The Chief Commissioner of Customs & Central Excise, Coimbatore Zone has issued Departmental Clarification and answers to Frequently Asked Questions. The same is reproduced here for the benefit of the readers.

1. General

1.1 What is Service Tax? Is it an indirect tax?

The tax levied on certain specified services by the Central Government is called Service Tax. It is an indirect tax.

Service Tax is levied (under Chapter V of the Finance Act, 1994) on services specified in the section 65 as per section 66 of the Finance Act, 1994. There are 80 services liable to Service Tax including the nine new services which are brought into Service Tax net w.e.f. 16-6-2005. (The list of the services is furnished as Appendix-I. For details about the nine new services, please see Chapter 13).

Since the Service Tax payable/paid by the service provider can be collected from the customers, it is an indirect tax.

1.2 What is the rate of Service Tax?

At present, the rate of Service Tax is 10%; payable on the "value of taxable service". In addition to this, Education Cess is payable at the rate of 2% on the Service Tax amount (Total : 10.2% on the value of the taxable service).

– Sec. 66 of the Finance Act, 1994 (Service Tax); and

– Sec. 85 of the Finance Act, 2004 (Education Cess).

1.3 What is meant by “value of taxable service”?

In general, "value of taxable service" means, the gross amount received by the service provider for the taxable service provided or to be provided by him. For services rendered free of cost, the value of taxable service has to be treated as zero.

For certain services, a specified percentage of abatement is allowed from the gross amount collected for rendering the services. For abatement admissible for various services, please see Appendix-II.

1.4 Who is liable to pay Service Tax to the Government?

1. Generally, the ‘person’ who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government [Sec. 68(1) of the Act]. Please refer Q. No. 2.2 regarding ‘person’.
    

2. There are certain exceptions in this regard. A few of them are as follows:

• Taxable services provided by Foreign Service providers with no establishment in India.
   

• These services will be treated as taxable services provided in India (Section 65 of the Act). In this regard, the recipient of such services in India is liable to pay Service Tax.
   

• The services in relation to Insurance Auxiliary Service by an Insurance Agent. In this regard, the Service Tax is to be paid by the Insurance Company.
   

• In respect of the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight should pay Service Tax, if the consignor or consignee falls under any of the seven categories viz., (a) a factory (b) a company (c) a corporation (d) a society (e) a co-operative society (f) a registered dealer of excisable goods (g) a body corporate or a partnership firm (For details, please see Sr. No. ’12.17' of Chapter 12).
   

• The taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund. In this regard, Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.

(Scc. 68(2) of the Act read with Ride 2(d) of the STR, 1994).

1.5 What are the statutes governing the taxation relating to Service Tax?

The statutes governing the levy of Service Tax are as follows :

• The Finance Act, 1994 – Chapter V – Sections 64 to 96-L (referred to as ‘Act’ hereinafter)

• This chapter extends to the whole of India except the State of Jammu and Kashmir.

• The Finance Act, 2004 Chapter VI – for levy of Education Cess @ 2% on the Service Tax.

• The Service Tax Rules, 1994. (referred to as ‘Rules’ or STR, 1994 hereinafter)

• The CENVAT Credit Rules, 2004.

• Export of Service Rules, 2005.

• The Service Tax (Registration of Special Categories of Persons) Rules, 2005.

In addition to the above, certain provisions of the Central Excise Act, 1944 are also made applicable for Service Tax matters (Section 83 of the Act).

1.6 What are the provisions of Central Excise which are made applicable for Service Tax matters?

The provisions of Central Excise which are made applicable to Service Tax matters, as they are applicable in relation to the duty of Excise are listed in Appendix-III.

1.7 How to decide whether Service Tax is payable by a person?

1. If you are engaged in providing service to your customer, please check :–

• Whether the service rendered by you is falling under the scope of any of the 80 taxable services listed in the Appendix – I.
   

• Whether there is a general or specific exemption available for the category of service provided under any notification.
   

• Whether you are entitled to the value based exemption available for small scale service providers as explained in Chapter 7 here.
   

• Whether the service charges were received for the services provided or to be provided.

In case the service provided by a person falls within the scope of the 80 taxable services and if such service is not fully exempted, the Service Tax is payable on the value of the taxable service received subject to the eligible abatements, if any (please also refer Q. No. 1.3)

2. If you are availing the services of the service provider, please check :

• Whether the service received by you is falling under the scope of any of the services where the recipient of the service is liable to pay Service Tax in terms of section 68(2) of the Act read with Rule 2(d) of the Rules (For details, please see the answer to Question
  No. 1.4).

In case the service received by a recipient of such service is falling under the scope of any of the 80 taxable services, the recipient of the service shall pay Service Tax having regard to the exemptions/abatements admissible, if any.

Please note that the value based exemption for small scale service providers under Notification No. 6/2005-S.T., dated 1-3-2005 effective from 1-4­2005 is not admissible to such recipients of taxable services who are liable to pay Service Tax. (For further details, please see the answer to Question No. 7.1).

