Finance, Accounts, Tax & Economic issues

Friday, 3 October 2014

October 2014 - Tax Calendar

Tax Calendar for October 2014

Extension of Due Date for Payment of TDS to 10th October 2014

CBDT has issued an order under section 119 of the Income Tax Act, 1961 extending due date for depositing of Tax Deducted at Source (TDS) to 10th October 2014 from 7th October 2014, due to long holidays in October.

Sunday, 28 July 2013

Brief on New Pension Scheme - NPS

New Pension Scheme (NPS) is one of the best retirement products available today in India. This is a Defined Contribution based pension scheme, which is being administered in India by Pension Fund Regulatory and Development Authority (PFRDA). If planned properly and if the contribution is made by employer we can avail tax exemption under section 80CCE. Main advantages of this scheme are

It is open to all citizens of India between the age of 18 and 55.
Administration cost is one of the lowest, for non Government employees charge is subject to a limit of 0.25% which is lowest amongst all existing schemes
Scheme closely monitored by PFRDA
Clearly defined investment options which choice resting with employee or in case employee feels it can be an automated option, it is also available. The auto choice is as below (Class G - Government securities; Class E - Equity; Class C - Corporate Debt). The visibility is clear, higher the age lesser the risk and viceversa

The next question arises what is the return over the last 3 years. I have been investing since 2010 April and in these 3 years I have received 8% returns which is a decent return considering the additional interest due to tax benefit which I received on contribution. The calculation of my contribution is as below as on 7th May 2013 and on that date my fund value was Rs.37,350

I would recommend for all non governmental employees who do not have a proper pension plan to adopt NPS and start contributing from an early age to benefit from decent returns and a handsome corpus on retirement.

A Brief guide to Income tax returns filing - PY 2012-13 / FY 2013-14

Select your relevant form

ITR1

Income from salary / pension
Income from one house property (excluding losses brought forward from previous year)
Income from other sources (excluding lottery, horse races)

ITR2 – ITR1 categories plus / or

Income from Capital Gains
Income from other sources including Lottery, races

ITR3

Income from partnership firms by way of salary, interest, bonus, commission includable under the head “Profits or Gains of business or profession”

ITR4

Individual or HUF who is carrying on a proprietary business or profession

ITR4S – ITR1 categories plus / or

Income from business computed under special provisions of section 44AD & 44AE of income tax act (presumptive taxation)

ITR5

Returns by Firms, Association of Persons, Body of Individuals

ITR6

Returns by companies

ITR7

Returns under section 139(4A) , 139(4B), 139(4C) & 139(4D) – belated returns but before completion of assessment year

Compulsory E-filing of Returns with or without digital signature – Previous Year 12-13 / Assessment Year 13-14

ITR1, ITR2, ITR3, ITR4, ITR4S, ITR5 is mandated for compulsory e-filing (with or without digital signature) if income exceed Rs.5 lacs. Income below Rs.5 lacs can go in for manual filing.

Compulsory E-filing of Returns with digital signature – Previous Year 12-13 / Assessment Year 13-14

ITR4 & ITR5 is mandatory for e-filing with digital signature if section 44AB is applicable (audit of accounts)

ITR6 is mandatory for e-filing with digital signature

How to file returns

Visit site https://incometaxindiaefiling.gov.in/ and download the relevant ITR in excel format.

View your 26AS following this link https://services.tdscpc.gov.in/serv/tapn/welcome26AS.xhtml. If you have not registered in income tax website, there will be a promt to register using your PAN. After registration or login this site provides you all details of your tax deducted by your employer or any other person like your banker on interest income. Also it provides details of advance tax paid & details of high value transactions reported in your name. Cross check the tax deducted & advance tax, ensure that these figures are reflected in your ITR returns. If there is a mismatch then there will be query from income tax as to the mismatch. If there are any discrepancies take it up immediately with the TDS deducing authorities to correct if discrepancy is in TDS or take it up with your banker if discrepancy is in advance tax payment.

