FAQ on Reverse Charge

Reverse charge for Directors & security services - FAQ

VIDE notifications 45 & 46/2012 ST Dated 07.08.2012, services provided by non employee directors to the Companies and security agencies have also been subjected to the levy of service tax. In this connection, the following questions are often raised.

1. Is service tax applicable for all directors of a Company?

Whole time directors and Managing Directors of the companies are considered as employees of the company in which they are directors. The definition of service itself excludes services provided by the employees to employers. Hence, there is no service tax in respect of such employee directors. Service tax will apply only in case of non employee directors.

2. Does reverse charge apply for all service recipients?

In respect of services provided by directors, obviously, the service recipient should be a company established under the Companies Act, like Private Limited Company, Public Limited Company, Government Company. In case of security agency services, the service recipient should be a business entity registered as a body corporate. Only in such cases reverse charge will apply.

3. If the service recipient is a partnership firm, whether reverse charge will apply for security services received by it?

No. Partnership firm is not a body corporate. Similar would be the case in case of other reverse charge liabilities, viz., manpower supply, works contract service and renting of vehicle services. But in case of support services provided by Government, Advocates, reverse charge will apply if the service recipient is "business entity" and they need not be body corporates.

4. What about the liability for the period 1 st July 2012 to 7th August 2012?

It may be noted that the services of Directors to the companies and security agency services are normally continuously provided for more than a period of 3 months. Hence, they would be "continuous supply of service" as defined in Point of Taxation Rules, 2011. As per first proviso under Rule 4 of the said Rules, the point of taxation in case of continuous supply of services has been defined as "in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service".

For example, if the security agency has already raised their invoice for the services provided by them during July 2012, before 7 th August 2012, the service recipient's liability to make the payment is recognized on the date of invoice and hence the point of taxation shall be the date of such invoice. Hence, if invoice has been raised by the security agency before 7 th August 2012, reverse charge will not apply, even if the payment is made by the service recipient after 7 th August 2012. But, if the invoice for the services provided from 1 st August to 31 st August 2012 is raised on 31 st August 2012, the date of invoice, i.e. 31 st August 2012 would be the point of taxation and hence the service recipient would be liable to make the payment of his portion of service tax liability under reverse charge, though part of the service has been provided before 7 th August 2012. In other words, there is no need to split up the liability into pre / post 7 th August 2012.

Similar would be the case in respect of services provided by the Directors to the Companies. If the liability to make the payment to the Director is recognized after 7 th August 2012, reverse charge will apply and if such liability is recognized by the company before 7 th August 2012, reverse charge will not apply.

If the services provided by the directors and security agencies does not qualify as continuous supply of service, then the point of taxation shall first be determined for the services provided. If the point of taxation is on or after 7 th August 2012, reverse charge will apply and if the point of taxation is before 7 th August 2012, reverse charge will not apply.

5. Whether the Directors have to obtain registration and pay service tax for the month of July 2012?

Yes. But, till 1 st July 2012, the services provided by them was not a taxable service. Hence, if the value of other taxable services rendered by them, if any, during the financial year 2011-12 is less than Rs. 10 lakhs, they can claim exemption upto Rs.10 lakhs, during 2012-13 if the value of services provided by them to the companies and other taxable services, if any provided by them, is upto less than Rs.10 lakhs. This exemption is contained in notification 33/2012 ST Dated 20.06.2012 and subject to the conditions prescribed therein.

6. What is the portion of service tax payable under reverse charge?

In case of directors, the entire service tax liability has to be paid by the company. In case of security agencies, 75 % of the service tax liability (9%) shall be paid by the service recipient and 25 % of the service tax liability (3%) shall be paid by the security agencies.

7. Whether the security agencies can pay 3 % service tax in all cases?

No. Reverse charge will apply only if the service recipient is a business entity registered as a body corporate. In case of the services of security agencies are provided to other than business entities or to business entities who are not registered as body corporates, the entire service tax has to be paid by the security agency and no reverse charge will apply.

8. Whether the service tax thus paid under reverse charge can be availed as cenvat credit?

Entitlement to cenvat credit of service tax is to be decided with reference to the definition of input service under the Cenvat Credit Rules, 2004. Normally, the services of Directors and security agencies would be an eligible input service for a manufacturer and a service provider. Further, security service is specifically covered in the definition of input service. Hence, cenvat credit would normally be entitled subject to other conditions under the Cenvat Credit Rules, 2004.

