CHETAN VERMA

Indirect Tax
Introduction
1. 2. 3. 4. 5. 6. With the economics growth Govt. Expenditure Increases. The only sources of revenue for the Govt. is taxes With increases in expenditure Govt. has been increasing taxes dividing To the extend 135% of custom duty levied & it becomes matter of gossiping. India become member of GATT & entered in to WTO agreement. This agreement restricted custom duty & created a wide gap in the Govt. revenue & Govt. Expenditure & there for it become compulsory to impose Additional Taxes. 7. Government appointed a committee for tax reforms under the chairmanship of Dr. Raj Chelaiya committee recomnded in production of extensive tax system intend of existing intensive tax system = Extraction of more amt. of taxes from the same sources. This was not possible therefore committee recommended introduction of Service Tax. If goods can br taxed Why not Service Tax Based on this principal Service Tax has been imposed. Can Govt. impose any tax was a question raised by the C.A association of Gujarat & civil engineering & artitractor of Mumbai. The validity was challenged Therefore Constitution provide for there list List A Union List List B State List List C Concurrent List (Misc. List) List A has 97 item on which central Govt. is empowered to make act. & impose taxes in this list of 97 there was no Service Tax therefore it wasincluded under entry item97 residual taxes& therefore only there service were tax i.e. Telephone, Stock Broker & General Insurance Service. -Subsequently constitution was amended & entry 92 has been inserted to cover service tax & this has been pharmlise THERE ARE CARTEN STAGES TO BE FOLLOWED FOR IMPOSING TAXES:-. A. B. C. D. E. Enactment passing of an act by the parliament & approval by the precedent. Establishment of some machine for implementing of this act. Determination of assesses & his liabilities. Forcefully recovery if not voluntarily paid. Service tax yet to pass this stage no separate act has been to pass only available section from finance act has been for this purpose. F. No department has been created for services tax central excise department has been given this responsibilities. G. This is how service tax come in to force.

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TYPES OF TAXES Taxes are two types:1. Direct tax 2. Indirect tax In indirect tax the burden of tax(Incident of tax) is passed on the consumer good or services. Points of Distinguish. DIRECT TAX It is on the individual Incident cannot be passed on to anybody Recovery mechanism is expansive INDIRECT TAX It is on goods Incident can be passed on the final consumer Recovery mechanism is very economic. In economic indirect tax are called duty however service tax is not called duty i.e. excise duty, custom duty, however service tax is not called like sales tax this is because service tax is recovery before and paid to the govt. later on. Whether in excise & custom payment is made first to central Govt. then is recovered.

Service tax is a VAT i.e value added tax. Tax on value addition only. Constition prohibites Govt.from imposing tax on tax under the same act because it has a cumulative effect.(Cascading effect) & burden on the customer increases.

Body of Service tax laws. Law is the wider term & it includes the concerned act, relevant other act, amendments, notification, Rules & regulation. The body of Service tax laws consists of------1. 2. 3. 4. 5. Service tax provision under finance act. Service tax rule CENVET credit rule. Service export rule & valuation rule. In addition to this, the notification issued by the govt. & regulation frame by the board for indirect taxes.

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Service tax is VAT the concept has cone from MODVAT (Modified VAT) & CEMVET & whatever service tax is paid on input service s taken away from setoff and is adjusted while making final payment of tax. Service tax is collected first and is paid later on. The payment has to be in the prescribed manner. The concept of service tax is not new Mrs. Romila Thapfr in one of her book writes that earlier the king use to avail the service of weapon manufacturer or equipment manufacturer for maintenance of their army weapons. This was the sort of service tax but in form of services. Later on the concept of recovery of money has been introduced and now it is formalized. Services are two types 1. Legal Services / Lawful Services. 2. Other Services.

1. Legal services are further classified in to two. a. Taxable Services b. Non taxable Services Legal Services are those which are listed in the tariff on which tax is required to be paid. Classification of services 1. Services are classified to ensured that it comes only under one head & not over lapping Example:- Services of C.A. as well as services of management consultant. 2. Similarly services of an architect as well as interior decorator services. 3. At present the rate of service tax is same for all services therefore classification is not required but if it all different rates are levied then classification will be necessary to find out the correct rate of the tax. 4. Classification shall be based on HSN (Harmonized System of Naming Nature) After the classification is carried on it may be that particular service may classified in to two or more head & rate may be different If it happens so the Appropriate rate have to be selected far which guildelines would be issued by the Govt. Rate of Service Tax 1. Initially all services were taxed at the rate 5% subsequently revised & today the rate of tax is 12% This called as basic rate in addition to the which education cess 2% of the tax & secondary & higher education cess 1% is paid . thus the total liabilities is 12.36% 2. Service tax is based on value of services and therefore it becomes necessary to find out correct value as Advalorem Department accept the value agreed upon by the services provider & Service receiver The doctrine consideration to conform that the value has not been supposed or reduced. Documentary evidence can be demanded to ascertain the value of services.

