Budget 2010 - Indirect Taxes





             Service Tax:
  
The service tax effective rate is remains unchanged @ 10.3%   Important amendment to the existing provisions:   ·         Amendment of Section 65 (19) Business Auxiliary Service (BAS) - in sub – clause (ii) the explanation has been omitted (i.e. promotion or marketing includes games of chances, lottery lotto, etc) as the same are taxable under new services. ·         Insertion of Section (19b) Business entity includes an association of persons, body of individuals, company or firm but does not include an individual. ·        

Amendment to port services and airport services means any services rendered within the port/airport in any manner would be liable under these categories of service only. Further, classification under Section 65A would not arise as any services render within the port/airport is taxable under port/airport services irrespective of service they do within the port/airport. ·         Amendment of Section 65 (105) (zzq) (i.e. in relation to Commercial or Industrial Construction service). Insertion of explanation note to (zzq), (zzzh), a deeming fiction would exist if the prospective buyer pays any money in advance before grant of completion certificate by the authority competent. ·         Sponsorship services now include even sports also. (i.e to bring IPL event, etc are into service tax net). ·         Aircraft operator services now include domestic journey also. ·         An explanation has been added to Action of property under section 65(105) (zzzr). An auction by the govt means the Govt property being auctioned by any person acting as auctioneer is excluded from service tax net. To bring the clarity in the said definition the explanation has been inserted. ·          Amendment of renting of immovable property Section 65(105) (zzzz). Now the renting of immovable property per-se would be liable for service tax as the definition is amended. Further, the vacant land is now liable for service tax under this category of services as if the vacant land is given on lease or licence for construction of building or temporary structure at a later stage. ·         In relation to definition of Information Technology Software Service (zzzze) the words for use in the course of or furtherance of business or commerce shall be omitted. ·         Life insurance business (zzzzf): An explanation is added in place of clauses (ii) and (iii) gross amount for the purpose of the insurer would be the maximum amount fixed by the IRDA as fund management charges or actual amount charged by the insurer whichever is higher. ·        


Introduction of new services:

1.      Promotion, marketing, organizing or in any other manner assisting in organizing games of chance, including lottery, bingo or lotto in whatever form or by whatever name called, whether or not conducted through internet or other electronic network.

2.       Hospital, nursing home or multi- specialty clinic: Heath checkup or preventive care of employees paid by the business entity directly or such amount is paid by the insurance company directly to such hospital or nursing home or multi – specialty clinic.

3.      Storing, keeping or maintaining of medical records of employees of a business entity.

4.      Promotion or marketing of a brand of goods, services, event or endorsement of name, including a trade name, logo or house mark of a business entity by appearing in advertisement and promotional event or carrying out any promotional activity for such goods, service or event

5.      Granting the right or by permitting commercial use or exploitation of any event including an event relating to art, entertainment, business, sports or marriage organized by such other person.

6.      Electricity exchange, by whatever name called, approved by the Central Electricity Regulatory Commission constituted under section 76 of the Electricity Act, 2003, in relation to trading, processing, clearing or settlement of spot contracts, term head contracts, seasonal contracts, derivatives or any other electricity related contract.

7.      Transferring temporarily or permitting the use of enjoyment of any copy right defined under Copy right Act, 1957 except the rights covered under sub-clause (a) of clause (1) of section 13 of the said Act.

8.     
Amount paid to builder for preferential location of resident or development of a complex would be liable to service tax       Notification No. 02/2010 (for Central Excise17/2010- CE and Notification No. 31/2010 customs)   Exempt the taxable services in relation to acquiring the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell as defined in Section 65{105) (zzzze) of item (v) for packaged or canned software, intended for single use and packed accordingly from whole of the service tax subject to the following conditions:   ·         The documents pertaining to the software shall be packed along with the software ·         The importer would have paid the entire duties on the entire amount ·         The benefit under notification number 17/2010 is not availed (this is reversal to this effect except that the manufacturer would have registered under Service tax law)

 Exemption is available in Central Excise and Customs only if the assessee is registered under service tax law provisions.  

