Service Tax Budget Highlights 2009

Service Tax Budget Highlights 2009

1. Economy may be good or bad, there may be any progress or not, there may be development or not, but imposition and leviability of taxes is certain for the growth of the country. Shri Pranab Mukherjee has also in his Budget done it for the benefit of the country at large.2. Now, the territorial jurisdiction has been extended to cover the installations, structures and vessels in the entire CSI and EEZ. (Notification No. 21/2009-ST, dated July 7, 2009)The consequent change has also been made in the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. (Notification No. 22/2009-ST, dated July 7, 2009)Impact : Thus, now it will attract service tax even on services provided in (EEZ) area vice versa it will attract the service tax under a reverse charge mechanism if the service has been received in such area from the outside India. Up till now, it was not attracting service tax. (ii)- Composition scheme under works contract service - The composition scheme is one where the assessees are required to pay the service tax on the gross amount of contract including the labours and materials used in the contract and cannot avail the Cenvat credit of duty paid on inputs. However, it was not including the value of goods supplied free of cost by the service receiver to the service provider. 23/2009-ST, dated July 7, 2009)Impact : This enables the Government to eliminate the chances for evasion of service tax by showing less value of material used in the execution of works and showing it as free material supplied by the client or under any other contract. (iii)- Exemption to a particular service under certain existing category A. Tour operator service - Contract carriage - The exemption has been granted to the service provider having contract carriage permit for inter-State or intra-State transportation of passengers. 20/2009-ST, dated July 7, 2009)B. Banking and other financial services and Foreign exchange broking service - Foreign currency exchange - The inter-bank transaction for the sale and purchase of foreign currency between the scheduled bank has been exempted from the payment of service tax.(Notification No. Club or association service - Export promotion councils - The exemption has been granted to the export promotion councils including Federation of Indian Export Organisation and other such 21 organisations from the payment of service tax up to March 31, 2010 on the membership fees paid by the members to the association.(Notification No. 16/2009-ST, dated July 7, 2009)Impact : It is not much beneficial and whether such organizations are really liable for the payment of service tax under the Club and association services? Levy of service tax itself is challengeable so there is no need for granting any exemption. (iv) Amendment in Cenvat Credit Rules, 2004A. Change in rule 6 (3) - pay 6 per cent of exempted service and 5 per cent of exempted goods and avail full Cenvat credit - The service provider who is providing both exempted and taxable services and maintaining the separate account for the value of input services and inputs received, may avail full Cenvat credit and pay 6 per cent instead of paying 8 per cent of the exempted service. Hence, this rate has also been reduced now. B. Change in rule 3 (5B) - Payment of taxes equivalent to written off in the books of account by service provider - In any situation or due to any reason if service provider is writing off the input or capital goods fully or provision has been made for write-off, then in such cases service provider shall make the payment of credit availed on the value of input or capital goods. Similar provision is there for the manufacturer but for the service provider it was not there which has been inserted now.