2. Registration

2.1 What is the meaning of an ‘assessee’ in relation to Service Tax and who should be approached for Service Tax Registration?

‘Assessee’ means a person liable to pay Service Tax and includes his agent. A prospective assessee of Service Tax can approach the Asstt./Deputy Commissioner of the concerned Central Excise/Service Tax Division or the Superintendent in charge of the Service Tax Cell/Range and obtain the Registration. (The list of the Central Excise Commissionerates along with Telephone Numbers and Website addresses of Coimbatore Zone is furnished in the end).

2.2 How do you describe the expression “person” appearing in the definition of taxable service?

The expression ‘person’ refers to a legal person and would include any individual, proprietary firm or partnership firm, company, trust, institution, society etc.

2.3 What is the procedure for Registration?

A prospective Service Tax assessee seeking registration should file an application in Form ST-1 (in duplicate) before the jurisdictional Central Excise/ Service Tax officer within 30 days from the date of notification of the taxable service.

If such service has already been notified, the application for registration should be filed within 30 days from the date of commencement of rendering the Service [Rule 4(1) of the STR, 1994].]

The brief hints for filing the application for Registration (ST-1) are in Appendix-IV.

2.4 When would the Registration Certificate be issued?

The Registration Certificate would be issued within a period of seven days from the date of submission with all relevant details/documents. In case the registration certificate is not issued within seven days, the registration applied for is deemed to have been granted. [Rule 4(5) of the STR, 1994]

2.5 Who should apply for registration under Service Tax law? Is there any provision for centralized Registration?

All "persons" who are liable to pay Service Tax to the Government and the ‘Input Service Distributors’ are required to register themselves with the Central Excise Department.

Persons having centralised account and billing system, at their option, can have single registration or more than one registration. However, if such persons do not have centralized billing at one place, then they will have to register at each place separately.

If the taxable services are provided by an assessee from more than one premises, and if such premises are located within the jurisdiction of various Divisions of the Commissionerate, the assessee may obtain centralized registration from the Commissioner of Central Excise having jurisdiction over all such premises. If such premises are located within the jurisdiction of various Commissionerates of the Zone, the Registration Certificate would be issued by the Chief Commissioner having jurisdiction over all such premises. If the premises are located in different Zones, the Registration Certificate would be issued by the Director General of Service Tax having office at Mumbai [Rule 4(2) of the STR, 1994].

Only one Registration certificate is to be taken even if the person provides more than one service, but from the same premises.

In respect of services like Goods Transport Agency, where the liability to pay Service Tax is on the recipient of the services, such recipients of taxable service should register with the Central Excise Department.

The Service Providers need to obtain Registration, if only the aggregate value of their taxable service in a financial year exceeds three lakh rupees although full exemption for payment of Service Tax is up to rupees four lakhs as per Notifn. No. 6/2005-S.T., dated 1-3-2005.

Note : The value of services exempted by any Notification other than Notifn. No. 6/2005-S.T., dated 1-3-2005 are not includable while computing the value for the above purpose. (Notifn. 27/2005-S.T., dated 7-6-2005 w.e.f. 16-6-2005).

2.6 Is PAN allotted by the Income Tax Department a must for obtaining Service Tax Registration?

The Service Tax Registration number is generated based on the PAN issued by the Income Tax Department. However, in the absence of PAN, a temporary Service Tax registration number would be issued for assessees who are not having PAN at the time of filing the application (ST-1) for Service Tax registration till such time they obtain PAN. Once the PAN is obtained, the Service Tax assessee should obtain the PAN-based Service Tax Registration number.

2.7 What is to be done with the Service Tax Registration when a registered assessee ceases to carry on the activity for which he was registered?

The assessee should surrender the Service Tax Registration Certificate – T-2) to the concerned Central Excise/Service Tax authorities.

2.8 What is to be done with the Registration when a registered assessee transfers his business to another person?

In the event of transfer of the business, the transferee should obtain a fresh certificate of Service Tax registration.

2.9 Whether a service provider can make payment of Service Tax and file returns before the grant of registration by the proper officer?

Yes. A service provider can pay Service Tax and file returns immediately after applying for the registration.

2.10 Is there any penal provision for non-registration?

Failure of registration may attract a penalty up to Rs. 1,000/- under Section 77 of the Finance Act, 1994.

However, such penalty could be waived in case the assessee proves that there was reasonable cause for such delay (Section 80 of the Act). Please also see the answer to Q. No. 8.2.

3. Payment Service Tax

3.1 How to pay Service Tax?

The Service Tax amount is required to be paid under Form TR 6 Challan (yellow in colour) in the specified branches of the designated banks. The details of such banks and branches may be obtained from the nearest Central Excise Office.

The facility for on-line payment of Service Tax (e-payment) has been launched recently to enable the Service Tax assessees to pay the Service Tax, without having the need to visit the Bank.

