CASunilGabhawalla|SBGabhawalla&Co.

|CharteredAccountants|Mumbai
12LaBella,AzadLane,Andheri East,Mumbai400069www.sbgco.co.insunil@sbgco.in 12LaBella AzadLane Andheri East Mumbai400069www sbgco co insunil@sbgco in

1.ShortTitle&Commencement 2.Definitions 3.DeterminationofPOT General 4.Changeineffectiverateoftax 5.Newservices 5 Newservices 6.Continuoussupplyofservices 7.Specifiedservices/persons S ifi d i / 8.Copyrights 9.TransitionalProvisions
16November2011

Unlessotherwiseprovided NotwithstandingRule3

NotwithstandingRules3,4&8 Notwithstandingallotherrules N t ith t di ll th l

Notwithstandingallotherrules

If invoice is raised within 14 days of i i i i d i hi d f completion of service

InvoiceDateorReceiptDate,whicheverisearlier

If invoice not raised within 14 days of co p et o o se ce completion of service

DateofCompletionofServiceorReceiptDate, p p ,

whicheverisearlier
16November2011

A Limited completes a service valued at Rs. Li it d l t i l d t R 1,00,000 on 29th August 2011 and records Unbilled Revenue in its accounts on 31st 3 August 2011. However, due to internal processes, it has not raised the invoice till 6th September 2011 the 2011, due date of payment of service tax for August 2011. Should the accountant of A Limited discharge the service tax liability in the month of August 2011 or not?

16November2011

Whenisaservicesaidtobecomplete?
The invoice needs to indicate interalia the value of service so

completed. Thus it is important to identify the service so completed. completed This would include not only the physical part of providing the service but also the completion of all other auxiliary activities that enable the service provider to be in a position to issue the invoice. Such auxiliary activities could include activities incl de acti ities like meas rement q alit testing etc which measurement, quality hich may be essential prerequisites for identification of completion of service. The test for the determination whether a service has been completed would be the completion of all the related p p activities that place the service provider in a situation to be able to issue an invoice. However such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice

16November2011

Intangibility UndocumentedScopeofWork PossibilitytoIssueanInvoice bl Caretobetakenwhere b k h

Documentarytrailisavailable DeemingFiction ContinuousServices

16November2011

Whatistobetreatedasaninvoice? Wh ti t b t t d i i ?

Proforma Invoice DebitNote StatementofWorkDone Unnameddocumentcontainingtheparticulars mentionedinRule4A

Pleaseremember, Pl b
Issueofinvoiceisamust,atsomepointoftime Therearetwosidesofeachcoin

16November2011

Description InvoicesRaisedduringthemonth ServicesCompleted butinvoicesnotraised within14days AdvancesReceivedduringthemonth Ad R i dd i th th LESSInvoices Raisedduringthemonthbut taxpaidonprovisionofservices/advances inearliermonths

Amt.

LinkagewithAccounts SalesRegister UnbilledRevenue/MIS Debtors Ledger D bt L d Contra fromearlier workings

16November2011

continuoussupplyofservice means continuoussupplyofservicemeans

anyservicewhichisprovided,ortobeprovidedcontinuously,

underacontract,foraperiodexceedingthreemonths,or wheretheCentralGovernment byanotificationintheOfficial wheretheCentralGovernment,byanotificationintheOfficial Gazette,prescribesprovisionofaparticularservicetobea continuoussupplyofservice,whetherornotsubjecttoany condition

Clause (zzq) (zzzh) (zzzx) (zzzu) (zzzza)
16November2011

Dealswith CommercialorIndustrialConstruction ConstructionofResidential Complex p TelecommunicationServices InternetTelecommunicationServices WorksContractServices

Wheretheprovisionofthewholeorpartof Wh h i i f h h l f theserviceisdeterminedperiodicallyonthe completionofaneventintermsofacontract, completionofaneventintermsofacontract whichrequirestheservicereceivertomakeany paymenttoserviceprovider, thedateofcompletionofeachsucheventas p specifiedinthecontractshallbedeemedto bethedateofcompletionofprovisionof service

