Student Seminar at Jodhpur 30.11.2012

1. Regional Conference for CA Students
(Waves of Change : Ocean of Opportunities )
Session
On
“Indirect Taxes”
30th November, 2012 By
CIRC-ICAI, Jodhpur Branch Sanjiv Agarwal
Jodhpur FCA, FCS
© Dr. Sanjiv Agarwal

2. This presentation covers –
 Negative List Approach – Overview
 Goods & Service Tax- Overview
 Professional Opportunities

3. Indian Economy – An overview
 India’s economy is the 11th largest economy in the world
and the second fastest growing even in today’s recession
 World is presently facing recession-II but Indian economy
is still better than comparable economies.
 Agriculture, services and industry are the major sector of
India an economy. Contribution of different sectors in
March, 2012 was :
 Agriculture 19%
 Services 59%
 Industry 22%
to be contd…….
3

4. Brief Overview of Services /
Service Tax Share of Services in
GDP
Agricult ure
19%
Service
Sect or
Indust ry 59%
22%
GDP C O MPO S ITIO N IN MARC H, 2012
4

5. Service Tax in India (The Past)
 Introduced in India in 1994 as a simple, modest tax with just
three services.
 Service tax – an indirect tax.
 Approach to Service Tax – Selective as against comprehensive
one .
 Desirable from revenue, equity and economic view point.
 Governed by Finance Act, 1994 and a dozen of rules.
 Legislative dependence on other laws.
5

6. Service Tax in India (The Past)
Selective Approach to Service Tax
 Selective v. Comprehensive approach
 Taxation by choice
 Service not defined but taxable service defined.
 > 120 taxable services [section 65(105)]
 Untapped tax potential
 Economically justified
6

7. Service Tax - Today
Shift to Comprehensive approach
 W.e.f. 1st July 2012
 Finance Act, 2012 – A land mark Act to shift from positive to
negative approach.
 It took 18 years to shift from selective approach to positive
approach to tax services
 Service’ defined for the first time.
 ‘Negative List’ and ‘declared services’ also defined.
7

8. Taxation of Services by Finance Act, 2012
All Services
(including declared Services
(-)
Specific Exclusions
(-)
Negative List Services
(-)
Exemptions
(=)
Taxable Services
8

9. Service Tax provisions no longer applicable
(w.e.f. 1.7.2012)
 Section 65 Old definitions of Services / Taxable
Services
 Section 65A Classification of Services
 Section 66 Charge of Service Tax
 Section 66A Charge of Service Tax on Services
received from outside India.
 Import of Service Rules, 2006
 Export of Service Rules, 2005
9

10. New Provisions in Service Tax
 Section 66 B deals with charge of service tax
on the after Finance Act, 2012
 Section 66 C provides for determination of
place of provision of service.
 Section 66 D comprises of negative list of
services
 Section 66 E comprises of the services which
constitute declared services
 Section 66 F provide principles of interpretation
of specified description of services
or bundled services
10

11. The New Taxability Concept
SERVICE FOR A CONSIDERATION
9 DECLARED SERVICES
E: Employee
M: Money
A: Actionable claim E - MAGIC TEST
G: Goods
I: Immovable property
C: Court Fee
1. Non-
taxable 2. Negative
territory list (17)
(POPS)
3.
Exemption
s (39)
Taxable
11

12. Taxable of Services w.e.f. 1.7.2012
 All services Taxable
[section 65B (44)]
 Declared services Taxable
(section 66E)
 Services covered under Not Taxable
negative list of services
(section 66D)
 Services exempt under Mega Exempted
Notification No. 25/2012-ST
dated 20.6.2012
 Other specified Exemptions Exempted
12

13. Scope of services under Service Tax
Services on which Service Tax shall be attracted comprise of :
 Those services which satisfy the definition of service u/s 65B (44)
 Nine specified declared services u/s 66E
 Those services which do not find place in negative list of services
u/s 66D
 Those services which are not exempt from levy of Service Tax
under Notification No. 25/2012-ST dated 20.06.2012
to be contd….
13

14. Scope of services under Service Tax
Services on which no Service Tax shall be payable comprise of :
• Service which are specifically excluded from the scope of
definition of service itself u/s 65B(44).
• 17 broad services specified in the negative list of services u/s
66D.
• Services which are exempt from levy of Service Tax under N.
No. 25/2012-ST dated 20.06.2012.
• Specified services otherwise exempt under specific
notifications.
• Activities where service provider and service receiver are in
non –taxable territory
14

