CORPORATE AND PROFESSIONAL UPDATE FOR THE MONTH

Provision of section 2(22)(e) would not be applicable

9Initiation of proceedings under section 201 against assessee after 9 years from end of relevant financial year was time barred

[2015] 56 taxman.Com 458 (Delhi)-HIGH COURT OF DELHI-CIT (TDS)-I v. C.J. International Hotels (P.) Ltd

Section 2(22) of the Income-tax Act, 1961 – Deemed dividend -Loans or advances to shareholders

FACTS

One ‘H’ was a shareholder of ‘P’ Ltd. which held shares in Assessee Company. ‘H’ had borrowed amounts from the assessee company.

The Assessing Officer sought to bring assessee company to tax under section 2(22)(e) holding that ‘H’ had more than 10 per cent stake in the assessee company and conditions spelt out in section 2(22)(e) were satisfied.

The assessee contended that said ‘H’ could not be considered as a shareholder in the assessee company. The other contention was that said ‘H’ could not be considered even as a beneficial shareholder of the assessee company.

On appeal, the Commissioner (Appeals) as well as the Tribunal held that section 2(22)(e) would not be applicable.

On appeal it was held that:

The individual ‘H’ was not a shareholder of the present assessee but rather the shareholder of another concern which held shares in Assessee Company.

With respect to section 2(22)(e), the mandatory need to fulfil both pre-conditions which are conjunctive and not dis-conjunctive i.e. the shareholder must be (a) Registered shareholder; and (b) A Beneficial shareholder.

In the absence of any finding that ‘H’ owned the shares or was beneficial owner in terms of such provision – on both counts – the findings being adverse to the revenue, no question of law arises.

Section 201 of the Income-tax Act, 1961 – Deduction of tax at source – Consequence of failure to deduct or pay – Period of limitation

Initiation of proceedings under section 201 against assessee after 9 years from end of relevant financial year was time barred

FACTS

The Assessing Officer initiated proceedings under section 201 against the assessee after 9 years from the end of relevant financial year, treating the assessee as an assessee in default.

The assessee contended in the appeal that the initiation of proceedings under section 201 was time barred.

It was argued by the revenue that there was no limitation was prescribed under section 201.

On appeal: it was held that 

The submission of the revenue is unacceptable, had the Parliament indeed intended to overrule or set aside the reasoning in CIT v. NHK Japan Broadcasting Corpn. [2008] 305 ITR 137/172 Taxman 230 (Delhi), it would have, like other instances and more specifically in the case of section 201 (1A), brought in a retrospective amendment, nullifying the precedent itself. That it chose to bring section 201(3) in the first instance in 2010 and later in 2014 fortifies the reasoning of the court. Accordingly, the issue is answered against the revenue

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 011-233 433 33

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CORPORATE HIGHLIGHT FOR THE MONTH

Loss arising on intra-day trading in shares wasn’t speculative if such transactions were in nature of jobbing

Untitled1Section 73 of the Income-tax Act, 1961 – Losses – In speculation business -Intra-day trading of shares

Before disallowing assessee’s claim of loss on account of intraday trading in shares as speculative loss, a clear finding was to be given as to whether intraday purchases and sales made were jobbing transactions [2015] 56 taxman .com  462 -HIGH COURT OF DELHI -CIT v. Lalit Kumar Poddar

FACTS

The assessee, a share broker, was engaged in trading in stocks and shares. The assessee had claimed a sum of Rs. 66.35 lakhs on account of clearing difference.

The Assessing Officer treated said sum as a speculative loss and disallowed it on account of section 73(1).

On appeal, both Commissioner (Appeals) and Tribunal upset the findings of the Assessing Officer. Both the appellate bodies were of the opinion that the nature and character of the transaction was such that it did not fall within the description of speculative transaction and all the shares and scripts purchased from the broker were on firm basis.

On revenue’s appeal it was held by High Court

Both the Commissioner (Appeals) and the Tribunal took into consideration the assessee’s explanation that certain intraday transactions – broadly described as ‘clearing differences’ were held over in the sense that the delivery had to be obtained.

