TIOL-DDT 685 · the untouched capture
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<body><p align="justify"><font size="3"><b><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif">TIOL</font></b><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif"><b>-DDT 685</b></font></font><font size="3" face="Verdana, Arial, Helvetica, sans-serif"><b></b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><br>
24.08.2007<br>
Friday </b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Sub contractor liable to pay Service Tax – Board clarifies – issues master circulars for Service Tax </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has at last officialised the draft master circulars for Service Tax. Now there are only two circulars for service Tax. At least all the instructions are in one place or rather two. The final circular has a few minor changes from the draft circular. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A new clarification is added as <b><font color="#663399">999.03 /23.08.07</font></b></font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">ISSUE: A taxable service provider outsources a part of the work by engaging another service provider, generally known as sub-contractor. Service tax is paid by the service provider for the total work. In such cases, whether service tax is liable to be paid by the service provider known as sub-contractor who undertakes only part of the whole work.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Clarification:</font></b> A sub-contractor is essentially a taxable service provider. The fact that services provided by such sub-contractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor. </font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Services provided by sub-contractors are in the nature of input services. Service tax is, therefore, leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input services. The fact that a given taxable service is intended for use as an input service by another service provider does not alter the taxability of the service provided.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So now all doubts about the sub contractor's liability to pay the tax is removed adversely.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So if somebody takes a contract and if the entire contract is outsourced, the sub contractors and the main contractor are liable to pay Service Tax. This may not be all that legal in view of the AP High Court judgement in the L&T case.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Works Contract- Credit on Capital Goods and input services- eligible</font></b><font color="#663399">:</font> The Works contractor who pays service Tax at 2% is not eligible to take credit on inputs. There were nagging doubts whether credit was barred for capital goods and input services also. Board has now clarified that there is no such bar. Clarification <b><font color="#663399">097.01 / 23.08.07</font></b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>In case of return ticket, service Tax on whole value: </b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether service tax is liable on the total value of the ticket or only half the value of the ticket in the case of round trip / return ticket (say Delhi-London-Delhi)?</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies that Service tax is leviable on the total value of the ticket. –Clarification. <b><font color="#663399">086.05 / 23.08.07</font></b></font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Organisation of trade fairs – more clarity? </b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Organizers of Trade Fairs and Exhibitions solicit participation from the trade and industry and provide space and other facilities, including furniture, cabins, security, electricity, etc., to display products and provision of services. Whether services provided by the organizers of trade fairs / exhibitions are covered within the scope of event management service [section 65(015)(zu)]?</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has now clarified this issue in more detail,</font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Trade fairs and exhibitions are organised by persons. Such organisers of trade fairs and exhibitions provide services to exhibitors in relation to business exhibition. Services provided by an organizer of trade fairs and exhibitions to an exhibitor in relation to business exhibition is liable to service tax under “Business Exhibition Service” [Section 65(105)(zzo)] w.e.f. 10.09.2004.</font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">In addition, an organiser of the trade fair or business exhibition may engage an event manager to provide service to the organiser in relation to organising trade fairs and exhibitions. In such cases, the event manager renders the service of “Event Management” to the organisers and is liable to pay service tax under “Event Management Service”.</font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">The two services, namely “Business Exhibition Service” and “Event Management Service”, and the two service providers of the respective services are distinct.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Clarification 041.01 / 23.08.07</font></b></font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service Tax on Chit funds – new clarification added.</b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies </font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) In the case of Simple Chit Funds, no consideration is paid or received for the services provided and, therefore, the question of levy of service tax does not arise.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) In the case of Business Chit Funds, cash management service is provided for a consideration and, therefore, leviable to service tax under “banking and other financial services</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Clarification 034.04 /23.08.07</font></b></font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Whether repair of ships during dry-docking by persons duly authorized by the Port is leviable to service tax under port service [section 65(105) (zn)]?</b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This issue clarified in the draft circular is now missing – Clarification 35.01 in the draft circular.</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/2007/sercir96.htm" target="_blank">CIRCULAR NO. 96/7/2007-ST.<strong>,</strong></a><strong>and</strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2007/sercir97.htm" target="_blank">97 / 8 /2007 Dated: August 23, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service Tax on packaged tour – abatement</b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At present Services provided in relation to a tour, by a tour operator enjoys an abatement of 60%. Now this is changed as follows</font></p>
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<td width=245 valign=top class="Normal"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service</strong></font></p></td>