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3. In case of continuous services if assesses has received some advance service tax has to be paid on that also. 4. If the expenditure incurred by the service provider is rebersable no services tax shall be levies on it Reference- Ad vision advertiser v/s Commissioner of Excise ( Company has to prove that the expense are reimbursable there is no intention to reduce the tax liabilities) Registration by Service tax payer:1. Every service provider of taxable services shall obtain registration certification. 2. Within the period of 30 days from the date of providing taxable services. 3. The application shall be made to the superintendent central excise in quadruplet. 4. Application shall be accompanied by copy of PAN, an affidavit declaring the commencement of services, copy of passport, ration card OR MOA for proof of residence. 5. In case of an individual the photograph of the proprietor, in case of the partnership firm partnership deed, in case of company MOA & AOA. 6. The application shall be in the prescribed form ST1 (Service Tax 1) on satisfaction certificate of registration shall be issued in prescribed form i.e. ST2. 7. The certificate will include:a. Address of the premises b. Nature of service c. Input required for the services 8. Whenever the certificate is issued the service provider will preserved it he declares the dosucc of the business If the business is closed the certificate shall be surrender for closer, if the business is sold-out new owner shall obtain fresh certificate, if the business is transfer one zone to another the certificate shall be submitted for transfer. 9. If there is any change in the nature of the services change in the ownership (constitution of the firm), change in the inputs used will be brought to the notice of superintendent who will give endorsement to the effect. 10. If the certificate is loss or spoiled duplicate can be obtain. 11. If the accounting or billing is centralized one registration for all the premises shall be permitted provided proper officer is satisfied that there is no loss to govt. revenue. 12. Registration shall be obtained by a service provider providing taxable service of aggregate value in a financial year more than Rs. 7 ,00,000/13. Governments empowered to give exemption by notification in the official gazette.

Exemption (3Marks) 1. Govt. may be notification in the official gazette exempt any person are class of persons are any organization or class of organization from payment of service tax. 2. Exemption may be partial or full. 3. So far Govt. has exempted the full:a. Taxable services provided or to be provided by any person/organization by RBI.

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b. Taxable services provided by RBI to any person or an organization on which RBI is liable to pay tax. c. Taxable services received in India from outside India by RBI. Deemed Export Export is to earn foreign exchange. Goods are sent out foreign exchange is received. When goods sent out and foreign exchange is received. When goods go out of india at it is exported, however there number of instance were goods do not go out but payment is received in foreign emergency. The propose of export get fulfilled therefore it is called as a deemed export Who will liable to pay service tax? Every service provider providing service taxable is liable to pay service tax. In exceptional casein special case service tax is paid by the receiver of the service this is also known as Reverse Charge Reverse charge:Under rule2 under service tax rule 1992 following service have been include in reverse charge. 1. The general and life insurance service. The person carrying on insurable business. He is liable to pay Service tax andnot the insurance agent. 2. Incase of mutual fundservice the mutual fund management is liable to pay service tax and not the agent. 3. In case of service received in india from a place outside india or by a person outside india the receiver of the service will pay the tax. 4. For sponsorship service the companywho receivers willpay the tax and not one who act as an agent for that company. 5. In specified cases consigner and consignee paying freight charges are liable to pay service tax on behalf of transport company. When to pay Service Tax? 1. Service tax is payable on the quarterly or monthly basis 2. Assessment have been group into two a. Individual and partnership firm b. Other 3. If the assesses are individual or partnership firm service tax collected during any quarter shall be paid by 5th of the month after the end of the quarter. 4. In case of other assesses service tax received during any colander month shall be paid by 5th of the next month. 5. In case of e-payments the word 5th is replaced by 6th. 6. In case of march, 31 however the due date shall be 31st for the month or quarter ending march. 7. E-payment is mandatory for an assesses who has paid the tax rs. 50lakhs or during the previous financial year.

