How to Work Smart?????

Working smarter, not harder, is an age-old adage, and if you master the concept, your entire working life will be easier. There are simple techniques that you can employ to save steps and tedium from almost any task.

Steps

1. Assess everything that needs to be done. Before you plunge in headfirst, remember that enthusiasm needs to be tempered with wisdom. Look over every aspect of the job, and allow yourself ample "pondering time" so that you can be sure that every detail is accomplished on time, and accurately.
2. 
   Make an outline. Whether it's in your head or on paper, you should have a checklist in mind, and follow it to the letter, and in order - you don't want to repeat steps, duplicate the efforts of others, or make mistakes. Also, you definitely don't want to forget anything.
3. Consider your materials. Don't take shortcuts, when possible, on the quality of your materials. Cheap materials are harder to work with, because they aren't as sturdy or nice. Because they're harder to work with, they take longer to bend to your will. Remember that working smart means thinking about these things - in most jobs, the materials aren't where the majority of the costs are. It's the labor - the time needed to complete the job - that costs the company more money. Using inexpensive materials where they are easily installed makes sense. Trying to save a few bucks but spending an extra hour or two because those cheap things didn't install properly doesn't make any sense at all.
4. 
   Follow your plan and don't deviate from it - unless you must. Once you've assessed the job and come up with a plan, it's usually best to stick with the plan. However, things come up: a part doesn't fit, or it turns out it's not the best item for the job, someone gets sick, all sorts of emergencies can throw a wrench into your plan. Be prepared to think on your feet, and be resourceful. Nimble thinking is essential to working smart, especially when something goes wrong. Following a plan slavishly, in spite of new information, developments, or problems is just plain dumb. Be flexible and change if you need to.
5. 
   Delegate to the right people at the right times. Make sure your team is well-ordered. If one person is faster, put him or her on the part of your task that will take longest. If one person is more skilled and accurate, put him or her on the part of the task that is most critical.
6. Work parallel. This means that there may be four or five, for example, components to your job. Let's say you are a design and display company creating a display for a county fair. Your client wants a combination of signs, banners, flyers, and brochures, along with a booth design. You set your best designer in motion to design the copy and look of things, but meanwhile, you assign someone to procure what essential supplies you will need. So far, you could be having one of your people contact printers to get pricing for the number of flyers and/or brochures your client wants, and another to take an inventory of what sign and banner materials you already have on hand - vinyl or paint colors, banner sizes, pre-cut blanks. This way, once the client meeting is complete and you have a good idea of what is going into the installation, you can match it to your inventory and see if there are things on hand that you can use to get started, while someone else goes and gets the things you still need.
7. Control clients by
   communicating properly. Many times, it's hard to work smart because your clients will insist that their job is a big rush. Instead of scrambling to get that job done, make sure your clients understand in the initial meeting what your normal turnaround time for their job would be. If you know you will need two weeks, don't let the client squeeze you into one week unless that client is willing to pay extra for the rush. Most businesses have more than one client, yet many clients forget that their job is not the only one you're working on.
   
   
   • Stick to your policies. If you charge extra to rush a job, don't deviate from that, ever. It's unfair to apply policies to some customers and not others. When one client comes in and is very pushy, feeling entitled to your undivided attention immediately, often, you can simply say something like, "Sure, we can rush the job for you, but I need to let you know that it will cost extra - probably as much as 50% more than the original quote, for the rush." It's amazing how quickly this type of client stands down, saying, "Oh, forget that - it's not that big a rush. We can wait." Just let them know that you are willing to rush their jobs, but by doing so, you must move other customers who were "in line" before them out of the way - causing you to run those jobs behind. Plus, you need different workers to complete different jobs, and rushing requires you to pay them overtime, rather than allowing more time to complete the job during regular hours. This is smart - it lets your clients know that you really know your stuff, plus it relieves your schedule or makes you more money.
   • Give one to three choices - never more. Handing a swatch book to a client and saying, "Tell me which colors you are interested in" is deadly. Too many choices will cause horrible delays as the customer peruses ALL possibilities, and later tends to second-guess every decision, wanting to see it now "In green?" or how about "In this chartreuse? It's just a shade different, but..." Oy. Instead, say things like, "Do you like this blue or this green better?" Lots of the jobs you do will instantly suggest certain tools, colors, approaches, materials, etc. You can also attempt to influence the client in the direction you think best for his purpose. Use your expertise to narrow down the critical choices right away: "We can paint, which will be expensive to fix when it weathers, about 3 - 5 years from now, or we can use 5-year vinyl, or 10-year vinyl for the letters. The best stuff only costs a few dollars more."
8. Never willingly trap yourself into accepting a bad job. You know when a job is going to be great. You also know when you get that "uh-oh" feeling that something is not right. A client or boss who pressures you into areas where you are not comfortable, either because it is an unreasonable expectation or because it's outside your scope needs to be aware immediately of your discomfort with the job as proposed. Make any misgivings clear instantly, and in front of others, if possible. If you are self-employed, declining a job like this is much smarter, even though it's so hard to let that money go when you depend on every job for your livelihood. Still, a client who doesn't pay because you didn't adhere to every jot and tittle of his demands (and some are just breathtakingly demanding) is not a good customer in the end, and if you work for hours and end up not being paid all or part of what you worked for - especially when you were sweating bullets over it the whole time - is not smart. And it's the hardest work you'll ever do.
9. Work as hard and as efficiently as possible, and finish each job as quickly as you can. Hit every job with everything you've got. Getting it done quickly and efficiently - while you have the time - is much smarter than looking at the schedule and telling yourself you have three more days to get it done, and then going to a long lunch or off to play tennis or whatever. You don't know what will happen tomorrow - you might come down with the flu. Figuring that you will need only one day to complete that job if nothing goes wrong and then sitting on it just because you can is dumb. If you end up getting sick, you might not even be well enough to finish on time, let alone early. Running out the clock on jobs when you don't absolutely need to can force a rush at the finish line, or worse, deprives you of opportunities you might not have otherwise.
   
   
   • Example: you're the self-employed designer mentioned above. Today is Wednesday. You have a big job due for Client A on Friday. You know the job will only take about 8 hours if all goes well. You could quit at 4pm and go to a ballgame with friends, leaving you all day tomorrow to finish so that the job will be ready for pickup on Friday morning. Or you could put your head down and work until 7pm today instead of your usual 6pm. If you do this, you will be finished today - the client can pick it up on Thursday morning, a full day ahead of schedule. You decide to sacrifice the ballgame and get the job done tonight. On Thursday morning, Client B comes in, panicked because he has a job which he needs finished by Friday - you've worked with him before, and he realizes he will have to pay a rush charge to get it done that quickly. You accept the job on a rush basis, knowing you have cleared your schedule and can easily turn this around in time during regular hours - you will work no overtime, but still receive rush pay. Had you gone to that ballgame, Client A's job would still be sitting there, undone, and in front of this job, and you would have to work all day today to finish it, then be forced to pull an all-nighter to finish Client B's rush job. But because you sacrificed your fun at the ballgame: You can call Client A on Thursday and let him know he can come and pick up his job, plus, you can do the new job, be Client B's hero - and you can get his job to him by Friday! On top of that, you can even give Client B a slight discount (from the rate he was willing to pay for the rush job), and still make loads of money you wouldn't have been able to make at all, had you allowed Client A's job to run out until Friday, slacking until the last minute.
10. Recognize the point of 'diminishing returns.' The above steps do not imply that you should work yourself to the point of exhaustion. You need to protect your health and the integrity of your job. Working yourself to a frazzle constantly makes you prone to mistakes. When you're so tired that you realize it's taking you twice or three times longer to do a job than normal, you need to call it a day. Rest at least a few hours, and come back fresher, so that you can be strong at the end of the job. Learn
    how to power nap.
11. Finish strong. It's sooooo important! Being dead tired and sluggish at the finish line is not smart - it's foolish. Be sure that you are well rested at deadline time. On the day a client is expected to pick up his or her job, go over it with a fine-toothed comb - and this means checking the finished product against the original instructions, making sure they match up. Check it for accuracy and detail, make any adjustments, corrections or touch-ups well ahead of the time the client will arrive. Making sure every last detail has been checked and re-verified will make you confident and calm when your client comes to pick up the job. You can present it proudly, knowing that everything has been done to ensure the client will be happy with the finished product. Your confidence spills over to the client, which also makes it easier to ask for that final payment - when you see the client smiling and appreciative of the work you've done for him or her. This works for any project you have to do in life.

Tips

• When you can work, do. Don't slack or allow time to run out so that you're rushing at the end to meet a deadline.
• When you're sick, stay home and rest until you are well. You make too many mistakes when you're ill or tired to call that "working smart."
• Learn to make your money work for you. Working a lot and spending every penny you make is NOT working smart!

Warnings

• It's mentioned above that you should avoid taking a bad job. By that, it's meant that you know that it's a sort of thing you aren't good at, or that is not part of the usual services you offer, or that it's something you don't know much about. Instead of trying to bs your way through it, tell the truth. And if you get an "uh-oh" feeling from the client, don't take the job. If you have a sense right away that this client is not on the same page with you, either you must take steps immediately to get them there, or you must not take the job. This doesn't suggest that a difficult client is a bad client - often, a difficult client isn't really so difficult at all, once s/he knows you and trusts you to do the good job s/he requires. But one who constantly grinds for discounts, tries to get you to cut corners to save money, or changes scope of job or deadlines in the middle of everything, this is someone who will work your last nerve. You must ask yourself if the money you make on these jobs is worth the time, effort and tears.
• There is one other situation you should take caution with, and that is allowing the customer to make changes mid-stream, causing you to go out of pocket much more than you originally planned. A little tweak is one thing. A big change should stop everything while you re-think - and re-bid. The client should be made aware instantly that it's not "just a little change", and that making changes in mid-job could cost significantly more. Don't allow yourself to be suckered into making "just a little adjustment" more than one time during a job. Some clients have this down to a science, asking for "small changes" several times when you're already heavily into the project. Many huge problems and disagreements (usually resulting in you not getting paid as you should have, had you bid the job this way originally) start with "small changes."

