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Introduction & Overview

Special Story

V. H. Patil
Advocate

A. Direct Taxes

  1. TAX RATES AND TAX REBATES

    1. Rates for Individual and HUFs

      Substantial relief has been granted by raising the threshold limit of basic exemption as well as by scaling up the slabs of income tax. For individuals, HUFs, AOPs, and BOIs the rate of tax on total income is as under:
       

      Total income Tax rate
      Up to Rs. 1,00,000/- Nil
      Between Rs. 1,00,001/- and Rs. 1,50,000/- 10%
      Between Rs. 1,50,001/- and Rs. 2,50,000/- 20%
      Above Rs. 2,50,000/- 30%

      For resident women below 65 years of age and resident individuals of 65 years and above, the threshold limit has been further increased to Rs. 1,25,000/- and Rs. 1,50,000/- respectively. Thereafter, the slab rates as given above would be applicable.

      As taxable income will be computed after considering deduction under the newly inserted section 80C, the effective incidence of tax would be lower in case of individuals and HUFs.

      Rebate under section 88D to resident individuals having total income not exceeding Rs.1,00,000/- is consequentially withdrawn. Also, rebates under sections 88B and 88C available to senior citizens and women respectively are withdrawn. Consequently, senior citizens earning salary or pension and having total income between Rs. 1,80,000/- and Rs. 2,50,000/- are actually worse off under the new proposals. Further, in any case, the comparative advantage that senior citizens and women enjoyed vis-a-vis other individuals is reduced by Rs. 15,000/- and Rs. 2,500/- respectively.

      There would tax saving at various levels of total income.

      However the aforesaid tax saving will be substantially whittled down when the withdrawal of standard deduction available to salaried employees (at a maximum of Rs. 30,000/-) and withdrawal of deduction under section 80L of Rs. 15,000/- is considered. The tax impact thereon (excluding surcharge); on Rs. 45,000/- would be Rs. 9,180/- for individuals in the 20% tax bracket and Rs. 13,770/- for those in the 30% tax bracket.
       

    2. Rates for firms and Companies, etc.

      In case of firms and domestic companies, the tax rate is reduced from 35% to 30%. The tax rate on Co-operative Societies, Local Authorities and Foreign Companies has remained unchanged.
       

    3. Rates for royalties, etc.

      Royalty or fees for technical services received by a Non-resident (not being a company) or by a Foreign Company in pursuance of an agreement made on or after 1st June, 2005 shall be taxed @ 10% as against the current rate of 20%. However, the rate TDS on royalty or fees for technical services is reduced from 20% to 10% only in case of foreign companies, whereas no such change in the rate of TDS is made in case of other non-residents.
       

    4. Rates of surcharge

      Rates of surcharge on tax are now as follows:
       

      Persons covered Rates
      Individual, HUF, AOP & BOI 10% if total income exceeds Rs.10,00,000/-. Otherwise Nil
      Firm, Domestic Company & Artificial Jurisdical Person 10% (Increase from 2.5% to 10%
      Co-operative Society & Local Authority Nil
      Foreign Company 2.50%

      Even though rate of tax for firms and companies have been lowered from 35% to 30%, due to the increase of surcharge from 2.5% to 10% the effective tax saving will be lower.
       

    5. Education Cess will continue to be charged as in the preceding year at 2%
       

    6. Rate of Dividend Distribution Tax – Sections 115-O and 115R

      The surcharge on Dividend Dividend Distribution Tax has been increased from 2.5% to 10%. Consequentially, the effective rate of tax (inclusive of surcharge and Education Cess) will now be as under:—

      Dividend/Income distributed by Existing rate New rate
      Domestic Company 13% 14.03%
      Mutual Fund to individual/HUF 13% 14.03%
      Mutual Fund to Others 20.91% 22.44%

       

  2. NEW TAXES

    1. FRINGE BENEFIT TAX

      The Finance Bill proposes to introduce a new Chapter XII-H to levy a tax to be termed as "Fringe Benefit Tax". Fringe benefit tax is proposed to be levied at the rate of 30% of the value of fringe benefits provided or deemed to have been provided by an employer to his employees.

