TIOL-DDT 456 · the untouched capture
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<p align="justify"> <b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT
456</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
25 09 2006<br>
Monday</font></b></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Bar
Council of <st1:country-region>India</st1:country-region> is a club liable to
pay Service Tax? – No Charity!says, Board. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And so is
<strong>FICCI!</strong> The Board clarification says that even if an organisation
is exempted under IT Act as a charitable institution, it need not automatically
go out of the purview of Service Tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the
Act,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(25a) “club
or association” means any person or body of persons providing services, facilities
or advantages, for a subscription or any other amount, to its members, but does
not include—</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) any
body established or constituted by or under any law for the time being in force;
or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) any
person or body of persons engaged in the activities of trade unions, promotion
of agriculture, horticulture or animal husbandry; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) any
person or body of persons engaged in any activity having objectives which are
in the nature of public service and are of a charitable, religious or political
nature; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) any
person or body of persons associated with press or media; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now are
the activities of Bar Council of India or FICCI charitable in nature? Income
Tax Department would say, “yes”, but not Service Tax.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The recent
clarification given by the Commissioner, Service Tax in the Board says, </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++Exemption
under the Income Tax Act on the ground of being a public charitable institution
is of no consequence to levy of service tax. Levy of service tax is entirely
governed by the provisions contained in the Finance Act, 1994 and the rules
made there under.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The
definition of “charity” and “charitable” as defined in Black’s Law Dictionary
may be kept in mind. “Charity” is defined as “aid given to the poor, the suffering
or the general community for religious, educational, economic, public safety,
or medical purposes”, and “charitable” as “dedicated to a general public purpose,
<b>usually</b> for the benefit of needy people who cannot pay for the benefits
received”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++The
officer concerned should examine the matter on a case-by-case basis, and the
decision should be made after taking into account all material facts and statutory
provisions. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He does
not clarify whether FICCI is liable to pay Service Tax. He wants the officers
to take a decision after taking into account all material facts. Now what will
happen if the officer in Bangalore decides that FKCCI is not liable to pay Service
Tax and the officer in Hyderabad decides that FAPCCI is liable to pay tax? Why
can’t the Board give a clear clarification this way or that? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even Black’s
Law Dictionary, which the Board quotes, defines charitable as “dedicated to
a general public purpose, <b>usually</b> for the benefit of needy people who
cannot pay for the benefits received”. It is primarily “dedicated to a general
public purpose” and is “usually for the benefit of needy” – It need not always
be for the benefit of the needy. In unusual cases it can be for the benefit
of the greedy - like advocates for instance. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The heading
of this piece is not really correct. Bar Council of India is not liable to Service
Tax with or without charity, as it would be excluded in the first clause - <strong>any
body established or constituted by or under any law for the time being in force,
but Bar Associations and Advocates’ Associations will be liable. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And that
still makes FICCI and CII liable to tax. Or why can’t they define <b><i>charity</i></b>
in the Service Tax statute or say that it has the same meaning as in the Income
Tax Act? In the name of clubs, did the government really want to tax trade associations
and flat welfare associations? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2006/sercir84.htm">Board
Circular No. 84 /2/2006-ST Dated 19<sup>th</sup>September, 2006</a></u></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Drawback
– value addition in case of free materials</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the business
of exports, sometimes the main raw material is supplied ‘free of cost’ by the
overseas buyer for maintaining the quality of the final product. In such cases
the notional value of the ‘free of cost’ material is declared to Customs only
for the purpose of payment of duty and the same is not included in the export
value (FOB value) of the product, the reason being that no realization takes
place for such notional value of ‘free of cost’ material.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been
reported that while calculating value addition in such cases, the notional value
of ‘free of cost’ material is added to the CIF value of other inputs but not
to the FOB value of export goods. This results in the FOB value of export goods
becoming less than the CIF value of imported materials. As the value addition
works out to be negative the exporters are denied the facility of drawback although
duties have been paid on the imported materials. The trade and industry has
represented that in such cases the notional customs value of the material supplied
‘free of cost’ should be added both to the export value (FOB value) of goods
and the CIF value of inputs for the purpose of calculation of value addition.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has
observed that:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ for the
sake of equity the value of the ‘free of cost’ material should be added both
to the FOB value of goods and CIF value of materials or this value should not
be added to the FOB and CIF values at all. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ If
this is done, the value addition in most of the cases would be positive, entitling
the exporters to avail of the facility of duty drawback.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ However,
in terms of paragraph 4.6 of the Handbook of Procedures, Vol-I of the Foreign
Trade Policy, under advance licensing scheme, where some materials are supplied
free of cost, the value addition is computed by adding the notional value
of ‘free of cost’ material to both the CIF value of imports and FOB value
of exports. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And so to
ensure uniformity in the matter, Board has decided that :-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">for the
purpose of calculation of value addition under brand rate claims, the notional
value of imported materials supplied ‘free of cost’ by the foreign supplier
should be added both to the CIF value of inputs and the FOB value of export
goods.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2006/cuscir06_25.htm">CBEC
CIRCULAR No.25/2006 –CUSTOMS Dated the 19th September, 2006</a></u></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">e-payment</font></strong><font color="#006600"><strong>
of Service Tax – we are as ignorant as you are. </strong></font></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Our
Netizen reporters – assessees report for TIOL</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We asked
some of our netizens who are also Service Tax assessees to report to us after
ascertaining from Service Tax officers and banks on how to go about e-payment
of Service Tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here’s what
they reported:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Bangalore</b>:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An assessee
called up a Joint Commissioner, Service Tax in Bangalore to find out the procedure
of paying Service Tax electronically. “ we are as ignorant as you are.”, said
the honest Joint Commissioner. Of course he was kind enough to clarify that
it was a banking procedure and the banks should be able to give better information.
