Negative list of services Other Issues CA Hemant

Negative list of services & Other Issues CA Hemant Jajodia

Contents 1 Understanding Service 2 Negative List of Services 3 Declared Services 4 Exempt Services 5 Bundled Services 6 Liability of service recipient 7 Valuation of Service Portion 8 Place of provision of service 9 Point of taxation

Understanding Service 3

Taxation of services based on negative list A case for negative list? Positive List • Detailed description of taxable services Negative List • Unspecified services not liable to tax • Overwhelming support as consonance with International Taxation • Neither conducive from point of tax administration nor tax compliance • Views and suggestions of stakeholders taken into account • Legal disputes • Independent appraisal of services sector prior to introduction of GST • Possibilites of overlap amongst definitions • Service definition useful for Import /Export of services, POT, CCR • Smooth transition and significantly ease challenges on GST • Clarity to reduce quantum of tax controversy • Expectation of seamless credit mechanism Negative list based service tax approach may lead to significant jump in tax revenues as services hitherto not taxed come under tax net 4

Basic Understanding of the Law • Taxation of services based on negative list. • Shift from a selective system of taxing services to a comprehensive system. • Effective from July 1, 2012. • Service to be taxed in the jurisdiction of consumption. • Finance Act, 2012 has defined: ‒ ‒ 5 Activity qualifying as service 17 services stated in the Negative List of services – Section 66 D 9 services as ‘declared services’ – Section 66 E Exemptions

What is ‘service’ • Not defined • Includes act done, deed done, work Activity done, operation carried out, execution of act, provision of facility 6 For Conside-ration • Not defined • Definition under the Indian Contract Act, 1872, could be adopted • Self-service excluded, such as, by one branch to another Carried or HO out by a person • Exception to for this outlined another in Explanation 2 to clause 44 of Section 65 B

Are you providing a service? • Doing an activity for another person. • Doing such activity for consideration (Tourist information no consideration) • Contractual Obligation Excludes : I M A G E • Activity does not consist only of transfer of title in goods or immovable property by way of sale, gift or in any other manner. • Activity does not consist of a transaction in money or actionable claim. • Consideration for activity is not in the nature of court fees for a court or tribunal. • Activity is not in the nature of service provided by an employee of such person in the course of employment. • Deemed sales 7

To determine whether you are providing a service? 8 S. Question N o. 1 Am I doing an activity (including declared service) for another person? Ans wer 2 Am I doing such activity for a consideration? Yes 3 Does this activity consist only of transfer of title in goods or immovable property by way of sale, gift or in any other manner? No 4 Does this activity constitute only a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29 A) of article 366 of the Constitution? No 5 Does this activity consist only of a transaction in money or actionable claim? No 6 Is the consideration for the activity in the nature of court fees for a court or a tribunal? No 7 Is such an activity in the nature of a service provided by an employee of such person in the course of employment? No 8 Is services in the capacity of M. P. , Member of State legislature and Member of other local authorities etc. No Finance Act 2012 - Service Tax Yes

To determine whether service provided by you is taxable and tax is payable ? If you are providing a ‘service’ (Step 1) and then pose the following questions to yourself- S. No. 9 Question Answer 1 Have I provided or agreed to provide the service? Yes 2 Have I provided or agreed to provide the service in the taxable territory? Yes 3 Is this activity entirely covered in any of the services described in the negative list of services specified in section 66 D of the Act or otherwise exempted by MEGA Notification No Finance Act 2012 - Service Tax

Consideration Monetary or Non monetary Damages for longer duration of use i. e. demurrage charges: Related to provision of service: Taxable e. g. containers retained beyond permissible period Subsidies : Accidental damages: Taxable when influence the unit price: price must change proportionate to Not related to provision of service: not amount given Deficit subsidies not taxable e. g. damages to a rented taxable property 10 Finance Act 2012 - Service Tax

Employer – Employee - Taxability § Services provided outside the terms of employment will be taxable Ø Non-compete agreement taxable Ø Expenses recovered from employees for private use of company facilities taxable Ø Canteen charges (usually exempt unless AC and alcoholic liquor being served) Ø To and fro transportation will be taxable; Ø Stay in guest house Rs 1000 per day or more taxable Ø Charges for private use of official car: taxable unless “right to use” 11 Finance Act 2012 - Service Tax

