By Pinky Shah, Sonalee Godbole, Gaurang Gandhi, Chartered Accountants
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Part A : DIRECT TAXES Part
B : Indirect taxes
Service tax :
6 Post Budget notifications to give effect to
the provisions of Finance Act, 2008 (18 of 2008) dated 10-5-2008 (Press release
reproduced).
The Finance Bill, 2008 received the assent of the President
of India on the 10th May 2008 and consequently the Finance Act, 2008 is being
published in the Gazette of India dated 10th May 2008 as Act No. 18 of 2008.
Central Government has issued seven notifications relating to service tax so as
to give effect to various provisions of the Finance Act, 2008.
2. Transaction between associated enterprises :
2.1 In the Finance Act, 2008, S. 67 has been amended. As per
this amendment, service tax is required to be paid by the person liable to pay
service tax on the taxable services provided even if the consideration for the
taxable services provided is not actually received. In such cases, service tax
is required to be paid immediately after crediting/debiting of the amount in the
books of accounts or receipt of payment, whichever is earlier. However, this
provision is restricted to transaction between associated enterprises and shall
come into force w.e.f. 10th May 2008. Explanation to Rule 6(1) of the Service
Tax Rules, 1994 has been added as removal of doubts stating that any payment
received towards the value of taxable service shall include any amount credited
or debited, as the case may be, to any account, whether called ‘Suspense
account’ or by any other name, in the books of account of a person liable to pay
service tax (Refer Notification No. 19/2008-Service Tax dated 10-5-2008).
3. Certain provisions relating to the levy of service tax in
the Finance Act, 2008 shall come into force from a date to be notified. For this
purpose, Notifications No. 18/2008 to 24/2008-Service Tax, all dated 10th May,
2008 have been issued.
4. Following changes/amendments shall come into force w.e.f.
16-5-2008 :
à
Seven services which are specifically mentioned in the category of taxable
services and amendments made relating to existing taxable services.
à
Amendments made in S. 65 (defines taxable services and specified terms used in
relation to taxable services) and S. 66 (charging section) vide the Finance
Act, 2008.
à
Amendments made in Export of Services Rules, 2005 and the Taxation of Services
(Provided from Outside India and Received in India) Rules, 2006 so as to
categorise the newly specified taxable services under Rule 3 [Refer
Notification No. 20/2008-Service Tax dated 10-5-2008 and Notification No.
21/2008-Service Tax dated 10-5-2008].
à
Optional Scheme for payment of service tax on Purchase or Sale of foreign
currency : Service tax is leviable on purchase or sale of foreign currency,
including money changing, provided by an authorised dealer in foreign currency
or an authorised money changer, or a foreign exchange broker. Where the
consideration for the services provided in relation to purchase or sale of
foreign currency is not explicitly indicated, the person liable to pay service
tax has been given the option to pay service tax calculated at the rate of
0.25% of the gross amount of currency exchanged. The method is prescribed
under Rule 6(7B) of the Service Tax Rules, 1994. [Refer Notification No.
19/2008-Service Tax dated 10-5-2008].
5. Government of India has already notified, vide
Notifications No. 41/2007-Service Tax, dated 6-1-2007 and 43/2007-ST, dated
29-11-2007, sixteen taxable services attributable to export goods, whether or
not in the nature of input services, providing refund of service tax paid on the
said sixteen taxable services. Consequent upon the enactment of the Finance Act,
2008, Government has notified 16-5-2008 as the effective date for the
specifically included taxable services vide the Finance Act, 2008. Out of the
said taxable services, refund of service tax paid by exporters has been extended
to the following additional 3 services :
à
Purchase or sale of foreign currency under banking and other financial
service,
à
Purchase or sale of foreign currency under foreign exchange broking service,
à
Supply of tangible goods for use of service (refer Notification No.
24/2008-ST, dated 10-5-2008)
6. Notifications No. 18/2008 to 24/2008-Service Tax, all
dated 10th May 2008 are available on the CBEC website http://www.cbec.gov.in.
For details, relevant provisions of the law and notifications may be referred of
the Ministry of Finance, Department of Revenue, Tax Research Unit, Govt. of
India.