15. Negative list of Services
What is negative list
• Defined in new section 66D
• Section 66D specifies seventeen 17 broad categories of services.
• Effective from 1-7-2012
• If an activity meets the characteristics of ‘ service ‘, it is taxable unless
specified in Negative List.
• Based on socio-economic–tax criterion
15

16. Sectors in Negative List
Negative list of services is drawn from seven sectors, viz.
• services provided by specified person ie, Government
• social welfare & public utilities
• financial sector
• transportation
• construction & real estate
• education
• health care
• others & miscellaneous
16

17. (a) services by Government or a local authority excluding
the following services to the extent they are not covered
elsewhere—
(i) services by the Department of Posts by way of speed
post, express parcel post, life insurance and agency services
provided to a person other than Government;
(ii) services in relation to an aircraft or a vessel, inside or
outside the precincts of a port or an airport;
(iii) transport of goods or passengers; or
(iv) support services, other than services covered under
clauses (i) to (iii) above, provided to business entities;

18. (b) services by the Reserve Bank of India;
(c) services by a foreign diplomatic mission located in India;
(d) services relating to agriculture by way of—
(i) agricultural operations directly related to production of any agricultural produce
including cultivation, harvesting, threshing, plant protection or seed testing;
(ii) supply of farm labour;
(iii) processes carried out at an agricultural farm including tending, pruning,
cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing,
sorting, grading, cooling or bulk packaging and such like operations which do
not alter the essential characteristics of agricultural produce but make it only
marketable for the primary market;
(iv) renting or leasing of agro machinery or vacant land with or without a structure
incidental to its use;
(v) loading, unloading, packing, storage or warehousing of agricultural produce;
(vi) agricultural extension services;
(vii) services by any Agricultural Produce Marketing Committee or Board or services
provided by a commission agent for sale or purchase of agricultural produce;

19. (e) trading of goods;
(f) any process amounting to manufacture or production
of goods;
(g) selling of space or time slots for advertisements other
than advertisements broadcast by radio or television;
(h) service by way of access to a road or a bridge on
payment of toll charges;
(i) betting, gambling or lottery;
(j) admission to entertainment events or access to
amusement facilities;
(k) transmission or distribution of electricity by an
electricity transmission or distribution utility;

20. (l) services by way of—
(i) pre-school education and education up to higher secondary school or
equivalent;
(ii) education as a part of a curriculum for obtaining a qualification
recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course;
(m) services by way of renting of residential dwelling for use as residence;
(n) services by way of—
(i) extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount;
(ii) inter se sale or purchase of foreign currency amongst banks or
authorised dealers of foreign exchange or amongst banks and such
dealers;

21. Negative list of Services
(o) service of transportation of passengers, with or
without accompanied belongings, by—
(i) a stage carriage;
(ii) railways in a class other than—
(A) first class; or
(B) an airconditioned coach;
(iii) metro, monorail or tramway;
(iv) inland waterways;
(v) public transport, other than predominantly for tourism
purpose, in a vessel of less than fifteen tonne net; and
(vi) metered cabs, radio taxis or auto rickshaws;

22. Negative list of Services
(p) services by way of transportation of goods—
(i) by road except the services of—
(A) a goods transportation agency; or
(B) a courier agency;
(ii) by an aircraft or a vessel from a place outside India to
the first customs station of landing in India; or
(iii) by inland waterways;
(q) funeral, burial, crematorium or mortuary services
including transportation of the deceased.

23. Goods & Service Tax (The Future)
GST: A Common Tax
on
Goods Services
23

24. Pre-requisites for migrating to a GST regime
• Setting up of empowered committee for GST (like VAT) which can steer the road
map into action - done
• Broaden the tax base for excise duty (presently 40% comes from petroleum
products) – being done
• Finishing area based and product based exemptions – being done
• Rationalization of concessions and exemptions including that on exports –
being done
• Expanding service tax to almost all services – now proposed
• Common/unified tax rate for goods and services which may be ideally, revenue
neutral (a suitable GST rate) – dual tax proposed
• Avoiding or minimizing differential tax rates – under discussions
• Abolition of other small taxes - under discussions
• Abolition of CST in a phased manner - being done
• Power to levy service tax on select/agreed services to States - under
discussions
• Issue of inter-State services and goods movement vis-à-vis levy of duty or tax
to be sorted out - under discussions
• Revenue sharing mechanism to be rationalized - under discussions
24

