|
OFFICE OF
THE COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-I, CENTRAL
EXCISE BHAVAN, 7TH FLOOR, AMBAWADI, AHMEDABAD-380 015. Web: www.cenexahmedabad.nic.in Email :
cexahmed@excise.nic.in (Tel:
079-26300024, Fax:
079-26306152, C. Room: 079-26300183) |
F. No. IV/16-126/MP/2009-Budget Dated 07.07.2009
TRADE
NOTICE NO. 08/2009
Sub: Introduction of Finance (No.2) Bill 2009 : Major changes in Central Excise, Service tax and
Customs duties : Regarding.
It is notified for information of all
concerned that the Finance Minister has introduced the Finance (No.2) Bill,
2009 in Lok Sabha on
2) Changes in excise
and customs duties have been made through Notification Nos.77/2009-Customs to
80/2009-Customs and 7/2009-CE to 22/2009-CE all dated
3) Changes in Service Tax have been made
through Clause 112 of the Finance (No 2)
Bill, 2009, which
covers all the changes relating to Chapter V of Finance Act, 1994. Changes are
also being proposed in the provisions of the,-
• CENVAT Credit Rules,
2004;
• Works Contract (Composition
Scheme for Payment of Service Tax)
Rules, 2007; and
• Taxation of Services
(Provided from Outside India and Received in
4) The salient
features of changes in respect of Central Excise duties, Customs duties and Service
Tax are indicated in Annexure `A’.
2
5) Central Excise Notifications No. 7/2009
–CE to 22/2009-CE and Notification Nos. 16/2009 -CE(NT)
to 18/2009-CE(NT) all dated 07.07.2009, Customs Notifications No.
77/2009-Customs to 80/2009-Customs all dated 07.07.2009, Service Tax
Notifications No. 16/2009-ST to 23/2009-ST, all dated 07.07.2009 issued in this
regard may kindly be referred to for information and guidance. It is clarified
that this Trade Notice is only illustrative and explain the position in brief.
It cannot be a substitute for the Finance (No.2) Bill, 2009 or the
Notifications issued thereunder. For full details the
relevant provisions of the Finance Bill, 2009/or relevant Notifications may be
referred to.
6) All the Trade Associations/Chambers of
Commerce and the members of the RAC/PGRC are requested to bring/publicise the
contents of this
Trade Notice amongst their Members/Constituents for their information and
necessary action.
(RAKESH KUMAR SHARMA)
COMMISSIONER
Encl : As above (Annexure-`A’).
Copy to : As per
Mailing List of Department.
ANNEXURE – A
Salient features of changes in respect of
Central Excise duties, Customs duties and Service Tax introduced in Finance
(No.2) Bill, 2009.
I. CENTRAL
EXCISE
I.1 Rate
structure
As a consequence of changes in the ad valorem
rates of Central Excise duty for non-petroleum products on
• food items such as sugar confectionary, biscuits with retail price
exceeding Rs.100/kg, cakes and pastries, sherbets, scented supari
etc.;
• Paraxylene;
• drugs and
pharmaceutical products of chapter 30;
• paper,
paperboard and articles made therefrom;
• footwear of retail price exceeding Rs.250 per pair but not
exceeding Rs.750 per pair;
• Pressure
cookers
• power –driven
pumps designed for handling water;
• water
filtration/ purification equipment;
• specified
textile machinery;
• compact fluorescent lamps (CFL) and vacuum and gas filled bulbs of
retail price not exceeding Rs.20 per bulb; and
• medical equipment
These lists are not exhaustive and the relevant notifications/
Explanatory Notes may be referred to for details. Consequent upon increase in excise
duty rate from 4% to 8%, abatement rates have been revised suitably on items
covered under RSP (Retail Sale price) based assessment.
