TIOL-DDT 1905 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14276"><img src="http://www.taxindiaonline.com/RC2/image/ddt/ddt_1794.jpg" alt="DDT in Limca Book of Records" width="175" height="120" hspace="5" border="0" align="right"></a></font></strong></font><font color="#663399" size="3">TIOL-DDT 1905</font><br>
20.07.2012 <br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax on Service of Service Tax collection? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YOU</strong> open a restaurant, serve food, charge your customers and at the end of the day, have your meal in your own restaurant and pay the bill to the restaurant owner! Funny? Please read this. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prior to negative list regime, Notification No <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2004/stnot04_013.htm" target="_blank">13/2004</a></strong> dated 10.09.2004 exempted the taxable service provided by a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, to the Government of India or the Government of a State in relation to collection of any duties or taxes levied by the Government of India or the Government of a State from the whole of the service tax leviable thereon under section 66 of the said Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Vide Notification No<strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2012/stnot12_034.htm" target="_blank">34/2012</a></strong> dated 20.06.2012, 81 Notifications have been rescinded and Notification <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2004/stnot04_013.htm" target="_blank">13/2004 ST</a></strong> is one among them. Collection of taxes by any Bank or financial institution is neither under negative list nor exempted under Mega Exemption Notification. So, with effect from 1st July, the commission received by any Bank or Financial institution from Government of India or from any State government for the services they render in collection of taxes and duties is liable for payment of service tax. May be the change was intentional, with an eye on the revenue earned by the Banks in collecting various taxes and duties, but it has resulted in a funny situation of Government ending up paying service tax on the services received for collection of service tax! And when the Government was ready to forgo service tax on construction undertaken for Government, it could have as well continued the exemption for collecting taxes. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Government Notifies Exchange Rate - Effective from 20th July 2012 </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has notified exchange rate for export and import to be effective from 20.07.2012. Exchange rate for USD for import is at Rs 55.50 and for export, it is Rs 54.65. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2012/cnt12_061.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No.61/2012-Cus (N.T.) Dated 19.07.2012</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rent-a-cab - Partial reverse charge </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MANY</strong> assessees who engage the services of Rent-a-Cab operator service are confused a lot on their liability under partial reverse charge with effect from 01.07.2012. We are flooded with mails asking to explain the liability under various situations. For the benefit of all the assessees, the issue is explained here: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Sl No 7(a) and (b) of Notification No <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2012/stnot12_030.htm" target="_blank">30/2012 ST</a></strong>, there are two situations depending on whether the service provider is availing abatement or not. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. If the service provider is availing 40% abatement, the service receiver is liable for complete payment of tax.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Eg: ABC Transports is availing abatement for payment of service tax. He billed M/s XYZ Rs 20,000/- for a cab. The Bill will be: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Cab charges : Rs 20,000/- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ST ( 12.36% on 40% of Rs 20,000) = Rs 989/- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Liability on XYZ = Rs 989/- ( i.e., 100% of the tax amount of Rs 989/-) </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Liability on ABC Transports = 0 </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. If the service provider is not availing the 40% abatement, the Bill will be </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Cab charges : Rs 20,000/- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ST ( 12.36% on Rs 20,000/-) = Rs 2,472/- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Liability on XYZ = 40% of Rs 2,472/- = Rs 989/- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Liability on ABC Transports = 60% of Rs 2,472/- = 1483 </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In both the situations, it can be seen that the liability on XYZ is only Rs 989/- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(Note: The partial reverse charge is applicable only if the service is provided by any <font color="#FF0000">individual, Hindu Undivided Family or partnership firm</font>, whether registered or not, including association of persons, located in the taxable territory to a <font color="#FF0000">business entity registered as body corporate</font>, located in the taxable territory - Under the partial reverse charge, the service receiver has the <strong>option</strong> of forgoing the abatement benefit, as clarified in Para 10.1.6 of the Education Guide. In other words, XYZ can also have the option of paying service tax on full Rs 20,000/- billed to them at 12.36%, irrespective of the amount of service tax paid by the service provider) </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">EEFC Account - RBI clarifies 50% conversion is not applicable to Resident Foreign Currency Accounts </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>VIDE</strong> Circular No 124 dated 10th May 2012, RBI had clarified that: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">50% of the balances in the EEFC <a></a>(Exchange Earner's Foreign Currency Account) accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder. In respect of all future forex earnings, an exchange earner is eligible to retain 50% (as against the previous limit of 100%) in non-interest bearing EEFC accounts. The balance 50% shall be surrendered for conversion to rupee balances. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On a review of the above Circular, now, it is decided that the provisions contained in the aforesaid Circular will not apply to the Resident Foreign Currency Accounts. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir008.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI Circular No 8, Dated: July 18, 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI had clarified earlier that in the case of Non-Resident (External) deposits of staff members, existing or retired, interest rate including any additional interest paid to them by virtue of their being staff members, should not exceed the ceiling stipulated by RBI from time to time. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On a review, it has now been decided that banks should not allow the benefit of additional interest rate on any type of deposits of non-residents. Accordingly, the discretion given to banks to allow the benefit of additional interest rate of one per cent per annum as available to bank's own staff on deposits under NRE/NRO accounts is now withdrawn. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/rbi_notification.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DBOD.Dir.BC. 29/13.03.00/2012-13: Dated: July 18, 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Pending EODC cases where vehicles imported under EPCG Scheme were not registered as Commercial/Tourist Vehicle - DGFT Clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>VIDE</strong> Policy Circular 7 dated 07.05.2008, it was stipulated that “ In all past cases where Export Obligation Discharge Certificate (EODC) has not been obtained by 30-06-2008 and where vehicles were not registered as Tourist Vehicles, EPCG authorization holders will get them registered as Tourist Vehicles, by 31.08.2008”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Many representations have been received indicating that the EPCG Authorisation holder could not get the Vehicle, (imported under EPCG Scheme), registered as commercial / tourist vehicle due to various reasons. Therefore it is clarified that: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para 2(b) of Policy Circular 7 dated 07.05.2008 would not be required to be complied with in cases where </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. Vehicles imported prior to 31.08.2006 cannot be registered again as Tourist Vehicle, as under Rule 82 of CMVR vehicles older than 2 years cannot be registered as Tourist vehicles; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. RTO issues a confirmation that the imported vehicle is not allowed to be registered as Tourist Vehicle; </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And in case of delay in registration in other cases, the cut off date as specified in Policy Circular No. 7 dated 07.05.2008 is extended till the date of this circular, thereby the del ay in registration is condoned in all such similarly placed cases. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2012/dgft12cir002.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT POLICY CIRCULAR NO 2/(RE-2012)/2009-14, Dated: July 19, 2012 </font></strong></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
<font color="#006600"><strong>DDT Cartoon </strong></font></font></p>
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<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> - Monday's cases</font></strong></font></strong></font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left">Customs</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Argument that since customs officers loaded value once at time of imports to a certain extent further proceedings cannot be initiated by DRI can turn out to be one of best means to evade customs duty with impunity - provisions in Customs Act are not that weak - such an argument is not based on any provisions in statute a nd appears to be not consistent with section 28 of Customs Act - appellants were mere conduits for arranging inputs at under declared prices - revision of value and consequent duty liability upheld: CESTA T</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AT </strong>the time of initial assessment of goods customs suspected under valuation of the goods, particularly the main item, namely PCB. For goods with declared value varying from HKD 20 to HK D 30 per piece the customs department loaded the value to values in the Range of HKD 20.50 to HKD 42.75 in different consignments. But later the Directorate of Revenue Intelligence did more investigations and they were of the view that the under valuation was to a much higher extent. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income tax - Whether approvals granted under the Income Tax Act, 1922 to educational institutions for conducting scientific research, is valid under present Act - YES, rules HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Bench are - Whether when the inquiry is dropped after the assessment is completed based on thorough scrutiny of records, such assessment can still be reopened after the expiry of four years; Whether expenditure on scientific research already allowed, can be disallowed at a later stage, when the AO after due application of mind had previously found no reasons for disallowing such deductions. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">ST - Accounting Standard (AS) 7 is for ascertaining the profit and loss of a construction company and does not straight away reflect position of receipt of payments which is relevant factor for paying service tax - Amounts received against taxable activities can be arrived at only if accounts are examined by a person having some knowledge about accounting methods - amount confirmed without due diligence - Pre-deposit waived and Stay granted: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellants are registered with the department for payment of Service Tax in respect of services of Construction of Residential Complexes. Pursuant to audit conducted, it was found that there was a difference between gross receipts shown in the profit and loss account and the value of service rendered by them as declared in their service tax return. Alleging that there was a short payment of Service Tax, a demand was issued which culminated in an order by the CCE, Meerut confirming tax amount of Rs. 67,20,597/- along with interest and penalties under sections 76 and 78 of the Finance Act, 1994. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Weekend. </font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p>
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