Seminar on Service Tax at Jaipur on 20.4.2013(Session iv)

Agarwal Sanjiv & Company
Chartered Accountants

Presents

A Workshop
On
Service Tax
Conducted by
Dr. Sanjiv Agarwal
FCA, FCS

Saturday,
20th April, 2013
Jaipur © Dr. Sanjiv Agarwal

1

SESSION – IV

Cross Border Services,
Reverse Charge &
Abatements

2

Cross Border Services, Reverse
Charge, and Abatements

This Presentation Covers

• Cross Boarder Services / Export

• Reverse Charge – Concept , Conditions, Full /

Joint Reverse Charge

• Abatements –
Conditions, Services, Rates, Specific Issues

3

Taxation of Cross Border Services

Peculiar Features in Cross Border Services
 Service tax is a destination based consumption tax –
International practice
 Double taxation
 With export of services, taxes should not be exported (ideally
taxed at point of consumption)
 Imports – taxed at the destination
 Incentivizing exports of goods and services
 Special incentives – rebates, SEZ etc.

4


The concerns
 How to tax cross border services
 How to determine whether the transaction is export
 How to determine whether the transaction is import
 How to determine place of provision of services
 How to value the services so provided
 Availing tax exemptions / refunds

5

Taxation of Cross Border Services –
Exports

W.e.f. 1.7.2012
Up to 30.6.2012

Place of
Rule 6A of Provision
Export of Services Tax of Services
Services
+ Rules,2012
Rules, 1994
Rules, 2005

6

 Rule 6A has been inserted in Service Tax Rules 1994 vide Notification
No. 36/2012-ST, dated 20.6.2012
 Rule 6A comprises what is export of services
 Service will be treated as export if all following conditions are satisfied -
(a) the provider of service is located in the taxable territory ,
(b) the recipient of service is located outside India,
(c) the service is not a service specified in the section 66D of the Act,
(d) the place of provision of the service is outside India,
(e) the payment for such service has been received by the provider of service in
convertible foreign exchange, and
(f) the provider of service and recipient of service are not merely establishments of a
distinct person.

7


Rule 6A of Service Tax Rules, 1994
 Services provided to / in India + Indian currency = Taxable
 Services provided to / in India + Foreign currency =Taxable
 Services provided to / in Non-taxable territory + Indian
currency = Taxable
 Services provided to / in Non-taxable territory + Foreign
currency = Export / Exempt

8

Taxation of Cross Border
Services
Taxable Services to qualify as import if -

 Service provider located in Non-taxable
Territory

 Service recipient located in Taxable Territory

 Import of services from outside India - local
taxes paid on reverse charge mechanism

9

How to Determine Taxability
i) Which rule applies to the service provided specifically? In case more
than one rules apply equally, which of these come later in the order
given in the rules?
ii) What is the place of provision of the service in terms of the above
rule?
iii) Is the place of provision in taxable territory? If yes, tax will be payable.
If not, tax will not be payable.
iv) Is the provider 'located' in the taxable territory? If yes, he will pay the
tax.
v) If not, is the service receiver located in taxable territory? If yes, he
may be liable to pay tax on reverse charge basis.
vi) Is the service receiver an individual or government receiving services
for a non-business purpose, or a charity receiving services for a
charitable activity? If yes, the same is exempted.
vii) If not, he is liable to pay tax.
10


Place of Provision of Service Rules, 2012

 Purpose is to identify taxing jurisdiction for a service
 In earlier regime focus was to determine taxability in case of exports
and imports only.
 Present rules replace Export and Import Rules and define local
jurisdiction
 Meant for cross border services, services to J & K, service providers
operating from multiple locations, determining services wholly
consumed in SEZ and a precursor to GST.

11


Important Terms of POPS Rules, 2012

 Taxable Territory [Section 65B(52)] –Taxable territory means
the territory to which the provisions of this chapter apply.
(Taxable territory = India – J & K State)

 Non-taxable Territory [Section 65B(35)] – Non-taxable
territory means the territory which is outside the taxable
territory.

