TIOL-DDT 619 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT
619</font></b><br>
<b>23.05.2007<br>
Wednesday</b></font></p>
<p align="center"><b><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">It
is now official – Finance Bill, 2007 got presidential assent on
11th May, 2007 – New Services Notified – Effective from 1st
June, 2007</font></b></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now it is officially
clarified that the Finance Bill, 2007 received the assent of the President on
11th May, 2007 and the Finance Act, 2007 was published in the Gazette of India
on 12th May, 2007 as Act No. 22/2007. This information is contained in the official
communication dated 22nd May, 2007 from the Joint Secretary TRU. The Joint Secretary
has explained the changes relating to Service Tax consequent to the enactment
of the Finance Bill, 2007.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/tru_lett.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">JS
(TRU) Letter F.No. B1/16/2007-TRU, Dated May 22, 2007</font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">1st
June, 2007 is the effective date for New Services</font></b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The New Services
brought within the taxable net in this year’s Budget and the amendments
to the Act will be effective from 1st June, 2007. The New Services are</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Tele Communication<br>
2. Mining of Mineral, Oil or Gas<br>
3. Renting of immovable property for commercial purposes<br>
4. Works contract<br>
5. Development and supply of content<br>
6. Asset Management<br>
7. Design Services</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Certain changes
are made in the existing services</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Business Directories,
Yellow Pages and Trade catalogues excluded from the definition of Book in<b><font color="#0000FF">
“sale of space or time”</font></b> for advertisement service.<br>
2. <font color="#0000FF"><b>“CAB”</b></font> to include vehicles
capable of carrying more than twelve passengers.<br>
3. Social functions to include marriage also.<br>
4. Organizing a marriage is event management. <br>
5. Man power supply to include pre-recruitment services.<br>
6. Cash management to be included in banking and other financial services.<br>
7. Management consultant to include business consultant.<br>
8. Computer Hardware engineer included in consulting engineer.<br>
9. Computer software included in <b><font color="#0000FF">Management, Maintenance,
or Repair Service</font></b>.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_023.htm" target="_blank">Notification
No. 23/2007-ST, Dated May 22, 2007</a></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Renting
of property – Municipal Taxes to be excluded</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While the FM did
not relent and stuck to the imposition of service tax on renting of commercial
property, the Government has allowed a small concession. For calculating the
tax, the property tax paid to local bodies can be deducted from the rent received.
However any interest, penalty etc., paid to the municipalities for delayed payment
of tax or for any other reason, are not excluded. The property tax has to be
computed proportionately, relevant to the period for which the service tax is
paid.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_024.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 24/2007-ST, Dated May 22, 2007</font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Construction
of Ports – Re-exempted</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Construction of
ports was already exempted by Notification No. 16/2005 dated 7.6.2005 as far
as construction service was concerned. Now that the <font color="#0000FF">works
contract service</font> has been introduced, a combined notification is issued
to exempt construction of port under construction service or works contract
service. However, this exemption comes with a rider that construction of port
does not include finishing, repair, renovation, restoration etc., of an existing
port. Notification No. 16/2005-ST, Dated 7th June, 2005, being redundant is
now rescinded.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_025.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 25/2007-ST, Dated May 22, 2007</font></a></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_026.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 26/2007-ST, Dated May 22, 2007</font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Telecommunication
Services consequential amendments</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No.
36/2004 dated 31-12-2004 prescribes the services for which, persons other than
the service providers can be made liable to pay the Service Tax. In view of
the merger of various services like Telephone, pager, Telegraph, Telex, Fax
or leased circuits in to the one “Telecommunication Services”, consequential
amendments are made in the Notification No.36/2004.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_027.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 27/2007-ST, Dated May 22, 2007</font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Adjustment
of excess service tax paid in respect of renting service.</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As explained above,
for renting service, municipal taxes are excluded while computing the value.
However for any reason, if the municipal taxes could not be excluded and thereby
excess taxes were paid, the assessee can adjust the excess tax against his tax
liability for a subsequent period, but within one year from the date of payment
of property tax and such adjustment has to be intimated to the Superintendent
within 15 days of adjustment.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_028.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 28/2007-ST, Dated May 22, 2007</font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Valuation
of Works Contracts</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax Valuation
Rules have been amended to provide for separate valuation provisions for works
contract.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The value for works
contract is gross amount charged minus the value of goods sold in executing
the contract. Of course it can not be that simple. There are certain explanations.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Gross amount charged
will not include the VAT or Sales Tax paid on the Sale of goods involved in
the works contract</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Value for works
contract shall include</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (i) Labour charges<br>
(ii) Payment to Sub-contractor for labour and services<br>
(iii) Planning, Designing and Architect charges<br>
(iv) Charges for hiring Machinery, Tools etc.<br>
(v) Cost of consumables, like water, electricity, fuel etc.<br>
(vi) Establishment cost of the contractor<br>
(vii) Similar Expenses for supply of labour and services<br>
(viii) Profit earned relatable to supply of labour and services</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where the VAT or
Sales Tax has been paid on the actual value of the sale of goods, then such
value adopted for VAT shall be taken as the value for Service Tax also.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_029.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 29/2007-ST, Dated May 22, 2007</font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Export
of services – Rules amended.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mining Service,
Renting and works contract service are now included in the 1st category of Exporter
Services i.e. these services would be treated as export services if they are
provided in relation to an immovable properties situated outside India.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Services would
be treated as Exports only if two conditions are fulfilled.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> I. The Service
is provided from India and used outside India;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> II. Payment for
the service <font color="#0000FF"><b>“provided outside India”</b></font>
is received by the service provider in convertible Foreign Exchange.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please note the
difference. Under the 1st condition, the service has to be <font color="#0000FF">
<b>provided</b></font> from India and used out side India. But as per the 2nd
condition, the payment is for the service <font color="#0000FF"><b>provided
outside India</b></font>. This perhaps creates contradictory situation between
the two conditions in the sense, the 2nd condition perhaps restricts the scope
of 1st condition and requires the service to be <font color="#0000FF"><b>provided
outside India</b></font>. This is the problem of using more words than required.
