Sunday, March 11, 2007

Service Tax: Amendments made by the Finance Bill, 2007 and changed made through various Notifications


HIGHLIGHTS



  • Service Tax Rate: There is no change in the service tax rate.



  • Secondary and Higher Education cess: The Government has proposed to levy additional cess @ 1% on the service tax payable on taxable services. The cess shall come into force from the date of enactment of the Finance Bill, 2007 i.e. the date of President assent to the Finance Bill, 2007 [Refer Clause 130 of the Finance Bill, 2007]. The Secondary and Higher Education cess shall be in addition to the education cess payable which was levied in the year 2004.



  • Exemption to small service provider enhanced: W.e.f. 1-4-2007, service tax exemption for small service providers is increased from the present level of Rs.4 lakhs to Rs.8 lakhs. Notification No.6/2005-Service Tax, dated 01.03.05 amended [Refer notification No. 4/2007-Service Tax, dated 01.03.07].



  • Minimum turnover limit for compulsory limit enhanced: Consequent upon the increase in the threshold exemption limit from Rs. 4 lakh to Rs. 8 lakh, W.e.f. 1-4-2007, the limit for obtaining service tax registration has also been increased from Rs. 3 lakh to Rs. 7 lakh. Notification Nos. 26/2005-Service Tax and No.27/2005-Service Tax (Registration of Special Category of Persons Rules), both dated 07.06.05 and ST-I Form have been amended [Refer Notification Nos. 5, 6 & 7/2007-Service Tax, dated 01.03.07].



  • New Services: The following services are proposed to be specifically included and defined in the list of taxable services, namely:


[Service tax on such services shall come into force from the date to be notified after the enactment of the Finance Bill, 2007].


a) Telecommunication service: Presently telecom related services are separately taxed under different taxable service such as telephone services, pager, leased circuit, etc. The Government has proposed to merge all such services into one category of taxable service i.e. ‘telecommunication service’. Further, telecommunication services have been comprehensively defined under section 65 (109a) read with section 65(105)(zzzx) and its scope has been widened.


b) Mining service: Services in relation to mining of mineral, oil or gas is proposed to bring under the service tax net. [Section 65(105)(zzzy) ].


c) Renting of immovable property service: Renting of immovable property for use in the course or furtherance of business of business or commerce is proposed to brought under the service tax net. However, residential accommodation such as hotels, hostels, boarding houses, etc. which are solely used for residential purposes or accommodation purposes have been excluded from the term ‘immovable property’. Further, renting of immovable property by or to a religious body and renting of immoveable property to an educational body, other than commercial training or coaching center have also been excluded from the scope of this taxable service. Where renting of immovable property is a single composite contract involving part of property for use in commerce or business and part of it for residential /accommodation purposes, for the purpose of levy of service tax under this sub-clause, entire property under the contract is treated as property for use in commerce or business and accordingly the total value of the contract shall be the taxable value. [Section 65(105)(zzzz) read with section 65(90a)]


d) Service involved in the execution of a works contract: Under this category of taxable service, the proposal is to levy service tax on services involved in the execution of a works contract. It may be noted that under this service only selective works contracts are covered, namely:-

(i) works contract for carrying out erection, commissioning or installation

(ii) works contract for commercial or industrial construction

(iii) works contract for construction of complex

(iv) works contract for turnkey projects including Engineering Procurement and Construction or Commissioning (EPC) projects.


Works contract in respect of specified infrastructure projects namely roads, airports, railways, transport terminals, bridges, tunnels and dams are specifically excluded from the scope of the levy. It is also proposed to give an option to an assessee to opt for a composition scheme, whereby the assessee would be required to pay 2% of the total value of the works contract as service tax. Assessee opting for the composition scheme would not be entitled to avail CENVAT credit of capital goods, inputs and input services required for use in the works contract. Valuation of works contract and details of the composition scheme will be notified separately. [Section 65(105)(zzza) ]


e) Development and supply of content service: It is proposed to separately specify services provided by content developers in relation to development and supply of content for use by telecommunication service providers, advertising agencies and on-line information and database access or retrieval services such as internet or website service providers under this service. [Section 65(105)(zzzzb) read with section 65(36c)]


f) Asset management including portfolio management and all forms of fund management service : Asset management including portfolio management and all forms of fund management provided by individual service providers are proposed to cover separately, similar services provided by other than individual are already covered under banking and other financial services. [Section 65(105)(zzzzc) ]


g) Design services: Design services, other than fashion designing service and interior decorator’s service, like furniture design, aesthetic design, consumer or industrial products, logos, packaging, production of three dimensional models, etc. will be taxable under this category. [Section 65(105)(zzzzd) read with section 65(36b)]



