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Budget Changes In S ervice Tax Finance Bill 2012

Budget Changes In S ervice Tax Finance Bill 2012. For private circulation only. Effect of Union Budget 2012 with Service tax Perspective. Rate of Tax.

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Budget Changes In S ervice Tax Finance Bill 2012

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  1. Budget Changes In Service Tax Finance Bill 2012 Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  2. For private circulation only Effect of Union Budget 2012 with Service tax Perspective Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  3. Rate of Tax Rate of service tax has been increased from 10% to 12%. Due to this increase of 20% in basic rate, corresponding changes have been made in composite rate of tax. This will also increase the effective rate of tax where abatement/exemption is available to a service provider/ receiver. Revised rate of tax would be as under:- Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  4. Effective date: This change will take effect from 1st April, 2012. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  5. Common form of registration & return A common simplified form has been prescribed for excise as well as service tax for registration and filling of return.Return form EST-1 has also been prescribed which will be of one page. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  6. Payment of Service Tax Rules relating to payment of service tax has been rationalised. At present only Individuals or Firms are allowed to pay the taxes on quarterly basis. Now this relaxation has been given to every small assessee. The same can be understood with the following table:- Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  7. In an another important change, now every Individual or firm (including LLP) can pay service tax on receipt basis provided their turnover in previous year (FY 2011-12 for 2012-13) towards taxable service was upto Rs. 50.00 lacs. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  8. Periodicity of filling of Return At present service tax assesses are required to file return on six monthly basis. Now for large assesses (not defined) periodicity of filling of return reduced from 6 months to 1 month. Other assesses are required to file return as usual on six monthly basis. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  9. New levy of Service Tax on Railway Passengers Service Tax has been levied on A.C./First Class passengers with an abatement of 70% i.e taxable value would be 30% of ticket value. Considering tax rate of 12.36% the effective rate would be 3.71%. This will increase the travelling cost of a common man. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  10. Cenvat Credit can be availed on Motor Vehicle In the budget 2011, there was a restriction imposed on taking cenvat credit of service tax on motor vehicle. Now from this budget, this restriction has been withdrawn. Therefore now assessee can take cenvat credit of service tax paid on repair or maintenance or Insurance of a motor vehicle except commercial vehicle used for transport and classifiable under chapter heading 8702, 8703, 8704 and 8711. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  11. Cenvat Credit reversal for exempted service In accordance with change in rate of tax, cenvat credit reversal required under Rule 6(3) of Cenvat Credit Rules, 2004 towards exempted service is also increased from 5% to 6%. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  12. Negative List A revolutionary change has been made in the concept of service tax. Now taxation will be based on a Negative List. The simple meaning of this newly introduced concept is that apart from the services defined in this Negative List all the other services would be taxable subject to exemption given to the specific service. Now this Negative list along with Exemption notification 12/2012 where list of exempted services are given would become Geeta/Kuran/Bible for a service tax payer. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  13. These Negative list services as prescribed in new section 66D are:- Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  14. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  15. All the Exempted services listed in single notification At present there are various exemptions given to a service provider either through issuing notification or it is given in the definition itself. Now all these exemptions have been clubbed in one notification no. 12/2012-Service Tax dated 17-03-2012. There are 34 services listed in the said notification. This list can be called a `General Exemption’ list. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  16. Interest on loans, advances are considered as exempted services Interest earned on loans and advances given to other party would now be exempted income. This is an important amendment since cenvat credit will also be required to reverse in proportion to such income in proportion to total taxable service. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  17. Special Audit provisions are made applicable to Service Tax also Like Excise Duty special audit provisions have also been made applicable to service tax. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  18. Cenvat Credit for Banks In the last budget, Banks were allowed to take cenvat credit of 50% of total cenvat credit as per Rule 6(3D) if they don’t want to maintain separate records for taxable as well as non taxable service. This facility has been withdrawn. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  19. Service word has been defined for the first time Government is collecting tax on service for the last 18 years however there was no definition given to the word `Service’. Now government has dared to define the service word under a new section 65(B)(44). Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  20. Cenvat Credit Bonanza to Hotels, Restaurant & Outdoor Caterers In the last year budget, service tax was imposed on food and drink served in Restaurants (having liquor license and Air conditioned facility) and on room accommodation provided by hotels. They were allowed abatement in value of service with the condition that they will not be entitled for cenvat credit facility. Similar provisions were there with outdoor catering Service which was already in the list of taxable service since 10-09-2004. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  21. Now they are being allowed to take cenvat credit on Capital Goods, Specified inputs and input services by slight decrease in rate of abatement as given below:- Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  22. Time limit for issue of Show Cause Notice Time limit for issuing show cause notice u/s 73 has been increased from 12 months to 18 months. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  23. Settlement Commission Provisions relating to Settlement Commission which are at present available under Excise Act are also made applicable in Service Tax cases which will encourage quick settlement of disputes. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  24. Time limit for filling appeal before Commissioner (Appeal) reduced Time limit for filing the appeal before Commissioner (Appeal) reduced from 3 months to 2 months. This will take effect only on the orders passed after the date on which Finance Bill 2012 receives the assent of the President. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  25. Reversecharge Till now only certain category of persons like in case of GTA, Mutual Funds, service receiver was directly liable to make payment under reverse charge mechanism. Here the total amount of service tax was payable by service receiver. In a surprise move, to curb the evasion of tax four category of service has been identified where service provider and receiver both will have to pay tax at a prescribed percentage. The only condition is that in these cases service provider should be either an individual or a firm or LLP and the recipient should be a body corporate. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  26. These four services are:- Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  27. Big Relief for Service Tax payers under Renting service In a big relief to the Service Tax payers under the category of Renting of Immovable Property Services, no penalty will be levied on the person who pay the service tax due as on 06/03/2012 in full along with interest within six months from the date on which section 80A comes into existence. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  28. Retrospective amendment beneficial to tax payer Normally Government makes certain amendments retrospectively to overcome from the court judgements. Surprisingly for the first time certain retrospective amendment has been proposed to give relief to the tax payer. Some of the important retrospective changes are given below:- Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  29. In case of service provided to SEZ there is no need to reverse the cenvat credit considering the SEZ service as exempt service. This effect is given from 10-02-2006 • Repair of Road has been exempted from payment of tax from 16-06-2005. • Repair services relating to Non Commercial Government Building has also been exempted from 16-06-2005. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  30. POT Rules In POT Rules, time period for issue of invoice increased from present 14 days time limit to 30 days. This limit if further increased to 45 days for Banks and Financial Institutions. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  31. POT Rules In POT Rules, time period for issue of invoice increased from present 14 days time limit to 30 days. This limit if further increased to 45 days for Banks and Financial Institutions. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  32. Works Contract Service Residential complex services has also been included in works contract services. Now, the service tax payer of the construction services can get themselves registered under this category of services and can get cenvat credit benefits with certain conditions. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  33. Residential complex service At present, residential complex service is taxable only when a complex consists of more than 12 dwelling units. Now the finance minister has very cleverly defined the residential complex as a complex having more than 1 dwelling unit and have imposed service tax on every such complex. Considering this now every flat purchaser will have to pay service tax. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  34. Abatement on completion and finishing services Till now there was no abatement available on completion and finishing services. An abatement of 40% has been proposed by the finance ministry, which is a welcome step. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  35. Last but not the least Following are some other changes proposed in the budget:- • Exemption limit for the members paying maintenance charges to Resident Welfare Society increased from 3000/- p.m. to 5000/- p.m. • Further simplified scheme for exporters for getting refund of service tax. • Now there is no limit for self adjustment of excess service tax paid. Previously there was a limit of Rs. 2.00 lacs. Krishan Garg & Co. Chartered Accountants Email: kkgargca@yahoo.com

  36. Krishan Garg and Co. Chartered Accountants Address: 411, Chetak Centre, R.N.T. Marg, Indore Contact: 098260-52060 0731-2520604 Email: kkgargca@yahoo.com

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