The assessee had also apparently argued before the concerned authorities and placed a chart reflecting the transactions to support the submission that even in respect of intraday sales, consideration had passed.

A look at the order of the Commissioner (Appeals) as well as Tribunal nowhere reflects this position. Even the discussion of the Assessing Officer while including a sum of Rs. 66,35,210 would show that the no rationale has been given as to whether in fact consideration flowed for the intraday purchases and sales effected by the assessee so as to take it out of the mischief.

The matter should be considered afresh and express findings recorded as to whether in fact intraday purchases and sales made by the assessee were jobbing transactions and whether consideration has passed

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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CLARIFICATION BY CBEC

CBEC clarifies – Dealer Registration NOT mandatory for transit sale

Untitled22Background:

Vide Notification No. 8/2015-CE. (NT) Dated 1st March 2015-05-08, the following proviso was added to Rule 11(2) of the Central Excise Rules, 2002 (the Excise Rules)

“Provided also that if the goods are sent directly to any person on the direction of the registered dealer, the invoice shall also contain the details of the registered dealer as the buyer and person as the consignee, and that person shall take Cenvat credit on the basis of the registered dealer’s invoice.

Provided also that if the goods imported under the cover of a bill of entry are sent directly to buyer’s premises, the invoice issued by the importer shall mention that goods are sent directly from the place or port of import to the buyer’s premises.”

In view of the newly inserted provisos, some field officers took the view that whoever orders goods to the Manufacturer and directs the Manufacturer to send the goods to ultimate user directly are required to take “Dealer’s” Registration. They insisted that Cenvat credit will not be allowed on the strength of Manufacturer’s invoice when the goods are sold through a Non-Registered Dealer.

This view was also endorsed recently by the Joint Commissioner, Office of the Principal Chief Commissioner of Central Excise, Mumbai Zone-I, who clarified that since Cenvat credit will be available on Registered Dealers’ Invoice, hence registration of Dealer with Central Excise is must from March 1, 2015.

Clarification issued by the CBEC:

The Central Board of Excise and Customs (the CBEC” or “the Board) vide Circular No. 1003/10/2015-CX dated May 5, 2015 (“the Circular) has clarified that the new provisos are meant to improve the ease of doing business by providing an additional facility to the Registered Dealer or Importer for direct dispatch of goods from the manufacturer to the consignee, when he is issuing Cenvatable invoice. They do not withdraw any past facility. These amendments should therefore be harmoniously interpreted with the existing Rules and Circulars in conformity with the legal provisions, keeping the intention of the Government in mind.

The Board has clarified as under:

“(i) Where a registered dealer negotiates sale of an entire consignment from a manufacturer or a registered importer and orders direct transport of goods to the consignee, credit can be availed by the consignee on the basis of invoice issued by the manufacturer or the registered importer. In such cases no Cenvatable invoice shall be issued by the registered dealer in favour of the consignee though commercial invoice can be issued. Where a registered dealer negotiates sale of goods from the total stock ordered on a manufacturer or an importer to multiple buyers and orders direct transportation of goods to the consignees and the manufacturer or the importer is willing to issue individual invoices for each sale in favour of the consignees for such individual sale, the same procedure shall apply.

(ii) Where a registered dealer negotiates sale by splitting a consignment procured from a manufacturer or a registered importer and issues Cenvatable invoices for each of the sale, it would now be possible for the dealer to order direct transport of the consignments as per the individual sales to the consignee without bringing the goods to his godown. This would save time and transportation cost for the dealer adding to ease of doing business. This is a new facility which flows from the amended provisions. Procedure as prescribed in the third proviso of rule 11(2) shall be applicable in such case.

(iii) Where a un-registered dealer negotiates sale of an entire consignment from a manufacturer or a registered importer and orders direct transport of goods to the consignee, credit can be availed by the consignee on the basis of invoice issued by the manufacturer or the registered importer. As the dealer is not registered, there is no question of issuing any Cenvatable invoice by him. Such dealers as in the past can continue to be un-registered.

