TMI BlogFinance Act, 2006 (No. 21 0f 2006) - regardingX X X X Extracts X X X X X X X X Extracts X X X X ..... ation of Value) Rules, 2006; (ii) Taxation of Services (Provided from outside India and received in India ) Rules, 2006; and (iii) Export of Services (Amendment) Rules, 2006; 4.1 Service Tax (Determination of Value) Rules, 2006 Section 66 enables levy of service tax @ 12% of the value of the taxable services referred to in sub-clauses of clause (105) of section 65. In addition, education cess is leviable @ 2% of 12% i.e., 0.24%. Taxable services received from outside India are charged to service tax under section 66A. 4.1.2 The new section 67 provides valuation of taxable services for charging service tax. The salient features of the new section 67 are,- Where the consideration received for provision of services is wholly in money, the value shall be the gross amount charged by the service provider for provision of service. Where the consideration received for provision of service is not wholly consisting of money, the value in such cases shall be the gross amount charged by the service provider for provision of similar service to any other person in the ordinary course of trade. If the value of similar service provided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice provider in the course of providing a taxable service forms integral part of the taxable value and are includable in the value. It is not relevant that various expenditure or costs are separately indicated in the invoice or bill issued by the service provider to his client. 4.1.8 The service provider in the course of providing any taxable service may incur certain expenditure or cost as a pure agent of the client. The service provider seeks to exclude such expenditure or cost incurred by him as a pure agent of his client (generally known as reimbursable expenditure) from the value of the taxable services. 4.1.9 There could be situations where the client of the service provider specifically engages the service provider, as his agent, to contract with the third party for supply of any goods or services on his behalf. In those cases such goods or services so procured are treated as supplied to the client rather than to the contracting agent. The service provider in such cases incurs the expenditure purely on behalf of his client in his capacity as agent of the client. Amounts paid to the third party by the service provider as a pure agent of his client can be treated as reimbu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as deemed service provider. 4.2.2 Charging of service tax at the hands of the recipient of service where the taxable service is provided from outside the country is required to prevent distortion of competition. Explanation occurring at the end of clause (105) of section 65 of the Finance Act, 1994 and Rule 2(1) (d) (iv) of the Service Tax Rules, 1994 enabled charging of service tax in such cases. 4.2.3 In the Budget for 2006-07, Explanation to clause (105) of section 65 providing for charging of service tax on taxable services received from outside India has been omitted and for this purpose a new section 66A has been incorporated in the Finance Act, 1994. Section 66A is to be read with the Taxation of Services (Provided from outside India and Received in India) Rules, 2006. It may be noted that only services received in India are taxable under these provisions. 4.2.4 All taxable services are chargeable to service tax under this section. The service provider should be outside India and the recipient of service should be in India. However, taxable services received by an individual from outside the country other than for the purpose of use in business or commerce, ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rules made there under. Rule 4 specifically states the obligation of the recipient of services. 4.2.13 The treatment of the recipient of service, as the deemed service provider under section 66A is only for the purpose of charging service tax on taxable services received from outside the country. Services provided from outside India and received in India, therefore, not treated as taxable service provided by the recipient for the purpose of CENVAT Credit Rules, 2004. However, where such service is used as an input for providing any taxable output, the service tax paid on such service can be taken as input credit. 4.3. Export of Services Rules, 2005 Rule 3 of the Export of Services Rules, 2005 has been amended vide Export of Services (Amendment ) Rules 2006. For the purpose of export of services, services have been categorized into three categories: (i) services provided in relation to an immovable property which is situated outside India [rule 3 (1) (i)] (ii) services provided where the place of performance is outside India [rule 3 (1) (ii)] (iii) services other than specified in category (i) and (ii) above and received by a person outside India [rule 3 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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