Notification No. 30/2012-Service Tax

Government of India

Ministry of Finance

(Department of Revenue)

Notification No. 30/2012-Service Tax 

New Delhi, the 20^th June, 2012 

 

            GSR.…..(E).—In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), and in supersession of  (i) notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 15/2012-Service Tax, dated the   17^th  March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 213(E), dated the  17^th  March, 2012, and (ii) notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 36/2004-Service Tax, dated the  31^st  December, 2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 849 (E), dated the 31^st December, 2004,  except as respects things done or omitted to be done before such supersession, the Central Government hereby notifies the following taxable services and the extent of service tax payable thereon by the person liable to pay service tax for the purposes of the said sub-section, namely:—

 

I. The taxable services,—

 

(A)  (i)   provided or agreed to be provided  by an insurance agent to any person carrying on the insurance business;

(ii)   provided or agreed to be provided  by a goods transport agency in respect of  transportation  of goods by road, where the  person liable to pay freight    is,—

(a)  any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(b)  any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India;

(c)  any co-operative society established by or under any law;

(d)  any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder;

(e)  any body corporate established, by or under any law; or

(f)  any partnership firm whether registered or not under any law including association of persons;

Explanation-I. - The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

(iii) provided or agreed to be provided by way of sponsorship  to anybody corporate or partnership firm located in the taxable territory;

(iv) provided or agreed to be provided by,-

              (A) an arbitral tribunal, or

              (B) an individual advocate or a firm of advocates by way of support services, or

(C) 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,

       to any business entity located in the taxable territory;

(iva)   provided or agreed to be provided  by a director of a company to the said company; (N/N 45/2012)

 (v) provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers to any person who is not in the similar line of business or supply of manpower for any purpose or security services (N/N 45/2012) or service portion in execution of works contract by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory;

Explanation-II. - In works contract services, where both service provider and service recipient is the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service.

 

(B)  provided or agreed to be provided by any person which  is located in a non-taxable territory and received by any person located in the taxable territory;

 

(II) The extent of service tax payable thereon by the person who  provides the service and the person who receives the service for the taxable services specified in (I) shall be as specified in the following Table, namely:-

 

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%
5A	in respect of  services  provided or agreed to be provided  by a director of a company to the said company	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 or security services (N/N 45/2012) 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%

 

 

2. This notification shall come into force on the 1^st day of July, 2012.  

Notification No. 46/2012 - Service Tax

Government of India
Ministry of Finance 
(Department of Revenue)

 

Notification No. 46/2012 - Service Tax

New Delhi, the 7^th August, 2012

 

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely:—

 

1.         (1) These rules may be called the Service Tax (Third Amendment) Rules, 2012.

            (2) They shall come into force on the date of their publication in the Official Gazette.

 

2.         In the Service Tax Rules, 1994, in rule 2, in sub-rule (1),-

 

(A)  in clause (d), in sub-clause (i),-

 (i)  after the item (E), the following item shall be inserted, namely;-

 

“(EE) in relation to service provided or agreed to be provided by a director of a company to the said company, the recipient of such service;”;

 (ii)  in the item (F), in the sub-item (b), after the words “manpower for any purpose”, the words “ or security services” shall be inserted.          

 

(B)   after clause (f), the following clause shall be inserted, namely:—

 

“(fa) “security services” means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity;”

 

[F.No. 334 /01/2012- TRU]

 

 

(Raj Kumar Digvijay)

Under Secretary to the Government of India

 

 

Note.- The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 2/94-ST,dated the 28^th June, 1994 vide number G.S.R. 546(E), dated the 28^th June, 1994 and was last amended by notification No. 36/2012-Service Tax, dated the 20^th June, 2012 vide number G.S.R. 478 (E), dated the 20^th June, 2012.

 

 

Notification No. 45/2012 - Service Tax

Government of India
Ministry of Finance 
(Department of Revenue)

 

Notification No. 45/2012 - Service Tax

 

New Delhi, the 7^th August, 2012

 

G.S.R. (E).- In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.30/2012-Service Tax, dated the 20^th June,2012,  published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),  vide number  G.S.R.  472 (E), dated the 20^th June, 2012, namely:-

 

In the said notification,-

 

(a)  in para I, in clause (A),-

 

(i) after the sub-clause (iv), the following sub-clause shall be inserted, namely :-

 

“(iva)   provided or agreed to be provided  by a director of a company to the said company;”;

 

(ii)  in sub-clause (v), after the words “manpower for any purpose”, the words “ or security services” shall be inserted.

 

(b)  in para II, in the Table,-

 

(i)   after Sl.No. 5, the following S.No. and entries shall be inserted, namely:-

           

“5A

in respect of  services  provided or agreed to be provided  by a director of a company to the said company

Nil

100%”

 

(ii)  in Sl.No. 8, in the entries under the heading ‘Description of a service’, after the words “manpower for any purpose”, the words “or security services” shall be inserted.

 

[F.No. 334 /1/ 2012-TRU]

 

(Rajkumar Digvijay)

Under Secretary to the Government of India 

 

Merely entry in books - Not amount to provision of Service

Highlights of important judgement of the Hon’ble CESTAT-Chennai in the case of M/s FUTURA POLYESTER LTD. versus COMMISSIONER OF CENTRAL EXCISE. CHENNAI-I [2013 (1) TMI 658 - CESTAT CHENNAI] on the issue:

 

Issue:

 

Whether merely making entry in books of account did not amount to provision of service?

