Wednesday, 6 March 2013

Highlights of The Changes In Service Tax-Budget 2013-14


Changes in the Finance Act
1. The definition of approved vocational course in section 65 B (11) of the Finance Act, 1994 is being proposed to be changed to include courses run by an industrial training institute or an industrial training centre affiliated to State Council for Vocational Training in the Negative List and thus exclude such courses from the levy of Service Tax. This definition is further proposed to be amended to remove the courses run by an institute affiliated to the National Skill Development Corporation from the Negative List. Consequentially all the courses run by an institute affiliated to the National Skill Development Corporation would attract Service Tax. This amendment will come into effect from the date of enactment of the Finance Bill, 2013.
2. The definition of “process amounting to manufacture or production” in Section 65B (40) is proposed to bee expanded to exempt the processes on which excise are leviable under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 from the levy of Service Tax by including such processes in the Negative List. This amendment will come into effect from the date of enactment of the Finance Bill, 2013.
3. The negative list entry in Section 66 D (d) (i) is proposed to be modified by deleting the word “seed”. This will allow exemption from Service Tax to all testings in relation to “agriculture” or “agricultural produce”. This amendment will come into effect from the date of enactment of the Finance Bill, 2013.
4. The provisions of Section 73 of the Finance Act, 19994 is proposed to be amended so to empower the Central Excise officer to determine the demand for the shorter period of eighteen months if the grounds for invoking extended period are not sustained in appeal proceedings. As per this amendment if a demand of Service Tax confirmed in pursuance of Show Cause Notice issued for the extended period of five years by alleging fraud or collusion or willful misstatement or suppression of facts or contravention of any Service Tax provisions with intent to evade payment of service tax, and such confirmation of demand in Order in Original is set aside by the appellate forum such as Commissioner (Appeals), CESTAT, High Court or Supreme Court, the Show Cause Notice issued can be re-adjudicated by the original adjudicating authority for determining the demand of Service Tax for the last period of eighteen months out of the Service Tax demanded for the total period of five years. This amendment will also come into effect from the date of enactment of the Finance Bill, 2013.
5. The penal provisions of Section 73 of the Finance Act, 1994 is also proposed to be amended for providing a penalty upto Rs. 10,000/- for failure to take registration. The erstwhile provisions provided a penalty upto Rs. 10,000/- or Rs. 200/- for every day for the period of default, whichever is more. This proposed amendment would result in reduction of the penalty for not obtaining registration.
6. A new Section 78 A is proposed to be introduced in the Finance Act, 1994 providing for penalty upto Rs. 1,00,000/- for offences by Director, Manager, Secretary or any other officer of a Company. As per the proposed provision such penalty can be imposed for the following contraventions by a Company:-
(a) evasion of service tax or
(b) issuance of invoice, bill or, as the case may be, a challan without provision of taxable service in violation of the rules made under the provisions of this Chapter or
(c) availment and utilisation of credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter; or
(d) failure to pay any amount collected as service tax to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due.
Such penalty can be imposed only if at the time of such contravention was in charge of, and was responsible to, the company for the conduct of business of such company and was knowingly concerned with such contravention.
7. The Section 89 of the Finance Act, 1994 is also proposed to be amended to provide for a upto seven years for the offence of collecting any amount as service tax but failing to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, where the amount exceeds Rs. 50 Lakhs.
8. The Section 89 of the Finance Act, 1994 is also proposed to be amended for classifying the offence of collecting any amount as service tax but failing to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, where the amount exceeds Rs. 50 Lakhs and attracts a punishment upto seven years, as a cognizable offence.
9. The Finance Bill, 2013 proposes to introduce a new Section 90 in the Finance Act, 1994 whereby any offence which attracts a punishment of upto seven years would be cognizable and all other offences shall be non-cognizable and bailable.
10. A new Section 91 is proposed to be introduced in the Finance Act, 1994 conferring the powers of arrest to the officers the rank of Superintendent of Central Excise and above for offences in Service Tax which are punishable with imprisonment of three years or seven years. However, such arrests have to be authorised by the Commissioner of Central Excise. The new provision further specifies that a person who is arrested for any cognizable offence attracting punishment of seven years is required to be informed of the grounds of arrest and is needed to be produced him before a magistrate within twenty-four hours of his arrest. In the case of a non-cognizable and bailable offence, the Assistant Commissioner or the Deputy Commissioner is empowered to release the person on bail.
11. The Section 95 of the Finance Act, 1994 is also proposed to be amended to empower the Government of India to remove the difficulty in giving effect to the amendments made by the Finance Act, 2013 to the Service Tax provisions, by issue of an order within one year from the date on which the Finance Bill, 2013 receives the assent of the President.
12. A new Section 99 of the Finance Act, 1994 is also proposed to be inserted in the Finance Act, 1994 to the effect that no service tax shall be levied or collected in respect of taxable services provided by the Indian Railways during the period prior to the 01.07.2012, to the extent notices have been issued under section 73, up to the 28.02.2013.
Amendment to Abatement Notification
The abatement of 75% available under S. No. 12 of Notification 26/2012-ST dated June 20, 2012 for residential complex is restricted to residential unit having a carpet area up to 2000 sq ft or where the amount charged per unit is less than Rs 1 crore vide amendment Notification No. 2/2013-ST dated 01.03.2013. All other constructions of complex, building, civil structure including commercial and industrial construction would enjoy an abatement of only 70%. This will come into effect from March 1, 2013.
Amendment to Service Tax Exemption Notification
Vide Notification No. 2/2013-ST dated 01.03.2013, the following changes are being made w.e.f 01.04.2013 in the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012:
Exemption for service provided by way of auxiliary educational services and renting of immovable property by specified educational institutes will not be available. Before the amendment such services provided to as well as by specified educational institutes were eligible for exemption under the notification.
