Service Tax — 7 New Services & new provisions effective from 1-6-2007 - Service Tax - Press Note

Press Note dated 22-5-2007 The Finance Bill, 2007 received the assent of the President of India on the 11th May, 2007 and the corresponding Act is published in the Gazette of India dated 12th May, 2007 as Act No. 22 of 2007. 2. Certain provisions relating to the levy of service tax in the Finance Act, 2007 shall come into force from a date to be notified. For this purpose, Notifications No. 23/2007 to 32/2007-Service Tax, all dated 22nd May, 2007 have been issued. 3. Seven services which are specifically mentioned in the category of taxable services and amendments made relating to existing taxable services shall come into effect from the 1st June, 2007 [ Notification No. 23/2007-Service Tax, dated 22-5-07 ]. 4. Section 65 defines taxable services and various terms used in relation to taxable services. Section 66 is the charging section and provides for levy of service tax on taxable services. These two sections have been amended in the Finance Act, 2007 and these amendments shall come into effect from 1-6-07 [ Notification No. 23/2007-Service Tax, dated 22-5-07 ]. Amendment to Rules : 5. In view of the merger of various telecommunication related taxable services into telecommunication service , Notification No. 36/2004-Service Tax, dated 31-12-04 and Rule 2(1)(d)(i) of the Service Tax Rules, 1994 have been amended so as to substitute the reference to various telecommunication related taxable services, namely telephone connection, pager, leased circuit, communication through telegraph, communication through telex and facsimile communication, with the merged telecommunication service [ Notification No. 27/2007-Service Tax, dated 22-5-07 Notification No. 28/2007-Service Tax, dated 22-5-07 ]. 5.1 Export of Services Rules, 2005 and the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 have been amended so as to categorise the newly specified taxable services under Rule 3 [ Notification No. 30/2007-Service Tax, dated 22-5-07 Notification No. 31/2007-Service Tax, dated 22-5-07 ]. Exemption from service tax : 6. Notification No. 24/2007-Service Tax, dated 22-5-07 exempts taxable service provided by any person in relation to renting of immovable property from service tax equivalent to service tax payable on the amount of property tax, actually paid by the service provider to the local authority. In other words, service tax is payable on the rental amount received less the actual amount of property tax paid. 6.1 There may be a situation where property tax is paid after the payment of service tax on the rental. As a result, deduction of property tax paid from rental could not be availed of at the time of payment of service tax. In such cases, Rule 4C of the Service Tax Rules, 1994 provides self-adjustment of excess service tax paid without any limit [ Notification No. 24/2007-Service Tax, dated 22-5-07 ]. 6.2 Commercial or industrial construction service, and services provided in relation to the execution of works contract, provided in relation to construction of a port or other port has been exempted [ Notification No. 25/2007-Service Tax, dated 22-5-07 ]. However, services such as completion and finishing, repair, alteration, renovation, restoration, maintenance or repair provided in relation to existing port or other port shall be outside the scope of this exemption and hence, leviable to service tax. Optional Composition Scheme for Works Contract : 7. Rule 2A of Service Tax (Determination of Value) Rules, 2006 [ Notification No. 29/2007-Service Tax, dated 22-5-07 ] provides for valuation of services provided in relation to the execution of a works contract [section 65 (105)(zzzza)]. 7.1 As a trade facilitation measure and also for ease of administrative convenience, the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 has been notified vide Notification No. 32/2007-Service Tax, dated 22-5-07, whereby the service provider has been given an option to pay service tax equivalent to 2% of the total value of the works contract instead of paying service tax at the rate specified in section 66 . 8. A letter explaining the aforementioned changes has been issued under F. No. B1/16/2007-TRU, dated 22-5-07 . For details, relevant provisions of the law and notifications may be referred to.