  • Exiting Services expended: The following existing services are proposed to be amended, namely:


[Service tax on such changes made in the existing services shall come into force from the date to be notified after the enactment of the Finance Bill, 2007].


a) Sale of space or time for advertisement : Sale of space for advertisement in business directories, yellow pages and trade catalogues will also be leviable to service tax under this service as such publication are primarily meant for commercial purposes and have been excluded from the definition of ther term “Book”. [Section 65(105)(zzzm]


b) Rent-a-cab service: Definition of “cab” has been amended so as to include motor vehicles capable of carrying more than twelve passengers for hire or reward. However, motor vehicle capable of carrying more than twelve passengers and maxicab, rented to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, is specifically excluded from the scope of the term “cab”. Motorcab, even if it is rented to an educational body is leviable to service tax. [Section 65(20)]. Ambulances are not meant for carrying passengers for hire or reward. Hence, the question of levy does not arise.


c) Mandap keeper service: Explanation has been added stating that social function includes marriage functions. [Section 65(66) and 65(67)]


d) Pandal or shamiana service: Explanation has been added stating that social function includes marriage functions. [Section 65(77a)]


e) Event management service: Definition of event management is amended so as to specifically include marriage event within the scope of this service. [Section 65(40)]


f) Manpower recruitment or supply service: Explanation is added to clarify that manpower recruitment or supply agency service includes services in relation to pre-recruitment screening, verifying the credentials of the candidate, authenticity of documents submitted by the candidates and verification of antecedents. [Section 65(105)(k)]. The amendment is for the purpose of clarification.


g) Banking and other financial service: As per the proposed amendment, cash management services will be leviable to service tax under this service. Cash management services includes services of collection of receivables, execution of payment, management of liquidity and providing customized Management Information System (MIS) reports, provided by banks to clients such as corporate clients. The term “financial leasing” is also explained. [Section 65(105)(zm) read with Section 65(12)]


h) Management consultant’s service: This service renamed as management or business consultant’s service and to explicitly include business consultancy in the definition itself [[Section 65(105)(r)] read with Section 65(65)].


i) Consulting engineer’s service: Presently computer hardware engineering consultancy is specifically excluded from this service. Specific exclusion of computer hardware engineering consultancy is being omitted. Consequently, computer hardware engineering consultancy will be leviable to service tax under this service. [Section 65(105)(g)]


j) Management, maintenance or repair service: Section 65(64) is amended to clarify that “goods” for the purposes of this service includes computer software. Consequently, maintenance or repair of computer software will be leviable to service tax under this category. It may be noted that development of computer software is distinct from maintenance or repair of computer software and development of computer software continues to be not leviable to service tax.



  • Other Changes in the Finance Act, 1994:


[Such changes shall come into force from the date of the enactment of the Finance Bill, 2007 except point (a) which shall be changed from the date to be notified].


a) Omission of some services as grouped into single service: Since the proposed telecommunication service includes telecommunication related taxable services separately defined at present, such as telephone connection services, pager, leased circuit, communication through telex, facsimile communication are not required to be defined separately any more.


b) Penalty for delay in filing return: Section 70(1) is being amended. After the proposed amendment in section 70(1) comes into force, appropriate rules will be notified indicating the conditions and the amount to be paid for delayed filing of return.


c) Extended the applicability of Section Section 14AA and 38A of Central Excise Act, 1944: Section 14AA related to empowers the Commissioner of Central Excise to order for cost audit by a Cost Accountant to study the abnormal utilisation of CENVAT credit and Section 38A provides protection by way of savings for all pending actions under rules and notifications that are repealed, rescinded or amended by amending the Section 83.


d) Section 86 is being amended to empower the Central Board of Excise & Customs to constitute a committee of (i) two Chief Commissioners to review the adjudication order passed by a Commissioner of Central Excise (ii) two Commissioners to review the order passed by a Commissioner of Central Excise (Appeals)


e) Section 96A is being amended to insert an Explanation in clause (b) of section 96A relating to definition of ‘applicant’ so as to clarify that in the ‘joint venture in India’ at least one of the participants or partners or equity holders shall be a non-resident.



