Ankur Doshi: Service Tax Changes in the Budget

Service Tax provisions of Budget 2011

Section	Sub Clause	Details	Category
65	9	Definition of Authorised Service Station omitted	Omission
	25a	Definition of Clinical Establishment introduced which cover all types of hospitals with the facility of more than 25 beds and Central Air Conditioning either in whole or part of its premises offering services in any system of medicines with the exception of Government and Local Authority controlled Hospitals.	Newly Introduced
	27	Definition of Commercial training or coaching centre amended to include Pre School coaching & Training centre or any educational institute granting degree, diploma or certificate recognized by law. So whether all the school and colleges are included is a question ????	Scope Expanded
	104 (c)	Definition of Support Service of business or commerce amended to include administration assistance in any manner instead of only marketing.	Scope Expanded
	105 (zo)	Vis-à-vis omission of definition of Authorised Service Station the taxable service definition is also amended to include any person providing service for repair, decoration, etc. of any motor vehicle except 3 wheel scooter auto rickshaw & goods carriage motor vehicle.	Scope Expanded
	105 (zx)	Amends the definition of taxable service of Life Insurance Business to include all type of charges i.e. whole premium instead of only risk premium.	Scope Expanded
	105 (zzze)	Amends the definition of taxable service of club & association to include services provided to non members also. Earlier these services were exempt.	Scope Expanded
	105 (zzzzm)	Amends the definition of taxable service in relation to Legal Consultancy Services to include service provided by a Business entity to any person and representational services provided by any person to business entity i.e. appearing before any authorities or court. So legal consultancy services provided by an individual to an individual or business entity is still out of purview while the representational services have been made taxable.	Scope Expanded
	105 (zzzzo)	Amends the definition of taxable service in relation to Health Check-up and Treatment services to include Clinical Establishment, the definition of which is provided supra and also to include visiting doctors in such establishment.	Scope Expanded
	105 (zzzzv)	Service provided to any person by a restaurant having Air Conditioning in any part and holding license to serve Alcoholic Beverages	Newly Introduced
	105 (zzzzw)	Service provided by any type of hotel for accommodation for continuous period of less than 3 months.	Newly Introduced
70		Penalty for late filing of Return increased from ` 2,000 to ` 20,000	Increase in Penalty
73	1 (A)	Omitted, which provided the concessional penalty of 25% of Service Tax and consequential amendment to sub section (2) is made.	Omission
	4 (A)	New clause is inserted which deals with penal provision with certain provisos.	Newly Introduced
73B		Certain relaxations in interest rate to certain persons	Relaxation
75		Certain relaxations in interest rate to certain persons	Relaxation
76		Penalty for failure to pay service tax has been reduced. ` 100 per day or 1% p.m. subject to maximum 50% of service tax payable which was earlier ` 200 per day or 2% p.m. subject to maximum of service tax payable.	Relaxation
77		Penalty for any other contravention of rules where there is no penalty specified has been increased from ` 5,000 to ` 10,000.	Increase in Penalty
78		Section substituted with new provisions. Penalty has been reduced from maximum 200% to 100% with certain provisos.	Relaxation
89		Besides other provisions under the section there is one harsh provision introduced. If any person collects service tax and does not pay the same within a period of 6 months when it becomes due he shall be sent to imprisonment for a period of 1 year.	Very harsh provisions.

Certain other machiney provisions have also been inserted or amended. The above provisions shall come into effect from the date of assent of Hon'ble President to the Finance Bill.

Certain Notification have already been issued with various effective dates. Some of the notifications are as under :-

Notification No.	Details	Effective Date
1/2011	It provides that in relation to Works Contract Composition Scheme Cenvat Credit of tax paid on taxable service in respect of Commercial or Industrial Construction, Construction of Complexes and Erection, Commissioning or Installation service is allowed upto 40% of tax paid under Regular payment Scheme.	01-03-2011
2/2011	Amendment to Service Tax (Determination of Value) Rules, 2006	01-04-2011
3/2011	Amendment to Service Tax Rules	01-04-2011
4/2011	Increase in Air Fare	01-04-2011
5/2011	Exempts organizer of a Business Exhibition	01-03-2011
6/2011	Exempts certain projects under construction of complexes	01-03-2011
7/2011	Exempts certain General Insurance policies	01-03-2011
8/2011	Exempts certain transport of goods by Air, Rail or Road	01-04-2011
9/2011	Exempts certain value of transport of goods by Air	01-04-2011
10/2011	Exempts works contract services provided within Airport	01-03-2011
11/2011	Exempts works contract services provided within Port	01-03-2011
12/2011	Amendment to Export of Services Rules	01-04-2011
13/2011	Amendment to Taxation of Services (Provided from Outside India and Received in India) Rules	01-04-2011
14 & 15/2011	Rate of Interest increased from 13% to 18%	01-04-2011
16/2011	Grants abatement to transport of Coastal goods, Goods through National Waterway or Inland Water	01-03-2011
17/2011	Certain exemptions to units located in SEZ and refund provisions.	01-03-2011
18/2011	Introduction of Point of Taxation Rules	01-04-2011

Budget 2011: CA Anshuma Rustagi

CA Anshuma Rustagi

1.       GST in 2012 -  IT infrastructure to be laid down by NSDL - Pilot Project in 2011 – 13 states to adopt GST.

2.       Service tax refunds for exporters to be made easier. Tax Free receipts of services by exporters to be put into place.