      It is proposed that fringe benefit tax shall be charged in addition to the Income-tax charged for every assessment year and shall be payable by the employer even if no income-tax is payable by the employer under the other provision of the Income-tax Act.

      The term "employer" for the purpose of taxation of fringe benefits is proposed to be defined in section 115W to mean.

      1. "an individual or Hindu undivided family engaged in a business or profession, the profits and gains whereof are assessable to income-tax under the head "Profits and gains of business or profession".

      2. a company;

      3. a firm

      4. an association of persons or a body of individuals, whether incorporated or not;

      5. a local authority; and

      6. every artificial jurisdical person, not falling within any of the preceding sub-clauses".

      The term ‘fringe benefit’ is proposed to be defined to mean:

      1. any privilege, service, facility or amenity provided directly or indirectly by an employer to his employees including former employees by reason of their employment;

      2. any reimbursement, directly or indirectly, made by the employer to his employees for any purpose.

      3. any free or concessional ticket provided by the employer for private journeys of the employees and their family members; and

      4. any contribution by the employer to an approved superannuation fund.

      For determining the above fringe benefits, perquisites in respect of which tax is paid or payable by the employee are to be excluded. Further, free or subsidized transport or any such allowance provided to employees for journey from residence to place of work or vice versa is proposed to be excluded.

      In case of a free or concessional ticket provided, the value of the fringe benefits shall be the cost at which the benefit is provided to the public as reduced by the amount, if any, recovered from the employee.

      In the case of contribution to superannuation fund, the value of fringe benefit shall be the actual amount of contribution made by the employer.

      It is further proposed that if the employer, has in the course of business or profession incurred any expenses on or made any payment for the following purposes, fringe benefit shall be deemed to have been provided by the employer which shall be valued as under:

      Sr.No. Nature of expenditure Value of fringe benefits
      1 Entertainment 50% of expenses
      2 Festival celebrations  
      3 Gifts  
      4 Use of club facilities  
      5 Provision of  hospitality of every  kind by the employer  to any person except  the expenditure on food and beverages  provided to employees  in an office or factory 50% of expenses if employer is engaged in the business of hotel
      6 Maintenance of any accommodation in the nature of guest house 50% of expenses
      7 Conference 50% of expenses
      8 Employee welfare 50% of expenses
      9 Use of health clubs, sports and similar facilities 50% of expenses
      10 Sale promotion including publicity 50% of expenses
      11 Conveyance, tour and travel including foreign travel 20% of expenses
      12 Hotel, boarding and loding 20% of expenses
      13
      14      		 Repair, running and maintenance of motor cars
      Repair, running and maintenance of aircrafts      		 20% of expenses (5% if employer is engaged in the business of carriage of passengers or goods either by motor car or by aircraft)
      15 Consumption of fuel other than industrial fuel 20% of expenses (5% if employer is engaged in the business of carriage of passengers or goods)
      16 Use of telephone 10% of expenses
      17 Scholarship to the children of the employees Actual amount incurred

      It is proposed to provide that while computing the fringe benefit for repairs, running and maintenance of motor cars and aircraft, depreciation on the said motor cars and aircraft shall also be included as fringe benefits.

      It is further proposed that while computing the value of perquisites in respect of ‘any other fringe benefit or amenity’ taxable in the hands of the employees, the fringe benefits chargeable to tax in the hands of the employer shall be excluded.

    2. LEVY OF TAX ON BANKING CASH TRANSACTIONS

      It is proposed to introduce a Banking Cash Transactions Tax (BCTT) on certain taxable banking transactions. Under the new scheme, every taxable banking transaction entered into on or after 1st June, 2005 and having a value in excess of Rs. 10,000/- shall be charged to tax at the rate of 0.1% on the value of the taxable banking transaction.

      A taxable banking transaction is proposed to be defined as a transaction exceeding
      Rs. 10,000/- on any single day by a person in respect of:

      1. withdrawal of cash (by whatever mode) from any scheduled bank.