16November2011

Aconstructioncontractprovidesforastandard A t ti t t id f t d d rateofRs.500/ persq.ft.ofworkdonetobe billedmonthlybythe3rd ofthenextmonth. y y 3 However,thepaymentsshallbereleasedonly aftercertification,whichtakesaroundamonth Inaparticularcase,aninvoicefor100osq.ft(Rs. Inaparticularcase aninvoicefor100osq ft(Rs 5lakhs)ofworkwasraisedon3rd September. However,theclientcertifiedonlytotheextent of800sq.ft(Rs.4lakhs)on10 of800sq ft(Rs 4lakhs)on10th Octoberand paidanamountofRs.3lakhs afterdeducting y TDSandretentionmoneys Howshouldservicetaxbedischarged?

16November2011

Description InvoicesRaisedduringthemonth ServicesCompleted butinvoicesnotraised within14days AdvancesReceivedduringthemonth Ad R i dd i th th Services deemedtobecompletedon achievementofmilestonebutinvoices notraisedwithin14days LESSInvoices Raisedduringthemonthbut taxearlier

Amt.

LinkagewithAccounts SalesRegister UnbilledRevenue/MIS Debtors Ledger D bt L d ProjectTeams&Client Communications Contra fromearlier workings

16November2011

Copyrights, Trademarks,DesignsorPatents
Whereconsiderationdeterminedbyasubsequent

use
InvoiceorReceiptwhicheverisearlier

WhetherofRelevance?
Differencebetweencontinuousserviceandsingle ff

service

16November2011

Notwithstandinganythingcontainedintheserules N t ith t di thi t i di th l Exportofservices p

PaymenttobereceivedwithinRBIstipulatedtimeframe

Importofservices&otherReverseChargeCases
Paymenttobemadewithin6monthsfromdateofinvoice ExceptincaseofAssociatedEnterprises p p
Earliestofdateofcreditorpayment

WhatabouttransactionswithAElocatedwithinIndia?

16November2011

ExportofServices: E t fS i
ImpactonBadDebts/WriteOffs/DirectAdjustments ReasonsforrelaxationasstatedinCircular IsthereanexposureforAERelatedExportsinthe

ImportofServices/OtherReverseChargeCases
6monthsofinvoice? Howtoensurecompliancewithinvoicing p g requirements

past? Howtoreconcilewithexemptionavailableforsmall serviceproviders Notification6/2005ST

Whatifcontractuallythepaymentistobemadeafter

16November2011

Individuals&Partnershipsprovidingcertain professionalservices
CA,CWA,CS,Lawyers,Architects,IDs,STC,

ConsultingEngineers

Whataboutotherservicesprovidedbythem? Wh b h i id d b h ? Whataboutotherserviceproviders?

16November2011

Description InvoicesRaisedduringthemonth ServicesCompleted butinvoicesnotraisedwithin14days AdvancesReceivedduringthemonth Services deemedtobecompletedonachievementof milestonebutinvoicesnotraisedwithin14days NonAERelated ForeignRemittancesmadeduringthe month NonAE RelatedExpenditureforwhichnoforeign remittancesaremadewithin6months AERelatedForeignCurrencyExpenditurebookedinbooks ofaccounts Export Invoicesnotrealised withinRBIStipulatedtime frame LESSInvoices R i dd i th LESSI i Raisedduringthemonthbuttaxedearlier thb tt d li

Amt.