12


13

Location of service provider -

 Business establishment – Place where essential decisions concerning the general
management are adopted and functions of its central administration are carried out.
A service provider or receiver can have only one business establishment

 Fixed establishment -Place other than Business Establishment which has
permanent presence of human and technical resources to provide or receive service

 Usual place of residence –

Body Corporate : place where incorporated

Individual : place where he spends most of his time for the period in question or
where he lives with his family and is in full time employment. An individual cannot
have more than one place of usual residence.

14

Location of the service provider

(a) where the service provider has obtained a single registration, whether centralized or
otherwise, the premises for which such registration has been obtained

(b) where the service provider is not covered under sub-clause (a):

(i) the location of his business establishment; or

(ii) where the services are provided from a place other than the business
establishment or a fixed establishment elsewhere, the location of such
establishment; or

(iii) where services are provided from more than one establishment, whether
business or fixed, the establishment most directly concerned with the provision of
the service; and

(iv) in the absence of such places, the usual place of residence of the service
provider. 15

Location of the service receiver

(a) where the recipient of service has obtained a single registration, whether centralized
or otherwise, the premises for which such registration has been obtained;

(b) where the recipient of service is not covered under sub-clause (a):

(i) the location of his business establishment; or

(ii) where services are used at a place other than the business establishment, a
fixed establishment elsewhere, the location of such establishment; or

(iii) where services are used at more than one establishment, whether business or
fixed, the establishment most directly concerned with the use of the service; and

(iv) in the absence of such places, the usual place of residence of the

recipient of service.

16

India [U/s 65B(27)]

(a) the territory of the Union according to Article 1 clauses (2) and (3) of the

Constitution;

(b) its territorial waters, continental shelf, exclusive economic zone or any other

maritime zone ;

(c) the sea-bed and the sub-soil underlying the territorial waters;

(d) the air space above its territory and territorial waters; and

(e) the installations, structures and vessels located in the continental shelf of India

and the exclusive economic zone of India, for the purposes of prospecting or

extraction or production of mineral oil and natural gas and supply thereof;

17


S. No. Conditions Tax Liability

1 Both service provider and service receiver Service provider
are in taxable territory

2 Service provided from taxable territory in No tax (Export)
non taxable territory (except J & K)

3 Service provided from non-taxable territory Service receiver (Import)
(including J & K) in taxable territory

4 Both service provider and service receiver No service / No tax
are in non-taxable territory

18

POPS - At a Glance
Rule Governing Situation Place of Provision of Service
3 General Rule Location of Service Receiver
If recipient's location not available in the ordinary course of Location of Service Provider
business
4 Service provided in respect of goods that are required to be Location where service is performed.
made physically available by the service receiver to the service
provider t o provide the service
When such services are provided from a remote location by Location where the goods are
way of electronic means situated at the time of provision of
This rule shall not apply in case of service provided in respect of service
goods temporarily imported into India for repair or re-export.

Service provided entirely or predominantly in the physical Location where service is performed.
presence of an individual.

5 Immovable property based services provided directly in relation Location or proposed location of
to an immovable property (includes grants of right to use immovable property
immovable property, services for carrying out or coordination of
civil work)

19

POPS - At a Glance
6 Services in relation to an event Location of event
If services referred to in Rules 4, 5 &
Taxable territory in which greatest
7 6 provided in many locations,
proportion is provided
including location in taxable territory.
Where service provider and service
8 Location of service receiver
receiver located in taxable territory
Specified services of banking, online
data base, intermediary services and
9 Location of service provider
hiring means of transport up to one
month.

