Sunday 30 March 2014

Procedure for Surrender and Cancellation of Service Tax Registration

1. Provisions of sub-rules (7) and (8) of the Rule 4 of the Service Tax Rules, 1994, provides for surrender of Registration certificate in the case of an assessee who ceases to provide the taxable for which he is registered. The Superintendent of Central Excise after ensuring that the assessee has paid all the Service Tax dues may cancel such Registration certificate.
2. Taking note of the fact that large number of assesses are inactive and number of applications are pending for surrender/cancellation of service tax Registration, following guidelines are issued detailing the procedure to be followed in this regard.
3. An application for surrender/cancellation of the service tax registration is to be made for following reasons:-
a) Assessee’s turnover is below the threshold limit,
b) Change in the constitution of assessee, say from partnership to company or amalgamations.
c) Death of proprietor.
d) Assessee closing down the taxable service business.
e) Assessee has taken centralized registration and hence wants to surrender his other previous multiple registrations pertaining to various branches.
f) Assessee has shifted its office from the jurisdiction of one Division/Commissionerate to another and instead of requesting for change in the location code and premises code of the assessee, a fresh registration has been taken for the new address. Therefore, a need arises for surrender of the old registration.
g) Due to technical error in the system, the assessee has been issued multiple registrationsfor the same address. In that case, the additional registrations are required to be surrendered.

4. Assessees who wish to surrender their registration certificates shall file their application on-line using the ACES module on www.aces.gov.in. On successful filing of the online application, the assessee shall submit the copies of documents mentioned at pare 5 along with signed copy of the printout of the application generated by the ACES System to the jurisdictional Group Superintendent or Superintendent(s) of the Registration Cell’ in the concerned Divisional office. For, surrendering application, submitted by an assessee who had obtained registration prior to 01,04.2010 and not migrated to ACES, requirement of online filing of catica- has been done away with and for this purpose the procedure given in para 8.1 below may be referred to.
5.1 All the assessees falling under category (a) to (g) of Para 3 are required to submit following documents:
--(i) Application Form & Undertaking to surrender the Service Tax Registration (Annexure-I)
--(ii) Copies of last six ST-3 returns filed with the department from the date of taking registration till the date of surrender but up to a maximum of last six returns
Where the assessee has not filed ST-3 returns for the period mentioned above, on account of the reasons that the turnover is within the threshold limit of small service providers exemption then it is not necessary for him to file fresh return for surrender purpose only. He can apply for waiver of penalty under Rule 7C of STR for non-filing of returns. Instructions have been issued for waiver of penalty for non filing of return where total turnover was less than threshold limit. The fact of non-filing of return should be clearly mentioned in the undertaking.
--(iii) Copies of Profit & Loss account and Balance Sheet from the date of taking registration to the date of surrender, but for a maximum of last 3 financial years only. However, if Balance Sheet or Profit & Loss Statement has not been prepared, the applicant may submit copies of Income Tax Return for the said period. If said return has also not been filed then applicant should provide appropriate evidence like Bank Statement so as to enable the department to verify the reason stated for surrender. [Not required for category (e) & (g)]
--(iv) Details of Show Cause Notice pending adjudication, details of confirmed demands, details of court cases, details of audit conducted, etc. as per Annexure-II.
5.2 In case of an assessee falling under category (c) of para 3 above, the death certificate of the proprietor needs to be enclosed along with the application form.
5.3 In case of change of constitution [category (b) of para 3] the necessary documents like Partnership deed or Articles of Association etc. showing change of constitution may be enclosed along with application for surrender. In case of merger or acquisition necessary documents such as Order passed by the Hon’ble High Court or Article of Association to that effect, may be enclosed along with the application of surrender.
5.4 In case of assessee taking centralized registration [category (e) of para 3], the copy of centralized registration certificate, showing the premises for which surrender application is being submitted, should also be enclosed along with the application for surrender.
5.5 For cases covered by category (g) of Para 3 above, copy of registration triplicate for which the applicant wants to continue with should also be submitted with the application for surrender,
6. After submission of the required documents as per above details the Superintendent concerned may require further information like reconciliation of the income shown in the Profit & Loss Account with the taxable income declared in ST-3. However, reconciliation information would not be necessary in case of assessee taking centralized registration or in case of shifting of office from one jurisdiction to other jurisdiction or in case of technical error resulting in multiple registration or in case of turnover as per income statement/Profit & Loss account being below the exemption limit.
7. The assessee should submit the required documents with proper indexing of all enclosures, As far as possible all these documents will be verified by the Superintendent or Inspector at the time of its submission itself. In case of any deficiency , the same shall be informed to the assessee at the time of receipt of the documents. It may be noted that if the assessee fails to submit the complete set of hard copies within 15 days of submission of on-line application, it is liable to be rejected.
8.1 in case the applicant has taken Service Tax registration prior to 01.04.2010 and has not migrated to ACES system, it is not necessary for such assesses to migrate to ACES for surrendering their registration. They can apply for surrender of registration by a manual application, along with other documents as required, without filing the online surrender application. Instruction have been issued to liberally cancel the registration for assessee who had taken registration in the past when there was no threshold limit. Further, in those cases the intimation regarding the cancellation shall be sent by post.
8.2 The assessees who have misplaced the User-id & Password for transacting in ACES may approach the ‘Help Desk’ of the respective Division along with filled in application Form (format enclosed as Annexure-III) for generating T-pin. Using the T-pin generated by the System, which will be received by the applicant through e-mail.
9. The Superintendent shall process the application for surrender of registration and after successful cancellation of the registration, will inform the assessee through e-mail, and then the assessees can make surrendering application through ACES.
10. In case of any difficulty, Assistant Commissioner/Deputy Commissioner of the concerned Division may be approached for the resolution of grievance.
11. Surrender Application shall be accepted in person between 3.00 to 5.00 PM in the division