  • Amendment in Service Tax Rules, 1994 [Refer Notification No. 1/2007-ST, dated 1-3-2007] :


a) Dispensing of submitting original registration certificate: W.e.f. 1-3-2007, as per the amended provisions, (Rule 4), it is provided to dispense with the requirement of submission of original registration certificate to the department at the time of intimation of any changes. Now, the assessee is required to submit only a self-certified copy of the registration certificate. Rule 4, Form ST-1 and ST-2 are suitably amended for this purpose. The Department will issue the amended registration certificate after canceling the original registration certificate issued earlier.


b) Self adjustment of excess tax further extended: W.e.f. 1-3-2007, self-adjustment of excess service tax paid has been extended to all assessees subject to the following conditions:

• Self-adjustment of excess credit is allowed on account of reasons other than interpretation of law, taxability, classification, valuation or applicability of any exemption notification.

• Excess amount paid and proposed to be adjusted should not exceed Rs.50,000 for the relevant month or quarter.

• Adjustment can be made only in the succeeding month or quarter.

• The details of self-adjustment should be intimated to the Superintendent of Central Excise within a period of 15 days from the date of adjustment.


However, assessees who have centralised registration can adjust the excess service tax paid on their own without any monetary limit provided the excess amount paid is on account of delayed receipt of details of payments from branch offices. It may be noted that Rule 6(3), which also contain provisions, related to self-adjustment of excess tax paid has not been omitted, which has not become irrelevant.


c) W.e.f. 1-3-2007, Rule 7B is inserted to allow an assessee to rectify mistakes and file revised return within 60 days from the date of filing of the original return.


d) Rule 2(1)(d)(vii) is amended so that service tax is required to be paid under reverse charge method in relation to sponsorship service only if the recipient of service is located in India . In other words, if the recipient of sponsorship service is located outside India , in such cases, service tax is required to be paid by the service provider and not by the recipient. This change will come into effect from 1st April, 2007.



  • Amendments in the Export of Services Rules, 2005: With effect from 1st March, 2007, Rule 3 (2) is amended and the words ‘delivered outside India and used outside India’ has been substituted with the words ‘provided from India and used outside India’ and also clarify that that both rule 3(1) and 3(2) are to be satisfied for provision of service to be treated as export of services. [Refer Notification No. 2/2007-ST, dated 1-3-2007]



  • Amendments in the Cenvat Credit Rules, 2004: [Refer Notification No. 10/2007-CE, dated 1-3-2007]


[Such changes shall come into force w.e.f. 1-3-2007 except point (a) which shall be changed w.e.f. 1-4-2007].


a) Optional Scheme to General Insurance Service Provider: W.e.f. 1-4-2007, Rule 6(3) is amended to provide an option to general insurance service providers providing taxable as well as exempted insurance schemes and do not maintain separate input / input services credit accounts to utilise CENVAT credit proportionate to the inputs and input services used in providing taxable services. The scheme is optional. It may be noted that the scheme is applicable only to general insurance services referred to in section 65(105)(d).


b) Rectification of Mistakes: The Rule 9 is amended to insert sub-rule (11) to allow an assessee to rectify mistakes and file revised return within 60 days from the date of filing of original return.


c) Necessary amendments have been made in the Cenvat Credit Rules, 2004 to allow credit of Secondary and Higher Education Cess paid on inputs and capital goods, which can be utilized for payment of Education cesses only.


d) Sub-rule (2) of rule 9 has been amended to provide that the CENVAT credit can be taken if all the particulars as prescribed under the rules are available on the invoice or other duty-paying document. Further, in case any of the required particulars (other than specified particulars) are not available on the document, the Assistant/Deputy Commissioner may allow the credit subject to his satisfaction that (i) goods/services covered by said document has been received by the asseessee, and (ii) the receipt of said goods/services has been accounted for in the books of accounts of the receiver. Consequential amendments have also been made in rule 15(1) and 15(3), which provides for penal action.


e) Sub-rule(3) of rule 9 has been deleted, which had the provisions related to ensuring of payments of duty. It may be noted that in this regard, earlier Board issued Draft Circular dated 23-5-2006, which has now been converted into law. It is a welcome step to avoid litigation.


f) New sub-rules (3) & (4) have been inserted in rule 11 to provide that when a person opts for exemption from whole of duty (in case of conditional notification) or where a product becomes exempted absolutely, in such cases, the CENVAT credit taken on inputs lying in stock, or in process or contained in the final product lying in stock should be reversed. Similar provision has been made in respect of cases wherein taxable service becomes exempted. However, no reversal of credit of input services is required to be made in such cases.