3.2 When is Service Tax required to be paid?

If the assessee is an individual or a proprietary or partnership firm, Service Tax is to be paid on quarterly basis by the 5th day of the month following the quarter. For example, Service Tax for the quarter ending 30th of June is to be paid by 5th of July.

In respect of all other categories (Company, Society, Trust etc.), the Service Tax is payable on monthly basis and is to be paid by the 5th day of the succeeding month.

However, the Service Tax for the month of March or quarter ending March should be paid by all Service Tax assessees by 31st of March of the Calendar year [Rule 6(1) of the STR, 19941.

3.3 What are the statutory provisions and facilities available with regard to the payment of Service Tax for the month of March/Q.E. March, as the Service Tax for the said period is payable by 31st of March itself as per Rule 6(1) of the STR, 1994 vide Notification No. 1/2005-S.T. dated 14-1-2005?

The various statutory provisions and facilities available in this regard, are as indicated below:

• As per Rule 6(4) of the STR, 1994 where the Service Tax assessee is unable to correctly estimate the actual amount of Service Tax payable for a particular month or quarter by the due date for payment of such Service Tax, the Service Tax assessee can request the concerned Asstt./ Deputy Commissioner of Central Excise seeking permission for payment of Service Tax on provisional basis. On receipt of such written request of the assessee, the authority may allow payment of Service Tax on provisional basis, on such value of taxable service as may be specified by the authority. In this regard, the provisions of Rule 7 of the Central Excise Rules, 2002 relating to provisional assessment are applicable for finalization of the Service Tax provisional assessment etc., except so far as they relate to execution of Bond.
   

• The assessees having centralised registration who paid excess amount of Service Tax, on account of non-receipt of details regarding the receipt of gross amount for the services at his other premises or offices, may adjust such excess amount against the Service Tax liability for the subsequent period and furnish the details of such adjustment to the Jurisdictional Superintendent of Central Excise within 15 days from the date of such adjustment. [Rule 6(4A) of the STR, 19941.
   

• The facility of on-line payment (e-payment) which had been recently launched would also enable the Service Tax assessees to make the payment from their premises itself, without having the necessity to visit the bank within the stipulated time, for the above purpose.
   

• The Department makes arrangement to receive the challans with the cheques, to facilitate payment of Service Tax till midnight on 31st of March. This facility can be made use of, by the assessees.
   

• The Reserve Bank of India (RBI) vide letter RBI/2005/400/ DGBA/GAD No. H-5164/42.01.029/2003-2004 dated 22-3-2005, had issued specific directive to all the authorized banks to keep their banks/branches open in such a manner that no assessee faces difficulty in discharging the tax liabilities on 31st of March, 2005. Similar facility of extended working hours to facilitate payment of taxes by all authorised banks is expected on 31st March, in future also.

3.4 What is the head of account into which the Service Tax amount is to be paid in respect of various services?

Separate "Head of account" has been specified for each taxable service. The service tax has to be paid under such specific head of account relevant for the service on which the Tax is being paid.

While making the payment of Service Tax to the credit of the Central Government, head of account which is specific to a service should be properly indicated in the TR 6 challan along with the 15-digit Service Tax payer code number allotted by the Department, to avoid incorrect accounting. The list of taxable services along with accounting code number (Head of Account), is at Appendix-I.

3.5 Can the Service Tax be deposited in non-designated banks?

No. For payment of Service Tax, specific bank has been nominated for every Central Excise Commissionerate. If Service Tax is deposited in a branch/bank other than the nominated bank/branch, it amounts to non-payment of Service Tax [Rule 6(2) of the STR, 1994].

3.6 Whether the payment of Service Tax is to be made for the billed amount or for the value received?

The Service Tax for a particular period is payable on the amount/value of taxable service received during that period and not on the gross amount billed to the client.

If the charges for the taxable service have been received in advance prior, to rendering of the services, the Service Tax is payable even if the services are yet (to be provided by them [Section 67 and Rule 6(1) of the STR, 1994]

3.7 What is the date of payment of Service Tax? Is it the date in which the cheque for the same is deposited/tendered in the designated bank or the date on which the amount is credited?

The date of deposit of cheque is the date of payment of Service Tax. The Service Tax Rules provide that it would suffice if the cheque is presented to the bank by the due date for payment of Service Tax. However, if the cheque is dishonoured, it would mean as if the Service Tax has not been paid and the relevant penal consequences would follow [Rule 6(2) of the STR, 1994].

3.8 When payment is made by a client to an assessee after deducting his Income Tax liability under the Tax Deduction at Source (TDS) provision, whether the Service Tax liability of the assessee is only towards the amount actually received from that client or tax is to be paid on the amount including the Income Tax deducted at source also?

Service Tax is to be paid on the value of taxable service which is charged by a Service Tax assessee. Income tax deducted at source is included in the charged amount. Service Tax is, therefore, payable on the amount of Income Tax deducted at source also.