By - S0njoy Dahal

VAT - in India

VAT will replace the present sales tax in India. Under the current single-point system of tax levy, the manufacturer or importer of goods into a State is liable to sales tax. There is no sales tax on the further distribution channel. VAT, in simple terms, is a multi-point levy on each of the entities in the supply chain with the facility of set-off of input tax - that is, the tax paid at the stage of purchase of goods by a trader and on purchase of raw materials by a manufacturer. Only the value addition in the hands of each of the entities is subject to tax. For instance, if a dealer purchases goods for Rs 100 from another dealer and a tax of Rs 10 has been charged in the bill, and he sells the goods for Rs 120 on which the dealer will charge a tax of Rs 12 at 10 per cent, the tax payable by the dealer will be only Rs 2, being the difference between the tax collected of Rs 12 and tax already paid on purchases of Rs 10. Thus, the dealer has paid tax at 10 per cent on Rs 20 being the value addition in his hands.

Purchase price - Rs 100
Tax paid on purchase - Rs 10 (input tax)
Sale price - Rs 120
Tax payable on sale price - Rs 12 (output tax)
Input tax credit - Rs 10
VAT payable - Rs 2

VAT levy will be administered by the Value Added Tax Act and the rules made there-under.

VAT can be computed by using either of the three methods detailed below

• The Subtraction method:- The tax rate is applied to the difference between the value of output and the cost of input.
• The Addition method: The value added is computed by adding all the payments that is payable to the factors of production (viz., wages, salaries, interest payments etc).
• Tax credit method: This entails set-off of the tax paid on inputs from tax collected on sales.

India opted for tax credit method, which is similar to CENVAT.

Note : Also look for MODVAT

States such as Andhrapradesh, Kerala, Maharashtra, Madhyapradesh, Delhi and Haryana have experimented with VAT albeit in a limited manner, covering only limited goods. The experiments never had the full-fledged features of VAT and were only concoctions. These states have even called off their experiments owing to different reasons. If one analyses why VAT or its variant failed in Maharashtra, which was the only state to come closer to a true VAT regime, the following reasons emerge:

1. Dual methodologies of computation of VAT credit Error! Hyperlink reference not valid. , one for the Manufacturing stage and the other for the trading stage, thus breaking the audit trail. It may be noted that one of the advantages of VAT system, as we would be dealing later on, is the audit trail that is created in the VAT chain.

2. Presence of a large number of tax deferral and holiday schemes, which resulted in a narrow base. It may again be noted that under VAT, which is multi-point, the tax rates have to be reasonably low, and lower tax rates presupposes that the tax base is wide. These two features were not present in the Maharashtra tax regime.

3. Low level of awareness among traders, and even administrators, giving rise to fears and apprehensions. Owing to this, there was considerable consternation among the trade, which gave rise to open revolt against the system.

4. Partial implementation of the ideal VAT with the existing system coexisting even under this regime.

5. Increased burden on retailers of Bookkeeping and compliance.

6. Multiplicity of rates of tax under the VAT regime.

7. Drop in revenue for the State Government, though there are no studies attributing such reduction to the system of taxation.

Thus States had indeed tried some variations of VAT, but eventually gave up due to a variety of reasons.