(iv) Where goods are sold by the registered importer to an end-user (say a manufacturer) who would avail credit on the basis of importer’s invoice and the goods are transported directly from the port or warehouse at the port to the buyer’s premises, the amendment prescribes that for such movement the factum of such direct transport to the buyer’s premises needs to be recorded in the invoice.”

The above stated clarification has not only brought a sigh of relief for the Dealers, but has also granted additional benefits like direct transport in case of split consignments, an appreciating move of the CBEC towards “Ease of doing business”.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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HIGHLIGHTS OF THE PROPOSED GST

Highlights of New Proposed Goods & Service Tax (GST)

3

  1. The basic principal governing behind GST is to have single Taxation System for Goods and Services across the country. Currently Indian economy has various taxes on Goods and services such as VAT, Service Tax, Excise, Entertainment Tax, Luxury Tax Etc. now in the new Proposal of GST; we will be having only two taxes on all goods and Services as follows:
  2. State Level GST (SGST)
    Central Level GST (CGST)
  3. In case of Central GST, following Taxes will be subsumed with CGST which are at presently levied separately on goods and services by Central government:
  4. Central Excise Duty
    Additional Excise Duty
    The Excise Duty levied under Medicinal and toiletries preparation Act
    Service Tax
    Additional Custom Duty (CVD)
    Special Additional Duty
    Surcharge
    Education Cess and Secondary and Higher Secondary education Cess
  5. In case of State GST, following taxes will be subsumed with SGST; which are priestly levied on goods and services by State Governments:
  6. VAT/ Sales Tax
    b. Entertainment Tax (unless it is levied by local bodies)
    c. Luxury Tax
    d. Tax on lottery
    e. State Cess and Surcharge to the extend related to supply of goods and services.
  7. The basic principal for subsuming of taxes in GST is provided as follows:
  8. Those taxes which commences with import / manufacture /production of goods or provision
    of services at one end and the consumption of goods and services o other end.
    The taxes, levies and fees which are not related to supply of goods & services should not be
    subsumed under GST.
  1. Taxes on items containing alcohol and petroleum product are kept out of GST. They will continue to be taxed as per existing practices.
  2. Tax on Tobacco products will be subject to GST. But government can levy the extra Excise duty over and above GST.
  3. The Small Taxpayer: The small taxpayers whose gross annual turnover is less than 1.5 Crore are exempted from CGST and SGST.
  4. Input Tax Credit (ITC): Taxes Paid against CGST allowed as ITC against CGST. Taxes paid against SGST allowed as ITC against SGST.
  5. Cross utilization of ITC between the Central GST and State GST would not be allowed. Exception: Inter State Supply of goods and services.
  6. PAN based identification number will be allowed to each taxpayer to have integration of GST with Direct Tax.
  1. IGST Model and ITC:
  1. Center would levy IGST levy (CGST + SGST)
    The ITC will be allowed in this transaction will be SGST, IGST, CGST as applicable.
    Appropriate provision will be provided for consignment or Stock transfer.
  1. GST Rate Structure:

Two Rate Structure

a. A lower rate for necessary items and goods of basic importance
b. Standard rate for goods in General
c. Special Rate

  1. Exports are fully exempted with Zero rates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 011-233 433 33

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CORPORATE AND PROFESSIONAL UPDATE

Untitled270

Larger Bench of Bangalore CESTAT decides five key issues in relation to Turnkey Projects

The Bench of in the case of M/s Lanco Infratech Ltd. 2015 TIOL-768-CESTAT – BANG-LB has decided five key issues relating to Service tax on various infrastructure projects undertaken for Government. The same has been discussed below:

S.no. Issue Larger Bench held that
1. Whether laying of pipelines for lift irrigation systems, transmission and distribution of drinking water or sewerage, undertaken for Government/ Government undertakings should be classified under ECIS aserection, commission or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise; or installation of plumbing, drain laying or other installations for transport of fluids, enumerated in Section 65(105)(zzd) as defined under Section 65(39a), during 16.06.2005 to 31.05.2007; or must be classified under CICS, as amounting to construction of pipeline or conduit; and if classifiable under the later provision, whether the activity is not taxable since it is not used or to be used, engaged or to be engaged primarily for industry or commerce; Laying of pipelines/ conduits for lift irrigation systems for transmission of water or for sewerage disposal, undertaken for Government/ Government undertakings and involving associated activities like trenching, soil preparation and filling, supporting masonry work, jointing of pipes, electro-mechanical works or pumping stations and like activity, is classifiable only under Commercial or Industrial Construction Service (CICS) for the period up to 01.06.2007 and not under Erection, Commissioning or Installation Service (ECIS);
2. Whether construction of canals for irrigation purposes and laying of pipelines including as part of lift irrigation systems, undertaken for the Government/ Government undertakings is liable to service tax under WCS as turnkey projects, including engineering, procurement and construction or commissioning projects under clause (e) of Explanation (ii) in the definition of WCS or is excluded from the ambit of WCS since it is in respect of a “Dam” and thus stands excluded from WCS, as defined; (i) Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract “in respect of dam” and is thus excluded from the scope of “Works Contract Service” defined in Section 65(105)(zzzza) of the Act, in view of the exclusionary clause in the provision;(ii) Turnkey/ EPC project contracts, enumerated in clause (e), Explanation (ii) in Section 65(105) (zzzza) of the Act is a descriptive and ex abundant cautela drafting methodology. In the light of the decision in Alstom Projects India Ltd., fortified by the Special Bench decision (dated 19.03.2015) in Larsen & Toubro Ltd. reference, a turnkey/ EPC contract is taxable prior to 01.06.2007 as well. On and since 01.06.2007, turnkey/ EPC contracts must be classified on the basis of the essential character of the service provided thereby, with the aid of classification guidelines set out in Section 65A(2) of the Act. Consequently, a turnkey/ EPC contract must be classified under any of the clauses (a) to (d),
Explanation (ii), Section 65(105)(zzzza). The bundled bouquet of services provided as turnkey/ EPC contract, classifiable as Commercial or Industrial Construction Service (CICS) prior to 01.06.2007, would be classifiable under clause (b), Explanation (ii), Section 65(105)(zzzza) on and from 01.06.2007 and would not be eligible to service tax if the rendition of service thereby is primarily for non-commercial, non-industrial purpose, in view of the exclusionary clause in clause (b) of the definition of WCS. This is the only possible and harmonious interpretation possible of the several clauses under Explanation (ii) of Section 65 (105)(zzzza), a distinct taxable service defined with constituent elements thereof substantially drawn from elements of pre-existing taxable services like ECIS, CICS or COCS; and other services when bundled to amount to turnkey/ EPC;(iii) Construction of canals/ pipelines/ conduits to support irrigation, water supply or for sewerage disposal, when provided to Government/ Government undertakings would be for non-commercial, non-industrial purposes, even when executed under turnkey/ EPC contractual mode and would fall within the ambit of clause (b), Explanation (ii) of Section 65(105)(zzzza); and would consequently not be exigible to service tax, in view of the exclusion enacted in clause (b);
3. Whether, turnkey projects, including engineering, procurement and construction or commissioning (EPC) projects specified in clause (e) is merely an enumeration of the mode of execution of taxable services specified in clauses (a) to (d) or is a wholly distinct taxable service and is eligible to service tax as an independent species of works contract service;
4. Whether, even if clause (e) in Explanation (ii) of WCS is considered a distinct and independent service, where construction of canals for irrigation purposes and laying of pipelines either as part of lift irrigation systems or for transport and distribution of water is undertaken for Government/ Government undertakings, the same is more appropriately covered under clause (b) of WCS i.e. construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, by applying principles of classification set out in Section 65A(2)(a) & (b) and thus fall outside the ambit of levy, since the activity is not primarily for the purpose of commerce or industry; or whether a contrary view that clause (e) being an independent entry, activities falling there under would be taxable even if the rendition of service thereby or there under, was not primarily for non-commercial or non-industrial purposes;
5. Where execution of the whole or a part of the work is sub-contracted on back to back basis by the main contractor (which is a joint venture) to sub-contractors, in the absence of any transfer of property in goods involved in the execution of such works, from the main contractor to the Government/ Government undertakings, whether levy of service tax in the hands of appellant (main contractor) is valid under WCS, in the light of the judgment in State of A.P. vs. L & T Ltd. Where under an agreement, whether termed as works contract, turnkey or EPC, the principal contractor, in terms of the agreement with the employer/ contractee, assigns the works to a sub-contractor and the transfer of property in goods involved in the execution of such works passes on accretion to or incorporation into the works on the property belonging to the employer/ contractee, the principal contractor cannot be considered to have provided the taxable (works contract) service enumerated and defined in Section 65(105)(zzzza) of the Act.