Negative List of Services 12

Service Tax – Negative List • Negative List effective from July 1, 2012 ‒ Sectors covered in the negative list are: Entertainment and Amusement Government or Local authorities Agriculture and Animal Husbandry Education Public Transportation Negative List for Sectors (exhaustive) Trading of goods Miscellaneous Financial Sector 13 Specified persons

Negative List of Services Ø Services by Government or a Local Authority EXCEPT for services: ü by Posts Department by way of speed post, life insurance & agency services to ü Non-Govt. Entity; ü in relation to Vessel/Aircraft; ü transport of Goods/Passengers; & ü support Services to Business entities. For support services provided by the Govt. to business entities, other than by way of renting of immovable property, ST would be payable by the service recipient i. e. the business entities under Reverse Charge Mechanism. However, services which are provided by Govt. in terms of their sovereign right to business entities are not support services Ø Services by RBI; Ø Services by a foreign diplomatic mission located in India; Ø Services relating to Agriculture or Agricultural Produce; Ø Trading of goods [including future contracts in commodities] 14 Finance Act 2012 - Service Tax

Negative List of Services Ø Any process amounting to manufacture or production of goods; Ø Selling of space/time slots for advertisements EXCEPT advertisements broadcast by radio or television; Ø Sale of space or time for advertisement in print media, bill boards, buildings, cell phones, internet, ATM, aerial advertising are not taxable. However, services provided by advertisement agencies for preparing advertisements are taxable. Ø Services by way of access to a road or a bridge on payment of toll charges; Ø Betting, gambling or lottery; Ø Admission to Entertainment Events or access to Amusement Facilities; Ø Transmission or distribution of electricity by an electrical transmission or distribution authority; Ø Services by way of education - (i) pre-school education & education up to higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognized by law & (iii) education as a part of an approved vocational education course; 15 Finance Act 2012 - Service Tax

Negative List of Services Ø Services by way of renting of residential dwelling for use as residence; Ø Services by way of (i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount & (ii) inter-se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers; Ø Service by way of transportation of passengers, with or without accompanied belongings, by (i) a stage carriage; (ii) railways [except for first class & air conditioner coach]; (iii) metro, monorail or tramway; (iv) inland waterways; (v) public transport, other than predominantly for tourism purpose, in a vessel between places located in India & (vi) metered cabs, radio taxis or auto rickshaws; Ø Service by way of transportation of goods by (i) road except for goods transportation agency & courier agency; (ii) an aircraft or a vessel from a place outside India up to the customs station of clearance in India; or (iii) by inland waterways; Ø Funeral, burial, crematorium or mortuary services including transportation of the deceased. 16 Finance Act 2012 - Service Tax

Declared Services 17

Declared Services • Declared services means any activity carried out by a person for another person for a consideration. • Following activities are declared services under Section 66 E: ‒ Renting of immovable property subject to Municipal Tax deduction ‒ Construction of a complex, building, civil structure or part thereof exclude where consideration is received after issuance of completion certificate by competent authority ‒ Temporary transfer or permitting use of any IPR excludes copyright ‒ Development, design, adaptation, implementation, etc. of information technology software 18 • A mere license to use such canned software, which is not transfer of “right to use” is a provision of service • On-site development of software is service • Internet downloads also service • Sale of pre-packaged or canned software is sale of goods

Declared Services 19 • Agreeing to the obligation to refrain from an act or tolerate an act or situation or to do an act • Transfer of goods by way of hiring, leasing, licensing without transfer of right to use such goods • Activities in relation to delivery of goods on hire purchase or any system of payment by installments • Service portion in the execution of works contract • Service portion in an activity wherein food or any other article of consumption or any drink is supplied