-BY SONJOY

Service Tax

Service Tax In India
Dr. Manmohan Singh, the then Union Finance Minister, in his Budget speech for the year 1994-95 introduced the new concept of Service Tax and stated that '' There is no sound reason for exempting services from taxation, therefore, I propose to make a modest effort in this direction by imposing a tax on services of telephones, non-life insurance and stock brokers.''
Service Tax has been introduced in order to explore new avenues for taxation and to bring more people into the tax net. Service Tax generated revenue of Rs 2612 crores in 2000-2001. In 2001-2002 it is estimated at 3600 crores.
Bringing services under taxation is not simple as the services are intangible and are provided by large groups of organized as well as unorganized service providers including retailers who are scattered across the country. Further, there are several services, which are of intermediate nature. The low level of education of service providers also poses difficulties to both-tax administration and assessees.
The Service Tax assessee is the person/firm who provides the service. Hence, the Service Tax must be paid by the person/firm providing the service.
As stated earlier, service tax was introduced in India for the first time in 1994. Chapter V of the Finance Act, 1994 (32 of 1994) (Sections 64 to 96) deals with imposition of Service Tax interalia on-
Service rendered by the telegraph authorities to the subscribers in relation to telephone connections.
Service provided by the insurer to the policy-holder in relation to general insurance business.
Service provided by a stockbroker.
The Finance Acts of 1996, 1997, 1998, 2001, 2002 and 2003 added more services to tax net by way of amendments to Finance Act, 1994. At present total number of services on which Service Tax is levied has gone upto 58 despite withdrawal of certain Services from the tax net or grant of exemptions (Goods Transport Operators, Outdoor Caterers, Pandal and Shamiana Contractors, and Mechanized Slaughter Houses).
Formation And Functions Of Director General Service Tax (DGST).
Validity Of Service Tax Under The Constitution Of India.
Legal Issues And Court Decisions On Service Tax.
Classification Of Services.
Taxable Services In India.
Refund In Service Tax India.
Service Tax Code (STC) Number.
Registration Procedure For Service Tax.
Service Tax Returns.
Rates Of Service Tax For Different Classes Of Assesses.
Service Tax appeals.
Service Tax-Penalties.
Service Tax Credit.
Advance Ruling In Service Tax.
Formation And Functions Of DGST
Considering the increasing workload due to the expanding coverage of service tax, it has been decided to centralise all the work and entrust the same to a separate unit supervised by a very senior official. Accordingly, the office of Director General (Service Tax) has been formed in the year 1997. It is headed by the Director General (Service Tax). The functions and powers of Director General (Service Tax) are :
To ensure that proper establishment and infrastructure has been created under different central excise Commissionerate to monitor the collection and assessment of service tax.
To study the staff requirement at field level for proper and effective implementation of service tax.
To study as to how the various service taxes are being implemented in the field and to suggest measures as may be necessary to increase revenue collection or to streamline procedures.
To undertake study of law and procedures in relation to service tax with a view to simplify the service tax collection and assessment and make suggestions thereon.
To form a data base regarding the collection of service tax from the date of its inception in 1994 and to monitor the revenue collection from service tax.
To inspect the service tax cells in the Commissionerate to ensure that they are functioning effectively.
To undertake any other functions as assigned by the Board from time to time.
The Directorate of Service Tax has been co-ordinating between the Board and Central Excise Commissionerates. It also monitors the collection and the assessment of Service Tax. The Service Tax Revenue Reports, received from various Central Excise Commissionerates, are complied at the Directorate and the performance of the Commissionerates/Zones in Service Tax collection are being monitored for corrective actions.
During the course of Inspection of the Central Excise Commissionerates, the Inspection team of this Directorate has in variably pointed out the requirement of the staff in field level for proper and effective implementation of Service Tax. The Directorate has also suggested necessary measures to be adopted to increase service Tax revenue collection. The grey areas and evasion prone services have been brought to the notice of the Commissionerate for conducting effective Surveys/Audit.
The Directorate of Service Tax has drafted a separate act for Service Tax and the Rules therefor and has forwarded the same to the Ministry for approval vide letter F.No.V/DGST/30-Misc-56/2000 dtd. 19/02/2001. The Service Tax manual has also been prepared and forwarded to Board for approval and issue during year 2001. The correspondences received from field formations and service providers are scrutinised from law and the clarifications sought for are replied to wherever possible. In cases where the doubts/clarification sought involved policy matter, the Board has been apprised for issuing clarification/instruction.
This Directorate has taken up the issue of forming a database regarding register of the assessee and collection of Service Tax in co-ordination with the Directorate of Systems.
The Directorate has also recommended electronic administration in implementation of Service Tax to bring transparency in tax administration and avoid interfacing between Service providers and tax authorities. The Board has also instructed the Commissionerate to feed the figures of service tax revenue collection in the system on line before 7th of every month. The Directorate of Service Tax has advised all the Central Excise Commissionerates to re-consile service tax collection with the help of T.R.-6 challans and the statements of the P.A.O.
The Directorate of Service Tax has been conducting inspection of Central Excise Commissionerates. During the course of inspection, verification of Service Tax records, maintained by the Commissionerate, is done. Staff of Service Tax Cell are also guided suitably in proper implementation of Service Tax and maintenance of records. A meeting with the Service Tax officers is always conducted in the Commissionerate during inspection. Open-house meeting is also arranged in the Commissionerate wherever it was felt necessary. Problems faced by the assessees in Service Tax compliance are sorted out in the open-house meeting with the members of various service providers associations.
Presently there are 65 Central Excise Commissionerates and 6 Service tax Commissionerates within the jurisdiction of 23 Central Excise Zones. The 6 Service Tax Commissionerates have been established in Mumbai, Delhi, Kolkata, Chennai, Ahmedabad & Bangalore.
Validity Of Service Tax Under The Constitution Of India
Article 265 of the Constitution lays down that no tax shall be levied or collected except by the authority of law. Schedule VII divides this subject into three categories:
Union list (Article 246(1) of the Constitution specifies that Parliament has exclusive powers to make laws with respect of any of the matters enumerated in List I in the Seventh Schedule to Constitution)
State list (As per Article 246(3) State Government has exclusive powers to make laws with respect to matters enumerated in List II)
Concurrent list (both Parliament and State Government can pass legislation with respect to items specified in this list).
The authority of the Parliament to levy service tax is derived from Entry 97 of List I (Union List) of Seventh Schedule to Constitution which reads as under: �Any other matter not enumerated in List II or List III including any tax not mentioned in either of those lists�. Time and again there have been attempts to challenge the constitutional validity of the levy of service Tax and the courts have more than once upheld the constitutional validity of such levy.
The Gujarat High Court in the case of Addition Advertising vs. Union of India [1998 (98) ELT 14] has held that levy of tax on advertising service is not unconstitutional. It was held that this is not a tax on any profession, trade, calling or employment, but in respect of service rendered. If there is no service, there is no tax. It was further held that 'the tax is not on advertisement' but on the services rendered with reference to the advertisement and there is a clear distinction between the advertisement service and advertisement.
In another case of M/s. Laghu Udyog Bharati v/s. UOI [1999 (89) ELT 247] the petitioners challenged the Government's decision to shift the burden of duty liability to the service receivers in case of Goods Transport Operators and Clearing & Forwarding Agents. In this case, the Hon'ble Supreme Court upheld the contention of petitioners and held that the relevant provisions of Service Tax Rules were ultra vires the Finance Act, 1994.
The Hon'ble Supreme Court while deciding the case, observed as follows: -
"The service tax levied by reason of services which are offered. The imposition is on the person rendering the service. Of course, it may be indirect tax, it may be possible that the same is passed on to the customer but as far as the levy and assessment is concerned, it is the person rendering the service who alone can be regarded as an assessee and not the customer. This is the only way in which the provision can be read harmoniously.
The Hon'ble Apex Court further opined that ''The charge of tax is on the value of services and it is only the person who is providing service can be regarded as an assessee. The rules, therefore, cannot be so framed which do not carry out the purpose of the Chapter (Statute) and cannot be in conflict with the same.''
The Supreme Court in Tamil Nadu Kalyana Mandapam Assn. V. Union of India [(2004) 267 ITR 9] held that a tax cannot be struck down on the ground lack of legislative competence by enquiring whether the definition accords what the layman�s view of service. It is well settled that in matters of taxation laws, the court permits greater latitude to pick and chose objects and rates for taxation and has a wide discretion with regard there to. Relying on Mafatlal Industries Ltd. and Ors. vs. Union of India and Ors. [(1997) 5 SCC 536] the court added that in the matter of taxation laws, the court permits great latitude to the discretion of the legislature. It held that the State is allowed to pick and chose districts, objects, persons, methods and even rates for taxation, if it does so reasonably. The courts view the laws relating to economic activities with greater latitude than other matters. Therefore, the court opined that a levy of service tax on a particular kind of service could not be struck down on the ground that it does not conform to a common understanding of the word service so long as it does not transgress any specific restriction contained in the Constitution.
From the above it may be surmised with a reasonable amount of certainty that the challenges to the constitutionality of the levy of service tax by the Central Government may be in vain, at least for the present.
At this point it may be pertinent to point out that the Constitution (95th Amendment) Bill seeking to include service tax as a specific entry in the Union List was introduced in March, 2003. At the time of writing, the said Constitution (95th Amendment) Bill had not become an act.
Legal Issues And Court Decisions On Service Tax
The validity of Service tax has been challenged in various courts of India, who have in their various decisions have upheld the legality of the levy. Few important decisions in this regard are given below.
The Gujarat High Court in the case of Addition Advertising vs. Union of India (1998 (98) ELT 14) has held that levy of tax on advertising service is not unconstitutional. It was held that this is not a tax on any profession, trade, calling or employment, but in respect of service rendered. If there is no service, there is no tax. It was further held that 'the tax is not on advertisement' but on the services rendered with reference to the advertisement and there is a clear distinction between the advertisement service and advertisement.
In another case of M/s. Laghu Udyog Bharati v/s. UOI (1999 (89) ELT 247) the petitioners challenged the Government's decision to shift the burden of duty liability to the service receivers in case of Goods Transport Operators and Clearing & Forwarding Agents. In this case, the Hon'ble Supreme Court upheld the contention of petitioners and held that the relevant provisions of Service Tax Rules were ultra vires the Finance Act, 1994.
The Hon'ble Supreme Court while deciding the case, observed as follows :-
"The service tax levied by reason of services which are offered. The imposition is on the person rendering the service. Of course, it may be indirect tax, it may be possible that the same is passed on to the customer but as far as the levy and assessment is concerned, it is the person rendering the service who alone can be regarded as an assessee and not the customer. This is the only way in which the provision can be read harmoniously.
The Hon'ble Apex Court further opined that ''The charge of tax is on the value of services and it is only the person who is providing service can be regarded as an assessee. The rules, therefore, cannot be so framed which do not carry out the purpose of the Chapter (Statute) and cannot be in conflict with the same.''
A number of trade bodies and individual service providers have challenged the levy of service tax by the Union Government under the residuary entry No.97, list I in VIIth Schedule of the Constitution. They contended that the service tax is nothing but a tax on professions, which is specifically listed, in the State list. Therefore, the Union Government is not empowered to levy service tax on professional services. Additionally, the levy has also been challenged on the grounds of hostile discrimination vis-Ã -vis other services and/or the service providers within the same category. The Institute of Architects and certain representative bodies of Chartered Accountants have been in the forefront of this litigation. However, this challenge has not found favour with the courts.
The Gujarat High Court in its judgement dt.27.12.2000 (in SCA No.469/1999 and 7220/1999) and the Mumbai High Court in the judgement dt. 22.02.2001 (in the W/P no. 142/1999 and 1174/2000) have held that the tax on profession (which is in the State list) is a tax on the privilege of carrying on such profession. Therefore, such a tax is irrespective of the fact whether professional does or does not render professional service for remuneration. Whereas the service tax is a levy, which has to be paid each time a professional renders services for remuneration. Thus, professional tax and service tax are different in pith and substance. Further, the legislature is competent to identify and reasonably discriminate between various services and service providers for the purposes of taxation. Therefore, there is no ground to challenge the levy on the grounds of discrimination. The Madras High Court have also taken the same view in a plethora of petitions pending before them.
A number of trade bodies and individual service providers have challenged the levy of service tax by the Union Government under the residuary entry no. 97, list I in Seventh Schedule of the Constitution. They contended that the service tax nothing but a tax on professions, which is specifically listed, in the State list. Therefore, the Union Government is not empowered to levy service tax on professional services. Additionally, the levy has also been challenged on the grounds of hostile discrimination vis-Ã -vis other services and/or the service providers within the same category. The Institute of Architects and certain representative bodies of Chartered Accountants have been in the forefront of this litigation.
Considering the importance of early resolution of these disputes, the Directorate actively pursued such cases pending in Ahmedabad, Mumbai and Chennai High Courts have upheld the constitutional validity of the service tax law provisions contained in the Chapter V of the Finance Act, 1994 as amended and the Rules framed thereunder.
Classification Of Services
The provisions relating to Service Tax were brought into force with effect from 1st July 1994 vide notification No. 1/94 dated June 28, 1994 published in the Gazette of India.. It extends to whole of India except the state of Jammu & Kashmir. Set out hereunder are the services hat have been brought within the purview of service tax since its introduction vide the Finance Act, 1994:
The services, brought under the tax net in the year 1994-95, are as below:
Telephone
Stockbroker
General Insurance
The Finance Act (2) 1996 enlarged the scope of levy of Service Tax covering three more services, viz.,
Advertising agencies,
Courier agencies
Radio pager services.
But tax on these services was made applicable from 1st November, 1996. The Finance Acts of 1997 and 1998 further extended the scope of service tax to cover a larger number of services rendered by the following service providers, from the dates indicated against each of them.
7. Consulting engineers
7th July, 1997
8. Custom house agents
15th June, 1997
9. Steamer agents
15th June, 1997
10. Clearing & forwarding agents
16th July, 1997
11. Air travel agents
1st July, 1997
12. Tour operators
exempted upto 31.3.2000 Notification No.52/98, 8th July, 1998, reintroduced w.e.f. 1.4.2000
13. Rent-a-Cab Operators
exempted upto 31.3.2000 Vide Notification No.3/99 Dt.28.2.99, reintroduced w.e.f. 1.4.2000
14. Manpower recruitment Agency
1st July, 1997
15. Mandap Keepers
1st July, 1997
The services provided by goods transport operators, out door caterers and pandal shamiana contractors were brought under the tax net in the budget 1997-98, but abolished vide Notification No.49/98, 2nd June, 1998.
Government of India has notified imposition of service Tax on twelve new services in 1998-99 union Budget. These services listed below were notified on 7th October, 1998 and were subjected to levy of Service Tax w.e.f. 16th October, 1998.
16. Architects17. Interior Decorators18. Management Consultants19. Practicing Chartered Accountants20. Practicing Company Secretaries21. Practicing Cost Accountants22. Real Estates Agents/Consultants23. Credit Rating Agencies24. Private Security Agencies25. Market Research Agencies26. Underwriters Agencies
In case of mechanized slaughter houses, since exempted, vide Notification No.58/98 dtd. 07.10.1998, the rate of Service Tax was used to be a specific rate based on per animal slaughtered. In the Finance Act’2001, the levy of service tax has been extended to 14 more services, which are listed below. This levy is effective from 16.07.2001.
27. Scientific and technical consultancy services28. Photography29. Convention30. Telegraph31. Telex32. Facsimile (fax)33. Online information and database access or retrieval34. Video-tape production35. Sound recording36. Broadcasting37. Insurance auxiliary activity38. Banking and other financial services39. Port40. Authorised Service Stations41. Leased circuits Services
In the Budget 2002-2003, 10 more services have been added to the tax net which are listed below. This levy is effective from 16.08.2002.
42. Auxiliary services to life insurance43. Cargo handling44. Storage and warehousing services45. Event Management46. Cable operators47. Beauty parlours48. Health and fitness centres49. Fashion designer50. Rail travel agents.51. Dry cleaning services.
and these services have been notified on 1-8-2002 and were subject to levy of Service Tax w.e.f. 16-8-2002.
In the Budget 2003-2004, more services have been added to the tax net, which are listed below. This levy is with respect to the belowstated services was effective from July 1, 2003.
52. Commercial vocational institutes, coaching centres and private tutorials53. Maintenance and repair services.54. Commissioning and installation services55. Business auxiliary service56. Technical testing and analysis; technical inspection and certification57. Internet cafe services58. Franchise services
In the budget 2004-2005 13 more services are proposed to be added, to the list of taxable services. The services are:
59. Airport services60. Transport of goods by air61. Survey and exploration of minerals62. Business exhibition services63. Transport of goods by road64. opinion poll services65. Intellectual property services66. Broker of forward contracts67. Pandal and shamiana contractors68. Outdoor caterers69. Independent TV/radio programme producers70. Construction services in respect of commercial and industrial constructions71. Travel agents
The basis for classification of services can be found in Section 65A of the Finance Act, 1994 according to which, classification of taxable services shall be determined in terms of the sub clauses of clause (104) of Section 65 of the Finance Act, 1994.
It has been seen that in practice, the classification of services is not a watertight chamber. On the contrary, it has been seen that there are numerous overlaps when related services are concerned. It is to obviate such confusion that the principles that underlie the classification of services, in instance where a service is classifiable under more than one sub clause of clause (104) of Section 65 of the Finance Act, 1994, have been further elaborated as under:
The service shall be placed in a sub clause which provides the more specific description;
Services consisting of a combination of services shall be classified based on the service that gives them their essential character. In other words, composite services should be classified on basis of ‘essential character’, if no specific description can be found for such specific services;
When the service cannot be classified by either 1 or 2, i.e. either specific description or essential character it shall be classified under the sub clause that occurs first among the sub classes that merit consideration for the purpose of classification.
As a chronological list of services has been provided above the same need not be stated again
Taxable Services
In terms of Section 66 of the Finance Act, 1994, there shall be charged a tax (hereinafter referred to as service tax) at the rate of eight per cent (proposed to be raised to 10% by the Finance Bill 2004) of the value of the taxable services referred to in any sub clause of clause 105 of Section 65 of the Finance Act, 1994 . Value of service shall be the gross amount charged by the service provider for such service rendered by him as stated in Section 67 of Finance Act, 1994. Being in the nature of an indirect tax, it is levied on the persons using the services and the persons responsible and liable to collect service tax are authorised to collect service tax on services rendered by them. Thus in terms of Section 68(1) of the Finance Act, 1994, the responsibility for the payment of service tax at the prescribed rates rests on every person providing taxable service, whether he receives it from the client or not. However, in terms of Section 68(2) of the Finance Act, 1994, Central Government is empowered to specify, with respect to specific services, that service tax shall be paid by another person in the manner as may be prescribed. Further, in case of the service provider being a person who is non-resident The Finance Act does not make a distinction between the various categories of service providers viz. individuals, firms or corporate with respect to the tax liability. This was emphasised in TCS v. Union of India [2001(130) ELT 726 (Karnataka)] where it was held that the term ''every person'' was wide enough to cover both natural and juristic persons.
In terms of Section 68(1) of the Finance Act, 1994 service tax is to be paid in the manner and within such period as may be specified. Rule 6 of the Service Tax Rules, 1994 states that in case the assessee is an individual or proprietary firm or partnership firm, the tax on the value of the taxable service received in any quarter shall be paid to the credit of the Central Government by the 25th day of the month immediately following calendar month on which the said quarter ended. In all other cases the tax on value of taxable services received during any calendar month is required to be paid be paid by the 25th day of the month immediately following the said calendar month. Quarter for this purpose shall be a calendar quarter and each month a calendar month. It may be worthwhile to mention that the liability to pay service tax is on the value of taxable services actually received. Thus, service tax is not payable on amounts charged in the bills / invoice, but on amounts actually received.
In principle, no tax is payable for reimbursement of expenses incurred on behalf of client. Department has clarified that out of pocket expenses like traveling, boarding and lodging on reimbursable basis are not subject to service tax. The assessee will however have to provide documentary evidence substantiating his claim from the gross amount.
The levy of service tax covers only services rendered within India. It may therefore be said that:
No service tax is leviable on export of service.
No service tax is leviable on service provided by an Indian outside India.
No service tax is leviable on technical consultancy provided by foreign collaborator provided outside India. However, if the foreign technicians visit India and provide technical services, tax will be payable.
In instances where value received becomes refundable if service is not provided by the assessee either wholly or partly for any reason, the assessee can adjust the amount payable from service tax liability of service tax payable and pay net amount as service tax. Such adjustment is permissible only if the assessee refunds the value of taxable service along with service tax thereon from whom it was received.