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CORPORATE AND PROFESSIONAL UPDATE

Solatium should also be taken into consideration while computing market value of an asset as on 1-4-1981

Untitled32ASection 48 of the Income-tax Act – Capital gains – Computation of Fair Market Value

Solatium is also to be taken into account for purpose of computing fair market value of land.

Section 48 of the Income-tax Act – Capital gains – Computation of Cost of improvement

It is not always possible for an individual to have third party evidences of land improvement expenses and if small amount is claimed by assessee, same is to be allowed [2015] – ITAT DELHI – ITO, , Meerut v. Anil Kumar

FACTS

The assessee sold certain agricultural land. In the computation of capital gains on sale of the land, he adopted the fair market value of the land as on 1-4-1981 at Rs. 110 per sq. yard, and accordingly, computed the capital gain at Nil.

The Assessing Officer rejected the value so adopted by the assessee. He noted that in the case of another assessee, the Additional Commissioner issued a direction under section 144A, by taking into account all the relevant factors, that the value as on 1-4-1981 be adopted at Rs. 70 per square yard. The Assessing Officer adopted the same rate of Rs. 70 per sq. yard, as FMV as on 1-4-1981.

The Commissioner (Appeals) took into notice judgment of the Supreme Court in Meharban v.State of U.P. [Civil Appeal No. 8196 of 1995, dated 30-4-1997], held that the value of the land to be at Rs. 85 per square yard plus solatium of Rs. 30 per square yard. However, he adopted the FMV at Rs. 85 and decline to take the solatium into account for the computation for this purpose.

On second appeal ITAT held that:

It is found that in the light of Supreme Court’s judgment in the case of Meharban v. State of U.P.[Civil Appeal No. 8196 of 1995; judgment, dated 30-4-1997], there is indeed no error in rejecting the valuation at the rate of Rs. 70 per square yard adopted by the assessee. However, the Commissioner (Appeals) was in error to the extent of non-inclusion of solatium. Solatium is required to be treated as a part of the compensation for Income tax purposes in the light of Gujarat High Court’s judgment in the case of Vadilal Soda Ice Factory v. CIT [1970] 80 ITR 711, and, therefore, as against valuation at Rs. 85 per square yard, he should have taken the same as at Rs. 110 per square yard as claimed by the assessee.

As regards the cost of improvement, there is no dispute about the fact of the leveling having been done but the claim is declined only for want of evidences. In the case of expenses of this nature,i.e. on leveling etc., it is not always possible to have third party evidences of expenses. The assessee is an individual and not a corporate. Keeping in view all these factors, and smallness of amount, there are no reasons to decline the claim. The grievance of the assessee is upheld on this count as well.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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CORPORATE AND PROFESSIONAL UPDATE

COMPANIES ACT

2MCA has recently introduced Companies (Incorporation) Amendment Rules, 2015 vide Notification dated 1st May 2015.