Income Tax Notice to non-filers who had done high value transactions – Compliance


In 2013, Income Tax Department issued letters to 12,19,832 non-filers who had done high value transactions.

In 2014, Income Tax Department hasidentified additional 22,09,464 non-filers who have done high valuetransactions.
Log on to e-filing portal athttps://incometaxindiaefiling.gov.in
If you are not registered with the e-filingportal, use the ‘Register Yourself’ linkto register.
You can view ‘Information Summary’ under the ‘Compliance’ module and submit whether it pertains to you or any other person you know.
If you have already filed the return, you should submit the details under ‘Filing of Income TaxReturn’. If not, you should pay your taxes and file the return.
You can keep a print out of submitted response for record.

Saturday 29 March 2014

Banks and RBI to facilitate Tax Payments on March 29, 30 and 31, 2014


With a view to providing greater convenience to tax payers, it has been decided that
all designated branches of agency banks and RBI Offices conducting government
business will keep their counters open for extended hours on Saturday, March 29,
and Monday, March 31, 2014 till 8.00 p.m. This arrangement will apply where March
31, 2014, has not been declared as a public holiday. On Sunday, March 30, 2014,
and on Monday, March 31, 2014 (at places where holiday under the Negotiable
Instruments Act has been declared), agency banks would keep select branches open
for transacting government business at locations identified by them based on volume
of transactions.Facility of electronic transactions would, however, continue till midnight on March 31,
2014.In order to facilitate government receipts, necessary arrangements have also been
made to conduct special clearing operations across the country. Centralised payment
systems, such as, Real Time Gross Settlement (RTGS) and National Electronic
Funds Transfer (NEFT) will also be operational on these three days (from March 29,
2014, to March 31, 2014).

Alpana Killawala
Press Release : 2013-2014/1899 Principal Chief General Manager

Monday 24 March 2014

E-filing of I-T returns: Taxpayers to get digital signatures

In order to weed out the hassle of sending by post a hard copy of e-filed return, the 
Income Tax department has decided to bring in the facility of electronic signatures for
taxpayers to endorse their bonafides.
The Central Board of Direct Taxes (CBDT), the apex office to formulate policies for the
Income Tax department, has decided to implement the new mechanism by the end of the next financial year in March, 2015.
Official sources privy to the development told PTI that the CBDT will get in touch with
the Union Ministries of Law and Communications and Information Technology to
establish the legal position and technology requirements respectively before it
operationalises the new protocols for the e-returns called 'ITRV'.
"It has to be seen what will be the procedure to obtain electronic or digital signature by the taxpayers. There should not be an additional cost or procedural burden for the
taxpayer who opts to file his or her I-T return online," a senior official said.
In case of digital signatures (used by corporate entities as of now), a bonafide statement that verifies the identity of the sender, it is required to be created by paying a fee and this requires regular renewal, which is why this is being seen as a burden on salaried class and other categories of small taxpayers.
The department, within the same time-frame, is also desirous of enabling the e-filing of
Tax Deducted at Source (TDS) statements through its official web portal which is used
by taxpayers currently to file their electronic returns.
As per the norms in force at present, a taxpayer who files an e-return has to mandatorily send a copy of the same by post to the I-T department's Central Processing Centre (CPC) in Bengaluru.

However, in many cases the post would not reach the CPC and hence the tax department categorised the taxpayers return as null and void.
The department, sources said, wants to promote e-filing of I-T returns and it desires that e-filing should be "hassle free and sans any glitches", which will prompt more number of people to file their tax returns by this way. 

The I-T department is also bolstered by the fact that more and more number of people are opting to file their returns online. As per existing rules, the CPC, on receipt of the posted 'ITRV', sends an electronic acknowledgement to the tax return filer. The problem arises when the document sent by post does not reach the CPC because of lapses on the part of the taxpayer or some other reason.

