A LAW PROJECT ON BUSINESS AND TAX LAWSSERVICE TAX

SUBMITTED TO: PROF. UPDESH SINGH SACHDEVA

SUBMITTED BY:DEEPAK SAINI

11BSP1937 SECTION D

STUDENT DECLARATION
This is to certify that I have completed the Project titled A Project on Business and Tax Laws- Service Tax under the guidance of Prof. UPDESH SINGH SACHDEVA in the partial fulfillment of the requirement for the award of the degree of Master in Business Administration from ICFAI BUSINESS SCHOOL, GURGAON. This is an original work and I have not submitted it earlier elsewhere.

DEEPAK SAINI Enrollment No. : 11BSP1937 SECTION-D

CERTIFICATE (From Guide)

This is to certify that the project titled A Project on Business and Tax Laws- Service Tax is an academic work done by Deepak Saini submitted in the partial fulfillment of the requirement for the award of the degree of Masters in Business Administration from ICFAI BUSINESS SCHOOL, GURGAON. under my guidance and direction. To the best of my knowledge and belief the data and information presented by him in the project has not been submitted earlier elsewhere.

Prof. UPDESH SINGH SACHDEVA

(Project Guide) ICFAI BUSINESS SCHOOL

ACKNOWLEDGEMENT

I pay my gratitude and sincere regards to Prof. UPDESH SINGH SACHDEVA, my project Guide for giving me the cream of his knowledge. I am thankful to him as he has been a constant source of advice, motivation and inspiration. I am also thankful to him for giving his suggestions and encouragement throughout the project work. I take the opportunity to express my gratitude and thanks to our computer Lab staff and library staff for providing me opportunity to utilize their resources for the completion of the project. I am also thankful to my family and friends for constantly motivating me to complete the project and providing me an environment that enhanced my knowledge.

TABLE OF CONTENTS
1.

Service tax in India

2. Need for Service Tax 3. Services that come under the Service Tax 4. Overview of Service tax In India 4.1 Constitutional & Legal provisions behind the levy of Service Tax in India 4.2 Formation and functions of Service Tax 4.3 Existing scheme for levy, assessment & collection of Service Tax in India 4.4 Analysis of Service Tax Revenue 4.5 Challenges before the Service Tax Administration in India 4.6 Electronic Tax Administration 4.7 Audit and Inspections 4.8 Future growth path for Service Tax in India

5. Sales Tax Avoidance

6. Sales Tax notifications 2011 7. Bibliography

SERVICE TAX IN INDIA

The tax reforms committee headed by Dr.Raja.J.Chelliah recognized the revenue potential of the service sector in India and recommended imposition of service tax on select services. Based on these recommendations Dr. Manmohan Singh, the Union Finance Minister, in his budget speech for the year1994-1995 introduced the new concept of service tax. Service tax is being proposed on fifteen individually specified services and the scope of certain existing services is being extended or clarified. Subsequent Finance Acts have added more and more services to be taxed for service tax purpose. As such today 107 services are chargeable to service tax. Service Tax is a form of indirect tax imposed on specified services called "taxable services". Service tax cannot be levied on any service which is not included in the list of taxable services. Over the past few years, service tax been expanded to cover new services. The objective behind levying service tax is to reduce the degree of intensity of taxation on manufacturing and trade without forcing the government to compromise on the revenue needs. The intention of the government is to gradually increase the list of taxable services until most services fall within the scope of service tax. For the purpose of levying service tax, the value of any taxable service should be the gross amount charged by the service provider for the service rendered by him. Service Tax was first brought into force with effect from 1 July 1994. All service providers in India, except those in the state of Jammu and Kashmir, are required to pay a Service Tax in India. Initially only three services were brought under the net of service tax and the tax rate was 5%. Gradually more services came under the ambit of Service Tax. The rate of tax was increased from 5% to 8% w.e.f 14 May 2003. From 10 September 2004 the rate of Service Tax was enhanced to 10% from 8%. Besides this 2% education cess on the amount of Service Tax was also introduced. In the Union Budget of India for the year 2006-2007, service tax was increased from 10% to 12%. On February 24, 2009 in order to give relief to the industry reeling under the impact of economic recession, The rate of Service Tax was reduced from 12 per cent to 10 per cent.