Key features being:-

  • Verification of signature of promoter(s)/director(s) in Form INC 10 has been done away  with.
  • A Private Limited Company may get itself converted into OPC if its Paid up capital is  less than Rs. 50 Lacs and turnover less than Rs. 2 Cores.
  • Penalty for violation of rules regarding OPC has been halved.
  • New Rule 36 has been introduced and Form INC-30, INC-31for model Memorandum    of Association & Articles of Association introduced.
  • Form INC -29 introduced for simplifying the process of filing forms for the    Incorporation of Company.

Indirect Taxes:

Credit of Cess can be used for payment of Excise Duty*

Taking a step towards GST, in Union Budget 2015, Honorable Finance Minister has proposed to abolish Education Cess and Secondary and Higher Education Cess (collectively referred as ‘cess’); in case of Excise Duty w.e.f. 1st March, 2015 and in case of Service Tax w.e.f. a date to be notified after the enactment of Finance Bill, 2015.

This amendment has raised questions regarding fate of cess, majorly, in following cases:

  1. Closing balance of cess as on 28th February, 2015;
  2. Cess in respect of inputs and capital goods received in factory in F.Y. 2014-15 but CENVAT Credit is omitted to be availed;
  3. Cess in respect of input services received in F.Y. 2014-15 but CENVAT Credit is omitted to be availed;
  4. Deferred cess of Capital Goods received in factory in F.Y. 2014-15;
  5. Cess in respect of Capital Goods received in factory prior to F.Y. 2014-15;
  6. Cess in respect of inputs and capital goods received on or after 1st March, 2015; and
  7. Cess in respect of input services availed on or after 1st March, 2015.

To remove difficulties, Central Government has issued Notification No. 12/2015-CE (NT) dated 30th April, 2015 to provide provisions for utilization of CENVAT Credit of cess for the purpose of payment of Excise Duty in following cases:

  • Cess paid on inputs or capital goods received in factory on or after 1st March, 2015;
  • Deferred cess in respect of capital goods received in F.Y. 2014-15;
  • Cess on input services received on or after 1st March, 2015

Therefore, though Central Government has allowed to utilize CENVAT Credit of cess in three cases mentioned in Para supra; fate of cess in respect of point no. a, b, c, and e is still full of doubts.

Here, it is pertinent to mention that similar doubts will also arise for Service Providers at the time of applicability of new Service Tax rate. Hope to see similar amendment in CENVAT Credit Rules, 2004 parallel with introduction of new rate of Service Tax to remove scope of difficulty as faced by manufacturers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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CORPORATE AND PROFESSIONAL UPDATE

A STEP TOWARDS GST, IN UNION BUDGET 2015

3Taking a step towards GST, in Union Budget 2015, Honourable Finance Minister has proposed to abolish Education Cess and Secondary and Higher Education Cess (collectively referred as ‘cess’); in case of Excise Duty w.e.f. 1st March, 2015 and in case of Service Tax w.e.f. a date to be notified after the enactment of Finance Bill, 2015.

This amendment has raised questions regarding fate of cess, majorly, in following cases:

  1. Closing balance of cess as on 28th February, 2015;
  2. Cess in respect of inputs and capital goods received in factory in F.Y. 2014-15 but CENVAT Credit is omitted to be availed;
  3. Cess in respect of input services received in F.Y. 2014-15 but CENVAT Credit is omitted to be availed;
  4. Deferred cess of Capital Goods received in factory in F.Y. 2014-15;
  5. Cess in respect of Capital Goods received in factory prior to F.Y. 2014-15;
  • Cess in respect of inputs and capital goods received on or after 1st March, 2015; and
  1. Cess in respect of input services availed on or after 1st March, 2015.

To remove difficulties, Central Government has issued Notification No. 12/2015-CE (NT) dated 30th April, 2015 to provide provisions for utilisation of CENVAT Credit of cess for the purpose of payment of Excise Duty in following cases:

  • Cess paid on inputs or capital goods received in factory on or after 1st March, 2015;
  • Deferred cess in respect of capital goods received in F.Y. 2014-15;
  • Cess on input services received on or after 1st March, 2015

Therefore, though Central Government has allowed to utilise CENVAT Credit of cess in three cases mentioned in Para supra; fate of cess in respect of point no. a, b, c, and e is still full of doubts.