10 Goods transport service Destination of goods
Goods transportation agency Location of person liable to pay tax
services
20

POPS - At a Glance


Passenger transport services Where the passenger embarks on
the conveyance for continuous
11 journey

Services provided on board a First scheduled point of departure.
12 conveyance

Order of application of rules Later rule to supersede.
14

21

Rule 3- Default Rule

 The main rule or default rule provides that a service shall
be deemed to be provided , where the receiver is located
 In case, when location of the service receiver is not
ascertainable, location of the service provider is the place
of provision of service
 This rule is applied when none of the other later rules
apply

22

Rule 3- Default Rule
Taxable Territory Non- Taxable Territory

‘A’ Not Taxable ‘Y’
Service Provider Service Receiver
A
Taxable for

‘B’ Taxable for B ‘X’
Service Receiver Service Provider

23

Rule 4- Performance based services

Place of provision is the location where services are actually performed

Goods which are required to made physically available

Services involve movable objects or things that can be touched, felt or
possessed

Services provided from a remote location by electronic means – where goods
located at that time

Not applicable when goods are temporarily imported into India for
repairs, reconditioning or reengineering for re-export (sent back)

Contd……

24


Rule 4- Performance based services

Examples:
 Services in respect of goods to be physically made available by receiver
(repair, storage / warehousing, technical testing, dry-cleaning, cargo handling etc).
 Plastic surgery, beauty treatment services, personal security services, health and
fitness services, photography services internet cafe services etc.
 Market research reports, CA reports do not fall under this rule

 Indian engineers going to US to repair a ship not taxable in India

 Foreign engineers coming to India to repair a ship – taxable in India

25

Rule 5-Services relating to Immovable Property

 Place of provision is where immovable property is located

 Applicable for services directly connected with immovable property.

 Immovable property not defined in the Finance Act, 1994.

 Immovable property shall include land, benefits to arise out of land, and
things attached to the earth, or permanently fastened to anything attached
to the earth. [ S. 3 (26) of the General Clauses Act, 1897]

 Definition is inclusive

 Properties such as buildings and fixed structures on land covered under
immovable property.

 The property must be attached to some part of earth even if under water.

Contd……
26

Rule 5-Services relating to Immovable Property

Examples:

 Services in course of construction, alteration, repair, maintenance etc, of immovable

property

 Renting of immovable property

 Services of architects, engineers etc. relating to land, building or civil engineering works

 Services connected with oil / gas / mineral exploration

 Surveying, property management services, hotel accommodation

 Lease, or a right of use, occupation, enjoyment or exploitation of an immovable property

 Real estate services in relation to the actual or proposed acquisition, lease or rental of

property, legal services rendered to the owner or beneficiary or potential owner or

beneficiary of property as a result of a will or testament

27

Rule 6- Service relating to Events
 Place of provision is the place where event is actually held

 Covers admission to events, organizing events and ancillary services relating to events

 Includes cultural, artistic, sporting, scientific, educational, entertainment event, or a
celebration or any other similar event

Examples

 Conventions

 Conferences

 Exhibitions

 Fairs , Seminars

 Workshops

 Weddings

 Sports

 Cultural Events etc. Contd……
28

Rule 6- Service relating to Events
 A management school located in UK intends to organize a road show in
Mumbai and New Delhi for prospective students. Any service provided by
an event manager, or the right to entry like participation fee for prospective
student will be taxable in India.

 An Indian fashion design firm hosts a show at USA. The firm receives the
services of a Canadian event organizer. The place of provision of this
service is the location of the event, which is outside the taxable territory.
Any service provided in relation to this event, including entry fee will not be
taxable.

 Provision of sound engineering for an artistic event is a pre-requisite for
staging of that event and should be regarded as a service ancillary to its
organization. A service of hiring a specific equipment to enjoy the event at
the venue, is ancillary to admission. 29

Rules 7- Services from Multi locations
 The place of provision shall be the location in taxable territory where greatest
proportion of service is provided.
 Service is performed at different locations like partly from Mumbai , partly from
New Delhi
 Where any service stated in 4, 5 and 6 is provided at more than one location
including a location in taxable territory and one or more location is outside taxable
territory
Example:
• Technical inspection and certification of a product by carrying out testing at two
locations in India and one outside India - Taxable in India where a higher stake is
involved.

