We are
builders and are engaged in the business of construction and sale of commercial
buildings either constructed by us or constructed by a contractor.
Out of
entire project of Rs.1,00,00,000 half of it is completed by engaging a
contractor, and half of it by ourselves.
Now our
queries are:
(i) are we liable to take service tax
registration, and pay tax on the entire amount of Rs. 1 crore?
(ii) is the contractor
engaged for completion of construction work is liable to take service tax
registration number, if yes what will be the taxable value?
Reply
to Q No.(i) : In this connection I would like to draw your
attention to Service Tax Circular No. 80/2004,dated
17.09.2004 [reported in].
The relevant extract of the same is reproduced below:
"Estate
builders who construct buildings/ civil structures for themselves (for their
own use, renting it out or for selling it subsequently) are not taxable service
providers. However, if such real estate owners hire contractor/ contractors,
the payment made to such contractor would be subjected to service tax under
this head. The tax is limited only in case the service is provided by a
commercial concern. Thus service provided by a laborer engaged directly by the
property owner or a contractor who does not have a business establishment would
not be subject to service tax."
Therefore,
you being a Builder who construct building and sells the same will not fall
under the purview of Construction Services for the purpose of payment of
service tax. Hence you are not liable to take any registration or pay tax
provided you are doing such construction for your own.
Reply
to Q No.(ii) : In this regard I am of the opinion that, the contractor so
engaged shall be liable to take service tax registration and collect the tax on
the services rendered by him to you and pay the same to the Government
treasury.
As regard
taxable value, either of the, following conditions as notified by various
notifications shall prevail:
(i) As per SERVICE TAX NOTIFICATION No.
12/2003 Dated 20th June, 2003
total cost
of construction minus the cost of goods and materials consumed or sold,
provided the genuineness of the material consumed is supported by necessary
bills and vouchers.
For example : The total cost of
construction is say Rs.50,00,000/‑. Cost of material consumed is
Rs.25,00,000/
Then in
such a case only Rs.25,00,000/‑ i.e (50,00,000 ‑ 25,00,000)shall be
the taxable value, The service tax to be collected and paid by the contractor
shall be 10% of Rs.25,00,000/‑ i.e., Rs.25,000/‑ and 2% of Service
Tax as Education Cess i.e., Rs.500. The total liability of the contractor shall
be Rs.25,500/‑.
(ii) As per NOTIFICATION No. 15/2004‑Service Tax 10th
September, 2004, a contractor is entitled to enjoy exemption of 67% of the
gross value of the contract and is liable to pay service tax only on 33% of the
gross value.
For Example:
·
Say, Rs 50,00,000 is the amount charged by your contractor
which includes amount of materials supplied cum sold as well;
·
Then the gross value for the purpose of payment of service
tax will be
·
33% of Rs.50,00,000/‑ i.e.,
·
Service tax payable @ 10% on Rs 1,34,000/‑ will be Rs
13,400/‑
·
Where as, Rs. 268/‑
will be education cess payable @ 2% on Rs 13,400/
Your contractor can avail the above exemption
provided the following two conditions are fulfilled:
1. CENVAT
credit should not be availed on any inputs or capital goods used in rendering
of services
2. The value of sold goods should not be excluded from the gross value in terms of amended Notification No.12/2003‑S.T dated 20.06.2003.
The relevant notifications are produced here‑in‑below:
A. SERVICE
TAX NOTIFICATION No. 12/2003 Dated 20th June, 2003
In
exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of
1994), the Central Government, being satisfied that it is necessary in the
public interest so to do, hereby exempts so much of the value of all the
taxable services, as is equal to' the value of goods and materials sold by the
service provider to the recipient of service, from the service tax leviable
thereon under section (66) of the said Act, subject to condition that there is
documentary proof specifically indicating the value of the said goods and
materials.
This notification has been amended vide notification
no. 12/2004 dated 10‑92004in the following manner:
In the
said notification, in the opening
paragraph, the following
proviso shall be inserted at the end, namely:-
"Provided
that the said exemption shall apply only in such cases where
(a) no credit of duty paid on such goods and materials sold, has been taken under the provisions of the Cenvat Credit Rules, 2004; or
(b) where such credit has been taken by the service provider on such goods and materials, such service provider has paid the amount equal to such credit availed before the sale of such goods and materials.".
B. NOTIFICATION
No. 15/2004‑Service Tax 10th September, 2004
G.S.R. (E).‑ In exercise of the
powers conferred by sub‑section (1) of section 93 of the Finance Act,
1994 (32 of 1994), the Central Government, being satisfied that it is necessary
in the public interest so to do, hereby exempts the taxable service provided by
a commercial concern to any person, in relation to construction service, from
so much of the service tax leviable thereon under section 66 of the said Act,
as is in excess of the service tax calculated on a value which is equivalent to
thirty‑three per cent. of the gross amount charged from any person by
such commercial concern for providing the said taxable service:
Provided
that this exemption shall not apply in such cases where
(i) the credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004; or
(ii) the commercial concern has availed the benefit under the notification of the Government of India, in the Ministry of Finance, (Department of Revenue) No. 12/2003Service Tax, dated the 20th June, 2003 [G.S.R. 503 (E), dated the 20th June, 2003].