NEED FOR SERVICE TAX

It is prime responsibility of the Government to fulfil the increasing developmental needs of the country and its people, by the way of public expenditure. Governments primary sources of revenue are direct and indirect taxes. Revenue receipts from customs and Excise duties are on the decline due to World Trade Organisation (WTO) commitments and rationalization of commodity duties. While the largest component of GDP in the country comes from the Service Sector, its contribution to the national treasury had been insignificant. With the increase in income , increasing portion of such incomes is spent on the consumption of services like entertainment, travel and tourism, etc. Though there exist various taxes or duties like Union Excise Duties, VAT, Sales Tax, Entry Tax, or Octroi Duty, etc by Central or State Government, most of the services are not directly subject to taxation. Thus production and consumption of services, which constitute a large growing portion of the economy, contribute very little by way of taxation. Extending the tax to the service sector was not only to ensure neutrality and horizontal equity in taxation but also to broaden the tax base and improve revenue productivity of tax system.

Some of the major services that come under the ambit of Service Tax are:
Telephone Stockbroker General Insurance Advertising agencies Courier agencies Consulting engineers Custom house agents Steamer agents Clearing & forwarding agents Air travel agents Tour operators Rent-a-Cab Operators Manpower recruitment Agency Mandap Keepers Architects Interior Decorators Management Consultants Practicing Chartered Accountants Practicing Company Secretaries Practicing Cost Accountants Real Estates Agents/Consultants Credit Rating Agencies Private Security Agencies Market Research Agencies Underwriters Agencies Scientific and technical consultancy services Photography Convention Telegraph Telex Facsimile Online information and database access or retrieval Video-tape production Sound recording Broadcasting Insurance auxiliary activity Banking and other financial services Port Authorised Service Stations Leased circuits Services Auxiliary services to life insurance Cargo handling Storage and warehousing services Event Management Cable operators Beauty parlours Health and fitness centres Fashion designer 10

. . . . . . . . . 0. 1. 2. 3. 4. 5. 6. 7. 8. 9. 0. 1. 2. 3. 4. 5. 6. 7. 8. 9. 0. 1. 2. 3. 4. 5. 6. 7. 8. 9. 0. 1. 2. 3. 4. 5. 6. 7. 8.

9. 0. 1. 2.

3. 4. 5.

6. 7. 8. 9. 0. 1. 2. 3. 4. 5. 6. 7. 8. 9. 0. 1. 2. 3. 4. 5.

Rail travel agents Dry cleaning services Commercial vocational institute, coaching centres and private tutorials Technical testing and analysis (excluding health & diagnostic testing) technical inspection and certification service Maintenance & repair services Commission and Installation Services Business auxiliary services, namely business promotion and Support services (excluding on information technology services) Internet caf Franchise Services Out door Caterers service Airport Services Transport of Goods by Air Services Business Exhibition Services Intellectual Property Services Opinion Poll Services TV or Radio Programme Services Survey and Exploration of Minerals Services Travel Agent's Services other than Rail and Air travel agents Forward Contract Services Transport of goods through pipe line or other conduit Service Site preparation & clearance Services Dredging Services Survey & Mapmaking Services Cleaning Services Membership of Clubs & Associations Packaging Services Mailing list compilation & Mailing Services

11

An Overview of Service Tax in India

1. Constitutional & Legal provisions behind the levy of Service Tax in India 2. Formation and functions of DGST 3. Existing scheme for levy, assessment & collection of Service Tax in India 4. Analysis of Service Tax Revenue 5. Challenges before the Service Tax Administration in India 6. Electronic Tax Administration 7. Audit and Inspections 8. Future growth path for Service Tax in India

12

1. Constitutional & Legal provisions behind levy of Service Tax in India. Constitutional Validity Article 265 of the Constitution lays down that no tax shall be levied or collected except by the authority of law. Schedule VII divides this subject into three categoriesa) b) c) Union list (only Central Government has power of legislation) State list (only State Government has power of legislation)

Concurrent list (both Central and State Government can pass legislation). To enable Parliament to formulate by law principles for determining the modalities of levying the Service Tax by the Central Govt. and collection of the proceeds thereof by the Central Govt. and the State, the amendment vide Constitution (92nd amendment) Act, 2003 has been made. Consequently, new article 268 A has been inserted for Service Tax levy by Union Govt., collected and appropriated by the Union Govt., and amendment of seventh schedule to the constitution, in list I-Union list after entry 92B, entry 92C has been inserted for taxes on services as well as in article 270 of the constitution the clause (1) article 268A has been included.

2.

Formation and function of DGST:

Considering the increasing workload due to the expanding coverage of service tax, it was decided to centralize all the work and entrust the same to a separate unit supervised by a very senior official. Accordingly, the office of Director General (Service Tax) was formed in the year 1997. It is headed by the Director General (Service Tax). The functions and powers of Director General (Service Tax) are: i) To ensure that proper establishment and infrastructure has been created under different central Excise/service tax Commission rates to monitor the collection and assessment of service tax. ii) iii) To study the staff requirement at field level for proper and effective implementation of service tax. To study as to how the various service taxes are being implemented in the field and to suggest Measures as may be necessary to increase revenue collection or to streamline procedures: iv) To undertake study of law and procedures in relation to service tax with a view to simplify the service tax collection and assessment and make suggestions thereon: 13

v)

To form a data base regarding the collection of service tax from the date of its inception in 1994 and to monitor the revenue collection from service tax:

vi) vii)

To inspect the service tax cells in the Commissioner ate to ensure that they are functioning effectively.