Exempt Services 20

Wholly Exempt Services • Notification No. 25/2012 -ST, dated June 20, 2012, effective from July 1, 2012 ‒ Sectors covered in Wholly Exempt Services are: Health Business Exhibition Transport of specified goods Hospitality Copyright Wholly Exempt Services for Sectors (exhaustive) Education Job work Miscellaneous Erection/ Construction/ Maintenance/ Repair/ Renovation Services for specified purposes 21

Exemption Ø Medical Services ü ü ü Clinical Establishment, an authorised Medical Practitioner or Para-Medics; Veterinary clinic in relation to health care of animals or birds; & Approved Clinical Research Organisation engaged in technical testing or analysis of new drugs on human participants Ø Religious & Charitable Services ü ü Charitable activities by an entity registered u/s 12 AA of Income Tax Act; & Renting of precincts of religious place meant for general public or conducting of religious ceremony. Ø Art & Culture ü ü 22 Training or coaching in recreational activities in arts or culture; & Performance by artist in folk or classical art forms of music, dance, or theatre excluding services provided by such artist as a brand ambassador. Finance Act 2012 - Service Tax

Exemption Ø Sports ü ü ü Training or coaching in recreational activities in sports; Services by individual [as player, referee, umpire, coach or team manager] or a recognised sports body to another recognized sports body; & Sponsoring of sporting events of specified organization or federation. Ø Educational Services ü ü Services to or by an educational institution in respect of education exempted from service tax, by way of (a) Auxiliary educational services or (b) renting of immovable property; & Public libraries by way of lending of books & publications. Ø Hospitality Services ü ü 23 Renting of hotel, inn, guest house, club or other commercial places meant for residential or lodging purposes having declared tariff < ` 1, 000/day & Serving of food or beverages by restaurant, eating joint or mess provided it is not airconditioned AND do not hold licence to serve alcohol. Finance Act 2012 - Service Tax

Exemption Ø Construction Services Construction, erection, repair, maintenance, renovation or alteration of: For Government , Local Authority & Government Authority ü Civil structure meant for use other than for business or profession; ü Structure meant for use as educational/clinical/cultural establishment; ü Canal, dam, any other irrigation works or pipeline; & ü Residential complex meant for self-use or employees or other persons specified in Explanation 1 to Section 65 B(44). For any person ü Road, bridge, tunnel, or terminal for road transportation for use by general public; ü Civil Structure pertaining to specified scheme; ü Building of Registered entity [12 AA of IT Act ] & used for religious purpose by general public; ü Pollution control or effluent treatment plant [except when located as a part of factory]; ü Airport, port or railways, including monorail or metro [except for repair & maintenance]; üSingle residential unit other than a part of a residential complex; üPost-harvest storage (incl. cold storage) for agricultural produce & mechanised food grain handling system for agricultural produce as food stuff excluding alcoholic beverages. 24 Finance Act 2012 - Service Tax

Exemption Ø Transportation Services Transportation by Rail or Vessel within India ü Petroleum & petroleum products, chemical fertilizer and oilcakes; ü Relief materials for victims of natural or man-made disasters; ü Newspaper, defence equipments, mail bags & household effects; ü Railway equipments & agricultural produce & foodstuff (excl. alcoholic beverages). Ø Transportation by Goods Transport Agency ü Fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage; or ü Other Goods [amount charged in single carriage ≤ ` 1, 500 or all goods for single consignee ≤ ` 750]. Transport of passengers through (a) Air [embarking from or terminating in an airport located in North-Eastern State or Bagdogra, West Bengal]; (b) Contract carriage; & (c) ropeway or cable car or tramway; Service by way of hire (a) to a state transport undertaking motor vehicle for carrying > 12 passengers or (b) vehicle meant for transportation of goods to a goods transport agency; Service by way of vehicle parking to general public except leasing of space for parking facility. 25 Finance Act 2012 - Service Tax

