Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

REVERSE CHARGE ON ANY SERVICE RECEIVED FROM GOVERNMENT ALARM BELL FOR ALL BUSINESS ENTITIES FROM 1st APRIL 2016

Service Tax - By: - Vivek Jalan - Dated:- 14-5-2016 Last Replied Date:- 19-5-2016 - The striking difference between the Service Tax and Income Tax is that under Income Tax Government is not included in the definition of person and, thus, is not a taxable entity. However, under the Service Tax as per section 65B(37) of the Finance Act, 1994 person includes Government and, thus, the Government is a taxable entity and the services provided by them, unless included in negative list and Mega Exemptio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ist comprised of the following:- services by Government or a local authority excluding the following services to the extent they are not covered elsewhere- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) * [ support services ] .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

which are not substitutable in any manner by any private entity, were not support services, e.g., grant of mining or licensing rights and, thus, not exigible to service tax. However, the services provided by Police to PSUs or Corporate entities or sports events held by private entities, being support services as similar services can be provided by private entities and would be taxable. In this regard it is important to note the following terms - S 65B (26A) Government means the Departments of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tution; (c) a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006 (41 of 2006); (e) a regional council or a district council constituted under the Sixth Schedule to the Constitution; (f) a development board constituted under article 371 of the Constitution; or (g) a regional council constituted under article 371A of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vided by Government or local authority except: (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994, to any business entity located in the taxable territory, is the recipient of such service. In consonance to above Notification No. 30/2012-ST, dated 20-6-2012 also prescribes that 100% of service tax in respect to support services provided (except renting of immovable property) by Government or Local .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iable to service tax. Amended section 66D(a) is as under:- Services by Government or a Local Authority excluding the following services to the extent they are not covered elsewhere (iv) any service, other than those covered by clauses (i) to (iii) above, provided to business entities. Hence ANY SERVICE by Government or a Local Authority except as exempt or in negative list shall be exigible to Service Tax. Consequential amendment to Reverse Charge provisions - In parity with the above proposed c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ition of the term support services is also deleted. Hence all services by Government or a Local Authority except as exempt or in negative list, shall be under reverse charge mechanism and hence would effect all entities. Impact of the amendment on the negative list - Services which were provided by Government in terms of their sovereign right to business entities and which were not substitutable in any manner by any private entity, were not support services, e.g., grant of mining or licensing ri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hould be provided by the Government. The term 'service' as we know is defined in section 65B(44) of the Finance Act, 1994. For Eg. - Government has imposed a fine or penalty for violation of a provision of law. It would not be regarded as a service because to be a service, an activity has to be carried out for a consideration. Therefore, fines and penalties which are the legal consequences of people's actions are not in nature of consideration for an activity. VARIOUS DOUBTS CLEARED .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rifications and in this article as follows - A question may arise as to when all services have been excluded from negative list, then what is use of retaining section 66D(a)? In this regard, it is worthwhile mentioning here that under sub-clause (iv) only the services which are provided to business entities have been excluded from the negative list. Thus, when this amendment will come into effect the negative list would continue to operate in respect to the services other than those mentioned in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vernment, a local authority or shall be inserted. The amended Entry No. 39 reads as under: Services by Government, a local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution. New Exemptions Provided Entry No. 54 Services provided by Government or a local authority to another Government or local authority. Provided that nothing contained in this Entry shall apply to services specified in sub-cl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Government or a local authority where the gross amount charged for such services does not exceed ₹ 5000/- This exemption is not applicable to services specified in sub-clauses (i), (ii) and (iii) of Section 66D(a) of the Finance Act; In case of continuous supply of service, the exemption shall apply only where the gross amount charged for such service does not exceed ₹ 5000/- in a Financial Year. Entry No. 57 Services provided by Government or a local authority by way of tolerating .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under any law for the time being in force However vide circular 192/02/2016-ST, DATED 13-4-2016, It is clarified that any activity undertaken by Government or a local authority against a consideration constitutes a service and the amount charged for performing such activities is liable to Service Tax. It is immaterial whether such activities are undertaken as a statutory .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted by the Government or a local authority. Entry No. 59 Services provided by Government or a local authority by way of assignment of right to use natural resources to an individual farmer for the purposes of agriculture Entry No. 60 Services by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution Entry No. 61 Services provided by Government or a local authority by way of assig .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ectrum during the financial year 2015-16 on payment of licence fee or spectrum user charges, as the case may be. (It may be noted here that the Union Budget, 2016, under Section 66E of the Finance Act, after clause (i), clause (j) is inserted to include assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof under the list of Declared services. But such changes shall be effective from the date of enactment of the Finance Bill, 2016 ( FB, 201 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nce not leviable to Service Tax. These taxes, cesses or duties include excise duty, customs duty, Service Tax, State VAT, CST, income tax, wealth tax, stamp duty, taxes on professions, trades, callings or employment, octroi, entertainment tax, luxury tax and property tax. Whether Service Tax is payable on yearly installments due after 1-4-2016 in respect of spectrum assigned before 1-4-2016. Service Tax is payable on such installments in view of rule 7 of Point of Taxation Rules, 2011 as amended .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

icense fee in respect of spectrum, or monthly payments with respect to the coal extracted from the coal mine or royalty payable on extracted coal which shall be taxable. Amendment in Valuation Rules to include in value of taxable services, payment of interest/ other consideration payable on Governmental services whose payment is allowed to be deferred on such payment of interest/ other consideration In terms of Rule 6(2)(iv) of the Service Tax (Determination of Value) Rules, 2006 ( the Valuation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

such service is allowed to be deferred on payment of interest or any other consideration. Point of Taxation ( POT ) under Reverse Charge in case of Governmental services The Central Government vide Notification No. 24/2016-ST dated April 13, 2016, has amended Rule 7 of the Point of Taxation Rules, 2011 to provide that in case of services provided by the Government or local authority to any business entity, the POT shall be the earlier of the dates on which - Any payment, part or full, in respect .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wed to be taken evenly over a period of 3 (three) years. [Rule 4(7) of Credit Rules as amended]. However, the Service tax paid on spectrum user charges, license fee, transfer fee charged by the Government on trading of spectrum would be available in the year in which the same is paid. Likewise, Service tax paid on royalty in respect of natural resources and any periodic payments shall be available as credit in the year in which the same is paid. The existing eighth proviso in sub-rule (7) of Rul .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es] WHAT IS STILL IN DOUBT It may be noted that still complete clarity/relief is not granted to Business Entities and some doubts still remain like Whether incentive received from the Government (Central or States) will be liable to reverse charge While Interest paid to the Government would be taxable, yet, would the interest for delayed payment of taxes be liable to tax. Prima facie, it seems that such interest is not liable to tax as Taxes, cesses or duties levied are themselves not leviable t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version