To undertake any other functions as assigned by the Board from time to time.

2.A. i) The Directorate General of Service Tax has been co-coordinating between the Board and Central Excise Commission rates. It also monitors the collection and the assessment of Service Tax. The Service Tax Revenue Reports, received from various Central Excise Commission rates, are complied at the Directorate and the performance of the Commission rates/Zones in Service Tax collection are being monitored for corrective actions. ii) The Directorate General of Service Tax has been conducting inspection of Central Excise Commission rates. During the course of inspection, verification of Service Tax records, maintained by the Commissioner ate, is done. Staff of Service Tax Cell are also guided suitably in proper implementation of Service Tax and maintenance of records. A meeting with the Service Tax officers is always conducted in the Commission rate during inspection. Open-house meetings are also arranged in the Commission rates. Problems faced by the assesses in Service Tax compliance are sorted out in the open-house meeting with the members of various service providers associations. iii) The correspondences received from the field formations and service providers are scrutinized and the clarifications sought for are replied to wherever possible. In cases where the doubts/clarification sought involved policy matter, the Board has been apprised for issuing Clarification/instruction. 14

iv)

This Directorate General has taken up the issue of forming a database regarding registration of the assesse and collection of Service Tax in co-ordination with the Directorate of Systems.

15

v)

Presently there are 67 Central Excise Commission rates and 7 Service tax Commission rates

within the jurisdiction of 23 Central Excise Zones. The 7 Service Tax Commission rates have been established in Mumbai (2 Commission rates), Delhi, Kolkata, Chennai, Ahmedabad & Bangalore. Also, there are 5 Large Taxpayer Units (LTUs) located at Mumbai, Bangalore, Delhi, Kolkata and Chennai.

3. Existing scheme for levy, assessment & collection of Service Tax in India

Levy and assessment Service tax is levied on specified services and the responsibility of payment of the tax is generally cast on the service provider but for few exceptions. System of self-assessment of Service Tax Returns by service tax assesses has been introduced w.e.f. 01.04.2001. The jurisdictional Superintendent of Central Excise is authorized to cross verify the correctness of self assessed returns. These tax returns have to be filed half yearly.

The Central Excise officers are authorized to conduct surveys to bring the prospective service tax assessees under the tax net. Directorate General of Service Tax at Mumbai oversees the activities at the field level for technical and policy level coordination.

16

4. Analysis of Service Tax Revenue SERVICE TAX REVENUE (ALL INDIA FROM 1994-95 TO 2009-10)
1. The Service Tax collections have shown a steady rise since its inception in 1994. The tax collections have grown manifolds since 1994-95 i.e from Rs. 410 crores in 1994-95 to Rs.71174.58 crores in 2010-11. 2. The target for the year 2010-11 was Rs.69400 Crores and the actual realisation was Rs.71174.58 Crores, showing increase of Rs.1774.58 Crores (2.56%) 3 The total number of taxable services have also increased from 3 in 1994 to 119 as on 1st May, 2011. 4. There is a substantial growth in the assessee base from 3943 numbers in 1994-95. The revenue and assessee statistics from the year 1994-95 onwards onwards is given in the Table-1 below: FinancialYear RevnueRs. Crores 410 846 1022 1515 1787 2072 2612 Table 1 % Growth over No. of Services previous year under tax net Base Year 106 21 48 18 16 23 3 6 6 18 26 26 26 No. of Assessees 3943 4866 13982 45991 107479 115495 122326 % Growth over previous year Base Year 23.41 187.34 228.93 133.70 7.45 5.91 17

1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

3305 4125 7890 14196 23053 37482 51133 60702 58319

26 25 91 80 62 63 36 19 -3.93

41 52 62 75 84 99 100 106 117

187577 232048 403856 774988 846155 940641 1073075 1204570 1307286

53.34 23.71 74.04 91.89 9.18 11.17 14.08 8.78 8.53

(Revenue as reported by Pr.CCA and Number of assesses as reported by Zones) 1.4 Zone wise performance in Service Tax revenue collection as reported by the Chief Commissioners of all the Zones and comparison thereof with previous year is as per Table-2 below. Table 2 ZONE WISE SERVICE TAX COLLECTION FOR F.Y. 2008-09 & 2009-10 (Source: reports received from Commissionerates /Zones) (Revenue in crores) NAME OF REV. 2008-09 NO. OF ASSESSEES REV. 2009-10 THE ZONE

SR. NO.

