This presentation covers service tax procedures in India such as registration, payment, returns, invoices, records, and reverse charge. Key points include: - Registration is required if taxable services exceed Rs. 9 lakhs and must be applied for online within 30 days. - Service tax must be paid monthly or quarterly depending on the assessee, by the 6th/5th day of the following period. - Returns must be filed half-yearly by the 25th of the month following the half-year. - Invoices must be issued within 30 days and contain registration number, tax amount, and other details. - Records like invoices and account books must be

1. Presentation
on
Service Tax
Organized By By
Indirect Tax Committee of ICAI Dr. Sanjiv Agarwal
@ Ernakulam FCA, FCS,
28th July, 2013 Jaipur
© Dr. Sanjiv Agarwal

2. SESSION – IV
Service Tax Rules &
Procedures
2

3. 3
This Presentation covers -
 Service Tax Procedures
 Registration
 Payment
 Returns
 Invoice / documents / records
 Reverse Charge
 Interest and Penalties
 Audit under Service Tax

4. 4
Registration (Section 69 & Rule 4)
 Every person liable to pay service tax has to take registration
under Service Tax Law
 Assessees who have to take registration
 Service provider who has provided a taxable services of value
exceeding Rs. 9 lakhs in the proceeding financial year
 Service receiver liable to pay service tax under reverse charge
mechanism u/s 68(2)
 Input service distributor
 Importer of service being person liable u/s 68(2)
 Application to be filed before Superintendent of Central
excise.
 To be applied online in Form ST-1 within 30 days from the
date on which the service tax is levied

5. Registration (Section 69 & Rule 4)
 Where assessee is providing more than one taxable services, it should
apply only for one registration for all the taxable services.
 Superintendent of Central Excise shall after due verification of the
application, grant a certificate of registration in Form ST-2 within 7 days
from the date of receipt.
 If the certificate is not granted within 7 days then registration applied for
shall be deemed to have been granted.
 Any change in any information / details furnished in ST-1, to be intimated
in writing within a period of 30 days.

6. Registration (Section 69 & Rule 4)
 Where the registered assessee transfers his business to
another person, the transferee shall obtain a fresh
certificate of registration.
 Where assessee ceases to provide taxable services he
shall surrender registration forthwith.
 Temporary suspension of business or getting no
business for the time being does not require
surrendering of registration.

7. Specified Documents required for Registration
 Documents required at the time of registration -
 Copy of Permanent Account Number (PAN)
 Proof of Residence
 Constitution of the Applicant
 Power of Attorney in respect of authorized person(s)
 Documents alongwith ST-1 application to be presented
with concerned officer with in 15 days of online
application.

8. Centralized Registration
 Where a person liable for paying service tax on a taxable
service —
 provides such service from more than one premises or offices;
or
 receives such service in more than one premises or offices; or,
 is having more than one premises or offices, which are engaged
in relation to such service in any other manner, making such
person liable for paying service tax
centralized registration may be taken
 For centralized registration, assessee must have-
 Centralized accounting, or
 Centralized billing system

9. New Accounting Codes under new regime ( July – November 2012)
Tax Collection 00441089
Other Receipts 00441090
Penalties 00441093
Deduct Refunds 00441094
Restoration of Service Specific Accounting Codes
 C. No. 165 dated 20.11.2012 / N. No. 48/2012-ST dated 3.12.2012
 No change in law; only for statistical analysis
 New code created for penalty
 Registration obtained under the positive list approach continue to be
valid
 Registration under all taxable services to be amended online under
specific head of services
 For reverse charge, registration should be obtained as service receiver
under respective category.
 Accounting codes for residual entry
Service Tax 00441480
Interest 00441481
Penalty 00441485
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10. Payment of Service Tax ( Section 68 & Rule 6 )
 Every person providing taxable services to pay tax @ 12.36% including
cesses
 Obligation to pay -
 Time limit -
 By 6th day of the following month / quarter, if deposited electronically.
 By 5th day of the following month / quarter, if deposited in Bank.
 Tax to be deposited by Form GAR- 7 Challan.
 Service tax on the services provided in the month of March shall be paid by
31st March of the same calendar year.
Assessee Frequency
Individuals, LLP and Firms Quarterly
For companies and others Monthly