 (Financial Express)

Sec 35CCC – Expenditure on Notified Agricultural Extension Projects


ELIGIBLE ASSESSEE: Any (i.e Individual,Firm,Company etc)
APPLICABILITY – Where an assessee incurs any expenditure on agricultural extension project notified by the Board in this behalf in accordance with the guidelines as may be prescribed, then, there shall be allowed a deduction on such expenditure.
AMOUNT OF DEDUCTION – The assessee shall be allowed a deduction equal to 150 per cent or one and one-half times of such expenditure.
NATURE OF EXPENDITURE – The deduction shall be allowed for expenditure incurred on Extension of Agricultural Projects.
NON – ALLOWABILITY – If the assessee has already claimed any deduction for any assessment year, in the respect of expenditure as incurred above, then the assessee shall not be allowed any further deduction for the same or any other assessment year

Section 54F requires only the assets to be purchased within specified time, date of booking / payment not relevant

Shri Gopilal Laddha V/s. ACIT (ITAT Bangalore), I.T. A. No.1356/Bang/2012, Date of Pronouncement: 31.10.2013

Authorized Representative submitted that as per section 54F(1), the only condition required to be satisfied for the assessee to avail the exemption thereunder was that the assessee should within a period of one year before or two years after the date of transfer, purchase or within a period of three years construct a residential property. It is submitted by the learned Authorised Representative that there is no dispute with regard to the fact that the assessee received compensation of Rs.84,61,701 as compensation for acquisition of the land i.e. the old asset acquired for the Bangalore Metro on 21.7.2008. The learned Authorised Representative further submitted that there was also no dispute with regard to the fact that the assessee acquired a residential flat at Gokulam, Kanakpura Road, Bangalore for Rs.50,98,720 by registered sale deed dt.11.9.2008 and therefore has satisfied the conditions required for being allowed exemption u/s.54F of the Act as claimed at Rs.46,11,166. The learned Authorised Representative contended that since various courts have held that the only condition to be satisfied is that the new residential property should be purchased within the specified period of one year before or with two years after the sale of the old capital asset, which has been done by the assessee in the case on hand, the assessee is entitled to be allowed exemption under section 54F of the Act. The issues raised by the authorities below to deny the assessee the said exemption u/s.54F viz. (i) that the booking for the said flat was made by the assessee on 19.1.2006; (ii) that a loan of Rs.40 lakhs was taken from Syndicate Bank on 24.5.2006 towards investment in the said flat being more than one year, prior to sale acquisition of the said property on 21.7.2008, the learned Authorised Representative submits, is not material, since the assessee has acquired the new property i.e. ;the flat, only on 11.9.2008 by Registered Sale beed and not before that. The learned Authorised Representative submits that all acts by the assessee to book the said flat in 2006 and availing of housing loan for investing therein in 2006 do not confer ownership of the said property in the said flat. In this view of the matter, the assessee prays that he is entitled to be granted exemption u/s.54F of the Act as claimed by it. In support of the assessee’s claim for deduction u/s.54F of the Act, the learned Authorised Representative inter alia relied on the following judicial pronouncements -


(i) CIT V Arvinda Reddy T N (1979)120 ITR 46.

(ii) ITO V K C Gopalan (2000)107 Taxman 591 (Kar)

(iii) Fatima Bai V ITO (2009) 32 bTR 243 (Kar).


There is no dispute that the LTCG on this transaction is Rs.76,80,240. How the Assessing Officer on examination of the assessee’s claim for exemption under section 54F of the Act, restricted the assessee’s claim from Rs.46,11,166 to Rs.6,23,433 for the reasons that :-

(i) though the asset i.e. the flat was purchased by the assessee by Regd. Sale beed dt.11.9.2008, the booking was made on 9.1.2006 and

(ii) a Housing Loan of Rs.40 lakhs was taken from Syndicate Bank on 24.5.2006 which was invested in the said property before 31.3.2007

We do not agree with the view of the authorities below that both these investments amounting to Rs.44,70,852 being made more than one year prior to the date of receipt of compensation of Rs.84,61,701 for the asset, on 21.7.2008, the assessee would not be eligible for exemption under section 54F of the Act to the extent claimed but only for Rs.6,23,133. In our view, the amounts paid by the assessee on booking of the asset i.e. flat at Gokulam, Kanakpura Road on 9.1.2006 and the housing loan of Rs.40 lakhs availed from Syndicate Bank for investment in the purchase thereof have not vested the assessee with ownership of the new asset. The assessee has been vested with the ownership of the new flat at Gokulam, Kanakpura Road only by virtue of the Registered Sale beed dt.11.9.2008. In this view of the matter, we find that the authorities below have erred in restricting the exemption under section 54F of the Act to Rs.6,23,433. Rather, we are of the view that the assessee is entitled to exemption under section 54F of the Act to the extent of Rs.46,11,166 as claimed by it and the net LTCG on sale of the above property would be Rs.30,41,414 as given in the revised computation of LTCG (supra). The Assessing Officer is directed to allow the assessee exemption under section 54F of the Act accordingly.