NO. OF ASSES SEES 64419 77489 53346 18986 45464 70475

1 2 3 4 5 6

AHMEDABAD BANGALORE BHOPAL BHUBANESHWAR CHANDIGARH CHENNAI

2017.58 3455.56 1148.91 817.23 948.23 3620.48

62636 71836 49396 16805 43540 69191

1975.44 3175.00 1046.25 784.50 680.96 3335.02

18

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

KERALA COIMBATORE DELHI SHILLONG HYDERABAD JAIPUR KOLKATA LUCKNOW MYSORE MEERUT MUMBAI-I MUMBAI-II NAGPUR PUNE RANCHI VADODARA VISHAKHAPATNA M LTU GRAND TOTAL

1009.78 932.91 10178.93 279.92 2190.72 914.59 2744.61 769.49 661.51 1145.74 20205.11 350.13 761.88 2393.24 636.26 980.57 859.48 1935.58 60958.44

23386 61743 144699 12399 40947 53303 51966 46490 24059 36439 178328 3810 48511 73920 24392 38576 27654 544 1204570

907.12 765.95 9895.07 299.39 2039.34 817.14 2712.79 704.90 604.49 1082.45 18440.84 315.80 725.04 2184.01 655.99 963.11 814.03 3202.84

24158 64286 156811 13303 45578 56370 64996 54438 23636 45890 188843 4375 52340 83075 27303 39810 31379 516

24

58127.47 1307286

Note:There is a minor variation between the revenue figures provided by the Zones and those reported by the Pr. C.C.A. 1.5 Commissionerate wise performance in Service Tax revenue collection as reported by the Chief Commissioners of all the Zones, for the year 2007-08 & 2008-09 is given in Table-3 below. Table 3 19

Sr. No.

COMMISSIONERATE WISE SERVICE TAX COLLECTION FOR F. Y. 2008-09 & 2009-10 ( Source : Reports received from the Commissionerates /Zones ) Commissionerate GAR-7 Revenue No. of GAR-7 2008-09 (Rs. In Assessees Revenue crores) 2009-10 (Rs. In crores) AHMEDABAD SERVICE TAX AHMEDABAD-III RAJKOT BHAVNAGAR BANGALORE SERVICE TAX BHOPAL INDORE RAIPUR BHUBANESHWAR-I BHUBANESHWAR-II CHANDIGARH JALANDHAR LUDHIANA CHENNAI-SERVICE TAX CHENNAI-III PONDICHERRY COCHIN (KERAL) CALICUT THIRUVANANTHAPURAM COIMBATORE MADURAI SALEM THIRUNELVELI THIRUCHIRAPALI DELHI-SERVICE TAX ROHTAK PUNCHKULA SHILLONG DIBRUGARH GUWAHATI HYDERABAD-I 999.31 204.01 703.30 110.96 3455.56 354.91 459.78 334.22 452.16 365.07 635.85 122.32 190.06 3367.86 126.14 126.48 507.26 208.82 293.70 317.72 115.60 115.37 136.59 247.63 9906.05 160.49 112.39 165.38 62.14 52.40 68.70 25959 7614 18982 10081 71836 16438 20770 12188 12049 4756 18066 8764 16710 56082 7956 5153 9739 7058 6589 22163 9737 10904 10000 8939 129137 7834 7728 2987 2724 6688 3610 919.37 198.12 762.15 95.80 3175.00 352.41 330.99 362.85 458.42 326.08 408.91 98.79 173.26 3071.90 115.61 147.51 456.07 203.69 247.36 249.32 92.26 118.93 126.44 179.00 9662.15 120.07 112.85 98.69 71.62 129.08 56.83

No. of Assessees

76.

26222 8225 19544 10428 77489 15748 24086 13512 14870 4116 16931 9140 19393 57008 8537 4930 10220 7312 6626 22163 10211 11631 10574 9707 142645 8843 5323 3277 2731 7295 3919 20

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

HYDERABAD-II HYDERABAD-III HYDERABAD-IV JAIPUR-I JAIPUR-II KOLKATA-SERVICE TAX BOLPUR HALDIA SILIGURI LUCKNOW ALLAHABAD KANPUR MANGALORE BELGAUM MYSORE MEERUT-I MEERUT-II NOIDA GHAZIABAD MUMBAI-SERVICE TAX RAIGAD NAGPUR NASIK AURANGABAD PUNE-I PUNE-II ( Kolhapur ) PUNE-III GOA RANCHI JAMSHEDPUR PATNA VADODARA-I VADODARA-II SURAT-I SURAT-II DAMAN VAPI