11. Payment of Service Tax ( Section 68 & Rule 6 )
 Online payment is mandatory where an assessee has paid service tax of
Rs. 10 lakh or more including the amount paid by utilization of Cenvat
credit in preceding financial year
 Date of presentation of cheque to the designated bank deemed to be the
date on which service tax has been paid subject to realization of that
cheque.
 Where the service is not provided / the amount of invoice is
renegotiated, assessee may take credit of excess service tax -
 If the payment has been refunded
 If the credit note for the revised value has been issued.
 Such adjustment should not arise out of interpretation of law, taxability,
valuation or applicability of any exemption notification.

12. Return (Section 70 & Rule 7 )
 Return to be filed on half yearly basis.
 Prescribed Form ST-3
 To be submitted by 25th of the month following the
particular half year.
 Every return shall be filed electronically.
 Assessee may submit a revised return in Form ST-3
within ninety days from the date of submission of the
original return. (Rule 7B )

13. Quarterly Service Tax Returns
April to June, 2012
 N. No. 47/2012-ST dated 28.09.2012 – for April to June 2012, quarterly
return prescribed.
 Order No. 3/2012 - last date of return was extended upto 25.11.2012
July to September, 2012
N. No. 1/2013-ST, dated 22.02.2013
Circular No. 137 dated 22.02.2013 / Order No. 1
 New ST-3 Form is available in offline mode
 Last date 25th March, 2013; extended to 15th April, 2013; further
extended upto 30th April 2013 vide Order No. 2/2013-ST, dated
12.4.2013
 To indicate capacity – as provider / under RCM / under partial RCM
 Filing of return for second half of 2012-13 – last date is 31.08.2013
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14. Invoice / Bill / Challan (Rule 4A of ST Rules, 1994)
 Invoice means the invoice referred to in rule 4A of the Service Tax
Rules, 1994 and shall include any document as referred.
 Every person providing taxable services is required to issue invoice
with in a period of 30 days ( in case of banking company, 45 days)
of such taxable service / receipt of any payment toward such
taxable service.
 Bill / Challan should contain -
 Name, address and the registration number of service provider
 Name and address of the service receiver
 Description and value of taxable services
 Service tax payable thereon
 signed by authorized person
 serially numbered

15. Invoice / Bill / Challan (Rule 4A of ST Rules, 1994)
 In case when banking company issues invoice / bill / challan, following are not required -
 serial number
 address of service receiver
 In case of GTA, invoice is consignment note.
 Consignment note means -
 a document
 issued by a GTA
 against the receipt of goods
 for the purpose of transport of goods by road in a goods carriage
 serially numbered
 contains –
 name of consigner and consignee
 registration number of goods carriage in which goods are transport
 details of goods transported
 details of place of origin and destination
 person liable for paying service tax
 Consigner
 Consignee
 GTA

16. Invoice / Bill / Challan (Rule 4A of ST Rules, 1994)
 In case of continuous supply of service -
 date of invoice (invoice should be raised with in 30 days of
completion of each event)
 In case of transportation of passengers -
 Invoice/ Bill/ Challan shall include ticket
 Whether or not containing registration number of service provider
and address of recipient of services
 but should contain other informations required under the rule.

17. Invoice / Bill / Challan (Rule 4A of ST Rules, 1994)
 There is no requirement to issue further invoice for up to rupees one
thousand in excess of the amount indicated in the invoice.
 Input service distributer to distribute credit by issuing Invoice/ Bill/
Challan which should contain:
 Name, address and the registration number of the person providing
input services.
 Serial number ( not required in case of banking company) and date of
Invoice/ Bill/ Challan.
 Name and address of input service distributer.
 Name and address of recipient of credit distributed.
 Amount of the credit distributed.