Exemption Ø Intermediary Services ü Services by (a) sub-broker or an authorised person to a stock broker………; ü Sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt; ü Job working in relation to (a) agriculture, printing or textile processing; ……. . ; ü goods on which appropriate duty is payable by principal manufacturer…. Ø International Services ü Services by organiser towards business exhibition held outside India; ü Services by Service Provider located in a non-taxable territory to: (a) Government/individual for purpose except for business or profession; (b) Registered Entity [Section 12 AA] or (c) Person in a non-taxable territory. Ø Public Utility Services ü Services to Government for (a) carrying out activity ordinarily entrusted on municipality - public health, sanitation etc. (b) Repair of a vessel or an aircraft; ü Services by departmentally run public telephone or free telephone at airport/hospital; ü Providing of public conveniences like public toilets, lavatories , urinals etc. 26 Finance Act 2012 - Service Tax

Exemption Ø Other Services • Services provided to UN or a specified international organization; • Services provided by (a) an arbitral tribunal or (b) an advocate or firm of advocates by legal services to (i) person except business entity or (ii) business entity with turnover < ` 10 Lakh in Preceding FY; • Services provided by an advocate or firm of advocates by legal services to similar entities; • Temporary transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical, artistic works or cinematograph films; • Services by way of collecting or providing news; • Services of general insurance business provided under specified schemes; • Services provided by an incubatee up to turnover of ` 50 Lakh subject to the certain conditions; • Service by an unincorporated body or a non- profit entity to its own members by way of reimbursement of charges or share of contribution (a) as trade union ; (b) for carrying out exempt services or (c) up to ` 5000 /month; 27 Finance Act 2012 - Service Tax

Partially Exempt Services (NN 26/2012 -ST, dated June 20, 2012 effective from July 1, 2012) Hospitality Services Particulars Taxable % Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises, including hotel, convention center, club, pandal, shamiana or any place specially arranged for organizing a function together with renting of such premises 70 Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes 60 Conditions No CENVAT credit on goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act Fair Market value of all goods and services should be included No CENVAT credit on inputs and capital goods Transport Services Particulars Taxable % Conditions Transport of passengers by air, with or without accompanied belongings 40 No CENVAT credit on inputs and capital goods Transport of goods by road by Goods Transport Agency 25 No CENVAT credit on inputs, capital goods and input services Renting of any motor vehicle designed to carry passengers 40 Same as above Transport of goods in a vessel 50 Same as above 28 © 2012 Deloitte Touche Tohmatsu India Private Limited

Partially Exempt Services (NN 26/2012 -ST, dated June 20, 2012 effective from July 1, 2012) Tour Operator Services Particulars Taxable % Conditions Services by a tour operator in relation to a package tour 25 (i) No CENVAT credit on inputs, capital goods and input services (ii) The bill is inclusive of charges for such tour Services by a tour operator in relation to a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour 10 (i) No CENVAT credit on inputs, capital goods and input services (ii) Invoice indicates that charges are towards accommodation (iii) Exemption not apply if invoice only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation Services, other than services specified above, provided or to be provided to any person, by a tour operator in relation to a tour 40 (i) No CENVAT credit on inputs, capital goods and input services (ii)Invoice indicates that amount charged in the bill is the gross amount charged for such tour 29 © 2012 Deloitte Touche Tohmatsu India Private Limited

Partially Exempt Services (NN 26/2012 -ST, dated June 20, 2012 effective from July 1, 2012) Construction Services Particulars Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority Taxable % 25 Conditions (i) No CENVAT credit on inputs (ii) The value of land is indicated in the amount charged from the service receiver Fair Market value of all goods and services should be included Leasing /Hire purchase Particulars Services in relation to financial leasing including hire purchase 30 Taxable % 10 Conditions (i) Payable on interest portion (ii) On lease management fee, processing fee, documentation charges and administrative fee, service tax is payable on 100% value © 2012 Deloitte Touche Tohmatsu India Private Limited

Bundled Services 31

Bundled Services Meaning ‘Bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. ’ Determination of service category • • Reference to a service not to include reference to a service used for providing main service. Specific description to be preferred over general description. If various elements of service are naturally bundled in the ordinary course of business – service which gives the essential character. If various elements of service are NOT naturally bundled in the ordinary course of business – service which gives the highest service tax liability. Naturally bundled ü Meals and air/rail travel: Air travel is the service ü Breakfast and hotel accommodation: Hotel accommodation is the service ü Meeting, accommodation, food - Convention services Unnatural bundled • 32 Renting for both commercial and residential – Service Tax liability ?