Reason to amend:

To distinguish between goods and services so as to avoid cascading effect.
  Notification No. 03/2010   Amendment of Notification No. 24/2004 – ST, dated 10th September, 2004. in the said notification, the explanation for

(i) definition of Vocational training institute has been amended. Those institutes which offer courses must be notified under the Apprentices Act, 1961.
  Reason to amend: The reason to amend the said notification would be that in the earlier explanation was more comprehensive in nature which were more litigate for the said explanation. To avoid such ambiguity the explanation has been amended.   Notification No 04/2010   Amendment of Notification No. 33/2004 in relation to service provided by Goods Transport Agency in relation to fruits, etc. the word eggs or mills has been amended to eggs, milks, food grains or pulses. Reason to amend: giving more exemption to those products provided by road by GTA   Notification No. 05/2010 Rescinding Notification No. 1/2000 – ST, dated 9th February, 2000   Notification No. 06/2010, (16/2010 for import of services)   Amendment of Export service Rules In Rule 3 in sub – rule (1) in clause (i) (i.e services in relation to immovable property situated outside India) in addition to general insurance business mandapa keeper is also added (i.e. (d), (m)). In clause
 
(ii) (i.e holly or partly performed outside India) mandapa keeper, Chartered Accountant, Cost Accountant and Company Secretary shall be omitted (i.e. (m),(s),(t), (u))
In Rule 3 sub – Rule (2) (conditions for export of services) clause (a) shall be omitted (i.e such services is provided from India and used outside India. Now this test is not required to fulfill). In Rule 3 (2) clause (b) for the explanation – the definition “India” has been expanded like touching installations structures and vessels located in the continental shelf of India.   Reason to amend: To keep all the professional services on location of the recipient is the criteria to conclude export of services (i.e. shifted to the residuary clause in Rule 3 (1)

(iii)). Further, expanded the definition of India so as to bring all prospecting or extraction or production of mineral oil and natural gas and supply thereof into service tax net these services are normally provided from sea bed, etc.
  Notification No. 07/2010   Rescinding notification No. 33/2009 – ST, dated 1st Sept, 2009 in relation to transport of goods by Rail is exempt from payment of service tax. W.e.f 1.04.2010   Notification No. 08/2010   Exempt taxable services provided to any person in relation to transport of goods by rail (zzzp) which are specified in the said notifications (such as defence, postal mail bags, relief materials, luggage of train passengers, etc.)   Reason to amend: From this it is very clear that the ideas of the Govt is to first bring into service tax net transport of good by Rail giving by way of exemption of all the taxable services and then at the later point of time withdraw the exemption.   Notification No. 09/2010   Insertion of SL. No. 11 in the notification No. 1/2006 for transport of good by rail.   Notification No. 10/2010   Exemption of taxable services provided by a Central or State seed testing Laboratory and Central or State Seed Certification Agency notified under the Seeds Act, 1966   Notification No. 11/2010   Exemption of taxable services provided by any person to any other person for transmission of electricity from whole of service tax leviable thereon.   Reason to amend: there are many organizations which are providing electricity through the wires, etc to many private sector organizations including EOU/SEZ/STPI, etc. To avoid this ambiguity whether supply of electricity is liable for ST or not, the Central Govt has granted exemption.   Notification No. 12/2010   Taxable services referred to Commission and Installation Agency (zzd) of clause (105) of section 65 of the Finance Act, in relation to food grain handling system, cold storages, agricultural, horticultural, dairy, poultry, etc. whole of the service tax (i.e any commission and installation work has been carried out by any person in relation to these facilities there would not be any service tax).   Notification No. 13/2010   Whole of the service tax is exempted if taxable service provided in relation to Online information and database access or retrieval services and BAS (i.e (zh) and (zzb)) by an Indian News Agency subject to fulfillment of the conditions laydown in the said notification.     Notification No. 14/2010   Extension of scope of Chapter V of Finance Act, 1994 for covering all the areas such as Continental Self and special economic zone of India, installations, structures and vessels within the continental self and the exclusive economic zone, etc.         Notification No. 15/2010   Amendment of Service Tax Valuation Rules, 2006 Rule 6 (i.e. cases where commission, cost, etc, included or excluded.) sub – rule (2) the following clause is excluded from cost if the taxes levied by any Govt shown separately on the ticket or the invoice issued to the passenger who travels by air.  