30

Rule 8- Both service provider and service receiver located in taxable
territory
 Where service provider and service recipient is in taxable territory, the
location of service receiver will be the place of provision
 Even when the actual provision takes place outside taxable territory , it
will be taxable in India.
Example
• Indian plane needs repair while in US. Indian maintenance agency
sends its engineers to US for repairs or hires engineers in US to repair
the plane. This transaction will be taxable in India superseding earlier
clauses.

31

Rule 9 - Place of Provision in case of Specified Services
 The place of provision of service is location of service provider

 Specified services includes

 Banking service (to account holders)

 Online information and database access or retrieval

 Intermediary services

 Hiring of means of transport up to a period of one month

 Account means an account which bears an interest to the depositor.

 Services provided to holders of demand deposits, term deposits, NRE (non-resident
external) accounts and NRO (non-resident ordinary) accounts

 Services linked to or requiring opening and operation of bank accounts such as
lending, deposits, safe deposit locker etc.

 Transfer of money including telegraphic transfer, mail transfer, electronic transfer etc.
32


 Banking services provided to persons other than account holders will be covered under the
main rule (Rule 3- location of receiver).

 Services not covered under this rule

 financial leasing services including equipment leasing and hire-purchase;

 merchant banking services;

 Forex, broking, and purchase or sale of foreign currency, including money changing;

 asset management including portfolio management, all forms of fund management,

 pension fund management, custodial, depository and trust services;

 advisory and other auxiliary financial services including investment and portfolio research

and advice, advice on mergers and acquisitions and advice on corporate restructuring
and strategy;

 banker to an issue service.

 Contd……
33


 Online information and database access or retrieval services are services in relation to
online information and database access or retrieval or both, in electronic form through
computer network, in any manner.

 Essentially delivered over the internet or an electronic network which relies on the
internet or similar network for their provision.

 Completely automated, and require minimal human intervention.

 Examples

i) online information generated automatically by software from specific data input by
the customer, such as web-based services providing trade statistics, legal and
financial data, matrimonial services, social networking sites

ii)digitized content of books and other electronic publications, subscription of online
newspapers and journals, online news, flight information and weather reports

iii)Web-based services providing access or download of digital content.
34


Online information and database retrieval does not includes –

 Sale or purchase of goods, articles etc. over the internet;

 Telecommunication services provided over the internet, including

fax, telephony, audio conferencing, and videoconferencing;

 A service rendered over the internet, such as an architectural drawing, or

management consultancy;

 Repair of software, or of hardware, through the internet, from a remote location;

 Internet back-bone services and internet access services.

Contd………

35


Intermediary means -

- broker,

- agent, or

- any other person, by whatever name called

- who arranges or facilitates a provision of a service

- between two or more persons

- but does not include a person who provides the main service on

his account

Contd……….36


Hiring of means of transport

 Land vehicles such as motorcars, buses, trucks;

 Vessels;

 Aircraft;

 Vehicles designed specifically for the transport of sick or injured persons;

 Mechanically or electronically propelled invalid carriages;

 Trailers, semi-trailers and railway wagons.

Non- transport means

 Racing cars;

 Containers used to store or carry goods while being transported;

 Dredgers, or the like. 37

Rule 10- Transportation of Goods
 Place of destination of goods
 Except in GTA by road where place of provision is location of person
liable to pay tax
Example -
GTA (ABC) located in Delhi transports a consignment of new
motorcycles from the factory of XYZ in Gurgaon (Haryana), to the
premises of a dealer in Bhopal, (MP). XYZ is a registered assessee
and is also the person liable to pay freight and hence person liable
to pay tax.

38

Rule 11 – Passenger Transportation Services

 Place where passenger embarks on conveyance for continuous journey

 Continuous journey means a journey for which:-

(i) a single ticket has been issued for the entire journey; or

(ii) more than one ticket or invoice has been issued for the journey, by one service

provider, or by an agent on behalf of more than one service providers, at the same

time, and there is no scheduled stopover in the journey

 Stopover means a place where a passenger can disembark either to transfer to another

conveyance or break his journey for a certain period in order to resume it at a later point

of time.