Liability of Service Recipient 33 © 2012 Deloitte Touche Tohmatsu India Private Limited

Service Recipient – Liability NN 30/2012 –ST dated, June 20, 2012, effective from July 1, 2012 S. No Particulars Percentage of service tax payable service tax by the person payable by the providing service person receiving the service 1. Services by an insurance agent to any person carrying on insurance business NIL 100% 2. Transportation of goods by road services by a goods transport agency to a factory, society, cooperative society, dealer registered under central excise, any company and partnership firms NIL 100% 3. Sponsorship to any body corporate or any partnership firm located in the taxable territory NIL 100% 4. Services by an arbitral tribunal to any business entity located in the taxable territory NIL 100% 5. Services by an individual/ firm of advocate to any business entity located in the taxable territory NIL 100% 6. Support service by Government or local authority to any business entity located in the taxable territory excluding renting, transport of goods/passenger, services in relation to aircraft or vessel NIL 100% 7. *Supply of manpower for any purpose 25% 75% 34

Service Recipient – Liability NN 30/2012 –ST dated, June 20, 2012, effective from July 1, 2012 S. No Percentage of service tax payable by the person providing service Percentage of service tax payable by the person receiving the service *Renting or hiring any motor vehicle designed to carry passenger to any person who is not engaged in similar line of business: (a) on abated value (b) on non abated value NIL 60% 100% 40% 9. *Works contract services 50% 10. Services provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory NIL 100% 11. *Security services (effective 7 th August, 2012) 25% 75% 12. Services by Director (effective 7 th August, 2012) NIL 100% 8. Particulars * These services should be provided by individual, HUF, proprietary firm, partnership firm to any Company or business entity located in taxable territory 35

Issues under reverse charge mechanism • Additional burden of compliance and keeping records • In case of services such as Man power recruitment, Security, Works contract and Rent-a-cab service, knowledge of status of service provider and service recipient is required to ascertain service tax liability. • As per explanation – II to Notification 30/2012, in case of works contract, service receiver and service provider can avail different valuation options. • A lot of hazels can arise in a case of works contract, where service receiver and service provider opt for different valuation options. • As per rule 7 of POTR, date of payment will be point of taxation in case of service, where service recipient is liable to pay service tax. • If payment not made within six months the point of taxation shall be invoice date • In case of partial reverse charge, Cenvat credit of service tax paid by service provider and service receiver is eligible to avail on different occasions. 36

Valuation 37

Valuation • Service tax is payable on the gross amount charged • Cum Tax benefit in case of contract inclusive of service tax • gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called “Suspense account” or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise • The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided. • Rate of exchange should be as per Customs • Where value of service cannot be determined, comparable value for providing similar service should be adopted. • If comparable value not available, then taxable value cannot be less than the cost of provision of such taxable service 38

Valuation • Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service. • The expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service • The amount realised as demurrage or by any other name whatever called for the provision of a service beyond the period originally contracted or in any other manner relatable to the provision of service shall be included for the purpose of payment of service tax. Following expenses are not to be included in the value of taxable service: - • interest on delayed payment of any consideration for the provision of services or sale of property, whether movable or immovable; • accidental damages due to unforeseen actions not relatable to the provision of service; • subsidies and grants disbursed by the Government, not directly affecting the value of service. 39

Valuation of Service Portion in a Works Contract 40

Valuation of Service Portion – Works contract NN 24/2012 –ST dated, June 6, 2012, effective from July 1, 2012 Where actual value of goods transferred in the execution of works contract is available with the Company Value of service is: Gross amount charged for the works contract (excluding value added tax charged) less actual value of property in goods transferred in the execution of the works contract. 41

Valuation of Service Portion – Works contract NN 24/2012 –ST dated, June 6, 2012, effective from July 1, 2012 Where actual value of goods transferred in the execution of works contract is not available with the Company Value of service is: In the case of works contract entered into for execution of original work 40% of total amount charged for works contract In the case of works contract entered into for maintenance or repair or reconditioning or restoration or servicing of any goods 70% of total amount charged for works contract In the case of any other type of works contract 60% of total amount charged for works contract Total Amount = Gross amount charged for the works contract + Fair market value of all goods and services supplied in or in relation to the execution of works contract - amount charged for such goods or services - Value added tax or sales tax “ ‘original works’ means(i) all new constructions; (ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; ” 42