9. What is the document based on which cenvat credit can be taken?

In case of service tax paid directly by the service recipient under reverse charge, the challan evidencing payment of service tax by the service recipient would be the relevant document to avail cenvat credit. In respect of the portion of service tax paid by the security agency, the invoice issued by the security would be the relevant document.

10. Whether the directors have to issue an invoice?

As per the provisions of the Service Tax Rules, 1994 every service provider must raise an invoice within 30 days of completion of the service.

By G Natarajan, Advocate, Swamy Associates

Service Tax on Vocational Education

SECTION 66D OF THE FINANCE ACT, 1994 - NEGATIVE LIST OF SERVICES - SERVICE TAX ON VOCATIONAL EDUCATION/TRAINING COURSE

CIRCULAR NO. 164/15/2012-ST, DATED 28-8-2012

1. Clarification has been sought in respect of levy of service tax on certain vocational education/training/ skill development courses (VEC) offered by the Government (Central Government or State Government) or local authority themselves or by an entity independently established by the Government under the law, as a society or any other similar body.

2. The issue has been examined. When a VEC is offered by an institution of the Government or a local authority, question of service tax does not arise. In terms of section 66D (a), only specified services provided by the Government are liable to tax and VEC is excluded from the service tax.

3. When the VEC is offered by an institution, as an independent entity in the form of society or any other similar body, service tax treatment is determinable by the application of either sub-clause (ii) or (iii) of clause (i) of section 66D of the Finance Act, 1994. Sub-clause (ii) refers to "qualification recognized by any law" and sub-clause (iii) refers to "approved VEC". In the context of VEC, qualification implies a Certificate, Diploma, Degree or any other similar Certificate. The words "recognized by any law" will include such courses as are approved or recognized by any entity established under a central or state law including delegated legislation, for the purpose of granting recognition to any education course including a VEC.

4. This Circular may be communicated to the field formations and service tax assessees, through Public Notice/Trade Notice.

ST Compliance by CA

Service Tax Compliance by Chartered Accountants having turnover exceeding Rs. 50 Lakh

Till 31.03.2011, point of taxation in case of eight specified services including Chartered Accountants (CAs) was determined on the basis of receipt of payment.  However, w.e.f. 01.04.2011, this benefit has been extended to all services albeit, in a slightly modified form.  Now all individuals, partnership firms (including limited liability partnership firms) having a turnover not exceeding Rs. 50 lakh in the previous year can pay service tax on receipt basis in the current financial year.

Relevant provision – Rule 6(1) of the Service Tax Rules, 1994

…………..
"(1)     The service tax shall be paid to the credit of the Central Government, -
(i)         by the 6th day of the month, if the duty is deposited electronically through internet banking; and

(ii)        by the 5th day of the month, in any other case,

immediately following the calendar month in which the [Service is deemed to be provided as per the rules framed in this regard.

Provided that where the assessee is an individual or proprietary firm or partnership firm, the service tax shall be paid to the credit of the Central Government by the 6th day of the month if the duty is deposited electronically through internet banking, or, in any other case, the 5th day of the month, as the case may be, immediately following the quarter in which the [Services is deemed to be provided as per the rules framed in this regard.

Provided further that the service tax on the service deemed to be provided in the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year.

Provided also that in case of taxable services covered under  sub-rule (1) of rule 3 of the Export of Services Rules, 2005, this sub-rule shall not apply subject to the condition that the payment is received within the period specified by the Reserve Bank of India,  including such extended period as may be allowed from time to time.

Provided also that in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or to be provided by him up to a total of rupees fifty lakhs in the current financial year, by the dates specified in this sub-rule with respect to the month or quarter, as the case may be, in which payment is received."

In other words, the point of taxation (POT) in case of all service providers whose turnover exceeded Rs. 50 lakh in the year 2011-12 will be receipt of payment or issuance of invoice, whichever is earlier.  Thus, all CAs/firms of CAs with a turnover exceeding Rs.50 lakh in the year 2011-12 will also have to pay service tax on accrual basis.