The benefit of exemption to copyrights for cinematograph films will be available only to films exhibited in a cinema hall or theatre. Before this amendment such exemption was available to all forms off exhibition of cinematograph films. The present amendment is intended to allow the cinema hall or theatre to avail Cenvat credit on taxes paid by the distributors or producers of cinematograph films and utilize the same for payment of taxes on their taxable output services. However, such exhibition of films on Televisions would continue to enjoy the exemption.
Exemption available under the Notification is restricted to only to non air-conditioned (non-centrally air-heated) restaurants, eating joint or a mess. The amendment has done away with the dual requirement that only restaurants, eating joint or a mess serving food or beverages and having a license to serve alcohol and having the facility of air-conditioning or central air-heating in any part of the establishment at any time during the year with a licence to serve alcoholic beverages is done away.
Sr. No. 20 and Sr. No. 21 of Notification No. 25/2012-ST dated 20.06.2012.
The exemptions available to transportation of goods by railway and vessel under S. No. 20 and services provided by a goods transportation agency (GTA) under S. No. 21 are also amended. Thus exemption from Service Tax to transportation of petroleum and petroleum products, postal mails or mail bags and household effects by railways and vessels will not be available. The benefit of transportation of agricultural produce, foodstuffs, relief materials for specified purposes, chemical fertilizers and oilcakes, registered newspapers or magazines and defence equipments will be available to GTAs.
By virtue of these amendments the transportation of petroleum and petroleum products, postal mails or mail bags and household effects would not anymore enjoy exemption from Service Tax.
The exemption available for the service of vehicle parking provided to general public is withdrawn.
The exemption available for repair or maintenance of government aircrafts are withdrawn;
Definition of “charitable activities”
The definition of “charitable activities” is amended by deleting the portion listed in sub-clause (v) of clause (k) thereof. Thus the benefit to charities providing services for advancement of “any other object of general public utility” up to Rs 25 Lakh will not be henceforth available.
Service Tax Voluntary Compliance Encouragement Scheme, 2013
The highlights of the Scheme are as under:-
1. The Service Tax Voluntary Compliance Encouragement Scheme, 2013 is to encourage those assessee who has not filed service tax returns or have not declared true value of taxable service, to file service tax returns and declare true taxable value. An assessee who volunteers under said scheme shall not be subject to interest on Service Tax and penalty.
2. The said scheme is applicable to all the assessee. Individual, HUF, Partnership Firm, Body Corporate etc. all can take advantage of the said scheme. An assessee shall make true declaration of his tax dues before designated authority.
3. The scheme is valid for the tax dues pertaining to period from 01.10.2007 to 31.12.2012. One can apply on or before 31st day of December, 2013.
4. An assessee who has filed his ST-3 returns and disclosed his true liabilities but has not paid the disclosed amount of Service Tax or any part thereof; shall not be eligible to avail the benefit of the said scheme.
5. An assessee who has filed his ST-3 returns and has also paid tax on the same but true value has not been shown in the return cannot avail benefit of the said scheme.
6. An assessee who has been served with a notice or an order of determination in respect of any period on any issue, then such assessee can not apply for the said scheme for same issue for any subsequent period.
7. An assessee against whom an inquiry or investigation, as detailed below, is initiated respect of a service tax not levied or not paid or short-levied or short-paid not apply for the said scheme:-
(i) search of premises or
(ii) issuance of summons under Section 14 of the Central Excise Act, 1944, as made applicable to Service Tax provisions under section 83 of the Finance Act, 1994 or
(iii) requiring production of accounts, documents or other evidence under the Chapter or the rules made there under.
(iv) An assessee against whom audit has been initiated.
8. The scheme would apply to the Service Tax and Cess due or payable or any other amount due or payable under Section 73A of the Finance Act, 1994 for the period 01.10.2007 to 31.12.2012, but not paid as on the 1st day of March, 2013.
9. The designated authority under the said scheme is an officer not below the rank of Assistant Commissioner of Central Excise as notified by the Commissioner of Central Excise for the purposes of this Scheme. The application under the scheme is required to be made to such designated authority.
10. An assessee is required to make a declaration to the designated authority on or before the 31.12.2013 in such form and in such manner as may be prescribed and the designated authority shall acknowledge the declaration in such form and in such manner as may be prescribed.
11. Once the declaration has been made, the declarant is required to deposit 50% of the tax dues so declared on or before 31.12.2013 and submit proof of such payment to the designated authority. The remaining tax dues shall be paid by the declarant on or before the 30.06.2014.
12. If the remaining tax dues are not paid by declarant on or before 30.06.2014 then, such remaining dues is required to be paid on or before 31.12.2014. However, such payment is required to be made with interest for the period 01.07.2014 till the date of payment of the dues.
13. If an assessee could not pay tax dues declared by him even after 31.12.2014, either fully or in part, then such dues along with interest thereon shall be recoverable under the provisions of Finance Act, 1994 without extending the benefits under the scheme.
14. The amount paid under the said scheme shall not be refundable under any circumstances.
15. If an assessee files a false declaration under the scheme, and where the Commissioner of Central Excise has reasons to believe that the declaration made by a declarant under this Scheme is substantially false, he shall be served a Show Cause Notice under Section 73 of the Finance Act, 1994 in respect of such declaration requiring him to show cause why he should not pay the tax dues not paid or short-paid. Show Cause Notice can be issued within one year from the date of filing of declaration. Hence, interest and penalty as applicable shall be levied.
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