Valuation of Service Portion in a Restaurant or as an outdoor catering 43

Determination of value of service portion involved in supply of food or any other article of human consumption or any drink in a restaurant or as outdoor catering: - Sl. No. Description (1) 1. (2) Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity, at a restaurant Service portion in outdoor catering wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of such outdoor catering Percentage of the total amount on which tax payable (3) 40 Valuation of Service Portion in a Works Contract 2. 60 Total Amount = Gross amount charged + Fair market value of all goods and services supplied in or in relation to the supply of food or any other article of human consumption or any drink- amount charged for such goods or services - Value added tax or sales tax Provider of taxable service shall not take CENVAT credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 44

Place of Provision of Service 45

Determination of place of provision of service • The Place of provision of Service Rules, 2012 (POPOS Rules) is effective from 1 July 2012 • Power given to the Central Government to make rules for determination of place of provision of service under Section 66 C of the Act • POPOS Rules are also applicable to a situation where the service provider or service receiver or both are located outside the taxable territory • Export of Service Rules, 2005 and Taxation of Services (Provided from outside India and received in India) Rules, 2006 superseded • The POPOS Rules determine the exact place of provision of services on the basis of their consumption 46

Determination of place of provision of service Place of provision of service is required to be determined by application of following Rules: Rules Place of provision of service R 3 Location of the service receiver – Default rule to be applied in case the place of provision of service is not determinable under below Rules Location of service receiver (Example Intellectual Property Rights) R 4 Performance based services Location where the services are actually performed (courier, repair, storage, cargo handling, technical testing, dry cleaning, beauty treatment, training) R 5 Location of immovable property (leasing of building, construction, maintenance, architect, security) R 6 Services related to events Place where event is actually held (conferences, exhibitions, fairs, seminar, weeding, sports) R 7 Part performance of a service at different locations Location in the taxable territory where the greatest proportion of service is provided Even if the services are partly performed in India then also it is taxable 47

Determination of place of provision of service Place of provision of service is required to be determined by application of following Rules: Rules Place of provision of service R 8 Services where the provider as well as receiver is located in taxable territory Location of service receiver – Repair undertaken outside India but both service provider and recipient located in India R 9 Specified services (Services provided by banking company or a financial institution or a NBFC to account holder, Online information and database access or retrieval services, intermediary services, services consisting of hiring of means of transport, up to a period of one month) Location of service provider (social networking sites, trade statistics, online newspaper and journal, tour operator R 10 Service of transportation of goods (air, vessel, rail or GTA is covered) Place of destination of goods For GTA - Location of person liable to pay tax R 11 Passenger transportation services Place where passenger embarks on the conveyance for continuous journey R 12 Services provided on board conveyances First scheduled point of departure of that conveyance for journey – Movie on demand on a Delhi – Bangkok flight • Where more than one Rule merits equal consideration, the later Rule shall apply • Central Government retains power to notify place of provision of service on the basis of place of effective enjoyment of service 48

Point of Taxation 49

Point of Taxation RULE 3 – General Rule Determination of point of taxation. — “point of taxation” shall be earlier of - (a) the time when the invoice for the service provided or agreed to be provided is issued; (b) The time when the person providing the service receives a payment, to the extent of such payment; Exception: (i) If invoice not issued within specified time, the point of taxation will be date of completion of service or payment receipt whichever is earlier. (ii) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service; (iii) date of payment” shall be the earlier of the dates on which the payment is entered in the books of account or is credited to the bank account of the person liable to pay tax. 50

