Service Tax Amendments applicable for May 2011 CA examinations – A Y 2011-12

Dear students

There are 8 services applicable for the May 2011 Attempt. 3 Services continue from the old services.

1) Legal Consultancy Services 2) Information technology services 3)Commercial Training and coaching

Following are 5 new services

1. Cargo Handling Services

a) Any service provided (or to be provided) to any person, by a cargo handling agency in relation to cargo handling services, is a taxable service.

i.e. Service provider = Cargo handling agency,

Service Recipient = Any person,

Service = Cargo Handling Services.

b) Cargo handling services means:-

i. Loading of Cargo,

ii. Unloading of Cargo,

iii. Packing of Cargo, and

iv. Unpacking of Cargo.

c) It also includes:-

i. Cargo Handling services provided for freight in special containers or for non-containerised freight, services provided b y a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight; and

ii. Service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include, handling of export cargo or passenger baggage or mere transportation of goods.

d) “Cargo” means “the load (i.e. freight) of a vessel, train, truck, aero plane or other carrier”. Thus, any goods which are meant for transportation from one place to another by any mode of transport are known as “cargo”. But cargo handling services does not cover mere transportation of goods.

e) The act of loading takes place at the starting point of the journey of the cargo. “Unloading” means act of discharge of cargo.

f) The act of packing is primarily meant to protect the goods from damage while in transit.

g) Cargo handling service also includes services provided in special containers. Now days, container service has become a significant mode of cargo transportation by ship/aircraft/rail.

h) A place where empty containers are stored and accounted for when not in use is known as container freight terminal. Generally. Loading/unloading of cargo takes place at such a terminal. Such services are also taxable.

i) “Cargo handling services” also include services of only packing together with transportation of cargo.

j) Such service may be provided with or without providing other services like loading, unloading, packing, or unpacking. These services are also known as “packers and movers” services.

k) Loading, unloading and transportation of goods from warehouse to vehicles is “cargo handling service”.

l) Storing, washing, repairing and handling of empty containers for shipping companies is not “cargo handling service”, as empty containers cannot be treated as cargo. However, handling/storage and warehousing of empty containers, is covered within “storage and warehousing of goods services”.

Sr	Activity	Taxable/Exempt
1	Cargo handling services relating to agricultural produce or goods intended to be stored in a cold storage.	Exempt
2	Contract for shifting of household goods from one place to another, by packing, transporting and unpacking at the other end	Taxable
3	Loading, unloading of raw materials and finished goods inside the factory	Exempt
4	Handling of passenger baggage (whether accompanied baggage or unaccompanied baggage)	Exempt
5	Mere packing in the absence of transportation	Exempt
6	All cargo handling services in relating to cargo for export	Exempt
7	Where goods are transported without undergoing any loading, unloading, packing or unpacking	Exempt
8	Service provided to a Goods Transport Agency (GTA) for use by the said GTA.	Exempt
9	Handling of Iron Ore within mining area.	Exempt Taxable under “Mining Services”
10	Mere supply of labour	Exempt Taxable under “Manpower supply service”
11	Cargo handling in port	Taxable. Not a “Port Service”

2. Practicing Chartered Accountants

a) Service provided (or to be provided) to any person, by a practicing chartered accountant in his professional capacity in any manner, is a taxable service.

b) A practicing chartered accountant is one who satisfies the following requirements:-

i. The said accountant must be a “person”,

ii. such person must be a member of the Institute of Chartered Accountants of India; and

iii. such person must be holding a certificate of practice.

c) A concern engaged in providing services in the field of chartered accountancy is also included in the definition of a ‘practicing chartered accountant’.

d) Services provided in professional capacity are liable to tax.

e) Other fields include

i. Corporate Tax

ii. Personal Tax

iii. Service Tax

iv. Custom Duty

v. Company Law

vi. VAT/Sales Tax

vii. Management Consultancy

viii. Tax Planning

ix. Expenditure Planning

x. Portfolio Management

xi. Project Appraisal

Services rendered in these areas will also be treated as service rendered in professional capacity.

f) The recipient of service may be “any person” and not necessarily a client.

g) The place of rendering or providing service can be under one roof or at different places.

