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 ..... re 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. 5. Services of same category are grouped together and defined as a separate taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 machinery for extraction / breaking of rocks into stones, sieving, grading, etc. • outsourced services, provided for mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a works contract. Such value is to be determined on actual basis based on the records maintained by the assessee. However, it is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, 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 the term "cab". Commercial coaching or training centre is already defined under section 65 (27). 7.2.1 Effect of this proposed change are- • Renting of motor vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een 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 [Section 65(105)(r)], and (ii) to explicitly include business consultancy in the definition itself [Section 65(65)]. 7.8 CONSULTING ENGINEER'S SERVICE [Section 65(105)(g)]: Presently computer hardware engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 available from 01.04.2007. 8.4 Clinical trial of new drugs undertaken by Clinical Research Organisation (CRO) is presently leviable to service tax under technical testing and analysis service [section 65(105)(zzh)]. Clinical trial of new drugs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication 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) is being amended. After the proposed amendment in section 70(1) comes into force, appropriate rules will be notified indicating the conditions and the amount to be paid for delayed filing of return. 9.3. Section 14AA of Central Excise Act, 1944 empowers the Commissioner of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 details of payments from branch offices. 10.3 Rule 7B is being inserted to allow an assessee to rectify mistakes and file revised return within 60 days from the date of filing of the original return; 10.4 Rule 2(1)(d)(vii) is being amended so that service tax is required to be paid under reverse charge method ..... X X X X Extracts X X X X X X X X Extracts X X X X
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