Query_No
2:
We are
into the business of sales promotion and marketing of cars as well as arranging
loans for our customers from banks. Against sale of car we get the commission
from the manufacturer and against arranging loans and giving business to banks
being their direct sales agents, we get commission from the banks. Now are
queries are:
i) Are we liable to pay service tax on commission earned against
sale of car,. if yes from what date?
ii) Are we liable to pay service tax on commission earned from bank as Direct Sales Agents(DSA), If yes from what date?
Reply
to Q No.(i) : Commission earned by you against sale of cars makes you
fall under the category of commission agent as defined vide Notification No. 13/2003‑Service Tax
which is produced here‑in‑below:
Explanation.‑
For the purposes of this notification, "commission
agent" means a person who causes sale or purchase of goods, on behalf of
another person for a consideration which is based on the quantum of such sale
or purchase.
As
commission agent you are liable to fall under this category w.e.f 9.7.2004 vide
Notification No. 8/2004‑Service
Tax dated 9.7.2004.
Therefore any service rendered by you on or after
9.7.2004 as commission agent is liable for service tax under the head Business
Auxiliary Service.
Reply
to Q No.(ii) : Commission earned as a Direct sales agent is liable for
tax under the head Business Auxiliary Service since 1.7.2003,as such commission
is not earned a2ainst sale or purchase of goods. The sad service falls under
the following highlighted clause of the definition of Business Auxiliary
Service
As per
Section 65(19) "business auxiliary service" means any service in
relation to,
(i) promotion
or marketing or sale of goods produced or provided by or belonging to the
client; or
(ii) promotion
or marketing of service provided by the client; or
(iii) any customer care service provided on
behalf of the client; or
(iv) any incidental or auxiliary support service such as billing,
collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and
public relation services,
and includes services as a commission agent, but does not include any
information technology service.
Explanation. ‑ For the
removal of doubts, it is hereby declared that‑for the purposes of this
clause "information technology service" means any service in relation
to designing, developing or maintaining of computer software, or computerized
data processing or system networking, or any other service primarily in
relation to operation of computer systems;
This is
further supported by Service Tax Circular No: 66 dated 05th November, 2003
I am
directed to say that some doubts have been raised regarding application of
service tax on the activity of Mutual Fund Distribution as to whether ‑
(i) the commission received
by distributors on mutual fund distribution is liable to Service Tax under the
category of Business Auxiliary Services?
(ii) the services provided
is exempt from service tax in terms of Notfn. No. IN 2003, dated 20‑6‑2003?
In this
connection, it is clarified that the services provided as referred above are
primarily in nature of the services of commission agent in relation to Clause
(ii) and (iv) of the category of services mentioned in the definition of
Business Auxiliary Services and hence should be leviable to service tax under
this category. This activity goes not get covered under exemption Notfh. No.
13/2003‑S.T. dated 20‑6‑2003 as this is not in relation to
sale or purchase of goods. The exemption provided under Notfn. 13/2003S.T. is
applicable only for commission agents dealing in goods.
Therefore,
as the commission earned by you as a DSA is not against sale of goods, it is
liable to service tax since 1.7.2003 under the head Business Auxiliary Service.
Query
No. 1 :
I am into
the business of maintenance or repairs of machinery under a maintenance
contract, as well as merely repairing of machinery on work order basis. Now my
query is under such circumstances whether I am liable for service tax
provisions.
Reply to Q No. 1 : As regard
maintenance or repairs under a maintenance contract, u are liable for service
tax as per section 65(64) which reads
“maintenance or repair” means any service provided by
(i) any
person under a maintenance contract or agreement; or
(ii) a manufacturer or any
person authorized by him, in relation to maintenance or repair or servicing of
any goods or equipment, excluding motor vehicle.
As regard
work order for repairs, you are not covered the ambit of service tax, as the
services which are covered under the maintenance or repair means any service provided by any person under
a maintenance contract or agreement. The service of repairs provided by
you is vide a work order for repairs and not repairs under a maintenance
contract or agreement.
Therefore,
In the first case you are liable for service tax and in the second situation
you are not liable for service tax.
Query
No. 2 :
Reply to Q No. 2 : We, are
rendering maintenance & repair service of our manufactured gears boxes/gear
motors. Apart from charges against maintenance and repair service we charge
them for material used and for the fare, boarding and lodging, charges as well.
The bifurcations of all such expenses are shown separately on the bill.
Now kindly
let us know whether the gross amount charged/billed is taxable.
·
As regard charges against maintenance or repair, services,
they are taxable.
· As regard amount charged against material used it is not taxable in lieu of the following Notifications:
Querry NO‑1
We are covered under the service tax net w.e.f. 10.9.2004 under the head Business Auxiliary Service. We have our head office at Sutra and have branch offices in other cities of Gujarat. Now our query is we supposed to take separate registration for each branch or can we take one registration of our head office? What is the procedure in both the conditions and the document required to be submitted to take registration.
