TIOL-DDT 1595
26.04.2011
Tuesday

CENTRAL Government has issued a notification in exercise of the powers conferred by clauses (A) and (B) of section 71 of the Finance Act appointing May 1, 2011 as the date on which the provisions of the said Act shall come into force.

Unfortunately, the Government has not realized that after enactment of Finance Bill 2011 into Finance Act, 2011 on April 8, 2011, there is a renumbering of the sections. In the process, section 71 of Finance Bill 2011 was renumbered as section 74 and this Notification should have been issued invoking clauses (A) and (B) of section 74 of the Finance Act, 2011 and not section 71 as mentioned therein.

Section 71 of the Finance Act deals with amendment of Rule 3 of the CENVAT Credit Rules!

Now Government has to come out with an amendment or a corrigendum to set right this numbering fiasco that crept into this life giving Notification for new services and other amending provisions of Finance Act, 1994. Otherwise, the new services cannot really come into force on May, 1, 2011.

Notification No. 29/2011 - ST., Dated: April 25, 2011

Exemption to Services provided by Clinical Establishments

CENTRAL Government has provided exemption to taxable service referred to section 65(105)(zzzzo) of Finance Act, 1994 from the whole of levy of service tax. The exemption is effective from May 1, 2011.

It may be noted that by virtue of Finance Act, 2011, the text of clause (zzzzo) was completely replaced and the phrase ‘clinical establishment' is defined in terms of the newly amended sub-section 25a of section 65 of Finance Act, 1994.

Notification No. 30/2011 - ST., Dated: April 25, 2011

Exemption to Accommodation Service provided by Hotel, Inn etc

CENTRAL Government has provided exemption from the whole of levy of service tax on taxable service referred to in section 65(105)(zzzzw) of Finance Act, 1994 when the declared tariff for providing such accommodation is less than Rupees 1000 per day. This exemption is effective from May 1, 2011.

The Notification explains ‘declared tariff' for this purpose to include charges for all amenities provided in the unit of accommodation like furniture, air-conditioner, refrigerators etc but does not include any discount offered on the published charges for such unit.

Notification No. 31/2011 - ST., Dated: April 25, 2011

Representational services of CAs/CWAs/CSs taxable w.e.f from May 1, 2011

IN DDT 1562, we commented that “Incidentally as of now there is an exemption for CAs, Cost Accountants and Company Secretaries for representation work as per Notification No. 25/2006 - S.T DATED 13.07.2006. Most probably the government will withdraw this notification once the Finance Bill is enacted and lawyers' representation will become a taxable service. If they forget there will be a funny situation where the lawyers whose main job is to argue in courts will be taxed for their arguments while CAs will be exempted”

Now the Government is withdrawing this exemption with effect from May 1, 2011 which will bring CAs/CWAs/CSs on par with lawyers from May 1, 2011.

Notification No. 32/2011 - ST., Dated: April 25, 2011 Exemption provided for

Certain Commercial training & coaching services

CENTRAL Government has exempted from the whole of levy of service tax, ‘preschool coaching and training' and also ‘any coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognised by any law for the time being in force', provided by any commercial training or coaching centre. This exemption shall come into effect from May 1, 2011.

Also see our post Budget analysis story “Commercial Training or Coaching Service – Clarity of taxability only after issue of exemption notifications”.

Notification No. 33/2011 - ST., Dated: April 25, 2011

Abatement Rates Notified for Two New Services

NOTIFICATION No. 1/2006-ST dated 01.03.2006 is further amended to provide for abatement of 70% and 50% respectively for service provided by air-conditioned restaurants and accommodation service provided by hotels, inns etc.

Notification No. 34/2011 - ST., Dated: April 25, 2011

Rule 6 of Service Tax Rules Amended

IN Rule 6 of the Service Tax Rules, 1994, for the existing sub-rule (7A), the following sub-rule shall be substituted, namely,-

“(7A) An insurer carrying on life insurance business shall have the option to pay tax:

(i) on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service;

(ii) 1.5 per cent of the gross amount of premium charged from a policy holder in all other cases;

towards the discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V of the said Act:

Provided that such option shall not be available in cases where the entire premium paid by the policy holder is only towards risk cover in life insurance.”

This amendment will come into force from May 1, 2011 in the wake of amendment to section 65(105)(zx) of Finance Act, 2004.

Notification No. 35/2011 - ST. , Dated: April 25, 2011

Export of Services Rules and Import of Services Rules Amended

TAXABLE services as defined in clauses (zzzzv) and (zzzzw) of section 65(105) of Finance Act, 1994 are included in clause (i) of sub-rule (1) of Rule 3 of Export of Services Rules, 2005. After this amendment, for a Hotel or Restaurant, services are to be treated as export, if they are provided “in relation to immovable property situated outside India”. What does this mean? Hotel and restaurant services are provided to immovable properties?

Similarly, taxable services as defined in clauses (zzzzv) and (zzzzw) of section 65(105) of Finance Act, 1994 are included in clause (i) of sub-rule (1) of Rule 3 of Taxation of Services (Provided from Outside India and Received in India ) Rules, 2006.

Notification Nos. 36/2011 - ST., and 37/2011 - ST., Both Dated: April 25, 2011

Anti-Dumping Duty ‘extended' on imports of Silk fabric of weight 20 to 100 gms per metre

CENTRAL Government has extended anti-dumping duty on imports of silk fabric of weight 20 to 100 gms per metre, originating in, or exported from People's Republic of China till December 5, 2011 by amending Notification No. 121/2006-Cus dated December 26, 2006.

Notification No. 37/2011-Cus., Dated: April 21, 2011

Jurisprudentiol – Wednesday's cases

Income Tax

Income tax - Whether, for purpose of applying indexation of costs, year in which previous owner had acquired property is to be considered as relevant year for computing capital gains - YES, rules ITAT

THE issues before the Tribunal are - Whether, for the purposes of applying Indexation of costs, the year in which the previous owner had acquired the property is to be considered as the relevant year and whether in view of the fact that the fair market value has not been calculated in a fair manner, a reasonable estimate is justified to end the matter. Another question before the Bench is - Whether Department can take contrary stand for estimating FMV by enhancing the FMV when it is question of determination of sale consideration and by reducing the same when it is question of determination of LTCG. And the decision partly goes in favour of the assessee.

Service Tax

Service Tax – Liability to pay service tax on spare buses having spare bus permits – Carriages which run under public transport system where passengers have a right to board or alight according to their choice and pay fares for journey individually, do not fall under definition of ‘tourist vehicle’ under section 2(43) of Motor Vehicles Act: Madras High Court

THE petitioners filed Writ Petitions in the High Court which raises a common question as to whether the petitioner, a stage carriage operator having a spare bus permit is liable to be brought under the tax net for payment of service tax in respect of such spare bus.

Sales Tax

See our columns tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

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