THE CBEC has finally come out with the notifications regarding the new service coming into effect from today. While there is 75% abatement for transport of goods by Road and a 70 % abatement for transport by Rail, strangely there is no abatement for transport by waterways.

The levy of Service Tax on Rail and water transport was introduced in this budget to provide a level playing field. The Finance Minister in his Budget speech said,

In the goods transport sector, service tax is currently levied on transport of goods by road, by air, through pipelines and in containers. However, goods carried by Indian railways or those carried as coastal cargo or through inland waterways are not charged to service tax. In order to provide a level playing field in the goods transport sector, I propose to extend the levy of service tax to these modes of goods transport.

Service Tax - Transport of Goods by Rail – Several Items exempted

Several Items are exempted from Service Tax while transported by Rail. Some of them are:-

Defence/ military equipments; Railway equipments/ materials; Postal mail bags ; Relief materials meant for victims of natural or manmade disasters, calamities, accidents and mishap; Luggage of train passengers, Household effects; Parcels [including newspaper/magazines registered with Registrar of Newspapers] booked in the luggage vans; Food grains, flours and pulses, Chemical Manure, Gunnies, Oil cakes and seeds, Soap, Starch, Salt for industrial use, Sugar, Salt ,De-oiled cakes, Machinery and machine tools, Hides and Skins, Leather, Rubber and plastic, Electrical appliances and fittings, Empty drums, Jaggry , Jute, Milk and Milk products, Organic Manure, Paints and polishes

The mighty Indian Railways are in for a battle with the Indian Revenue. We spoke to several Railway officers who were either ignorant or arrogant about the new levy. Many officers told us that the Excise Department cannot levy any tax on Rail freight and the Rail Ministry is not going to agree to any such proposal.

We tried to argue with them that it is not a proposal, but THE LAW – many of them were not convinced.

Now there will be Summons issued to senior Railway officials.

DDT has come to know about an interesting incident. An Additional Commissioner level officer of the Railways called up a Commissioner of Central Excise when he was summoned by the Service Tax Assistant Commissioner. The Commissioner wanted to know from which batch the Indian Railways officer was. When he came to know that the Railway officer was junior to him, the Commissioner of Central Excise asked the Railway officer to call up the Additional Commissioner of Central Excise!

Instead of collecting Service Tax from every collecting point of the Railways, can the CBEC collect one consolidated amount from the Railway Board at the end of the year?

Notification No. 28/2009 - Service Tax: Dated 31st August, 2009

Service Tax – Transport of Goods by Rail – 70% abatement

Service Tax on transport of goods by Rail will get a 70 % abatement. Tax has to be paid only on 30% of the value of taxable services. Notification No. 1/2006 Service Tax, dated the 1 st March, 2006, is amended.

Notification No. 29/2009 - Service Tax: Dated 31st August, 2009

Service Tax – Water Transport – Several items exempted

These are some of the exempted items for transport of goods through national waterway, inland water and coastal shipping:

Fertilizer whether inorganic, organic or mixed; Petroleum and petroleum products; Hank yarn made wholly from cotton; Raw jute and jute textile; Seeds of food crops and seeds of fruits and vegetables; seeds of cattle fodder and jute seeds; Medicine/pharmaceutical products; Relief materials meant for victims of natural or manmade disasters, calamities, accidents and mishap; Defence/ military equipments; Luggage of passengers, whether carried as personal luggage in the ship or booked separately as consignment/ postal mail / mail bags/Household effects; Newspaper/magazines registered with Registrar of Newspapers

Notification No. 30/2009 - Service Tax: Dated 31st August, 2009

Service Tax – Un-notified Issues

While the Board has issued the last minute notifications for abatement and exemptions, there are still a couple of unresolved issues.

As raised in yesterday's DDT, “What will be the Small scale exemption limit for this financial year?” Will it be straight ten lakhs or will there be a proportionate reduction in the threshold limit?

Now what about the import and export of services with regard to cosmetic surgery and legal consultancy? If an Indian Law Firm is providing a consultancy service to a foreign firm, is it export or import of service?

One of our contributors asks,

“If a leading actress chooses to change the shape of her nose and she approaches a consultant in US and gets the surgery performed in the US, will she be liable to pay tax in India?”