 All stopovers do not cause a break in continuous journey. Only such stopovers will be

relevant for which one or more separate tickets are issued.

Contd….. 39

Rule 11 – Passenger Transportation Services

Example -
 A travel on Delhi-London-New York-London- Delhi on a
single ticket with a halt at London on either side, or even
both, will be covered by the definition of continuous journey.
 If a separate ticket is issued, New York-Boston-New York, the
same will be outside the scope of a continuous journey.

40

Rule 12- Services provided on board conveyances

 First scheduled point of departure of conveyance for journey

 On board service of provision of movies, music, games, beauty treatment etc.

Example –

 A video game or a movie-on-demand is provided as on-board entertainment

during the Kolkata-Delhi leg of a Bangkok-Kolkata-Delhi flight. POP will be

Bangkok (outside taxable territory, hence not liable to tax).

 If the same service is provided on a Delhi-Kolkata-Bangkok-Jakarta flight

during the Bangkok-Jakarta leg, POP will be Delhi in the taxable

territory, hence liable to tax.

41


Rule 14- Order of application of Rules

 Where more than one rule applies, rule
that occurs later is relevant rule

42


Rebate of inputs/input services for export of services (Notification
No. 39/2012-ST dated 20.06.2012)

 Rebate is granted of whole of duty paid on excisable inputs or whole of
service tax and cess paid on all input services used in providing
service exported
 Exported to any country other than Nepal and Bhutan
 Subject to conditions, limitations and procedure as prescribed in the
said Notification.
 Form ASTR-2 is to be used.

43

Rebate of Service Tax on the taxable service which are received by an
exporter of goods and used for exports of goods (Notification No.
41/2012-ST, dated 29.06.2012 )
 In suppression to Notification No. 52/2011-ST dated 30.12.2011

 Applicable w.e.f. 1.7.2012.

 Rebate shall be granted by way of refund of service tax paid on the specified services

 Specified services would mean —

(i) in the case of excisable goods, taxable services that have been used beyond the
place of removal, for the export of said goods;

(ii) in the case of goods other than (i) above, taxable services used for the export of
said goods;

but shall not include the following input services, viz, - construction, works
contracts, renting of motor vehicles, general insurance, servicing, repair &
maintenance, outdoor catering, health, life insurance etc. meant for employees etc.

Contd……44

Rebate of Service Tax on the taxable service which are received by an
exporter of goods and used for exports of goods (Notification No.
41/2012-ST, dated 29.06.2012)
 Rebate can be claimed on the basis of rates as mentioned in schedule
or as per procedure (Para 2) or based on documents (Para 3)
 Cenvat Credit of service tax paid on specified services used for export
of goods should not be taken.
 No rebate can be claimed under this notification by developer of SEZ or
unit in SEZ.
 If export proceeds are not received within time allowed or within
extended time, such rebate shall be deemed to have never been
allowed and shall be recovered back in terms of recovery provisions.
Forms used –
Form A1 – Application for claiming rebate of Service Tax on specified
services used for export of goods.
Form A2 – Declaration by exporter for obtaining Service Tax code.
45

Refund of Cenvat Credit
(Rule 5)
 Refund of cenvat credit allowed
 Who can take –
 manufacturer who clears final product for exports without payment
of duty
 Service provider who provides output service which is exported
without payment of Service Tax
(Export turnover of goods + Export turnover of
Service ) x Net Cenvat Credit
 Refund amount = --------------------------------------------
Total turnover
 To be claimed within one year
 Subject to procedure / conditions / limitations [Notification No.
27/2012-CE(NT) dated 18.06.2012]
 Form 'A' to be used

46


Determination of point of taxation in case of specified services or
persons (Rule 7 of POT Rules, 2011)

 POT shall be the date on which payment is made

 When the payment is not made within a period of six months of the date of
invoice, the POT shall be determined as per normal provision

 In case of associated enterprises, where the person providing the service
is located outside India, POT shall be the date of debit in the books of
account of the person receiving the service or date of making the payment
whichever is earlier.