18. Reverse Charge Mechanism
Additional information suggested on the invoice –
 Amount of Service Tax based on his share of Service Tax liability, if any, (which service
recipient is required to pay to the service provider) - in case of joint or proportionate reverse
charge liability.
 Fact that entire amount of Service Tax on the invoice is payable by the service recipient under
reverse charge (if so).
 Invoice amount is inclusive / exclusive of applicable Service Tax.
 Alternatively, in case of proportionate reverse charge, service provider should charge Service
Tax only on that part of the invoice for which he is liable to pay and wants to recover from the
service recipient and mention that balance amount is payable by the service recipient.

19. Record (Rule 5 of ST Rules, 1994)
 Records include computerized data as maintained in accordance
with the various laws.
 Records maintained shall be acceptable to Central Excise Officer.
 Every assessee is required to furnish to Central Excise officer at the
time of filing his return for the first time, a list in duplicate of -
 all the records prepared or maintained by the assessee for accounting
of transaction in regard to-
 providing of any services
 receipt of input services
 payment of input services
 Receipt/ purchase/manufacture/storage/sale or delivery as the case may be, in
regard of inputs and capital goods.
 Other activities such as manufacture and sale of goods , if any.
 All other financial records maintained in normal course of business.
 All such records should be preserved at least for a period of five
years.

20. Suggested Documents and Accounts
 Cash Book / Bank Book / Journal Book
 Cash, Bank and Journal vouchers (debit and credit)
 Sales bills or invoices and registers (showing Service Tax separately)
 Purchase bills and registers
 Invoices or challans for input credit distribution
 Other subsidiary records, ledgers and registers as may be necessary to keep proper record of Service Tax
charged, received, deposited, paid, input services consumed for rendering output service or
manufacturing goods to claim Cenvat Credit, etc.
 Record / register of receipt and consumption of input, input services and capital goods and tax paid
thereon, output Cenvat Credit claimed and balance to claim Cenvat Credit.
 Files containing service agreements entered into with clients or customers.

