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Service Tax


Frequently Asked Question (FAQ)
Service Tax

Question: We are handicraft exporters and remit commission to promote our sale. What is the limit which we can avail for refund of service tax on foreign agency commission?

The earlier limit of  ten per cent  is no longer valid with effect from March 1, 2015 with the rescinding of notification (no 42/2012 dated 29.6.2012 by notification 3 of march 1, 2015

Question: We request your advice regarding service tax refund/rebate/for commission to foreign agents and inland freight to be paid by us.

The limit of 10% on FOB value of exports has been withdrawn. As far as  inland freight is concerned the following changes stand effected since 01-03-2015  :

GTA and Uniform Abatement for transport by rail, road and vessel:

Goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is exempt from Service Tax vide notification No. 31/2012-ST dated 20-6-2012. Scope of this exemption is being widened to exempt such services when provided for transport of export goods by road from the place of removal to a land customs station (LCS) [Notification No. 4/2015-ST dated 1-03-2015 (Effective From 1-04-2015)]

A uniform abatement of 70% has been prescribed for transport by rail, road and vessel to bring parity in these sectors. Service tax shall be payable on 30% of the value of such service subject to a uniform condition of non-availment of Cenvat credit on Inputs, Capital goods and Input services. Presently, Service tax is payable on 30% (in case of rail transport)/ 25% (in case of road transport)/ 40% (in case of transport by vessels). Further, there is no condition for availment of Cenvat credit on Inputs, Capital goods and Input services in case of transport by rail, which is now withdrawn.[ Changes In Abatement Notification No. 26/2012-ST dated 20-06-2012 vide Notification No. 8/2015-ST dated 01-03-2015 given in tabulation below for clarity ]

Changes under the Abatement Notification No. 26/2012-ST dated June 20, 2012 (“the Abatement Notification”)

Effective rates of Service tax w.e.f June 1, 2015 on the specified services under the Abatement Notification subject to the conditions specified thereinare as follows:

 

Sl.
No.

Description of taxable
service

Taxable Value

(%)

Effective rate of Service tax

Prior to June 1, 2015

(%)

W.e.f June 1, 2015

(%)

1

Financial leasing including hire purchase

10

1.236

1.4

2

Transport of goods by rail

30

3.708

4.2

3

Transport of passengers, with  or without accompanied belongings by rail

30

3.708

4.2

4

Provisioning of bundled service by way of supply of food or any other article of human consumption or any drink, in a premises together with renting of such premises

70

8.652

9.8

5

Transport of passengers by air, with or without accompanied belongings in

(i) economy class

(ii) other than economy class

 

 

40

60

 

 

4.944

7.416

 

 

5.6

8.4

6

Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes.

60

7.416

8.4

7

Services of goods transport agency in relation to transportation of goods.

30

3.708

4.2

8

Renting of motorcab

40

4.944

5.6

9

Transport of passengers, with or without accompanied belongings, by a contract carriage other than motorcab or a radio taxi.

40

4.944

 

5.6

10

Transport of goods in a vessel

30

3.708

4.2

11

Services  by a tour operator in relation to,-

(i)  a package tour

25

3.09

3.5

(ii)  arranging or booking accommodation for any person in relation to a tour

10

1.236

1.4

(iii) any services other than specified at (i) and (ii) above.

40

4.944

5.6

12.

Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, except where entire consideration is received after issuance of completion certificate by the competent authority,-

(a) for a residential unit having carpet area less than 2000 square feet and cost is less than one crore Rupees;

 

25

 

3.09

 

3.5

(b) for other than the (a) above.

30

3.708

4.2

Changes under the Notification No. 30/2012-ST dated June 20, 2012 – Partial Reverse Charge

Effective rates of Service tax w.e.f June 1, 2015 to be determined accordingly for service provider and service receiver on services by way of renting of a motor vehicle and Works contract services as per the percentage prescribed under Reverse Charge Mechanism after taking into consideration the rates discussed above.

Here it would not be out of place to mention that Notification No. 30/2012-ST dated June 20, 2012 has been amended videNotification No. 7/2015-ST dated March 1, 2015, therebyshifting the Supply of Manpower and Security services from Partial Reverse Charge to Full Reverse Charge effective from April 1, 2015.

Question: We are a Hotel based in Rajasthan. Is the luxury tax imposed by State is required to be included for the purpose of determining either the declared tariff or the actual room rent for the purpose of Service Tax?

For the purpose of service tax, luxury tax has to be excluded from the taxable value.







 

 

Question: One of our clients makes a payment after deducting his Income Tax liability under the Tax deduction at source (TDS) provision. Does our the Service Tax liability is only towards the amount actually received from that client or tax is to be paid on the amount including the Income Tax deducted at source also?

Service Tax is to be paid on the gross value of taxable service which is charged by you for providing a taxable service. Income tax deducted at source is includible in the charged amount. Therefore, service Tax is payable on the gross amount including the amount of Income Tax deducted at source also.

 







 

 

Question: While exporting cargo to US, we are getting cleaning of export cargo by fumigation. Is it taxable under Service tax?

Fumigation of export cargo including agricultural/horticultural produce, whether loaded into containers or otherwise, does not satisfy the statutory definition of “cleaning activity‟ under Section 65(24b) of the Finance Act, 1994. Further the cleaning of the containers used for exporting the cargo are also exempted from the scope of cleaning services.





 

 

Question: What is the procedure for claiming Service Tax refund for exports electronically?

With the introduction of new scheme of electronic refund from Dec 2011, exporters now have a choice: either they can opt for electronic refund through ICES system, which is based on the ‘schedule of rates’ or they can opt for refund on the basis of documents, by approaching the Central Excise/Service Tax formations. To obtain benefit under the new electronic STR scheme, which is based on the ‘schedule of rates’, an exporter: (i) should have a bank account and also a central excise registration or service tax code number and the same should be registered with Customs ICES 1.5 using ‘Annexure –A’ Form; (ii) should declare his option to avail STR on the electronic shipping bill while presenting the same to the proper officer of Customs. 







 

 

Question: Can we get refund of Service Tax on payments made for Certificates of Origin (COO) to FIEO or other Chambers of Commerce?

FIEO  or EPC or Trade Association which issues COO Certificate  acts as a technical inspection and certification agency, and issuance of COO attracts service tax under ‘technical inspection and certification agency’ service. Service tax paid on ‘technical inspection and certification’ of export goods is eligible for refund under Notification 17/2009-ST dated 7th July, 2009.






 

 

Question: What is the position of application of service tax on the remittance of foreign currency in India from overseas or otherwise?

There is no service tax per se on the amount of foreign currency remitted to India from overseas. In the negative list regime, ‘service’ has been defined which excludes transaction in money. As the amount of remittance comprises money, the activity does not comprise a ‘service’ and thus not subjected to service tax. In case any fee or conversion charges are levied for sending such money, they are also not liable to service tax as the person sending the money and the company conducting the remittance is located outside India. In terms of the Place of Provision of Services Rules, 2012, such services are deemed to be provided outside India and thus not liable to service tax. 

Question: We are paying service tax on payments made to our CHA for using his services for exports. Since we are an exporter can we getting some rebate?

Yes. You can register yourself for availing rebate of service tax under Service Tax Circular 149 dated 16.12.2011. Please see the rate given in Service Tax Notification 52/2011 dated 30th Dec., 2011. If it meets your expectation, go for the same as it is relatively simpler else you can file a claim for refund of service tax paid by you on output services used in exports but the procedure is time consuming.

 


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