Once you have filled in the ITR, convert into an XML file and go to site https://incometaxindiaefiling.gov.in/e-Filing/MyAccount/UploadReturnsHome.html?ID=1707942105 to upload your returns. If you would wish to digitally sign your returns register your token in the “Profile settings” menu or follow this link https://incometaxindiaefiling.gov.in/e-Filing/MyAccount/UpdateDscDetailsLink.html?ID=579614307. Upload the returns.

Download the acknowledgement and forward it to CPC Bengaluru, if you have digitally signed the return you need not forward to CPC Bengaluru.

Sunday, 10 March 2013

Reform Tax Administration

In the budget estimates presented by our Honorable Finance Minister, shortfall on account of Corporation tax, Customs Duty and Excise Duty was projected to be around 58k crores. A huge shortfall indeed.

Now the question raised is how do we correct this shortfall or how to stop further shortfall in the above revenues? The following "novel" actions are being taken by our tax authorities.

Corporation Tax

Novel Method 1

Stop all refunds. No refund orders to be passed, if for an assessment year order under section 143(3) comes up for finalisation the officer ensures that the order does not have any refund (even if eligible). So what to do? Simple, Omit an advance tax challan!! If a company has paid Rs.10 crores with Rs.2.5 crore in each quarter miss out one quarter payment and show only Rs.7.5 crores and negate any refund or claim an additional tax. If in case the company immediately goes to the officer and requests for rectification of mistake the officer "off the record" says, Sir, I will pass your refund order in the next financial year, just file a Petition under Section 154, I will take it up next year!!

Novel Method 2

Send letters to companies asking them to appear before the authority asking as to why there is a shortfall in payment of advance tax. Is there a provision in Income tax law for this? Tax experts please guide me!!

Customs Duty

Novel Method 1

Delay assessment of bills filed under DFIA or any duty benefit schemes. Either the assessments for these bills are taken up once a week or only 1 hour per day. Priority given to bills filled with full payment of duty. This is to coerce companies to pay duties, if they want their consignments to be cleared immediately.

Question : Why give benefit at all and make people run around to claim it!!

Novel Method 2

Delay refunds. Either issue a letter seeking clarification or issue a notice demanding more details, if all fails call up the assessee or the clearing agent requesting them to pursue the refund in the next financial year. This is an age old and time tested method, time and again adopted!!

Excise Duty

Call up the companies in January / February or March requesting them not to use CENVAT credit for payment of duty instead pay all taxes through PLA. Is there a provision in law for this?

Imagine what would happen if in case a company official calls up the Assistant Commissioner of Central Excise and says, "Sir, I have a shortfall in my revenue can I pay my taxes later by 15 days?", will he get this opportunity? I am sure he will be greeted with a Show Cause Notice, which will carry Interest and Penalty

Mr.Finance Minister, Is this the way to meet tax targets? Come on Stop it we are in 21st Century and we are not idiots

When a company is at a default or "seemingly default" there is a raid, show cause notice, hearing called for and grilled. On top of this there is interest, penalty and in some cases Jail terms also. But what happens to our tax officers who do not pass refund orders on time, take up assessment on time and pass order denying genuine refunds on a silly ground? I have seen so many innumerable cases getting quashed at Tribunal levels because of trivial orders passed by Quasi Judicial tax authorities, is this the way it should be?

To clarify I will not suggest we should spare companies who are at default or who fail to comply with law, they should be prosecuted according to legal provisions, but rather I would also suggest the same should happen to tax authorities also to ensure that they are responsible enough and there is no hardship for companies in tax compliance.

Tax payments and legal compliance should be a pleasure, but unfortunately in India it is getting more and more of a pain. Imagine attending a Transfer Pricing Hearing, Hearing under section 143(1) of Income tax, Assessment under VAT rules or a Hearing for clarification on refunds with customs. The amount of documents demanded by the officers, the amount of clarifications demanded by them, most of the times, defy logic and in most cases I am sure the innumerable documents given by us land up in shelves unread and subsequently scrapped!! What a waste of time and resource!!