47

Reverse Charge Mechanism

Changes in Reverse charge
 Authority for reverse charge u/s 68(2) of Finance Act, 2012

 Person liable to pay tax – Rule 2(1)(d) of Service Tax
Rules, 1994

 W.e.f. 1.7.2012, a new scheme of taxation is applicable
whereby the liability of payment of service tax shall be both on
the service provider and the service recipient (Notification No.
30/2012-ST, dated 20.6.2012 )

 The extent to which tax liability has to be discharged by the
service receiver specified in the notification.

48

Changes in Reverse Charge
Mechanism
 Credit of tax paid can be availed by service
recipient if it is input service

 The credit of tax paid by the service recipient
under partial reverse charge would be available
on the basis on the tax payment challan (but
invoice required)

 Service provider under RCM may claim refund of
tax paid under rule 5(b) of CCR, 2004

49

Liability to pay tax under Reverse
Charge by Service Receiver
Under Partial Reverse Charge (Proportional)

 Renting of motor vehicles
 Manpower supply & security services
 Works contracts

Under Full Reverse Charge (100%)

 Insurance related services by agents
 goods transportation by road
 sponsorship
 arbitral tribunals
 legal services
 company director's services
 services provided by Government / local authority excluding
specified services
 services provided by persons located in non-taxable territory to
persons located in taxable territory. 50

Important Points in Reverse
Charge Mechanism
 Governed by Notification No. 30/2012-ST dated
20.06.2012 w.e.f. 1.7.2012
 Liabilities of both the service provider and service receiver
are independent of each other
 Reverse charge will not apply where the service receiver
is located in non-taxable territory
 For three specified services provided by business entities
being company, society, cooperative society, trust
etc, reverse charge will not apply.
 Reverse charge will also not apply where the service
recipient is any person or business entity not being a body
corporate in case of three specified services
 Small scale benefit is available only to service provider
(not to service receiver), if entitled

51

Important Points in Reverse Charge
Mechanism
 Service receiver under reverse charge cannot avail
exemption of Rs. 10 lakh under Notification No. 33/2012-
ST dated 20.06.2012
 Valuation of services by services provider and service
receiver can be on different principles, if permitted by law
(e.g. works contract - Refer Notification No. 30/2012-
ST, explanation II)
 Liability to pay Service Tax for ongoing contracts will be as
per Point of Taxation Rules, 2011
 Reverse charge shall not be applicable if provider of
service was liable before 1.7.2012
 Service Tax will not be payable by service receiver under
reverse charge, if service was provided prior to
1.7.2012, even if payment is made after 30.06.2012

52

Mechanism
 In case of proportional reverse charge (manpower supply
& security, works contract and motor vehicle hire to carry
passengers), it is advisable that service provider should
charge Service Tax only on his portion of Service Tax in
the invoice and mention that Service Tax on balance
amount is payable by service receiver.

 It is the statutory obligation on the service recipient to pay
Service Tax, whether under full or proportional reverse
charge

 Service Tax under reverse charge has to be paid by cash
vide GAR Challan No. 7 and it cannot be paid by way of
utilization of Cenvat Credit.

53

Mechanism
 In case of renting of motor vehicles to carry passengers where
abatement is also available, reverse charge basis is proportional
depending upon the abatement on the condition that no Cenvat
Credit has been availed. The service provider should provide a
certificate, either in the invoice itself or separately.

 In case of renting of motor vehicle to carry passengers, reverse
charge applies only where the motor vehicle is provided with driver
and service receiver is not engaged in same business.

 In case of director's services, the service provider should not be
employed (whole time) director in a company. Employees are not
covered under the scope of Service Tax.