3.9 What is the interest rate applicable on delayed payment of Service Tax?

The delayed payment of Service Tax attracts simple interest at the rate specified under section 75 of the Finance Act, 1994. The interest rate in force at present is 13% per annum. Interest is payable for the period from the first day after the due date till the date of payment of such defaulted Service Tax amount or any part thereof.

3.10 What are the penal consequences if the Service Tax is not paid or paid late?

If the Service Tax is not paid or paid after the due date, by a person liable to pay Service Tax, they shall pay, in addition to such tax and the interest on such tax as per section 75 of the Act (as indicated in the answer to Q. No. 3.9), a penalty which shall not be less than Rs. 100/- per day, which may extend to Rs. 200/- for every day during such failure to pay Service Tax. However, the penalty amount payable shall not exceed the amount of Service Tax that was not paid (Section 76 of the Act).

3.11 Whether Service Tax is payable after providing the service or after the receipt of the service charges?

Service Tax is payable once the amount/value (in respect of the taxable service) is received by the service provider, for the service so provided or to be provided (Sections 65 and 67 of the Act).

4.1 How to file Service Tax Returns, on what interval and with whom?

The Service Tax assessees are required to file a half yearly Return in Form ST-3 or ST-3A as applicable, in triplicate to the Superintendent of Central Excise dealing with Service Tax work.

The Return is to be filed within 25 days from the last day of the half year to which it relates and should be accompanied by copies of all the TR 6 Challans for payment of Service Tax during the relevant period. Thus, return for half year ending 30th September and 31st March are required to be filed by 25th October and 25th April, respectively.

The details in respect of each month of the period for which the returned is filed, should be furnished in the Form ST-3, separately (Section 70 of the Act and Rule 7 of the STR, 1994). The brief hints for filing of ST-3 Return are in Appendix-IV.

4.2 What is e-filing of Service Tax Returns?

The e-filing is a facility for electronic filing of Service Tax Returns through the Internet by using a computer. For further details, please refer Q. No. 4.3.

4.3 Who can file their Returns through Electronic medium?

A Service Tax assessees having a 15-digit Service Tax payer code can avail the facility of electronic filing of their Service Tax Returns (ST-3). They should also indicate the 15-digit payer code number in the TR-6 challans used by them.

An assessee who had not mentioned the STP code in the TR-6 challans may submit copies of the challans manually to the Department after e-filing his Return with due mention of the 15-digit Service Tax payer code on each challan.

4.4 What is the procedure for e-filing?

The Service Tax assessees who have 15 digit Service Tax code allotted to them, should file an application to their jurisdictional Asstt./Deputy Commissioner. They should mention a reliable e-mail address in their application, so that the Department can send them their User word and password to help them file their Return.

They should log on to the Service Tax e-filing home page by typing the address http://servicetaxefiling.nic.in in the address bar of the browser. On entering their Service Tax code, user word and password in the place provided on the home page, they will be permitted to access the e-filing facility. The assessee should then follow the instructions given therein and file the Returns through e­filing system.

4.5 What is to be done when there was no occasion to render a taxable service or did not receive any service attracting Service Tax (to be paid by the recipient of the service) during the period for which the ST-3 Returns are to be filed?

Even when there was no occasion to render any taxable service(s) or did not receive any service charges attracting Service Tax, as the case may be, during a particular half year, the assessee should file a ‘Nil’ ST-3 Return within the prescribed time limit.

4.6 Whether a single Return is sufficient when an assessee provides more than one service or separate Returns are to be filed for each service?

A single Return would suffice even if the assessee provides more than one service. However, details in each of the column in Form ST-3 have to be furnished separately for each of the taxable service rendered by the assessee.

4.7 What is the penalty for non-filing or delayed filing of half yearly Returns?

If a person fails to furnish the ST-3 Return within the due date; i.e., 25th of the month following the half year, he shall be liable to penalty which may extend to an amount not exceeding one thousand rupees (Section 77 of the Act).

However, such penalty could be waived in case the assessee proves that there was reasonable cause for such delay (Section 80 of the Act).

5.1 Is there any statutory documents prescribed by the Government such as specified invoice proforma, specified registers etc. for use by the service providers?

There are no specific records which have to be maintained by a Service Tax assessee. The records including computerized data, if any, which are being maintained by an assessee on his own or as required under any other law in force, such as Income Tax, Sales Tax etc. are acceptable for the purpose of Service Tax – [Rule 5(1) of the STR, 1994].

However, it is important to note that a list of all such accounts maintained by an assessee including the memorandum received from the branch offices shall be furnished to the Superintendent of Central Excise at the time of filing the Return (ST-3) for the first time [Rule 5(2) of the STR, 19941.

5.2 Where from the Service Tax assessee can get the Forms such as ST-1, ST-3 etc.?

The Forms are available on the websites as indicated at page 60 in this Booklet and also at the Central Excise Range /Division /Commissionerate Hqrs. offices.

