Service Tax Return (ST-3) for Oct 12 - Mar 13 Last Date Extended to 31st August 2013

The Central Board of Excise & Customs has extended the date of submission of the Form ST-3, for the period from 1st October 2012 to 31st March 2013, from 25th April, 2013 to 31st August, 2013 as the Form ST-3 for this period is expected to be available on the Service Tax Department's website at aces.gov.in by 31st July, 2013.

(Notification No. 03/2013-Service Tax dated 23.04.2013)

New Composition Scheme for dealers carrying out Works Contract

For dealers exclusively engaged in carrying out Works Contracts, a new Composition Scheme has been notified w.e.f. 1st April, 2013.

A works contract dealer who is paying tax under section 3 of the DVAT Act (not under composition scheme), can opt for this scheme by filing an application in Form WC 01 within thirty days from the first day of the financial year with effect from which composition is opted, i.e. on or before 30.04.2013.

Click here to download Form WC 01.

Service Tax Return (ST-3) Due Date Extended to 30th April, 2013

The last date for e-filing of the new Service Tax Return (ST-3) for the period July-September 2012 has been extended from 15th April to 30th April, 2013 (Order No. 2/2013 dated 12th April, 2013)

Click here to download the Service Tax Return (ST-3) e-filing utility. 

Frequently Asked Questions on DVAT Form T-2

1)      What is Form T-2 and its requirements?

v  Form T-2 requires the dealers to furnish details of invoices and goods receipt note for goods purchased or received as stock transfer from outside Delhi.

v  This form has to be submitted online before goods enter Delhi.

v  If the Vehicle Number is not available in advance, Form T 2 would need to be filed without Vehicle Number and the Vehicle Number would need to be updated within 24 hours of receipt of the goods by the Delhi dealer.

v  If form T-2 is not filed online before the goods enter Delhi, the Delhi dealer may not dispose of/sell/dispatch such goods till the Vehicle Number in Form T-2 is updated online.

v  The Transporter is required to obtain a hard copy of Form T-2 and carry it with the goods, If the dealer updates the information in Form T-2 within 24 hours of receipt of the goods, the Transporter would obtain a revised hard copy of the Form T-2 also and retain it.

v  If a dealer claims that he is exempted from filing information in form T-2, Transporter would obtain a quarterly declaration from such dealers clearly mentioning their TIN in Delhi and a self-certificate that they are exempted from filing of information in form T-2.

v  Option to select Outside India has been included in the window for State. Option to indicate mode of transport i.e. by Road, Railways, Air Carrier, Pipelines, Internet has also been provided in the form. Vehicle number would be required only in cases of road transport. GR/RR/Airway Bill/Courier Receipt would be mandatory for transport by Road/Railways/Air/ Courier respectively in accordance with Form 7 & 8 of Carriage by Road Rules.

Applicability of Service Tax on Tour & Travel Operator

Who is a “Tour Operator” under the Service Tax Laws?

Tour operator means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.

What is the value of taxable service provided by a tour operator?

The value of taxable service provided by a tour operator to a client is the gross amount charged by such operator from the client for services in relation to a tour and includes the charges for any accommodation, food or any other facilities provided in relation to such tour.

What are the rates of service tax applicable on various services provided by a tour operator?

