An introduction to change made by Finance Act, 2012

1. Presentation on Service Tax Amendments
An introduction to changes made by Finance Act,2012-
Effective from 01st July, 2012
Compiled By:
Rahul Agarwal
S.P. NAGRATH & CO.
CHARTERED ACCOUNTANTS
A-380, Defence Colony
New Delhi-110024
India-+91(11) 49800000
www.spnagrath.com

2. Flow of Presentation
 Service Tax
 Key Features at a Glance
 Negative List
 Exemptions
 Reverse charge mechanism
 New abatement scheme
 Amendments
(i) Procedural
(ii) Point of Taxation Rules
(iii) Cenvat Credit
(iv) Others

3. SERVICE TAX

4. Key features at a Glance
 Tax rate increased from 10% to 12%
 Negative list (of 17 heads) based approach introduced, positive list based
approach discontinued
 Huge list of services which have been exempted, vide Notification No.
12/2012-ST dated 17-03-2012.
 Draft Place of Provision of Services Rules, 2012 proposed to enable the
negative list approach
 Existing Export of Service Rules and Import Rules to be discontinued on
introduction of Place of Service Rules.

5. Key features at a Glance (Cont’d…)
 New sections 65B, 66B, 66C, 66D, 66E and 66F introduced
Section Description
65B Definitions
66B New charging section
66C Place of Provision of Service
66D Negative list of services
66E Declared services
66F Principles of interpretation of bundled services
 Above provisions will be applicable from 01.07.2012 vide Notification
No.19/2012-ST dated 05.06.2012.

6. Key features at a Glance (Cont’d…)
 New charging section under ST provisions (Sec.66B)
 Any activity carried out by a person for another for consideration, and includes a
declared service (Sec.65B)
 Declared services being- (i) renting of Immovable property
(ii) Construction related services
(iii) Temporary transfer of IPRs
(iv) service portion in WC Service
(v) transfer by way of hire purchase, leasing
 Bundled service means a bundle of provision of various services wherein an
element of provision of one service is combined with an element of provision of
any other service(s) (Sec.66F)
 Services are naturally bundled in ordinary course of business or not.

7. Negative List
 Negative list shall comprise of the following services
 Government or local authorities except
 Department of Posts
 Services in relation to an aircraft or a vessel, inside or outside the
precincts of a port or an airport
 Transport of goods or passengers
 Support services to business entities
 Reserve Bank of India
 Foreign Diplomatic Missions located in India
 Specified services relating to agriculture
 Trading of goods
 Process amounting to manufacture/ production
 Space selling for advertisement (except radio or television)
 Access to Road/ bridge for toll charges
 Betting, gambling or lottery

8. Negative List (Cont’d…)
 Entertainment/ amusement
 Transmission or distribution of electricity by a utility
 Education namely, pre-school, higher secondary, curriculum/
qualification recognized by law, approved vocational courses
 Renting of residential dwelling
 Interest/discount on deposits, loans or advances
 Inter se-sales/ purchase of FOREX by Banks/ Authorized Dealers
 Transportation of passengers by stage carriage, railway (not being 1st
class/AC,), metro, monorail, tram way, inland water ways, public
transport (not being for tourism), metered cabs, radio taxis and auto
rickshaws
 Transportation of goods by road ( except by a GTA or courier), aircraft
or vessel from abroad to India, inland water base
 Funeral, burial, crematorium or mortuary services including
transportation of the deceased

9. Exemptions
 Retrospective exemptions granted
 for repair of roads
 to management, maintenance or repair services undertaken in relation to non
commercial Government buildings
 for supply of taxable services by DTA units to authorized operations of SEZ
 to services provided by Association of Dyeing units in relation to common
effluent treatment plants
 Scheme for penalty waiver for renting of immovable property
 Penalty would be waived for those tax payers who pay the service tax due on
the renting of immovable property service (as on 6th day of March, 2012) in
full along with interest within 6 months.

10. Exemptions (Cont’d…)
 Some Proposed Exemptions of Services:
 Given to UN and International Organisations
 Healthcare services
 Veterinary Clinics
 Charitable services under Income tax
 Renting for religion
 Advocates to individuals
 Technical testing for clinical research
 Training / Coaching in arts, culture, sports
 Specified services to educational institutes
 Specified services of a recognised sports body
 Sponsorship of tournaments
 Construction for Government etc.,

11. New Reverse Charge mechanism
 The new scheme is being introduced for three services. The services and portion
of tax payable are as follows:
Sl. Description of service Service Service
No. recipient provider
1. Hiring of a motor vehicle
designed to carry
passengers:
(b)with abatement 100% Nil
(c)without abatement 40% 60%
2. Supply of manpower for 75% 25%
any purpose
3. Works contract service 50% 50%
 i.e. Now the recipient of above services is also required to get it self registered,
if recipient is a body corporate and provider is either an individual, firm or
LLP.