Compliance advisory for firms maintaining books of accounts on cash basis

As majority of the CAs/firms of CAs (firm) maintain their books of account on cash basis, complying with the new system will require making adjustments/changes therein, though the firm can continue to maintain the Cash Method of Accounting.  The firm can creditService Charges A/c in the books on receipt basis and all other income and expenditure on cash basis.

Till 31.03.2012

The service tax recovered in respect of invoices issued before 31.3.2012 should be credited to Service Tax A/c No. l and the same should be debited when service tax is paid to the Government every quarter.  For this purpose, a separate Service Charges Register No. 1 can be maintained by the Firm containing the following columns.

(i) Date (ii) Invoice No. (iii) Name of Client (iv) Services Charges (v) Service Tax (vi) Total (vii) Date of Receipt (viii) Receipt No. (ix) TDS (ix) Amount Received

For accounting purposes, a separate Receipt Register No. 1 containing the following information in respect of invoices issued up to 31.3.2012 should be maintained:

(a) Date, (b) Receipt No. (c) Name of Client, (d) Date of Invoice (e) Invoice No. (f) Services Charges Received (g) Service Tax (h) TDS (i) Net Amount.

From 01.04.2012 onwards

The firm can maintain its regular accounts on cash basis of accounting. It can follow the following method for Service Tax purposes.

(i) The Firm should maintain a separate Service Charges Register No. 2 with following columns:

(a) Date (b) Invoice No. (c) Name of Client (d) Service Charges (e) Service Tax (f) Total (g) Date of Receipt (h) Receipt No. (i) Service Charges Received (j) Service Tax Received (k) TDS Deducted (I) Net Amount Received

(ii) At the end of each quarter the Firm should pay service tax as per total of item (e) which is the service tax on invoices issued during the quarter (Accrual Basis) plus item (j) which is the service tax actually received from the service receivers.  This service tax should be debited to Service Tax A/c No. 2 in the Books on the date of payment.

(iii) Service tax received on actual receipt basis as per Column (j) should be credited to Service Tax No. 2 A/c in the Books.

(iv)The debit balance in the Service Tax No. 2 A/c will represent service tax paid on invoices issued but not yet recovered.  This can be carried forward to next year.

(v)The actual payment of Service Tax in A/c No. 1 and 2 will be eligible to CENVAT Credit as per the provisions of CENVAT Credit Rules, 2004.

(vi)If the entire amount of invoice is not received but is settled for lesser amount and service tax received is of lesser amount, set off of service tax can be claimed as per the provisions of Service Tax Rules, 1994.  Similar will be the position if service is not provided either wholly or partially for any reason while the invoice for the same has been issued or the payment therefor has been received.

For accounting purposes, a separate Receipt Register No. 2 containing the following information in respect of invoices issued from 01.04.2012 onwards should be maintained:

(a) Date (b) Receipt No. (c) Name of Client (d) Date of Invoice (e) Invoice No (f) Service Charges, (g) Service Tax (h) Invoice Total (i) Services Charges Received (j) Service Tax Received (k) TDS (I) Net Amount Received.

The amount of Service Charges received, service tax received and TDS should be adjusted in respective accounts in the books.

Service tax in case of statutory audits

CAs may consider revisiting their service contracts in respect of statutory audits, which is a major source of revenue for majority of CAs and negotiate with their clients to pay the service charges within three months from the last date of filing the tax audit report i.e., 30^thSeptember of the relevant year. Now, when the time period of issuance of invoice has been increased from 14 days to 30 days from completion of service, CAs can issue the invoice on or before October 29 of a year – service will be taken to be completed when the audit report is filed on 30^th September.  Thus, in effect they will have three months to recover the fee and service tax from clients as service tax for the quarter Oct-Dec is payable by January 5^th/6^th of the next year. 

Source: IDTC, ICAI

MCA ON Borrowing costs on foreign currency loans need not be expensed in P&L

Accounting norm for forex losses relaxed again

Borrowing costs on foreign currency loans need not be expensed in P&L

The Corporate Affairs Ministry has yet again come to the rescue of India Inc on the issue of accounting of exchange differences on long-term foreign currency borrowings.

It has now allowed companies to capitalise exchange losses, if any, to the extent such losses represent the difference in interest rates on local and overseas borrowing.

This accounting flexibility will help bolster profits for Indian corporates that have borrowed in foreign currency, say accounting experts.