 Body corporates are not covered under reverse charge for director’s
services

54

Important Points in Reverse
Charge Mechanism
 In respect of manpower supply and security services, works contract services
and renting of motor vehicles to carry passenger, reverse charge shall be
applicable only when following two conditions are satisfied –

 service receiver is a business entity registered as a body corporate, and
 service provider is any one of the following entities –
○ Individual
○ Hindu undivided family (HUF)
○ Firm (including limited liability partnerships)
○ Association of persons

If both the above conditions are not satisfied in respect of these three
services, Service Tax shall be payable by the service provider in ordinary
course.

 Security services means services relating to the security of any
property, whether movable or immovable, or of any person, in any manner and
includes the services of investigation, detection or verification, of any fact or
activity

55

Reverse Charge for Legal
Services
Service Provider Service Receiver
Individual Advocate / Firm / LLP **Business entity with turnover > Rs 10
lakhs in preceding financial year

Arbitral Tribunal **Business entity with turnover > Rs 10
lakh in previous financial year

** Business entity may be an individual also

56

Reverse Charge Mechanism under
various services

Sr. No Description of Service Service provider Service receiver

1. Services provided by an insurance Nil 100%
agent to any person carrying on
insurance business

2. Services provided by a goods Nil 100%
transport agency in respect
of transportation of goods by road

3. Services provided by way of Nil 100%
sponsorship

57

Reverse Charge Mechanism
under various services
Sr.No Description of Service Service provider Service receiver
4. Services provided by an arbitral tribunal Nil 100%

5. Services provided by individual advocate or Nil 100%
a firm of advocates by way of legal services
5A. in respect of services provided or agreed Nil 100%
to be provided by a director of a company
to the said company ( w.e.f 7.08.2012)

6. Services provided by Government or local Nil 100%
authority by way of support services
excluding,-
(1) renting of immovable property,
(2) postal services
(3) transport of goods / passengers
(4) air craft or vessel

58

Reverse Charge Mechanism under various
services

7. Hiring of Motor Vehicle Nil 100 %
(a) renting of a motor vehicle
designed to carry passengers on
abated value to any person not
engaged in the similar line of
business 60% 40%
(b) renting of a motor vehicle
designed to carry passengers on non
abated value to any person who is
not engaged in the similar line of
business
8. Services provided by way of supply 25% 75 %
of manpower for any purpose or
security services ( w.e.f 07.08.2012)
59

Reverse Charge Mechanism under
various services


9. Services provided in service portion
in execution of works contract 50% 50%

10. Services provided by any person who
is located in a non-taxable territory Nil 100%
and received by any person located in
the taxable territory

60

Reverse Charge Obligations for three
Specified Services
Service Provider Service Receiver Service Tax Payable by
Individual /HUF/ Business entity – Joint
Partnership firm body corporate
/AOP
Individual /HUF/ Individual /HUF/ 100 % by service
Partnership firm partnership firm provider
/AOP /AOP
Business entity – Individual /HUF/ 100 % by service
Body Corporate / Partnership firm provider
Company /AOP
Business entity – Business entity – 100 % by service
Body Corporate Body Corporate provider

61

Abatements in Service Tax

• Over and above full exemption to 39 categories of services
vide Notification No. 25/2012-ST dated 20.06.2012
• Earlier there were a number of exemption notifications that
prescribed the abatements for various categories of services
(including 1/2006)
• Abatements merged into a single Notification No 26/2012 - ST
dated 20/6/12
• Valuation rules contain abatement for Works Contract and
Supply of Food Services

62

Specific Abatements
Sl. No. Description of taxable service Taxable Conditions
value(%)

1 Financial leasing services including 10 Nil
equipment leasing and hire purchase

2 Transport of goods by rail (exempted upto 30 Nil
30.9.2012)

3 Transport of passengers, with or without 30 Nil
accompanied belongings by rail ( exempted
upto 30.9.2012)

4 Supply of food or any other article of 70 CENVAT credit on any
human consumption or any drink, in a goods classifiable under
premises, including hotel, convention chapter 1 to 22 of the
center, club, pandal, shamiana or any place Central Excise Tariff Act,
specially arranged for organizing a function 1985 has not been taken
under the provisions of the
CENVAT Credit Rules, 2004.
63

