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ShareMumbai: We take a look at the other changes made to service tax regulations with respect to exemptions, refunds, etc in Budget 2009-2010.
In the Budget, some amendments have been made to the Finance Act, 1994. They are:
(a) The commissioner's power to revise the order of the adjudicating authority has been abolished and replaced by reference to the commissioner (appeals)
Presently, Section 84 of the act provides for power to the commissioner to revise the orders passed by the sub-ordinates adjudication authority. The amendment is if any order passed by the sub-ordinate officer is not acceptable due to lack of legality or appropriateness then the commissioner will have the power to direct such sub-ordinate officer to apply before the commissioner (appeals) for determination of points arising out of such order.
(b) The Centre has been empowered to make rules for changes in service tax rate and place of provision of taxable service.
The above changes will come into effect from the date of the enactment of the Finance (No 2) Bill, 2009.
Amendments in the rules and existing notifications
(a) Extension of territorial jurisdiction
Applicability of service tax has been extended to services provided to and from the Continental Shelf of India and Exclusive Economic Zones of India. The provisions of the act have been extendedto installations, structures and vessels in the entire Continental Shelf of India and Exclusive Economic Zones of India.
(b) Rule 6 (3) of the Cenvat Credit Rules, 2004, is being amended to prescribe that a provider of both taxable and exempted services, who doesn't maintain separate accounts of inputs, shall pay an amount equal to 6% of the value of exempted services instead of 8% .
(c) Rule 3 (5B) of the Cenvat Credit Rules, 2004, is being amended to provide that a service provider shall pay back the amount of credit taken on inputs/capital goods fully written off before being put to use.
(d) Gross amount charged to include used in or in relation to the execution of work's contract, whether forming part of consideration or not. Before this amendment the works contractor was paying service tax on 'gross amount charged' for the works contract.
The 'gross amount charged' under the composition scheme has been expanded. For the composition scheme the 'gross amount charged' shall include:
i) Value of all goods used in or in relation to the works contract, whether supplied under any other contract for consideration or otherwise; and
ii) The value of all the services required to be provided for the execution of the works contract; but doesn't include
i) The value-added tax or sales tax, as the case may be, paid on transfer of property in goods involved; and
ii) The cost of machinery and tools used in the execution of the said works contract except for the charges for obtaining them on hire.
This amendment won't be applicable to contracts where the execution of works contract began on or before July 7, 2009, and the payment has been made in relation to the said contract on or before July 7, 2009.
The amendment is to ensure that all the goods and materials that go into the works contract, whether supplied free of cost by the client or for some other reason doesn't form a part of the contract, is includible in the gross amount charged for computing the value to which the 4% is to be applied.
(e) Exemption to certain services availed by goods transport agencies made effective from January 1, 2005.
Services provided by clearing and forwarding agent's services, manpower recruitment & supply services, cargo handling services, storage & warehousing services, business auxiliary services, packaging services, business support services, supply of tangible goods for use to a goods transport agency for providing services to its customer are now not liable to service tax.
Exemptions
(a) Services provided by a tour operator having a contract carriage permit for inter-state or intra-state transportation ofpassengers, is exempted from service tax provided it is not in relation to tourism, conducted tours, charter or hire service. For example, daily services provided by a tour operator on Mumbai-Pune route won't be liable to service tax.
(b) Federation of Indian Export Organisations (FIEO) and 21 specified export promotion councils sponsored by the commerce department or the textiles ministry are exempted from service tax under the category of 'service of club or association'. This exemption will be valid till March 31, 2010.
(c) Inter-bank transaction of purchase or sale of foreign exchange exempted.
Refund scheme for exporters
(a) Terminal handling charges has been added to the list of taxable services eligible forrefund to exporter.
(b) Now the claim for refund by exporters can be filled within one year from the date of export of the said goods . Prior to this amendment, exporters had to file quarterly claims. This change is a welcome one as the exporters have time on hand to file refund claims with all supporting documents.
(c) Exemption has been granted to exporters paying service tax under reverse charge mechanism from payment of service tax on services availed by them under:
i) Transport of goods by road; and
ii) From a foreign commission agent who causes sale of exporter's goods abroad.
(d) In a case where total amount of refund claim doesn't exceed 0.25% of the total freight on board value of exports under a claim, a self-certification by the exporter on the relevant documentswill suffice. Refund of service tax shall be granted within one month of filing the claim without any pre-audit; and if the amount of refund claim exceeds 0.25% of the freight on board value of exports, the documents submitted by the exporter should be certified by the chartered accountant who audits his annual accounts and based on the same, refund of service tax shall be granted within one month of filing the claim without any pre-audit.
The author is a Mumbai-based chartered accountant and can be reached at mshethco@yahoo.co.in