Service tax is a payable on the value of taxable services received during the period under consideration. It follows therefore, that in instances where advance payment is made and no service is provided at that time, the same shall not be chargeable to service tax till the actual rendering of the service (vide Circular No. 65/14/2003 dated November 5, 2003).
In terms of Rule 6 (2) of the Service Tax Rules, 1994 the service tax, liable to be paid by the assessee, shall be deposited only in a bank designated by the Central Board of Excise and Customs in Form TR-6 or any manner prescribed by the Central Board of Excise and Customs.
Taxable services rendered as under are exempt from service tax:
Service rendered to the United Nations or other international organisation (Notification No. 16/2002-ST, dated August 2, 2002).
Export of services (Notification No. 2/2003-ST of March 01, 2003).
Services rendered to Special Economic Zone (SEZ) developer or to a unit located in SEZ for the development, operation and maintenance or setting up SEZ units. (Notification No. 17/2002-ST, dated 21.11.2002 as amended by Notification No. 4/2004-ST dated 31.3.2004).
The cost of goods or material sold by the service provider to the receiver of such services, during the course of provision of the taxable services (Notification No. 12/2003-ST dated 31.03.2004).
Payment received in India in non-repatriable convertible foreign exchange, is exempt from Service Tax for the period 09.04.1999 to 28.02.2003 and from 20.11.2003 onwards. (Notification No. 6/99-ST, dated 09.04.1999 and Notification No. 21/2003-ST dated 20.11.2003).
Refund In Service Tax India
The Service Tax is required to be paid only on the value of taxable service received in a particular month or quarter as the case may be and not on the gross amount billed to the client. However, in all such cases where the amount received is less than the gross amount charged/billed to the client, the Service Tax assessee are required to amend the bills either by rectifying the existing bill or by issuing a revised bill and by properly endorsing such charge in the billed amount. In case an assessee fails to do so, his liability to pay Service Tax shall be on the amount filled by him to the client for the services rendered.
Facility for adjusting excess payment of service tax by the assessee towards future liability is now provided for in the law. In cases, where an assessee has paid to the credit of Central Government service tax in respect of a taxable service which is not so provided by him either wholly or partially, for any reason, the assessee can adjust the excess service tax so paid by him calculated on a pro-rata basis against his service tax liability for the subsequent period, provided that the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received. However, the assessee is required to file the details in respect of such suo-moto adjustments done by him at the time of filing the service tax returns. In all other cases of excess payment, the refund claims have to be filed with the department.
The procedure for claiming refund for the amount due from the Department is as mentioned below:-
Submission of application in prescribed Form-R in triplicate to the jurisdictional Assistant Commissioner.
Application should be filed within the prescribed period, i.e. before the expiry of six months from the relevant date as defined in Section 11B of the Central Excise Act, 1944 which is made applicable to service refund matters also.
Application should be accompanied by documentary evidence to establish that the amount of Service Tax in relation to which such refund is being claimed has been paid by the assessee in excess and the incidence of such tax had not been passed on to any other person. The ''Relevant Date'' for the purpose of refund (under section 11B of Central Excise Act, 1944) is date of payment of Service Tax. Thus, the limitation period of six months is to be calculated from the said date.
Service Tax Code Number (STC) Number
The Central Board of Excise and Customs has vide Circular No. 35/3/2001-CX4 dated August 27, 2001 and No. 40/03/2002 dated March 21, 2002 making it compulsory for the assessee to use a new 15 digit PAN based registration number called the Service Tax Code (''STC''). The first part of the STC is to consist of the 10 character PAN issued by the Income Tax Department followed by a two-digit alphabet code and a three digit numeric code. Such code is to be indicated in every challan using which tax is remitted into the bank.
Registration Procedure For Service Tax
Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994 prescribe the manner and form for registration as an assessee, of any person liable to pay service taxin accordance with the provisions of Section 68 of the Finance Act, 1994. Below set, in brief is the procedure for registration:
An application for registration in Form ST-1 has to be made to the concerned Superintendent of Central Excise within 30 days from the date on which service tax becomes leviable. However, where a person has commenced his business for providing taxable services after the date when Service Tax is levied, the application for registration is to be made within 30 days from the date of commencement of business.
For an assessee providing more than one taxable service, a single registration needs to be filed by him mentioning therein, all the taxable services provided by him.
If taxable services are provided by the assessee from more than one premise, and has a centralized billing system at any one of such premises then he has the option to get registration for only one premise from where such centralized billing is done. On the other hand if taxable services are provided by the assessee from more than one premise, and he does not have a centralized billing system, he has to make a separate application for registration in respect of each of such premises.
The assessee has to give some information like his name, address and the category of services rendered except in the case of registration of a Stockbroker. The Service Tax (Amendment) Rules, 2001, with effect from 16-7-2001, has inserted a new column No 2A in Form ST-1 for furnishing PAN Number by the Assessee. If PAN has not been allotted or applied for, the same is to be indicated.
A certificate of registration in Form ST-2 shall be issued within 7 days from the date of receipt of the application in Form ST-1. However if the registration certificate is not granted within the 7-day period, the registration applied for shall be deemed to have been granted. In the latter case where registration is deemed to have granted a slight anomaly may arise owing to the non-allotment of registration number in the light of the fact that Circular No. V/DGST/30-Misc-29/2001/3674 dated September 18, 2003 read with the Service Tax Credit Rules, 2002 require all service providers providing taxable services to quote their registration number on their invoices.
Every instance of transfer of business of a registered assessee to another would entail the obtaining of a fresh certificate of registration.
Every registered assessee, who ceases to provide taxable service, for which he is registered, shall surrender his registration certificate immediately.
The registration certificate issued to an assessee can be amended on various grounds namely change in address of business premises, change in name and style of firm etc.
There is no minimum/threshold limit that is prescribed for registration.
It may be noted that Section 75 A of the Finance Act, 1994, providing for a penalty of Rs. 500/- to be imposed on such person who has failed to obtain a registration, being liable to pay service tax, is proposed to be omitted by the Finance Bill 2004.
Rules For Payment Of Service Tax
Service Tax is payable on the value of taxable services charged.
Where the assessee is an individual or a proprietary firm or a partnership firm: The due date for payment of Service Tax is on or before 25th of the month immediately following that quarter when the value of taxable services is received.
For other assessees: The due date for payment of Service Tax is on or before 25th of the month immediately following the month in which the value of taxable services is received.
A Non-Resident Indian (NRI) or a person from outside India who is liable to pay Service Tax on taxable services rendered, but does not have any office in India, shall pay the Service Tax through any other person authorized by him.
Where an assessee is unable to correctly estimate the actual amounts of Service Tax payable for any month or quarter, the assessee may make a request in writing to the Central Excise Officer to make a provisional assessment of tax on the basis of the amount that is deposited. The Central Excise Officer may, on receipt of such request, order the provisional assessment of tax.
Service Tax has to be paid to the credit of the Central Government and the service tax, liable to be paid by the Assessee, shall be deposited in a bank designated by the Central Board of Excise and Customs in Form TR-6 or any manner prescribed by the Central Board of Excise and Customs.
Records Required To Be Maintained
The assessee is not required to maintain separate records for the purpose of service tax. However, the assessee is advised to maintain the following documents:
A bill file, containing the bills in serial, issued to the clients in respect of taxable service rendered;
Receipt, issued to the client in respect of payment received;
A service tax register containing the details of the bills issued, payments received and service tax deposited;
Proper records for all the credit notes issued to the clients;
A list of all accounts, maintained in relation to service tax including memoranda received from branch offices, only at time of filing of return for the first time, is to be furnished to the Superintendent of Central Excise.
Service Tax Returns In India
The filing of returns are provided for in Sections 70 and 71 A of the Finance At 1994 and the manner for filing such returns is set our in the Service Tax Rules, 1994. The Service Tax assessees are required to file a half yearly return in Form ST-3 or ST-3A, in triplicate, to the Superintendent, Central Excise, dealing with Service Tax work. The return is to be filed within 25 days from the last day of the half-year it relates to and should be accompanied by copies of all T.R.6 challans issued in the relevant period. Thus, the returns for half year ending 30th September and 31st March are required to be filed by 25th October and 25th April, respectively. Further, assessees filing the return for the first time should also furnish to the Department the list of all the accounts maintained by them, relating to the Service Tax. no services have been provided during a half year and no Service Tax is payable; the assessee may file a Nil Return within prescribed time limit.
E filing is a facility for the electronic filing of Service Tax returns by the assessee from his office, residence or any other place of choice, through the Internet, by using a computer. Introduced in 2003 with respect to only 10 services, the scope of the same was enlarged to facilitate the filing of e- returns for all taxable services (vide circular no. 71/1/2004-ST dated January 2, 2004). It is to be kept in mind that e-filing of returns is purely optional and the manual filing has not been dispensed with. Those assessees have 15 digit Service Tax Payer Code allotted to them, should file an application to their jurisdictional AC/DC as laid out in Trade Notice issued in this regard. They should mention a trusted e-mail address in their application, so that the department can send them their userword and password to help them file their return. They should log on to the Service Tax E-filing Home Page using the Internet. On entering their STP Code, user word and password in the place provided on the Home Page they will be permitted access to the E filing facility. They should then follow the instructions given therein.
An assessee failing to file half-yearly returns or failing to file them on time could be penalised from Rs.100 to Rs.200/- for every week or part thereof, during the period for which the failure continued.
Filing of single return has been clarified by Circular No. 72/2/2004-ST dated January 2, 2004. However, details in each of the column in Service tax the Forms ST-3 has to be furnished separately for each of the taxable service rendered by the assessee.
No specific records have been prescribed to be maintained by a service Tax assessee. The records, including computerised data if any, being maintained by an assessee as required under any other laws in force (eg. Income tax, Sales tax) is acceptable to the Central Excise Department for the purpose of Service Tax.
Rates Of Service Tax For Different Classes Of Assesses
Categories of assessees who have to pay Service Tax of 5% of gross amount charged, prior to May, 2003(Subsequently increased to 8%):
Actuary or intermediary or insurance intermediary or insurance agent.
Advertising agency.
Air travel agent (Also an option is provided to the air travel agent to pay service tax @ 0.25% of the basic fare in the case of domestic booking and 0.5% of the basic fare in the case of international booking).
Architect.
Authorised automobile service stations services to be extended to multi utility vehicles viz. Maxi Cabs.
Authorized automobile service station.
Banking company or financial institution or a non-banking financial institution.
Beauty parlour.
Broadcasting agency.
Business auxiliary service [business promotion and support services including customer care services (excluding any information technology service)].
Cable operator.
Cargo handling agency.
Clearing and forwarding agent.
Commercial concern offering convention service.
Commercial concern providing online information and data base access and/or retrieval services.
Commercial training and coaching centres - private tutorials.
Commissioning and installation services.
Consulting engineer.
Courier agency.
Credit rating agency.
Custom house agent.
Dry cleaner.
Event manager.
Fashion designer.
Foreign exchange broking by any person now included i.e. Individuals, partnership firms (hitherto it was limited to banking company, financial institutions, non-banking finance companies (NBFC) covered (w.e.f. 16/07/2001) & body corporate (w.e.f- 16/08/2002).
Franchise services.
Health club and fitness center.
Insurer carrying on general insurance business services.
Insurer carrying on life insurance business.
Interior decorator.
Internet Cafe - (Cyber Cafe).
Maintenance and repair services excluding motor vehicles.
Management consultant.
Mandap keeper.
Manpower recruitment agency.
Market research agency.
Photography studio.
Port or person authorized by the port for conducting port services.
Port services to be extended to all minor ports also (hitherto, it was limited to major ports).
Practicing chartered accountant.
Practicing company secretary.
Practicing cost accountant.
Rail travel agent.
Real estate agent.
Rent-a-cab operator.
Scientist or technocrat or science or technology institution.
Security agency.
Sound recording studio.
Steamer agent.
Stock broker.
Storage or warehouse keeper.
Technical inspection and certification services excluding inspection and certification of pollution levels.
Technical testing and analysis, excluding health and diagnostic testing in relation to human beings and animals.
Telegraph authority providing facsimile services.
Telegraph authority providing lease circuit services.
Telegraph authority providing pager services.
Telegraph authority providing telegraph services.
Telegraph authority providing telephone services.
Telegraph authority providing telex services.
Tour operator.
Underwriter.
Video production agency.
Service Tax Appeals
Any person may appeal to the Commissioner of Central Excise (Appeals) in the following cases:
If he is aggrieved by any assessment order passed by the Assistant or Deputy Commissioner of Central Excise;
Against an order passed under Section 71 (Assessment) or S 72 (best judge assessment) or S 73 (escaped assessment);
If denying his liability to be assessed.
An assessee aggrieved by the order of Assistant Commissioner/Deputy Commissioner in respect of Service Tax, may file an appeal to the Commissioner of Central Excise (Appeals) in Form ST-4, in duplicate along with a copy of order appealed against. The appeal should be presented within three months from the date of receipt of the decision or order of the Central Excise Officer. Any person aggrieved by any order passed by any assessing officer or adjudicating authority below the rank of Commissioner may file an appeal before the Commissioner, Central Excise (Appeals).
The appeal shall be filed in the prescribed form ST-4
It shall be presented within three months from the date of receipt of order which is being appealed against. If the Commissioner of Central Excise (Appeals) is satisfied that the appellant was prevented by sufficient cause, from presenting the appeal within the statutory period of three months, he may allow the appeal to be presented within a further period of three months.
It should be filed in duplicate.
It should be accompanied by a copy of the order appealed against.
The law provides for filing an appeal against the order of Commissioner of Central Excise or Commissioner (Appeals). Such appeals can be filed with the CESTAT within three months of the date of receipt of the order sought to be appealed against. The procedure is as stated under:
Any assessee aggrieved by the Commissioner of Central Excise or the Commissioner (Appeals) may file an appeal before the Appellate Tribunal i.e. CESTAT.
The appeal should be filed within three months from the date of receipt of the order appealed against.
It should be filed in the prescribed form ST-5. iv) It shall be filed in quadruplicate.
It should be accompanied by a copy of the order appealed against, one of which should be a certified copy.
The appeal should be accompanied by a fee of Rs. Two Hundred only.
procedure for an appeal
The appeal is to be filed in Form ST-4 and shall be verified in the manner specified. It is to be filed in duplicate along with the copy of the order that is appealed against.
The appeal must be filed within 3 months from the date of receipt of the order relating to service tax, interest or penalty. The specified time limit can be extended by another 3 months on sufficient cause by the Commissioner of Central Excise.
Service Tax Penalties
The Finance Act, 1994 provided for the imposition of penalties in the following cases when the assessee:
fails to pay service tax to the Government in time.
fails to file half-yearly return with the department in time or.
fails to obtain registration u/s. 69.
willfully suppresses or conceals the value of taxable service or furnishes inaccurate value of such taxable service.
fails to comply with a notice requiring him to produce within the specified time limit, such accounts, documents or other evidence as considered necessary by the Superintendent of Central Excise or Asst./Deputy Commissioner for assessment.
It is interesting to note that originally, provisions had been made in the law for prosecution for violations of requirements of Service Tax. The same, however, have been deleted by the Government by the Finance Act, 1998, as a measure of goodwill to the new assessees.
In terms of Section 75 of the Finance Act, 1994, every person, liable to pay the tax in accordance with the provisions of Section 68 of the Finance Act, 1994, or rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed shall pay simple interest at the rate of fifteen per cent per annum (proposed to be amended by the Finance act 2004 to read ''at such rate not below 10 percent and not exceeding 36% per annum'') for the period by which such crediting of the tax or any part thereof is delayed. This penalty is to be computed on the service tax due or unpaid.
Section 76 of the Finance Act, 1994 provides that any person, liable to pay Service Tax in accordance with the provisions of Section 68 of the Finance Act, 1994 or the rule made thereunder, who fails to pay such tax shall pay in addition to paying such tax, and interest on that tax in accordance with the provisions of Section 75 of the Finance Act, 1994, a penalty which shall not be less than one hundred rupees but which may extend to two hundred rupees for every day during which such failure continues, so, however, that the penalty under this clause shall not exceed the amount of Service Tax that he failed to pay. Penalties under this Section shall be over and above the payments of actual amount of tax due under Section 68 of the Finance Act, 1994 and interest under Section 75 of the Finance Act, 1994.The penalty under Section 76 is of mandatory nature and can not exceed the amount of Service tax in question.
Section 78 of the Finance Act, 1994 provides for levy of penalty for two specific default or offences, with the intent to evade the payment of Service tax: i.e.
Suppression or concealment of value of taxable service.
Furnishing inaccurate particulars of value of taxable service.
The Finance Bill 2004 has substantially enlarged the scope of Section 78 of the Finance Act, 1994 by clearly elucidating the evasion on grounds of :
Fraud.
Collusion.
Evasion.
Willful misstatement.
Suppression of facts, or any contravention under the parts or the rules.
The penalty under this section shall be a minimum of the amount of Service Tax sought to be evaded and a maximum of twice the amount of Service Tax. This penalty shall be in addition to the tax and interest payable. Thus, the penalty is a sum which shall not be less than, but which shall not exceed twice the amount of Service Tax sought to be evaded.
Section 79 provides for imposing a penalty for failure to comply with the notice issued to assessee under Section 71. It is the duty of the assessee to produce any accounts, documents or other documents, etc., as the Superintendent of Central Excise may call for the purpose of verification of the Service Tax return filed by the assessee. The jurisdiction to initiate the penalty under Section 79 vests with the Assistant or Deputy Commissioner of Central Excise. Thus, for failure to comply with the provisions of Section 71 in respect of self-assessment and verification of tax assessed by the assessee, the penalty leviable is –
a maximum of 10% and/or
a maximum of 50% or not more than 50%
This provision is sought to be deleted by the Finance Bill 2004.
In terms of Section 80 of the Finance Act, 1994, no penalty under Section 76, 77, or 78 can be imposed if the assessee proves that there was a reasonable cause for default or failure under these sections. Section 80 does not have a mention of Section 75A and therefore, it can be said that Section 75A penalty is not covered under Section 80. Even if there were a reasonable cause for default under Section 75A, penalty would be levied.
In Ashwani & Associates v. Commissioner of Central Excise, New Delhi [(2000) 118 ELT 57 (Tribunal)], it was observed that it is mandatory on the part of revenue to follow the principles of natural justice i.e. audi altarem paartem rule meaning that other party should be heard, before imposing any penalty and provide an opportunity to assessee to prove that there was a reasonable cause.
In CCE, Bhubaneswar - II v. Tyazhpromexport [(2003) 157 ELT 576 (CES-TAT, Kolkata)], it has been held that there cannot be an intention to evade Service Tax by a non-resident foreign company which is under the direct control of the Ministry for Economic Affairs and Trade of Russian Federation. It has been held that when under a contract, taxes payable in India were to be borne by the Indian company and when there was some dispute regarding the payment of tax on the services which were being provided and when the matter was resolved, immediately the tax was paid with interest, there was a reasonable cause under Section 80 for failure to deposit Service Tax and penalty was not imposable.
In R.B. Bahutule v. CCE, Mumbai [(2004) 166 ELT 233 (Tribunal, Mumbai)], it was held that the adjudicating authorities do not have a discretion for not imposing penalty for not applying for registration for Service Tax purposes. Section 75A or Section 80 does not allow any such discretion to the adjudicating authorities. They have discretion not to impose any penalty for delay in paying Service Tax and delay in furnishing returns but they have no such discretion for not imposing or reducing penalty for failure to apply for registration.
The power to search for documents, papers or things is contained in Section 82 of the Finance Act, 1994 subject to the provisions of Code of Criminal Procedure, 1973. As per Section 82 of the Finance Act, 1994,
Search may be conducted by Commissioner himself.
Commissioner may authorize search to be conducted by Assistant or Deputy Commissioner of Central Excise.
Search should be for any documents, papers or things.
Such search of documents, etc., should be useful for or relevant to any proceedings.
There must be reason to belief that such documents, etc., are secreted in any place.
This section provides for search of documents, books or things by Commissioner of Central Excise or any other officer authorized by him. The pre-condition to search is that the CCE should have reason to believe that there are certain books etc., in secret possession at any place which may be useful for any proceedings under this Act.
Section 82(2) of the Finance Act, 1994provides that provisions relating to search under Code of Criminal Procedure, 1973 shall apply. The relevant sections under Code of Criminal Procedure are as under for ease of reference:
47 Search of place entered by person proposed to be arrested. 51 Search of person arrested. 94 Search of a place where books, documents, property, etc., are suspected99 Search warrants100 Persons in charge of closed place to allow search.101 Disposal of things found in search beyond jurisdiction103 Magistrate's discretion for search in his presence.165 Search by a police officer.166 Officer-in-charge of police station requiring another to issue search warrant.
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Penalty For Non-registration.
Panalty For Late Payment Of service Tax.
Panalty For Failure To Pay Service Tax.
Panalty For Failure To Furnish Return.
Penalty For Suppressing The Amount Of Taxable Services.
Penalty For Failure To Comply With Notice Of Penal Demand.