      2. purchase of a bank draft or a banker’s cheque or any other financial instrument from any scheduled bank on payment of cash.

      3. receipt of cash from any scheduled bank on encashment of term deposit, whether on maturity or otherwise.

      The value of a taxable banking transaction shall be

      1. in case of cash withdrawal, the amount of cash withdrawn;

      2. in case of purchase of a bank draft or a banker’s cheque or any other financial instrument, the amount of cash deposited.

      3. in case of receipt of cash on encashment of term deposit, the amount of cash received.

      The BCTT is payable in the case of cash withdrawal by the person withdrawing cash or in the case of withdrawal of bearer cheque or other instrument by the bearer of such cheque or instrument. Further, the BCTT is payable by the person purchasing the bank draft or banker’s cheque or any other financial instrument and by the person receiving cash on encashment of term deposit.

      Every scheduled bank shall collect the BCTT from the concerned persons and the BCTT so collected during the month shall be paid to the credit of the credit of the Central Government by the 15th of the next month. In case, the scheduled bank fails to collect BCTT from any person it shall be liable to pay such tax.

      Every scheduled bank shall prepare and file a return in respect of all taxable banking transactions entered into during a financial year in the prescribed form, manner and time and shall deliver the same to the Assessing Officer or any other authority that may be authorized by the CBDT in this behalf.

  3. Other Provision

    1. Exemption (S. 10)

      In case of a non-resident three kinds of reliefs are proposed to be given by the Bill.

      1. Interest on Non-Resident (External) Account (Amendment to section 10(4)(ii).

        As it stands today, exemption of interest on moneys standing to the credit of a Non-Resident (External) Account in any bank in India in accordance with the provisions of FERA would not be taxed.

        However, it was provided by the Finance (No. 2) Bill, 2004 that the said provisions would not be operative from 1-4-2005. However, now it is proposed to remove the said condition of credit before 31st March, 2005 and as such, as per the proposed amendment the said exemption will be available even for A.Y. 2006-07 and for subsequent years.
         

      2. Similar provision is proposed to be made for interest received from a non-resident on his current account as covered u/s 10(15)(iv)(fa).
         

      3. Similarly, exemption in case of income of a non-resident on lease of aircraft and aircraft engines, as the provisions stand today, will not available if such lease agreement is entered into after 31st March, 2005. The said outer time limit is proposed to be extended from 31st March, 2005 to 30th September, 2005.

    2. Salary

      1. Standard deduction

        The standard deduction allowable under the provisions of s. 16(1) are proposed to be discontinued. Earlier the said standard deduction was denied only to those persons whose salary was exceeding Rs. 5 lakhs. Now, irrespective of the quantum of salary none of the salaried employees would be entitled to standard deduction.

        It may be noted that this amendment will affect badly the salaried persons who are otherwise in need of some relief.
         

      2. Perquisites

        Earlier, the fringe benefit received by an employee was taxable under the provisions of S. 17(2)(vi) of the Act. Now, in view of the proposed new provisions, fringe benefits will taxable in the hands of the employer and therefore these benefits taxed in the hands of the employer will not be taxable in the hands of the employees.
         

    3. Profits and Gains of Business or Profession

      1. Depreciation rates

        The general rates of depreciation is proposed to be reduced from 25% to 15%. There will be reduction in the rates applicable for other specified plant machineries as well.

        It must be noted that the benefit of reduction in rate of corporate tax will be substantially offset, by reduction in rates of depreciation.
         

      2. Initial depreciation

        At present, the initial depreciation is available at 15%. The same is proposed to be increased to 20% and again the condition that increase in installed capacity should not be less than 10% for claiming deduction on account of initial depreciation is proposed to be dropped.
         

      3. Amalgamation of a banking company with banking institution.

        Now a special scheme is proposed to be introduced which relates to amalgamation of a banking company with banking institution.

        Under the Scheme approved by the Government if a banking company amalgamates with a banking institution as per the provisions of the Banking Act, the Capital Gain arising on such amalgamation in the hands of such amalgamating banking company is proposed to be exempted from tax on capital gain s. 47 and s. 49 are proposed to be amended for that purpose.

