7.1 In most of the cases, service provider, i.e., person who is providing taxable service is liable to pay service tax and, hence, AAI or authorised persons providing services is liable for service tax. However, in few cases, exceptions have been made and the service receiver is made to liable to pay service tax. By Finance Act, 1999 it has been provided that if a person providing service is non-resident and does not have address or place of business in India, service tax is payable by person receiving taxable service in India [Rule 2(1)(d)(iv)]. The amendment has come in effect from 11 May 1999. In such a case, person receiving the service will also have to register.
7.2 Repair and maintenance of an aircraft inside the hanger of an airport may be undertaken by Airbus or Boeing Company and they may not have any permanent address or place of business in India. In such case, service recipient is liable to pay service tax.
7.3 If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time .
Monday, December 25, 2006
8. Valuation
8.1 The value of any taxable service is determined as per the provisions of the Service Tax (Determination of Value) Rules, 2006 [‘the Valuation Rules’].
8.2 As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
8.3 Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
8.4 However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
8.2 As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
8.3 Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
8.4 However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
9. Service tax credit
9.1
IPR holder avails many input services in the course of providing intellectual property services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. IPR holder has to bear the incident if service tax charged on these input services.
9.2
The Cenvat Credit Rules, 2004 provides that intellectual property services provider can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely intellectual property services
9.3
in case IPR holder is providing services other than intellectual property services which are not taxed and separate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
9.4
Similarly, a manufacturer or a service provider can take credit of the service tax paid on intellectual property services and adjust same against his excise duty/ service tax liability.
IPR holder avails many input services in the course of providing intellectual property services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. IPR holder has to bear the incident if service tax charged on these input services.
9.2
The Cenvat Credit Rules, 2004 provides that intellectual property services provider can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely intellectual property services
9.3
in case IPR holder is providing services other than intellectual property services which are not taxed and separate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
9.4
Similarly, a manufacturer or a service provider can take credit of the service tax paid on intellectual property services and adjust same against his excise duty/ service tax liability.
10 Rate of Service Tax
Presently Rate of service tax is 12% and education cess @ 2% on service tax is also payable.
However, this rate of tax is up to 28 February 2007 only.
It is expected that rate of tax will be increased to 14% in the next budget.
If you have any query or comment, pl do not hesitate to mail at consult_hardin@yahoo.com. I will be obliged to hear you. Your feedback is always welcome.
THANK YOU
However, this rate of tax is up to 28 February 2007 only.
It is expected that rate of tax will be increased to 14% in the next budget.
If you have any query or comment, pl do not hesitate to mail at consult_hardin@yahoo.com. I will be obliged to hear you. Your feedback is always welcome.
THANK YOU
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