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I.2 Textile
and textile intermediates:
Broadly speaking, the excise duty regime applicable to textiles, both manmade and natural, prior to the reductions made on
the 7th of December, 2008 is being restored. The important changes in this
sector are:
i. In respect of cotton textiles, not
containing any other material, the rate of duty has been enhanced from Nil to
4% on optional basis. Full exemption would now be available only if a
manufacturer does not avail of Cenvat credit of the duty paid on inputs. If he does
not fulfill this condition, he would be required to pay a duty of 4% ad valorem.
ii. The rate of duty on manmade fibre
and yarn has been enhanced from 4% to 8% on mandatory basis. Beyond the fibre/ yarn stage, the optional levy of 8% ad valorem has been restored (instead of the pre-budget rate
of 4%).
iii. Similarly, textile items manufactured from natural fibres other than cotton such as silk, wool, flax etc.
would now bear an optional levy of 8% ad valorem
instead of 4% beyond the fibre stage. The enhanced
rate of 8% would also apply to blended fabrics and products.
iv. Corresponding changes have also been made in the rates of duty
applicable to Export Oriented Units (EOU) that use only indigenous raw
materials when they make clearances of textile items into the Domestic Tariff
Area (DTA).
v. Full exemption from excise duty has been provided to tops manufactured
from duty paid tow of manmade fibre using the
tow-to-top process on the condition that the manufacturer availing of this
exemption does not have the facility to manufacture tow in his factory.
vi. Excise duty on some important textile intermediates has also
been enhanced from 4% to 8% ad valorem. These are:
a. Polyester chips
b. Di-methyl terephthalate
(DMT)
c. Pure Terephthalic Acid (PTA); and
d. Acrylonitrile
As far as possible, the enhanced rates are being prescribed
through the Tariff Schedule. In many cases, however, these rates have been
prescribed by notification as the tariff rates are higher.
I.3 Packaged or canned software:
Partial exemption from excise duty has been provided to packaged
or canned software so that the duty payable on that portion of the value which
represents the consideration for the transfer of the right to use such software, is exempted. The benefit of the exemption is
available to the manufacturer of such software when he declares to the Central
Excise authorities that the right to use
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is transferred for commercial
exploitation and fulfillment of some other conditions. The details are
contained in notification no.22/2009-Central Excise dated
I.4 Automobiles:
There are two important changes in the excise duty rates
applicable to automobiles:
i. Excise duty on motor vehicles of headings
8702 and 8703 having engine capacity exceeding 1999cc, has been reduced from
20% + Rs.20,000 per unit to 20% + Rs.15,000 per unit.
ii. Excise duty on petrol driven motor vehicles
for transport of goods except dumpers of tariff item 8704 10 90 has been
reduced from 20% to 8%. Excise duty on chassis of such petrol driven vehicles has also
been reduced from 20% + Rs.10,000 per chassis to 8% + Rs.10,000 per chassis .
I.5 Petroleum:
The basic excise duty rates on MS/HSD intended for sale with a brand
name have
been converted from ‘ad valorem + specific rate’ to
pure ‘specific rate’ as under :
|
S. No. |
Description |
From |
To |
|
1. |
Motor Spirit |
6% + Rs. 5 per litre |
Rs. 6.50 litre |
|
2. |
HSD |
6% + Rs. 1.25 litre |
Rs. 2.75 litre |
Consequently petrol intended for sale with a brand name will
attract total excise duty of Rs. 14.50 per litre while the total duty applicable to High Speed Diesel
intended for sale with a brand name would be Rs 4.75
per litre. Other changes in respect of petroleum
products are:
i. Exemption from basic excise duty,
additional duty of excise and special additional duty of excise has been
provided to High speed diesel oil blended with bio-diesels, up to 20% by
volume, provided both HSD and bio-diesel have paid the appropriate duty of
excise.
ii. Excise duty rate on special boiling point
spirits falling under tariff items 27101111, 27101112 and 27101113 has been
reduced to 14%. Excise duty rate on Naphtha falling under heading 2710 has also
been reduced to 14%.
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I.6 Other Concessions:
The following concessions/ changes have also been made:
i. Full exemption from excise duty has been
provided to goods falling under Chapter 68 manufactured at the site of
construction for use in construction work at such site.
ii. Recorded smart card and tags are exempt from excise duty. A
condition has been added to this exemption so that it would be available only
if the manufacturer does not avail of Cenvat credit of the duty paid on inputs
for these goods.
iii. Articles of jewellery on which
brand name or trade name is indelibly affixed or embossed (branded jewellery), have been fully exempted from excise duty.
iv. Full exemption has also been provided to EVA compound
manufactured on job-work basis for further manufacture of footwear.