        It is also proposed to insert a new section S 72AA wherein it is provided that accumulated losses of amalgamating company could be carried forward by amalgamated banking institution.
         

      4. Shipping business — Reserve

        Clause 9 of Finance Bill 2005 seeks to restrict the incidence of tax which is chargeable on the transfer of an asset purchased out of the reserve under the provisions of S. 33AC to such amount of the sale proceeds which represents the amount credited to the Reserve Account and utilised for acquisition of a ship.
         

      5. Expenditure on scientific research.

        The benefit of deduction under S. 35(2AB) in respect of deduction on the expenditure incurred on in house research and development facility in respect of specified industries is proposed to be extended for two more years till 31-3-2007.
         

      6. Speculative transaction (S. 43(5) and S. 73)
         

        1. The transactions in derivatives would not be treated as speculative transaction as per the definition of "speculative transaction" under the provisions of S. 43(5) of the Act. For claiming that the transaction in derivative and is not covered by the definition of speculative transaction u/s 43(5), certain specified conditions are to be fulfilled.

        2. As the law stands today, the losses under speculation business are allowed to be carried forward for 8 years. The said period of carry forward is proposed to be reduced to 4 years.

      7. Amortisation of expenses relating to VRS (S. 35DDA)

        Amortisation of expenses releting to VRS are proposed to be extended to payment made by installments. It is proposed that such amortisation is available to such payments made in the subsequent years. This is proposed to be achieved by the substitution of the words "at the time of", by the words "in connection with" (such retirement.")
         

    4. Deduction in computing total income

      1. Proposed new S. 80C

        It is proposed that instead of giving rebate in respect of certain investments as provided under the existing S. 88, a deduction is proposed under the proposed S. 80C, which provides for a deduction in respect of investment made under a specified securities etc subject to the upper limit of Rs. 1 lakh . It must be noted that there are no limitation for computation of deduction under the various heads u/s. 80C and only an overall limit for all deduction together of one lakh is provided.
         

      2. Deduction for interest paid on loan taken for higher education. (S. 80E)

        Under the existing provisions on repayment of loan and on payment interest on loans taken for the purpose of pursuing higher education, subject to the upper limit of Rs. 40,000/- is available by way of deduction. Now, it is proposed to remove the upper limit of Rs. 40,000/-. However, the deduction is now on interest payment only and it will not be available for repayment of the loan.
         

      3. Deletion of S. 80L

        Deduction under the provisions of S. 80L in respect of income from interest on specified items like the interest on bank deposits etc up to Rs. 12,000/- and additional deduction of Rs. 3000/- in respect of interest on Government securities available u/s. 80L, is proposed to be withdrawn by deletion of S. 80L.
         

      4. Deduction u/s 80-IA.

        At present a deduction to an enterprise carrying on the business of developing, operating and maintenance of any infrastructure facilities, is available in case of a company or consortium of companies. The benefit of the deduction is proposed to be extended to a corporation or any body established under any Central or State Act.
         

      5. Deduction u/s. 80-IB

        1. In respect the benefit available for an industry set up in Jammu & Kashmir, it is proposed to extend the said terminal date by two years; i.e., to any industry established on or before 31-3-2007 will be eligible for the benefit under the provisions of S. 80-IB(4).

        2. Benefit available to companies carrying on scientific research and development u/s 80-IB(8A) is proposed to be extended for another two years; i.e., the terminal date 31-3-2005 is proposed to be extended to 31-3-2007.

      6. Exemption u/s. 10A

        Deduction u/s. 10A(1A) is in respect of industries setup in SEZ is proposed to be restricted to only those industries, set up on or before 31-3-2001.
         

    5. Income by way of royalty or Fees for technical services. (S. 115A)

      The tax rate on income of a non resident by way of royalty or fees or technical service u/s 115A is proposed to be reduced from 20% to 10%.
       