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8. The payment shall be by way of challan GAR7 on the specified counters/banks declare by the department. 9. If there is any delay 13% interest shall be paid. Record to be maintained:-What record to be maintained has not been prescribed under the provision of service tax. Every record is required to be maintained under other act applicable to that person or organization shall be maintained- it should be enough to provide documentary evidence for correct payment of tax. Return to be filed:-Doctrine of unjust enrichment, the doctrine (principal) provides that no person shall be allowed to become a rich unjustified manner, this doctrine was used for the first time in leading case Bharat Gires where assess had collected excessive duty from the customer and had claimed refund. The refund was denied on the ground that this is an indirect tax and the incidences already passed on the customer. Therefore if it at all it has to be refunded to the customer and not to the assesses and if it all it is not possible to refund to the customers the money will be credited to the fund created consumer welfare fund to be utilized for the welfare of the consumers. This doctrine is applicable in case of service tax also because it is also an indirect tax and incidence is already passed on to the consumer. This can be found out only after the return is filed to the department. Separate provisions have been made for filing the returns. 1. Every assesses shall file half yearly return in the prescribed form ( form No.ST3) 2. The return shall be accompanied by copy of challan through which assesses had paid the tax(Form NoTR6) TR6 is also called yellow challan 3. The return shall be furnished by 25th of the moth following particulars half year. 4. Section 77 provides that if there is a delay in asessee shall pay late fees upto rs. 1000/- in addition to late fee rule7 provides that there shall be penalty also. 5. The late fee table reads as under. a. Delay up to 15 days=500/b. Delay up to 30 days=1000/c. Delay beyond 30 days=1000/- + 100Per day. Instructed to maxmimum of rs.2000/6. Service tax rule 78 provides that an assessee is permited to file revise return within 60 days from the date of filing the original return. E-Return 1. Initially E-filing of service tax return was allowed for few service only but now it has been extended to all the service and for all service provider. 2. An assessee has to obtain a 15 degit code no. called as Service tax payer coder code(STPC) After getting this number E- filing facility can be availed. 3. An assesseee will get a computer generated acknowledgement as an evidence for having filed the return. Advance Ruling:1. Like all other act acts the provision of advance ruling is inserted for service tax also.

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2. Advance ruling had been defined as the determination (by an authority) of question of law or question of fact regarding the liability to pay service tax. 3. The government has constituted an authority advance ruling authority. 4. Advance ruling can be obtained in respect of the following:a. Classification of service. b. Valuation of taxable service c. Applicability of the notification issued by the government. d. Amiability of service tax credit. 5. Advance ruling can be sort by:- A person who is non-resident. - A resident setting up a joint venture with non resident. - Wholly own subsidiary company of a foreign company. 6. One who solicits advance erulling shall make an application in quadripulate ( four Copies) in the prescribed form (AAR applicable for advance ruling ST) & should be accompanied by a fees of RS.2500/-. 7. The application can so submitted can be with drawn within 30 days from the date of filing the application. 8. The authority shall give the ruling within 90 days from the receipt of valid application= an application complete in all respect with prescribed fees. 9. Application shall be rejected of the matter on which advance ruling is sort is already pending before any authority like department tribunal court similarly if the issue isalready decided by any of the authority no ruling application shall be accepted. 10. Ruling given by authority shall be binding an the applicant and the concerned officer of the department- will be continued till there is any change in the law 11. Ruling obtained shall be void if such has been obtained by fraud, misrepretation like unlawful manner. 12. Advance ruling authority is quasi judiciary authority 13. The ruling given by this authority is for the applicant only and for that issue only Recovery of Service Tax. 1. If the service tax is paid short or not paid at all proper officer has the right to start recovery process. Impose penalty and even if not responded further recovery action. Demand and show cause notice1. Demand shall be made:a. If asessee has not paid tax b. Asessee has not recovered tax therefore has not paid it. c. Assess has paid short tax. d. Asessee has short recoverd the tax therefore short paid it. e. Excess refund has been given to him by mistake. 2. In any of the above is without malafied intention demand notice shall be served within a period of 1year from the relevant Date. 3. If the above is with malafied intention the word 1 year will be replace by the 5 years

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Relevant Date= (2 Mark) a. Where the service tax has not been paid or service tax has been short paid the relevant date shall mean:1. Where the periodic return was to be filed the date of fillng the return. 2. When the return has not filed the last date on which the return should have been filed. b. Where the service tax is provisional by worked out ( service is value based if the correct value could not be determined temporary value shall be considered tax will be paid on that final value will be determined latter on and adjustment will be done accordingly) The date of adjustment shall be considered as a relevant date. c. In case of refund by mistake the relevant date will be considered as the refund date. Payment before receipt of show causes notice. 1. Assessee may make payment of the short tax paid on the basis of his own assement or the assessment by the department. 2. Immediately after having mode the payment the department will informed in writing in such case department will not issue a show cause notice however there is any other issue are amount involved department may / shall issue show cause notes. Provisional attachment of property. 1. If the proper officer have sufficient cause to belief that the assessee who is the defaulter and therefore action has been initiated is likely to transfer sale his property. He is empowered to bring provisional attachment. 2. Suitable orders shall be issued and assessee shall be issued and assessee shall be informed about it after the order are issued and if the assessee has sold pr transfer the property such shall be void. 3. Revenue recovery certificate shall be issued to the proper officer for further action 4. The provision is harsh and provision of misuse cannot be overvalued to save an assessee from hardship:a. Officer shall issued provisional attachment only after following the prescribed procedures. b. Prior approval in writing shall be obtained from the commissioner before provisional attachment order is issued. c. The attachment order shall case automatically after expiring of 6 month if no action is taken before. 5. Exercise officer are advised to be very curious in excising this right

