intended for sa%e to a bu er# who%% or .art% # exce.t where the entire consideration is received after issuance of com.%etionAcertificate b the com.etent authorit . c* tem.orar transfer or .ermittin& the use or enDo ment of an inte%%ectua% .ro.ert ri&ht. d* deve%o.ment# desi&n# .ro&rammin&# customisation# ada.tation# u.&radation# enhancement# im.%ementation of information techno%o& software. e* a&reein& to the ob%i&ation to refrain from an act# or to to%erate an act or a situation# or to do an act. f* transfer of &oods b wa of hirin&# %easin&# %icensin& or in an such manner without transfer of ri&ht to use such &oods. &* activities in re%ation to de%iver of &oods on hire .urchase or an s stem of .a ment b insta%%ments. h* service .ortion in the execution of a wor-s contract. i* service .ortion in an activit wherein &oods# bein& food or an other artic%e of human consum.tion or an drin- $whether or not intoxicatin&* is su..%ied in an manner as a .art of the activit .

(# Ne<ati5e Li6t
Ne&ative %ist of services means that a%% services# exc%udin& those s.ecified in ne&ative %ist wi%% be subDect to service tax. (owever# in addition to items inc%uded in ne&ative %ist# there wi%% be exem.tions# abatements and com.osition schemes as issued b the )3<) from time to time. The @e&a <xem.tion Notification issued b the )3<) and the issuance of &uidance .a.er on the new a..roach to service tax has mentioned "8 services on which service tax sha%% be exem.t. 1%% the other services# i.e. which are not mentioned in the ne&ative %ist# wi%% attract service tax %iabi%it . 'ome of the services covered in the ne&ative %ist cate&or are as fo%%ows2 i* (ea%th care services b a c%inica% estab%ishment# an authorised medica% .ractitioner or .araAmedics ii* 'ervices .rovided b an individua% as an advocate or a .artnershi. firm of advocates b wa of %e&a% services to 5 a* an advocate or .artnershi. firm of advocates .rovidin& %e&a% services b* an .erson other than a business entit 5 c* a business entit with a turnover u. to ru.ees ten %a-h in the .recedin& financia% ear iii* 'ervices .rovided to a reco&nised s.orts bod b a* an individua% as a .%a er# referee# um.ire# coach or team mana&er for .artici.ation in a s.ortin& event or&ani;ed b a reco&ni;ed s.orts bod 5 b* another reco&nised s.orts bod iv* auxi%iar educationa% services and rentin& of immovab%e .ro.ert b educationa% institutions in res.ect of education v* 'ervices b wa of trainin& or coachin& in recreationa% activities re%atin& to arts# cu%ture or s.orts vi* Tem.orar transfer or .ermittin& the use or enDo ment of a co. ri&ht covered under section 1" of the Fndian )o. ri&ht 1ct# 198! re%atin& to ori&ina% %iterar # dramatic# musica%# artistic wor-s or cinemato&ra.h fi%ms vii* 'ervices .rovided in re%ation to servin& of food or bevera&es b a restaurant# eatin& Doint or a mess# other than those havin& $i* the faci%it of airconditionin& or centra% airAheatin& in an .art of the estab%ishment# at an time durin& the ear# and $ii* a %icence to serve a%coho%ic bevera&es Therefore# with the exce.tion of "8 services as s.ecifica%% .rovided b the )3<) under ne&ative %ist# a%% other services wi%% come under the 12%" service tax brac-et.

Char<eabi"ity u7der the 7e; a::r!ach

The taxabi%it of services or the char&e of service tax has been s.ecified in section ++3 of the 9inance 1ct which reads as fo%%ows2 ?+here shall be levied a ta, at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the ta,able territory by one person to another and collected in such manner as may be prescribed(? 9rom the ana% sis of the above definition# it can be said that fo%%owin& conditions needs to be fu%fi%%ed in order to ma-e an activit char&eab%e to tax under the new .rovisions2 a* a service shou%d be not be s.ecified in the ne&ative %ist or as covered under the exem.ted %ist of services as issued under the @e&a Notification5 b* .rovided or a&reed to be .rovided in the taxab%e territor 5 and c* b a .erson to another.

C!7c"u6i!7
The new a..roach to taxation of services wi%% benefit the service .rovider in order to understand the %aw and the a..%icabi%it of the tax on the services to be .rovided. 1%so# the ?ne&ative a..roach? is a %ot sim.%er as com.ared to the ear%ier ?.ositive a..roach? based s stem of taxation. The ex.ansion of the service tax base b coverin& most of the sectors wi%% he%. in movin& towards the ado.tion of Hoods and 'ervice Tax )ode. Fn this wa # the new s stem shows a remar-ab%e shift from the o%d s stem b wa of introducin& com.rehensive taxation s stem which avoids the com.%ex issues and without &ettin& invo%ved into the c%assification of services.