Tax reforms should not only be in the written law but also in tax administration, this will ensure a tax friendly environment and attract more investments, unfortunately, currently our tax administration distracts investments.

Thursday, 27 December 2012

Do it Yourself - come on, Bend your Back - Result Corruption free India

One of my best friend, my bike, a Bajaj 4S bought by me in December 1992 needed a re-registration as he has turned 20. I had my bike neatly painted, changed worn out parts and made it look brand new, and he is sure sparkling and to my surprise he passed the mandatory pollution test with flying colours meaning his engine is absolutely fantastic even after 20 years at work.

Painting, changing parts, pollution test were all easy as at the best what I had to do was find a good mechanic and sure he did a good job. The next challenge is how do I get the re-registration done. The mechanic told me Sir, that is going to be difficult for you to handle, you go to a driving school they will charge around Rs.2,500 but official receipt may be only for a portion of the amount, as you know the people in Regional Transport Office (RTO) are highly corrupt and they will all take money, moreover they will make you run pillar to post and sir, you have better job to do and it is below your standard to deal with the people in RTO.

But I was adamant that I will not pay a dime extra than the official fees, so I decided I will go directly to RTO. I went into the internet read about the procedure and noted down the points. The applications were available in the internet, but I did not download, but went to a xerox shop near the RTO office one Saturday and asked them what are the forms for re-registration and address change they immediately gave me 2 forms for Rs.10 each, these forms exactly tallied with the forms found in internet by me. I brought those forms which were quite easy to fill, in fact the details in the form for re-registration were almost all copied from the RC book available with me.

It was a Wednesday morning (26.12.2012) I decided to go to the RTO. I filled up the forms had all the originals and copies as mentioned in the form. I was at the RTO sharp at 10am. There was an enquiry counter, I asked them what to do? He looked at my completed forms, Oh! this looks good pay the fees and come. So I went into the queue for payment of fees where another 2 people were in front of me. I waited for about 10 minutes when my turn came the cashier looked at me surprisingly and looked at my form turning all the pages. Then he asked me a question Sir, did you pay the taxes? I said my bike is under Life Time Tax and now I have to pay only Rs.500 towards Green Tax, he looked at me puzzled, because he became aware that he cannot take me for a ride as I new something of the procedure. He quickly typed the details on his computer and said this will cost you Rs.630, Rs.500 for Green Tax, Rs.100 for Address Change and Rs.30 for service charge. I said fine and paid the fees. He gave me 4 challans. Three of the challans I have to staple in my RC book and one is my copy, which I did and had it checked with a gentleman standing there who is from a driving school and doing this job for ages. I again went to the enquiry counter and showed him my payment challans, he said sir, the inspector will come and inspect your vehicle around 12 noon as currently he doing the LLR licence now, you wait near such and such spot. The time then was 10.30 am. Being a doubting Thomas myself I thought it appropriate to check with the inspector himself because if I wait till 12 noon and the inspector did not turn up what to do? So I went up to the inspector room it was fully crowded with LLR applicants and the inspector was busy checking their papers. One good thing was there was a queue, so I joined the queue at the end, and when my turn came I told the inspector why I came for, he looked at me and said sir this is queue for LLR you go and wait near your bike I will come around 12 noon. Now I was happy that I have the confirmation.

In the queue for verification by Inspector there were all new vehicles and had the company representatives (bike dealer representatives), I was the odd man out because I had an old vehicle and I am the owner. To my surprise the Inspector was at the inspection place around 11.30 am, first he was inspecting the vans / buses for their re-registration, when the turn for bikes came mine was around 6th in the queue. He came to my bike looked at me and had a small smile in the face asked me for the papers and I gave him all. He checked my application, the annexures, original Registration book, checked the Engine Number, Chassis number, and nodded in satisfaction. He then turned the page in my application to the space where he needed to sign and signed it. He returned the application to me and said Sir, give it to the enquiry counter and they will do the needful, your re-registration is over, he moved on to the next vehicle. I thanked him and pushed my vehicle out of that place and when I was about 20 metres away one of the dealer representative who had a new bike for registration walked up to me and asked rather slowly "Sir, how much did you pay the Inspector for this?", I said "I paid the fees at the counter". "No Sir, I understand but how much to the Inspector"? I said "nothing, so what"? He looked puzzled. I just left him there staring at me, and moved away to the enquiry counter, where I handed over the application and original RC book. The officer there looked at the Inspector's sign and smiled back again, sir come on friday and collect the RC book. It was over, and the time was 12.30pm.