Until now, exchange losses on foreign currency borrowings to the extent they are regarded as adjustment to interest cost had to be expensed in the profit and loss account.

This is provided in an accounting standard AS-16 (Borrowing Costs) issued by the Union Government, based on the recommendation of National Advisory Committee on Accounting Standards (NACAS).

Through a new circular, the Corporate Affairs Ministry has now clarified that this accounting norm under AS-16 will not apply to a company that has opted for flexible accounting treatment on exchange losses under AS-11, which is the accounting standard on exchange differences.

The Government had in December 2011 allowed companies to opt for flexible accounting treatment on forex losses even for accounting periods beyond March 31, 2012.

But many accounting experts frown at the Corporate Affairs Ministry's unilateral action as the latest move tends to hide economic volatility.

In the long run, such accounting jugglery – allowing corporates to carry forward interest expense to balance sheets — will be a disservice to companies, they point out.

This decision has come about without waiting for the formal views of the CA Institute or NACAS — country's top accounting standards body, it is learnt.

The latest Corporate Affairs Ministry move (circular) will result in increased capitalisation, said Jamil Khatri, Global Head of Accounting Advisory Services, KPMG.

Though the revised Schedule VI to the Companies Act treats exchange differences representing differential interest rates as finance costs and not exchange gains or losses, the latest amendment removes such distinction for the purpose of capitalisation, he said.

It is not clear whether the new requirements need to be applied retrospectively or prospectively considering that such expenses may have been expensed in the past, said Khatri.

Arm's Lengh Price Notified-2012-13 AY

SECTION 92 OF THE INCOME-TAX ACT, 1961 - TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE - NOTIFIED PERCENTAGE UNDER SECOND PROVISO TO SECTION 92C(2)

NOTIFICATION NO. 31/2012 [F.NO. 500/185/2011-FTD I], DATED 17-8-2012

In exercise of the powers conferred by the second proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where the variation between the arm's length price determined under section 92C and the price at which the international transaction has actually been undertaken does not exceed five per cent of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price for assessment year 2012-13.

MCA Clarification on Service Tax

CLARIFICATION ON SERVICE TAX ON REMUNERATION TO DIRECTORS

Vide Notifications 45/2012 and 46/2012 dated 07/08/2012, Service Tax on reverse charge mechanism was imposed on services rendered by directors to companies (i.e. the recepient company has to pay the entire the Service Tax due on remuneration paid / payable to its directors).

Doubts arose among corporates and tax consultants as to whether remunerations to WHOLE TIME DIRECTORS (I.e. Managing Director / Executive Directors) are covered under these notifications

The General Circular No. 23/2012 dated 09/08/2012 issued by Ministry of Corporate Affairsbrings some respite.

Though the above general circular is issued in the context of 'Managerial Remuneration' under the Companies Act, it clarifies a vital issue as under:

"The NON WHOLETIME DIRECTORS of the company are presently NOT COVERED(emphasis) under the exempted list and as such the sitting fee / commission payable to them by the company is liable for Service Tax"

From the above clarification we can draw the following inference:

• ·        WHOLE TIME DIRECTORS (Managing Director / Executive Directors) fall under the negative / exempted list of Service Tax and
• ·        Hence remuneration paid / payable to them by the company won't attract Service Tax

The general circular is pasted below. Please acknowledge the receipt and give your valuable comments.

GENERAL CIRCULAR NO

23/2012, Dated: August 9, 2012

Sub: Applicability of Service Tax on commission payable to Non-Whole Time Directors of a company under section 309(4) of the Companies Act, 1956 - approval of Central Government under section 309/310 of the Companies Act-regarding.

The Finance Act 2012 has introduced Service Tax which is applicable to anyone who provides a Service not covered under the negative/exempted list and if the value of annual revenue is more than Rs.10 lakh. The Non-Whole Time Directors of the Company are presently not covered under the exempted list and as such, the sitting fee/commission payable to them by the company is liable to Service Tax.

If such Service Tax is paid by the company, it will be deemed to be a part of remuneration under section 198 of the Act and would accordingly increase the remuneration amount of such Non-Whole Time Directors. This remuneration could then exceed the limit of 1% profit [u/s 309(4)] of the company when the company has a Managing/Whole Time Directors/Managers or. 3% of the profit [u/s 309(4)] of the company if the company does not have a Managing/Whole Time Directors/Managers, as the case may be. As per existing provisions of the Companies Act, 1956, this would require prior approval of Central Government u/s 309 and 310 of the Act.

