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Welcomes you all

Learn about the Service Tax exemption limits, conditions, and practical issues for Small Scale Industries under Budget 2005. Get insights into eligibility criteria and realizations to optimize your tax payments.

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Welcomes you all

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  1. Welcomes you all 03.03.2005

  2. Budget 2005 By swamy associates chennai – coimbatore – bangalore - hyderabad

  3. SERVICE TAX

  4. SSI - For Service Tax No service tax for the first realisation of Rs.4 Lakhs in a Financial year. (Exemption Limit : Rs. 4 Lakhs) If the value of taxable services rendered during the preceding financial year is less than Rs.4 Lakhs. (Eligibility limit of Rs.4 lakhs)

  5. Other conditions ... No Cenvat Credit can be availed in respect of the input services, used for rendering the taxable service, for which the exemption is claimed. No Cenvat credit can be availed in respect of the inputs and capital goods, received during the period, in which exemption is availed. Why restriction on capital goods?

  6. Other conditions ... At the time of claiming this exemption, credit already availed, in respect of the inputs lying in stock or in process, shall be paid back. Balance credit, if any shall lapse. It cannot be used for any other purpose also. (Eg. Payment of excise duty on final products). Exemption not entitled, if service is rendered under the brand name of another person.

  7. Other conditions ... Exemption limit to be calculated, by taking into account all services and all premises. Exemption limit, not to include the value of taxable service, which is exempted from the levy of service tax. Eligibility limit to be calculated, by taking into account, all premises.

  8. F Practical issues… Value of taxable service, during preceding financial year. Premises I Service A : Rs.1,00,000. Service B : Rs.1,25,000. Premises II Service A : Rs.75,000. Service C : Rs.1,50,000. Not entitled.

  9. F Practical issues… Am rendering two categories of taxable services. Can I avail the exemption for one service and pay service tax on one service? No. While calculating the exemption limit, the service on which you are paying service tax will also be considered together.

  10. F Practical issues… 2004-2005 Total value of taxable service rendered : Rs.3,50,000 Service Tax thereon : Rs.35,000 Realisation during 2004-05 : Rs.3,00,000 Service Tax paid : Rs.30,000 Outstanding amount : Rs.50,000 Service tax payable : Rs.5000

  11. F Practical issues… 2005-2006 Availed exemption for fresh realisations : Rs.3,50,000 Outstanding amount, now realised : Rs.50,000 Service tax realised thereon : Rs.5000. This should also be included in the exemption limit, since consecutive payments have to be considered together. As such, the exemption limit gets saturated, though exemption is availed only for Rs.3,50,000.

  12. If the collected service tax is not paid, Section 11 D will be attracted. Any solution in sight? Ask the debtor, to pay only the value and not service tax! Ask the debtor, not to pay, until you exhaust your exemption limit! Is that all practically possible?

  13. GTA & SSI Goods Transport Agency is entitled to claim this exemption, whenever it is liable for payment of service tax, by itself. Persons availing the benefit of GTA and are liable for payment of service tax, are not entitled to clam this exemption. All those who are liable for payment of Service Tax under Section 68 (2), are not entitled for claiming this exemption.

  14. GTA & SSI When a GTA claims this exemption, the value of taxable service, for which the consignor / consignee have paid service tax, shall not be taken into account, while determining the exemption limit.

  15. GTA & SSI Calculation of eligibility limit for GTA. - Value, in respect of which the consignor / consignee have paid service tax, shall also be taken into account. - Values, which are exempted, being less than Rs.1500 / Rs.750, as the case may be need not be taken into account. - If service tax is paid on 25 % of the freight, only the said 25 % shall be taken into account.

  16. Fresh levies

  17. a) Transport of goods, other than water, through pipeline or conduit. b) Site formation and clearance, excavation, earthmoving, demolition, including, i) drilling, boring and core extraction; ii) soil stabilisation; iii) horizontal drilling; iv) land reclamation; etc. But does not include services in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies.