Honestly this is not the first time I did this, in fact this is the 4th time with the RTO I had this experience, once for renewal of my licence, once for my wife licence address change and once for my bike re-registration after 15 years. In fact for all the 4 times I did not pay a paise more than the official fees, but I spent half a day everytime, but I was really proud that even though I spent my time I did not pay anything extra. Same goes to the passport office, I did not have an agent for my passport, I applied online and I went into the queue and got the verification done, paid the fees and came out, passport came to me in 2 weeks.

You can ask me why I am writing all this, I would request you all to contribute in a small way to avoid corruption. What you have to do is quite simple and the following are the steps when you deal with Government departments.

Read and understand the procedures to be followed clearly, so that nobody tries to outsmart you. If people find out that you are not aware of the procedures they will surely take you for a ride and it will cost you money.
Fill up the forms yourself and have the annexures done yourself - believe me this is not Rocket Science, we are so used to signing at the places marked "x" by the agent and allowing him to do everything please avoid it as much as possible
"Do it Yourself" - we have a common excuse "No time". I do not believe this, we have to create time, when we can take holiday for our wife birthday, wedding day, children birthday I am sure we can take holiday for these reasons also as it an important matter concerning our society

My humble request to you all, let's stop complaining "people in Government departments are corrupt and nothing moves without Vitamin-M". To put it bluntly we are the reason for this, we do not want to "bend our back" we want an easy way out, which is through paying money we get our work done. Corruption happens because we want it to happen, if every individual in this country takes responsibility for his tasks I am sure we can avoid corruption. This is easy to say and I am sure easy to follow.

Jai Hind. Let us make India corruption free

Saturday, 29 September 2012

ST-3 Returns due on 25.10.2012

Notification No.47/2012 Service tax has been notifified on 28.9.2012 under which it has been mandated that ST-3 returns due on 25.10.2012 will be covering transactions only for the period 1.4.2012 to 30.6.2012.

As there has been significant amendments to service tax act as on 1.7.2012, the ST-3 form is being modified to adopt to the changes for the period 1.7.2012 to 30.09.2012. The revised form and due date will be announced soon.

Sunday, 23 September 2012

Service Tax on Director Fees & Impact under Section 309/310 of Companies Act

Section 65B(44) of Finance Act, 1994 as Amended by Finance Act 2012 defines Service as follows :

"service" means any activity carried out by a person for another for consideration, and includes a declared service.

This definition further goes on to exclude in clause (b)

(b) a provision of service by an employee to the employer in the course of or in relation to his employment

This definition under 65B(44) and above exclusion makes it amply clear that :

Services of a Director who is not an Employee of the Company (ie) Non Executive Directors are covered under the scope of Service tax. Accordingly any remuneration to Non Executive Directors both monetary and non monetary are subject to Service Tax from 1.7.2012.

Valuation of Service

All monetary benefits like Fees, Commission, bonus etc to be taken at the monetary value. Non monetary benefits like Car, Phone, accommodation etc to be valued as per valuation Rules and subject to Service Tax

Foreign Directors (Only Non Executive)

Irrespective of Directors are within India or abroad Service tax is applicable on their monetary and non-monetary considerations for services rendered as Director

Who Pays Service Tax

From 1.7.2012 to 6.8.2012 for Non Executive Directors within India, liability is on the Directors to pay Service tax. Hence they need to have registration under Service Tax and discharge their liability. On their option they can choose to take the Rs.10 lakh exemption limit for discharge of their liability

From 1.7.2012 for Directors outside India (Foreign Directors), the company has to pay Service tax on Reverse Charge Mechanism as a Representative Assessee. Here there is no provision for Rs.10 lakh exemption. For the full amount (irrespective of the quantum) service tax needs to be paid.

