Service Tax circulars - review - Rustagi Panel Report - Board seeks comments
Mr. T R Rustagi, former Chief Commissioner, and JS TRU had been asked by the Government to review all the Service Tax circulars and instructions. Mr Rustagi has handed over his report in the last week of February and now the government seeks comments on the comments of Mr. Rustagi. Though an apparently hurried report, Mr Rustagi has suggested some very important changes.
His report consists of three annexures – circulars to be retained, amended and deleted.
His comments on some of the circulars
Credit of Service Tax on telephones: Board had clarified that
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.
Rustagi’s comments:
The tribunal and the Courts may not buy this argument. Cenvat Rules do not make an exception. Some solution has to be found to resolve this controversy. Either it be disallowed legally, or be allowed legally—say a specific proportion of the tax paid on mobile phones in the name of the company.
Construction of residential complexes:
This service would generally cover construction services in respect of residential complexes developed by builders, promoters or developers.
Rustagi’s comments:
Many have represented against DGST’s Circular No. V/DGST/22/Audit/Misc/1/2004 dated 16.2.2006 in the context of Rahejajudgment that the inference drawn by DGST is incorrect. This matters deserves clarification by the Board. It seems that facts are important. Prima facie construction of flats by builders is not a service.
Service Tax on GTA – DGST’s confusion
It has been requested that in cases where liability for tax payment is on the consignor or consignee, the procedure as to how it should be confirmed by such consignor or consignee that the goods transport agency has not availed credit or benefit of notification No. 12/2003- Service Tax may be prescribed. In such cases it is clarified that a declaration by the goods transport agency in the consignment note issued, to the effect that neither credit on inputs or capital goods used for provision of service has been taken nor the benefit of notification No. 12/2003-Service Tax has been taken by them may suffice for the purpose of availment of abatement by the person liable to pay service tax.
Rustagi’s comments:
Abatement is now provided by notification No. 1/2006-ST dated 1.3.2006. It is cumbersome to obtain the declaration for each transaction. Some trade-friendly approach, like quarterly declaration, is needed. Also, there is lot of hue and cry on this subject. The officers have not allowed benefit to those who pay the tax as service receiver. The DGST Circular created the avoidable confusion. Now, it is understood that C&AG has also taken objection. This matter needs to be resolved—by resorting to retrospective amendment, if need be. The intention can not be to deny the benefit of exemption.
We will bring you more comments on the Rustagi Panel report in the next few days. In the mean time, if you have any comments to make on the recommendations, please mail them to us marking the subject as “rustagi recommendations”. We will send a consolidated report to Board.
See Rustagi report and annexures.