S.No.	Taxable Service	Partial abatement/ Composition Scheme	Conditions	Statutory Reference
1	Accommodation booking service	10% of amount charged	1) No CENVAT Credit. 2) Invoice should be inclusive of cost of accommodation	S. No. 11(ii) of Notif. No. 26/2012-ST dt 20.6.12
2	Package tours - wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided as part of the package	Tax is payable on 25% of gross amount charged	1)  No CENVAT credit available. 2)  Bill to be inclusive of all charges for the tour.	S. No. 11(i) of Notif. No. 26/2012-ST dt 20.6.12
3	Tour operator – providing services solely of arranging or booking accommodation for any person in relation to a tour.	Tax is payable on 10% of  amount charged	1)  No CENVAT credit available. 2)  Bill to be inclusive of all charges for such accommodation. 3)  This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.	S. No. 11(ii) of Notif. No. 26/2012-ST dt 20.6.12
4	Tour operator – Other than abovementioned services	Tax is payable on 40% of amount charged.	1)  No CENVAT credit available. 2)  Bill to be inclusive of all charges for the tour. 3)  The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.	S. No. 11(iii) of Notif. No. 26/2012-ST dt 20.6.12
5	Air Travel Agent	Option to pay service tax at flat rate on ‘basic fare’ @0.6% in case of domestic booking and 1.2% in case of international booking – plus E. Cess	No restriction on availment of CENVAT credit. Option, once exercised, will apply uniformly in respect of all the bookings of passage for travel by air made during the financial year.	Rule 6(7) of Service Tax Rules

Who is an Air Travel Agent? Are his services chargeable to Service Tax?

An “Air Travel Agent” is any person engaged in providing any service connected with the booking of passage for travel by air.

Any service provided or to be provided to any person, by an air travel agent in relation to booking of passage for travel by air is a taxable service.

How is the taxable value of service provided by an air travel agent to be computed? What are the specific inclusions or exclusions?

In case of air travel agent, the value of taxable service is the gross amount charged by such agent from the customer for services in relation to the booking of passage for travel by air, excluding the air fare but including the commission, if any received from airline in relation to such booking.

Thus, the value of taxable services will include the commission received by the travel agent from the airline. However, it will exclude the fare amount collected from the customer.

The air travel agents receive certain commission for domestic and international tickets from the airlines. The details of the commissions payable by the airlines is indicated in the agency agreement entered into between the airline and the air travel agent. The travel agent files a fortnightly return to the airlines indicating the details of tickets booked, fare collected and the commission earned along with other particulars. After adjusting the commission, he remits the balance amount to the airlines. This fortnightly return would be the basis for assessment of Service Tax in respect of air travel agents.

Can the air travel agent pay service tax under any composition scheme?

An option has been given to the air travel agents to pay the Service Tax under the composition scheme as follows:

·         For booking domestic tickets: @ 0.6% of the basic fare

·         For booking international tickets: @ 1.2% of the basic fare

The basic fare is defined as that part of the fare on which commission is payable by the airlines.

E. Cess and S. H. E. Cess @3% of the tax amount determined as above will be payable additionally.

Which are the specified categories of persons, providing services to whom are exempt from service tax?

Services provided to the following persons are fully exempt:

·         United Nations or any such specified International Organization

·         Office of a foreign diplomatic mission or consular post in India

·         Personal use or for the use of family members of diplomatic agents or career consular officers posted in a foreign diplomatic mission or consular post in India

What is the place of provision of passenger transportation services?

The place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey.

What does a “continuous journey” mean?

A “continuous journey” means a journey for which:-

(i)                  a single ticket has been issued for the entire journey; or

(ii)                more than one ticket or invoice has been issued for the journey, by one service provider, or by an agent on behalf of more than one service providers, at the same time, and there is no scheduled stopover in the journey.

What is the meaning of a stopover? Do all stopovers break a continuous journey?

“Stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time. All stopovers do not cause a break in continuous journey. Only such stopovers will be relevant for which one or more separate tickets are issued. Thus a travel on Delhi-London-New York-London-Delhi on a single ticket with a halt at London on either side, or even both, will be covered by the definition of continuous journey. However if a separate ticket is issued, say New York-Boston-New York, the same will be outside the scope of a continuous journey.

Whether service tax will apply on related fees/charges on journeys starting outside India, even if the transaction for related charges is made in India?

and

Whether service tax will apply on related fee charges on journeys starting in India, even if the transaction for related charges is made outside India?