CENTRAL EXCISE:
  

The effective rate of Central Excise rate has been increased to 10.3% from 8.24% Duty on medical and toilet preparations containing alcohol, opium and Indian hemp is reduced to 10% from 16%.   ·         An explanation note has been inserted to Section 11A (i.e. recovery of dues for not-levied or not paid or short-levied or short paid): Explanation – 3 No penalty under any provisions of the act or rules made thereunder shall be imposed in respect of duty under this section and interest thereon paid. ·         Extension of time under section 32F sub – section (6) [Settlement Commission] for a further period of three months. Therefore, the total period would be 12 months (9+3). ·        


Payment of duty by SSI Units - Notification No. 05/2010 CE (N.T):
the duty on good cleared during a quarter of financial year shall be paid by 6th /5th, as the case may be, of the day of the month following that quarter. Further, the filing of quarterly return is pre-poned from 20th to 10th of the following month of that quarter.
·         Amendment of CENVAT credit Rule 3(5) Notification No. 6/2010 – CE (N.T) i.e. capital goods,  on which CENVAT credit has been taken, are removed after being used, the manufacturer or service provider shall pay amount equal to CEVNAT credit taken on the said capital good reduced by 2.5% per quarter on straight line basis. However, in case of computer and computer peripherals the following are the percentages would apply: 1.      First year for each quarter 10% 2.      Second year for each quarter 8% 3.      Third year for each quarter 5% 4.      Fourth and Fifth year for each quarter 1% ·          

Notification No. 15/2010 –

Central Excise: whole of duty (also import duty by vide Notification No 30./2010 – Customs) leviable on all items of machinery required for initial setting up of a Solar power generation project or facility shall be exempt subject to the conditions laid won in the said notification. The conditions are

1. a certificate obtained from Deputy Secretary to the Govt of India in the ministry of New and Renewable Energy recommending the grant of this exemption and

2. the said goods are meant for only in the said project and in the event of failure to do so pay the duty which would have been levied. 
      Customs   The basic customs duty remain unchanged at 10%   ·         Notification No 15/2010 – Customs: An amendment to Project import Regulations, 1989 by substituting Digital Cinema development projects and Digital head end projects. Further, the Monorial projects for urban public transport, projects for food grains and sugar, cold storage and cold rooms for agricultural products are brought into project imports. All theses projects are specified as notified projects by amending Notification No. 42/1996 – Customs, dated 23-07-1996 with Notification No. 19/2010 – Customs. ·          Notification No. 23/2010 – Customs: Exemption of whole of the duty of customs leviable on all parts, components and accessories for the manufacture of mobile handsets; subparts for manufacture of such parts and components; and parts or components for manufacture of battery chargers and hands free headphones of such mobile handsets.   ·         Notification No 27/2010 – Customs: exemption of the duty of custom, additional duty of customs and special additional duty of customs on motion pictures, music, gaming software for use on gaming consoles printed or recorded on media in excess of duties if the value of the goods were equal to the aggregate of cost of the carrier medium and the fright and insurance on the carrier medium. However, this notification shall not apply to motion picture, music or gaming software imported in pre-packed form retail sale.

Notification No. 02/2010 (for Central Excise17/2010- CE and Notification No. 31/2010
customs)
  

Exempt the taxable services in relation to
acquiring the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell as defined in Section 65{105) (zzzze) of item (v) for packaged or canned software, intended for single use and packed accordingly from whole of the service tax subject to the following conditions:   ·         The documents pertaining to the software shall be packed along with the software ·         The importer would have paid the entire duties on the entire amount ·         The benefit under notification number 17/2010 is not availed (this is reversal to this effect except that the manufacturer would have registered under Service tax law) Exemption is available in Central Excise and Customs only if the assessee is registered under service tax law provisions.  

