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CA Final Paper 8 Indirect Tax Laws Section B: Service Tax and VAT, Chapter 1
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(Updated as per Finance Act, 2014
confirmed by faculty on 24 April 2015)
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• Definition of Service
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• Declared Services
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• Classification of Service
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Global Economy down from 3.9% to 3.2%
Growth:
• Agriculture – 2.8%;
• Industry – 3.8%;
• Service – 8.8%;
• Contribution of Service Sector to GDP – 60%;
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Union List (Contains matters in respect of which
a) List – I:
only CG has power of legislation)
State List (Contains matters in respect of which
b) List – II:
only SG has power of legislation)
Concurrent List (Contains matters in respect of
c) List – III:
which both CG and SG have power of legislation).
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Finance Act 1994
Service Tax Laws
Rules
Notifications
Orders
Trade Notices
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In comprehensive approach all services are made taxable and a
negative list is provided to exempt some of the services. In
selective approach, selective services are subjected to service tax.
Selective Approach
July 1, 1994
Comprehensive Approach
July 1,2012
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Services Taxable
under Negative List
Existing Taxable
Services
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Charging Section Section 66B prescribing 12%
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Service
Services Under
Negative List
Other Exemptions/Abatements
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Restoration of Service Specific Accounting codes
for payment of Service tax & Registration (Circular
No. 165/16/2012-ST dated. 20-11-2012):
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Where Registrations obtained/ amended under
‘All Taxable Services’, the taxpayer should file
amendment application online in ACES and opt
for relevant description(s) from the list of 120
descriptions of services provided
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Ministry of Finance Service Tax Commissionerate
Joint Commissioner
Central Board of Excise And Customs
Assistant Commissioner/Deputy
Zones Headed by Chief Commissioners Commissioner
Superintendent
Central Excise Commissionerate Headed
By Commissioners
Inspector
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To structure the • Input Credit/ Output Tax, Tax
planning, etc.
transactions
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S. 66 There shall be levied a tax on the Value of taxable services
referred to in various sub-clauses of (105) of S.65 and collected in
such manner as may be prescribed
Association of Leasing & Financial Service Companies vs. UOI 2010 (20)
STR 417 SC Taxable Event Rendering of Service
S.65B (51) Taxable service means any service on which service tax is
leviable under section 66B;
There shall be levied a tax at the rate of 12% on the value of all
S. 66B services, other than those services specified in the negative list,
provided or agreed to be provided in the taxable territory by one
person to another and collected in such manner as may be
prescribed 17
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S. 65B (44) “Service" means Any Activity carried out by a Person for
another for Consideration, and includes a Declared service, but shall not
include
(c) fees taken in any Court or tribunal established under any law for the time
being in force.
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• Nothing contained in this clause shall apply
to functions performed by MP, MLA, Other
1 Govt. Officers or Govt. Bodies.
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• (a) an unincorporated association or a body of
persons, as the case may be, and a member
thereof shall be treated as distinct persons;
• (b) an establishment of a person in the taxable
3 territory and any of his other establishment in a
non-taxable territory shall be treated as
establishments of distinct persons.
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9 Activities declared to be Service:
a. Renting of Immovable Property (Entry 49 – List II)
b. Construction of a complex, building, civil structure for
which consideration received before issuance of
ccompletion
.Temporarycertificate
Transfer/Permitting Use or Enjoyment of IPR {IPR -
(Entry 49)
d. Development, Design, Implementation etc. of
10/9/2004}
Information Technology Software {IT Software Services –
16/5/2008}
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9 Activities declared to be Service:
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S. 66D: Comprises of following Services - 17 heads
iv. Support services, other than services covered under clauses (i) to
(iii) above, provided to Business entities;
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(b) Services by the Reserve Bank of India;
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ii. Supply of farm labour;
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v. Loading, unloading, packing, storage or warehousing of
agricultural produce;
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e. Trading of goods;
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j) Admission to entertainment events or access to
amusement facilities;
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(m) Services by way of renting of residential
dwelling for use as residence;
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(o) Service of transportation of passengers,
with or without accompanied belongings, by
• a stage carriage;
• railways in a class other than
(A) first class; or
(B) an air-conditioned coach;
• metro, monorail or tramway;
• inland waterways;
• public transport, other than predominantly for tourism
purpose, in a vessel of less than fifteen tonne net; and
• metered cabs, radio taxis or auto rickshaws;
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(p) Services by way of transportation of goods—
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S. 66F. Principles of interpretation of
descriptions of services or bundled services
(1) Unless otherwise specified, reference to a service (herein
referred to as main service) shall not include reference to a
service which is used for providing main service.