  • Exemption from levy of service tax :


a) Services provided by Resident Welfare Associations (RWA): W.e.f. 1-3-2007, exemption from service tax is provided to services provided by RWAs to their members, where the monthly contribution of a member does not exceed Rs. 3000/- per month. [Refer Notification No. 8/2007-Service Tax dated 01.03.2007].


b) Exemption to incubators and incubatee: W.e.f. 1-4-2007, exempts all taxable services provided by incubators from levy of service tax. [Refer Notification No. 9/2007-Service Tax dated 01.03.2007]. The incubator who intends to avail service tax exemption is required to furnish information in the format specified. Service tax exemption is also provided to incubatees subject to the following conditions. The exemption is available to an incubatee only for a period of three years. [Refer Notification No. 10/2007-Service Tax dated 01.03.2007].


c) Testing and analysis of newly developed drugs: W.e.f. 1-3-2007, exemption from service tax is provided to technical testing and analysis service provided in relation to testing and analysis of newly developed drugs on human participants by a CRO. New drugs include vaccines and herbal remedies. [Refer Notification No. 11/2007-Service Tax dated 01.03.2007].


d) Exemption to services provided by the digital cinema service provider: W.e.f. 1-3-2007, exemption from service tax is provided to services provided by the digital cinema service provider to the producer or distributor in relation to the delivery of content of cinema in digital form after encryption electronically. Exemption is not vailable if the content is delivered to the theatre for exhibition by any physical means. Transmission will be electronic either by wire or wireless means. [Refer Notification No. 12/2007-Service Tax dated 01.03.2007

COMPANY CASES (CC) HIGHLIGHTS - ISSUE DATED 2-3-2007 Volume 136 Part 1




F Where shares sold and proceeds in deposit with BIFR by an order of High Court against restraint order by BIFR and AAIFR, appeal becomes infructuous : Morgan Securities and Credit P. Ltd. v. Modi Rubber Ltd. p. 113

F Arbitration award : Scope of judicial interference : Morgan Securities and Credit P. Ltd. v. Modi Rubber Ltd. p. 113

F BIFR whether empowered to direct sale of the assets of sick industrial company at the stage of enquiry : Morgan Securities and Credit P. Ltd. v. Modi Rubber Ltd. p. 113


F Provision disqualifying director of company which is unable to pay its unsecured deposit-holders or redeem its debentures is valid : Saurashtra Cement Ltd. v. Union of India (Guj) p. 1

F Where investigation reveals manipulations by financiers through key operators applying for shares through benami dematerialised accounts and after allotment selling them on day of listing or thereafter, order of SEBI freezing dematerialised accounts and prohibiting persons involved from accessing market till further directions proper : Rajan Vasudevbhai Dapki v. Securities and Exchange Board of India (Guj) p. 20

F SEBI has power to suspend trading or prohibit any person from accessing securities market pending investigation : Rajan Vasudevbhai Dapki v. Securities and Exchange Board of India (Guj) p. 20

F SEBI being an expert body, court will not interfere in the discretion exercised by an expert on the subject : Rajan Vasudevbhai Dapki v. Securities and Exchange Board of India (Guj) p. 20

F Creditor holding arbitration award in its favour does not enjoy higher status : Modi Rubber Ltd. v. Board for Industrial and Financial reconstruction (Delhi) p. 107



F Petition u/s 397/398 maintainable on failure to discharge obligations under family settlement : Nagin M. Doshi v. Echjay Forgings P. Ltd. p. 75

F Where suit for implementation of family settlement pending, petition u/s 397/398 to be stayed till disposal of suit : Nagin M. Doshi v. Echjay Forgings P. Ltd. p. 75

F Where process for striking off name of company from register not complete, company to register transmission of shares and rectify register : Gummadi Aruna v. Gummadi Constructions Ltd. p. 81

F Transfer of shares in accordance with memorandum of understanding and with knowledge of petitioner cannot be set aside : ICICI Venture Funds Management Co. Ltd. v. SOFIL Information Systems P. Ltd. p. 84