I.7 SSI Exemption:
There is no change either in the exemption limit or the
eligibility limit for the small scale exemption. Under para 4(e) of Notification No. 8/2003-CE dated 01.03.2003, specified items that are in the nature of
packaging material are excluded from the purview of the brand name restriction.
One more item viz. ‘printed laminated rolls’ has been added to this list with
immediate effect. As a consequence, manufacturers of printed laminated rolls
bearing the brand name of another person and fulfilling the conditions of the notification
would be entitled to full exemption from excise duty for their first clearances
of this item (for home consumption) not exceeding Rs.150 lakh
during the remaining part of this financial year i.e. 2009-10.
I.8 Important Legislative amendments:
The highlights of the legislative amendments in the Central Excise
Act and the First Schedule to the Central Excise Tariff Act are as under:
i. In respect of ‘betel nut product known as supari’, it is being prescribed that the process of adding
or mixing certain ingredients to betel nut in any form would be a process
amounting to manufacture. For this purpose, note 6 is being inserted in Chapter
21 of the Schedule. A corresponding note is being inserted in Chapter 8 so as
to exclude this product from its purview. These changes come into immediate
effect under the Provisional Collection of Taxes Act, 1931.
ii. In the case of tariff item 5801 2210, columns (3) and (4) of
the Schedule, unit and rate of duty of 8% have been inserted in column (3) and
(4) respectively, with immediate effect.
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iii. Section 9A (2) of the Central Excise Act has been amended so
as to exclude certain types of offences and circumstances from the purview of
the compounding provisions.
iv. Sections 14A and 14AA have been amended to provide that the
Chief Commissioner may also nominate Chartered Accountants for conducting
special audits under these provisions.
v. Section 23A has been amended to prescribe that the Authority
for Advance Rulings authorised under section 28F of
the Customs Act would be competent to deal with cases under the Central Excise
Act as well.
vi. Sections 35G and 35H have been amended to empower High Courts
to condone delay in the filing of appeals as well as the memorandum of cross
objections where it is satisfied that there was sufficient cause for delay.
vii. Three notifications viz. notification Nos.33/1997-Central
Excise [N.T.], dated 01.08.1997, 44/1997-Central Excise [N.T.], dated
30.08.1997 and 7/1998-Central Excise [N.T.], dated 10.03.1998 issued under the
provisions of the compounded levy scheme for steel induction furnace units and
re-rolling mills (Rules 96ZO and 96 ZP) are being amended with retrospective
effect so as to regularise fixation of rates of duty
under these notifications.
viii. Rule 6(3) Cenvat Credit Rules, 2004 has been amended to
prescribe that a manufacturer of both dutiable and exempted goods, who does not
maintain separate accounts of inputs, shall now pay an amount equal to 5% of
the total price of exempted goods.
ix. Rule (2) of Cenvat Credit Rules, 2004 has been amended to
clarify that ‘input’ should not include cement, angles, channels, CTD/TMT bars
etc. used for construction of shed, building or structure for support of
capital goods.
x. The Central Excise Rules, 2002 have been amended to provide
that seized records that have not been relied upon should be returned to the
party within 30 days of issue of a show cause notice.
II. CUSTOMS
II.1. Rate Structure:
There is no change in the overall rate structure of customs duties.
As such, the peak rate for industrial goods has been retained at 10% and the
major ad valorem rates of 5% and 7.5% have also been
retained. Changes in the rate of duty on specific items are discussed in
subsequent paras.
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II.2. Precious Metals
Rates of basic customs duty on gold and silver have been increased
as under:-
S. No. Item From To
1. Gold bars, other than tola bars,
bearing Rs.
100 per Rs.
200 per
Manufacturer’s or refiner’s
engraved 10 gm 10 gm
serial
number and weight expressed in
metric
units, and gold coins
2. Gold in any form (other than those Rs. 250 per Rs. 500 per
specified, against S.
No. 1) 10 gm 10 gm
3. Silver in any form Rs. 500 Rs.
1,000
per Kg per Kg
The revised rates shall also apply to gold and silver including
gold/silver ornaments (excluding ornaments studded with stones or pearls)
imported as baggage.