25. GST - Journey so far
 Feb. 2006 : First time introduced concept of GST and announced the
date of its implementation in 2010
 Jan. 2007: First GST study by ASSOCHAM released by Dr. Shome
 Feb. 2007: F.M. Announced introduction of GST from 1 April 2010 in
Budget
 April 2007 : CST phase out started - CST reduced to 3%, currently 1%
 May 2007: Joint Working Group formed by EC
 Nov. 2007: Joint Working Group submits report
 April 2008 : Empowered Committee (EC) finalizes views on GST
Structure
 July 2009: FM announces commitment to bring GST from April 2010
 Consultation on inter-state services in progress 25

26. GST - Journey so far
Budget 2010
 To achieve the roll out of GST by April 2011
 Revamping of indirect tax administration at centre/
states internal work processes based on use of
information technology - massive information
technology (IT) platform
 Project ACES- ‘Automation of Central Excise and
Service Tax’ rolled out
 Rate of service tax retained at ten per cent
 States to revamp their internal work processes
to be contd……
26

27. GST - Journey so far
Budget 2011
 non-committal on timing and roll out but the Government
introduced Constitutional Amendment Bill, 2011
 overall amendments targeted towards moving close to
harmonize with GST regime in future
 major highlights of budget discussions/proposals on GST –
 DTC and GST to mark a water shed
 Decisions on GST to be taken in concert with the states
 Areas of divergence between centre and states narrowed
 Drafting of model legislation for central and state GST
underway
to be contd……
`
27

28. GST - Journey so far
 Establishment of IT infrastructure in process (GST
network)
 NSDL selected as technology partner for GST
 Tax rates maintained at same level of 10% to stay on
course towards ST
 Certain central excise rates changed to prepare the
ground for transition to GST by reducing number of
exemptions
 Nominal central excise duty of 1% imposed on 130
items, no Cenvat credit allowed on such items.
 In service tax, proposals aimed to achieve a close fit
between the present service tax regime and GST.
28

29. GST - Journey so far
Budget 2012
 No announcement on GST rollout date
 GST to be implemented in consultation with the States at the earliest
 GST network (GSTN) likely to be in place from August, 2012
 GSTN to implement common PAN based registration, return filing and
processing of payments for centre and all states on a shared platform.
 Bringing closer of Service Tax and Central Excise for transition to GST
 Drafting of model legislation for CGST and SGST under progress.
 Common forms for Service Tax and Central Excise registration and return
proposed.
 Place of Supply Rules, 2012 to trigger debate to assess issues that may arise in
taxation of inter state services for eventual launch of GST.
29

30. The GST Journey – beginning of
end…….
Past Recent Past Now & Future
National GST Dual GST ???????
…or end of beginning !!
30

31. Service Tax: Gateway to new Professional
Opportunities
Professional Practice Advance Ruling Employment with
Areas Representation Corporates- dealing with
(planning, compliances) Indirect taxes
Advisory Professional Representation
Services Opportunities in in Tribunals /
Service Tax Courts
Client Retainerships for Knowledge Management
Compliances GST awareness & Training
31

32. Service Tax: Gateway to new
Professional Opportunities
ROLE OF PROFESSIONALS UNDER SERVICE TAX
Services to the Government Services to Service Providers
Timely and correct Proper classification of
feedback on provisions taxable services
of law (Section 65A)
Compliance of Law Help in understanding
& Procedures law and its correct
interpretation
Dissemination of Knowledge
information to management & training
assessees
Knowledge sharing Tax Planning ,
with revenue officials Due Diligence
Help in tax collection Representation before
Appellate Authorities
Service tax audit GST preparedness
32

33. Service Tax: Gateway to new Professional
Opportunities
New tax, new assessees, new opportunities
Opportunities arising out of ignorance of law, lack of knowledge, poor
compliance (leading to penalties etc.) frequent amendments in law and
rules, large assessee base and heterogeneous group of assessees.
Opportunities to grow because of –
 Large number of services covered
 Enough scope for expansion of tax net
 Rate of tax is higher, yet an upward revision is likely- higher the
rate, larger the evasion.
Service tax and GST are the tax of future and lot of opportunities can be
explored in service tax, especially by young professionals
33

34. Service Tax: Gateway to new Professional
Opportunities
Role in classification of services
Opportunities in interpretation of provisions
Emerging opportunities-
 Advisory and consulting services
 Tax planning issues
 Interpretation of law
 Contesting cases on behalf of client
 Knowledge dissemination- corporate presentations / training
of client’s personnel.
Every crossroad is a choice to play safe or be brave- take a road that
your conscience tells
34

35. THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com