F CLB to relegate parties to civil suit where complicated questions of law or facts involved : ICICI Venture Funds Management Co. Ltd. v. SOFIL Information Systems P. Ltd. p. 84

F Private arrangement between two shareholders contrary to articles not binding on company or members : ICICI Venture Funds Management Co. Ltd. v. SOFIL Information Systems P. Ltd. p. 84



F ICAI seeks review of audit limit of PSB branches

Faced with the prospect of loss of assignments, the auditing community is seeking a review of RBI's recent decision to waive statutory audits for public sector bank branches that lend below Rs. 5 crore annually. Hitherto, the audit waiver was applicable only for branches with total advances of Rs. 1 crore and below.

The communique on the revision in limits have been sent directly to the PSBs, sources familiar with the development said. "We will approach the Reserve Bank of India and the Government for review of this move," President of the Institute of Chartered Accountants of India (ICAI) said.

ICAI's professional development committee Chairperson, said that the Institute would now work closely with the RBI and the Government to see how best the members' interests could be protected. Sources, however, maintained that 80-85 per cent. of the banking system would still come under statutory audit even after the latest revision in the limit. [ Source : Business Line, February 24, 2007 ]

F CBEC to include service tax in Electronic Accounting System

The Central Board of Excise and Customs has decided to include service tax in Electronic Accounting System in Excise and Service Tax (EASIEST), from March 1. EASIEST is operational in Chennai as a pilot project since 2005 and has now been extended to other parts of the country. Earlier, only excise challans were covered under the system. "The accounting procedure for service tax will be similar to that for excise till further instructions," said an RBI notification. [ Source : Business Line, February 23, 2007 ]

F Microfinance sector Bill approved

The Union Cabinet gave its approval for enactment of legislation for the development and regulation of the microfinance sector. For this purpose, the Government plans to introduce the Micro Financial Sector (Development and Regulation) Bill 2007 in the forthcoming Budget session of Parliament.

The Parliamentary Affairs Minister said that the legislation would provide a legal framework for the entities engaged in microfinance and facilitate an environment for development of micro finance services in the country with greater transparency, effective management and better governance. This would facilitate the flow of micro finance services to the unbanked population of the country, he said. [ Source : Business Line, February 23, 2007 ]

F RBI bars NBFCs from real estate speculation

After making it difficult for banks to lend to real estate, the Reserve Bank of India (RBI) has placed restrictions on finance companies investing in real estate. On February 22, 2007, RBI issued new norms for finance companies that bar them from speculating in property and enable RBI to monitor their capital market exposure on a monthly basis.

The guidelines seek to distinguish asset finance companies and loan and investment companies among deposit-taking NBFCs. The new norms state that no finance company, which is accepting public deposits, can invest more than 10 per cent. of its networth in land or property except for its own use. At the same time, investment in unquoted shares of a company that is not a subsidiary has to be limited to 10 per cent. of networth. Loan and investment companies are, however, allowed to invest up to 20 per cent. of their networth in unquoted shares. Existing guidelines require asset finance companies to ensure that 60 per cent. of their loans go to lease and hire-purchase of machinery. Several finance companies have been using the balance 40 per cent. to fund real estate sector. If a finance company acquires land or property or unquoted shares in exchange of its bad loans, these assets have to be disposed off by the NBFC within three years.

Finance companies and Residuary Non-Banking Finance Companies (RNBFCs) with total assets of Rs. 100 crore and above, according to the previous audited balance sheet, will have to submit a monthly return on their exposure to capital market within seven days of the expiry of the month to RBI. [ Source : Financial Express, February 24, 2007 ]

F Finance Minister to introduce road map for GST

The Finance Minister is likely to spell out a legal framework to phase out central sales tax (CST) and introduce a road map for goods and service tax (GST) in Budget 2007-08, with the Cabinet approving the modalities.

To facilitate this, a Taxation Laws (Amendment) Bill, 2007 would be introduced in the coming session of Parliament he added. The phase-out process will include both monetary and non-monetary measures and amend the Central Sales Tax Act, 1956 and the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The move would mark the beginning of significant tax reform measures, which was critical to the success of value-added tax and for introduction of the GST in future. The Cabinet has also approved a compensation package for States on account of an expected revenue loss due to the phase-out. [ Source : Financial Express, February 24, 2007 ]

F RBI issues norms for doorstep banking

Banking services will now be available at the doorstep. Individual customers can have cash and other bank instruments picked up from their home or office while only demand drafts will be delivered. Corporate customers can additionally have cash delivered against cheque received at the bank's counter.

