Service Tax

CHANGES BY FINANCE ACT 2012

Service Tax
Changes By Finance Act 2012

Before 01.07.2012 119 Services were Taxable Service Provider was Liable To Pay Tax in Full Under Special Condition Service Receiver was Liable To Pay
1.

2.
3.

Import of Services Transport of Goods By Road Services Sponsorship Service etc.

Service Tax
Changes By Finance Act 2012

W.E.F 01.07.2012 All Services Are Taxable except under Negative List.

(Important Negative List items Click Here) (Important exemption list Click Here )

Mega Exemption from Service Tax.

Removal of Services Classification prescribed vide

Section 65(105). Pure Services and Declared Services.

Declared Services
Renting of Immovable Property

Work Contract
Construction of Complex, Building, Civil Structure Temporary Transfer of Intellectual property right

Transfer of goods by way of hiring, licensing, hire

purchase Service portion in execution of work contract

Services
Banking, NBFC,

Electricity Distribution Services

Support Services Consignment Handling Services

Courier Agency
Restaurant, Food Stand, First food Center Caterer, Convention Centre etc.

Service Classification
Before 01.07.2012
Erection, Commissioning

From 01.07.2012

or Installation Services Construction Services in respect of Industrial Building or Civil Structure. Construction of Residential Complex Services Repair and Maintenance Services Interior Designer Services Renovation, Alternation, etc.

Now All this services

are covered under

1. 2.

Work Contract Service Construction of Complex.

Classification of Services

shall not include reference to a service which is used for providing main service.
Rule

1. Reference to a Main Service

Means Service used for Main Service may or may not classified under same services.

Rule

more general description. Rule 3 Taxability of a bundled service

2 . Most specific description shall be preferred over a

(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; (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.

Explanation. For the purposes of sub-section (3), the expression "bundled service" means a 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.

Negative list of Services

Services by Government or a Local Authority

Services by the Reserve Bank of India

Services by a foreign diplomatic mission located in India Services relating to agriculture Trading of goods, Activity amounted to Manufacturing Transmission or Distribution of electricity by an

electricity transmission or distribution utility Funeral, burial, crematorium or mortuary services including transportation of the deceased

Mega Exempted Services - 1

1. Services provided to the Government or local authority by way of erection, construction, maintenance, repair, alteration, renovation or restoration of :
canal, dam or other irrigation works pipeline, conduit or plant for (i) drinking water supply (ii) water treatment (iii)sewerage treatment or disposal a historical monument, archaeological site or remains of national importance, a residential complex predominantly meant for self-use or the use of their employees

Mega Exempted Services - 2

Services provided by way of erection, construction, maintenance, repair, alteration, renovation or restoration of:
a)

b)
c) d)

Road, bridge, tunnel, or terminal for road Transportation for use by general public building owned by charitable trust and meant predominantly for religious use by general public pollution control or effluent treatment plant, except located as a part of a factory electric crematorium

Mega Exempted Services -3

Services by way of erection or construction of

original works pertaining to:a)

b)

c)
d)

e)

airport, port or railways; single residential unit otherwise as a part of a residential complex; low- cost houses up to a carpet area of 60 square meters Post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes; Mechanized food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;

Specific Exempted Services:

Services to United Nation or Specified International Organization. 2. Service by way of vehicle parking to general public excluding leasing of space. 3. Service by the following persons in respective capacity:
1.
a) b)

Selling or distribution of SIM cards or recharge coupon voucher; Sub-contractor providing services by way of works contract to another contractor providing work contract services which re exempt;

Work Contract

One Contract - one order (Composite Order)

One Contract Many order (Divisible Order)

Supply order Erection order Civil order F&I Repairs & Maintenance

Valuation Method for Service Value of Work Contract

Cost Plus Method / Service Value / Direct Method

Composition Method or Preventive Method

Cost Plus Method / Service Value Method

Gross Amount Charged for Work Contract

Less: Value of Supply including Tax thereon

Note: 1. CENVAT credit available for Input, Input Services used in or in relation to execution of Work contract. 2. Service Value determined above must have value for items listed in list 1.

List - 1

(i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architects fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel, used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of labour and services;

Composition Method or Preventive Method

Gross Value Charged for Execution of Work Contract Add: FMV of Supplies (supplied in same or other contract for execution of work contract)
(i.e. Supplied free of cost or at discounted value) Less Value Charged for that Supplies

Note: 1. Preventive rate 40/60/70 % apply of calculating Service Value 2. CENVAT credit for Input is not available. 3. CENVAT credit for Input Services and capital Goods will be available.