21. Changes in Reverse Charge
 Authority for reverse charge u/s 68(2) of Finance Act, 2012
 Person liable to pay tax – Rule 2(1)(d) of Service Tax Rules, 1994
 W.e.f. 1.7.2012, a new scheme of taxation is applicable whereby the
liability of payment of service tax shall be both on the service
provider and the service recipient (Notification No. 30/2012-ST,
dated 20.6.2012 )
 The extent to which tax liability has to be discharged by the service
receiver specified in the notification.
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22.  Credit of tax paid can be availed by service
recipient if it is input service
 The credit of tax paid by the service recipient
under partial reverse charge would be available
on the basis on the tax payment challan (but
invoice required)
 Service provider under RCM may claim refund
of tax paid under rule 5(b) of CCR, 2004
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23. Under Partial Reverse Charge (Proportional)
 Renting of motor vehicles
 Manpower supply & security services
 Works contracts
Under Full Reverse Charge (100%)
 Insurance related services by agents
 goods transportation by road
 sponsorship
 arbitral tribunals
 legal services
 company director's services
 services provided by Government / local authority excluding
specified services
 services provided by persons located in non-taxable territory to
persons located in taxable territory.
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24.  Governed by Notification No. 30/2012-ST dated 20.06.2012
w.e.f. 1.7.2012
 Liabilities of both the service provider and service receiver
are independent of each other
 Reverse charge will not apply where the service receiver is
located in non-taxable territory
 For three specified services provided by business entities
being company, society, cooperative society, trust etc,
reverse charge will not apply.
 Reverse charge will also not apply where the service
recipient is any person or business entity not being a body
corporate in case of three specified services
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25.  Small scale benefit is available only to service provider
(not to service receiver), if entitled
 Service receiver under reverse charge cannot avail
exemption of Rs. 10 lakh under Notification No.
33/2012-ST dated 20.06.2012
 Valuation of services by services provider and service
receiver can be on different principles, if permitted by
law (e.g. works contract - Refer Notification No.
30/2012-ST, explanation II)
 Liability to pay Service Tax for ongoing contracts will
be as per Point of Taxation Rules, 2011
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26.  In case of proportional reverse charge (manpower supply &
security, works contract and motor vehicle hire to carry
passengers), it is advisable that service provider should
charge Service Tax only on his portion of Service Tax in the
invoice and mention that Service Tax on balance amount is
payable by service receiver.
 It is the statutory obligation on the service recipient to pay
Service Tax, whether under full or proportional reverse
charge
 Service Tax under reverse charge has to be paid by cash vide
GAR Challan No. 7 and it cannot be paid by way of
utilization of Cenvat Credit.
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27.  In case of renting of motor vehicles to carry passengers
where abatement is also available, reverse charge basis is
proportional depending upon the abatement on the
condition that no Cenvat Credit has been availed. The
service provider should provide a certificate, either in the
invoice itself or separately.
 In case of renting of motor vehicle to carry passengers,
reverse charge applies only where the motor vehicle is
provided with driver and service receiver is not engaged in
same business.
 In case of director's services, the service provider should
not be employed (whole time) director. Employees are not
covered under the scope of Service Tax.
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28.  In respect of manpower supply and security services, works contract services
and renting of motor vehicles to carry passenger, reverse charge shall be
applicable only when following two conditions are satisfied –
 service receiver is a business entity registered as a body corporate, and
 service provider is any one of the following entities –
 Individual
 Hindu undivided family (HUF)
 Firm (including limited liability partnerships)
 Association of persons
If both the above conditions are not satisfied in respect of these three services,
Service Tax shall be payable by the service provider in ordinary course.
 Security services means services relating to the security of any property,
whether movable or immovable, or of any person, in any manner and includes
the services of investigation, detection or verification, of any fact or activity
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29. Service Provider Service Receiver
Individual Advocate / Firm / LLP **Business entity with turnover > Rs 10
lakhs in preceding financial year
Arbitral Tribunal **Business entity with turnover > Rs 10
lakh in previous financial year
** Business entity may be an individual also
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30. Sr. No Description of Service Service provider Service receiver
1. Services provided by an insurance
agent to any person carrying on
insurance business
Nil 100%
2. Services provided by a goods
transport agency in respect
of transportation of goods by road
Nil 100%
3. Services provided by way of
sponsorship
Nil 100%
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31. Sr.No Description of Service Service provider Service receiver
4. Services provided by an arbitral tribunal Nil 100%
5. Services provided by individual advocate or
a firm of advocates by way of legal services
Nil 100%
5A. in respect of services provided or agreed
to be provided by a director of a company
to the said company ( w.e.f 7.08.2012)
Nil 100%
6. Services provided by Government or local
authority by way of support services
excluding,-
(1) renting of immovable property,
(2) postal services
(3) transport of goods / passengers
(4) air craft or vessel
Nil 100%
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32. Sr.No Description of Service Service provider Service receiver
7. Hiring of Motor Vehicle
(a) renting of a motor vehicle
designed to carry passengers on
abated value to any person not
engaged in the similar line of
business
(b) renting of a motor vehicle
designed to carry passengers on non
abated value to any person who is
not engaged in the similar line of
business
Nil
60%
100 %
40%
8. Services provided by way of supply
of manpower for any purpose or
security services ( w.e.f 07.08.2012)
25% 75 %
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33. Sr.No Description of Service Service provider Service receiver
9. Services provided in service portion
in execution of works contract 50% 50%
10. Services provided by any person who
is located in a non-taxable territory
and received by any person located in
the taxable territory
Nil 100%
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34. Service Provider Service Receiver Service Tax Payable by
Individual /HUF/
Partnership firm
/AOP
Business entity –
body corporate
Joint
Individual /HUF/
Partnership firm
/AOP
Individual /HUF/
partnership firm
/AOP
100 % by service
provider
Business entity –
Body Corporate /
Company
Individual /HUF/
Partnership firm
/AOP
100 % by service
provider
Business entity –
Body Corporate
Business entity –
Body Corporate
100 % by service
provider
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35. Interest on delayed Payment of Service Tax
(Section 75)
 Person who fails to deposit the tax or any part
thereof within the period prescribed shall pay
interest.
 Interest rate -
 In case turnover is below 60 lakh - 15% p.a.
 In other cases - 18% p.a.