It has now been decided that any increase in remuneration of Non-Whole Time Director(s) of a company solely on account of payment of service tax on commission payable to them by the company shall not require approval of Central Government under section 309 and 310 of the Companies Act even if it exceeds the limit 1% or 3% of the profit [u/s 309(4)] of the company, as the case may be, in the financial year 2012-13.

F.No.14/33/2012-CL.VII

(L K Trivedi)

Under Secretary to the Govt. of India

ICAI Elections 2012: Watch this page

The ICAI elections are back. Keep watch this page for all the updates on this election. You can bookmark this. To begin with, the first issue we want to raise is election expenses. Do you know, how much is spent by each regional and central council election contestants? Mind boggling in some cases. Is it worth to spend this exorbitant amount?

A single mailer to all members of the election constituency costs lacs of rupees only postage, forget the cost of printing and stationary. It is worth? Can we go green? Our community is a highly educated one. Can't we ask all contestants to create a blog and post everything you want to on that and let ICAI share the link to all. Let people go to your blog, read, interact with the contestant and decide. When even income tax returns are made mandatory to file online, please don't argue that rural members don't have access to technology or internet.

Can't we ban all postal mailers? Contribute to environment and save cost too?

Is it possible that ICAI asks each contestants to write  a mailer with limitations of maximum words and distribute all mailers together along with its list of candidates and let people decide?

Just floating some ideas to ponder.. Appreciate  a debate and your views. After all we are all concerned for environment, for cost and elections... Speak your mind, thoughts below in comments...

ST Notifications issued on 07-08-2012

ST : Amendment to Notification No. 25/2012-ST, dated 20-6-2012 providing exemption to specified servicesNOTIFICATION NO. 44/2012-ST, DATED 07-08-2012

ST : Amendment to Notification No. 30/2012-ST, dated 20-6-2012 levying ST on Director's services under reverse chargeNOTIFICATION NO. 45/2012-ST, DATED 07-08-2012

ST : Service Tax (Third Amendment) Rules, 2012NOTIFICATION NO. 46/2012-ST, DATED 07-08-2012

--

Form 23 B Extended upto 11-08-2012

Ministry vide circular number 14/2012 dated 21/06/2012 had imposed fees on Form 23B (Information by auditor to Registrar) w.e.f.22/07/2012.

Kindly note that the Ministry vide circular number 22/2012 dated03/08/2012 has further extended the last date for filing the Form 23Bwithout fee. Fee shall be charged on any eForm 23B filed on or after12th August, 2012. You are therefore advised to file the pending eForms within the time limit to avoid any last minute rush.

IndianCAs: Frequently Asked Questions on E-filing – CPC [3 Attachments]

 

[Attachment(s) from Ashwin Nagar included below]

To e-file the income-tax returns easily, the Direct Taxes Committee of ICAI had requested the CPC to provide the Frequently Asked Questions (FAQ's) on matters relating thereto. In response to their request, Committee received FAQ's on E-filing of Income-tax Returns and CPC.

If you didn't get it from the committee chairman, please find attached. Hope this will be of help to you.

 

| Ashwin Nagar | FCA and SAP-Finance & Consolidations |

Success is not permanent and failure is not final

 

Facebook : http://www.facebook.com/ashwinnagar

Twitter      : http://twitter.com/ashwinnagar

Orkut        : http://www.orkut.co.in/Main#Profile?uid=18246210461112749074

Linkedin    : http://in.linkedin.com/in/ashwinnagar

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Attachment(s) from Ashwin Nagar

3 of 3 File(s)

Data

utf-8'en-us'FAQ’s on CPC and E-filing.pdf

FAQ's relating to Refund,Demand, No refund No demand.pdf

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Interest Subvention of 1% on Housing Loan-2012-13

Press Information Bureau
Government of India
Cabinet

04-July-2012 14:26 IST

Interest Subvention of 1% on housing loans

The Union Cabinet today approved the proposal for extending the scheme of interest subvention of 1% on housing loans upto Rs.15 lakh where the cost of the house does not exceed Rs.25 lakh for the year 2012-13 and to amend the operational part of guidelines for release of funds.