Maybe the The Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 and Export of Services Rules, 2005 need amendments.

Has the Board forgotten about the existence of these Rules? Will the Board react? And while on that Notifications 17/09 ST and 18/09 ST both dated 7.7.2009 also need suitable amendments.

Pay Commission Arrears – CBDT's Pound of Flesh

The Babus are ready to get their second instalment of the VI Pay Commission Arrears and this is going to be 150% of the arrears they got last year. Now you don't have access to all the money – there's the taxman who wants his share.

Yesterday the CBDT issued a Circular advising the DDOs and PAOs to compute the correct tax liability of every employee on second instalment of arrears drawn by him and immediately recover the full tax liability along with education cess thereon at the rates in force. The deduction of tax at source on such arrear payment should not be deferred in any circumstance. They should further ensure that the tax so recovered is paid to the account of Central Government account immediately as per the Income Tax Rules, 1962. The DDOs / PAOs are further advised that they should ensure that the PAN details of the deductees (recipient of arrears) are correctly quoted in the relevant quarterly e-TDS returns filed by them so that the Government Servants get proper credit of their tax deducted in their respective income tax returns.

DDOs / PAOs who fail to comply with the provisions of Section 192 of the Income-tax Act, 1961 would be liable to pay interest under section 201(1) /( 1A ) of Income Tax Act along with other penal consequences.

CBDT Circular No. 6/2009: Dated 31st August, 2009

Exchange Rates for September 2009

The CBEC has notified the rate of exchange of conversion for Imported Goods and goods for Export for the month of September, 2009. Notification No. No. 102/2009-Customs ( N.T. ), dated the 29 th July, 2009 is superseded.

Notification NO. 125/2009- Cus .,( N.T. ), Dated: August 27, 2009

Tariff Value of Brass Scrap (All Grades) and Poppy Seeds increased

Government has increased the Tariff Value of Brass Scrap from US Dollars 3100 to 3235 per MT and the value of Poppy Seeds from 2830 to 3011 dollars.

NOTIFICATION NO. 131/2009-CUSTOMS ( N.T. ) Dated: August 31, 2009

Jurisprudentiol – Wednesday's cases

Central Excise

Refund under Rule 5 of CENVAT Credit 2005 Rules is admissible even if goods exported are exempted:

As an illustration, if a car which is dutiable is exported under bond without payment of duty there may be doubt as to whether credit on the inputs will be available, since the car is cleared without payment of duty under Rule 6(5) of CENVAT Credit Rules. 2002. It could be argued that it covers only the exempted goods exported and not dutiable goods exported. In order to cover such a situation also, Rule 6(6) of CENVAT Credit Rules, 2004 used the expression 'excisable goods' which is wider to include both dutiable as well as exempted goods.

Income Tax

FII -assessee makes both short-term capital gains and also loss - Finance Act 2004 amends regime for taxation of short-term capital gains - capital loss suffered prior to amendment can be set off against gains made post-amendment: ITAT

FINANCE ( No2 ) Act, 2004 brought in a new regime of taxation of capital gains on transfer of shares with effect from 1.10.2004. Till 30.9.2004, short term capital gains on transfer of shares was chargeable to tax at the normal applicable rate. For an FII , the rate was @30% as per section 115AD . From 1.10.2004, this regime underwent a change. A new section 111A was inserted in terms of which in respect of short term capital gains arising out of transfer of listed shares transacted through a recognised stock exchange and subject to the newly introduced Securities Transaction Tax, tax was to be charged at a concessional rate of 10%. The same rate was allowed to FIIs also by inserting a proviso to section 115AD .

Customs

Allegation of mis -declaration in export of gold jewellery – Documents filed by exporters have more evidentiary value than those relied upon by Revenue in SCN – Goods exported under 100% examination of Customs authorities not disputed – Rs. 55 Crore Customs case goes for a toss: CESTAT 

Since the goods were subjected to 100% examination by the Customs before exports which was not rebutted by the Revenue at any stage, the same cannot be subjected to any dispute subsequently more so when the representative of the revenue recognized Jewellers Association has certified the purity of the gold jewellery exported.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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