II.3. Capital Goods:
II.3.1 Concessional rate of basic customs duty of 5% was earlier
available to specified plantation machinery till 30.04.2009. This concessional
rate of 5% has now been restored for one more year i.e. upto
06.07.2010.
II.3.2 Basic customs duty on 'mechanical harvester' for coffee
plantation has been reduced from 7.5% to 5%. Such harvesters have also been
exempted from CVD by way of excise duty exemption.
II.3.3 Basic customs duty on permanent magnets for manufacture of
PM synchronous generators above 500KW for use in wind operated electricity
generators has been reduced from 7.5% to 5%.
II.4 Export Promotion:
II.4.1 Full exemption from customs duty presently available to specified raw materials/inputs imported by
manufacturer-exporters of sports goods has been extended to five additional
items.
II.4.2 Similarly, full exemption from
customs duty is presently available to specified raw materials and equipment
imported by manufacturer-exporters of leather goods, textile products, and
footwear industry. The list of such items has been expanded by including
additional items.
7
II.4.3 Basic customs duty on unworked
corals has been reduced from 5% to Nil.
II.5. Electronic industry:
II.5.1 Full exemption from basic customs duty available to set-top
boxes has been withdrawn. They will now attract basic duty of 5%.
II.5.2 Basic customs duty on LCD panels for manufacture of LCD
televisions has been reduced from 10% to 5%.
II.5.3 Full exemption from 4% special CVD on parts for manufacture
of mobile phones and accessories has been reintroduced for one year i.e. upto 06.07.2010.
II.6. Drugs and Medical Devices:
II.6.1 Basic customs duty on nine specified drugs and bulk drugs for their
manufacture, and one vaccine has been reduced from 10% to 5%. CVD on these
items would also be exempted by virtue of full exemption from excise duty.
II.6.2 Basic customs duty on Patent Ductus
Arteriosus/ Atrial Septal Defect occlusion devices is being reduced from 7.5%
to 5% with Nil CVD by way of excise duty exemption. Similarly, basic customs
duty on Artificial Heart (left ventricular assist device) is being reduced from
7.5% to 5%. This device already attracts nil excise duty/CVD.
II.7. Textiles:
Basic customs duty on cotton waste and wool waste has been reduced
from 15% to 10%.
II.8. Miscellaneous:
II.8.1 Basic customs duty on rock phosphate has been reduced from
5% to 2%.
II.8.2 CVD exemption on Aerial Passenger Ropeway Projects has been
withdrawn. Such projects will now attract applicable CVD.
II.8.3 Basic customs duty exemption on
“concrete batching plants of capacity 50 cum per hour or more” available by
virtue of exemption on specified machinery for construction of roads has been withdrawn. Such plants
will now attract basic duty of 7.5%.
II.8.4 Basic customs duty on inflatable rafts, snow-skis, water
skis, surf-boats, sail-boards and other water sports equipment has been fully
exempted.
II.8.5 Basic customs duty on bio-diesel has been reduced from 7.5%
to 2.5%
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II.9 IT Software
On packaged or canned software, CVD exemption has been provided on
the portion of the value which represents the consideration for transfer of the
right to use such software, subject to specified conditions. This portion of
the value is leviable to service tax as “Information Technology Software
Service’. Although, the CVD exemption has not been made conditional upon the
payment of service tax, it is requested that a mechanism be put in place to
ensure regular exchange of information on details of importers availing of the
exemption between the customs and service tax formations so that, where
necessary, action for recovery of service tax may be taken.