A budgetary provision of Rs.400 crore has been made for Financial Year 2012-13 for implementing the scheme.

Consequent upon the extension of scheme, the limit of subsidy for an individual borrower would be Rs.14,912 for a loan of Rs.15 lakh and Rs.9925 for a loan of Rs.10 lakh.

The extended scheme will benefit all house loans availed in Financial Year 2012-13.

Background:

The original scheme of 1% Interest Subvention on Housing Loans upto Rs.10 lakh, provided the cost of the housing unit does not exceed Rs.20 lakh was approved by the Cabinet in September, 2009. The scheme was revised by iberalizing the limit of housing loan upto Rs.15 lakh where cost of house does not exceed Rs.25 lakh in financial year 2011-12 which was approved by the Cabinet in October 2011. The scheme is further extended for another year that is financial year 2012-13. National Housing Bank (NHB) is the nodal agency for implementing the scheme both for Scheduled Commercial Banks and Housing Finance Companies.

****

SC/SH/SM

Draft ST Circular -27-07-2012

Draft Circular on leviability of service tax on staff benefits and employment related transactions

Draft CIRCULAR [F.No 354/127/2012-TRU], dated 27-7-2012

Subsequent to the operationlisation of the Negative List, a number of issues have been raised in relation to the manpower supply or the services provided by the directors of a company or by the employer to the employees. These issues have been examined and are proposed to be clarified as follows:

A. Scope of manpower supply

2. After the operationlisation of the Negative List, the erstwhile definition of the manpower recruitment or supply agency is no more applicable. Thus, the words manpower supply would have to be given their natural meaning. The manpower supply is understood to mean when one person provides another person with the use of one or more individuals who are contractually employed or otherwise engaged by the first person. The essence of the employment should be that the individuals should be employed by the provider of the service and not by the recipient of the service.

3. There could be certain contracts in which such manpower is made available to execute another independent contract by the service provider. For example, a person may agree to carry out construction or a manufacture for another in which certain manpower may be engaged. As long as such manpower is not placed operationally under the superintendence or control of the recipient, it shall not be a case of manpower supply, though it will continue to be judged independently whether it comprises any other taxable service.

4. There are also cases of secondment whereby certain staff belonging to an organization is placed at the disposal of a subsidiary company or any other associate company. Such cases will be covered by the definition of manpower supply as the contractual employment continues to be with the parent company.

B. Joint Employment

5. There can also be cases where staff is employed by one or more employers who normally share the cost of such employment. The services provided by such employee will be covered by the exclusion provided in the definition of service. However, if the staff has been engaged by one employer and only made available to other for a consideration, it shall not be a case of joint employment.

6. Another arrangement could be where one entity pays the salary and other expenses of the staff on behalf of other joint employers which are later recouped from the other employers on an agreed basis on actuals. Such recoveries will not be liable to service tax as it is merely a case of cost reimbursement.

C. Directors

7. Services of a director on the board of a company have now become taxable. A director may be appointed either in an individual capacity or to represent an entity (including government) who has either invested in the company or is otherwise authorized to nominate a director. When a director receives payment in his personal capacity, the same is liable to be taxed in the hands of the director. However, where the fee is charged by the entity appointing the director and is paid to such entity, the services shall be deemed to be supplied by such an entity and not by the individual director. Thus in the case of Govt. nominees, the services shall be deemed to be provided by the Govt. and liable to be taxed under the exclusion sub- (iv) of clause (a) of section 66D of the Finance Act, 1994 i.e. support services by Government to business. Such services are liable to be taxed on reverse charge basis.

D. Treatment of supplies made by the employer to employees

8. A number of activities are carried out by the employers for the employees for a consideration. Such activities fall within the definition of "service" and are liable to be taxed unless specified in the Negative List or otherwise exempted.

9. One of the ingredients for the taxation is that such activity should be provided for consideration. Where the employees pays for such services or where the amount is deducted from the salary, there does not seem to be any doubt. However, in certain situations, such services may be provided against a portion of the salary foregone by the employee. Such activities will also be considered as having been made for a consideration and thus liable to tax. Cenvat credit for inputs and input services used to provide such services will be eligible under extant rules. The said goods or services would now not be construed to be for personal use or consumption of an employee per se and rather shall be a constituent to the taxable service provided to an employee. The status of the employee would be as a service recipient rather than as a mere employee when consuming such output service. The valuation of the service so provided by the employer to the employee shall be determined as per the extant rules in this regard.