Saturday 22 March 2014

Rate of exchange of conversion of each of foreign currency wef 21st March, 2014


NOTIFICATION NO.24/2014-CUSTOMS (N.T.), DATED THE 20th March, 2014
S.O. (E). – In exercise of the powers conferred by section 14 of the Customs Act, 1962 (52 of 1962), and in super session of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.15/2014-CUSTOMS (N.T.), dated the 6th March, 2014 vide number S.O.694 (E), dated the 6th March, 2014, except as respects things done or omitted to be done before such super session, the Central Board of Excise and Customs hereby determines that the rate of exchange of conversion of each of the foreign currency specified in column (2) of each of Schedule I and Schedule II annexed hereto into Indian currency or vice versa shall, with effect from 21st March, 2014 be the rate mentioned against it in the corresponding entry in column (3) thereof, for the purpose of the said section, relating to imported and export goods.
SCHEDULE-I
S.No.Foreign CurrencyRate of exchange of one unit of foreign currency equivalent to Indian rupees
(1)
(2)
(3)
               (a)
                (b)


(For Imported Goods)
  (For Export Goods)
1.
Australian Dollar
55.85
54.50
2.
Bahrain Dinar
167.10
157.90
3.
Canadian Dollar
55.10
53.75
4.
Danish Kroner
11.55
11.15
5.
EURO
85.65
83.65
6.
Hong Kong Dollar
7.95
7.80
7.
Kuwait Dinar
223.75
211.35
8.
New Zealand Dollar
52.95
51.45
9.
Norwegian Kroner
10.25
9.95
10.
Pound Sterling
102.45
100.20
11.
Singapore Dollar
48.60
47.55
12.
South African Rand
5.80
5.45
13.
Saudi Arabian Riyal
16.80
15.90
14.
Swedish Kroner
9.70
9.40
15.
Swiss Franc
70.35
68.60
16.
UAE Dirham
17.15
16.20
17.
US Dollar
61.75
60.75
  SCHEDULE-II
S.No.Foreign CurrencyRate of exchange of 100 units of foreign currency equivalent to Indian rupees
(1)
(2)
(3)
(a)
(b)


(For Imported Goods)
  (For Export Goods)
1.
Japanese Yen
60.55
59.10
2.
Kenya Shilling
73.00
68.85
 [F.No.468/01/2014-Cus.V]
 (Akshay Joshi )
Under Secretary, Government of India

Friday 21 March 2014

Service Tax on Rent-A-Cab Service




Definition and Scope of Rent-A-Cab Service

 What is Rent- A-Cab Service?
Rent-A-Cab Service means renting of any motor vehicle designed to carrypassengers!!!

 What??? I haven’t heard or read such a definition anywhere?
Correct, but let me explain – As per Finance Act, 1994 the relevant definitions contained in Section 65 are as follows:
Section 65(105)(o) – ‘taxable service’ means any service provided or to be provided “to any person, by a ‘rent-a-cab scheme operator’ in relation to the renting of a cab.”
Section 65(91) – “rent-a-cab scheme operator means any person engaged in the business of renting of cabs.”
Section 65(20) – “Cab means –
(i) a motor cab, or
(ii) a maxi cab, or
(iii) any motor vehicle constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward:
Provided that the maxi cab referred to in sub-clause (ii) or motor vehicle referred to in sub-clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of cab.”

Section 65(71) read with Section 2(25) of Motor Vehicle Act, 1988, “motor cab means any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward.”
Section 65(70) read with Section 2(22) of Motor Vehicle Act, 1988, “maxi cab means any motor vehicle constructed or adapted to carry more than six passengers but not more than twelve passengers excluding the driver for hire or reward.”
Section 65(73) read with Section 2(28) of Motor Vehicle Act, 1988, “motor vehicle or vehicle means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty-five cubic centimetres.”
However, as per Notification No. 20/2012-ST dated 05-06-2012, the provisions of Section 65 shall not apply with effect from 01-07-2012. It means, in the Negative List regime, the definitions contained in Section 65 are no longer applicable for service provided or agreed to be provided on or after 01-07-2012. The new definitions are contained in section 65B of the Finance Act, 1994 which do not define ‘Rent-A-Cab’ or any similar service.

How rent-a-cab service has been defined at Answer to Q. 1.1 above?

For the purposes of abatement and reverse charge mechanism, the service of ‘renting of motor vehicle designed to carry passengers’ has been specifically provided. And as per rules of interpretations under section 66F(2), where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. So, the definition given at answer to Q.1 is not the statutory definition, but adopted for the sake of convenience to name such specific description. Also for payment of tax, the accounting code ‘00440048’ of rent a cab operator service is the most appropriate code for such service.

Who are covered under rent-a-cab service?

Any person providing service of ‘renting’ of motor vehicle designed to carry ‘passengers’, which is not covered under the negative list u/s 66D and also not exempted vide Notification No.25/2012-Service Tax, dated the 20th June, 2012 is covered in the description of rent-a-cab service. It can be clearly seen that renting of any motor vehicle (and not just a cab/taxi) is included. It means it includes renting of motor cars, motor cabs, maxi cabs, mini buses, buses and all other motor vehicles which are designed to carry passengers, irrespective of its passenger carrying capacity. The more meaningful description of this service could be ‘Rent-A-Passenger Vehicle Service’ which is not provided in the listed services. Also note that the vehicles like truck, trailer, dumper, etc designed to carry goods are not covered by this description.

