Service Tax
Service tax was first introduced by finance act 1994 with 5 services and
out 5 only three were taxable at that time. Steadily and gradually till the
year 2011 covered approximately 125 or more services covered in tax net and 119
services were taxable. But the finance act 2012 brings major revolution in
service tax by introducing place of provisioning rules 2012 as well as negative list of services before brings these
changes govt. also introduced point of taxation rule 2011 vide finance act 2011.
Although government brings time to time changes in services tax it also amends
various laws to enhance and increase revenue and also to reduce litigations, as
the matter of fact is that only in service tax we used to saw least compliances
asked by the authority.
The approach adopted by the authorities was quite flexible as compare to
other tax laws. The year 2011 and 12 was the year of revolution in Service tax
field as in these two years cumulatively proposed and approved two major
changes first one is point of taxation law which re defines the point of
taxation of services and another one is Negative list of services and place of
provisioning of services . This list contains certain services which are not
taxable and all other services which are not falls in this negative list are
taxable. The negative lists of services were proposed in finance bill 2012
which on later stages approved and becomes finance act 2012.
Rules
Government of India for the sake of easiness and
efficient operating issued time to time various rule and regulation in that
regard which are listed below. With the help of these rules an assessee can
assess his tax liability and discharge as well.
Place of Provisioning
Services Rules 2012
Point
of Taxation Rules, 2011
Service
Tax (Determination of Value) Rules, 2006
Service Tax
Rules, 1994
There are other various rules for different type of issues
such as dispute resolution, attachment of property, settlement commission,
advance ruling etc.
And Service Tax input and out put are taken care by CENVAT
Credit Rules, 2004
Place
of provisioning of services Rules 2012 (POP)
are introduced by omitting the rules related to import and
export of services.
Service
Tax (Determination of Value of Service) Rules, 2006
Does not have any fundamental changes, majority of changes
are related to taxability and definition of Works Contract Services
Out of above rule we are going to discuss only Point of
Taxation rules as these changed the time of taxing a service and due to that
these are named Point of taxation.
POINT of Taxation Rules, 2011
This rules put light on the time of taxability of services
and time of discharge of liability.
As we all are aware that service is taxable at the time of
provisioning at the time it provided or yet to be provided then liability to
pay service tax arises but when.
Earlier in service tax regime tax liability arises at the
time of receiving of payment of services provided or yet to be provided and the
tax liability deferred to till time service provider receives payment of
provisioning of services, if he did not receive those payments the service
provider need not to pay tax but after implementation of point of taxation
rules 2011 position has been changed. Now onwards the service provider has to
discharge his tax liability with the prescribed time limit once he issues the
invoice or he received advance payments or service had been provided but no
payment have been received.
Earlier in the service tax, Tax is payable on
the “cash basis” means tax is levied at the time of receipt of fee/service
charges. Now tax is payable on “Mercantile Basis” means assessee needs to pay
tax at the time of issuance of invoice or date of payment for the service
provided or to be provided which ever is earlier. Tax will be levied at the
time service is provided means point in time when a service provided or to be
provided.
Applicability
Point of taxation rules are applicable w.e.f.
01.04.2012
Exemption to Small Service Provider (SSP)
As the taxable event is providing of services so that rate
of tax will be applied which are applicable on such point of time and the payment of tax shall be allowed to be deferred till the
receipt of payment upto a value of Rs 50 lakhs of taxable services.
The facility has been granted to
all individuals and partnership firms, irrespective of the description of
service, whose turnover of taxable services is fifty lakh rupees or less in the
previous financial year.
Negative List Approach
Applicability
Negative list based comprehensive approach will be applicable from
01.07.2012.
Negative List of Services (Sec 66D of Finance Act, 1994)
Negative list" means the services which are listed in
section 66D and there are 17 services listed in this list. Negative list of
services covered description of those services which are non – taxable. And
those services which are not part of negative list are taxable.
Declared List of Services (Sec 66E of Finance Act, 1994)
Declared Services are activities that have been specified in
Section 66 E of the Act. When such activities are carried out by one person for
another in the taxable territory for a consideration then such activities are
taxable services
Service Tax Liability under Reverse charge mechanism
Reverse Charge
Under the reverse charge service tax is payable by the service recipient
instead of service provider. Before the enactment of finance act 2012 there
were only 6 services which falls under the ambit of this mechanism like wise
the GTA service, insurance business, mutual fund distributor’s services, sponsorship
services and services provided place out side India.
After enactment of Finance act 2012 the position has been changed now
there are 10 services which comes under this mechanism but the most important
and subtle part of this changed mechanism is that now both services provider
and services recipient needs to discharge the tax liability in the specified
proportion.
This mechanism of distribution of Service Tax between the
Service Provider and Service Recipient shall only be applicable if such services
are provided by any individual, Hindu Undivided Family, proprietary firm,
partnership firm whether registered or not including association of persons,
located in the taxable territory to any company
Specified Proportion for discharge of Tax liability
Nature of Service Percentage of Service Tax Percentage of Service Tax
payable by Service payable
by Service
Provider Recipient
In relation to Services provided or agreed
to be provided by way of renting or hiring 60% 40%
any motor vehicle designed to carry
passenger on Non abated value
In respect of Services provided or agreed to
be provided by way of supply of 25% 75%
manpower for any purpose
In respect of Services provided or agreed to
be provided by way of works contract 50% 50%
in addition to above few services also added wherein tax payable by
recipient vide notification no 15/2012
dtd. 17 march 12.
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