Service Tax Penalties For Non-registration
The penalty for non-registration is Rs 500 if the Assessee fails to make an application for registration for Service Tax. (Sec 75A)
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Penalty For Late Payment Of Service Tax
The penalty for late payment of service tax is simple interest at the rate of 24% p.a. by which crediting of tax or any part thereof is delayed. (Sec. 75). Further, the Finance Act, 2002 has proposed to reduce the rate of interest from 24% p.a. to 15% p.a. for the period for which the payment of Service Tax is delayed.
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Panalty For Failure To Pay Service Tax
Penalty for failure to pay service tax is as follows:- In addition to paying Service Tax and interest U/S 75, not less than Rs 100/- but which may extend to Rs 200/- for every day during which the failure continues (Sec 76). However, the penalty should not exceed the amount of Service Tax that the assessee has failed to pay.
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Panalty For Failure To Furnish Return
The penalty for this may extend to an amount not exceeding Rs 1000/- (Sec 77).
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Penalty For Suppressing The Amount Of Taxable Services
The penalty for this is as follows:-In addition to Service Tax and interest a sum, which shall not be less than but which shall not exceed twice the amount of Service Tax that is sought to be evaded (Sec 78).
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Penalty For Failure To Comply With Notice Of Penal Demand
For this, the penalty is a sum not less than 105 but which shall not exceed 50% of the amount of Service Tax that would have been avoided (Sec 79).