5.3 Can the Department ask for more information than what assessee is submitting to it in the Forms ST-1 and ST-3?

Yes. If it is felt necessary, the Department can ask for additional information/ documents for scrutiny, as per Rule 6(6) of the STR, 1994 and sec. 14 of the Central Excise Act, 1944 which is made applicable to Service Tax matters as per sec. 83 of the Finance Act, 1994.

5.4 Whether issue of Invoice/Bill/Challan is mandatory? When should the same be issued?

Issue of invoice/bill/challan by a Service Tax assessee is mandatory as per Rule 4A of the STR, 1994. The same should be issued within 14 days from the date of completion of taxable service or receipt of payment towards the service, whichever is earlier.

However, if the service is provided continuously for successive periods of time and the value of such taxable service is determined or payable periodically, the invoice/bill/challan shall be issued within 14 days from the last day of the said period [Proviso to Rule 4A(1) of the STR, 1994].

5.5 Is there any prescribed format for the invoice/bill?

There is no prescribed format for issue of Invoice. However, the invoice/bill/ challan should contain the following information (Rule 4A of the STR, 1994).

1. Serial number.

2. Name, address and regn. No. of the service provider. (iii) Name and address of the service receiver.

3. Description, classification and value of taxable service being rendered.

4. The amount of Service Tax payable (Service Tax and Education cess should be shown separately).

Note : If the service provider is a banking company, the details at Sl. Nos. (i) and (iii) are not necessary.

In respect of the taxable services relating to the transport of goods by road, provided by the Goods Transport Agency, the service provider should issue a consignment note containing the following information (Rule 4B of the STR, 1994) :

• Serial Number

• Name of the consignor and consignee

• Regn. No. of the vehicle

• Details of the goods transported

• Details of the place of origin & destination

• Person liable for payment of Service Tax (consignor/consignee/GTA)

5.6 Is the amount of Service Tax charged from the client compulsorily to be indicated separately in the Bills/Invoices/Challans raised on him?

Yes. It is mandatory to separately indicate the amount of Service Tax charged in the Bills/ Invoices/ Challans raised on the clients as per Section 12A of the Central Excise Act, 1944 which is made applicable to Service Tax, under sec. 83 of the Finance Act, 1994.

Such mention of the Service Tax amount in the Invoice/ Bill/ Challans, would also facilitate the service receiver to avail the eligible credit of the Service Tax paid on the input services.

6.1 Can any adjustment of tax liability be made by an assessee on his own, in cases when Service Tax has been paid in excess?

Yes. Where an assessee has paid to the credit of the Government in respect of a taxable service, which is not so provided by him, either wholly or partially for any reason, the assessee may adjust the excess Service Tax so paid by him (calculated on a pro rata basis) against his Service Tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the Service Tax thereon to the person from whom it was received [Rule 6(3) of the STR, 1994].

Further, assessees having centralised registration who paid excess amount of Service Tax, on account of non-receipt of details regarding the receipt of gross amount for the services at his other premises or offices, may adjust such excess amount against the Service Tax liability for the subsequent period and furnish the details of such adjustment to the Jurisdictional Superintendent of Central Excise within 15 days from the date of such adjustment [Rule 6(4A) of the STR, 1994].

In all other cases of excess payment, refund claims have to be filed with the Department. The refund claims would be dealt as per the provisions of section 11B of the Central Excise Act, 1944, which is made applicable to Service Tax under section 83 of the Finance Act, 1994.

It is important to note that any amount of Service Tax paid in excess of the actual liability, is refundable, only if it is proved that the claimant of refund had already refunded such amount to the person from whom it was received or had not collected at all (Section 11B of the Central Excise Act, 1944 which is applicable to Service Tax matters under section 83 of the Act).

6.2 Is the Service Tax payable by the assessee even in cases where his clients do not pay for the service(s) rendered or when the client pays only a part of the bill raised in this regard?

Service Tax is required to be paid at the rate in force (at present 10.2%) only on the value/amount 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 when the amount received is less than the gross amount charged/billed to the client, the Service Tax assessee is required to amend the bills either by rectifying the existing bill or by issuing a revised bill or a credit voucher/note and by properly endorsing such change in the billed amount. In case an assessee fails to do so, his liability to pay Service Tax shall be on the amount billed by him to the client for the services rendered.

6.3 What is the procedure for claiming refund?

The procedure for claiming refund for the amount due from the Department is as mentioned below:–

• Application in the prescribed form (Form - R) is to be filed in triplicate with the jurisdictional Asstt./Deputy Commissioner of Central Excise.
   

• The application should be filed within one year from the relevant date as prescribed in section 11B of the Central Excise Act, 1944 which has been made applicable to Service Tax refund matters also.
   

• Application should be accompanied by documentary evidence to the effect that the amount claimed as refund is the amount actually paid by him in excess of the Service Tax due and the incidence of such tax claimed as refund has not been passed on to any other person.

6.4 What is relevant date for calculation of limitation period in respect of filing refund claims relating to Service Tax?

The "relevant date" for the purpose of refund as per section 11B of the Central Excise Act, 1944 which is applicable to Service Tax also, is the date of payment of Service Tax. Thus, the limitation period of one year is to be calculated from the date of payment of the Service Tax.