It is pertinent to mention that as per declared service u/s 66E(f), the levy of service tax is attracted on transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods. This is because any transfer of right to use goods is considered as ‘deemed sale’ as per Article 366(29A) of the Constitution of India and the Central Government is not empowered to levy service tax on such transactions. However, almost all the state governments have levied VAT on such deemed sale. It means that any such activity of renting, hire, lease, licence, etc would attract service tax or VAT, which are mutually exclusive, depending on transfer of right to use as per facts and circumstances of each transaction and based on judicial precedents.

The Hon’ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd. held that ‘transfer of right to use goods’ involves transfer of possession and effective control over such goods, but mere transferof custody along with permission to use or enjoy such goods, per se, does not lead to transfer of possession and effective control. This being a completely different and vast subject in itself, the author does not wish to elaborate more of it here.

What is the meaning of ‘renting’?
As per Section 65B(41), “renting means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property.”
The term renting has been defined above in the context of renting of immovable property and the same definition can’t be imported to interpret ‘renting of motor vehicle’. Hence, renting has to be given its general and common usage meaning in the context of motor vehicles. The meaning of ‘rent’ as per Oxford Dictionary is: (i) “Pay someone for the use of (something, typically property, land, or a car).” (ii) “A sum paid for the hire of equipment.”

 Whether ownership of the vehicle is a pre-requisite?
No. Even the erstwhile statutory definition of ‘rent-a-cab scheme operator’ uses the words ‘renting of cabs’ and does not stipulate that the cab must be owned by the operator.
a) In case of Transport Solutions Group Vs. CCE (2006), the Tribunal, Mumbai held that there is no requirement for a rent-a-cab scheme operator to own the vehicles which are rented out.
b) In case of Ghanshyam Transport Vs. CCE (2009), it was held that if a person is engaged inbusiness of engaging taxis for customers and giving them services without even owning or plying vehicle, service tax is payable under ‘Rent-a-cab scheme operators’ service.
In the negative list regime, any service other than in negative list or exempted is a taxable service. An operator can take a vehicle on rent and then rent it out to a third party; he will be treated as a rent-a-cab operator. Similarly, the owner of the vehicle in such situation will also be treated as rent-a-cab operator when he renders service of renting of motor vehicles.

 Whether service tax is attracted when the customer hires the vehicle on per KM rate basis, agreeing to some minimum fare and where the driver as well as the fuel is provided by the service provider?
Prior to 01-07-2012, i.e. in the positive list approach of taxation, various courts held that such services are in the nature of ‘transportation service’ provided to the customer wherein neither the possession, not the control has been given to the customer and service tax not attracted.
a) In the case of Kuldip Singh Gill Vs. CCE [2006(3) STR 689], [STO-2005-CESTAT-324] has observed that the vehicle running on Kilometre basis are not liable to service tax.
b) In the case of RS Travels Vs. CCE [2008 (12) STR 27] [(2008) 15 STT 437 (New Delhi – CESTAT)], where the Tribunal observed that the cab operator providing cab with driver for going from one place to another either on Kilometre basis or lump sum basis based on the distance is that of a transportation service and observed that no service tax is payable as the control over the vehicle is with the rent-a-cab operator. Similar view was taken in the case of Surya Tours & Travels Vs. CCE [2008 (10) TMI 123 – CESTAT, NEW DELHI].
c) Further, in the case of Cochin International Airport Prepaid Taxi Operators Co-op society[2008 (16) STT 190], the Tribunal held that a co-operative society formed by taxi drivers playing to and for airport cannot be considered as operating tours in a tourist vehicle for purpose of levy of service tax.
However, all these judgement are with respect to ‘rent a cab scheme operator’ service which had a statutory definition u/s 65(91) and is no more applicable in the negative list regime. In author’s view, all such services which were earlier termed as ‘transportation service’ are now liable to service tax as rent-a-cab service.


 NEGATIVE LIST
What types of Rent-A-Cab services are not taxable?
The service of transportation of passengers with or without accompanied belongings by a stage carriage; and metered cabs, radio taxis or auto rickshaws are covered in the negative list, hence not taxable.
As per Section 65B(40) “stage carriage means a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey”
As per Section 65B(32) “metered cab means any contract carriage on which an automatic device, of the type and make approved under the relevant rules by the State Transport Authority, is fitted which indicates reading of the fare chargeable at any moment and that is charged accordingly under the conditions of its permit issued under the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under”
The term ‘radio taxi’ has neither been defined in the Finance Act, 1994 nor in the Central Excise Act, 1944 or in any rules framed there under. However, the intention could be to exempt radio taxis operated by operators who obtained licence under any scheme, in this behalf, framed by the state government u/s 74 and other provisions of the Motor Vehicle Act, 1988. In general, but not necessarily, the main features of radio taxis are:
The vehicle should be fitted with electronic fare meters on the front panel.
The vehicle should be fitted with GPS/GPRS based tracking devices which must be in constant communication with the Central Control unit while the vehicle is on duty.
The vehicle should be equipped with a mobile radio fitted in the front panel for communication between driver and the main control room of the licensee.
On the roof of the vehicle there should be an LCD board to display that the vehicle is a radio taxi.
The scheme may provide for minimum fleet size, say 100 cabs for making application for licence under the scheme.
The scheme may also prescribe the manner in which the fare is to be charged.