1646.47 205.87 269.68 647.61 266.98 2437.24 145.64 124.47 37.26 419.91 104.59 244.99 256.16 320.42 84.93 230.67 131.01 652.81 131.25 20205.11 350.13 321.75 210.09 230.04 347.34 180.42 1648.70 216.78 201.36 232.60 202.30 260.58 255.14 298.59 46.44 74.46 45.36

23821 8242 5274 35451 17852 38952 5841 2823 4350 13193 11437 21860 5695 12417 5947 14385 9205 5897 6952 178328 3810 18763 14971 14777 11549 11742 41979 8650 8064 6008 10320 8344 10476 9102 2721 5447 2486

1527.46 185.16 269.89 596.83 220.31 2421.43 153.36 97.29 40.71 327.60 128.60 248.70 238.49 283.71 82.29 270.29 102.41 574.54 135.21 18440.84 315.80 359.81 166.65 198.58 364.82 160.36 1450.69 208.14 286.38 198.93 170.68 246.95 183.71 329.74 58.50 99.35 44.86

26043 9311 6305 37644 18726 51899 6161 2782 4154 18841 12381 23216 5843 11865 5928 16938 10396 11745 6811 188843 4375 20624 15866 15850 15701 12047 45761 9566 9128 6526 11649 8672 10422 9303 3033 5794 2586 21

33.

34.

35.

36.

37.

38.

39.

40.

41.

42.

43.

44.

45.

46.

47.

48.

49.

50.

51.

52.

53.

54.

55.

56.

57.

58.

59.

60.

61.

62.

63.

64.

65.

66.

67.

68.

69.

GUNTUR VISHAKHAPATNAM -I VISHAKHAPATNAM-II THIRUPATI LTU BANGLORE LTU CHENNAI LTU DELHI LTU KOLKATA LTU MUMBAI GRAND TOTAL

226.52 292.99 250.93 89.04 770.20 771.07 115.12 0 279.19 60958.44

10947 5144 5040 6523 147 258 14 0 125 1204570

262.84 318.42 163.56 69.21 896.00 804.24 843.94 0 658.66 58127.47

13886 5548 5081 6864 161 298 20 0 37 1307286

70.

71.

72.

73.

74.

75.

76.

77.

Challenges before the Service Tax Administration in India

Service tax administration in India has before it multi-dimensional challenges. Some of them are related to the very nature and growth of service sector in the economy and others relate to procedural aspects of the service tax collection. The growth of service sector at a high rate offers opportunities as well as challenges to bring under the tax net hitherto uncovered services. This offers tremendous revenue potential to the Government. It is expected that in due course Service Tax would reduce the tax burden on international trade (Customs duty) and domestic manufacturing sector (Excise duty). So a planned growth of service tax would be commensurate with the goals of economic liberalization and globalization. This process requires levy of taxes on new services without substantial rise in the rate or cost of collection. The proposed Goods and Service Tax is a part of the tax reforms that centre around evolving an efficient and harmonized consumption tax system in the country. Presently, there are parallel systems of indirect taxation at the Central and State level. The existing Service Tax System poses an imminent challenge, to reform its synergies, to eventually harmonize itself in the GST regime, as and when it is rolled out. Successful integration of goods and service tax, would give India a world-class tax system and will bring in improved tax collection. In a way, it will boost our economy and enable us to compete at the global front. As a result, our system will eventually match the international standard in the sphere of indirect taxation. It will also end the long standing distortions of differential treatments to the manufacturing and service sectors. The effort to prepare for a smooth integration with the GST without any hardship to public is a big challenge, that need to be handled at the field as well policy level. No doubt, the twin goal of revenue maximization and introduction of the culture of voluntary tax compliance also throw up major challenge before the 22

service tax administration in the country. The Department has taken several steps to upgrade the skill of the officers handling Service Tax and equip them with necessary expertise. Training programmes on the issues related to Service Tax are regularly conducted for the Departmental officers. A Manual for scrutiny of Service Tax Returns has been prepared by the CBEC to enable the Departmental officers to carry out the scrutiny of Service Tax returns in a methodical and systematic manner. At the same time, the Govt. has also taken several facilitation measures for the tax payers. To assist them in the filing of Service Tax returns, Service Tax Returns Preparer (STRP) Scheme has been launched in 2009. To enable them to understand the basic issues related to Service Tax, a booklet on Frequently Asked Questions (FAQ) on Service Tax has been published and the FAQ has also been put up on the Departmental website. Open House sessions, Seminars etc. are also organized by the field formations to help the assesses and solve their problems.

6.