Specific Abatements
Sl. Description of taxable service Taxable Conditions
No value(%)

5 Transport of passengers by air, with 40 CENVAT credit on inputs or capital goods,
or without accompanied belongings used for providing the taxable service, has
not been taken under the provisions of the

6 Renting of hotels, inns, guest 60 Same as above.
houses, clubs, campsites or other
commercial places meant for
residential or lodging purposes

7 Transport of goods by road by 25 CENVAT credit on inputs, capital goods
Goods Transport Agency and input services, used for providing the
taxable service, has not been taken under
the provisions of the CENVAT Credit
Rules, 2004.

8 Services provided in relation to chit 70 Same as above.

64

Specific Abatements

Sl. Description of taxable service Taxable Conditions
No value(%)

9 Renting of any motor vehicle 40 Same as above.
designed to carry passengers
10 Transport of goods in a vessel from 50 Same as above.
one port to another
11 Tour operator services 25 (i) CENVAT credit on inputs, capital
(i) provided by a tour operator in relation goods and input services, used for
to a package tour providing the taxable service, has not
been taken under the provisions of the
(ii) The bill issued for this purpose
indicates that it is inclusive of charges
for such a tour.

65

Specific Abatements
Sl. No Description of taxable Taxable Conditions
service value(%)

(ii) provided by a tour operator in 10 (i) CENVAT credit on inputs, capital goods
relation to a tour, solely arranging and input services, used for providing the
or booking accommodation taxable service, has not been taken under
the provisions of the CENVAT Credit Rules,
2004.
(ii) The invoice, bill or challan issued
indicates that it is towards the charges for
such accommodation.
(iii) This exemption shall not apply in such
cases where the invoice, bill or challan
issued by the tour operator, in relation to a
tour, only includes the service charges for
arranging or booking accommodation for
any person and does not include the cost
of such accommodation.

66

Specific Abatements
Sl. No Description of taxable service Taxable Conditions
value(%)

(iii) Services, other than 40 (i) CENVAT credit on inputs, capital
services specified above in (i) goods and input services, used for
or (ii) providing the taxable service, has not
been taken under the provisions of the
(ii) The bill issued indicates that the
amount charged in the bill is the gross
amount charged for such a tour.

67

Specific Abatements
Sl. No Description of taxable service Taxable Conditions
value(%)

12. Construction of a complex, 25 (upto (i) CENVAT credit on inputs
building, civil structure or a 28.02.2013) used for providing the taxable
part thereof, intended for a service has not been taken
sale to a buyer, wholly or under the provisions of the
partly except where entire CENVAT Credit Rules, 2004.
consideration is received after
issuance of completion (ii) The value of land is
certificate by the competent included in the amount
authority - charged from the
service recipient.
(i) For residential unit having 25 ( w.e.f.
carpet area upto 2000 sq. 1.03.2013)
ft. or where the amount
charged is less than
rupees one crore;
(ii) For other than the (i) above 30 ( w.e.f.
1.03.2013)
68

Specific Abatements
Draft Circular F. No.354 /146/2012 – TRU dated 27.09.2012 (Air Travel)

Charges which are directly related to journey such as re-confirmation fee, date
change fee, seat upgrade fee, preferred seat charges etc. will be covered by
abatement

Charges which are not related to journey such as meal charges, escort
charges etc. will not be covered by abatement.

Excess baggage charge may be leviable to service tax without abatement

Pet charges may be leviable to service tax without abatement

For cancellation charges billed separately as administrative
charge, abatement will not be applicable

69

THANK YOU

FOR

YOUR

PRECIOUS TIME

AND

ATTENTION

Dr. Sanjiv Agarwal

FCA, FCS, Jaipur

asandco@gmail.com

sanjivservicetax@gmail.com

70

Seminar on Service Tax at Jaipur on 20.4.2013(Session iv)

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