As per Clarification given in Draft Circular F. No.354 /146/2012 – TRU dated 27.09.2012:

“According to Rule 11 of Place of Provision of Services Rules, 2012, the place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey. Therefore, if place of embarkation of passenger is located within the taxable territory, service tax is leviable on the gross amount payable for such continuous journey, irrespective of where the ticket is booked and where fees/charges are collected. If the place of embarkation of a passenger on a continuous journey falls outside the taxable territory, service tax is not leviable, irrespective of where the tickets are booked and where fees/charges are collected. However, only such charge will be determined under Rule 11 of POP as are directly related to the continuous journey. The POP of other charges will be judged on their own merits.”

However, it is to be noted that as per Rule 8 of Place of Provision for Service Rules, 2012, where the service receiver and service provider are located in the taxable territory, the provision of service would be the location of service receiver irrespective of where the service is performed, delivered or consumed.

For determining “location of service” as above, if the service recipient has obtained service tax registration, it is the registered premises of the service receiver. However, if the service receiver is not registered under service tax, his location will be determined as follows:

1.       Location of business establishment

2.       Location of fixed establishment

3.       Where services are used at more than one establishment, the establishment most directly concerned with the use of service

4.       In the absence of above, the usual place of residence.

New Norms for Credit & Debit Cards

Reserve Bank of India (RBI) vide Circular dated 28.02.2013 on “Security and Risk Mitigation Measures for Electronic Payment Transactions” has directed banks to put in place the following safety measures for Credit and Debit Card Transactions :

• All new debit and credit cards to be issued only for domestic usage unless international use is specifically sought by the customer. Such cards enabling international usage will have to be essentially EMV Chip and Pin enabled. (By June 30, 2013).

• Issuing banks should convert all existing Magstripe cards to EMV Chip card for all customers who have used their cards internationally at least once (for/through e-commerce/ATM/POS) (By June 30, 2013).

• All the active Magstripe international cards issued by banks should have threshold limit for international usage. The threshold should be determined by the banks based on the risk profile of the customer and accepted by the customer (By June 30,2013).

• Banks should ensure that the terminals installed at the merchants for capturing card payments (including the double swipe terminals used) should be certified for PCI-DSS (Payment Card Industry – Data Security Standards) and PA-DSS (Payment Applications – Data Security Standards) (By June 30,2013).

• Bank should frame rules based on the transaction pattern of the usage of cards by the customers in coordination with the authorized card payment networks for arresting fraud (By June 30, 2013).

• Banks should ensure that all acquiring infrastructure that is currently operational on IP (internet protocol) based solutions are mandatorily made to go through PCI-DSS and PA-DSS certification. This should include acquirers, processors/aggregators and large merchants (By June 30, 2013).

• Banks should move towards real time fraud monitoring system at the earliest.

• Banks should provide easier methods (like SMS) for the customer to block his card and get a confirmation to that effect after blocking the card.

• Banks should move towards a system that facilitates implementation of additional facilitates implementation of additional factor of authentication for cards issued in India and used internationally (transactions acquired by banks located abroad).

After discussions with Banks, the RBI had issued the guidelines vide Circular dated 28.02.2013 on “Security and Risk Mitigation Measures for Electronic Payment Transactions”.

Budget 2013-14: Sec. 80G 100% deduction for donation to National Children’s Fund

Under the existing provisions of section 80G an assessee is allowed a deduction from his total income in respect of donations made by him to certain funds and institutions. The deduction is allowed at the rate of fifty per cent of the amount of donations made except in the case of donations made to certain funds and institutions specified in clause (i) of sub-section (1) of section 80G, where deduction is allowed at the rate of one hundred per cent. In the case of donations made to the National Children’s Fund, deduction is allowed at the rate of fifty per cent of the amount so donated.

Donations to Funds which are of national importance have been generally provided a deduction of one hundred per cent of the amount donated. Since the National Children’s Fund is also a Fund of national importance, it is proposed to allow hundred per cent deduction in respect of any sum paid to the Fund in computing the total income of an assessee.