EXEMPTION
Whether ambulance service provided by hospitals is exempted?
Yes, as per entry no. 2 of mega exemption Notification No. 25/2012-ST dated 20-06-2012, health care services, which include services by way of transportation of patient to and from a clinical establishment is exempted. Also, as per clarification given by CBEC vide Letter F. No. 334/1/2007- TRU dated 28-02-2007, ambulances are not meant for carrying passengers for hire or reward. Hence, service tax liability does not arise on renting of ambulances.
Whether services provided to an educational institution including schools, colleges and universities by way of transportation of students, faculty or staff is exempted?
Yes, as per entry no. 9 of mega exemption Notification No. 25/2012-ST dated 20-06-2012, auxiliary educational services, which include services relating to transportation of students, faculty or staff of such institution is exempted.
Whether services provided by an educational institution including schools, colleges and universities by way of transportation of students, faculty or staff is exempted?
The exemption was given under the above entry no. 9 which has been withdrawn w.e.f. 01-04-2013. However, as per entry no. 23 of mega exemption Notification No. 25/2012-ST dated 20-06-2012,service of transport of passengers, with or without belongings, by a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire is also exempted.
As per section 2(7) of the Motor Vehicles Act, a “contract carriage means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether express or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorized by him in this behalf on a fixed or an agreed rate or sum–
a) On a time basis, whether or not with reference to any route or distance; or
b) From one point to another;
And, in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes

a) A maxi cab; and
b) A motor vehicle notwithstanding that separate fares are charged for its passengers.”
The essential ingredient of a contract carriage is that it plies under a contract for a fixed set of passengers, and does not allow any other passenger to board or alight from the carriage at will. The transportation service provided by educational institutions is in the nature of contract carriage and hence exempted. Moreover, this exemption is not restricted to educational institutions but can be availed by any ‘contract carriage’.

Whether any other exemption is also available?
As per entry no. 22 of mega exemption Notification No. 25/2012-ST dated 20-06-2012, services by way of giving on hire – (a) to a state transport undertaking (as defined in section 2(42) of Motor Vehicle Act, 1988), a motor vehicle meant to carry more than twelve passengers; (b) to a goods transport agency, a means of transportation of goods; is exempted.

REVERSE CHARGE MECHANISM
When is Reverse Charge Mechanism – RCM applicable for Rent-A-Cab Service?
As per Section 68(2) of the Finance Act, 1994, the Central Government is empowered to notify such services on which the liability of pay service tax shall be on the service receiver to the extent specified, instead of service provider. The Central Government has issued Notification No. 30/2012-ST dated 20-06-2012 and RCM is also applicable on Rent-A-Cab service if all the following conditions are fulfilled:


Illustrations under various situations to show whether reverse charge mechanism is applicable or not, assuming that both the service provider and service receiver are located in the taxable territory.
 st on rent cab 2


ABATEMENT
When is abatement available for Rent-A-Cab Service?
As per Sr. No. 9 of Notification No. 26/2012-ST dated 20-06-2012, abatement of 60% is available on Rent-A-Cab Service i.e. service of renting of any motor vehicle designed to carry passengers. It means service tax is payable on only 40% of the value of Rent-A-Cab service. The abatement is subject to the condition that the Cenvat Credit of inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of Cenvat Credit Rules, 2004. If the service provider avail cenvat credit on any input, capital good or input service, used for providing rent a cab service, then abatement is not available.

CENVAT CREDIT
Whether Cenvat Credit is available on Rent-A-Cab Service?
The Hon’ble Karnataka High Court in the case of CCE Vs. Stanzen Toyotetsu India (P) Ltd.[(2011) 32 STT 244 (Kar.)] held that the transportation/Rent-a-Cab service is provided by the assessee to their employees in order to reach their factory premises in time which has a direct bearing on manufacturing activity. In fact, the employee is also entitled to conveyance allowance which would form part of his condition of service. Therefore, by no stretch of imagination it can be construed as a welfare measure by denying the availment of Cenvat credit to the assessee for providing transportation facilities as a basic necessity which has a direct bearing on the manufacturing activity. This decision was again followed by the same court in the case of CCE Vs. Tata Auto Comp Systems Ltd. CEA No. 132 of 2009.
But, w.e.f. 01-04-2011, the Central Government has amended the definition of ‘input service’ under Rule 2(l) of Cenvat Credit Rules, 2004 vide Notification No. 3/2011 – CE(NT) dated 01-03-2011 and again vide Notification No. 18/2012 – CE(NT) dated 17-03-2012 (w.e.f. 01-04-2012). The effect of the amendment is that rent-a-cab service has been specifically excluded from the definition of ‘input service’ and hence cenvat credit is generally not available. Cenvat Credit is available only when rent a cab service could be related to a motor vehicle which is capital good for them. In other words, when a motor vehicle designed to carry passengers including their chassis, registered in the name of provider of service, when used for provided output service of- (i) transportation of passengers; or (ii) renting of such motor vehicle; or (iii) imparting motor driving skills, then cenvat credit can be availed.