    6. Special Provisions relating to MAT companies (S. 115JAA and S.115JB)

      As of now under the provisions of S. 115JB, the credit for payment of tax on MAT is not available. Now, it is proposed to amend the provisions of S. 115JAA which provides for credit for payment of tax available to be carried forward. The benefit of credit is proposed to be extended to payments
      u/s. 115JB.
       

    7. Assessment procedure (S. 139)

      As the law stands today, a company is under an obligation to file returns every year irrespective of its range of its total income. This a compulsory obligation to file return is proposed to be extended to partnership firms.

      In respect or taxable entities other than a company and a firm, while determining the minimum taxable limit, one has to take gross total income without taking into account provisions of Ss. 10A, 10B and 10C and provisions of Chapter VIA.

      From the list of 1 x 6 scheme for filing return, mobile phone is proposed to be excluded. However, a new criterion in respect of electricity consumption is brought in, wherein if a person is paying electricity bill exceeding Rs. 50,000/- would be covered by 1 x 6 scheme where under on one of the specified conditions being present one is under an obligation to file a return irrespective of the range of income.
       

    8. Collection and Recovery of Taxes

      1. Amendment to S. 194C

        It is proposed that in case of a sub-contractor who is carrying on the business of transportation if he does not own two vehicles there is no obligation to deduct tax at source in respect of payment to be made to a sub- contractor.
         

      2. Submission of Quarterly Statement of Tax Deducted at Source (new S. 206A).

        The new S. 206A is proposed to be introduced wherein a banking company or co-operative society or public company for any payment of interest to its customers will have to file a return giving particulars in respect of interest payment not exceeding Rs. 5,000/-. It may be noted that in respect of payment which is above Rs. 5,000/- one will have to deduct tax at source under the provision of S. 194C.

        Computerisation in respect of deduction of tax at source is proposed to be done away with which was supposed to be brought in A.Y. 2005-06 is now proposed to be brought in from next year; i.e., from the year 2006-07
         

    9. Zero Coupon Bond

      It is proposed that in respect of specified and notified zero coupon bonds, the amount received on maturity would be taxable for capital gain. Certain conditions are provided for claiming the benefit of these provisions.

      It is also provided that in respect of transfer of such bonds before maturity any loss suffered on such transfer will be available as deduction while computing income from business (see proposed cl. (iia) to S. 36(1),
       

B. Indirect Taxes

  1. CENTRAL EXCISE ACT

    REDUCTION IN EXCISE DUTY

    • Out of the five items having highest excise duty of 24%, three items namely Polyester filament yarns, Tyres & Air Conditioners has now been shifted to the Excise Duty slab rate of 16%. However, abatement from retail price for levy of excise duty on Air Conditioner has been reduced from 35% to 30%.

    • Excise Duty has been reduced from 16% to 12% on matches made by mechanised & semi-mechanised sectors.

    • Excise Duty on Imitation Jewellery and on Cakes & Pastries has been reduced from 16% to 8%.

    • The Surcharge of Re. 1/- per kg on refined edible oils & tea and of Rs. 1.25 per kg on vanaspati has been abolished.

    • Tea and tea waste have been exempted from additional duty of excise of Re. 1/- per kg.

    IMPOSITION AND INCREASE IN DUTY

    • An Additional excise duty shall be charged by way of Surcharge on Pan Masala and Specified Tobacco Products, at specific rate on cigarettes and a rate equal to 10% of the aggregate of normal rates of excise duty payable. The amount collected will be exclusively earmarked to finance National Rural Health Mission. The surcharge have not been levied on biris.

    • The credit of additional excise duty on Pan Masala and certain Tobacco Products would be available for utilisation of payment of this additional excise duty only. The credit of no other duty can be utilised for paying this additional excise duty.

    • Excise duty of 8% has been imposed on mosiac tiles. However SSI exemption for the same will be available.

    • Excise duty @ 16% imposed on Road Tractors and Trailers having engine capacity more than 1800 cc.

    • Excise Duty of 2% imposed on Branded articles of Jewellery.

    • Excise Duty on Iron & Steel and Ships for breaking raised from 12% to 16%.