Service Tax Credit
The Raja Chelliah Committee which initially recommended the levy of tax on service in India saw such a levy the context of the gradual movement towards unified VAT, covering both services and commodities, and eventually resulting in an indirect taxation regime which was, to the extent possible, revenue neutral. The input tax credit mechanism with respect to the levy of service tax is a step in that direction, and is expected to benefit the taxpayer and the tax administration by:
Ensuring greater levels of tax compliance.
Promoting transparency.
Reducing cascading effect of taxes.
Increasing service sector competitiveness.
Minimising disputes in service tax administration.
The Finance Act, 2002 has amended Section 94 of the Finance Act, 1994 to provide for credit of Service Tax paid on input services used in the output services where both the input and output services fall within the same category of taxable services. As per section 94(2)(ee) of the Finance Act, 1994, Central Government has been empowered to make rules for the credit of service tax paid on the services consumed for providing a taxable service in case where the services consumed and service provided fall in the same category of taxable service.
Section 94(2)(eee) of the Finance Act, 1994 inserted with effect from May 14, 2003 empowers Central Government to make rules for the credit of service tax paid on the services consumed or duties paid or deemed to have been paid on goods used for providing taxable service. Presently, credit may only be availed in respect of service tax paid on inputs.
The Service Tax Credit Rules, 2002 have come into force from 16th August, 2002 for availing credit of input Service tax under same category. The date of applicability for availing credit under different categories is from 14th May, 2003. The applicable dates are, thus, as follows:
Where input and output services fall under same category input service challan/ bill/invoice issued on or after 16.8.2002;
In any other case input service challan/bill/invoice issued on or after 14.5.2003.
The manner of availing credit has been prescribed under the Service Tax Credit Rules 2002 as amended by the Service Tax Credit (Second Amendment) Rules, 2003 vide Notification No. 5/2003-Service Tax dated May 14, 2003 (''Credit Rules'').
In terms of Rule 3 of the Credit Rules an output service provider shall be allowed to take credit of the Service Tax paid on input service in the following manner, namely:-
Where the input service falls in the same category of taxable service as that of output service, Service Tax credit shall be allowed to be taken on such input service for which invoice or bill or challan is issued on or after the sixteenth day of August, 2002.
In any case, Service Tax credit shall be allowed to be taken on such input service for which invoice or bill or challan is issued on or after the fourteenth day of May, 2003.
Provided that the output service provider shall be allowed to take such credit, on or after the day on which he makes payment of the value of input service and the Service Tax paid or payable as indicated in invoice or bill or challan referred to in sub-rule (1) of rule 5. No credit is available if the output service is exempt from service tax. In the interest of clarity it is imperative to explain the following terms in detail: Output services - 'Output service' means any taxable service rendered by service provider to a customer, client, subscriber, policy holder or any other person. [Rule 2(b) of Credit Rules]. Input services - 'Input service' means any service received and consumed by a service provider in relation to rendering output service. [Rule 2(c) of Credit Rules]. Meaning of 'same category of taxable service' - Two services shall be deemed to be falling in the same category of taxable service, if the input service and the output service fall within the same sub-clause of clause (105) of section 65 of the Finance Act, 1994. (Illustration: The services provided by a photo studio to a customer and by a developing and processing lab to a studio fall in the same category of service i.e. 'photography service') Meaning of 'in relation to' –Service tax paid on input services is eligible for credit only when it is received and consumed in relation to taxable output service. The Supreme Court in Doypack Systems Pvt. Ltd. vs. Union of India [1988 (36) ELT 201 (SC)] held that the expression 'in relation to' is a very broad expression, which pre-supposes another subject matter. These are words of comprehensiveness, which might both have a direct significance as well as an indirect significance depending on the context. The words 'in relation to' are the same as those used in Cenvat Credit Rules in respect of eligibility of inputs for Cenvat credit. This term has been interpreted in broad terms, i.e. as long as there is reasonable nexus (direct or indirect) between input and output services, the credit will be available. However, if input service is unrelated to output services, the credit will not be available. On the other hand, input services like courier services and telephone services may be held to be 'in relation' to taxable output service. Credit of tax on input service will be available only if service tax is payable on output services. If output services are exempt from tax or not taxable at all, credit of input service tax is not available. However, if input service is partly used for taxable service and partly for exempt or non-taxable service, credit of service tax paid on input services is available as per provisions of rules 3(4) and 3(5). [Rule 3(3) of Service tax Credit rules]. If the input and output service does not fall in same category, it may be than the input service may be used in relation to taxable output service as well as exempt service or service which is not taxable at all. In such case, assessee is required to maintain separate records for input services used in relation to taxable output services. In such case, he can avail full credit of service tax on input services. [Rule 3(4) of the Credit Rules]. In case of common services, assessee may not be able maintain separate records of input services used in relation to taxable service and other services, the assessee will be entitled to credit of service tax upto a maximum of 35% of output services. [Rule 3(5) of Credit Rules. Service tax is payable by 25th of following month [25th of following quarter if assessee is individual, proprietary firm or a partnership firm]. However, the assessee can only avail credit of service tax as available at the end of month/quarter as applicable. [proviso to Rule 4(1) of Service tax credit Rules]. Thus, even if tax is payable by 25th of following month/quarter, credit available as at end of month/quarter alone can be utilised for payment of service tax of that month/quarter. In terms of Rule 5 of the Credit Rules, credit can be availed based on a bill, an invoice or a challan. Such a document shall contain details regarding:
Name and address of the service provider.
Service tax registration Number.
Serial number.
Date of issue.
Description and value of the input service.
Service tax paid/ payable.
The service provider is required to maintain records reflecting the following details
Serial number and date of document on which credit is availed.
Name and address of the service provider.
Service Tax registration number.
Description of service received.
Value of service received.
Amount of credit availed.
Date of utilisation of credit.
Amount of credit utilised and balance thereof.
Return in the prescribed form (in terms of Rule 5(4) of the Credit Rules)is required to be filed along with Form ST3.
It may be noted that the Finance Act, 1994 does not prescribe a time limit within which service tax credit should be availed and utilised. However,in CCE v. Mysore Lac & Paint Works Ltd. [1991 (52) ELT 590 (T)] it was held that MODVAT credit has to be taken within in a reasonable period. Further the Supreme Court in the case of Government of India v. Citedal Fine Pharmaceuticals [1989 (42) ELT 515 (S.C)] in the context of recoveries under Rule 12 of the Medicinal & Toilet Preparation Rules 1956 observed ''In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend on the facts of each case''.
Hence credit taken by an assessee, should be within a reasonable time, and such reasonable time within which to avail credit could be one year, in view of the analogous provisions of refund under section 11B of the Central Excise Act, 1944.. In any event, as far as 'utilisation' of such credit is concerned, it can be done at any time.
In brief, the present position regarding the availing of service tax credit is as under:
Credit is only available if input service is in relation to output service.
If input and output services fall in same category, full credit is available.
Credit can only be availed once the service tax on the input service has been paid.
No credit is available if the output service is exempt from service tax.
No inter sectoral (i.e manufacturing and services and vice-versa) credit is allowed. The position has been clarified vide circular no. 56/5/2003 dated April 25, 2003.
If input and output services do not fall in same category, full input service tax credit will be available only if separate records of input services used in relation to output taxable services are maintained.
If separate records are not maintained, then credit of input tax will be available subject to ceiling of 35% tax payable on output services. Even here, the input services should have been used in relation to output service.
Advance Ruling In Service Tax India
A new Chapter V-A has been inserted by the Finance Act, 2003 in the Finance Act, 1994 to provide for advance rulings with respect to service tax. Advance ruling means the determination, by the authority of a question of law or fact specified in the application, regarding the liability to pay service tax, in relation to a service, proposed to be provided, by the applicant, who may be any of the following:
a non resident setting up a joint venture in India in collaboration with a non resident or a resident.
a resident setting up a joint venture in India in collaboration with a non resident.
a wholly owned subsidiary Indian company, of which the holding company is a foreign company.
The same has been clarified in Re McDonald’s India Pvt. Ltd. [(2004) 165 ELT 404 (AAR)], where it has been held that advance ruling can not be availed by ongoing business/undertaking which has already commenced business.
The question on which advance ruling may be sought shall be in respect of :
classification of any service as a taxable service.
the valuation of taxable services.
the principles to be adopted for the purposes of determination of value of the taxable service.
applicability of notifications.
admissibility of credit of service tax.
Section 96C prescribes the application in Form AAR (ST) required to be made to the authority in prescribed form and manner. The application should be made in quadruplicate and accompanied by a fee of rupees two thousand and five hundred only. The application can be withdrawn within a period of 30 days from the date of the application. The authority is required to give its ruling within 90 days of the receipt of valid application.
An application may be rejected by the prescribed authority if the question or subject matter of ruling sought in the application is such which is already pending before any assessing officer, Tribunal and court of law or such questions already stands decided by any court or bench of Tribunal.
The advance ruling pronounced on a matter referred to the authority is binding only on the applicant and his jurisdictional assessing officers and only in respect of question referred to by the applicant. However, if there is a change in the law or facts on the basis of which ruling was pronounced, such advance ruling will not be binding.