II.10 Important Legislative amendments:
The major changes in the Customs Act and Customs Tariff Act are
discussed below:
i. Section 26A has been inserted in the
Customs Act to provide for refund of import duty paid on imported goods if they
are found to be defective or not conforming to the specifications agreed upon
between the importer and the seller, subject to certain conditions.
ii. Section 28F of the Customs Act has been amended to provide
that the Central
Government may by notification authorize the Authority for Advance
Ruling constituted under Section 245-O of the Income Tax Act to act as an
Authority for
the purposes of customs, central
excise and service tax subject to some modification regarding the constitution
of the Authority. The change will come into effect from a date to be notified.
iii. Sections 130 and 130A of the Customs Act have been amended to
empower the High Court to condone the delay in filing of appeals/applications/memorandum
of cross objections where it is satisfied that there is sufficient cause for
delay.
iv. Section 137 of the Customs Act has been amended to exclude
certain types of offences and circumstances from the purview of compounding
provisions.
v. Section 3 of the Customs Tariff Act has been amended so as to
provide that where the Central Government has fixed tariff value for collection
of central excise duty on an article produced or manufactured in
vi. Sections 8B, 8C, 9 and 9A of the Customs Tariff Act, 1975 have
been amended retrospectively so as to extend the machinery provisions of the
Customs Act to the duties levied under these provisions.
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vii. Sub-section (6A) has been inserted in section 9A of the
Customs Tariff Act so as to provide that the margin of dumping in relation to
an article exported by an exporter or producer shall be determined on the basis
of records maintained by such exporter or producer and on the basis of
information available in the case of
non-cooperating exporter or
producer.
viii. Para (A) in Note 2
of Section XI of the Customs Tariff Act has been amended so as to align it with
the parallel provision in the Central Excise Tariff Act.
ix. Notification No.
40/2006-Customs dated 01.05.2006 is sought to be amended retrospectively from
its date of issue so as to allow the facility of rebate in respect of locally
procured materials used in the manufacture of goods exported under the Duty
Free Import Authorisation Scheme and to carry out
other related changes.
x. Notification No. 27/2009-Customs (NT) dated
17.03.2009 appointing officers of
DGCEI as officers of customs with all
III. SERVICE
TAX
New
Services included in the list of Taxable Services
The following
new services are proposed to be included in the list of taxable services. These
services would get covered under the list of taxable services from a date to be
notified after the enactment of Finance (No. 2) Bill, 2009.
III.1
Transport of Goods through Rail:
Presently, transportation of goods in containers
by rail, by other than Government railways is taxable under section 65(105)(zzzp) since 2006. It is now
proposed to impose service tax on goods transported by railways including
Government railways, whether in containers or otherwise. Suitable abatement and
exemption to specified goods would be provided through issuance of notification
at the appropriate time.
III.2 Transport of Coastal Goods; and Goods
transported through Inland water:
Coastal goods
(as defined under the Customs Act) and transport of goods through National
Waterways, and inland waters are proposed to be brought under tax net. Suitable
abatement and exemption to specified goods would be provided through issuance
of notification at the appropriate time.
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III.3 Legal Consultancy Service:
As in the case of management consultancy or engineering
consultancy service, any consultancy, advice or technical assistance provided
in any discipline of law is proposed to be subjected to service tax. However,
the tax would be limited to services provided by a business entity to another
business entity. It has been defined that a business entity includes firms, associates,
enterprises, companies etc. but does not include an individual. Thus, services
provided by an individual advocate either to an individual or even to a business
entity would be outside the scope of the taxable service. Similarly, the services
provided by a corporate legal firm to an individual would also be outside the purview
of taxable service. Any service of appearance before any court of law or any statutory
authority would also be kept outside this levy.
III.4
Cosmetic and Plastic Surgery service:
III.4.1
Beauty treatment service provided by saloons, beauty
parlors and beauticians are taxable since 2002. The service now proposed to be
taxed is cosmetic surgery and plastic surgery undertaken to preserve or enhance
physical
appearance or beauty. As per common definition, surgery
is a medical technology consisting of a physical intervention on tissues. As a
general rule, a procedure is considered surgical when it involves cutting of a
patient’s tissues or closure of a previously sustained wound. Commonly surgery
is performed in a sterile environment with anesthesia and antiseptic conditions
using surgical instruments. It also includes ‘non-invasive’ surgery.
III.4.2 Some of the
commonly known aesthetic/cosmetic surgeries are abdominoplasty
(tummy tuck); bletharoplasty (eyelid surgery); mammoplasty; buttock augmentation and lift; rhinoplasty (reshaping of nose); otoplasty
(ear surgery); Rhytidectomy (face lift); liposuction
(removal of fat from the body); brow lift; cheek augmentation; facial implants;
lip augmentation; forehead lift; cosmetic dental surgery; orthodontics;
aesthetic dentistry; laser skin surfacing etc.
