TMI BlogBudget changes in Service Tax-DO of JS(TRU)X X X X Extracts X X X X X X X X Extracts X X X X ..... of the changes are discussed hereinafter. 2. New Services included in the list of Taxable Services The following new services are proposed to be included in the list of taxable services. These services would get covered under the list of taxable services from a date to be notified after the enactment of Finance (No. 2) Bill, 2009. 2.1 Transport of Goods through Rail: Presently, transportation of goods in containers by rail, by other than Government railways is taxable under section 65(105)(zzzp) since 2006. It is now proposed to impose service tax on goods transported by railways including Government railways, whether in containers or otherwise. Suitable abatement and exemption to specified goods would be provided through issuance of notification at the appropriate time. 2.2 Transport of Coastal Goods; and Goods transported through Inland water: Coastal goods (as defined under the Customs Act) and transport of goods through National Waterways, and inland waters are proposed to be brought under tax net. Suitable abatement and exemption to specified goods would be provided through issuance of notification at the appropriate time. 2.3 Legal Consultancy Service: As in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cleft lip etc. 3. Alteration in the scope of existing taxable services : The following alteration/modifications have been done in the existing taxable services. These changes would come into effect from a date to be notified after the enactment of the Finance (No. 2) Bill, 2009. 3.1 Modification in Business Auxiliary Service (BAS) [section 65(19)]: It may be recalled that production or processing of goods for or on behalf of a client falls within the purview of this service. However, if any such activity amounts to manufacture within the meaning of section 2(f) of the Central Excise Act, the same is excluded from its purview. This exclusion has been modified to state that it would apply only if the activity results in manufacture of 'excisable goods'. Both the words/phrases i.e. 'manufacture' and 'excisable goods' would have the same meaning as defined under the Central Excise Act. The impact of this change would be that even if a process of manufacture is undertaken for the client, but the resultant product does not fall under the category of excisable goods, such as alcoholic beverages, the service tax would be attracted. Certain other goods which would also fall under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make it in line with the central excise procedure. The same has been done by suitably amending section 84 with certain consequential amendments in section 86. This provision would come into effect from the date of enactment of the Finance (No. 2) Bill, 2009. All cases decided before this date would continue to be governed by the existing provisions. 4.2 The service tax rules suffer from the deficiency of not having provisions relating to (1) relevant date for determination of rate of service tax and (2) place of provision of taxable services. For this purposes section 94 of the Act is being amended to empower the Central Government to make rules in this regard. This provision would come into effect from the date of enactment of the Finance (No. 2) Bill, 2009. 4.3 Goods Transport Agents (GTAs) receive several services from other service providers (such as warehouse keeper, cargo handlers, C F agents) during the movement of goods, en-route. While these individual services are taxable at the hands the service providers, the GTA cannot take credit of tax paid on such services, as the abatement allowed to them is subject to condition that no credit should be availed. This matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appearing in sub-rule (3) is being amended to provide that the composition scheme would be available only to such works contracts where the gross value of works contract includes the value of all goods used in or in relation to the execution of works contract whether received free of cost or for consideration under any other contract. This condition would not apply to those works contracts, where either the execution of works contract has already started or any payment (whether in part or in full) has been made on or before the date of the amendment, i.e. 07.07.2009, from which the said amendment becomes effective (refer notification No.23/2009-ST dated 07.07.2009). 5.2 Amendments made in CENVAT Credit Rules (pertaining to service tax) 5.2.1 Rule 3(5B) of the CENVAT Credit Rules provide that, if value of any input or capital goods on which CENVAT credit has been taken, is written off fully or where provision to write off has been made in the books of account before being put to use, the 'manufacturer' shall pay an amount equivalent to the CENVAT credit taken on such item. Similar provision is presently not prescribed in case of taxable service provider. The said sub-rule is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department of Commerce or by the Ministry of Textiles are being exempted from the levy of service tax under the said service. This exemption would remain valid till 31.03.2010. (Notification No. 16/2009-ST dated 07.07.09 refers) 6.4 All the exemptions mentioned above would come into force immediately 7. Changes in territorial jurisdiction: 7.1 Vide notification No. 1/2002-ST dated 01.03.2002, the provisions of Chapter V of the Finance Act, 1994 (which governs the levy and collection of service tax were extended to the designated areas in the Continental Shelf of India (CSI) and