Point of Taxation Rule 4 - Determination of point of taxation in case of change in rate of tax - Releva nt Rules 51 Date – Before change in rate (10%) Date – After change in rate (12%) Effectiv e Rate Point of Taxation 4(a)(i) Service Provided Invoice Raised Payment Received [WEE] 12% Earlier of date of invoice or payment 4(a)(ii) Service Provided Invoice Raised Payment Received 10% Date of issuing invoice 4(a)(iii) Service Provided Payment Received Invoice Raised 10% Date of payment 4(b)(i) Invoice Raised Service Provided Payment Received 12% Date of payment 4(b)(ii) Invoice Raised Payment Received [WEE] Service Provided 10% Earlier of date of invoice or payment 4(b)(iii) Payment Received Service Provided Invoice Raised 12% Date of issuing invoice

Point of Taxation RULE 5 -  Payment of tax in case of new services i. e. where a service is taxed for the first time say Directors Services Sl. No. Situation Tax/No Tax A Invoice issued & payment received prior to service became taxable No Tax B Payment received prior to service became taxable and invoice issued within 14 days of the date when service is taxed for the first time No Tax C Others Tax RULE 7 - Determination of point of taxation in case of specified services or persons. • In case of Section 68(2) services i. e. where service recipient is liable to pay tax under reverse charge, the point of taxation shall be the date of payment • Where the payment is not made within a period of six months of the date of invoice, the point of taxation shall be determined on the basis of date of invoice • In case of “associated enterprises”, where the person providing the service is located outside India, the point of taxation shall be the date of debit in the books of account of the person receiving the service or date of making the payment whichever is earlier. 52

Point of Taxation ………. . Service Taxable services 20. 3. 2012 Taxable Work contract with no effective rate change 20. 6. 2012 1. 7. 2012 10. 7. 2012 20. 6. 2012 20 th June being earlier of three events - Rule 3 Taxable Works contract with effective rate change 20. 6. 2012 1. 7. 2012 10. 7. 2012 1. 7. 2012 Newly Taxed Service 20. 6. 2012 1. 7. 2012 10. 7. 2012 No Tax Here service provided after change in rate of tax and invoice also issued after change in rate of tax , so POT is 1 st July, 2012 - Rule 4(b) (iii) Payment received before service became taxable and invoice also issued within 14 days so no tax [Rule 5(B)] Finance Act 2012 - Service Tax Invoice Point of Taxation 20. 3. 2012 Remarks Service Completion 1. 4. 2012 10. 4. 2012 53 Payment 20 th March being earlier of three events - Rule 3

Point of Taxation RULE 8.   Determination of point of taxation in case of copyrights, etc. — In respect of royalties and payments pertaining to copyrights, trademarks, designs or patents, where the whole amount of the consideration for the provision of service is not ascertainable at the time when service was performed, and subsequently the use or the benefit of these services by a person other than the provider gives rise to any payment of consideration, the service shall be treated as having been provided each time when a payment in respect of such use or the benefit is received by the provider in respect thereof, or an invoice is issued by the provider, whichever is earlier. RULE 8 A.  Determination of point of taxation in other cases. — Residual rule empowers the Central Excise officer to determine the point of taxation to the best of his judgment if date of invoice or date of payment or both are not available 54

Issues in CENVAT Credit Rules 55

Broad overview of the changes CENVAT Credit Rules • Dumpers and tippers included in definition of capital goods w. e. f. 1 -7 -2012 • Duty on removal of capital goods after use or cleared as waste & scrap to be paid at higher of CENVAT credit as reduced by specified percentage or duty on transaction value w. e. f. 17 -3 -2012 • Credit of inputs and capital goods without bringing them into premises allowed to service provider subject to maintenance of documentary evidence (Rule 4) • Amendment to Rule 6(3) wherein the rate of payment increased to 6% for the manufacturer/service provider who does not maintain separate accounts w. e. f. 1 -4 -2012 • Credit allowed on the basis of tax payment challan for Service Tax paid under reverse charge • Rules relating to distribution of credit of input services by ISD amended (Rule 7) • Interest not applicable where credit has been wrongly availed but reversed prior to utilisation (Rule 14) • Unutilized credit of SAD at the end of each quarter can be transferred to another factory of the manufacturer (Rule 10 A) 56

THANK YOU Views expressed herein are personal in nature and any reliance on it is at the recipient’s own risk 57