3.       New Companies Bill to be introduced in this session of the Parliament.

4.       Income Tax exemption limit increased from 1,60,000 to 1,80,000 – individual tax payers

5.       Income Tax exemption limit increased from 2,40,000 to 2,50,000 – for senior citizen above 65 years of age

6.       Income Tax exemption limit increased to Rs 5,00,000 – for individual tax payers above 80 years of age

7.       Surcharge payable by companies reduced to 5% from 7.5%

8.       MAT increased to 18.5% from 18%

9.       Additional Rs. 20,000 investment in long term infrastructure bonds sop to continue

10.   15% tax on dividend recd by Indian company earned from foreign subsidiary

11.   Scientific Research Expenditure – contribution to National Laboratory etc  – weighted deduction increased from 175% to 200%

12.   Central Excise Duty to remain at 10%

13.   SEZ companies to come under MAT

14.   Service Tax to remain at 10%

15.   New services to be taxed

a.       AC Restaurants serving liquor – with 75% abatement

b.      Hospitals with more than 25 beds having AC – with 50% abatement

c.       Diagnostic Test Centres – with 50% abatement

d.      Government Hospitals not to be subject to service tax

e.      Air Travels to be subject to service tax

f.        Life insurance companies to pay service tax on investment activities

g.       Legal services subject to service tax

16.   Input and Input services to be defined more clearly

17.   Allocation of CENVAT credit between exempt and taxable services to be rationalized

 

 

 

Budget 2011: Synposis by Anand Wadadekar

GENERAL:
 
Economy to grow at 9%, plus or minus 0.25% in 2012
Agriculture growth at 5.4%, industry at 8.1% in 2010-11
Agricultural credit limit raised to Rs 4,75,000 crore
Food inflation declined to less than half to 9.30%
Food inflation is a big concern
Economy has regained pre-crisis growth momentum
States to cut down fiscal deficit to 3% of Gross State GDP by 2014
Growth rate of services sector expected at 9.3%
Exports up 9.4% in 2010-11
FY2012 Divestment Target at Rs 40,000 crore
Removal of supply bottlenecks in food sector in focus in 2011/12
Food Security Bill to be introduced in this year
FY 2012 defence capital expenditure seen at Rs 69,199 crore
Allocation to Department of Justice increased 3 fold to Rs 3000 cr
Plan expenditure at Rs 4.14 lakh crore
To distribute 1 million Unique Identification (UID) cards per day shortly
Fiscal deficit down at 5.1% from 5.4%
Fiscal deficit seen at 4.1% in FY 13, 3.5% in FY 14
Budget estimates for 2011-12 projects Rs 9,32,440 crore - an increase of 24 per cent

FINANCE:
 
FIIs allowed to invest in Mutual Funds and in 5-year unlisted bonds with minimum lock in period of 3 yrs
Plan to allow FII limit in infrastructure bonds to $25billion
FII limit in corporate bonds raised to $ 40billion
Plan to introduce Companies Bill in current session

Infrastructure spending to be raised by 23%
Priority home loan limit raised to Rs 25 lakh from Rs 20 lakh
Tax-free bonds worth Rs 30,000 cr proposed to boost infrastructure
To introduce self assessment in customs to facilitate fast clearance
General Sales Tax (GST) Bill to be introduced in the current session
To introduce Public Debt Management Bill in 2012; To set up independent debt management office
To provide Rs 200 cr grant to IIT Kharagpur, Rs 20 crore to IIM Calcutta
Banks to cover 20,00 villages for opening accounts in FY12
Have set up dedicated cell on transfer pricing monitoring
To amend Indian Stamp Act shortly
Gross Tax Receipts at Rs 9.32 lakh crore, up 25%
Tax sops of Rs 20,000 on Infra Bonds extended for one year
Revenue deficit for FY11 seen at 3.4%
 
DIRECT TAX:
 
Direct tax code will be effective from April 1, 2012; DTC after getting Standing Committee Report; Direct Tax Code likely to be passed by parliament next fiscal year
No Tax Return to be filed if TDS deducted by employer
Age for being classified as Senior Citizen cut to 60 years from 65 years
 
Corporate Tax reduced to 5%
Minimum Alternate Tax (MAT) raised to 18.5% of book profits
Surcharge on domestic companies cut to 5% from 7.5%
Foreign unit dividend tax rate cut to 15 percent for Indian companies
Special Economic Zones to come under MAT
 
Personal Taxation:
 
Individuals:
Income up to Rs 1.80 lakh: NIL tax
Income between Rs 1.80-5 lakh: Tax at 10%
Income between 5-8 lakh: Tax at 20%
Income above Rs 8 lakh: Tax at 30%
 
Senior Citizen: Minimum Tax Exemption limit raised to Rs. 2,50,000 from Rs. 2,40,000
women Citizens: Remains unchanged; i.e. at Rs. 1,90,000
New category of very senior citizens introduced under which Senior Citizens above the age of 80 years to get Rs. 5,00,000 as minimum tax exemption
 
Rs 20,000 deduction made available for investment in Infrastructure Bonds extended for one year. This is above Rs. 1,00,000 80C exemption
 
INDIRECT TAX:
 
Service Tax rates unchanged at 10%;
Service tax to cover more areas:
Service tax net extended to include health check-ups
Domestic travel to pay Rs 50 service tax, Rs 250 on international travel
Service tax on hotel accomodation above Rs 1500 per day
Legal representation for businesses under service tax
To tax life insurance service providers
 
Peak excise duty unchanged at 10%; To withdraw 130 items from exemption under Central Excise; Base rate on excise duty raised to 5% from 4%
No change in peak customs duty rate i.e. customs duty remains unchanged at 10%
No change in CENVAT rates
 
 
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Disclaimer: This Synposis prepared by Anand Wadadekar, has been prepared with utmost care and accuracy, however errors or omissions cannot be fully ruled out and the Author is not responsible for the same. The recipient is advised to go through the original Finance Bill if required.
Source: The Economic Times, Rediff.com