The Reserve Bank of India issued guidelines for banks on "Doorstep Banking" allowing banks to either deploy their employees or hire agents to extend these services.

The new guidelines allow banks to extend cash delivery services to corporate clients, public sector units and departments of Central and State Governments against the receipt of cheque at the branch, and not based on telephonic requests. Individual customers cannot, however, avail of this facility.

According to the guidelines, banks have been asked to acknowledge cash collection by issuing receipts and ensuring that it is credited to the customer's account on the same day or the next working day. The charges for these services would have to be prominently indicated on brochures.

Banks will now have to prepare their own schemes based on the guidelines with the approval of their board. The central bank has also asked banks to appoint a Grievance Redressal Machinery for redressing complaints about services rendered by its "agents". The name and the telephone number of the designated officer should be made available to the customers on the bank's website.

Banks have been asked to educate their "agents" about the incidence of circulation of forged notes, particularly of high denominations. [ Source : Business Line, February 22, 2007 ]

F Sensitive FDI will be scrutinised by FEMA

The Government is planning a series of amendments to the Foreign Exchange Management Act (FEMA) in order to address security concerns related to foreign investment. A new law is also being drafted to block FDI in sensitive sectors and sensitive areas of the country.

A committee of secretaries (CoS) headed by Cabinet secretary has asked the National Security Council (NSC) to recommend amendments to FEMA and draft the proposed legislation. A decision to this effect was taken by CoS on February 6. The committee has also said RBI and FIPB should be drafted to check misuse of FDI by anti-national forces.

According to Government sources, the council will draft the proposed law in consultation with the Law Ministry, Department of Industrial Policy and Promotion and Department of Economic Affairs. NSC has also been urged to work out a mechanism listing the standard procedures that will be followed to screen FDI whenever doubts arise.

BUDGET 2007-08 HIGHLIGHTS

Direct tax proposals


  • Income Tax Exemption limit increased by Rs. 10,000/- for individuals across the board

  • Individuals (Men) Limit Rs. 1,10,000/-

  • Individuals (Ladies) Limit Rs. 1,45,000/-

  • Senior Citizens Limit Rs. 1,95,000/-

  • Section 80 D limit raised to Rs. 20,000/- for Senior Citizens and Rs. 15,000/- for others.

  • Dividend distribution tax on Companies raised to 15 per cent.

  • Dividend Distributon Tax on Money Market Mutual Funds raised to 25%

  • ESOPs to be brought under FBT.

  • Expenditure on samples and free distribution items to be exempted from fringe benefit tax.

  • Additional revenue from direct taxes to yield Rs 3000 crore and indirect taxes revenue neutral.

  • Tax exemption on aviation turbine fuel sold to turbo prop aircraft extended to all small aircraft less than 40,000 kg.

  • Withdrawals by central and state governments exempted from Banking Cash Transaction Tax. The limit for individuals and HUF raised from Rs 25,000 to Rs 50,000.

  • 1% Additional Secondary Education Cess introduced across the board

  • Corporate Tax Rates Unchanged

  • No surcharge for SMEs (firms and Companies with a taxable income of Rs 1 crore or less).

  • Tax free bonds to be issued by state-owned urban local bodies.

  • Five year tax holiday for two, three, four star hotels and convention centres with a seating capacity of 3,000 in NCT of Delhi, Gurgaon, Ghaziabad, Faridabad and Gautam

  • Minimum Alternate Tax being extended to I-T companies.

  • Benefits of investment in venture capital funds confined to IT, bio-technology, nano-technology, seed research, dairy among some others.

Service Tax Proposals


  • No change in service Tax Rates

  • Exemption limit for small service providers from Rs 4 lakh to Rs 8 lakh. Two lakh people to benefit out of service tax exemption. Govt to lose Rs 800 crore as a result.

  • Service tax on Residents Welfare Associations whose members contribute more than Rs 3,000.

  • New Services under Service Tax Net

  • Services outsourced for mining of mineral, oil or gas;
    Renting of immovable property for use in commerce or business; however, residential properties, vacant land used for agriculture and similar purposes, land for sports, entertainment and parking purposes, and immovable property for educational or religious purposes will be excluded;

    Development and supply of content for use in telecom and advertising purposes;

    Asset management services provided by individuals; and

    Design services.


