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TMI BlogChanges are being proposed in a number of provisions of the Finance Act, 1994, Service Tax Rules, 1994, CENVAT Credit Rules, 2004 and Export of Services Rules, 2005X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2004 and Export of Services Rules, 2005 . Details of the changes are explained in the Explanatory Notes. INCREASE IN THRESHOLD EXEMPTION LIMIT FOR SMALL SERVICE PROVIDERS 2. The threshold limit of service tax exemption for small service providers is being increased from the present level of Rs.4 lakhs to Rs.8 lakhs with effect from 01.04.2007, by amending notification No.6/2005-Service Tax, dated 01.03.05 vide notification No.4/2007-Service Tax, dated 01.03.07 . 3. Consequent upon the increase in the threshold exemption limit from Rs. 4 lakh to Rs. 8 lakh, the limit for obtaining service tax registration has also been increased from Rs. 3 lakh to Rs. 7 lakh by amending notification Nos. 26/2005-Service Tax and No.27/2005-Service Tax, both dated 07.06.05 vide notification Nos. 5, 6 7/2007-Service Tax, dated 01.03.07. WIDENING OF SERVICE TAX BASE 4. In continuation of the policy of widening of the service tax base, the Finance Bill, 2007 proposes to, Levy service tax on more services, Expand or clarify the scope of existing services, and Carve out separate services from the existing services and specify them as separate taxable services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unication service" [ section 65(109a) ] is being defined comprehensively. Specific inclusion and exclusion of telecom services may be seen in the definition. 6.1.1 Services provided by the telegraph authority to any person in relation to telecommunication are covered under this service. It may be noted that the present condition namely, recipient of service needs to be a subscriber, under telecommunication related services has been changed under the proposed Telecommunication Service. Telecommunication Service includes services provided to any person and not confined only to subscriber. 6.2 MINING SERVICE [ section 65(105)(zzzy) ]: Presently, geological, geophysical or other prospecting, surface or sub-surface surveying or map-making services relating to location or exploration of deposits of mineral, oil or gas are leviable to service tax under "survey and exploration of mineral service" [ section 65(105)(zzv) ]. Services such as- site formation and clearance, and excavation and earth moving, drilling wells for production / exploitation of hydrocarbons (development drilling) well testing and analysis services sub-contracted services such as deploying workers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.4 SERVICE INVOLVED IN THE EXECUTION OF A WORKS CONTRACT [ section 65(105)(zzzza) ] : VAT / sales tax is leviable on transfer of property in goods involved in the execution of a works contract. The proposed taxable service is to levy service tax on services involved in the execution of a works contract. It may be noted that under this service only the following works contracts wherein transfer of property in goods involved in execution of such works contract is leviable to VAT / sales tax, 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. 6.4.1 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. 6.4.2 Taxable value under this service is that part of the value of the works contract which is relatable to services provided in the execution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viable to service tax under interior decorator's service [ section 65(105)(q) ]. Design services, other than the above specifically mentioned taxable services, like furniture design, aesthetic design, consumer or industrial products, logos, packaging, production of three dimensional models, etc. will be taxable under this category. 7. AMENDMENTS: 7.1 SALE OF SPACE OR TIME FOR ADVERTISEMENT [ Section 65(105)(zzzm ]: Definition of the term "Book" is being amended so as to exclude business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes from the scope. Consequently sale of space for advertisement in such publications will also be leviable to service tax under this service. 7.2 RENT-A-CAB SERVICE [ Section 65(20) ] : 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, and (iii) The term "financial leasing" is explained as a lease transaction fulfilling the following conditions, namely:- (a) a contract for leasing of a specific asset is entered into between two parties, (b) the contract is for use and occupation of the specific asset, (c) the lease payments are calculated so as to cover the full cost of the asset together with the interest charges, and (d) the lessee is entitled to own or has the option to own, the asset at the end of the lease period after completing the lease payment; 7.6.1 International Accounting Standards Committee defines financial lease as "lease that transfers substantially all the risks and rewards incidental to ownership of an asset, title may or may not eventually be transferred". Financial lease is a way of purchasing an asset with the help of the loan and the lessee uses the asset. Risks and rewards incidental to ownership of an asset is also with the lessee. All lease transactions particularly sale and lease back transactions are to be examined carefully on the basis of this clarification. 7.7 MANAGEMENT CONSULTANT'S SERVICE: (i) Renamed as management or business consultant's service [ Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before he starts availing the exemption. They are also required to furnish the details of incubates to whom they are providing assistance. 8.3 Service tax exemption is also provided to incubatees. Incubatees are entrepreneurs working with the incubator to develop their ideas into a commercially viable venture. Incubatees are required to sign an agreement with incubator. Every incubatee who signs an agreement with the incubator is entitled to service tax exemption subject to the following conditions: (i) the incubatee should be located within the premises of an incubator (ii) The total business turnover of the incubatee should not have exceeded Rs.50 lakhs during the preceding financial year (iii) The total business turnover of the incubatee remains within Rs.50 lakhs (incubatee is not eligible for service tax exemption once he crosses Rs. 50 lakh business turnover) (iv) The exemption is available to an incubatee only for a period of three years. Period of three years is computed from the date of signing the agreement with an incubator The exemption will be availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... munication through telegraph[ sub-clause (ze) of section 65(105) ] (v) communication through telex[ sub-clause (zf) of section 65(105) ] (vi) facsimile communication[ sub-clause (zg) of section 65(105) ] Since the proposed telecommunication service includes telecommunication related taxable services separately defined at present, the above mentioned services are not required to be defined separately any more. Section 66 is being amended to omit reference to sub-clauses (b), (c), (zd), (ze), (zf) and (zg) of clause (105) of section 65. Till telecommunication service is separately notified as a taxable service under sub-clause (zzzx) of clause (105) of section 65 after enactment of the Finance Bill, 2007, the above mentioned services continue to be classifiable as per the existing classification of taxable services. 9.2 At present filing of a return after the due date is treated as a violation and is liable for penal action. It is proposed to prescribe a specified amount of late fee linked to period of delay for filing of return after the due date. The assessee is required to pay the amount prescribed depending upon the period of delay. For this purpose, section 70(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment will issue the amended registration certificate after canceling the original registration certificate issued earlier. 10.2 At present, self-adjustment of excess service tax paid is available only to those who have centralised registration and that also only if the adjustment is on account of delayed receipt of details from the branch offices. It is proposed to extend self-adjustment of excess service tax paid 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 det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o bring to our notice at the earliest any omissions / errors that might have crept in. It is also felt desirable to have interactive sessions with the field officers and trade and industry associations for their views, comments and suggestions, if any. 13.3 Any problems of implementation may kindly be brought to our notice. A survey may be conducted to assess the potential service providers of the newly introduced services and their revenue potential. Reports to this effect may be sent by 15.03.2007 and 31.03.2007. 13.4 If there is any doubt or difficulty on any point, you are requested to bring it immediately to my notice (email - jstru.sekar @gmail.com) or to the notice of Shri R. Sriram, Deputy Secretary (TRU) Tel: 23092634 (email - [email protected] ) Copies of the FM's speech, notifications, Finance Bill, 2006, explanatory notes etc, are forwarded. These will also be available on the CBEC website soon after the conclusion of FM's speech. With regards, Yours sincerely, (R. Sekar) To, All Chief Commissioners/Director General (All) Commissioners of Central Excise and Service Tax (All) - Circular - Trade Notice - Public Notice - Instructions - Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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