Electronic Tax Administration

1.1 The Directorate General of Systems & Data Management has developed a web based software named as AUTOMATION OF CENTRAL EXCISE AND SERVICE TAX (ACES) which automates various processes of Central Excise & Service Tax for Assesses and Department and gives complete end to end solution. The ACES can be used for: (i) Online registration and amendment of registration details; (ii) Electronic filing of documents such as Returns, Claims, Intimations and permissions; (iii) Online tracking of the status of applications, claims and permissions; (iv) Online facility to view documents like registration Certificate, Returns, Show Cause Notices, and Order-In-Originals etc. 1.2 As per the proviso to amended Rule 6 (2) of Service Tax Rules, 1994, where an assessee has paid a total service tax of rupees ten lakh or more including the amount paid by utilisation of CENVAT credit, in the preceding financial year, he shall deposit the service tax liable to be paid by him electronically, through internet banking. This has been made effective from 01.04.2010 vide Notification No.01/2010 ST dated 19.02.2010. 1.3 As per the proviso to amended Rule 7 (2) of Service Tax Rules, 1994, where an assessee has paid a total service tax of rupees ten lakh or more including the amount paid by utilisation of CENVAT credit, in the preceding financial year, he shall file the return electronically. This has been made effective from 01.04.2010 vide Notification No.01/2010 ST dated 19.02.2010.

7.

Audit and Inspections 23

Inspection: Directorate General of Service Tax (DGST) conducts inspections of Service Tax work in Central Excise Commissionerates & Service tax Commission rates all over the country. Inspections in the past have prompted the Commission rates to streamline the service tax administration system. In pursuance of the Boards letter No.137/311/2007-CX.3 dated 15.12.2007, the DGST is conducting the inspection of the Commission rates having service tax revenue of Rs.500 Crore and above per annum. Accordingly, 8 Commissionerates each were inspected by the DGST during 2008-09, 2009-10 and 2010-11. Audit: The service tax is envisaged to be administered on self-assessment basis. Legal provisions for facilitating such self-assessment have been made in the Finance Act, 2001. This underlines the need for strengthening the audit mechanism to prevent tax evasion/avoidance. The Director General of Audit, Central Board of Excise & Customs New Delhi published SERVICE TAX AUDIT MANUAL 2003 on 01.10.2003 containing the entire procedure to be followed by the officers of the Department while conducting audit of the Service Tax providers. All Commissionerates have also been directed to conduct the internal audit of assessees records as per the instructions of the Board. This audit drive has resulted in the augmentation of revenue. During 200910 total 12989 audits were conducted in India by 549 audit groups. These audits, resulted in detection of short payment to the tune of Rs. 7873.84 Crores and a recovery of Rs.1083.43 Crores. It is necessary that all available resources and efforts are mobilized by the field formations for audit of the registered assesses as per the norms decided by the Board.

8.

Future growth path for service tax in India.

Service tax is envisaged as the tax of the future. Well synchronized taxation on manufacturing, trade (domestic & international) and service without giving rise to cascading effect of taxation would be an ideal worth pursuing in the immediate future. This would bring in VAT in its truest sense, though the ultimate objection usher in the regime of Goods and Service Tax (GST). Continued growth in GDP accompanied by higher rate of growth in service sector promises new & wider avenues of taxation to the Government. If the tax on services reduces the degree of intensity of taxation on manufacturing and trade without forcing the Government to compromise on the revenue needs, then one of the basic objectives of taxing the service sector would be achieved. Voluntary tax compliance on the part of taxpayers demands prudent accounting practices and transparency in the conduct of their business. Marginal rates of taxation would be conducive in this process. Many new services may be brought under the tax net in future. The inclusion of all value added services in the tax net would yield larger amount of revenue and make the existing tax structure more elastic. Advanced economies of Western Europe, North America and Far East have share of service sector in their GDP ranging from 60% to 80%. The growth in absolute quantum of GDP and proportion of Service-sector in GDP holds promise for larger revenue generation without increasing the existing level of taxation Future Course of Action 24

The following items of works have to be attended to urgently to improve the administration of Service Tax in the country. 1. Target (Budget estimate) of Rs.82000 crores Service Tax collection for f.y. 2011-12 to be exceeded. 2. Intensify the field survey operations to ensure that all taxable service assessees are brought into the tax net and Service Tax due from them are collected without hitch. 3. While the basic tenet of voluntary compliance of Service Tax law has to be adhered to, recalcitrant/ habitual evaders of Service Tax have to be booked for appropriate action under the law. There could be no leniency in this regard. 4. Effective use of Audit and Anti-evasion as tools for ensuring the compliance on the part of the assessee and curbing the instances of irregularities and tax evasion. With the launch of ACES greater emphasis will be on training the staff in computer skills necessary to carry out effective, systematic and result oriented analysis of data available in the system, to achieve their person. 5. The statutory change to prosecute frequent offenders/tax evaders is needed in the Act.