Here, it is pertinent to mention that similar doubts will also arise for Service Providers at the time of applicability of new Service Tax rate. Hope to see similar amendment in CENVAT Credit Rules, 2004 parallel with introduction of new rate of Service Tax to remove scope of difficulty as faced by manufacturers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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CORPORATE AND PROFESSIONAL UPDATE

SERVICE TAX AMENDMENTS

Untitled22Clarification about the Rate of Service Tax

The rate of Service Tax will continue @12.36% until the new rate is notified. The increase in service tax rate from 12.36% to 14% is yet to be notified.

 Service Tax amendments applicable from 01 April 2015.

 New Exemptions provided

  1. Services provided by way of transportation of a patient in an ambulance would now be exempt from Service Tax. The scope of this exemption is being widened to include all ambulance services in addition to health care services.
  2. Life insurance services provided under Varishtha Pension Bima Yojna scheme would now be exempted.
  3. The scope of exemption on transportation of goods by road has been extended from the place of removal to an inland container depot, a container freight station, a port, airport or Land Customs Station is exempt from Service Tax vide notification No. 31/12-ST dated 20 June 2012.
  4. Service provided by a Common Effluent Treatment Plant operator for treatment of effluent would now be exempted.
  5. Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables would now be exempted.
  6. Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve would now be exempted.
  7. Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of its members would now be exempted.

Withdrawal of Exemptions

  1. The following services provided to government, local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of:
  1. A civil structure meant for use other than for commerce, industry, etc.
  2. A structure meant predominantly for use as an educational, clinical, or an art or cultural establishment.
  • A residential complex predominantly meant for self-use or the use of their employees would be taxable.
  1. Services provided by way of construction, erection, commissioning or installation of original works pertaining to an airport or port would now be taxable.
  1. Exemption to services provided by a performing artist in folk or classical art form
  2. music, or
  3. Dance, or
  4. Theater,

Will be limited only to such cases where amount charged is uptoRs. 1, 00,000 for a performance would be taxable. It is further clarified that the exemption shall not apply if services provided by artist as a brand ambassador;

  1. Goods Transport services by rail or water in respect of following products which were exempt earlier will now be taxable with regards to fruits, vegetables and eggs. Hence, Goods transport services by rail or water will not be taxable in case of Milk, Salt and food grain including flours, pulses and rice.
  2. Goods transportation by roadin respect of following products which were exempt earlier will now be taxable with regards to tea, coffee, Jaggery, Sugar, Milk Products and edible oil Hence, GTA (road) will not be taxable in case of Milk, Salt and food grain including flours, pulses and rice.
  3. The following services provided would be taxable:
  • distributor to a mutual fund or AMC,
  • a mutual fund agent to a mutual fund or assets management company,
  • Selling or marketing agent of lottery ticket to a distributor.
  • These services are now covered under reverse charge basis.
  • Departmentally run public telephone, guaranteed public telephone operating only local calls; Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued would be taxable.

Changes in Abatement

  1. Currently, the Service Tax is payable on 70% of the fees, commission or any such amount in case of Chit Funds.  The abatement is being withdrawn from services provided in relation to chit fund business.
  2. The service tax abatement is several transportation services have been changed to bring them to same rate of service tax and related conditions.  In the table below, we have summarized the old and new rate of service tax:
Services Old Rate and Conditions New Rate and Conditions
Goods Transport Agency 25% and no cenvat credit shall be allowed on inputs, capital goods and input services 30% and no cenvat credit shall be allowed on inputs, capital goods and input services
Rail Transportation of Goods 30% and no further conditions Same as above
Rail transport of Passengers 40% and no cenvat credit shall be allowed on inputs and capital goods Same as above
Transportation of goods by Vessel 50% and no cenvat credit shall be allowed on inputs, capital goods and input services Same as above
  1. Currently, the Service Tax is payable on 40% of the value of air transport of passenger irrespective of the class.  The service tax would now be payable on 60% of the value in case of classes above economy class.