On 7.8 2012 Notification No.45/2012 was introduced under which even for local Non Executive Directors service tax liability has to be discharged by the Company. In this situation, the company has to get itself registered under Service Tax and discharge the Service tax liability.

In short, the situation as on today is that for all Non Executive Directors the company has to discharge service tax liability under Reverse Charge Mechanism as per Notification No.45/2012.

Implications under Company Law

Due to the above changes in Service Tax and the Service Tax amount being 12.36% of the monetary and non monetary benefit of the Non Executive Directors the expenses on Directors to the company has increased to that extent, this in turn affects section 198, 309 & 310 of the Companies Act, 1956. This would mean that some companies have to approch Central Government again if they breach the threshold limits specified in these sections. To avoid this complication for the financial year 2012-13 the Ministry of Corporate Affairs have issued a Notification No.24/2012 dated 9.8.2012 wherein it exempts companies from applying to Central Government for approval for increase in remuneration of Directors only on account of Service Tax. Note, this provision is only for the year 2012-13 and from next year onwards the companies have to apply for approval inclusive of service tax.

Saturday, 11 August 2012

Expatriates in India - Actual Tax Calculation

To bring in a clear understanding and as a supplement to my blog on expatriate taxation http://ssaravanan-vvu.blogspot.in/2012/07/expatriates-taxation-in-india.html, I have tried to demonstrate here a calculation of expatriate taxation and then finally calculate his / her take home salary in India.

Assumptions

The expatriate is first time in India and hence he is considered a Non Resident for tax purposes
His income is split into two parts

Salary paid by overseas parent for services rendered in India- USD 50,000 per annum
Income paid by Indian company for services rendered in India - INR 5,000,000 per annum

He has been given the following perquisites in India

Furnished housing
One Motor Car with Driver
Indian company pays school fees for his children
Indian company pays for maintenance of the house & domestic help

The country from which the expatriate is based does not have a Social Security Agreement (SSA) with India, and hence Providend Fund (PF) has to be deducted @12% on both International & Indian salary (effective from 1.10.2008)
No Other Income for this expatriate in India
No Other tax savings in India other than 80C
No Sweat Equity or ESOP

The tax calculation will be as below for the expatriate

Calculation of perquisites

Calculation of Take Home Salary in India is as below

This is a simplified example of expatriate tax and his / her take home salary, but in practice there will be more complicated scenarios which need to be handled according to the relevant laws prevailing at that time

Sunday, 15 July 2012

Expatriates Taxation in India

India is a fast growing economy with many multinationals setting up shop in India. This means that quite a number of Expatriates of various nationalities come into India and they would in turn like to know tax impact on their salaries earned in India and abroad. To ascertain tax status of these expatriates in India we need to review

Section 5, 6, 9 and 10 of Income Tax Act, 1961.
Indian Provident Fund Scheme, 1952 (specifically notification dated 1.10.2008)

Section 6 - Residence in India
Residence in India determines the taxable status of an individual in India. The following are the various definitions under Income Tax Act, 1961 on Resident status.

Resident	1. Was in India for a period of minimum 182 days during that year or 2. Was in India during the year for a period of minimum 60 days and in the preceding 4 years was in India for a minimum period of 365 days
Non Resident	A person who is not a Resident is a Non Resident
Not Ordinarily Resident	1. Non Resident in 9 out of 10 years preceding that year or 2. In India for a period of 729 days or less during the preceding 7 years

Section 5 - Scope of Taxation

The incomes which are taxed are as given below for each category of Residency.