10. However, any activity available to all the employees free of charge without any reduction from the emoluments shall not be considered as an activity for consideration and will thus remain outside the purview of the service tax liability (facilities like crèche, gymnasium or a health club which all employees may use without any charge or reduction from the salary will be outside the tax net). However the Cenvat credit for such inputs and input services will be guided by the extant rules.

11. Moreover, it would need to be seen whether the services provided by the employer are otherwise covered by the Negative List or exempt. For example, the services of food and catering provided by the employer in a canteen would normally fall outside the tax net unless such canteen has both the facility of air-conditioning as well as license to serve liquor (S. No. 19 of the Mega exemption). Likewise, services provided by way of guest house will also not be liable to tax if the tariff for such unit of accommodation is below Rs.1000 per day or equivalent (S. No. 18 of the Mega exemption). Similarly, services of telephone and motorcar for personal use will be covered by the service tax.

E. Treatment of reimbursements made by the employer to the employee

12. Provision of service by an employee to the employer in the course of or in relation to his employment is excluded from the definition of the "service". Thus reimbursements of expenditure incurred on behalf of the employer in course of employment would not amount to a "service" per se and hence are non-taxable.

F. Treatment of supplies and reimbursements made by the employer to ex-employees/ pensioners

13. The supplies made by the employer to the ex-employees or pensioners will be of same status as those to an employee and thus would accordingly attract taxability as per discussion in D above. The reimbursements to pensioners will also be treated at par with those of current employees when such reimbursements arise out of the initial employment contract or are in relation to that employment.

14. Chambers, trade, industry and field formations are requested to go through the draft Circular and offer their comments, views and suggestions. It is requested that comments, views and suggestions on the same may be forwarded to the undersigned on or before 24th August 2012. The same may also be emailed to shobhit.jain@nic.in

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IndianCAs: Filing of Form 23B without Payment of Fee

 

Filing of Form 23B without Payment of Fee
 

As you may be aware, the Ministry of Corporate Affairs vide its circular number 14/2012 dated 21.06.2012 had imposed fees on Form 23B (Information by auditor to Registrar) w.e.f. 22/07/2012. Subsequently, the Ministry vide its circular number 19/2012 dated 27.07.2012 has extended the last date for filing the Form 23B without fee for two weeks. Accordingly, fee shall be charged on any e-Form 23B filed on or after 05.08.2012. The Ministry has requested the Institute to advise its members to file the pending e-forms immediately without waiting for last date to avoid last minute rush on MCA21 system.

Members concerned are accordingly requested to do the needful.

| Ashwin Nagar | FCA and SAP-Finance & Consolidations |

Success is not permanent and failure is not final

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Cost Audit Report-XBRL-31-12-2012

Ministry of Corporate Affairs30-July, 2012 17:20 IST

Filing of Cost Audit Report and Compliance Report in the Extensible Business Reporting Language (XBRL) Mode

The Ministry of Corporate Affairs has decided that all cost auditors and the concerned companies will be allowed to file their Cost Audit Reports and Compliance Reports for the year 2011-12 [including the overdue reports relating to any previous year(s)] with the Central Government in the XBRL mode, without any penalty, upto 31st December, 2012. Accordingly the Institute of Cost Accountants of India, 12, Sudder Street, Kolkata – 700 016 Institute has been requested to circulate this for the information of all concerned. It may be noted that its circular of 10th May, 2012 [as amended on 29th June, 2012], it has already been mandated by the Ministry of Corporate Affairs that all cost auditors and the concerned companies shall file their Cost Audit Reports and Compliance Reports for the year 2011-12 onwards [including the overdue reports relating to any previous year(s)] only in the XBRL mode. For this purpose, the applicable taxonomy, business rules, validation tools, etc. and also the "Product Group" classification required for preparing the cost audit reports and compliance reports as per the notified Cost Accounting Records Rules, 2011 and Cost Audit Report Rules, 2011 are under preparation and would soon be made available by the Ministry. The actual date for enabling XBRL filing will be intimated separately. *****