Reply to Q No. 1 : Your query
consist of two parts:
i) Are you required to
take separate registration for each branch, or only one registration of the
head office is sufficient?
To
understand this reference to the following service tax rules is required:
Rule 4 (2) Where an
assessee is providing a taxable service from more than one premises or offices
and has a centralised billing system in respect of such service rendered to
clients from such premises or offices at any one premises or office, he may opt
for registering only the premises or office from where such centralised billing
is done.
Rule 4 (3) Where an assessee is providing a
taxable service from more than one premises or offices, and does not have any
centralised billing system, he shall make separate applications for
registration in respect of each such premises or offices to the concerned
Superintendent of Central Excise.
Rule 4(3A) Where an assessee is providing
taxable service from more than one premises or office and has a centralised
accounting system in respect of such service rendered to clients from each such
premises or office at any one premises or office, the Commissioner of Central
Excise may permit such assessee to registering only the premises or office from
where such centralised accounting is done, if he is satisfied that such
registration shall not be detrimental to the interest of revenue.
Now as per
the clauses (2),(3) and (3A) of rule 4 of the Service Tax Rules,
1994, it may thus be concluded as under:
|
Option |
Obligation |
|
If your concern has a centralised billing system or has a centralised accounting system |
Only one registration of the premises |
|
from where the billing is done is |
|
|
required |
|
|
If your concern does not have any centralised billing or accounting System |
All the branch offices are required to |
|
obtain separate registration to the |
|
|
concerned Jurisdictional Superintendent |
|
|
|
of Central Excise |
ii) The procedure to be followed by you
is as under
If your concern does not have any centralised billing or
accounting system
A separate application in FormST‑ 1 for each branch has to be filed in duplicate with the concerned Superintendents of Central Excise under whose jurisdiction your office premises fall.
If all or
any of your branch offices is Individual/Proprietorship concern the application
in FORM ST‑1, shall accompany self certified copies of the address proof
and Permanent Account Number.
If all or
any of your branch office is a Partnership Firm, the application in FORM ST 1,
shall accompany self certified copies of the address proof, Permanent Account
Number and Partnership Deed.
If all or
any of your branch office is other than Individual, proprietorship concern and
Partnership Firm shall accompany certified copies of the address proof,
Permanent Account Number Memorandum of Association and extracts of the Board's
Resolution authorising any person to sign and comply with the provision of
Services Tax Rules.
If in case Permanent Account Number is not available at the time of filing of application then the photocopy of the acknowledgement of the application made for Permanent Account Number in Form 49‑A is advisable to be furnished.
In your concern has a centralised billing system or has a centralised
accounting system then
Prior
permission has to be taken from jurisdictional Commissioner by the centralized
billing/accounting office by writing an application. Along with which the
following documents are to be enclosed:
ü
An application for registration in Form ST‑ I made for
registration with the concerned Superintendent of Central Excise under which
the centralized office falls
ü Proof of
address of the premises office sought to be registered
ü PAN number
of the assessee
ü List of
Branch offices or premises of the assessee
ü Brief note
on accounting system adopted by the assessee
ü Branch‑wise
series of invoices maintained along with a sample copy thereof
ü
Previous years audited balance sheet along with gross trial
balance of different branches
ü
Details of records accounts maintained at different branches
and Central Office
ü
Bank account numbers of the Branches and Central Office
through which the receipts are deposited transacted.
Note: An
application for registration should be made within thirty days from the date on
which the service tax under section 66 of the Finance Act, 1994 is levied. And
where a person commences the business of providing a taxable service after such
service has been levied, he shall make an application for registration within a
period of thirty
I am
rendering a taxable service of which I have raised bills till 31.3.2005 of Rs.
5,00,0001‑ and received payments only of Rs. 3,85,000/‑ till
31.3.2005. Now my query is whether I am entitled for exemption as per
Notification No. 6/2005 Service Tax dated 1.3.2005 ? What will be my obligation
as regard the payments received after 31.3.2005 of the bills raised till
31.3.2005?
Reply:
You are
very much entitled for exemption as the amount received towards taxable service
is less then Rs. 4,00,000/‑. And as regard the amount received after
31.3.2005 against the outstanding bills of previous year you liable to pay
service tax on such payments and file your service tax return as well.
And as
regard the bills raised on or after 1.4.2005 you are not liable to collect and
pay service tax till the gross amount received against taxable service exceeds
Rs. 4,00,000/
Now this
four lakh will be arrived at including the payments received against the
outstanding bills of previous year and the bills raised during current year.
For
Example :
You
raised the bills till 31.3.2005 of Rs.
5,00,000/-
Your
received the payment till 31.3.2005 of Rs.
3,85,000/-
You received the payment of the outstanding amount
On or After 1.4.2005 of Rs.
15,000/-
Now to arrive at the exemption limit of Rs. 4,00,0000/‑ during the current year you will be including the amount of Rs. 15,0001‑ which relates to previous year. The moment the amount comes to Rs. 4,00,000/‑ you will have to start collecting and pay service tax and file the returns as prescribed under law.