Resident	1. Received or is deemed to be received in India during the year 2. Accrues or arises or is deemed to accrue or arise in India during the year 3. Accrues or arises outside India during the year
Non Resident	1. Received or deemed to be received in India during the year 2. Accrues of arises or deemed to accrue or arise in India during the year
Not Ordinarily Resident	1. Received or is deemed to be received in India during the year 2. Accrues or arises or is deemed to accrue or arise in India during the year 3. Accrues or arises outside India during the year provided it is derived from a business controlled in or a profession set up in India

Section 9(1)(ii) - Income deemed to accrue or arise in India

Salaries if earned in India for

Services rendered in India and
for the leave period which forms part of the service contract of employment

The either of the above 2 conditions if satisfied will entail taxation in India. Section 9(1)(ii) will hold good irrespective of Residence status.

Taxation impact under Income Tax Act

Due to operation of section 9(1)(ii) salary received for services rendered in India will be taxable in India irrespective of place of receipt of salary. For example if an Expatriate receives salary of Rs.100,000 in India and $5,000 in US, for services rendered in India, then the entire amount of Rs.100,000 and $5,000 are taxable in India

Section 10(6) - Exceptions to the above taxation Rule

Exceptions to the taxation are provided for

Employees of Consulate etc
Remuneration paid by a foreign enterprise for service rendered in India if

the foreign enterprise is not engaged in any trade or business in India
the employee stay is not more than 90 days in the year
the remuneration paid by the foreign enterprise is not deducted from income of the enterprise for purpose of income tax in India

Provident Fund
International worker is defined to include a Foreign National working in India. India has signed social security agreements till todate with 3 countries namely Belgium, France and Germany. Foreign Nationals who belong to these countries do not come under the definition of International workers. Other Foreign Nationals should contribute the Provident Fund Scheme in India. Provident Fund is to be

Deducted at 12% - employee contribution and 12% - employer contribution - total 24% contribution
To be deducted on the full salary both received in India and also abroad and also from the parent company abroad

Conclusion

Expatriate employees come under purview of income tax and provident fund acts. There are certain exemptions which can be claimed. Taxation aspects are quite clear and hence care should be taken to abide by them

Saturday, 7 July 2012

Account Code for Payment of Service Tax

With the changes in Service tax due to introduction of 'Negative list', the account codes for payment of service tax has also being changed to provide for payment under one head called "All Taxable Services"

Circular No.F.No.341/21/2012-TRU has been issued dated 6.7.2012 providing for the below account codes.

Accounting codes for the purpose of payment of service tax under the Negative List approach, with effect from 1^st July, 2012 is as follows:

Name of Services	Accounting codes
Name of Services	Tax collection	Other Receipts	Penalties	Deduct refunds
All Taxable Services	00441089	00441090	00441093	00441094

NOTE: (i) service specific accounting codes will also continue to operate, side by side, for accounting of service tax pertaining to the past period (meaning, for the period prior to 1^st July, 2012); (ii) Primary Education Cess on all taxable services will be booked under 00440298 and Secondary and Higher Education Cess on all taxable services will be booked under00440426 ; (iii) a new sub-head has been created for payment of “penalty”; the sub-head “other receipts” is meant only for payment of interest etc. leviable on delayed payment of service tax; (iv) the sub-head “deduct refunds” is not to be used by the assessees, as it is meant for use by the Revenue/Commissionerates while allowing refund of tax.

Monday, 2 July 2012

Income Tax Returns from Assessment Year 2012-13 - Mandatory e-filing

From the Assessment year 2012-13 the income tax department has made e-filing compulsory for the following categories of tax payers vide Notification number S.O.626(E), dated 28.3.2012.

an Individual or a HUF whose total income is more than Rs.10 lacs
an Individual or a HUF, who is a resident, having assets (including financial interest in any entity) located outside India or signing authority outside India and required to furnish tax returns under ITR2 or ITR3 or ITR4

CBDT has further clarified under its Press Release No.402/92/2006-MC (12 or 2012) dated 2.7.2012 that though e-returns are mandatory for the above 2 categories, digital signature is not mandatory. The assesses can transmit the data in the return electronically and thereafter submit for verification to ITR-V to CPC in Bangalore by ordinary post within 120 days.