    • Excise Duty on moilasses has been increased by Rs. 500/- per MT.

    • Changes in Excise Duty of Petroleum Products:

    Name of products Existing rate Proposed rate
    Petrol 23% 8% + Rs. 5./litre
    Diesel 8% 8% + Rs. 1.25/litre
         
    Name of Products Existing Rate Proposed Rate
    Kerosene for public distribution 12% NIL
    LPG for domestic use 8% NIL
    Light diesel oil 16% +Rs. 1.50/litre 16% + Rs. 2.50/litre

    • National Calamity Contingent Duty as introduced by Finance Act 2003 is further extended without any time limit.

    TEXTILES

    • The optional duty has been prescribed for processed filament yarns manufactured from yarn procured from outside by independent processors. Such yarn would attract NIL rate of excise duty without availment of Cenvat Credit or pay 8% of excise duty with availment of Cenvat Credit.

    SMALL SCALE INDUSTRIES

    • The value of clearances in the preceding financial year, for determining eligibility for the exemption, is being increased from Rs. 3 crores to Rs. 4 crores.

    • Exemption Scheme, which provides for a concessional rate of 60% of normal rate with Cenvat Credit up to clearances of Rs. 1 crore ( Notification No. 9/2003-CE), is being withdrawn.

    OTHER AMENDMENTS

    • The benefit of advance ruling is also extended to existing Joint Ventures in India and any other assessee as notified by the Central Government.

    • It will become mandatory to avail exemption on the exempted goods.

  2. CUSTOMS DUTY

    MAJOR PROPOSAL

    Peak Rate of Ad Valorem Customs Duty Reduced:

    • Peak rate of customs duty on non – agricultural products reduced from 20% to 15% with few exceptions.

    • Ad Valorem component of customs duty on textile fabrics and garments has been reduced from 20% to 15%. There has, however, been no change in specific component of customs duty.

    1. Additional Duty of Customs

      • The Centre will have power to levy Additional Duty of Customs of @ 4% on all items imported in India whether such articles could be manufactured or produced in India or not.

      • There will be no Levy of Educational Cess on the additional duty of customs.

    2. National Calamity Contingent Duty

      • The National Calamity Contingent Duty on Crude Oil and Other Products introduced by Finance Act 2003, which was valid till 31st March, 2005 is further extended without any time limit.
       

    3. Baggage

      • Customs Duty on passenger has been reduced from 40% to 35%

    ELECTRONICS AND TELECOMMUNI-CATION SECTORS

    • The custom duty on specified Capital Goods & all inputs required for manufacture of items covered under 217 Information Technology Agreements will be brought down to NIL. However CVD @ 4% shall be levied on such goods and Credit for duty paid will be allowed for payment of Duty.

    • CVD as collected above will not be included in assessee value for Levy of Educational Cess.

    • There will be no charge of Custom Duty on Import of Information Technology Software.

    • The Custom Duty on Optical fibres/bundles and optical fibre cables has been reduced from 20% to 10%.

    PETROLEUM PRODUCTS, CHEMICALS AND PETROCHEMICALS

    • The Custom Duty on various Petroleum Products, Chemicals and Petrochemicals has been reduced.

    • Additional Duty of Customs on Motor Spirit and High Speed Diesel oil has been increased by Re. 0.50 per Litre. The additional resources are proposed to be earmarked exclusively made available for development of National Highway.

    AGRICULTURE AND FOOD PROCESSING

    • Concessional Rate of 5% Customs Duty + Nil rate of CVD which is presently available to specified Plantation Machinery upto 30th April 2005 has been extended upto 30th April 2006.

    • The Customs Duty on various Agricultural Products like Cloves, Oleo pine resin, Alpha pinene, Refrigerated goods transport vehicles has been reduced however the import of Cut Flowers has become costlier due to proposed increase in duty from 30% to 60%.

    CAPITAL GOODS

    • Concessional rate of customs duty of 5% presently available to specified goods designed for use in leather/footwear industry has been extended to 7 more specified machinery.