36. Sections / Rules Defaults Penalties
Section 70 Belated filing of return For Delay of 15 days – Rs.500/-
For Delay between 16-30 days – Rs.1000/-
For Delay beyond 30 days – Rs. 1000/- + Rs.
100 per day (subject to maximum amount Rs.
20,000/-)
Section 76 Failure to pay Service
Tax
Not less than Rs. 100/- for every day during
which such failure continues or at the rate
one percent of such tax per month, whichever
is higher ; Maximum penalty shall not exceed
50% of service tax payable

37. Sections / Rules Defaults Penalties
Section 77 (1) (a) Failure to obtain registration Extend up to Rs. 10,000/-
Section 77 (1) (b) Failure to keep, maintain or retain
books of account
Extend up to Rs. 5,000/-
Section 77 (1) (c) Failure to furnish information
called by officer as per Provision/
Rule
Rs. 200/- per day of default or up
to Rs. 10,000/-, whichever is
higher.
Section 77 (1) (d) failure to pay Service Tax
electronically
Up to Rs. 5,000/- per default
Section 77 (1) (e) Issuance of invoice with incorrect/
incomplete details of failure to
account for
Maximum upto Rs. 5,000/-
Section 77 (1) (2) For any other contravention Maximum upto Rs. 5,000/-

38. Sections / Rules Defaults Penalties
Section 78 Suppression Not less than up to the
amount of tax due.
50% of the service tax if
records are maintained
In case of Service Tax is
paid along with interest
within 30 days (90 days in
case of assessees with
turnover upto Rs.
60lakhs) of order, 25% of
tax determined.
Section 78A Offences by directors etc. of
company
Up to Rs. 1,00,000/-

39. Principles of Audit
 Audit to be conducted in a systematic and
comprehensive manner.
 Emphasis on scrutiny of records maintained in the normal
course of business.
 Audit effort based on materiality principle — higher the
potential risk, greater the intensity of scrutiny.
 Recording of all audit findings.
 Audit is clearly distinct from anti-evasion activity. Audit
can uncover non-compliance only to the extent of their
reflection in the books of accounts.
 Discussing audit findings before finalizing the audit to
reduce audit paras as well as legal risks.
 Protecting the interest of legitimate revenue.

40. Special Audit (Section 72A)
 Special audit can be conducted on the directions of Commissioner of
Central Excise (not by an officer below that rank)
 Commissioner directing such audit can do so if he has reasons to believe
that any person liable to pay tax has committed certain action or deeds.
 Audit can be in respect of any person liable to pay service tax.
 Such person-
 Has failed to declare or determine the value of taxable service correctly.
 Has availed and utilized credit of duty or tax paid, which is not in the normal
limits compared with the capital, goods, used or other relevant and appropriate
factors or by means of fraud, collusion, or any willful misstatement or
suppression of facts.
 Has operation in multiple locations and it is not possible or practicable to obtain
a true and complete picture of his accounts from the registered premises.
 Direction can be given to get his/its accounts audited for the period and
scope as specified by the Commissioner.
 Such audit shall be conducted by a practicing chartered accountant or
cost accountant.