• Exemption Main Service & Service w.r.t Main Service – Toll Collection
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(a) if various elements of such service are naturally bundled in the ordinary
course of business, it shall be treated as provision of the single service which
gives such bundle its essential character;
• Hotel Stay with complimentary breakfast
(b) if various elements of such service are not naturally bundled in the ordinary
course of business, it shall be treated as provision of the single service which
results in highest liability of service tax
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S. 67A The rate of service tax, value of a taxable service and
rate of exchange will be the one as in force or as applicable at
the time when the taxable service has been provided or agreed
to be provided.
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S. 65B(41) “Renting" means:
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Permitting use of immoveable Chargeable to service tax as
1. property for placing permitting usage of space is covered
vending/dispensing machines in the definition of renting
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If….. Then……
(iv) Government department allots houses such service would be covered in the
to its employees and charges a license fee negative list entry relating to services
provided by government and hence non-
taxable.
(v) Furnished flats given on rent for these are in the nature of lodges or guest
temporary stay houses and hence not treatable as a
residential dwelling
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Following activities of renting not taxable to service as
covered under Negative List of Services are:
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Following activities of renting are exempt as covered
under Mega Exemption NN.25/2012-ST are -
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• Construction of a complex, building, civil structure or a part
thereof, including a complex or building intended for sale to
a buyer, wholly or partly, except where the entire
consideration is received after issuance of completion-
S. 66E(b) certificate by the competent authority;
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S. 65B(54) - Works Contract means a contract wherein
transfer of property in goods involved in the execution of
such contract is leviable to tax as sale of goods and such
contract is for the purpose of carrying out construction,
erection, commissioning, installation, completion, fitting out,
repair, maintenance, renovation, alteration of any moveable
or immovable property or for carrying out any other similar
activity or a part thereof in relation to such property; -Labour
/ Rate Contract??
• Challenge remains how to arrive at Material/ Service Value in Works
Contract:-
•- Actual Material/ Service portion
•- Standard Material/ Service portion
•- Composition Tax (Alternative Option)
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Overruled in LB – CESTAT Delhi – CCE vs. BSBK Pvt. Ltd.
(2010) 26 STT 263 – “Turnkey project can be vivisected &
service element involved in works contract”.
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Intellectual property right
includes :-
Temporary transfer of
a patent registered
outside India would be
Registration of
declared service if the
intellectual right is not
place of provision of
required in India.
service of temporary
transfer of IPR is in
taxable territory.
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Sale of pre-packaged or canned software Vs. Customized Software
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What is the basis of
Classification of Services?
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Under Section. 66F (Earlier S. 65A)
Reference shall not draw same status quo, which is used for providing
main service.
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Whether Service tax leviable
if process undertaken by Job
Worker is not manufacture?
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Under Section 66D(f)
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What is the difference between
Negative list of Services and
Exempted list of Services?
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Both, the services under negative list and exempted are not liable to service tax but there
exist a difference.
Negative list covered under Section 66D, enlist 17 services not liable to service tax since July
1, 2012 while 39 exempted services are effective from 1-7-2012 as stated under Mega
Exemption Notification No. 25/2012- Service Tax, dated the 20th June, 2012, as amended
by in N/N no. 3/2013-ST dated. 1-3-2013.
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Constitutional Validity of Double Taxation i.e.
Service Tax and VAT on Works Contract?
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Every Works contract involves an element of sale of goods and provision
of service.
In terms of Article 366 (29A) transfer of property in goods involved in
execution of works contract is deemed to be a sale of such goods. It is a
well settled position of law, declared by the Supreme Court in BSNL‘s
case [2006(2) STR 161 (SC)], that a works contract can be segregated into
a contract of sale of goods and contract of provision of service
Aspects theory: Federation of Hotel & restaurant Assoc V UOI -Subjects
which fall in one aspect within the power of one legislature may fall in
another aspect within another legislature power
SLP (C) No.24690/2009 filed by M/s. Idea Mobile Communication Ltd. -
Value of SIM includible for Service tax when VAT was paid on it.
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Whether services provided by Employer to Employee is taxable
State with reasons whether the following are liable to service
tax:-
Services by way of training or coaching in recreational
activities relating to arts, culture or sports.
Services provided by a player to a franchisee which is not a
recognized sports body.
Pre-school education and education up to higher secondary
school or equivalent
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i. Services by way of training or coaching in recreational
activities relating to arts, culture or sports are not liable to
service tax as it is specifically exempt under the mega
exemption notification.
ii. Service of a player to a franchisee which is not a recognized
sports body is taxable as it does not get covered under the
mega exemption notification.
iii. Pre-school education and education up to higher secondary
school or equivalent is not liable to service tax as it is
included in the negative list under section 66D of the Finance
Act, 1994.
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• Constitutional validity of Service tax and levy, chargeability,
importance, role of Chartered Accountants, opportunities in
1 Service Sector, etc.
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CA. Bimal Jain
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