6.5 How does one work out the Service Tax liability and pay the same to the Government, in case the customer or a client pays only the billed amount, but not the Service Tax amount mentioned, in the bill?

In such a situation, the amount so realized from the client would be treated as gross amount inclusive of Service Tax and accordingly the value of taxable service and the Service Tax liability are worked out as follows :

For example :

Value of taxable service (V) = Gross Value x 100
                                    (Gross Value + Rate of Tax)

Service Tax + Edn. Cess Payable = V x Rate of Tax
                                                     100

7.1 Please explain the exemption available for small scale service providers?

• Service Tax is fully exempted in respect of the taxable services of aggregate value not exceeding four lakh rupees in any financial year.
   

• The above mentioned exemption based on the turnover is not available to the persons who are liable to pay Service Tax but are not the service providers. Eg. (1) The recipient of services from an overseas service provider who has no registered office in India. (2) A company incurring the transportation charges for availing the services from Goods Transport Agencies, for transportation of goods by road.
   

• This exemption was introduced w.e.f. 1-4-2005. (Notifn. No. 6/2005­ST, dated 1-3-2005).

7.2 What are the conditions for availment of the exemption from Service Tax by the small scale service providers?

Some of the important conditions for availment of the exemption are as follows :

• If the aggregate value of taxable services rendered by the service provider from one or more premises, exceeds rupees four lakhs in the preceding financial year, the service provider is not eligible for the exemption for the current year.
   

• The exemption shall apply to the aggregate value of all taxable services and from all premises and not separately for each premises or each services.
   

• The benefit of the exemption shall not apply to taxable services rendered by a person under a brand name or trade name whether registered or not, of another person.
   

• The exemption shall not apply to persons who are other than the service providers, but liable to pay Service Tax under sec. 68(2) of the Act.
   

• The provider of the taxable service shall avail the Cenvat credit only on such inputs or input services received, on or after the date on which the service provider starts paying Service Tax, and used for the provision of taxable services for which Service Tax is payable.
   

• Cenvat Credit of Service Tax paid on any input services, under Rule 3 or Rule 13 of the Cenvat Credit Rules, 2004 used for providing the services under the above exemption, is not admissible for persons availing the above exemption.
   

• Cenvat Credit under Rule 3 of the said Rules, is not admissible on the capital goods which are received in the premises of the service provider during the exemption period.
   

• An amount equivalent to the Cenvat credit taken by them, if any, in respect of the inputs lying in stock or in process as on the date on which the provider of taxable service starts availing the exemption should be paid; the balance credit amount, if any, shall lapse.

7.3 Is the exemption for small scale service providers compulsory?

Service Tax assessees have the option not to avail the above exemption and pay Service Tax on the taxable services. However, such option once exercised in a financial year shall not be withdrawn during the remaining part of such financial year.

7.4 Are there any other General exemptions?

The following general exemptions from payment of whole of the amount of Service Tax are available for the Service Providers :

• Services provided to the United Nations or International Organisations (Notifn. No. 16/2002-ST, dated 2-8-2002).
   

• Services provided to a developer of Special Economic Zone or a unit of Special Economic Zone (Notifn. No. 4/2004-S"T dated 31-3-2004).
   

• The value of the goods and materials sold by the service provider to the recipient of the service is exempted from payment of the Service Tax, if there is a documentary proof specifically indicating the value of the goods and materials when credit of duty paid on those goods has not been taken or when the amount equal to the credit is paid before sale of such goods, if credit had already been taken (Notifn. 12/2003-S.T., dated 20-6-2003).

7.5 Is there any exemption for payment of Service Tax if the receiver/provider of the service is the Central/State Government organization and Public Sector Undertakings?

No. There is no such exemption. All service providers, including the Central/State Government organisations and the public sector undertakings rendering the specified taxable service, are liable to pay Service Tax.

However, the taxable services provided by a banking company or a financial institution including a non banking financial company, or any other body corporate or a commercial concern, to the Government of India or the Government of a State, in relation to collection of any duties or taxes levied by the Government of India or the Government of a State, are exempted from the payment of Service Tax (Notifn. No. 13/2004-ST, dated 10-9-2004).

8.1 What are the penal provisions for various contraventions of the Service Tax Law?

The penal provisions for various contraventions of the Service Tax Law are as follows:

1. Non-registration or delayed registration: An amount Rs. 1,000/- is liable to be imposed as penalty under section 77 of the Act, as explained in the answer to Q. No. 2.10.
    

2. Non-payment or delayed payment of Service Tax : A penalty at the rate of Rs. 100/-, extendable up to Rs. 200/- is impossible for every day during which such failure continues as explained in the answer to Q. No. 3.10.
    

3. Non-filing/delayed filing of returns : An amount not exceeding One Thousand Rupees is liable to be imposed as penalty as explained in answer to Q. No. 4.6.
    