the Exclusive Economic Zone (EEZ) of India, as declared by Ministry of External Affairs Notification Nos. S.O. 429(E) dated 18.07.1986 and S.O. 643 (E) dated 09.09.1996. Notification No. 1/2002-ST has been amended to extend the provisions of Chapter V of the Finance Act, 1994 to installations, structures and vessels in the entire CSI and EEZ of India. Thus, services provided to or from CSI and EEZ of India would be covered within the ambit of the provisions relating to service tax w.e.f. 07.07.2009 (Notification No. 21/2009-ST dated 07.07.09 refers). Consequential changes have also been made in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing list of taxable services. The service 'transport of goods through road' is also included in this list to cover such exporters who are not liable to pay service tax under reverse charge mechanism. The services of foreign commission agents have been deleted from the list, as it is comprehensively covered under Notification No. 18/2009-ST dated 07.07.2009. While the general structure of the notification is similar to that of Notification No. 41/2007-ST, the new scheme is essentially trust based i.e. refund is to be granted on self-certification/certification by Chartered Accountant. 8.4 A note is being annexed to this letter giving details of the scheme. All officers dealing with the scheme should be advised read it carefully. The jurisdictional Chief Commissioners and Commissioners are requested to ensure that the scheme is followed in its letter and spirit and the prescribed time period is strictly adhered to. In case of any difficulty or doubt in implementing the scheme, the same may kindly be brought to the notice of the undersigned or of the officers mentioned below immediately. It must be kept in mind that smooth implementation of this scheme is high on the priority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he departmental officers have been explained here in a sequential way so that both find it easy to follow. 2. Independently, the Chief Commissioners may direct the Commissioners under their jurisdictions, having cases pertaining to refund scheme under notification No. 41/2007-ST pending (as on 06.07.2009) at different stages to take an immediate stock. The information should be gathered in a stage wise manner as mentioned below: (a) Claims received but not processed (b) Refund claims processed, claimants asked to furnish details of the documents but no response received (c) Response received and further examination is on (d) Objections have been finalized but notices are yet to be issued (e) Notices issued but adjudication process not complete (f) All formalities completed but refund claim has not been disposed of or refund not yet granted (g) Pending for any other reasons (Please state the reasons) (h) Total [sum of (a) to (g)]. The above details should contain both the number of claims and amount of refund involved. 3. The report mentioned above may be compiled for all Commissionerates under the zonal jurisdiction and the zonal report may be sent to the unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctober, 2009). 3) The following documents should be enclosed with the return: (a) Self-attested copies of shipping bill/bill of exports pertaining to the exports in respect of which the exemption has been claimed; (b) Self-attested copies of bill of lading/airway bill pertaining to above exports; (c) The original invoice/bill/challan issued by the provider of taxable service in the name of the exporter showing the description and value of taxable service provided and the service tax payable thereon; (d) The said original invoice/bill/challan should be self-certified by the exporter or by an authorised person in the following format- "It is certified that the service mentioned in this bill/invoice/challan issued in my/our name pertaining to ___________ (name of taxable service) has been received by me/us and that the said taxable service has been fully utilized in export of goods covered under shipping bill/airway bill No. ________ dated ___________." (e) Additional documents required as per the condition laid down as per Column (4) of the Table annexed to the notification; 5.4 The field officers must ensure that all exporters who have opted for the scheme have filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned below; (v) in case the amount of total claim is upto 0.25% of the total declared fob value of the export under the claim, such certificate will be issued by the exporter or by an authorized person; (vi) in case the amount exceeds the above limit, such certification shall be done by the Chartered Accountant who audits the annual accounts of the exporter under the provisions of the Companies Act, 1956 or the Income Tax Act, 1961; (vii) in either case the proforma of certification will be as follows: "It is certified that the services mentioned in this bill/invoice/challan issued in my/our name pertaining to ___________ (name of taxable service) has been received by me/us, that I/we have paid the value of the service and the service tax thereon and that the said taxable service has been fully utilized in export of goods covered under shipping bill/airway bill No. ________ dated ___________." (viii) additional documents required as per the condition laid down as per Column (4) of the Table annexed to the notification. 4) While receiving a claim it must be ensured that the claim is complete in all respects and the required documents have been enclosed properly. In ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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