LinkagewithAccounts SalesRegister UnbilledRevenue/MIS Debtors Ledger ProjectTeams&Client Communications ForeignCurrency Remittances

Reviseold working

Ageing Analysis Provisions

Revise old working

Correspondences with Authorised Dealers&Ageing Analysis Contra fromearlierworkings C t f li ki

16November2011

Nothingcontainedinthissubruleshallbeapplicable h d h b l h ll b l bl where:
Provisionofserviceiscompletepriorto1April2011or Invoiceisissuedpriorto1April2011

Optiontopayservicetaxonreceiptbasiswhere
Provisioniscompleteonorbefore30June2011or Invoiceisissuedonorbefore30June2011

16November2011

Description InvoicesRaisedduringthemonth I i R i dd i th th ServicesCompleted butinvoicesnotraisedwithin14days AdvancesReceivedduringthemonth Services deemedtobecompletedonachievementof milestonebutinvoicesnotraisedwithin14days NonAERelated ForeignRemittancesmadeduringthe month NonAE RelatedExpenditureforwhichnoforeign N AE R l t dE dit f hi h f i remittancesaremadewithin6months AERelatedForeignCurrencyExpenditurebookedinbooks ofaccounts Export Invoicesnotrealised withinRBIStipulatedtime frame Invoices raisedunderolderprovisionsbutrealised during thecurrentperiod h i d LESSInvoices Raisedduringthemonthbuttaxearlier
16November2011

Amt.

LinkagewithAccounts SalesRegister S l R i t UnbilledRevenue/MIS Debtors Ledger ProjectTeams&Client Communications ForeignCurrency Remittances

Reviseold R i ld working

Ageing Analysis A i A l i Provisions

Revise old working

Correspondences with Authorised Dealers&Ageing Analysis DebtorsReconciliation Statement S Contra fromearlierworkings

Issuance of invoice

Provision of service

Dateof payment

ApplicableSTrate 2/3 l bl
16November2011

Provisionof Service PriortotheRate Change PriortotheRate Change PriortotheRate Change PriortotheRate Change AftertheRate Change Ch AftertheRate Change AftertheRate Change AftertheRate Change

RaisingofInvoice PriortotheRate Change PriortotheRate Change AftertheRate Change AftertheRate Change PriortotheRate Change Ch PriortotheRate Change AftertheRate Change AftertheRate Change

ReceiptofMoney PriortotheRate Change AftertheRate Change PriortotheRate Change AftertheRate Change PriortotheRate Change Ch AftertheRate Change PriortotheRate Change AftertheRate Change

EffectiveRate OldRate OldRate OldRate NewRate OldRate NewRate

Referencetothe Rules NoNeedtorefer totheRules Rule4(a)(ii) Rule4(a)(iii) Rule4(a)(i) Rule4(b)(ii) Rule4(b)(i)

PointofTaxation InvoicingorReceipt whicheverisearlier Invoicing Receipt InvoicingorReceipt whicheverisearlier InvoicingorReceipt whicheverisearlier hi h i li Receipt(eventhoughit issubsequentto invoicing) Invoicing(eventhough itissubsequentto receipt) InvoicingorReceipt whicheverisearlier

NewRate

Rule4(b)(iii)

NewRate

NoNeedtorefer totheRules

16November2011

On27August2011,theserviceproviderinvoices O A t th i id i i acustomerforAMCfromOctober2011till September2012forRs.100000+10300service p 3 taxandpaysthetaxtotheDepartmenton5 September2011 Assumethaton25th September2011 an September2011,an abatementof50%isprovidedforAMCs. Thepaymentisreceivedon12October2011 Issues
Whatisthepointoftaxation? Howwillthetaxliabilitybedischarged? o t e ta ab ty be d sc a ged

16November2011

WhereaservicenotbeingaCSS,istaxedfirst Wh i tb i CSS i t dfi t timethen,noSTpayableif

InvoiceandReceiptarebeforedateofintroduction Receiptisbeforedateofintroductionandinvoiceis

issuedwithin14daysfromcollection

Whathappenstoinvoiceraisedbeforethe introductionbutreceiptafterthe introd ctionb treceiptafterthe introduction?