4. Contravention of any of the provisions of the Act or the Rules made thereunder for which no provisions for penalty are available : An amount not exceeding Rs. 1,000/- is liable to be imposed as penalty (Sec. 77 of the Act).
    

5. Suppression of the value of taxable services : Penalty to an extent ranging from 100% to 200%, of the Service Tax which was not levied or paid or erroneously refunded, can be imposed on any person, if such short levy or short payment or erroneous refund is by reason of fraud, collusion, wilful misstatement, suppression of facts; or contravention of the Act or the rules made thereunder with an intent to evade payment of Service Tax. Such liability towards penalty would be in addition to the Service Tax amount evaded or erroneously refunded and the interest thereon (Section 78 of the Act).

Reduced penalty in respect of Sl. No. (v): If the Service Tax amount as determined by the competent authority is paid within 30 days from the date of communication of the order, along with interest, the amount of penalty liable to be paid shall only be 25% of the Service Tax amount so determined. The benefit of reduced penalty equivalent to 25% of the said Service Tax is available only if such lesser penalty amount is also paid within the aforesaid period (First and second proviso to section 78).

8.2 Is there any provision to waive the penalty under Service Tax law?

The penal provisions under Service Tax are provided under sections 76, 77 and 78 of Finance Act, 1994. Although the penalty is liable to be imposed for the circumstances covered under the said provisions, the section 80 of the Finance Act, 1994, provides sweeping provisions not to impose penalty, for any failure referred to in the said provisions, if the Service Tax assessee proves that there was sufficient cause for such failure.

9. Appellate remedies

9.1 Whom should be approached when an assessee is aggrieved by an order/decision of the Adjudicating authority subordinate to the Commissioner of Central Excise in respect of Service Tax? What is the procedure for filing the Appeal?

An assessee aggrieved by such order/decision may file an Appeal to the Commissioner (Appeals) in Form ST-4, in duplicate.

• A copy of the order/decision appealed against should be enclosed.

• The Appeal should be filed within 3 months from the date of receipt of the order/decision.

• There is no fee for filing an Appeal before the Commissioner of Central Excise (Appeals), even in respect of Service Tax matters (Section 85 of the Act and Rule 8 of the STR, 1994).

9.2 Can the time limit of three months for filing the appeal to the Commissioner (Appeals) be extended? If yes, under what circumstances?

Yes. If the Commissioner (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. The law does not provide for further extension of time [Proviso to section 85(3) of the Act].

9.3 Can an Appeal be filed against the order/decision of the Commissioner of Central Excise or Commissioner (Appeals)? If so, what is the procedure for that?

Yes. The law provides for filing such an Appeal. The procedure is as follows:–

• The Appeal against the order of the Commissioner of Central Excise or Commissioner (Appeals) can be filed with the Customs, Excise and Service Tax Appellate Tribunal (in short, CESTAT).
   

• The Appeal should be filed within three months of the date of receipt of the order sought to be appealed against.
   

• It should be filed in the prescribed Form (ST-5) in quadruplicate.
   

• It should be accompanied by a certified copy of the order appealed against.
   

• The Appeal should be accompanied by the prescribed fee based on the amount of Service Tax and interest demanded and penalty levied.

Rs. 1,000/- if the amount involved is Rs. 5 lakhs or less, Rs. 5,000/- if the amount involved is more than Rs. 5 lakhs but not exceeding Rs. 50 lakhs and Rs. 10,000/- if the amount involved is more than Rs. 50 lakhs. (Section 86 of the Act and Rule 9 of the STR, 1994).

10.1 What is Cenvat Credit Scheme with reference to Service Tax assessees?

The Cenvat Credit Rules, 2004 which was introduced w.e.f. 10-9-2004 provides for availment of the credit of the Service Tax/Central Excise duties paid on the input services/inputs/capital goods. Such credit amount can be utilised towards payment of Service Tax by an assessee on their output services.

In fact, such credit availed by a manufacturer can also be utilised for discharging their liability towards Service Tax and/or Central Excise duties.

10.2 What are the duties/taxes that can be availed as credit?

Duties paid on the inputs, capital goods and the Service Tax paid on the ‘input’ services can be taken as credit. Education Cess paid on the Excise duty and Service Tax can also be taken as credit. However, the credit of Education cess availed can be utilized only for payment of Education cess relating to output service.

The interest and penalty amounts cannot be taken as credit.

10.3 What is meant by ‘input’ for a service provider?

For service providers rendering taxable services, input means all goods excluding diesel, petrol and motor vehicle used for providing any output service.

10.4 What is ‘Input Service’ for a service provider?

‘Input Service’ for a service provider means any service used by a provider of taxable service for providing an output service and includes services used in relation to setting up, modernization, renovation or repairs of a premises of provider of output service or an office relating to such premises, advertisement or sales promotion, market research, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods.