6. Effectively implement an Electronic Tax Administration (ETA) system for service tax so that service tax could be administered as a pioneer e-tax of the country. The Directorate General of Systems & Data Management has developed a web based software named as AUTOMATION OF CENTRAL EXCISE AND SERVICE TAX (ACES) which automates various processes of Central Excise & Service Tax for Assesses and Department and gives complete end to end solution. 7. Concentrate on liquidation of Service Tax arrears and issue necessary clarifications to the field officers so that arrears linked up with disputed interpretations of the provisions of the law could be easily resolved. 8. Attend to all major court cases relating to Service Tax law for early decision. 9. Deploy adequate staff to attend to the service tax work and provide infrastructure and conveyance to implement service tax law effectively.

25

Sales Tax Avoidance

Businesses can reduce the impact of sales tax for themselves and their customers by planning for the tax consequences of all activities. Sales tax avoidance often includes the following: 1. Designing invoices to reduce the taxable portion of a sale transaction. In Maryland, for example, a delivery charge is exempt from the tax when stated separately from handling and other taxable charges. 2. New facilities. Jurisdictions with no sales tax or broad exemptions for certain types of business operations would be an obvious consideration in selecting a site for a new manufacturing plant, warehouse or administrative office. 3. Delivery location. For a businesses operating in several jurisdictions, choosing the best location in which to take delivery can reduce or eliminate the sales tax liability. This is particularly important for an item to be sold or used in another jurisdiction with a lower tax rate or an exemption for that item. Businesses should consider whether a temporary storage exemption applies to merchandise initially accepted in a jurisdiction with a higher tax rate. 4. Review of company purchases to determine whether tax was paid in error for equipment and supplies qualifying for exemptions, especially in jurisdictions with broad manufacturing exemptions. Some jurisdictions allow refunds as long as three or even four years after the tax was paid. 5. Periodic review of record-keeping procedures related to sales and use tax. Proper supporting detail, including exemption and resale certificates, invoices and other records must be available to defend the company in the event of a sales and use tax audit. Without proper documentation, a seller can be held liable for tax not collected from a buyer.

26

Service Tax Notifications of Year 2011

Service Tax Notifications of Year 2011 (Reverse Chronological Index)

52/2011 - Service Tax, dated 30-102011 51/2011 - Service Tax, dated 30-102011 50/2011 - Service Tax, dated 30-102011 49/2011 - Service Tax, dated 30-102011 Order No. 03-Service Tax, dated 29-122011 Order No. 02-Service Tax, dated 13-122011 Order No. 01-Service

Seeks to supersede Notification No. 17/2009 - Service Tax, dated the 7th July, 2009 thereby exempting certain taxable services Amends Notification No.092010-Service Tax, dated 27th February, 2010 Amends Notification No.08/2010-Service Tax, dated the 27th February, 2010

Amends Notification No.07/2010-Service Tax, dated the 27th February, 2010

Extension of date of submission of service tax half yearly returns

Regarding documents to be submitted for application of registration for paying service tax Extension of date of submission of service tax half yearly returns 27

Tax, dated 20-102011 48/2011 - Service Tax, dated 19-102011 47/2011 - Service Tax, dated 19-092011 46/2011 - Service Tax, dated 19-092011 45/2011 - Service Tax, dated 12-092011 44/2011 - Service Tax, dated 09-092011 43/2011 - Service Tax, dated 25-082011 42/2011 - Service Tax, dated 25-072011 41/2011 - Service Tax, dated 27-062011 40/2011 - Service Tax, dated 14-062011 39/2011 - Service Tax, dated 14-062011 38/2011 - Service Tax, dated 14-062011 37/2011 - Service Tax, dated 25-042011 36/2011 - Service Tax, dated 25-042011 35/2011 - Service Tax, dated 25-042011 Corrigendum, dated 26-04-2011 34/2011 - Service Amends Service Tax Rules, 1994

Amends Notification No. 17/2004-Service Tax, dated the 10th September, 2004

Amends Notification No. 18/2002-Service Tax, dated 16th December, 2002

Exempts certain taxable services

Amends Notification No. 31/2009-Service Tax, dated the 1st September, 2009

Fourth Amendment in Service Tax Rules, 1994

Exempts service provided by certain association of dyeing units from whole of service tax Amends the Point of Taxation Rules, 2011