  18. c) Dredging of rivers, port, harbour, backwater or estuary. d) Survey and map making. e) Cleaning services - including specialised cleaning - of commercial or industrial buildings / premises; factory, plant or machinery, tank or reservoir of such commercial / industrial buildings. Exclusion : agriculture, horticulture, animal husbandry or dairying/

  19. f) Services by clubs or associations, to its members, in relation to provision of services, facilities or advantages. Exclusion : - Body constituted under any law. - trade unions, promotion of agriculture, horticulture or animal husbandry. - charitable, religious or political. - associated with press or media. g) Packaging - manufacture excluded.

  20. h) Mailing list compilation and mailing. i) Construction of residential complexes, having more than 12 units. All new levies to be effective, after the enactment of the Finance Act, 2005

  21. Withdrawal of levy Services rendered by authorised service stations, in respect of Light Motor Vehicles.

  22. Expansion of existing levies ... Services rendered by authorised service stations : To cover reconditioning and restoration also. Scope of broadcasting services, expanded.

  23. Beauty Parlour to cover hair cutting, hair dyeing and hair dressing. Hair dyeing continue to be exempted under Notification 11/2002 Dt. 01.08.2002.

  24. Business Auxiliary Service. “production of goods on behalf of the client” replaced with “production or processing of goods for, or on behalf of the client”. Commission agent is defined in the Act itself.

  25. Commercial or industrial construction. Expanded to cover : Construction of pipe line or conduit. Completion and finishing services also, such as painting, carpentry, wall covering, etc.

  26. Erection, Commissioning or Installation. Expanded to cover : Installation of specific items, like electrical or electronic devices, plumbing, heating, ventilation, air conditioning, insulation, life, escalator, etc.

  27. Maintenance or repair service. Expanded to cover : Services provided under any contract or agreement, as against maintenance contract or agreement. Reconditioning and restoration added. Maintenance or management of immovable property is covered. Roadside repair shops, to be covered?

  28. Labour contractors to be covered under manpower recruitment or supply agency. Canteens in factories, etc. covered under outdoor catering service. Scope of sound recording expanded. Scope of video production expanded.

  29. Other important changes Service to be provided is also taxable service. As a result, service tax is payable even on advance receipts. Service rendered by a foreign person, to an Indian recipient is deemed to be a taxable service. Defence of “service rendered outside India” - can no longer be pleaded. Adjudication procedures streamlined.

  30. Other important changes Centralised Registration Procedure streamlined. Invoice has to be raised by the service provider, within 14 days of completion of service or receipt of payment, whichever is earlier. Due date for payment of service tax made as 5th of succeeding month / quarter. Effective from 01.04.2005.

  31. Exemption to Business Auxiliary service Production of good on behalf of client (Not production or processing of goods for or on behalf of the client). - Raw materials or semi-finished goods should be supplied by the client. - Goods produced, to be returned to the client. - Client shall use it in or in relation to manufacture of goods, on which “appropriate duty” of excise is payable.

  32. Exemption to Business Auxiliary service What if the job worker also uses his own raw materials / consumables? What if the job worker directly removes the processed goods, as directed by his client? What if the job work is done for a SSI unit?

  33. THANKS

  34. Swamy associates 21/8 Rams Flats Ashoka Avenue Directors Colony Kodambakkam Chennai 600 024. Ph: 044-24811147 Fax : 044-24733344 Swamy associates 4 E Radhekrishna Apartments 33 Sarojini Street Ram Nagar Coimbatore 641 009 Ph: 0422-5377669 Fax : 0422-5378622 Swamy associates 493 – 17th G Main 6th Block Koramangala Bangalore 560 095. Ph: 080-51303434 Swamy associates H.No.3-6-659, Flat No.3C Anushka Enclave Street No. 9 Himayat Nagar Hyderabad - 500 029. Ph: 040 - 55526879

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