This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year 2014-15 and subsequent assessment years.

Budget 2013-14: Direction for special audit under sub-section (2A) of section 142

The existing provisions contained in sub-section (2A) of section 142 of the Income-tax Act, inter alia, provide that if at any stage of the proceeding, the Assessing Officer having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the approval of the Chief Commissioner or Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit.The expression “nature and complexity of the accounts” has been interpreted in a very restrictive manner by various courts.

It is, therefore, proposed to amend the aforesaid sub-section so as to provide that if at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialized nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or the Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit.

This amendment will take effect from 1st June, 2013.

Budget 2013-14: Sec.161: Taxation of Securitisation Trusts

Section 161 of the Income-tax Act provides that in case of a trust if its income consists of or includes profits and gains of business then income of such trust shall be taxed at the maximum marginal rate in the hands of

trust.

The special purpose entities set up in the form of trust to undertake securitisation activities were facing problem due to lack of special dispensation in respect of taxation under the Income-tax Act. The taxation at the level of trust due to existing provisions was considered to be restrictive particularly where the investors in the trust are persons which are exempt from taxation under the provisions of the Income-tax Act like Mutual Funds.

In order to facilitate the securitisation process, it is proposed to provide a special taxation regime in respect of taxation of income of securitisation entities, set up as a trust, from the activity of securitisation. It is proposed to amend section 10 and also insert a new Chapter XII-EA for providing a special tax regime. The salient features of the special regime are :-

(i)      In case of securitisation vehicles which are set up as a trust and the activities of which are regulated by either SEBI or RBI, the income from the activity of securitisation of such trusts will be exempt from taxation.

(ii)    The securitisation trust will be liable to pay additional income-tax on income distributed to its investors on the line of distribution tax levied in the case of mutual funds. The additional income-tax shall be levied @ 25% in case of distribution being made to investors who are individual and HUF and @ 30% in other cases. No additional income-tax shall be payable if the income distributed by the securitisation trust is received by a person who is exempt from tax under the Act.

(iii)         Consequent to the levy of distribution tax, the distributed income received by the investor will be exempt from tax.

(iv) The securitisation trust will be liable to pay interest at the rate of one percent. for every month or part of the month on the amount of additional income-tax not paid within the specified time .

(v) The person responsible for payment of income or the securitisation trust will be deemed to be an assessee in default in respect of amount of tax payable by him or it in case the additional income-tax is not paid to the credit of Central Government.

This amendment will take effect from 1st June, 2013.

Budget 2013-14: 1% TDS on Transfer of Immovable Property Exceeding Rs.50 Lakh

There is a statutory requirement under section 1 39A of the Income-tax Act read with rule 11 4B of the Income-tax Rules, 1962 to quote Permanent Account Number (PAN) in documents pertaining to purchase or sale of immovable property for value of Rs.5 lakh or more. However, the information furnished to the department in Annual Information Returns by the Registrar or Sub-Registrar indicate that a majority of the purchasers or sellers of immovable properties, valued at Rs.30 lakh or more, during the financial year 2011-12 did not quote or quoted invalid PAN in the documents relating to transfer of the property.

Under the existing provisions of the Income-tax Act, tax is required to be deducted at source on certain specified payments made to residents by way of salary, interest, commission, brokerage, professional services, etc. On transfer of immovable property by a non-resident, tax is required to be deducted at source by the transferee. 

However, there is no such requirement on transfer of immovable property by a resident except in the case of compulsory acquisition of certain immovable properties. In order to have a reporting mechanism of transactions in the real estate sector and also to collect tax at the earliest point of time, it is proposed to insert a new section 194-IA to provide that every transferee, at the time of making payment or crediting of any sum as consideration for transfer of immovable property (other than agricultural land) to a resident transferor, shall deduct tax, at the rate of 1% of such sum.

In order to reduce the compliance burden on the small taxpayers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakh rupees.

This amendment will take effect from 1st June, 2013.