Appeal to commissioner

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1. Like all other acts dispute settlement machinery has been constituted for the resulation of the dispute related to service tax. 2. A commissioner appeal followed by the tribunal is the machinery constituted. 3. An aggrieved assessee shall go into an appeal to an commissioner appeal 4. Appeal shall filed against the order passed by the officer belowthe rank of commissioner 5. It shall be in the prescribed form (ST4)and shall be accompanied by set of relevant document which can established the stand taken by the assessee. 6. It has to be within 3 months from the date of order received by the assessee. 7. If commissioner is satisfied that there was valid reason for not filing the appeal within three months, he may be extend this 3 month by issuing order in writing. 8. Commissioner appeal will review the application (if necessary) will gather the detail from the concerned officer who has passed the order before. 9. The principal of natural justice will be followed- assesseee will be give reasonable opportunity to be heard of. 10. After having commissioner will pass a suitable order- may conform the earlier order or may set aside the order. 11. Order shall be in writing of the 2 concerned officer for the information. Appeal to Tribunal 1. When assessee feels agrrived due to an order passed by an officer or a rank of a commissioner appeals or by the board for indirect taxes. Appeal shall be made to the tribunal. 2. Central government has constituted a tribunal that customer excise service tax appellate tribunal 3. Tribunal consists of a chairman and members. 4. Appeal shall be in the appeal memorandum manner & in the prescribed form (ST5) For assessee and (ST7) for department. 5. It has to be within 3 months from the date of order received. 6. Tribunal has right to call for the proceeding of the earlier authority whose order is appealed. 7. Tribunal has the right to refer the case to the lower authority that has passed the order for rejudication or for reexamination on specific points. 8. Tribunal will call for memorandum of across objection if nessary the proper officer who has passed the order. 9. Principal of natural justice will be followed and decision will be given. 10. Tribunal has right to refer for read judication even after hearing. 11. Order of tribunal shall be in writing, copies to concerned parties, zonal commissioner for record. 12. Tribunal is a quasi judicial authority and has all the powers of civil court. 13. Chairman is empowered to constitute the benches any administrative defect in the constitution of the benches shall not invalidate the proceedings before it. (Bengal Quaruses vs. MRTP commissioner)

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14. If the beach get split equally the chairman may hear the case again or may direct any other member to hear it and decide on the basis of decision of the earlier decision. 15. Every member of the tribunal is the public servant ( who is given immunity from prosecution for any of his act during the course of duty & with the bonafied intention)

CENVET CREDIT 1. For the purpose of cenvet credit adequate provisions has been made under service tax law also. 2. The fundamental idea is same like other duties to avoid multiplying effect. 3. Service provider may avail taxable service from other him those will be called as input service and the final service he provides is called as output service. 4. If input service are taxable and output service is also taxable there is always tax on tax as well as multiplying effect. 5. Constitution does not permit this therefore tax paid on input service is given set off and only on value addition the tax is imposed. 6. This is not only for service provider but such facility is available for manufacturer of excisable goods if he used input service for manufacturing excisable item he is eligible for set off for service tax also. 7. Alongwith service tax education cess is also required to be paid setoff this is also allowed but the condition setoff service tax for payment of service tax and setoff education cess for payment of education cess. 8. It could be possible that the service provider provides taxable as well as non taxable both for which he avails input service taxable 9. He has to maintain a separate record showing how much has been used for providing taxable and nontaxable service. If not possible he will have to pay service tax as prescribed in rule 6(3) 10. central government is empowered to exempt taxable service either fully of partially in such case all the service p[provider is eligible for setoff 11. if service provider has incur capital expenditure he also eligible for set of duty on capital goods 12. if any expenditure includes CVD( counter velling duty)/balancing duty that is also eligible for Cenvet credit. 13. In cenvet credit is fraudulently taken it shall be void and assess shall be laible for action 14. If credit cannot be availed assessee is eligible for refund.

Thanks Love.S.Nahar