Reverse Charge Mechanism

  1. Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Currently, the service receiver pays 75% of the service tax due and balance is paid by service provider.
  2. The following servicers are brought under reverse charge mechanism:

            Mutual fund agents,

            Mutual fund distributors and

            Agents of lottery distributor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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CORPORATE AND PROFESSIONAL UPDATE FOR THE MONTH

Service Tax changes applicable from 1.4.2015

Untitled12APlease ensure that Rate of Service tax has not changed – it will remain to be 12.36% and NOT 14%, until notification issued.

A) Exemptions withdrawn

B) Goods Transport services

(a) by rail or water in respect of following products which were exempt earlier will now be taxable: Fruits, Vegetables & Eggs

Hence, Goods transport services by rail or water will not be taxable in case of Milk, Salt and food grain including flours, pulses and rice.

(b) by road  in respect of following products which were exempt earlier will now be taxable: Tea, coffee, Jaggery, Sugar, Milk Products and edible oil

Hence, GTA (road) will not be taxable in case of Milk, Salt and food grain including flours, pulses and rice ONLY – rest all will be taxable.

  1. Services provided by a mutual fund agent to a mutual fund or assets management company, distributor to a mutual fund or AMC, selling or marketing agent of lottery ticket to a distributor. Service Tax on these services shall be levied on reverse charge basis.
  1. Following services provided to government, local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of:
  2. a civil structure meant for use other than for commerce, industry, etc.
    ii. a structure meant predominantly for use as an educational, clinical, or an art or cultural establishment.
    iii. a residential complex predominantly meant for self-use or the use of their employees.
  1. Exemption to services provided by way of construction, erection, commissioning or installation of original works pertaining to an airport or port
  2. Exemption to services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theater, will be limited only to such cases where amount charged is up to Rs. 1,00,000 for a performance. It is further clarified that the exemption shall not apply if services provided by artist as a brand ambassador;
  3. Departmentally run public telephone, Guaranteed public telephone operating only local calls; Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued.

                 New Exemptions introduced

  1. Goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is exempt from Service Tax vide notification No. 31/12-ST dated 20.6.2012. Scope of this exemption is being widened to exempt such services when provided for transport of export goods by road from the place of removal to a land customs station (LCS).
  2. Any service provided by way of transportation of a patient to and from a clinical establishment by a clinical establishment is exempt from Service Tax. The scope of this exemption is being widened to include all ambulance services.
    Life insurance service provided by way of Varishtha Pension Bima Yojna is being exempted.
  3. Service provided by a Common Effluent Treatment Plant operator for treatment of effluent is being exempted.
  4. Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables is being exempted.
  5. Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve is being exempted. These services when provided by the Government or local authority are already covered by the Negative List.
  6. Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of it’s members is being exempted.

Reverse Charge Mechanism

  1. Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism;
  2. Services provided by mutual fund agents, mutual fund distributors and agents of lottery distributor are being brought under reverse charge consequent to withdrawal of the exemption on such services.

                  Rationalisation of Abatement

                  Transport for Goods

At present, service tax is payable on 30% of the value of rail transport for goods and passengers, 25% of the value of goods transport by road provided by a goods transport agency and 40% for goods transport by vessels. The conditions also vary.

A uniform abatement is now being prescribed for transport by rail, road and vessel. Service Tax shall be payable on 30% of the value of such services subject to a uniform condition of non-availment of CENVAT Credit on inputs, capital goods and input services.

Air Transport of Passengers

At present, Service Tax is payable on 40% of the value of air transport of passenger for economy as well as higher classes, e.g. business class. The abatement for classes other than economy is being reduced and service tax would be payable on 60% of the value of such higher classes.

Abatement is being withdrawn from services provided in relation to chit fund business consequently Service Tax shall be paid on full consideration received by way of fee, commission or any such amount.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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