Welcomes you all

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Welcomes you all
03.03.2005
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Budget 2005
By swamy associates chennai coimbatore
bangalore - hyderabad
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SERVICE TAX
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SSI - For Service Tax
No service tax for the first realisation of Rs.4
Lakhs in a Financial year. (Exemption Limit
Rs. 4 Lakhs) If the value of taxable services
rendered during the preceding financial year is
less than Rs.4 Lakhs. (Eligibility limit of
Rs.4 lakhs)
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Other conditions ...
No Cenvat Credit can be availed in respect of the
input services, used for rendering the taxable
service, for which the exemption is claimed.
No Cenvat credit can be availed in respect of
the inputs and capital goods, received during the
period, in which exemption is availed.

• Why restriction on capital goods?

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Other conditions ...
At the time of claiming this exemption, credit
already availed, in respect of the inputs
lying in stock or in process, shall be paid back.
Balance credit, if any shall lapse. It
cannot be used for any other purpose also. (Eg.
Payment of excise duty on final
products). Exemption not entitled, if service is
rendered under the brand name of another person.
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Other conditions ...
Exemption limit to be calculated, by taking
into account all services and all premises.
Exemption limit, not to include the value of
taxable service, which is exempted from the
levy of service tax. Eligibility limit to be
calculated, by taking into account, all
premises.
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F Practical issues
Value of taxable service, during preceding
financial year. Premises I Service
A Rs.1,00,000. Service B Rs.1,25,000. Prem
ises II Service A Rs.75,000. Service
C Rs.1,50,000. Not entitled.
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F Practical issues
Am rendering two categories of taxable
services. Can I avail the exemption for one
service and pay service tax on one service?
No. While
calculating the exemption limit, the service on
which you are paying service tax will also be
considered together.
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F Practical issues
2004-2005 Total
value of taxable service rendered Rs.3,50,0
00 Service Tax thereon Rs.35,000 Realisation
during 2004-05 Rs.3,00,000 Service Tax
paid Rs.30,000 Outstanding
amount Rs.50,000 Service tax
payable Rs.5000
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F Practical issues
2005-2006 Availed
exemption for fresh realisations Rs.3,50,000
Outstanding amount, now realised Rs.50,000
Service tax realised thereon Rs.5000. This
should also be included in the exemption limit,
since consecutive payments have to be considered
together. As such, the exemption limit gets
saturated, though exemption is availed only for
Rs.3,50,000.
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If the collected service tax is not paid, Section
11 D will be attracted. Any solution in sight?
Ask the debtor, to pay only the value and not
service tax! Ask the debtor, not to pay, until
you exhaust your exemption limit!

• Is that all practically possible?

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GTA SSI
Goods Transport Agency is entitled to claim this
exemption, whenever it is liable for payment of
service tax, by itself. Persons availing the
benefit of GTA and are liable for payment of
service tax, are not entitled to clam this
exemption. All those who are liable for
payment of Service Tax under Section 68 (2), are
not entitled for claiming this exemption.
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GTA SSI
When a GTA claims this exemption, the value of
taxable service, for which the consignor /
consignee have paid service tax, shall not be
taken into account, while determining the
exemption limit.
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GTA SSI
Calculation of eligibility limit for GTA. -
Value, in respect of which the consignor /
consignee have paid service tax, shall also be
taken into account. - Values, which are
exempted, being less than Rs.1500 / Rs.750, as
the case may be need not be taken into account.
- If service tax is paid on 25 of the
freight, only the said 25 shall be taken into
account.
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Fresh levies
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a) Transport of goods, other than water, through
pipeline or conduit. b) Site formation and
clearance, excavation, earthmoving, demolition,
including, i) drilling, boring and core
extraction ii) soil stabilisation iii)
horizontal drilling iv) land reclamation etc.
But does not include services in relation to
agriculture, irrigation, watershed development
and drilling, digging, repairing, renovating or
restoring of water sources or water bodies.