III.4.3
However, any reconstructive surgery undertaken to restore
one’s appearance, anatomy or bodily functions affected due to congenital
defects, developmental abnormalities, degenerative diseases, injury or trauma
would be outside the scope of this service. These processes could be undertaken
to correct impairment caused by burns, fractures or congenital abnormalities
like cleft lip etc.
III.5
Alteration in the scope of existing taxable services :
The following
alteration/modifications have been done in the existing taxable services. These
changes would come into effect from a date to be notified after the enactment
of the Finance (No. 2) Bill, 2009.
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III.5.1 Modification
in Business Auxiliary Service (BAS) [section 65(19)]: It may be recalled that
production or processing of goods for or on behalf of a client falls within the
purview of this service. However, if any such activity amounts to manufacture
within the meaning of section 2(f) of the Central Excise Act, the same is excluded
from its purview. This exclusion has been modified to state that it would apply
only if the activity results in manufacture of ‘excisable goods’. Both the words/phrases
i.e. ‘manufacture’ and ‘excisable goods’ would have the same meaning as defined
under the Central Excise Act. The impact of this change would be that even if a
process of manufacture is undertaken for the client, but the resultant product
does not fall under the category of excisable goods, such as
alcoholic beverages, the service tax would be attracted.
Certain other goods which would also fall under BAS on account of the proposed
change would be kept outside the tax net by way of exemption notification, to
be issued at the appropriate time.
III.5.2
Stock-broker Service [section 65(105)(a)]: The
present definition of a stockbroker [section 65(101)] includes sub-broker as
well. A number of cases have been booked in the recent past where the
sub-brokers have been asked to pay tax on the remuneration they receive from
the stockbroker. Previously, the sub-brokers could issue contract note and
receive amounts from the investors. With effect from 01.06.2005, SEBI
regulations have prohibited sub-brokers from these activities. The role of
sub-brokers has thus reduced substantially. Considering that the entire broking
charges are anyway taxable at the hands of stock-broker and a large number of
small sub-brokers have to comply with the service tax laws, the sub brokers have
been excluded from the purview of service tax by making suitable amendment in
the definition of stock-broker. It is also clarified that such sub brokers should
also not be charged to service tax as commission agents under Business
Auxiliary Service. For this purposes, specific exemption notification would be
issued at the appropriate time.
III.5.3 Information Technology Software Service
[section 65(105)(zzzze)]: A correction has been
carried out in the definition of the taxable service by replacing the word ‘acquiring’
by the word ‘providing’, considering the fact that it is the providing of ‘right
to use’ and not the acquiring of ‘right to use’ is a taxable service. This amendment
would have retrospective effect from 16.05.2008, when the service came into
effect.
III.6
Other changes in the Finance Act, 1994:
III.6.1 While most of the procedures under service tax
law are aligned to that of the central excise, one of the exceptions is the
treatment to an order-in-original passed by an officer subordinate to
Commissioner, if the same is not acceptable to the Commissioner on account of
its lack of legality or appropriateness. While section 35E of the Central
Excise Act, 1944 prescribes a departmental appeal being filed against such
order before the Commissioner (Appeals), section 84 of the Finance Act, 1994
prescribes revision of such orders, which amounts to recalling the order and
re-adjudicating it. Field formations as well as trade has requested that the service
tax procedure should be amended to make it in
line
12
with the central
excise procedure. The same has been done by suitably amending section 84 with
certain consequential amendments in section 86. This provision would come into
effect from the date of enactment of the Finance (No. 2) Bill, 2009. All cases
decided before this date would continue to be governed by the existing
provisions.
III.6.2 The service tax rules suffer from the deficiency of not
having provisions relating to (1) relevant date for determination of rate of
service tax and (2) place of provision of taxable services. For this purposes
section 94 of the Act is being amended to empower the Central Government to
make rules in this regard. This provision would come into effect from the date
of enactment of the Finance (No. )
Bill,
2009.