Composite Contract
Total Value of Composite Contract Value of Supply (Value to be Justified with VAT / Sales Tax return) (Here we may show the Supply Invoice) 100 80

Value of Service including incidental material for Services Determine the Tax payable (Full Rate i.e. 12.36%)
Less CENVAT Credit For Material / Input used in Services (Non-billable items) For Input Services used for providing Services For Capital Goods (we can take credit 50% & 50% in 1st & 2nd Year but we have to reverse credit when the same is transfer to other site as such on value purchased less deprecation)

20 2.472
1.000 0.400 0.00

Net Tax payable

1.072

Single Contract Divisible order

Gross Amount for Supply Order
Gross Amount for Erection order Gross Amount for Civil order Gross Value for F & I (except F & I value being integral part of Supply) Total Contract Value Add: FMV of Free Supply after reducing amount charged Value of Work Contract Taxable Value (40/60/70 %)

800
80 100 20 1000 0.00 1000 400

Tax Livable Less CENVAT Credit For Input Services used for providing Services
For Capital Goods (we can take credit 50% & 50% in 1st & 2nd Year but we have to reverse credit when the same is transfer to other site as such on value purchased less deprecation) Net Tax payable

49.44 0.400
0.00

1.072

Separate Contract for each work without Interdependency clause

Supply Contract Exempted

Erection Contract

Tax payable to determined as per clause applicable to Cost Plus Contract / Direct calculation
Tax payable to determined as per clause applicable to Presumptive Taxation / Composition method Presumptive Taxation / Composition method

Civil Contract

Repair & Maintenance Contract

This is not possible to be applied in our case as service provider because we are providing bundle of Services which are normally bundled in business practice.

Most Vital Changes

Service Provided in or from India is Taxable (except

provided in Jammu & Kashmir) Services received in Taxable Territory from any nonTaxable Territory. In case of change in effective rate of tax date of payment have vital Important. Enlargement of Reverse Charge Coverage

Reverse Charge Mechanism

Services Covered are (subject to specified condition): Transportation of Goods by Road Support Service by Government or Local Authority Renting or Hiring any Motor Vehicle for carrying passenger. Supply of manpower for any purpose Service by way of works contract Import of Services Note: 1. CENVAT credit can be availed on the basis of tax paid challan for Any Tax paid under Reverse Charge Mechanism. 2. Govt. has clarified in educational guide that Service Receiver is not liable for Services whose point of taxation has been determined and whole liability affixed before 01.07.2012.

Transportation of Goods by Road

Service Receiver (Who is paying Freight) CENVAT Credit CENVAT Document Must Note

Tax @12.36% on 25% Freight Value Can Avail for Service Tax payable against Service Billed. Tax paid Challan Freight paid does not have element of Loading & Unloading Charges

Support service by Government or Local Authority

Service Provided by
Taxable Value for Service Receiver Services Mainly Covered

Government or local authority

Tax @12.36% on 100% Service Charges Paid 1. Testing , 2. Security 3. Construction / Erection 4. R & D or any other Support Services 1. Renting of Immovable property, 2. Postal Services, 3. Services in relation to Aircraft or Vessel and 4. Transportation of Goods or Passenger.

Following Govt. Support Services are exempted

Renting or Hiring of Vehicle for Passenger Carrying.

Service Provider 1. 2. 3. 4. Any individual, Hindu Undivided Family Proprietary firm Partnership firm,

Service Receiver Liability Mainly Cover

Tax 12.36% on 40% Value Paid 1. CAR 2. Jeep 3. Bus etc .

Supply of Manpower for any purpose

Service Provider

1. 2. 3. 4.

Any individual, Hindu Undivided Family Proprietary firm Partnership firm,

Service Receiver Liability Mainly Cover

Tax 12.36% on 75% Value Paid 1. Labour provided by Agency 2. Man power for Loading & Unloading. 3. Security Personal 4. Man power for Material Sifting

Works Contract
Service Provider 1. 2. 3. 4. Any individual, Hindu Undivided Family Proprietary firm Partnership firm,

Service Receiver Liability

On 50% Value Paid (Method of Calculation of Taxable value is disused above) 1. Civil Work order (With or Without Material) 2. Erection work order(With or Without Material) 3. Repair & Maintenance order(With or Without Material)

Mainly Cover

Import of Services
When Service is called Imported Service Receiver liability Abetment & Exemption When a Service is received in Taxable Territory from non-taxable Territory. Tax @12.36% on full value paid subject to available Abetment / Exemption Taxable Value should be determined considering service is provided from Taxable area by Service Receiver.

Services Covered

All Taxable Services

Most Important Action to be taken

All work order to be revised considering Tax implication

under reverse charge method, All Service Provider to be registered with Service Tax department, All Input Service Bill must complied with provision of CENVTABLE invoice. First Service Invoice to be supported by Service Tax Registration and subsequent Invoices to be supported by Tax paid challan for Tax paid against earlier bill.(Bill format and check list enclosed) All Service And Excise Bill to be address to Site address otherwise CENVAT Credit will not available and also billed Site become liable for tax under reverse charge.

Contains of Invoice if Partial Reverse Charge Applicable

Invoice to be issued in compliance of Rule 4A of

Service Tax Rule,1994

Name, Address and Registration Number of Service Provider and Receiver Value of Taxable Service Provided or agreed to be provided Service Tax payable thereon (Only Service Provider liability)

Thanks for your Feedback

Prepared By P K Jaiswal & Co 56/1/1, Kings Road, Howrah 711 101 Email: pkjaiswal.co@live.in Contact: 09062000111 033 32515699 Techno Electric and Engg. Co. Ltd.

Prepared For

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