1 / 24

Name Designation Discipline City Date of Meeting

GLOBAL SERVICE/ INDUSTRY. Place Presentation Title Here. Implementation and Administration of Service Taxation Selected Aspects. AUDIT / TAX / ADVISORY / LINE OF BUSINESS. 19 September, 2009. Name Designation Discipline City Date of Meeting. Contents. Reverse Charge-Domestically

sahkyo
Download Presentation

Name Designation Discipline City Date of Meeting

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. GLOBAL SERVICE/ INDUSTRY Place Presentation Title Here Implementation and Administration of Service Taxation Selected Aspects AUDIT / TAX / ADVISORY / LINE OF BUSINESS 19 September, 2009 NameDesignation DisciplineCityDate of Meeting

  2. Contents Reverse Charge-Domestically Supplied Services 1 2 Reverse charge-Internationally Supplied Services - Imports 3 Services Supplied Internationally - Exports 4 Composite Contracts 5 Annex

  3. Reverse Charge MechanismDomestically supplied services… • Transportation of goods by road in goods carriage - Goods Transport Agency ( GTA) – introduced in 01.01.05 • Implementation challenges • Trade characteristics: • Unorganized • Dispersed • Semi-literate • Inadequate access to banking system • Strong bargaining power – essential service

  4. …Reverse Charge MechanismDomestically supplied services… • How addressed? • Abatement – effective ITC • Intra-service providers – no service tax • 7 specified categories ( organized businesses) - reverse charge- optional between consignee and consignor • Others, especially, individuals – GTA – exemption for small and individual consignments • Experience • Generally, working well • Organised transporters providing bundled services would prefer direct charge as against reverse charge

  5. …Reverse Charge MechanismDomestically supplied services… • Sponsorship • Implementation Challenges • Primarily, charities/NGOs – voluntary workers • Semi-organised – lack of resources for record maintenance and compliance • Changing management team – fixing responsibility/liability

  6. …Reverse Charge MechanismDomestically supplied services… • How addressed? • Reverse charge • Sponsoring business to pay – compliance responsibility of sponsoring business • Experience • Working well • Loss of ITC on costs incurred by sponsorship receiving entity

  7. …Reverse Charge MechanismDomestically supplied services… • Financial Services – Insurance and Mutual Fund Agents • Implementation challenges • Semi organised • Large number of small individuals – largely operating from homes • Dispersed • Semi-literate • Not much bargaining power

  8. …Reverse Charge MechanismDomestically supplied services • Solution • Reverse charge - Insurance companies and Funds to pay service tax • Few tax payers for administration – Less than 100 against say, 1 million • Experience • Loss of threshold exemption for Agents • Loss of ITC for Agents – not very significant • Loss to Agents – made to bear Service tax ? • ITC – accumulation for Funds – no or insufficient output tax

  9. Reverse Charge Mechanism-Internationally supplied services… • Evolution of mechanism/Law and Regulation • No place of supply rules • Import of Service – Act & Rules – specific for category of service • Three groups • Based on location of immovable properties • Based on place of performance of service • Based on location of recipient of service • Branch – treated as separate establishment • More than one establishment – connected with providing service relevant

  10. Reverse Charge Mechanism-Internationally supplied services… • Experience • Service received outside India – double taxation – carve out - determination of place of performance of service in specific cases like repair, testing • Multiple element contracts – classification • Cost sharing agreements • Reimbursements - valuation

  11. Services supplied internationally – export… • Evolution • Export of Service Rules – category wise • Three Groups • Based on location of immovable properties • Based on place of performance of service • Based on location of recipient of service • Additional conditions- export of service • Consideration in foreign currency • Service provided from India and used outside India

  12. Services supplied internationally – export… • Export without service tax – no zero rating concept – Instead, rebate for input services/inputs used in providing taxable export service • Issues • Export of non-taxable service – input tax cost • Exports by traders – goods – refund of input taxes • Refund of input taxes to service providers • Cross border services provided remotely from India

  13. …Services supplied internationally – export • Solution • Special Refund Schemes for traders and service providers • Service provided remotely – carve out - place of performance for some category of services, example, ship repair • Experience • Processing of refund claims – huge challenge

  14. Composite Contracts… • Characteristics • Contracts involving supply of goods and services – construction, EPC contracts • Essentially, resulting in immovables like buildings, plants • Transfer of property in goods during execution of such contracts – State VAT • Service element – Union Service tax

  15. …Composite Contracts… • Challenges • Partly within State scope and Partly within Union scope • States taking aggressive positions – significant revenue involvement • EPC Contracts – divisible v/s indivisible • Daelim Judgement – SC ( 2004) • Telecommunication Service • Telephone connections, leased line, SIM Card, DTH Service, Ring Tones ( Value Added Services), game parlors, software maintenance • Hotels - banquets

  16. …Composite Contracts… • Application and interpretation by judiciary • Gannon Dunkerley/Builders Association • Rainbow Color Lab ( 2000) • ACC ( 2001) • BSNL( 2006) • Imagic Creative ( 2008)

  17. …Composite Contracts… • Solution • Abatement Scheme – simplification measure • Composition Scheme – simplification measure • Introduction of Works Contract Service category • Experience • Litigation continues • More clarity required • Significant uncertainties and costs for businesses

  18. Annex

  19. Service Taxation inIndia - Overview • Central Level: • Union Service Tax – Uniform across the country • Introduced in 1994 – evolved over a period of time • Taxation of specifically notified services – covers almost all services except for general education and medical – more than 100 categories of services • Destination principle • VAT mechanism – across CENVAT ( VAT on goods up to manufacturing stage) and services • State Level: varies from State to State – on specified services like entertainment

  20. 14 May 2003 Inter-category 10 September 2004 Inter-sectoral 16 August 2002 Intra-category Input Tax Credit (ITC)- Union Level

  21. Input Tax Credit (ITC) – General… • From 1994 (Introduction of Service Tax) till August 2002 – No ITC • Rate of Service tax - moderate – 5% • Tax on few select services • No ITC • From August 2002 till date • Gradual increase in rate of Service Tax – 5 % to 8 % to 10 % to 12% to 10 % ( reduction as fiscal stimulus) • ITC introduced – intra-category – 16.8.2002

  22. …Input Tax Credit (ITC) – General… • ITC expanded to inter-category – 14.05.03 • ITC across CENVAT & Service tax – 10.09.04 • More than one Unit of Taxpayer – treated as separate tax payers – optional centralised registration- treated as single tax payer • Head Office/Regional Office – Input Service Distribution mechanism • ITC – Capital goods – introduced from 10.09.04 - spread over 2 years • Not on all goods/services – terms specifically defined • No cash refund except for exports

  23. …Input Tax Credit (ITC) - General • Taxable & Exempt – goods and services – evolution of law • Identification Method – separate records required – 16.08.02 • Alternatives: • Restriction on utilization – 35% ( reduced to 20 %) of ITC • Replaced by payment of specified percentage of value of exempt goods/services ( 01.04.08) • 100 % ITC of specified services (16 categories) • Added – Optional -proportionate credit mechanism ( 01.04.08)

  24. Thank You!!! Presenter Bhavna Doshibdoshi@kpmg.com + 91 98923 33374

More Related