III.6.3 Goods
Transport Agents (GTAs) receive several services from
other service providers (such as warehouse keeper, cargo handlers, C&F agents)
during the movement of goods, en-route. While these individual services are
taxable at the hands the service providers, the GTA cannot take credit of tax
paid on such services, as the abatement allowed to them is subject to condition
that no credit should be availed. This matter was agitated by the GTAs, and the government agreed to exempt such services.
Consequently, notification No. 1/2009-ST dated 05.01.2009 was issued. It was,
however, pointed out by GTAs that litigation is
pending for the past period. In this regard Board’s letter F. No.
137/175/2007-CX.4 (Vol. II) dated 22.04.2009 was sent to the field formations
to identify such cases, as the Government has promised to drop all past
demands/litigation on this matter, latest by the end of August, 2009. In order
to enable the field formations to dispose of the pending demands and discharge
the notices issued for the past period, the said notification No. 1/2009-ST is
being given retrospective effect (with effect from 01.01.2005) through changes
made in the Finance (N0. 2) Bill, 2009. Upon the enactment of the Bill, field
formations must be directed to take up these cases on priority and ensure that
all such cases are disposed of latest by
III.7.
Amendments in Rules (pertaining to service taxpayers):
III.7.1
Changes in the Works Contract (Composition Scheme for
Payment of Service Tax) Rules, 2007: These rules provide a simplified procedure
for working out the tax liability by the service providers providing works
contract service. Instead of working out the service element from the value of
works contract and paying service tax at full rate (i.e. 10%) the service
provider is allowed to pay 4% on the ‘gross amount charged’ for the works
contract. The reason for prescribing the lower rate under the scheme is that
the service provider need not bifurcate the gross
value of works contract. It was expected that the gross value should be shown
to include the total value of materials as well as services used in providing
the taxable services. However, it has been reported that in certain cases, the
taxpayers are not including the full value of the goods required for execution
of works contract for working out service tax liability under the Composition
Scheme by either excluding the value of goods received free of cost from their
client or splitting the contract into a sale contract (for a portion of goods
required to execute the works contract) and works contract (for only a portion
of the total
13
value of goods and the labor charges), thus reducing
the value of works contract for the purposes of calculating service tax. In order
to plug this loophole, the Explanation appearing in sub-rule (3) is being amended
to provide that the composition scheme would be available only to such works contracts
where the gross value of works contract includes the value of all goods used in
or in relation to the execution of works contract whether received free of cost
or for consideration under any other contract. This condition would not apply to
those works contracts, where either the execution of works contract has already
started or any payment (whether in part or in full) has been made on or before
the date of the amendment, i.e. 07.07.2009, from which the said amendment
becomes effective (refer notification No.23/2009-ST dated 07.07.2009).
III.7.2
Amendments made in CENVAT Credit Rules (pertaining to
service tax)
III.7.3 Rule 3(5B)
of the CENVAT Credit Rules provide that, if value of any input
or capital goods on which CENVAT
credit has been taken, is written off fully or where provision to write off has
been made in the books of account before being put to use, the ‘manufacturer’
shall pay an amount equivalent to the CENVAT credit taken on such item. Similar
provision is presently not prescribed in case of taxable service provider. The
said sub-rule is being amended to bring taxable service provider within the
ambit of the said restriction. This provision would come into force immediately
(Refer notification No.16/2009-CE (NT), dated 07.07.2009).
III.7.4 Rule 6(3)
provides an option for a provider of taxable as well as exempt services, using
common inputs or input services, but opting not to maintain separate accounts
to pay an amount of 8 per cent of the value of exempted service. This provision
was made when the rate of tax on taxable services was 12 per cent. Since the
service tax rate has been reduced to 10 per cent, the said amount payable on
the exempted services is being reduced from 8 per cent to 6 per cent of the
value of exempted service. This provision would come into force immediately
(Refer notification No16/2009-CE (NT), dated 07.07.2009).
III.7.5 For changes
made in the Taxation of Services (Provided from Outside
III.8
Exemptions:
III.8.1 Private bus operators, who operate buses on specific inter-state or
intra-state routes, are required to pay service tax as they ply their buses
having ‘contract carriage permits’ and thus fall within the definition of tour
operators. On the other hand the State Undertakings run buses, which run on the
same route carrying passengers, are not subjected to service tax as these buses
bear ‘stage carriage permit’. In order to bring parity between the two, the
services provided by the tour operators undertaking point-to-point
transportation of passengers in a vehicle bearing contract carriage permit is
being fully exempted from service tax, provided such transportation is not in
relation to tourism or conducted tours, or charter or hire. (Notification No.