EFFECTIVE RATE OF SERVICE TAX
-What is the effective rate at which service tax is payable by Service Provider?
-What is the effective rate at which service tax is payable by Service Receiver?
The service receiver shall pay service tax @ 4.944% (i.e. 12.36% of 40% Value) only when reverse charge is applicable. His liability to pay service tax is not affected by cenvat credit availed or not availed by the service provider. When RCM is not applicable, service receiver is not required to pay any tax.

Below is the Flow Chart of effective rate of service tax payable by service provider and service recipient under various situations:
POINTS TO NOTE:
-When the service provider has not availed any cenvat credit, i.e. when abatement is available, then the service tax is payable @ 4.944% either by provider or receiver depending of applicability of RCM.
-When the service provider has availed any cenvat credit, i.e. when abatement is not available, then the total service tax is payable @ 12.36% by provider or jointly with receiver depending of applicability of RCM.
-As far as service receiver is concerned, he shall pay @ 4.944% only, irrespective of abatement, only when RCM is applicable.

Thursday 20 March 2014

TDS


Nowadays delay in payment of TDS and in TDS return Filing makes an assessee liable to Late Payment Interest, Late Payment Penalty, Late Filing Fees, Late Filing Penalty and Further makes him liable to prosecution under the provision of the Income Tax Act, 1961. In this article we are discussing some of these provisions which makes it clear that TDS cannot be taken lightly and we should take utmost care in timely payment of TDS and filing of TDS return.
TDS payment and Return Filing
The provision of TDS is getting stringent and from now it is becoming very necessary for all to comply the same and understand the importance of TDS.
As per the provision of TDS is to be deducted on payment or credit whichever is earlier. So for e.g. If bill date is 15/4/13 amounting to 25000/- but advance payment is made on 05/04/2013 amounting to Rs. 85,000/- than TDS has to be deducted on 85,000/- on 05/04/2013 and to be paid either on same day or next day. Though the due date of payment is 7th of next month but that is not to be considered as due date, it is just grace days provided by department for the convenience of the assessee. Hence as soon as you deduct TDS it has to be paid. Even if we pay the TDS on 7th,the challan would get process with 24-48 hours as per banking terms. Hence as per Income tax department the date would not be considered as 7th but it would 8th or 9th as per the bank processing. Hence late payment interest would be charged for 2 months i.e. from date of deduction to date of payment.
If TDS is paid after 7th, Interest is charged at 1.5% p.m. (18% p.a.) from date of deduction till date of payment. For e.g. if TDS is deducted on 15th April and paid on 9th May than interest would be calculated for 2 months i.e. April and May. Hence, it is advisable to pay TDS on date of deduction itself rather than waiting for 7th of next month for payment. It is from now compulsory to pay online TDS for all assessee whose payment exceeds Rs. 1,00,000/- for the whole year. Hence if the assessee does not have online payment facility kindly get the same.
The chart for payment of TDS is as follows:
S. No.ParticularsDue Date
1Tax         Deductible             in
March
30th April
2Other Months and Tax opted to be deposited by the employer7th of next month
Even if PAN is incorrect, TDS @ 20% needs to be deducted. Hence, always take PAN copy of the party and file return. Now, only 2 digits and 2 letters of PAN are allowed to be changed in revised return which would cause more difficulties as if whole PAN is in correct it would be difficult to change the same. Hence from now it is advisable that PAN copies is taken from all clients and then send all details.
The due date of filing of TDS return is as follows:
QuarterForm Nos. 24Q & 26QForm No. 27QForm No. 27EQ
April to June15 July15 July15 July
July to September15 October15 October15 October
October to December15 January15 January15 January
January to March15 May15 May15 May
Late filing consequences


Fees for delay in furnishing the statements: (refer section 234E of Income Tax Act) Effective from 1st July 2012, any delay in furnishing the eTDS statement will result in a mandatory fees of Rs. 200 per day, the total fees should not exceed the total amount of TDS made for the quarter. The late filing fee should be paid before filing such delayed eTDS statement.
Penalty for failure to furnish statements and furnishing incorrect statements: (refer section 271H of Income Tax Act)
Failure to file eTDS statement delaying more than an year or furnishing incorrect details in the statement filed like PAN, Challan and TDS Amount etc, will result in a penalty ranging from Rs. 10,000 to one lac.
Due date for furnishing TDS certificate to the employee or deductee or payee is revised as under :
Sl. No.CategoryPeriodicity of furnishing TDS certificateDue date
 1.Salary                  (Form
No.16)
AnnualBy 31st day of May of the financial year immediately following the financial year in which the income was paid and tax deducted
2.Non-Salary (Form No. 16A)QuarterlyWithin fifteen days from the due date for furnishing the ‘statement of TDS’


Failure to issue TDS certificate within the time allowed, attracts penalty of Rs. 100/- per day of default (Sec 272A(2)(g)). However, penalty will not exceed the amount of tax deductible or collectible, as the case may be.