h) Service can be provided by the chartered accountant himself or with the help of other persons.

i) Service can be provided directly or through post, e-mail or any other electronic mode.

j) Service provided (or to be provided) by a practicing chartered accountant in his professional capacity to a client relating to representing the client before any statutory authority in the course of proceedings initiated by way of issue of a notice is exempt from service tax

i) A member of the institute, who does not hold a certificate of practice, is not eligible for the aforesaid exemption.

ii) Service should be provided to a client. In other words, if service receiver is not a

client of the service provider, this exemption is not available.

iii) Only service relating to representing the client before any statutory authority, is

exempt.

j) Following are e.g. of taxable services:-

i. Giving legal opinion to a client.

ii. Submitting income tax/TDS returns or returns to ROC,RBI, etc.

iii. Drafting documents/agreements/deeds/memorandums.

iv. Appearing before revenue authorities in respect of certain issues where no notice has been issued.

v. Representing a client before revenue authorities where no notice has been issued.

vi. Representing a client before revenue authorities where any approval/authorization/permission has to be taken (proceedings not being initiated by issue of notice).

vii. Drafting scheme of mergers.

viii. Statutory Audit.

ix. Inspection of records/documents.

x. Preparation of accounts.

3. Custom House Agents Services

a) Any service provided (or to be provided) to any person, by custom house agent is a taxable service.

b) Service in relation to entry or departure of conveyances or the import or export of goods.

c) Service is provided by custom house agent (CHA).

d) CHA means a person licensed, temporarily or otherwise, under the regulations made under section 146(2) of the Customs Act, 1962.

e) Such a person holds a valid license (temporary or otherwise) granted under the Customs Act.

f) A person not having such a license is not subject to service tax.

g) The following services are provided by CHA:-

i. Obtaining relevant documents (invoices, packing list, license required for clearance of cargo, license required for export, bill of lading);

ii. Preparation of bill of entries;

iii. Arranging for execution of bond and transferring material from port to bond;

iv. Examining of cargo;

v. Preparing shipping bill;

vi. Making payment of export/import duty;

vii. Clearing of import and export consignment;

viii. Loading/unloading of import/export of goods from/at the premises of exporter/importer;

ix. Packing, weighment and measurement of export/import goods;

x. Transportation of export goods to customs station or import goods from customs station to importer’s premises;

xi. Carrying out various statutory and other formalities (such as payment of octroi, drawback/DEEC processing, payment of survey/amendment fees/dock fees, drug control formalities); and

xii. Sorting/marking/stamping/sealing of goods on behalf of exporter/importer.

h) Service tax is payable on the amount received for the aforesaid services.

i) Expenses (which are liability of the service receiver) incurred by the service provider and later on recovered from service receiver, are not subject to service tax.

j) CHA, who provides services to other licensed CHA, is not subject to service tax in respect of such services.

k) Charges of transport of goods from warehouse/godown for import or export, would not be taxable under CHA services.

4. Manpower recruitment or supply agency’s services

1) Any service provided or to be provided to any person by manpower recruitment or supply agency will be taxable.

2) The service is in relation to supply or recruitment of manpower.(temporarily or permanent)

3) These services include the following

• Pre- recruitment services
• Verification of the credentials of the candidate
• Authenticity of the documents submitted by the candidates
• Building of database for manpower recruitment for different categories
• Employment in India or outside India
• Determining manpower requirements for the clients and short listing and screening of candidates
• Arranging for interviews at every stage
• Placing advertisement in print or electronic media for recruitment

In short it includes all services from the initial stage till the final stage of selection.

4) These services can be rendered to any person. The receiver may or may not be the client of the provider.

5) These services should be rendered as fairly continuous activity and not as isolated or occasional activity.

6) Service tax is livable on the amount received for the above services

Other points

Sir	Particulars	Taxability
1	When manpower agency provides these services To a goods transport agency (G T A)	exempt from service tax
2	Educational Institutes (like universities, IIM and IIT) providing campus services	Taxable
3	If employees are hired directly without intermediary	Not taxable
4	Contract for supply of manpower	Taxable
5	Services of making available bio data of prospective candidates	Taxable

5. Consulting Engineers Services

1) Any service provided or to be provided to any person by a consulting engineer is taxable

2) The service is in relation to advice, consultancy or technical assistance in any disciplines of engineering.