41. Special Audit (Section 72A)
 The audit report, duly signed and certified shall be submitted to
Commissioner ( not to assessee) within stipulated time frame unless
extension is sought and granted.
 Audit u/s 72A shall be conducted irrespective of any other audit being
carried out of the accounts of such person under any other law in force.
 An opportunity of being heard shall be provided to the auditee.
 Such audit covers all or any unit (i.e.
factory, office, warehouse, godown, depot, distributors or any other place
) of the assessee/person.
 Show cause notice or pre-decision hearing is a must before any order is
pronounced based on special audit.
 Direction of special audit is a non- appealable order.
 Revenue department shall bear the audit expenses and audit fees payable
to the special auditor.
 There is no prescribed format or manner of audit report but shall vary
depending upon scope of audit, terms of reference and audit findings.
 Commissioner may decide to accept or reject or consider partly the audit
report.

42. Access to Registered Premises (Rule 5A of ST Rules, 1994)
 Central excise officers / audit party are empowered to pay visits to
the premises of the assessees.
 Such visits shall be subject to the following rules:
 All visit to the premises of service tax assessees will be made by central
excise officers only after giving a notice in writing explaining therein
the purpose of such visit.
 The officers will clearly indicate the documents which may be required
by them during their visits.
 Records include records as per Rule 5, trial balance and Income Tax
audit report
 No such visits will be made without giving a clear notice of 15 days to
the assessee.
 Such visits will be made only with the prior approval of the
Commissioner.

43. S. No. Quantum of annual duty payment
(in cash + CENVAT Credit)
Frequency of audit
1 Taxpayers paying more than Rs. 50
lakhs
Every year
2 Taxpayers paying between Rs. 25
lakhs and Rs. 50 lakhs
Once in two years
3 Taxpayers paying between Rs. 10
lakhs and Rs. 25 lakhs
Once in five years
4 Taxpayers paying below Rs.10 lakhs 2% of the total number
every year
(Vide Circular No. 381/145 dated 6.6.2006)

44. Effective Handling of Audit
 The audited financial statements, directors’ reports, cost audit report, Income
tax audit reports, and the notes to accounts may be asked.
 Assessee should not refuse to produce books and records as this could lead to
penal action going beyond limitation period citing suppression.
 The advance intimation of same is generally given by department. The written
confirmation of timeline of audit is also given.
 The responsible team should be formed in office to answer to the queries of
audit team.
 The access to books and records may be allowed only during office hours. No
books should be allowed to be removed from premises. If they seek to take
records, it should be done under a written request and acknowledgement.

45. Effective Handling of Audit
 Documents should be furnished only for the period under audit.
 The delivery of books and records to them should be acknowledged by departmental
officers.
 No SCN / summons can be issued or demand raised nor assessment can be made during
audit.
 The assessee can make his views known to the audit team in advance prior to raising audit
objections.
 The audit team can only make factual observations and should not draw conclusion on
points of law.
 After audit is over, auditor may be discouraged from coming to auditee's premises.
 Questioning for long hours under stress and duress should be brought to the notice of
higher authorities.
 Trade formulas and secrets should be given only on written request from auditors.

46. Effective Handling of Audit
 Assessees should not panic and react blindly by complying
with the departmental officer’s instructions during audit.
 The auditee could refer the matters to a professional, and
seek advice, when the audit team is raising a number of
issues or verify claims made by audit team.
 When a number of records are continuously asked by audit
team, it is better to get an internal review of records done so
that auditee knows where it stands as far as compliances are
concerned.

47. In SKP Securities Ltd. v. Deputy Director (RA- IDT) (2013)
29 STR 337; (2013) 39 STT 327 (Calcutta), it was held –
 Scope of Rule 5A includes members of audit team, auditor
or accountant authorized by Commissioner
 Rule 5A(2) does not empower the CAG to audit accounts of
any assessee.
 Section 94(2) does not empower the Central Government
of frame rules for such audit.
 Condition precedent to order for special audit is reason to
believe that person liable to Service Tax is within
circumstances stipulated in section 72A (wrong
declaration of value of taxable service, misutilisation of
credit of tax etc).

48. THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com
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