16November2011

ServiceTaxtobepaidasandwhenservicesare deemedtobeprovided SubsequentAdjustmentPermitted

inthefollowingcases:
N P i i fS i h ll ti ll NonProvisionofService,whollyorpartially DeficiencyinProvisionofService RenegotiationofInvoiceasperthetermsofthecontract

Subjecttothefollowingconditions
AmountRefunded CreditNoteIssued
16November2011

NonProvisionof Service

Cancellationafteradvance MistakesinInvoices QualityDiscount VolumeDiscount PerformanceDrivenWaivers

Deficiencyin ProvisionofService Renegotiationof InvoiceAmountdue totermsincontract

16November2011

CreditAvailableonorafterthereceiptofinvoice C ditA il bl ft th i t fi i Paymenttobemadewithin3monthsotherwise credittobereversed Oncereversed,freshcreditcanbeclaimedon paymentbasis

WhetherExpenseOffRatioapplicabletosuchfresh

claimofcredit?

Insomecases,Governmentis outofpocket Insomecases Governmentisoutofpocket

ProfessionalServices TransitionalCases

16November2011

X Limited is a Depository Participant. It Li it d i D it P ti i t maintains accounts of various investors and has entered into contracts with them. As per the p agreement with the investor, the Annual Fee charged is Rs. 2000/ and is billed at the start of the year In case the investor does not pay the year. fees within 60 days of the invoice, the account is blocked for debit transactions. If the amounts remain outstanding for more than one year X year, Limited provides for doubtful debts in its books p g and stops raising fresh invoices to the investor.

16November2011

Isservicetaxpayableontheamountbilled butnotreceived? Cananadjustmentoftheservicetax d f h componentbeclaimedwhentheamountis providedasdoubtful/finallywrittenoff? d d d b f l f ll ff CantheDPdiscontinuebillingsuchinvestors whohavebeenclassifiedasdoubtful? h h b l f d d bf l

16November2011

AmendmentinDefinitionsofInputs&Input f f Services ShiftfromPaymentBasistoAccrualBasis hf f l AmendmentinRule6 Creditavailableonthebasisof d l bl h b f supplementaryinvoiceexceptincaseof suppression ProvisiongrantingFULLCreditforspecified servicesisdeleted d l d

16November2011

CocaColaIndiaPrivateLimitedvs.CCE2009(15)STR C C l I di P i t Li it d CCE ( )STR 657(Bom HC)

Creditofservicetaxpaidonadvertisementofaerated p

drinkseligibleagainstexcisedutypayableonconcentrates

CCEvs.Manikgarh Cement2010(20)STR456(Bom HC)

Creditofservicetaxpaidonrepairsandmaintenanceof

staffquartersnoteligible

CCEvs.Ultratech Cement2010(20)STR577(Bom HC) CCE Ult t h C t ( )STR (B

Creditofservicetaxpaidonoutdoorcateringservicesis

g eligible
16November2011

Means Usedfor providingoutput services

Usedwhetherdirectlyor indirectlyinorinrelationto manufactureoffinal productsandclearance

Includes

ButExcludes

Specified Overheads

Construction RelatedServices VehicleRelated Services EmployeeRelated Services

16November2011

NatureofInputService Services usedforprovidingoutputservice Services usedinrelationtomanufactureoffinalgoods Modernisation,RepairsorRenovation ofPremises M d i ti R i R ti fP i Advertisement,SalesPromotion, MarketResearch,Storage, ProcurementofInputs,Accounting,Auditing,Financing, RecruitmentandQualityControl,CoachingandTraining, RecruitmentandQualityControl CoachingandTraining ComputerNetworking,CreditRating,ShareRegistry, Security,BusinessExhibition,LegalServices

Eligibility Yes Yes Yes Y Yes

16November2011

NatureofInputService Architect,Port, Airport,Construction&WorksContract Servicesusedforconstruction Insurance, RentaCab,RepairsorSupplyofTangibleGoods Servicesconnectedwithmotorvehicles Outdoor Catering,BeautyTreatment,HealthServices, CosmeticSurgery,Club,HealthClub.LifeInsurance,Health Insurance,TravelBenefitstoemployees Insurance TravelBenefitstoemployees

Eligibility No,unlessusedfor providingspecified outputservices No,unlessthecredit isavailableonthe motorvehicle itself No

16November2011

Natureof Transaction Goodsusedfor constructionofbuildingor civilstructureorfoundationforcapital p goods(InGeneral) Goodsusedfor constructionofbuildingor civilstructureorfoundationforcapital goods (forport,airport,construction,works d f k contractserviceproviders) Architect,Port, Airport,Construction& WorksContractServicesusedfor construction(InGeneral) Architect,Port, Airport,Construction& WorksContractServicesusedfor construction(ForContractors)
16November2011

Eligibility No

Further Restrictions, ifany N.A.