To clarify

ITR1 is for tax payers with

salary or pension income
Rental income from one property
capital gains that are tax free
Interest from interest and other sources

ITR2 is for tax payers with

salary or pension income
Rental income from more than one prpoerty
Any Capital losses or Capital gains
Income from other sources
Foreign assets

ITR3 is for tax payers with

Interest from salary, bonus, commission or remuneration
Capital gains
More than one house rental income with carried forward losses
Income from other sources

ITR4 is for tax payers with

Income from business or profession
Income from other sources
Foreign assets

ITR5 is for Firms
ITR6 is for Companies

E-filing of income tax returns can be done through website of the CBDT @ https://incometaxindiaefiling.gov.in/portal/index.jsp. One has to login using their PAN number and then download the relevant ITR. Once the ITR is completed there is a Submit Return icon available through which online return can be filled and ITR-V can be generated to forward to CPC in Bangalore.

Sunday, 1 July 2012

Service Tax from 1.7.2012 - Changes a review

Collection of Service Tax has undergone a sea change today with the Government notifying 1.7.2012 as the date for implementation of "Negative List Based Taxation" for Service Tax. To enable this the Government has carried out the following changes.

Rescinded Sections 65, 65A, 66 & 66A in Finance Act, 1994
Introduced Sections 65A, 66B, 66C, 66D, 66E & 66F in Finance Act, 1994
Issued Notifications Nos.25/2012-ST to 40/2012-ST dated 20.06.2012

What is this Negative List - Section 66D

Negative list consists of 17 services on which there is no service tax is charged (ie) these 17 items are exempt from Service Tax. These include services provided by Central & State Governments, local authority, RBI, Services by foreign Diplomatic missions in India, services relating to agriculture, manufacturing of goods, trading of goods, transmission and distribution of electricity, admission to entertainment events, services by way of renting residential buildings, transport of passengers in State Transport vehicles (however First class and air-conditioned rail travel attracts service tax), transportation of goods other than GTA and courier, funeral, burial, cremation and mortuary services.

What is taxable under Service Tax? Section 65B (44)

Other than the negative list all other services are taxable. Service is defined under Section 65B, Clause (44) "to mean an activity carried out by a person or entity for another for consideration". In short, all services are taxable other than those specified under Section 66D (Negative List).

Mega Exemption List - Notification No.25/2012-ST dt.20.6.12

The complexity does not stop here, the Government has notified vide Notification Number 25/2012-ST dated 20.06.2012 a list known as Mega Exemption List. This list consists of 39 items which are exempted from Service tax apart from the Negative List provided in Section 66D.

So a Service Provider has to check Section 66D & Mega Exemption List to check his nature of service and pay tax on the same.

Reverse Charge - Notification No.30/2012-ST dt.20.6.12

To add masala to the service tax act this notification No.30/2012-ST dt.20.6.12 has been issued. Which lists 11 services of which 8 services need to be paid by the receiver of services and balance 4 services need to be paid in a given proportion by the provider and receiver. The gist of the items are as listed below

Table

Sl.No.	Description of a service	Percentage of service tax payable by the person providing service	Percentage of service tax payable by the person receiving the service
1	in respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business	Nil	100%
2	in respect of services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road	Nil	100%
3	in respect of services provided or agreed to be provided by way of sponsorship	Nil	100%
4	in respect of services provided or agreed to be provided by an arbitral tribunal	Nil	100%
5	in respect of services provided or agreed to be provided by individual advocate or a firm of advocates by way of legal services	Nil	100%
6	in respect of services provided or agreed to be provided by Government or local authority by way of support services excluding,- (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994	Nil	100%
7	(a) in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business (b) in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business	Nil 60%	100 % 40%
8.	in respect of services provided or agreed to be provided by way of supply of manpower for any purpose	25%	75 %
9.	in respect of services provided or agreed to be provided in service portion in execution of works contract	50%	50%
10	in respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory	Nil	100%

Abatement

All earlier abatement notifications have been rescinded and a fresh notification number 26/2012-ST dt.20.6.2012 has been issued mandating the abatement percentages. The following is the new abatement table