Indirect Tax Proposals


  • Peak Rate For Non Agricultural Products From 12.5% to 10%

  • Second and defective steel from 20% to 10%

  • No Duty on Coking Coal

  • Customs duty on Polyster Fibre and Yarns down to 7.5%

  • Duty on Cut and Polished diamonds from 5 to 3%

  • Dredgers to be exempt from import duty

  • Duty on Drip Irrigation, Agricultural Sprinklers and Food processing machinery from 7.5% to 5%

  • General rate on medical equipment to 7.5%

  • Duty on Sunflower Oil down 15 percentage points

  • Duty on pet foods down from 30 to 20%

  • Excise No change in Excise Rates

  • Ad-valorem component on petrol and diesel down from 8% to 6%

  • Excise & Service Tax:Relief for deserving cases in job creating sectors

  • SSIs exemption from Rs 1 crore to Rs 1.5 crore

MVAT - Trade Cir. No.21 T of 2007





8 th floor, Vikrikar Bhavan,

Mazgaon, Mumbai-400010.


TRADE CIRCULAR

To

…………………………

…………………………

No.VAT-1006/ Resale Tax( Medicine)/71/ Adm/3 Mumbai, Dt.27.02.2007

Trade Cir. No.21 T of 2007


Sub: Applicability of Resale Tax on Drugs and Medicine

under Bombay Sales Tax Act, 1959.


Gentlemen/Sir/ Madam,


Queries have been received by this office regarding the applicability of resale tax on medicines under the Bombay Sales Tax Act, 1959. The position is clarified as under:

2. The provision for Resale Tax (R.S.T.) was inserted w.e.f. 1 st April 2001 on goods specified in Schedule ‘C’ by section 10 of the B.S.T. Act, 1959. The section was again amended w.e.f. 1 st May 2002 . As per provisions of clause (iv) of section 10, resale of goods covered by entry 37 in Part-II of Schedule ‘C’ is required to be deducted from turnover of sales while determining turnover of sales for levy of Resale Tax.

3. At the same time, entry 146, in Group ‘A’ of Notification under section 41 was added w.e.f. 1 st May 2002 , for exemption of R.S.T. on retailers w.e.f. 1 st April 2001 subject to some conditions and restrictions. The said notification entry was deleted retrospectively w.e.f. 1 st May 2002 vide Notification No.STA-2004/ CR-24/Taxation- 2 dated 22 nd July 2004 .

4. It is clarified that the entry 146, in Group ‘A’ of Notification under section 41 had become redundant as exemption of R.S.T. on drugs and medicine covered under Schedule Entry C-II-37 was provided by the section itself. R.S.T. is not leviable on drugs and medicine w.e.f. 1 st May 2002 although the notification entry 146 has been deleted with effect from 1 st May 2002 .

4. This circular cannot be made use of for legal interpretation of provisions of law as it is clarificatory in nature. If any member of the trade has any doubt, he may refer the matter to this office for further clarification.

5. You are requested to bring the contents of this circular to the notice of the members of your association.


Yours faithfully,



(B. C. Khatua)

Commissioner of Sales Tax,

Maharashtra State , Mumbai.


No.VAT-1006/ Resale Tax( Medicine)/71/ Adm/3 Mumbai, Dt. 27.02.2007.

Trade Cir. No.21 T of 2007


1. Copy forwarded To :

a. All the Addl. Commissioners of Sales Tax in the State.

b. All the Joint Commissioners of Sales Tax in the State.

c. All the Sr. Dy. Commissioners of Sales Tax in the State.

d. All the Dy. Commissioners of Sales Tax in the State.

e. All the Asstt. Commissioners of Sales Tax in the State.

f. All the Sales Tax Officers in the State.

2. Copy forwarded with compliments for information to :

a. The Officer on Special Duty, Finance Department, Mantralaya,

Mumbai.

b. The Under Secretary, Finance Department, Mantralaya,

Mumbai.

c. The Accounts Officer, Sales Tax Revenue Audit, Mumbai and

Nagpur .

3. Copy to all the Desks and Desk Officers in the office of the Commissioner of Sales Tax, Maharashtra State , Mumbai.




(S.D.BHANDARE)

Sr. Dy. Commissioner of Sales Tax,

(Act & Rule) Maharashtra State , Mumbai .