Sales Tax

Sales Tax In India
Sales tax is levied on the sale of a commodity which is produced or imported and sold for the first time. If the product is sold subsequently without being processed further, it is exempt from sales tax.
Sales tax can be levied either by the Central or State Government, Central Sales tax department. Also, 4 per cent tax is generally levied on all inter-State sales. State sales taxes, that apply on sales made within a State, have rates that range from 4 to 15 per cent. Sales tax is also charged on works contracts in most States and the value of contracts subject to tax and the tax rate vary from State to State. However, exports and services are exempt from sales tax. Sales tax is levied on the seller who recovers it from the customer at the time of sale.
Table of contents:-
Who Pays Sales Tax In India?
Constitutes Of Sales Tax Act In India.
Inter State Trade or Commerce.
Dealers In Sales Tax india.
Import Or Export Of Goods In Sales Tax India.
Business, Manufacture And Works Contract In Sales Tax India.

Who Pays Sales Tax In India?
Central Sales tax is generally payable on the sale of all goods by a dealer in the course of inter-state Trade or commerce or, outside a State or, in the course of import into or, export from India.
Sales tax is payable to the sales tax authority in the state from which the movement of goods commences. It is to be paid by every dealer on the sale of any goods effected by him in the course of inter-state trade or commerce, notwithstanding that no liability to tax on the sale of goods arises under the tax laws of the appropriate state.
Sales Tax In Course Of Import Or Export Of Goods.A sale, which is made in the course of the export of goods outside the territory of India, does not attract Central Sales tax. Similarly, a sale made in the course of an import of goods into the territory of India does not attract Central Sales Tax. This is because goods exported or imported are subject to Customs duties.
Constitutes Of Sales Tax Act In India
According to S2 (g), a sale refers to any transfer of property in goods by one person to another for cash or, deferred payment or, for any other valuable consideration. It also includes the following:
A sale or purchase of goods is said to take place when the transfer of property in the existing goods or future goods takes place for consideration of money.
The goods have been divided into different categories and different rates of sales tax are charged for different categories of goods.
In most of the cases related to the sales tax, the tax on the sale or purchase of goods is at single point.
Under the provisions of some state laws the assesses are divided into several categories such as manufacturer, dealer, selling agent etc. and such as assess is required to obtain a registration certificate to that effect. The sales tax or the purchase tax is levied on that assessee on the basis of his category such as dealer, manufacturer etc. on production of certain forms or certificates (and differential rates of sales tax are levied).
Generally , a quarter return of sales or purchases is insisted upon and the assessee is required to furnish the return in the prescribed form.
At the time of assessment, the assessee has to furnish all the documentary evidence and satisfy the concerned sales tax / commercial tax officer.
The sales tax laws of the states prescribe the procedure to be followed in case an assessee prefers to make an appeal.
Every dealer should apply for registration and obtain a registration certificate to that effect. The registration certificate number should be quoted in all the bill / cash memos.
A supply, by way of or, as part of any service or, in any other manner whatsoever of goods, of goods, being food or any other article for human consumption or any drink (whether intoxicating or not), where such supply or service if for cash, deferred payment or other valuable consideration.
However, this does not include a mortgage or hypothecation of or a charge or pledge on goods.
In order to constitute a sale, it is necessary that the following conditions must exist:
The parties are competent to contract.
There is an agreement between the parties for the purpose of transferring title to the goods.
It must be supported by money consideration.
As a result of the transaction, the property must actually pass in the goods.
What are goods?Goods, for the purposes of the Act, include the following:
Materials.
Articles.
Commodities.
All kinds of movable property. (Movable property is property, which is capable of being lifted, carried, drawn, turned or conveyed or in any way made to change place or position. The nature of movable property is such that its identity is not lost if it is moved from one location to another.).
Standing crops, grass, trees, timber and other things attached to the earth, if it is agreed under the contract of sale that they will be severed or cut off the land where they are so attached; or, if the crop or timber is identified; the contract is unconditional; or the crop or timber is in a deliverable state.
Electric meters, which are the equipments, used for measuring electricity for the purpose of selling it to consumers, are goods.
It is important to note that only for the purposes of the CST Act, the following are not deemed to be �goods� and, therefore, are not assessable to CST.
Newspapers.(Exception: sale of old or waste newspapers is taxable & a dealer may buy raw material for newspapers at a concessional rate on submission of Form C)
Actionable claims.
Stocks shares and securities.