 

Facts:

 

M/s Futura Polyester ltd. (“the Appellants”) entered into an agreement with M/s. Futura Polymers Ltd., a 100% EOU Division for transfer of technical know-how. As per the agreement, the appellants agreed to transfer technical know-how in future and M/s. Futura Polymers Ltd, were at liberty to avail the advice of the appellants. A consideration was fixed in the agreement but M/s. Futura Polymers Ltd., never sought the advice of the appellants and the appellants never rendered any service of transfer of technical know-how to M/s. Futura Polymers Ltd. But the appellants made a debit entry in their books of accounts for the services to be provided in future. Consequently, the Revenue was of the view that the appellants are liable to service tax under the category of "Consulting Engineering Service" as per the agreement entered into between them and their client - M/s. Futura Polymers Ltd. Therefore, a show-cause notice was issued and adjudication took place and demand of service tax along with penalties was confirmed against the appellants. Thereafter, the appellants filed an appeal before the Hon’ble CESTAT-Chennai.

 

The contention of the appellants was that neither service has been provided by them nor any consideration for providing the service have been received by them, therefore, they are not liable to pay service tax. Further, it was submitted that the supply of technical know-how cannot be taxed under the category of "Consulting Engineering Service”.

 

Held:

 

It was held that merely making entry in the books of accounts does not render that the appellants have provided any service.The Appellants have never provided any service and no consideration for the service have been received during the period.

 

In the instant case, no service has been provided by the Appellants and only agreement to provide the service has been entered into, the service tax was not payable for the ‘service to be provided’, as the demand is for the period prior to 16.06. 2005. It was held by the Tribunal in the case of CCE v. Mastermind Classes (P.) Ltd. [2010] 24 STT 55 (New Delhi – CESTAT) the demand of tax for an earlier period prior to levy of service tax is not sustainable.

 

Section 65 (105) of the Finance Act, 1994 defined the term "taxable service" in respect of various taxable services. Till 16/6/2005, the relevant part of the said Section read as "Taxable service means any service provided by....to...." Therefore, the present case is covered by this analogy that no service tax will be leviable on those services where no service has actually been provided.

 

Further, it has also been held by the Hon’ble Supreme Court in the case of Association of Leasing & Financial Service Companies v. Union of India [2010] 29 STT 316 (SC) & Union of India v. Martin Lottery Agencies Ltd. [2009] 20 STT 203 (SC) that “when no service has been rendered, service tax cannot be levied”.

 

With respect to the issue of debit entry passed by the Appellants in their books for service to be provided in future, it was also held that the Notification No.19/2008 cannot be said to have retrospective effect, wherein it was explained that “deems creation of book entry” as receipt of consideration.

 

Furthermore, reliance was also placed on the case of CST & STC v. Molex (India) Ltd. [2012] 18 taxmann.com 113 (Kar.), the Hon’ble High Court had held that supply of technical know-how cannot be taxed under “Consulting Engineering Service”. Therefore, the argument of Revenue to tax the supply of technical know-how under “Consulting Engineering service” was also rejected by the Hon’ble CESTAT.

How to detect fraud during the Audit - A tool for auditors

By Rashid Mehmood

I felt a need to write about this important topic after experiencing that often times a fraud is detected by chance during the audit either by external or the internal auditors. The new auditors in profession and the auditors under training may skip the fraudulent transactions due to less experience and sometimes lack of analytical audit procedures. This article has been focused on two points i.e. fraud itself and its detection techniques. I believe once these techniques are properly understood by the auditors they will be mastering in identifying the risky areas and to implement the fraud detection plan during the audit of a financial statement as a whole or the group of transaction thereon.

Tax on Derivatives

In Future Contracts (Cash-Settled) there is no transfer or delivery of the underlying asset in case of futures. Hence the income or loss from it cannot be taxed under the head capital gains. If the assessee is a Trader the head of income will be income from business and profession. In case of Investor it will be income from other sources. In either case, the income will be taxed on net basis at the rates applicable to the assessee.

The option premium is an income for the writer of the option and a tax-deductible expense in the hands of the buyer of the option. In case of a Trader, the taxability of the gains/loss on exercise of the option is akin to Future Contracts. However, in case of an Investor, since there is an extinguishment of a right the gain therefrom will be treated as a capital gain, and not an income from other sources, and the premium will be allowed as the cost of acquisition.

Open interest refers to a situation, wherein on the date of the financial year end, there are outstanding derivatives contracts in the hands of the market participants. Since, under the prudent accounting principles, derivatives contracts are marked-to-market (MTM), there can be unrealised MTM gains or losses prevailing as on March 31. Whether the assessee will be liable to tax on the gains or take the benefit of the losses in such a case.

As per my understanding only real income/loss attracts tax provisions and not the notional gains/losses.

With the insertion of Section 43(5)(d), eligible transactions on notified stock exchanges have been rendered non-speculative in nature. Therefore, trading in commodity and equity derivatives traded on stock exchanges other than those notified, is still treated as speculative, the loss wherefrom cannot be adjusted against any other sources of income. Losses from such derivatives are eligible to be carried forward for a period of four years.