20/209-ST dated 07.07.09 refers).
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III.8.2
III.8.3
Associations, including trade associations, are taxable under clubs and association
service. Federation of Indian Export Promotion Organization (FIEO) and twenty-one
specified export promotion councils sponsored by the Department of Commerce or
by the Ministry of Textiles are being exempted from the levy of service tax
under the said service. This exemption would remain valid till 31.03.2010. (Notification
No. 16/2009-ST dated 07.07.09 refers)
III.8.4 All the exemptions mentioned above would come into force
immediately.
III.9
Changes in territorial jurisdiction:
III.9.1 Vide
notification No. 1/2002-ST dated 01.03.2002, the provisions of Chapter V of the
Finance Act, 1994 (which governs the levy and collection of service tax were extended
to the designated areas in the Continental Shelf of India (CSI) and the Exclusive
Economic Zone (EEZ) of India, as declared by Ministry of External Affairs Notification
Nos. S.O. 429(E) dated 18.07.1986 and S.O. 643 (E) dated 09.09.1996. Notification
No. 1/2002-ST has been amended to extend the provisions of Chapter V of the
Finance Act, 1994 to installations, structures and vessels in the entire CSI and
EEZ of India. Thus, services provided to or from CSI and EEZ of India would be covered
within the ambit of the provisions relating to service tax w.e.f.
07.07.2009 (Notification No. 21/2009-ST dated 07.07.09 refers). Consequential
changes have also been made in the Taxation of Services (Provided from Outside
India and Received in
III.10
Changes in the scheme for refund of service tax to the exporters of
goods:
III.10.1
Notification No. 41/2007-ST dated 06.10.2007 provides for a scheme of refund of
service tax paid on taxable services, received and used in connection with export
of goods by the merchant/manufacturer-exporter. This notification has been amended
several times in order to include a number of taxable services within the scheme
and also to facilitate speedier disposal of the refund claims. The Board has also
issued a number of circulars. Despite these efforts, representations have been received
from trade and industry that there are inordinate delays in grant of refund claims
and in many cases the refund is denied or notices are issued to the exporters.
On the other hand, the field formations have expressed difficulties in implementing
the conditions and following the procedures laid down in the said notification
and the circulars
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issued from time to time. In order to ensure that exporters
get refunds speedily, the entire scheme has been revamped. The new scheme would
consist of two parts.
III.10.2 Exemption to taxable services
The following two
services have been exempted, if they are used for export of goods and where the
liability to pay the tax on such services is on the exporter himself, on reverse
charge basis, -
(i)
Transport of goods by road, from the place of removal to any ICD, CFS, port
or airport; or from any CFS or ICD to the port or
airport; and
(ii) Services
provided by a foreign commission agent for procuring orders.
This has been done
in order to avoid the circuitous route of first paying the tax and then
receiving the refund. An exporter registered with an export promotion council, sponsored
by Ministry of Commerce or Ministry of Textiles, having Import-Export Code
Number and registered with the Department under section 69 of the Finance Act,
1994 for his liability under reverse charge is eligible to claim this
exemption. (Notification No. 18/2009-ST dated 07.07.2009 refers).
III.10.3 Modified Refund Scheme
Notification No.
41/2007-ST is being superseded by Notification No. 7/2009-ST dated 07.07.2009
prescribing refund scheme in respect of 16 taxable services. Service of
‘terminal handling’ has been added in the existing list of taxable services. The
service ‘transport of goods through road’ is also included in this list to
cover such exporters who are not liable to pay service tax under reverse charge
mechanism. The services of foreign commission agents have been deleted from the
list, as it is comprehensively covered under Notification No. 18/2009-ST dated 07.07.2009.
While the general structure of the notification is similar to that of Notification No. 41/2007-ST, the new scheme
is essentially trust based i.e. refund is to be granted on self-certification/certification
by Chartered Accountant.
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