Extracts - Addressing various proposal of theBudget 2003 - Service Tax - F. No. 334/1/2003

Extracts of the TRU File No. 334/1/2003 Dated 28/2/2003 Addressing various proposals of the Budget 2003 Item No. 12. Service Tax 1) Rate of service tax is proposed to be raised from 5% to 8% (from the date of enactment of Finance Bill). 2) Service tax 8% is proposed to be imposed on the following services (to be effective from a date to be notified). a) Commercial vocational institutes, coaching centers and private tutorials. b) Technical testing and analysis (excluding health and diagnostic testing), technical certification. c) Maintenance and repair services namely, Annual Maintenance Contracts (AMC) and other maintenance services; authorized repair services. d) Commissioning and installation services. e) Business promotion and support services including customer care services. These services include launching of products, customer education programmes, conduct of seminars, data warehousing, help desk services, managing front offices, enquiry bureaus, etc. However computer enabled services, namely, data processing, networking, back office processing, computer facility management shall not be subjected to Service Tax. f) Internet cafe g) Franchise services h) Extension of service tax on port services to minor ports. i) Extension of service tax on authorized automobile services to multi-utility vehicles. j) Extension of service tax on banking and other financial services to all FOREX brokers. Presently the services provided by banks and body corporates in relation to foreign exchange are covered under Service Tax. The proposal is to extend the same to proprietorship, partnership and other individual concerns providing such services. 3) The present exemption from service tax on hotels has been extended beyond 31.3.2003. 4) Exemption from service tax when payments are received in convertible foreign exchange has been withdrawn. 5) Provision has been made for allowing credit of service tax only when the payment has been made by the service user in respect of services provided. 6) Retrospective amendment to notification No.43/97-ST dated 5.11.1997 has been made so as to exempt service tax on services provided by Goods and Transport Operators to small scale units, traders and private limited trading companies for the period 16.11.2002 to 1.6.2002. 12.1 It may be recalled that with regard to payment of service tax in respect of Goods and Transport Operators (GTO) and C F services, certain amendments were made in section 65 and 66 of the Finance Act, 1994 to validate the collection of service tax. Certain frirther amendments are being made in section 68 and 70 of the Finance Act, 1994 retrospectively along with insertion of a new section 71A for the period 16.7.1997 to 16.10.1998 [ 150 of the Finance Bill]. Basically, this change will require the assessees (service receiver in respect of GTO and C F services) to file a fresh return within 6 months from the date of enactment of Finance Bill which can then be assessed. This is a validating provision. 12.2 The Board vide its telexes F.No.No.356/91/97-TRU dated 3.2.97 and 9.2.98 had directed to hold in abeyance the payment of service tax on Goods Transport Operators in respect of factories registered as SSI industries in State Government, companies which are solely and exclusively trading companies registered as private limited companies, and dealers registered with any sales tax authority and whose turnover had exceeded Rs.50 lakhs in the preceding financial year. Exemption from payment of service tax for these categories is now being given a legal backing through suitable amendments in the provisions of Finance Act, 1994 [152(1) of the Finance Bill]. 12.3 Service tax will now cover a number of new assesses. It is imperative that the Commissioners apprise the potential assessees of the basic features of Service Tax Scheme, its procedures and obligations well in advance. It would be usefril if some meetings with the assessees are also conducted in the Commissionerates to explain the features of Service Tax to them.