It could as well have been condition No.1 with a clause that the payment should
be received in Foreign Currency. The words <b><font color="#0000FF">‘provided
outside India’</font></b> were not at all required in 2nd condition. The
good Board realizes this mistake and has now deleted the words <b><font color="#0000FF">‘outside
India’</font></b> in the 2nd condition.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_030.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 30/2007-ST, Dated May 22, 2007</font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Import
of Services</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mining Service,
Renting and works contract service are now included in the 1st category of Import
Services i.e. these services received from abroad will be taxable only if they
are provided in relation to immovable property situated within India. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_031.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 31/2007-ST, Dated May 22, 2007</font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Classification
of New Service for Exports and Imports</font></b></font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There
are three categories:</font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#0000FF">For
Export:</font></b></font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Category
1</b>. Service provided in relation to immovable property situated outside India;<br>
<b>Category 2</b>. Service performed outside India partly or wholly<br>
<b>Category 3</b>. Service provided to a recipient located outside India</font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#0000FF">For
Import:</font></b></font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Category
1</b>. Service provided in relation to immovable property situated inside India<br>
<b>Category 2</b>. Service performed in India party or wholly<br>
<b>Category 3</b>. Service provided to a recipient located inside India</font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
new services can be categorised as under</font></p>
<table width=450 border=1 align="center" cellpadding=3 cellspacing=0 bordercolor="#CCCCCC" class=MsoTableGrid>
<tr>
<td width=48 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Sr.
No.</b></font></td>
<td width=169 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Name
of Taxable Service</b></font></td>
<td width=69 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Sub-clause
of section 65(105)</b></font></td>
<td width=116 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Export
of Services Rules, 2005</b></font></td>
<td width=144 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Taxation
of Services (Provided from Outside <st1:country-region
w:st="on">India</st1:country-region> and Received in <st1:country-region
w:st="on"><st1:place w:st="on">India</st1:country-region>) Rules, 2006</b></font></td>
</tr>
<tr>
<td width=48 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.
</font></td>
<td width=169 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Telecommunication
service</font></td>
<td width=69 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzzx</font></td>
<td width=116 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
3 </font></td>
<td width=144 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
3</font></td>
</tr>
<tr>
<td width=48 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.
</font></td>
<td width=169 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mining
of mineral, oil or gas</font></td>
<td width=69 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzzy</font></td>
<td width=116 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
1 </font></td>
<td width=144 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
1 </font></td>
</tr>
<tr>
<td width=48 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.
</font></td>
<td width=169 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Renting
of immovable property</font></td>
<td width=69 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzzz</font></td>
<td width=116 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
1 </font></td>
<td width=144 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
1 </font></td>
</tr>
<tr>
<td width=48 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">4.
</font></td>
<td width=169 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Works
contract service</font></td>
<td width=69 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzzza</font></td>
<td width=116 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
1 </font></td>
<td width=144 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
1 </font></td>
</tr>
<tr>
<td width=48 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.
</font></td>
<td width=169 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Development
and supply of content</font></td>
<td width=69 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzzzb</font></td>
<td width=116 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
3 </font></td>
<td width=144 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
3 </font></td>
</tr>
<tr>
<td width=48 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">6.
</font></td>
<td width=169 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Asset
management</font></td>
<td width=69 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzzzc</font></td>
<td width=116 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
3 </font></td>
<td width=144 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
3 </font></td>
</tr>
<tr>
<td width=48 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">7.
</font></td>
<td width=169 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Design
services</font></td>
<td width=69 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzzzd</font></td>
<td width=116 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
3 </font></td>
<td width=144 valign=top> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category
3 </font></td>
</tr>
</table>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Works
Contract- Composition - Rules</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government
has notified the Works Contract (Composition Scheme for Payment of Service Tax)
Rules, 2007 effective from 1st June, 2007</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The person liable
to pay Service Tax in relation to works contract shall have the option to discharge
his service tax liability on the works contract service by paying an amount
equivalent to two per cent of the gross amount charged for the works contract
instead of paying service tax at the rate specified in section 66 of the Act.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The gross amount
will not include VAT or Sales Tax paid.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Service provider
who pays the Service Tax @ 2% will not be eligible for cenvat credit. He should
exercise his option in respect of a works contract prior to payment of service
tax in respect of the said works contract and the option so exercised shall
be applicable for the entire works contract and shall not be withdrawn until
the completion of the said works.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_032.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 32/2007-ST, Dated May 22, 2007</font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Powers
of Tribunal vs L Chandra Kumar</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can the CESTAT
strike down a Central Excise Notification and can the High Court entertain an
appeal against a CESTAT order relating to classification or valuation? What
happens to the Supreme Court decision in the Chandra Kumar case?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see our
<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5511">Special Column</a> and <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5510">Breaking News</a> for a detailed analysis and case
law on the subject.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6666">Until
Tomorrow with more DDT</font></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice day.</font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail
your comments to <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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