SOLVED QUESTION AND ANSWERS
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Whether Service Tax under the provisions of Finance Act, 1994 is chargeable on an interior decorator providing service of beautification of spaces in Srinagar.
Service tax provisions are not applicable in the State of Jammu and Kashmir. Therefore, interior decoration services provided in Srinagar is not taxable.
Is Service tax payable on services provided to a developer or a unit in the Special Economic Zone (SEZ)?
Services provided to Special Economic Zones or services provided by Special Economic Zones are not subject to service tax.
(a) Explain in brief the manner of determination of value as per Rule 3 of the Service Tax (Determination of Value) Rules, 2006.
(b) What are the actions which can be taken by the department in case of misuse of service tax credit by the assessee?
(c) The value of service provided by an engineer is Rs. 12,00,000. He has paid Rs. 68,000 as cess under section 3 of the Research and Development Cess Act, 1986. What is the amount of service tax payable by him?
(d) Whether a manufacturer of excisable goods, who has paid service tax on freight, can himself take credit of service tax paid, if such transportation service is in relation to the manufacture and clearance of his final products?
(e) The goods manufactured by Ellora Infotech Ltd. got destroyed by fire. The payment of duty was ordered to be remitted. Is the company required to reverse the CENVAT credit taken on input services used in manufacture of such destroyed goods?
- Please refer the valuation rule 3
- Following actions can be imposed by the department in case of misuse of service tax credit:-
- Penalty extending upto Rs. 2,000 and,
- Special audit can also be imposed in some cases.
- Value of taxable services = Rs. 12,00,000
Service tax @ 10.30% = Rs. 1,23,600 less cess paid Rs. 68,000. Net service tax payable = Rs. 55,600
(d) Yes, manufacturer is eligible to take the CENVAT credit on input services (i.e. freight)
(e)There is no requirement for the reversal of CENVAT credit taken on input services used in the manufacture of such goods.
Question Answer the following:
(a) A particular service has been brought into service tax net with effect from 1-6-2010. Mr. Avinash has provided this service on 20-5-2010, the payment for the same was received on 10-6-2010. Is service tax payable on the same? If so when?
(b) Mr. Jitesh has collected Rs. 10,000 as service tax from a client mistakenly, even though no service tax is chargeable for such service. Should the amount so collected be remitted to the credit of the Central Government?
(c) Briefly explain the nature of the service tax.
(a) Service rendered by Mr. Avinash is not a taxable service. Taxable event not attracted as on 20th May, 2010.
(b) Section 73A of the Finance Act, 1994 casts an obligation on every person who has collected service tax from any recipient of service in any manner as service tax, to remit the same to the credit of the Central Government. On account of this provision, where any person has collected any amount, which is not required to be collected from any other person, in any manner as representing service tax, he should also immediately liable to pay the amount so collected to the credit of the Central Government.
Hence, Mr. Jitesh has to remit the service tax collected by him on the non-taxable services to the credit of Central Government.
(c) Section 70 of the Finance Act, 1994 enjoins that every person shall be liable to pay service tax and he shall himself assess the tax due on the services provided by him and shall furnish a return to the Superintendent of Central Excise.
Question Ms. Deepika, has rendered free of cost services to the client which are taxable in nature but has not charged or received any fee from a client. Is service tax payable on such free services?
No, Service tax is payable when value of services is zero, as the charging section 66 provides that service tax is chargeable on the value of taxable service. Hence, if the value is zero the tax will also be zero even though the service may be taxable. However, this principle applies only when there is really a ‘free service’ and not when its cost is recovered through different means.
Explain the validity of the following statements with reference to the service tax provisions:—
(a) Sandeep Goenka, an architect, has provided services in the area of landscape designing. The said services are taxable under the category of ‘architect’s services’.
(b) Depository services and Electronic Access to Securities information (EASI) services provided by Central Depository Services (India) Ltd. (CDSL) is liable to service tax under ‘banking and other financial services’.
(c) Business auxiliary services provided by a commission agent in relation to sale and purchase of the agricultural produce are exempt from the payment of service tax.
(d) The cargo handling services provided in relation to agricultural produce or goods intended to be stored in a cold storage are taxable under the category of ‘cargo handling service’.
(a) Landscape designing services are taxable services under the head ‘Interior decorator services’. Hence, Mr. Sandeep Goenka is liable to pay service tax under the head ‘Interior decorator services’ but not under the head ‘architect’s services’. Therefore, the given statement is invalid.
(b) Depository services and Electronic Access to Securities Information (EASE) services provided by Central Depository Services (India) Ltd. (CDSL) falls within the scope of “provision and transfer of information and data processing”. Therefore, these services are taxable under the head banking and other financial services’. Hence, the given statement is valid.
(c) Services in relation to purchase or sale of agricultural produce are exempt from the payment of service tax. Therefore, the given statement is valid.
(d) The cargo handling services provided in relation to agricultural produce or goods intended to be stored in a cold storage are exempt from service tax. Therefore, the given statement is not valid.
Whether a manufacturer of excisable goods, who has paid Service tax on freight, can himself take credit of Service tax paid, if such transportation service is in relation to the manufacture and clearance of his final products?
Any expenditure in or in relation to manufacture of excisable goods on which service tax has been paid, can be allowed to take CENVAT credit. Hence, the Transportation service is in relation to the manufacture and clearance of his final product. Therefore, service tax paid by the manufacturer on transportation is eligible for credit.
With reference to legal consultancy services, state whether service tax is applicable in the following cases:
(i) Mr. Mahir, an advocate, providing consultancy services to Omega Ltd. in relation to company law matters.
(ii) A law firm providing legal assistance to Alpha Ltd. in relation to civil cases filed against the company.
- A law firm providing advisory services to Mr. Pranav in respect of his property matters.
- A law firm providing service of appearance before Sessions Court to Beta Ltd. in relation to criminal cases filed against the company.
(i) Mr. Mahir will not be liable to service tax.
(ii) Service tax will be applicable in this case.
(iii) Service tax will not be applicable.
- Service tax will not be applicable
With reference to commercial training or coaching services, state whether service tax is applicable in the following cases:-
(i) An institute offering courses on personality development and grooming.
(ii) Engineering College offering B.Tech to students. However, the college has been derecognized by the All India Council for Technical Education.
(i) Institute is liable to pay service tax.
(ii) Engineering College has been derecognized by All India Council for Technical Education. Therefore, Engineering College shall be liable to service tax.
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