12. New abatement scheme
 The increase in taxable portion of some services covered under abatement
scheme are accompanied with liberalisation in input tax credits admissibility
Sl. Description of service Existing New Cenvat credit admissibility
No. taxable taxable
portion portion
1. Convention Centre or 60% 70% All credits, except on inputs of
mandap with catering chapter 1to 22, now available
2. Pandal or Shamiana with 70% 70% Same above
catering
3. Coastal shipping 75% 50% No credit as at present
4. Accommodation in hotel etc. 50% 60% Credit on input services allowed
5. Railways:
Goods 30% 30% All credits will be allowed
Passengers New 30%
levy

13. Amendments- Procedural
 Rule 4A of Service Tax Rule- Issuance of invoice
 For all assessees
and 45 days for banks and other financial institutions
 Self adjustment of service tax without any monetary limit and intimation to
department.
 Normal limitation for issuing Show Cause Notice increased from 12 to 18 months.
 Statement of tax due for subsequent period by referring to earlier Show Cause
Notice deemed to be proper Show Cause Notice.
 Settlement of Service Tax disputes by Settlement Commission introduced
 Revision Mechanism made applicable to Service Tax
 Limitation period reduced from 90 to 60 days for filling appeals before
Commissioner Appeals
 Offences can be compounded

14. Amendments- PoTR, 2011
 Definition of continuous supply of service is being amended to capture the
subject in a more wholesome manner
 Rule 7 of PoTR amended
Before amendment After amendment
Rule 7 states PoT for: Rule 7 states PoT for:
(ii)Export of Services (i) Services, where tax is
(iii)Specified Services by firms payable under reverse charge
(iv) Services, where tax is
payable under reverse charge
 PoT on the basis of date of payment is also extended to individuals and firms
upto a turnover of Rs. 50 lakh.
 In case of a new levy no tax if payment has been received and invoice issued
within a period of 14 days of the date of new levy

15. Amendments –Cenvat Credit
 Simplified procedure for refund of unutilized credit relating to exports.
 Cenvat Credit now allowed on specified categories of motor vehicles used for
all taxable services.
 Cenvat Credit to insurance companies on insurance and service station service
for re-insurance/third party insurance of motor vehicles.
 Cenvat Credit to be taken on delivery of the inputs/capital goods to the service
provider.
 Cenvat Reversal for exempt services increased from 5% to 6%
 Cenvat Credit of Service tax on services in respect of multi-unit assessee to be:
 exclusively allocated to a unit which wholly uses such input service.
 proportionately distributed to all the units on pro-rata basis based on their
respective turnovers in case such service is used by all the units.

16. Amendments- others
 Special rates in Service Tax:
 For life insurance under Rule 6(7A)(ii) of STR, 1994
Gross amount of premium New Rate Old Rate
charged
1st year 3% 1.5%
 For money changing under Rule 6(7B) of STR, 1994
Gross Amount of New Rate Old Rate
Currency Exchanged
Upto Rs. 100,000 0.12% subject to 0.10% subject to
maximum of Rs. 30 minimum of Rs. 25
Amount Rs.120 and 0.06% Rs.100 and 0.05%
>100,000<1,000,000
>1,000,000 Rs.660 and 0.012% Rs.550 and 0.01%
maximum of subject to maximum
Rs.6,000 of Rs.5,000

17. Amendments- others (Cont’d…)
 Works contract service , composition rate has been changed from 4% to 4.8%
 Challan of payment of service tax to be a duty paying document for CENVAT
purposes where the service receiver pays the service tax on reverse charge basis.
 Specific provision for Special Audit introduced as in Excise.
 Amendment to Small scale exemption to provide that the first clearances upto
Rs.10 lakhs will be considered on the basis of invoices issued and not merely on
payments received.
 Revision in period of filing of appeal:
Earlier Now
Commissioner (A) 3 month 2 month
Appellate Tribunal 3 month 3 month
Departmental 3 month 4 month

18. Amendments- others (Cont’d…)
 Common Service Tax Return called EST (Excise and Service Tax)
(A) Quarterly (B) Monthly
(i) Individuals/Firms/LLP Other than covered in
(A)
(ii) Others whose tax liability < Rs. 25lakh (preceding yr.)
 Common simplified registration for Central Excise and Service Tax
 The above changes will come into force after inviting comments from
stakeholders.

19. S. P. NAGRATH & CO.
CHARTERED ACCOUNTANTS