Service Tax

Service Tax
Negative list of services –

i.       At present, service tax is payable on specified 117 taxable services. Now, serviced tax will be payable on all taxable services, except those specified in the negative list and excluding those for which exemption has been granted. The provision will be effective from date to be notified after enactment of Finance Act, 2012.

ii.      Service tax rate increased from 10% to 12% w.e.f. 1-4-2012. Thus, total rate will be 12.3% w.e.f. 1-4-2012.

iii.     Service tax on works contract serviced payable @ 4.80% plus 3% education cess w.e.f. 1-4-2012.

iv.   Service tax on air transport payable @ 12% on 40%, subject to condition of non-availment of Cenvat credit on inputs or capital goods [This means Cenvat credit of input service is available] (Notification No. 6/2012-ST dated 17-3-2012].

v.     Service tax on repairs of roads has been exempted with retrospective effect from 16-6-2005 [proposed   insertion of section 97 to Finance Act, 1994 vide Finance Bill, 2012]

vi.    Management, maintenance or repair of non-commercial Government building exempted w.e.f. 16-6-2005 till the new provision relating to negative list of services comes into effect [proposed insertion of section 98 to Finance Act, 1994 vide Finance Bill, 2012]

vii.  Textile dyeing units can form an association or registered cooperative society which is engaged in treatment and recycling of effluents. The project is set up with financial assistance from Government. Services provided by such association or registered cooperative society to its members are exempt from service tax – Notification No. 42/2011-ST dated 25-7-2011 (The words ‘registered cooperative society’ have been added w.e.f. 17-3-2012). This notification is being given retrospective effect from 16-6-2005, vide clause 145 of Finance Bill, 2012.

viii.   Service tax on rail transport of goods (other than in containers) deferred till 1-7-2012.

ix.    Invoice can be issued within 30 days [present limit 14 days] Banking company or Financial Institution can issue invoice within 45 days [Rule 4A of Service Tax Rules amended]

x.    Adjustment of service tax under rule 6(4B) of Service Tax Rules of excess tax paid can be without any monetary limit. Any intimation to Superintendent is not required. Self-adjustment of excess credit is not allowed on account of reasons like interpretation of law, taxability, classification, valuation or applicability of any exemption notification.

xi.    Whenever there is change in effective rate of service tax or service tax is taxed for the first time, the date of payment shall be date of credit in bank account (Rule 2A of Point of Taxation Rules] This is to avoid the ‘tax planning’ of getting pre-dated cheques to show receipt of payment earlier. Of course, now, cheque is valid only for three months and hence this planning cannot be indefinite]

xii.   Service tax payable on receipt basis by all individual and partnership firms (including LLP) upto turnover of ` 50 lakhs, if turnover of taxable services in respect of previous year (of the total entity and not individual unit) was below ` 50 lakhs [Fourth proviso to Rule 6(1) of Service Tax Rules inserted w.e.f. 1-4-2012]

xiii.  No penalty if service tax and interest on renting of immovable property is paid within six months from date of enactment of Finance Act, 2012.

xiv. One year time limit for issuance of show cause notice for demand of service tax being increased to 18 months  [proposed amendment to section 73(1)]

xv.   It is provided that while giving follow up notices on same grounds, the grounds as given in earlier notice need not be repeated. Only tax due and reference to earlier notice is sufficient [proposed section 73(1A)]

      Provision for compounding of offences  [proposed amendment to section 94(2)]