TIOL-DDT 165 · the untouched capture
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<html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 165</font><br> 26 07 2005<br> Tuesday</b></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Service tax on mobile phones- can credit be availed?</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>“In regard to credit of service tax on telephone connection, queries have been raised as to whether service tax credit would be admissible on telephone sets installed only in the business premises. The answer is in the affirmative, and credit will be allowed only on telephone sets installed in the business premises. Mobile phones are not covered”</i></b> - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2003/sercircir59.htm">Circular No. 59/8/2003-S.T., dated 20-6-2003</a><br> <br> This clarification of the Board is being quoted to deny cenvat credit of the Service Tax paid by a manufacturer. It is being conveniently forgotten that the above clarification was in relation to the Service Tax Credit Rules, 2002 but certainly not in relation to the Cenvat Credit Rules, 2004. The new rules stipulate credit on <b>any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004.</b> There is absolutely no restriction on the service instrument to be installed in the business premises. May be in the case of telephones, the instrument can be installed in the factory or service premises but there are several services which can be availed only outside. If an event management service provider sends his anchors to a beauty parlour just before the show, is he eligible for taking credit on the service tax paid for the beauty treatment? Is he eligible for the credit only if the beauty treatment is done in his office? Is a manufacturer eligible for taking credit of Service Tax on a bank draft only if the bank is within the factory? <br> <br> Why this restriction only on telephones? And now even landline phones can be carried around. Will credit be allowed on the Service Tax for those phones? And what if the mobile phone is used only within the factory? Will credit be allowed? <br> <br> There seems to be no logic or law behind the Board’s clarification and credit should be allowed if the mobile phone is an input service – nothing more nothing less. <br> <br> In England, VAT credit is allowed on mobile phones but recently the Customs and Excise Department conducted a survey of company mobile phone bills and found that among all the companies inspected, personal use was as high as 40 per cent, according to Billy Cairns, director of VAT services. He advised companies that provide their staff with mobile phones to ensure that they avail credit only the VAT on the 'business' element of their phone bills, or that they pay back any VAT on the 'private' component of the calls. He said that what was often a "giveaway" when Customs & Excise looked at a company's mobile phone bills was the number of calls made after 6 pm along with “sms’ by an employee. "Text messages are not usually associated with business and it's unlikely many business calls are made after 6 pm," he said. <br> <br> Will our DGST or the Board clarify the matter?</font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Reforms in Indirect Taxes – Lok Satta submits report to CVC</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Lok Satta informs DDT that after the two workshops at Hyderabad and Mumbai (attended by a large number of departmental officers and a few assessees), the final report has been submitted to the CVC. The contents of the recommendations had been analysed in detail in these columns. The letter from Lok Satta to CVC mentions three major areas which need urgent attention of the CBEC and CVC.<br> <br> ++ Issuing Show-Cause Notices based on CAG objections. The CVC and CBEC may please pursue the matter with CAG to resolve such matters. <br> <br> ++ Interest for delayed payments to be fair and equitable. The CVC may discuss with CBEC and reconcile the issues fairly and equitably. <br> <br> ++ Overlap in the functional domain of the Director General of Foreign Trade (DGFT) and Customs department, when the offices of the DGFT and Central Excise & Customs Department are being electronically connected for data transmission and verifications. In the new context, a separate DGFT has no rationale. Therefore, DGFT can be disbanded, and its functions, along with personnel, can be merged with the Customs department. As a consequence, the assessee (importer / exporter) will be spared of unnecessary visits to multiple organizations. CVC may have to pursue this matter with the concerned ministries and agencies. <br> <br> Whatever be the shortcomings of the Lok Satta workshops that DDT had brutally castigated, it must be conceded that the above three suggestions from the NGO are simply great and deserve the immediate attention of the Government. And who better than the CVC to influence the Government to the right path? <br> <br> The CVC in his letter to Lok Satta, while wishing for a better participation from the trade, was all praise for the <b>positive outlook on the part of the departmental officials.</b> A Commissioner who attended the Hyderabad workshop told me, “ I don’t take anything in a casual manner; if it was worth travelling all the way to Hyderabad, it was worth taking the deliberations seriously” I was witness to a Chief Commissioner chiding a Commissioner in the workshop for suggesting to an assessee how he should plan his business. “You don’t give him suggestions on how to run his business, you tell him whether his suggestion can be accepted and if not, why not”, the Chief Commissioner told the Commissioner. Very positive people indeed.<br> <br> The CVC was so pleased with the programme that he asked Lok Satta to explore the possibility of such programmes for other departments.<br> <br> “Having whetted our appetite in this manner, could I now ask you whether we could plan a similar exercise in respect of a few other departments like Income Tax, Employees Provident Fund Organisation etc”, asked the CVC.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF6666">Until Tomorrow with more DDT<br> <br> Have a nice day. <br> <br> Mail your comments to</font></b> <a href="vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>