    • On Specified parts of Printing Press, Specified textile machinery, and raw materials and parts for manufacture of such machinery the Customs Duty has been reduced from 20% to 10%.

    • Customs duty exemption for specified inputs for manufacture of leather goods, travel goods, footwear, etc. for export has been extended to some more items, subject to the existing 3% value limit.

    OTHER AMENDMENTS

    • The benefit of advance ruling is also extended to existing Joint Ventures in India and any other assessee as notified by the Central Government.

    • The provisions of Customs Act are amended to provide for Advance Ruling in respect of determination of origin of goods and matters relating thereto.

    REDUCTION IN RATES

    The existing rates of many goods have been reduced.
     

  3. SERVICE TAX

    Following changes have proposed.

    1. EXEMPTION

      Small service providers with annual aggregate taxable service provided during the preceding financial year not exceeding Rs. 4,00,000/- is to be exempted up to an aggregate value of taxable service of Rs. 4,00,000/- in a financial year. This exemption will be available from 1st April 2005.
       

    2. WIDENING THE NET OF SERVICE TAX:

      The following services are proposed to be brought under service tax net from the date of enactment of Finance Bill, 2005:

      • Transport of goods through pipeline.

      • Site preparation, demolition and other similar activities other than those provided to agriculture, irrigation and water shed development.

      • Dredging services.

      • Survey and Map making other than by Government department.

      • Cleaning services other than in relation to agriculture, horticulture, animal husbandry and draining.

      • Membership of Club or Association.

      • Packaging services.

      • Mailing services including list compilation.

      • Construction of Residential Complex having more than Twelve Residential houses.
       

    3. WIDENING THE OF SCOPE FOR EXISTING SERVICES

      Scope of following services was further extended.

      • Commercial or Industrial services to include renovation, Post completion finishing services and construction repairs of building and civil structure and pipelines.

      • Erection, Commissioning or Installation services to include Specified Installation services.

      • Maintenance or Repairs services to include Maintenance or Management of Immovable Properties including reconditioning & restoration undertaken as part of any agreement or contract.

      • Broadcasting services to include charges recovered by Broadcasting Agencies from multisystem operator and provision of Direct to home signals to customers.

      • Sound recording to include recording of sound on any media and Post production services such as Sound mixing & remixing.

      • Similarly, video-tape production to include recording of any programme, event or function on any media including Post production services.

      • Services by Authorised service station to include reconditioning & restoration of motor cars, two wheeled and light motor vehicles.

      • Beauty Parlour services to include all the services provided by beauty parlour.

      • Manpower recruitment service to include supply of manpower, temporary or otherwise.

      • The franchisee service to cover all agreements by which, the franchisor grants representational rights to franchisee to sell or manufacture goods or provide services identified with the franchisor.

      • Business Auxiliary service to include production or processing of goods for or on behalf of the client.

      • Outdoor catering service, to include catering from a place or premises provided, by way of tenancy or otherwise, by the person receiving such services.

    OTHER AMENDMENTS

    • As per the present law, Service Tax is payable on rendering of services or receipt of payment, whichever is later. However, as per the amendment proposed, service tax is payable based on payments received irrespective of services provided before or after the receipt of payment that will be effective from notified date.

    • Business establishment outside India and providing manpower services in India are brought under Service Tax net.

    • The benefit of advance ruling is also extended to existing Joint Ventures in India and any other assessee as notified by the Central Government.

    • The Service Tax rules is amended prescribing the issue of invoice within 14 days from the date of completion of service or receipt of payment, whichever is earlier.

    • The Service tax rules has been amended prescribing the date of payment of Service tax to be 5th of the following month or quarter as the case may be in place of 25th day of month or quarter as the case may be previously.

    • The amended rules has provided for enabling Centralised Registration for service providers having more than one premises.

    • The liability of payment of Service Tax on Business Auxiliary Services provided by the distributor of Mutual Funds will be on the recipient of service; i.e., Mutual Funds.

    • All the above changes will be effective from services provided on or after 1st April, 2005.

 

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