Amends Notification No. 09/2010-Service Tax, dated the 27th February, 2010

Amends Notification No. 08/2010-Service Tax, dated the 27th February, 2010

Amends Notification No. 07/2010-Service Tax, dated the 27th February, 2010

Amends Taxation of Services Rules 2006

Amends Export of Services Rules, 2005

Amends Service Tax Rules, 1994

Further amendments in Notification No. 1/2006-Service Tax, dated the 1st 28

Tax, dated 25-042011 33/2011 - Service Tax, dated 25-042011 32/2011 - Service Tax, dated 25-042011 31/2011 - Service Tax, dated 25-042011 30/2011 - Service Tax, dated 25-042011 29/2011 - Service Tax, dated 25-042011 Corrigendum, dated 26-04-2011 28/2011 - Service Tax, dated 01-042011 27/2011 - Service Tax, dated 31-032011 26/2011 - Service Tax, dated 31-032011 25/2011 - Service Tax, dated 31-032011 Corrigendum dated 04-04-2011 24/2011 - Service Tax, dated 31-032011 23/2011 - Service Tax, dated 31-032011 22/2011 - Service Tax, dated 31-032011 21/2011 - Service Tax, dated 30-032011 20/2011 - Service Tax, dated 30-03-

March, 2006 Regarding exemption to preschool coaching and training

Rescinds Notification No.25/2006-Service Tax, dated the 13th July, 2006

Exempts certain taxable service

Exempts certain taxable service

Appoints the 1st day of May 2011 as the day for Finance Act, 2011 ( 8 of 2011) to come into force

Regarding Point of Taxation Rules, 2011

Amendment in the notification no. 19/2009-Service Tax, dated the 7th July, 2009 Amendment in the Service Tax Rules, 1994.

Amendment in the Point of Taxation Rules, 2011.

Amendment in the Service Tax (Determination of Value) Rules, 2006

Amendment in the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. Amendments in the Export of Services Rules, 2005

Amends Notification No. 09/2010-Service Tax, dated the 27th February, 2010

Amends Notification No. 08/2010-Service Tax, dated the 27th February, 2010 29

2011 19/2011 - Service Tax, dated 30-032011 18/2011 - Service Tax, dated 01-032011 17/2011 - Service Tax, dated 01-032011 16/2011 - Service Tax, dated 01-032011 15/2011 - Service Tax, dated 01-032011 14/2011 - Service Tax, dated 01-032011 13/2011 - Service Tax, dated 01-032011 12/2011 - Service Tax, dated 01-032011 11/2011 - Service Tax, dated 01-032011 10/2011 - Service Tax, dated 01-032011 09/2011 - Service Tax, dated 01-032011 08/2011 - Service Tax, dated 01-032011 07/2011 - Service Tax, dated 01-032011 06/2011 - Service Tax, dated 01-032011 05/2011 - Service Tax, dated 01-032011 04/2011 - Service Amends Notification No. 07/2010-Service Tax, dated the 27th February, 2010

Point of Taxation Rules, 2011.

Exemptions for certain taxable services specified in clause (105) of section 65 received by a Unit located in a SEZ) or Developer of SEZ for the authorised operations, from the whole of the service Tax. Amendments in the notification no. 1/2006-Service Tax, 01-03-2006

Amendment in the notification no. 8/2006-Service Tax, 19-04-2006

Amendment in the notification no. 26/2004-Service Tax, 10-09-2004,

Taxation of Services (Provided from Outside India and Received in India) Amendment Rules, 2011. Export of Services (Amendment) Rules, 2011.

Exemptions for certain services provided in relation to the execution of works contract, referred to in sub-clause (zzzza) of clause (105) of section 65 Exemptions for certain services provided in relation to the execution of works contract, referred to in sub-clause (zzzza) of clause (105) of section 65 Exemptions for certain taxable services as referred to in sub-clause (zzn) of clause (105) of section 65 Exemptions for certain taxable services as referred to in sub-clauses (zzn), (zzp) and (zzzp) of clause (105) of section 65 Exemptions for certain taxable service specified in sub-clause (d) of clause (105) of section 65 Exemptions for certain taxable service of execution of a works contract referred to in sub-clause (zzzza) of clause (105) of section 65 Exemptions for certain taxable service specified in sub-clause (zzo) of clause (105) of section 65 Amendment in the notification No. 26/2010-Service Tax, dated the 22nd June, 30

Tax, dated 01-032011 03/2011 - Service Tax, dated 01-032011 02/2011 - Service Tax, dated 01-032011 Corrigendum dated 08-03-2011 01/2011 - Service Tax, dated 01-032011

2010, Service Tax (Amendment) Rules, 2011.

Service Tax (Determination of Value) Amendment Rules, 2011 Corrigendum to Notification No. 02/2011-Service Tax, dated 01st March, 2010.

Works Contract (Composition Scheme for Payment of Service Tax) Amendment Rules, 2011.

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Bibliography
http://servicetax.net/
http://www.servicetax.gov.in/

http://www.google.co.in

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THANK YOU

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