Yes,ifservice taxpaidon full valueincluding l l d materials No

ServiceTaxnot eligibleascredit to themanufacturer h f N.A.

Yes

Credit restrictedto 40%ifEDCredit claimedby subcontractor

Natureof Transaction ManufactureofExcisableGoods ManufactureofExemptedGoods Manufacture ofGoodsclearedat1%Rate ClearancestoSEZUnits/Developers Cl t SEZU it /D l Exportof GoodsandServices ProvisionofTaxableServices ProvisionofExemptedServices Services onwhichAbatementisclaimedunder Notification1/2006ST Services onwhichCompositionScheme/Special RatesAvailed RatesA ailed Trading Services toSEZUnits/Developers TOTALSAY
16November2011

Taxable Yes No No Yes Y Yes Yes No No Yes,value correspondingtotax correspondingtota amount No Yes 1,00,00,000~40%

Exempted No Yes Yes No N No No Yes Yes No

Yes,totheextent of grossprofits No 1,50,00,000 ~60%

Total SpecificIdentificationandclaimfortaxable 2,00,000 goods/services(OptionI) Say1,10,000+ 90,000 Noidentification compositeschemefor 2,00,000 manufacturers/serviceprovidersbasedon output(adhocpayment) OPTIONII Noidentification N id tifi ti compositeschemefor it h f 2,00,000 manufacturers/serviceprovidersbasedon input&inputservices(proportionate p y payment) OPTIONIII Noidentification compositeschemefor manufacturers/serviceprovidersbasedon inputservices(proportionatepayment) OPTIONIV
16November2011

CreditAvailable Claim1,10,000

Claim2,00,000 Pay7,50,000 Claim2,00,000 Cl i Pay 1,20,000

2,00,000 Say60,000+ 20,000+ 1,20,000

Claim60,000+ 1,20,000Pay 72,000

EffectivedateoftheAmendment ff f ScopeofCoverage:
TradinginGoods TradinginServices GoodsComponentofWorksContract TradinginSecuritiesandShares

ImpactofValuation
GrossMargintobenotlessthan10%ofthecost g

ofgoodssold
16November2011

Hotels&Restaurants ConstructionContractors StockBrokers k k Traders&CommissionAgents

16November2011

Taxable Services S i Premises1 Registration 1 Premises2 Entity Registration 2 InputService Distributor Taxable Services Division2 Exempted Services Exempted Services Division1 Taxable Services Taxable Services

16November2011

Istheratioapplicableonlyforcommon f servicesorforall? Isitapplicablevis avis Division,Premises, l bl RegistrationorEntity? WhichratiotoapplytoISDtransfers, h h l f grantingratioorreceivingratio?

16November2011

16November2011

This presentation summarises the thoughts and views of the speaker. They are not intended to be comprehensive but merely an aid for presentation. The views expressed by the speaker (in presentation his detailed deliberations) are based on general facts. Each live case can have varying facts and the conclusions may be different. All examples in the presentation and the deliberations are fictitious and any resemblance to any company is purely unintentional. The presentation summarises the legal position as on the date of the presentation. There may be subsequent amendments/developments which may render this presentation obsolete. No responsibility is accepted either by the speaker, the firm or the organiser for the consequences of any action done or omitted to be done on the basis of this presentation

CASunilGabhawalla|SBGabhawalla&Co.|CharteredAccountants|Mumbai
12LaBella,AzadLane,Andheri East,Mumbai400069www.sbgco.co.insunil@sbgco.in 12LaBella AzadLane Andheri East Mumbai400069www sbgco co insunil@sbgco in