3) The services may be rendered to any person. Such person may or may not be the client of the provider.

4) Consultant engineer is a professionally qualified engineer. Also any body corporate or any firm which renders consultancy in any discipline of engineering.(Services provided any unqualified engineers cannot be taxed under this head)

5) These services will include the following

• Technical consultancy and assistance in both computer hardware and computer software
• Services pertaining to structural engineering works
• Civil , mechanical, electrical engineering works
• Works relating to construction management
• Services in relation to feasibility report, project report, basic and detailed design engineering
• Trouble shooting and technical services
• Construction , supervision and project management
• Planning of building, preparation of land map and ground plan of factory
• Stabilization certificate, installed capacity assessment and valuation of property

In short service could be in relation to any discipline of engineering. Some of the examples are – chemical , civil, automobile, marine, mechanical, fabrication, aviation, biotech, environmental, telecommunication, mining etc

6) Service tax is payable on the amount received for the aforesaid services

7) Self employed engineers are also treated as consulting engineer

8) Providing training to customers for the correct use of technology is not consulting engineers but it will be taxable under commercial coaching service

9) Transfer of technical Know how is not a consulting engineer service

Special cases of service tax

Air travel Agent & Life insurance already – covered in notes.

1. Purchase or sale of foreign currency including money changer- There is an option to charge service tax on 0.25% of gross amount of currency exchanged. It is optional. However, this option is not available if consideration for service provided is shown separately
2. Works Contract- There is an option of charging service tax @ 4% of gross amount charged for works contract. Gross amount includes value of all goods and services and hire charges of machinery in execution of contract. It does not include sales tax, vat, cost of machinery & tools used in execution of contract. Once the option is exercised, it shall be applicable for the entire works contract and cannot be changed till its completion

Following are the amendments in service tax with effect from AY 11-12

1. The quantum of service tax reduced for e payment from Rs 50 lakh to Rs 10 lakh.

Assessee should deposit service tax electronically through internet banking if he has paid the total service tax of Rs 10 lakh or more in the preceding financial year. The limit of Rs 10 lakh is including the amount of service tax paid by utilization of service CENVAT Credit)

2. E filing of returns made mandatory for assessees paying service tax of Rs 10 lakh or more in the preceding financial year.

The facility of e-filing was earlier optional to the assessee. Now e-filing mandatory if assessee has paid service tax of Rs 10 lakh or more including the Cenvat utilization in the preceding financial year.

3. Information Technology Services

The service of providing the packaged/ canned software which is pre packed in retail packages is exempt from service tax if certain conditions are satisfied. Such packages are intended for single use.

Following are the conditions

1) The document providing the right to use the software is packed along with the software.

2) Customs duty on the software has been paid if it has been imported.

3) Excise duty on the software has been paid if the software has been manufactured in India. The same is applicable if the software has been duplicated by the person holding the copyright for the software.

4. Commercial training o coaching services

A) Services provided by the vocational training institute are exempt from service tax. Now the definition of vocational training institute has been amended.

Old definition: Institute imparting skills to enable the trainee to seek employment or self employment immediately after such training

New Definition of vocational Training Institute: Means Industrial Training Institute (ITI) / Industrial Training Centre (ITC). It should be affiliated to the National council for vocational training. It should offer designated courses.

Implication of the amendment:

1) Now the exemption will be available only if the Institute is IIT/

ITC (and not any other Institute).

2) It should be affiliated to the National Council

3) It should offer designated courses

B) Now as per the amendment Coaching centres providing Modular

Employable Skill courses shall be exempt from service tax. The

coaching centre should be registered under Skill Development Initiative

Scheme with the Directorate General of Employment and training,

Ministry of labour and employment.

5. Information Technology Software Service

Earlier, ‘information technology software service’ was subjected to tax only in cases where such IT software was used for furtherance of business or commerce.

The scope of the taxable service has now been expanded to tax such service even if the service provided is used for purposes other than business or commerce.

All the Best …..