Reason to amend:

To distinguish between goods and services so as to avoid cascading effect.
  Notification No. 03/2010   Amendment of Notification No. 24/2004 – ST, dated 10th September, 2004. in the said notification, the explanation for (i) definition of Vocational training institute has been amended. Those institutes which offer courses must be notified under the Apprentices Act, 1961.  

Reason to amend:

The reason to amend the said notification would be that in the earlier explanation was more comprehensive in nature which were more litigate for the said explanation. To avoid such ambiguity the explanation has been amended.
  Notification No 04/2010   Amendment of Notification No. 33/2004 in relation to service provided by Goods Transport Agency in relation to fruits, etc. the word eggs or mills has been amended to eggs, milks, food grains or pulses. Reason to amend: giving more exemption to those products provided by road by GTA   Notification No. 05/2010 Rescinding Notification No. 1/2000 – ST, dated 9th February, 2000   Notification No. 06/2010, (16/2010 for import of services)   Amendment of Export service Rules In Rule 3 in sub – rule (1) in clause (i) (i.e services in relation to immovable property situated outside India) in addition to general insurance business mandapa keeper is also added (i.e. (d), (m)). In clause (ii) (i.e holly or partly performed outside India) mandapa keeper, Chartered Accountant, Cost Accountant and Company Secretary shall be omitted (i.e. (m),(s),(t), (u)) In Rule 3 sub – Rule (2) (conditions for export of services) clause (a) shall be omitted (i.e such services is provided from India and used outside India. Now this test is not required to fulfill). In Rule 3 (2) clause (b) for the explanation – the definition “India” has been expanded like touching installations structures and vessels located in the continental shelf of India.   Reason to amend: To keep all the professional services on location of the recipient is the criteria to conclude export of services (i.e. shifted to the residuary clause in Rule 3 (1) (iii)). Further, expanded the definition of India so as to bring all prospecting or extraction or production of mineral oil and natural gas and supply thereof into service tax net these services are normally provided from sea bed, etc.   Notification No. 07/2010   Rescinding notification No. 33/2009 – ST, dated 1st Sept, 2009 in relation to transport of goods by Rail is exempt from payment of service tax. W.e.f 1.04.2010   Notification No. 08/2010   Exempt taxable services provided to any person in relation to transport of goods by rail (zzzp) which are specified in the said notifications (such as defence, postal mail bags, relief materials, luggage of train passengers, etc.)   Reason to amend: From this it is very clear that the ideas of the Govt is to first bring into service tax net transport of good by Rail giving by way of exemption of all the taxable services and then at the later point of time withdraw the exemption.   Notification No. 09/2010   Insertion of SL. No. 11 in the notification No. 1/2006 for transport of good by rail.   Notification No. 10/2010   Exemption of taxable services provided by a Central or State seed testing Laboratory and Central or State Seed Certification Agency notified under the Seeds Act, 1966   Notification No. 11/2010   Exemption of taxable services provided by any person to any other person for transmission of electricity from whole of service tax leviable thereon.   Reason to amend: there are many organizations which are providing electricity through the wires, etc to many private sector organizations including EOU/SEZ/STPI, etc. To avoid this ambiguity whether supply of electricity is liable for ST or not, the Central Govt has granted exemption.   Notification No. 12/2010   Taxable services referred to Commission and Installation Agency (zzd) of clause (105) of section 65 of the Finance Act, in relation to food grain handling system, cold storages, agricultural, horticultural, dairy, poultry, etc. whole of the service tax (i.e any commission and installation work has been carried out by any person in relation to these facilities there would not be any service tax).   Notification No. 13/2010   Whole of the service tax is exempted if taxable service provided in relation to Online information and database access or retrieval services and BAS (i.e (zh) and (zzb)) by an Indian News Agency subject to fulfillment of the conditions laydown in the said notification.     Notification No. 14/2010  
Extension of scope of Chapter V of Finance Act, 1994 for covering all the areas such as Continental Self and special economic zone of India, installations, structures and vessels within the continental self and the exclusive economic zone, etc.