The assessee also called up the PRO who said,” first you have to register with
the bank, the bank will give you an user ID and password. There would be no
extra charges for availing this facility. Rest the bank will explain. He also
gave the banks which would be giving this service in Bangalore: SBI, Syndicate
Bank, UTI, SBM, Corporation Bank, Vijaya Bank, Canara Bank, HDFC Bank</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Chennai:</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Superintendent
told our amateur reporter that he would need a PAN card and a PAN Based Common
ID and a current account in a bank which is providing the service. He also said
that in today’s issue of Indian Express they have published an ad for the same.
He said that the rest of the details are available in trade notice number (ST)
10/2006 dated 10th August 2006. He said that all these information is available
in <a
href="http://Centralexcisechennai.gov.in/"
title="http://centralexcisechennai.gov.in/">http://Centralexcisechennai.gov.in</a>.
Our assessee reporter who was enjoying the new role crosschecked the web site
and found that the trade notice was not there in the site. He informed the Superintendent
about this and the Superintendent informed that it would be uploaded in half
an hour. He however explained the procedure. The assessee checked the web site
after an hour and the trade notice was indeed uploaded.</span></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Ahmedabad:</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here our
assessee talked to the Commissioner who told him that he had to pay through
internet only if he had a Service Tax of over Rs. 50 Lakhs. She said that details
could be had only from the banks. She added that in Ahmedabad, SBI and Bank
of Baroda are giving this service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Mumbai</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our
Mumbai assessee spoke to a Superintendent who had a fund of information. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ the
details are there in PNB bank’s site. Our reporter did not find it.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Presently
the services need to be connected through the IC gateway and then only the
department will have proper records.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ I don’t
know much about the service</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++The
infrastructure with the department is not in place and it will take another
8-10 days time to do so.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Delhi:</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is
what the assessee told us,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>“</b>I
called up <st1:Street><st1:address>Delhi ST</st1:address></st1:Street> but in
the commissioner's office, the lady asked me to call to the technical department.
She gave me the number xxxxx and contact Mr.xxxxxxxx In this number no one responded
the call (from 12:30 pm till 4 pm I tried every half an hour.0 Later I also
tried one JC number but he was not in the office and his PA told me to call
after an hour or so.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>How did
the banks respond? </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our reporters
also contacted some of the banks and this is what we learnt.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Bank
of Baroda, BhikajiCamma Place branch in New Delhi</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A lady officer
informed that they have received the software for the services (50 lakh criteria).
However the employees need to be trained for the same and the software need
to be installed. She further said that because of the process of half yearly
closing, they are not able to do much about it. And probably only after the
half yearly closing they will install the software and train the employees about
it. She also added that a ‘Dry Run’ of the software would be done and then only
BoB would go for a full-fledged service. All this process will take not less
than 10-15 days.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Parliament
Street Branch</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our reporter
spoke to the Chief Manager who said that the software needs to be loaded. It
will take another week or so to implement the whole process. He added that after
the software is in place all the 400-500 branches having the core banking facility
could give the services.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>State
Bank Of India – the well informed bank. </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The most
positive and accurate information came from the SBI. Its GM, government business,
Mishra told our assessee reporter that the facility of e-payment of Service
tax was always there. The only difference now (after October 1st) is that it
is now mandatory for those who pay more than Rs. 50 Lakhs. Even others can pay
through the net. He said that the assessee has to feed in his 15 digit assess
code provided by CBEC and the master record would automatically fill up the
form and the assessee will have to add just a few fields. MrMishra added that
if any one needs information about electronic format of taxation through SBI
then they just need to send a mail to<u><a href="mailto:etax@sbi.co.in" title="mailto:etax@sbi.co.in">etax@sbi.co.in</a></span></u> and
in reply an automated response would come to the sender, which will have all
the information (including service tax e-filing). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our reporter
tried the mail and within seconds he got a response. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thank you,
Mr. Mishra! There is at least one officer who is aware of what this is all about.
Why are we not mentioning any other names? Obviously to protect the guilty!
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Should CBEC
rush into e payment with such pathetic levels of ignorance? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We asked
the assessees who contacted the department on the procedure whether they would
be paying Service Tax through the net in October. Not one of them replied in
the affirmative. “I would rather pay interest rather than get my money blocked
in this confusion”, was the unanimous opinion. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Incidentally
are the banks liable to pay Service Tax for collecting tax on behalf of the
government?</b></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
tomorrow with more DDT </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice day. </font></p>
<p align="justify"><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">vijaywrite@taxindiaonline.com</a></span></font></p>
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