As per Circular No. 01/2012 dated 09.04.2012, it mandatory for all deductors to issue TDS certificate in Form No. 16A after generating and downloading the same from TRACES website.
The TDS chart for the F.Y. 2013-14 is as below:
TDS Rate on Payment of Salary and Wages
Section 192 – Payment of Salary and Wages
TDS is deducted if the estimated income of the employee is taxable.
Criteria of Deduction: - Employer must not deduct tax on non-taxable allowances like conveyance allowance, rent allowance, medical allowance and deductible investments under sections like 80C, 80CC, 80D, 80DD, 80DDB, 80E, 80GG and 80U.
No tax is required to be deducted at source if the estimated total income of the employee is less than the minimum taxable income (Rs. 2,20,000/- in case of Individual, HUF, AOP, BOD and AJP. Nil for others.)
TDS Rate - As per Income Tax, Surcharge and Education Cess rates applicable on the estimated income of employee for the year.
TDS Rates on Payments other than Salary and Wages to Residents (including domestic companies)
Section
For Payment of
On Payments Exceeding
Individual/HUF
Others
193Interest on DebenturesRs. 5000/-10%10%
194Deemed DividendNo minimum10%10%
194 AInterest other than on securities by banksRs. 10000/-10%10%
194 AInterest other than on securities by othersRs. 5000/-10%10%
194 BWinnings from Lotteries / Puzzle / GameRs. 10000/-30%30%
194 BBWinnings from Horse RaceRs. 5000/-30%30%
194 C (1)Payment to ContractorsRs. 30000/- for single payment
Rs. 75000/- for aggregate
payment during Financial Year
1%2%
194 C (2)Payment to Sub-Contractors / for Advertisements
194 DPayment of Insurance CommissionRs. 20000/-10%10%
194 EEPayment of NSS DepositsRs. 2500/-20%NA
194 FRepurchase of units by Mutual Funds / UTIRs. 1000/-20%20%
194 GCommission ons Sale of Lottery ticketsRs. 1000/-10%10%
194 HCommission or BrokerageRs. 5000/-10%10%
194 IRent of Land, Building or FurnitureRs. 180000/-10%10%
Rent of Plant & MachineryRs. 180000/-2%2%
194 IA Transfer of Immovable Property (w.e.f. 01.06.2013)Rs. 50 lacs1%1%
194 JProfessional / technical services, royaltyRs. 30000/-10%10%
194 J (1)Remuneration / commission to director of the company-10%10%
194 J (ba)Any remuneration / fees / commission paid to a director of a company, other than those on which tax is deductible u/s 192.-10%10%
194 LCompensation on acquisition of Capital AssetRs. 100000/-10%10%
194 LACompensation on acquisition of certain immovable propertyRs. 200000/-10%10%
Notes:
No surcharge or education cess is deductible / collectible at source on payments made to residents {Individuals / HUF / Society / AOP / Firm / Domestic Company) on payment of incomes other than salary or wages.
TDS at higher rate of 20% has to be deducted if the deductee does not provide PAN to the deductor.(section 206AA)
All persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain Tax Deduction or Tax Collection Account Number (TAN).

The following are the list of consequences of TDS: Consequences of TDS defaults

Failure to deduct taxes or wrong deduction of TDS (non deposit, short deposit or late deposit):

Failure to deduct tax at source201(1)Tax demandEqual to tax amount deductible but not deducted
201(1A)Interest@1 % p.m. of tax deductible
271CPenaltyEqual amount of tax deductible but not deducted
Failure to deposit tax at source201(1)Tax demandEqual to tax amount not deposited
 201(1A)Interest@1.5% p.m. of tax not deducted
 276BProsecutionRigorous imprisonment for a term for a minimum of 3 months which may extend to 7 years and with fine
Failure to apply forTAN No. u/s 203A272BBPenaltyRs. 10000
Failure to furnish prescribed statements u/s 200(3)272A(2)(k)PenaltyRs. 100 every day during which the failure continues subject to maximum of TDS amount
Failure to issue TDS certificate u/s 203272(A)(g)PenaltyRs. 100 every day during which the failure continues subject to maximum of TDS amount.
Failure      to      furnish statement                      of perquisite or profit in
lieu     of     salary     u/s
192(2C)
272(A)(i)PenaltyRs. 100 every day during which the failure continues subject to maximum of TDS amount
Failure to mention PAN of the deductee in the TDS statements and certificates272BPenaltyRs. 10000
Now we can even get the refund of excess TDS paid by us in the following manner:
GUIDELINES- REQUEST FOR REFUND
It is mandatory to register digital signature on TRACES to submit the refund request.
Request for refund can be submitted only if there is no outstanding demand against the TAN. Refund request can be submitted after total outstanding demand is closed.
A refund request can contain maximum of five challans. For claiming more challans, submit new request. Maximum refund amount will be the minimum challan balance amount in the challan history.
Available amount per challan must be greater than Rs.100/- Ensure that all statement in which the challan has been claimed have been processed before claiming refund for the challan.