| Monarch Bhatt | | | | reward as per section 2(7) of the Motor Vehicles Act, |
| The glimpse of service tax proposals forms the | | | | 1988. |
| subject- matter of this article. | | | | (Notification No. 20/2009-ST, dated July 7, 2009) |
| | | | B. Banking and other financial services and Foreign |
| 1. Economy may be good or bad, there may be any | | | | exchange broking service - Foreign currency |
| progress or not, there may be development or not, but | | | | exchange - The inter-bank transaction for the sale and |
| imposition and leviability of taxes is certain for the | | | | purchase of foreign currency between the scheduled |
| growth of the country. Shri Pranab Mukherjee has also | | | | bank has been exempted from the payment of |
| in his Budget done it for the benefit of the country at | | | | service tax.(Notification No. 19/2009-ST, dated July 7, |
| large. | | | | 2009) |
| 2. There is no change in the rate of service tax, i.e., 10 | | | | Impact : The Government has granted it as a |
| per cent service tax, 2 per cent Education Cess and 1 | | | | exemption but on the contrary it will be difficult for the |
| per cent Higher and Secondary Education Cess. | | | | bank to avail the credit of input service as now |
| Changes effective from July 7, 2009 | | | | banking companies are required to treat this service as |
| 3. The changes effective from July 7, 2009 are as | | | | exempted service. |
| follows : | | | | C. Club or association service - Export promotion |
| (i)- Territorial jurisdiction of India extended - The | | | | councils - The exemption has been granted to the |
| territorial jurisdiction of India was extended up to | | | | export promotion councils including Federation of Indian |
| Continental Shelf of India (CSI), i.e., up to 12 nautical | | | | Export Organisation and other such 21 organisations |
| miles and Exclusive Economic Zone (EEZ). Now, the | | | | from the payment of service tax up to March 31, 2010 |
| territorial jurisdiction has been extended to cover the | | | | on the membership fees paid by the members to the |
| installations, structures and vessels in the entire CSI | | | | association. |
| and EEZ. | | | | (Notification No. 16/2009-ST, dated July 7, 2009) |
| (Notification No. 21/2009-ST, dated July 7, 2009) | | | | Impact : It is not much beneficial and whether such |
| The consequent change has also been made in the | | | | organizations are really liable for the payment of |
| Taxation of Services (Provided from Outside India and | | | | service tax under the Club and association services? |
| Received in India) Rules, 2006. | | | | Levy of service tax itself is challengeable so there is |
| (Notification No. 22/2009-ST, dated July 7, 2009) | | | | no need for granting any exemption. |
| Impact : Thus, now it will attract service tax even on | | | | (iv) Amendment in Cenvat Credit Rules, 2004 |
| services provided in (EEZ) area vice versa it will | | | | A. Change in rule 6 (3) - pay 6 per cent of exempted |
| attract the service tax under a reverse charge | | | | service and 5 per cent of exempted goods and avail |
| mechanism if the service has been received in such | | | | full Cenvat credit - The service provider who is |
| area from the outside India. Up till now, it was not | | | | providing both exempted and taxable services and |
| attracting service tax. | | | | maintaining the separate account for the value of input |
| (ii)- Composition scheme under works contract service | | | | services and inputs received, may avail full Cenvat |
| - The composition scheme is one where the | | | | credit and pay 6 per cent instead of paying 8 per cent |
| assessees are required to pay the service tax on the | | | | of the exempted service. |
| gross amount of contract including the labours and | | | | Similarly, a manufacturer manufacturing both dutiable |
| materials used in the contract and cannot avail the | | | | and exempted goods but not maintaining the separate |
| Cenvat credit of duty paid on inputs. However, it was | | | | accounts for the value of inputs and input services |
| not including the value of goods supplied free of cost | | | | used in the manufacture of dutiable and exempted |
| by the service receiver to the service provider. Certain | | | | final products, may avail full credit and pay only 5 per |
| conditions have been introduced with respect to | | | | cent of the exempted goods. |
| calculation of ‘value’ of works contract | | | | Note : It is optional and not mandatory for the service |
| service.a- The works contract will include the value of | | | | provider and manufacturer. |
| goods used in the execution of works contract when | | | | (Notification No. 16/2009-CE (N.T.), dated July 7, 2009) |
| either goods have been provided by the receiver of | | | | Impact : The rate has been reduced to streamline it |
| the service free of charge or under any other contract | | | | with the payment of taxes on final products as duty |
| entered between the service provider and service | | | | rates have been reduced to 4 per cent and 8 per cent |
| receiver (including the contract other than the principle | | | | and service tax has also been reduced on output |
| contract).b- The value of works contract will also | | | | service from 12 per cent to 10 per cent. Hence, this |
| include the value of machinery and tools used in the | | | | rate has also been reduced now. |
| execution. | | | | B. Change in rule 3 (5B) - Payment of taxes equivalent |
| Note : The value will not include the Value Added Tax | | | | to written off in the books of account by service |
| or sales tax paid on the goods. | | | | provider - In any situation or due to any reason if |
| (Notification No. 23/2009-ST, dated July 7, 2009) | | | | service provider is writing off the input or capital goods |
| Impact : This enables the Government to eliminate the | | | | fully or provision has been made for write-off, then in |
| chances for evasion of service tax by showing less | | | | such cases service provider shall make the payment |
| value of material used in the execution of works and | | | | of credit availed on the value of input or capital goods. |
| showing it as free material supplied by the client or | | | | Similar provision is there for the manufacturer but for |
| under any other contract. | | | | the service provider it was not there which has been |
| (iii)- Exemption to a particular service under certain | | | | inserted now. |
| existing category | | | | Taxmann is growth oriented publishing house with in |
| A. Tour operator service - Contract carriage - The | | | | depended editorial, marking and production division .We |
| exemption has been granted to the service provider | | | | have an impressive tally of title on India –international |
| having contract carriage permit for inter-State or | | | | taxation, service tax, indian tax,tax calculator, banking - |
| intra-State transportation of passengers. However, the | | | | foreign laws, income tax returns, insurance laws,direct |
| exemption has not been granted to the tour operator | | | | tax laws,corporate laws and other judicial SC/HC acts |
| operating tour or providing charter or hire services in | | | | .Our experience in the industry. Editorial expertise, |
| respect of vehicles. | | | | market, network and in house production unit combine |
| The contract carriage permit means a motor vehicle | | | | to produce publication of quality. |
| used to transport the passengers for a hire and | | | | |