India Tax & Customs Team

Service Tax - A Paradigm Shift – Negative List Approach

SE Taxation Team MeetPresented by – Arbind AggarwalLocation – Gurgaon (India)24th Jan,2013 To 25th Jan, 2013

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Service Tax - A Paradigm Shift

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Approach – Selective Vs Negative List

Taxable ServicesExempt Services - ThresholdNegative list + exempt

120Taxable Services

Selective Approach – selected services are taxable

Selective Approach – selected services are taxable

Negative List – all services are taxableNegative List – all services are taxable

“There is COST to compliance but non-compliance costs MORE”

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Taxation of Services – Taxability Test and Valuation

Any Economic activity for consideration is taxable if

It is not mere IMAGE I: Immovable propertyM: MoneyA: Actionable claimG: GoodsE: Employee

And passes through below

filter

Determination of Value of taxable service

Schneider Electric 5- APAC T&C – Arbind Aggarwal – 24th and 25th Jan’13BAJAJ ELECTICALS

Taxation of Services – Negative List Approach

“We should not perform as employee looking after TAX but We should perform as TAXMAN working as employee”

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Cab - Transport: 60%;Manpower : 25%Construction/WC: 50%

“Nil” for following

InsuranceGoods Transport by RoadSponsorshipService by tribunal/advocatesCab – Transport Import of service – Royalty etc.

Avail ITC

Liability to pay to Govt. - Divided- No increase in Tax amount

Cab - Transport: 40%;Manpower: 75%Construction/WC: 50%

“100%” for following

InsuranceGoods Transport by RoadSponsorshipService by tribunal/advocatesCab – Transport Import of service

Independent liabilityAvail Cenvat Credit if eligible

Portion specified for Service provider Portion specified for Service receiver

No cash flow impact (Except tax on royalty – now liability is certain but revenue neutral. Tax amount is approx. 18 MINR per year

Reverse Charge – New Scheme

Points to be taken care1.Portion of Service Tax to be borne, in case you are Service Recipient 2. POT under reverse charge3. Latest Inclusions4. Practical Issues5.Computation of Tax & raising of Invoice

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• Whole of India except Non – Taxable Territories

Taxable Non - Taxable

• State of J & K

• SEZ

• Outside India

A. B2B supplies : Location of receiver

A. B2C supplies:

Place of actual performance, or

Location of property /event/ performance/ embarkation of journey

Location of supplier

Ref. – Note on Taxable Territory vs. Non-Taxable Territory

The Territory The rules

Place of Provision of Services – Taxable Territory - 1

“Aggressive tax planning may be aggregating future RISK”

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Place of Provision of Services – Taxable Territory - 2

Case – 1 [Service provider in Taxable Territory]

Case – 2 [Service provider in Non Taxable Territory]

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Place of Provision of Services

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Place of Provision of Services

S.No. Rule POPRule 3 General Rule Location of service receiver

If recipient location is not ascertainable in the ordinary course of business

Location of service provider

Specific RulesRule 4 Service provided in respect of goods that are required to

be made physically available by the service receiver to the service provider to provide the service

Location where the service is performed

Provided when such services are provided from a remote location by way of electronic means

Location where the goods are situated at the time of provision of service

This Rule shall not apply in case of service provided in respect of goods temporarily imported into India for repairs for re-export

Service provided entirely or predominantly in the physical presence of an individual

Location where the service is performed

Rule 5

Immoveable property based services provided directly in relation to an immoveable property (includes grants of right to use immoveable property, services for carrying out or coordination of construction work)

Location or proposed location of immoveable property

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Place of Provision of Services

S.No. Rule POPRule 6 Services in relation to an event Location of event

Rule 7 If services referred to in Rule 4,5 or 6 provided in many locations including location in taxable territory

Taxable territory

Rule 8 Where service provider and service receiver are located in the taxable territory (for e.g. .A India appoints B India to design a hotel in US – taxable)

Location of service receiver

Rule 9 Services such as specified Banking, Online database, Intermediary services , hiring of means of transport up to one month

Location of service provider

Rule 10 Transport services in relation to goods Destination of goods

Goods transportation agency services Location of service provider

Rule 11 Passenger transport services Where the passenger embarks

Rule 12 Services provided on board a conveyance First schedule point of departure

Rule 14 Order of Application of rules Later Rule to supersede

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Point of Taxation

Point of Taxation - whichever is

earlier

OR

OR

POT - General POT – Associated Enterprises (import of Services)

OR

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Export of Services

Service is not a service specified in the negative list

Ref. Detailed Summary

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Works Contract Service

Ref. Detailed Document

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General Rule of Interpretation & Bundled Services

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Input Service Distribution (ISD)

ISD Distribution – Process Note

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Make the mostof your energy™

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Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere

Admission to entertainment events or access to amusement facilities

Services provided by the Reserve Bank of India Transmission/distribution of electricity by electricity transmission/ distribution utility

Services by a foreign diplomatic mission located in India

Education upto higher secondary school or equivalent/for obtaining a qualification recognized by Indian laws/ vocational education course

Service relating to agriculture activity Renting of residential dwellings

Trading of goods Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount

Any process amounting to manufacture or production of goods

Service of transportation of passengers by specified modes

(g) Selling of space or time slots for advertisements other than advertisements broadcast by radio or television

Service of transportation of goods by specified modes

Service for access of a road or a bridge on payment of toll charges

Funeral, Burial, Crematorium or mortuary services

Betting, gambling or lottery

Services Covered under Negative ListServices Covered under Negative List