Inter State Trade or Commerce In Sales Tax
A sale or purchase of goods shall be deemed to take place in the course of interstate trade or commerce if the sale or purchase--
Occasions the movement of goods from one state to another.
Is effected by a transfer of documents of title to the goods during theirmovement from one state to another.
Where the goods are delivered to a carrier or other bailee for transmission, the movement of the goods for the purpose of clause is deemed to start at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Also, when the movement of goods starts and terminates in the same State, it shall not be deemed to be a movement of goods from one State to another.
To make a sale as one in the course of interstate trade, there must be an obligation to transport the goods outside the state. The obligation may be of the seller or the buyer. It may arise by reason of statute or contract between the parties or from mutual understanding or agreement between them or, even from the nature of the transaction, which linked the sale to such transaction. There must be a contract between the seller and the buyer. According to the terms of the contract, the goods must be moved from one state to another. If there is no contract, then there is no inter-state sale.
There can be an interstate sale even if the buyer and the seller belong to the same state; even if the goods move from one state to another as a result of a contract of sale; or, the goods are sold while they are in transit by transfer of documents.
Transactions not amounting to inter-state sales :Not all despatches of goods from one state to another result in inter state sales rather the movement must be on account of a covenant or incident of the contract of sales.There are some instances wherein the goods are moved out of the selling state and yet they are not considered inter state sales :-
Intra-state sales.
Stock transfer from head office to branch & vice versa.
Import and Export sales or purchases.
Sale through commission agent / on account sales.
Delivery of Goods for executing works contract.
Dealers In Sales Tax India
A dealer under Section 2(b) means any person, who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly for cash or, for deferred payment or for commission remuneration or, other valuable consideration.
Dealer also includes:-
A local authority, a body corporate, a company, any co-operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business.
A factor, broker, commission agent, del credere agent or any other mercantile agent, by whatever name called and, whether of the same description as mentioned earlier or not, who carries on the business of buying, selling, supplying or distributing goods belonging to any principal, whether disclosed or not.
An auctioneer, who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and, whether the offer of the intending purchaser is accepted by him or, by the principal or, a nominee of the principal.
Every person, who acts in any State, as an agent of a dealer residing outside that State and buys, sells, supplies or distributes goods in the State or, acts on behalf of such dealer as-
A mercantile agent, as defined in the Sale of Goods Act, 1930.
An agent for handling of goods or documents of title relating to goods.
An agent for the collection or the payment of the sale price of goods or, as a guarantor for such collection or payment.
Every local branch or office in a State of a firm, registered outside that State or, a company or, other body corporate, the principal office or headquarters that is outside that State, shall be deemed to be a dealer under the Act.
Dealers Must Furnish Security.The Sales Tax Authority has the power to impose a condition for the issue of certificate of registration and requires the dealer to furnish security, as specified in the prescribed manner and, within the prescribed time.This security is required for the following reasons:
To insure that the tax payable is properly realized.
For custody and use of forms.
Maximum amount of security that a dealer can be asked to furnish.There is an upper limit to the amount of security that can be asked for by the authorities to the dealer.
In the case of a dealer who applies for compulsory registration, the amount of tax, payable by him for the current year(I.e. for which the security or additional security is demanded), under the CST Act (tax payable is estimated on the basis of turnover of the dealer for the current year).
In the case of a dealer, who has made an application under voluntary registration or, is otherwise registered under voluntary registration, a sum equal to tax, leviable under the CST Act (the amount, estimated in accordance with the sales to such dealer in course of inter-state trade or commerce for the current year, had such dealer not registered under the Act.

Import Or Export In Sales Tax India
Inside Or Outside A State Sale Or Purchase.Section 4(2) Central Sales Tax Act states that a sale or purchase of goods shall be said to take place inside a state, if the goods are within the State, in the following situations:
If the goods are specific (Goods, identified and agreed upon at the time of making of the contract of sale) or ascertained, at the time the contract of sale is made.
In the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party has been made prior or subsequent to such appropriation.
Hence, Sub-section 2 to S 4 lays down that the sale or the purchases of goods are deemed to take place inside a state in the following cases:
In case of ascertained goods or specific goods�i.e. such goods are within the state at the time of contract of sale.
In the case of unascertained or future goods�i.e. such goods are in that State in which the goods are situated at the time of their appropriation to the contract of sale by the buyer or seller.
When goods are sold or purchased inside any state, as explained above, such sale or purchase is said to have taken place outside ALL other states. Where there is a single contract of sale or purchase of goods, situated at more than one place, the provisions of the Act will apply as if there were separate transactions in respect of the goods at each of such places.
Sales Or Purchase In The Course Of Export.Section 5(1) Central Sales Tax Act states that a sale or purchase of goods is deemed to take place in the course of export of the goods out of the territory of India, only if the sale or purchase either occasions such export or is effected by a transfer of documents of title after the goods have crossed the customs frontiers of India.
To constitute a sale in the course of export, there must be an intention on the part of both the buyer and seller to export. There must be an obligation to export and there must be an actual export. In order to prove that a sale was occasioned in the course of export, a person will not only have to prove that the goods have moved from a place inside India to a place outside India. The mere taking of the goods out of India does not amount to the export of the goods.
Notwithstanding anything in sub-section (1), the last sale or purchase of any goods, preceding the sale or purchase occasioning the export of those goods out of the territory of India, shall also be deemed to be in the course of export. However, such last sale or purchase should have taken place after and was for the purpose of complying with the agreement or, order for or, in relation to such export.
Sales Or Purchase In The Course Of Import.Section 5(2) Central Sales Tax Act states that a sale or purchase of goods is deemed to take place in the course of import of the goods into the territory of India only if the sale or purchase either occasions such import or, is effected by a transfer of documents of title before the goods have crossed the customs frontiers of India.
If a sale is effected by a transfer of documents of the goods before the goods have crossed the customs frontiers of India, a sale or purchase is deemed to have taken place in the course of import of the goods into the Indian territory. S 2(ab) defines �Crossing the customs frontiers� as crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities.
Business, Manufacture And Works Contract In Sales Tax India
What Is Business?
What Is Place Of Business?
What Is A Works Contract?
What Is Turnover?
What Is Meant By Manufacture?
What Is Business?Section 2(aa) states that a business includes the following:-
Any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and, whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern.
Any transaction in connection with or incidental or ancillary to such trade, commerce, manufacture, adventure or concern.
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What Is Place Of Business?A place of business includes the following:-
In any case, where a dealer carries on business through an agent by (whatever name called) the place of business of such agent.
A warehouse, godown or other place where a dealer stores his goods.
A place where a dealer keeps his books of accounts.
A dealer may have one or more places of business in more than one State or city. In such case, he will have to get himself registered under the sales tax authority of each state.Thus, the place of business is the place where the business is actually carried out as well as where an agent carries on the business, where the goods are stored (e.g. godown or warehouse) and the place where the books of accounts of the business are stored.
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What Is A Works Contract?A works contract is an agreement, which is entered into for the following purposes:
For carrying out construction, fitting out, improvement or repair of any building, road, bridge or other immovable or movable property.
For cash, or for deferred payment, or for other valuable consideration.
In other words, whenever there is a contract, by which one person promises to make something which, when made, will not be his absolute property, and by which, the other person promises to pay for the work done, will be considered to be a contract for work. This will be the case even if the payment maybe called a price for the thing and if the materials, of which the thing is made, may be supplied by the maker.
Though the Central Sales Tax Act still has no definition for a contract or works contract, the definition of sale includes a transfer of property in goods, involved in the execution of a works contract.
In order to prevent evasion of tax by the transfer of property through a works contract, the Indian Constitution was amended to make such transactions taxable. Works contracts are taxable under most State sales tax laws (but not under the Central Sales Tax Act). However, it is only taxable to the extent of the value of the goods that have been transferred. This means that the full value of the Works Contract is not taken into account while calculating tax that is payable under the state sales tax laws.
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What Is Turnover?Turnover is defined under S 2(j) to mean the aggregate of the sale prices in respect of sales of any goods in the course of inter-State trade or commerce, made during any prescribed period. This is determined in accordance with the provisions and rules of the Act.
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What Is Meant By Manufacture?Manufacture refers to the conversion of goods into a new form, whereby an altogether different article emerges. The conversion of raw material to finished goods is termed as manufacture.A checklist of goods, which may be used in manufacture, is given below:-
Raw material.
Fuels and consumables.
Machines, spare tools etc.
Storage and handling equipment for materials.
Goods required for research and development.
Computer internal telephone system used for production purposes.