<td width=234 valign=top class="Normal"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Condition</strong></font></p></td>
<td width=89 valign=top class="Normal"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Percentage value on which tax is to be paid</strong></font></p></td>
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<td width=245 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Services provided or to be provided to any person, by a tour operator in relation to a package tour.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation.- <i>The expression “package tour” means a tour wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided by the tour operator as part of the package tour to the person undertaking the tour. </i></font></p></td>
<td width=234 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The bill issued for this purpose indicates that it is inclusive of charges for such a tour.</font></p></td>
<td width=89 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">25</font></p></td>
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<td width=245 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Services provided or to be provided to any person, by a tour operator in relation to a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour.</font></p></td>
<td width=234 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) The invoice, bill or challan issued indicates that it is towards charges for such accommodation, and </font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) this exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.</font></p></td>
<td width=89 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10</font></p></td>
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<td width=245 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) Services, other than services specified in (i) and (ii) above, provided or to be provided to any person, by a tour operator in relation to a tour.</font></p></td>
<td width=234 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.</font></p></td>
<td width=89 valign=top class="Normal"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">40</font></p></td>
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</table><p align="justify"><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_038.htm" target="_blank">NOTIFICATION NO. 38/2007-Service Tax, Dated: August 23, 2007</a></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Anti dumping duty on nonylphenol imposed</b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">The Government has imposed anti dumping duty on </font></strong>nonylphenol originating in, or exported from, Chinese Taipei.</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=23&filename=notification/custom/2007/ctariff07_094.htm" target="_blank">NOTIFICATION NO. 94/2007- Cus.,, Dated: August 22, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>POY from Korea anti dumping duty withdrawn</b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">On the Designated Authority coming to the conclusion that</font> </strong>there is no justification for the continued imposition of the anti dumping duty on imports of partially oriented yarn generally known as POY originating in or exported from the Republic of Korea and Turkey, the Government has rescinded the Notification No. 97/2002 imposing the duty. </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=23&filename=notification/custom/2007/ctariff07_095.htm" target="_blank">NOTIFICATION NO. 95/2007- Cus.,, Dated: August 22, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From our Legal Corner – Monday's cases</b></font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><b><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_31.gif" alt="Legal Corner Icon" width="191" height="160" hspace="5" border="0" align="left"></b></b></b></font></p>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u2:p></u2:p>
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<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u2:p><font color="#FF0000">Income Tax </font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u2:p><font color="#663399">Reason for reopening assessment must be genuine - where assessee utilises certain sum for purposes specified in Sec 80HHD(4) and draws the same from '80HHD reserve account' it is open to assessee to utilise the fund for any purpose it deems fit and proper : Bombay HC </font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">if the assessee fails to utilise the amount credited to the '80HHD reserve account' for the purpose of its business in the manner laid down in Section 80HHD(4) of the Act or utilises the amount for the purposes other than those specified in Section 80HHD(4) of the Act, then the amount so utilised becomes chargeable to tax.</font></p>
<p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs</b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Yet again - COFEPOSA detention order sponsored by DRI fails judicial scrutiny! - Actual smuggling and links to facilitate smuggling - Bombay HC follows judicial precedence </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">IT'S</font></b> high time senior officers of DRI indulge in some serious introspection as to why cases for detention sponsored by this esteemed organization continue to fall like nine pins in the Courts. Apart from the same, Insiders inform that there a quite a number of cases involving huge revenue implications and immaculately planned / well executed economic offences which never find its way before the COFEPOSA screening Committee whereas in some cases COFEPOSA action is sponsored more out of ‘routine', without application of one's mind and without probing into settled case laws on preventive detention. Needless to add, this inconsistency and ‘selective' treatment will sooner than later erode the efficacy of the organization and one of these days deliver a telling blow to its impregnable edifice.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Ban on export of skimmed milk - DGFT's order quashed -While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria - High Court</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the existing policies and with the permission to export, the petitioner had various export orders for supply of SMP which remains to be executed as per the agreement entered into with the petitioner and its foreign importers / purchasers within the time limit specified therein. The delay in execution of the work would expose the petitioner to unnecessary liability.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns Monday for the judgements</u></b></font></p>
<div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u2:p></u2:p></font><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
</font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more DDT</font></p><p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><u2:p></u2:p>Have a nice day.</font></p>
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<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></font></p>
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