10.5 What is meant by capital goods for service providers?

Capital goods for a service provider means the following goods used for providing output service :

• all goods falling under Ch. 82, 84, 85, 90, 68.02, and 6801.10

• pollution control equipment

• components, spare and accessories of the above goods

• moulds and dies, jigs and fixtures

• refractories and refractory materials

• tubes and pipes and fittings

• storage tank

Capital goods also includes motor vehicles registered in the name of the provider of output service for providing the following taxable service only :–

• Courier agency

• Tour operator

• Rent-a-cab scheme operator

• Cargo Handling Agency

• Goods Transport Agency

• Outdoor caterer

• Pandal/shamiana contractor

10.6 Is it compulsory that the inputs/capital goods are to be purchased only from the manufacturers for the purpose of availment of credit?

Not necessary. The inputs/capital goods can be procured from the First stage and Second stage dealers also. Those dealers should have registered themselves with the Central Excise Department. The invoices issued by them should contain proper details about the payment of duty on those goods.

10.7 What are the documents prescribed for availment of the Cenvat Credit?

The documents on which Cenvat credit can be availed are as follows :-

• Invoice issued by the manufacturers and his depot/consignment agents

• Invoice issued by the Importer and his depot/consignment agents

• First stage and Second stage dealer registered with the Central Excise Department

• Bill of Entry

• Invoice /Bi11 /Challan issued by the provider of input services

• Invoice /Bill /Challan issued by the Service distributor.

• Certificate issued by the Appraiser of Customs in respect of the
  goods imported through Foreign Post Office.

10.8 Whether it is necessary to avail credit only after making payment against the bill/invoice/challan in respect of input services?

Credit of Service Tax on the input services can be availed, only after making payment of the amount indicated in the invoice/bill/challans. This is necessary because, the input service provider will be paying the Service Tax to the Government only after he realizes the payment, as the payment of Service Tax is only upon realization.

The above requirement is not applicable in respect of credit of duties paid on inputs and capital goods.

10.9 Who is an “Input Service Distributor”?

An office of the manufacturer or provider of output service who receives invoices for the procurement of input services and issues invoices for the purpose of distributing the credit of Service Tax paid to such manufacturer or provider of output service is an "Input Service Distributor".

The credit of the tax amount so distributed to various places shall not exceed the total Service Tax amount contained in the original invoice/bill.

10.10 What is the format of the invoice/bill/challan to be issued by the input service distributor?

No specific format has been prescribed. However, the same should contain the following information :–

• Name, address and Regn. No. of the service provider.

• SI. No. and date.

• Name and address of the input service distributor.

• The name and address of the recipient to whom the Service Tax credit is distributed.

• The amount of credit being distributed.

10.11 Whether the input service distributors should get themselves registered with the Department? Whether they have to file any returns with the Department?

Yes. They have to maintain adequate records and file an half yearly return by the end of the month following the half year – The Service Tax (Registration of Special Category of Persons) Rules, 2005. (For further details, please see Chapter 2)

10.12 What are the registers, to be maintained by the persons availing credit?

There are no specific format of returns/records to be maintained. However, they have to maintain adequate records showing the details such as receipt, disposal, consumption and inventory of inputs and capital goods, the amount of credit taken, utilization of the credit amount etc.

10.13 What should be done, if an assessee is rendering both taxable services as well as exempted services, but the inputs and input services are common?

Separate accounts are to be maintained for the receipt, consumption and inventory of input and input service meant for providing taxable output service and for use in the exempted services. Credit should be taken only on that quantity of input/input services which or used for the service on which Service Tax is payable.

The output service providers who have not opted to maintain separate accounts, can utilize Service Tax only to the extent of 20% of their Service Tax liability. For example, if Service Tax liability for a specific period is Rs. 1,000/­and there is a credit of Rs. 500/- available with them, the credit can be utilized only to the extent of Rs. 200/- and the balance Service Tax liability (i.e., Rs. 1000 - 200 =
800/-) has to be paid in cash/cheque. The remaining credit can be carried forward and used for the subsequent period in a similar manner.

10.14 Whether any separate registration is required for the purpose of availing Cenvat Credit?

Not required.

11.1 What is Export of Services? Whether export of services is exempted from Service Tax?

The taxable services shall be treated as Export only if such services are delivered outside India and payment is received in convertible foreign exchange. However, in certain cases, the services partially performed in India are also treated as Export of services subject to fulfilment of certain conditions. The Export of taxable services as explained above are exempted from Service Tax.

The taxable services rendered to a client/recipient when he is located outside India at the time of rendering the services, are not chargeable to Service Tax (Export of Service Rules, 2005).

11.2 What are the benefits available for Export of Services?

If services are exported after payment of Service Tax, rebate of Service Tax paid on such taxable services would be admissible.

The Service Tax paid on the input service, and Central Excise duty paid on the inputs which are used in providing the taxable services exported would also be granted as rebate in respect of the services exported subject to fulfilment of the conditions and limitations imposed by the Government.

(Rule 5 of the Export of Services Rules, 2005 vide Notfn. No. 9/2005-ST, dated 3-3-2005 effective from 15-3-2005)