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c) Dredging of rivers, port, harbour, backwater
or estuary. d) Survey and map making. e)
Cleaning services - including specialised
cleaning - of commercial or industrial
buildings / premises factory, plant
or machinery, tank or reservoir of such
commercial / industrial buildings. Exclusion
agriculture, horticulture, animal husbandry or
dairying/
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f) Services by clubs or associations, to its
members, in relation to provision of services,
facilities or advantages. Exclusion - Body
constituted under any law. - trade unions,
promotion of agriculture, horticulture or animal
husbandry. - charitable, religious or political.
- associated with press or media. g)
Packaging - manufacture excluded.
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h) Mailing list compilation and mailing. i)
Construction of residential complexes, having
more than 12 units.

• All new levies to be effective, after the
• enactment of the Finance Act, 2005

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Withdrawal of levy
Services rendered by authorised service stations,
in respect of Light Motor Vehicles.
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Expansion of existing levies ...
Services rendered by authorised service stations
To cover reconditioning and restoration also.
Scope of broadcasting services, expanded.
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Beauty Parlour to cover hair cutting, hair dyeing
and hair dressing. Hair dyeing continue to be
exempted under Notification 11/2002 Dt.
01.08.2002.
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Business Auxiliary Service. production of
goods on behalf of the client replaced with
production or processing of goods for, or on
behalf of the client. Commission agent is
defined in the Act itself.
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Commercial or industrial construction. Expanded
to cover Construction of pipe line or
conduit. Completion and finishing services also,
such as painting, carpentry, wall covering, etc.

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Erection, Commissioning or Installation. Expanded
to cover Installation of specific items,
like electrical or electronic devices, plumbing,
heating, ventilation, air conditioning,
insulation, life, escalator, etc.
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Maintenance or repair service. Expanded to
cover Services provided under any contract or
agreement, as against maintenance contract or
agreement. Reconditioning and restoration
added. Maintenance or management of immovable
property is covered.
Roadside repair shops, to be covered?
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Labour contractors to be covered under manpower
recruitment or supply agency. Canteens in
factories, etc. covered under outdoor catering
service. Scope of sound recording expanded.
Scope of video production expanded.
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Other important changes
Service to be provided is also taxable service.
As a result, service tax is payable even on
advance receipts. Service rendered by a foreign
person, to an Indian recipient is deemed to be a
taxable service. Defence of service rendered
outside India - can no longer be pleaded.
Adjudication procedures streamlined.
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Other important changes
Centralised Registration Procedure streamlined.
Invoice has to be raised by the service
provider, within 14 days of completion of service
or receipt of payment, whichever is earlier.
Due date for payment of service tax made as 5th
of succeeding month / quarter. Effective from
01.04.2005.
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Exemption to Business Auxiliary service
Production of good on behalf of client (Not
production or processing of goods for or on
behalf of the client). - Raw materials or
semi-finished goods should be supplied
by the client. - Goods produced, to be returned
to the client. - Client shall use it in or in
relation to manufacture of goods, on which
appropriate duty of excise is payable.
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Exemption to Business Auxiliary service

• What if the job worker also uses his own raw
  materials / consumables?
• What if the job worker directly removes the
  processed goods, as directed by his client?
• What if the job work is done for a SSI unit?

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THANKS
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Swamy associates 21/8 Rams Flats Ashoka
Avenue Directors Colony Kodambakkam Chennai 600
024. Ph 044-24811147 Fax [phone]
Swamy associates 4 E Radhekrishna Apartments 33
Sarojini Street Ram Nagar Coimbatore 641 009 Ph
0422-5377669 Fax [phone]
Swamy associates 493 17th G Main 6th
Block Koramangala Bangalore 560 095. Ph
080-51303434
Swamy associates H.No.3-6-659, Flat No.3C Anushka
Enclave Street No. 9 Himayat Nagar Hyderabad -
500 029. Ph 040 - 55526879