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Make service tax laws more democratic

FEBRUARY 13 , 2016

By CA Navin Khandelwal

1. CONCEPT:

"SERVICE" to include only the "economic activities' done for others for a consideration.

From negative list, the activity of trading and manufacturing is to be deleted as there is direct transfer of property by sale of goods in both the cases and there is no case of doing any activity for another or other persons. Hence non-service activity as per the definition's exclusion limb as provided in section 65 B (44). In other words all non-service activity or activities covered by state power should be deleted from negative list like wise last year entry related to access to amusement parks and facilities was deleted being state's competence.

2. EXEMPTIONS:

The balance remaining activities should be either transferred to mega exemption or the mega exemption notification to be merged into the negative list. There can either be a list of non taxable service or taxable but exempted service. There can't be any list of non-taxable activities in service tax laws which are not service activities per se.

The service should be exempted in all cases and not the service provider. Every service forming part of exemptions notification should be invariably exempted irrespective of who is providing the service.So exemptions to be qua service and not qua provider.

The service tax threshold exemption to be enhanced to 18 lakhs and to be available to service receivers also in case of reverse charge transactions enumerated in section 68 (2).

3. REGISTRATION:

Registration to be issued by Superintendent on the same day if single premises and without any requirement to have the department seal or so as it is issued online.

The centralized registration can be issued by the concerned AC.

4. TAX PAYMENTS:

The tax for the month of March or for the quarter ending on 31.03.should be allowed to be paid by 10.04.

For the payment of tax, my suggestion is that the slab should be like this….

++ up to 18 lakhs exemption in general (optional)

++ Then up to 48 lakhs composition scheme with annual return and half yearly tax @ 6% with no cenvat.

++ Then up to 100 lakhs rate is to be 10 %, then upto 2 crores @12% up to 4 crores 14% and above 4 crores 16% with no cenvat.

If cenvat is availed then rates to be higher by 4 % in each case.

Service tax to be payable at the point of time which is earlier of service value receipt or post 2 months to the raising of invoice . The facility of payment of tax on receipt basis should be extended to the cases where the billing of taxable services in the previous year was below 1 cr.

5. INTEREST:

There is an urgent need to understand the difference between the types of non tax payers. There are three categories:

a. People who charged and collected tax but retained it

b. People charged tax but still waiting for payments (normal scenario)

c. People who did not understand the intricate law and did not charge due to some bonafide belief.

The rate of interest to be re-determined in above cases and should be democratic.

In case of (a) above - present rates will suffice.

In case of (b) - it should be 4% lesser in every slab.

In case of (c) - it should be 8% less in every slab.

6. PENALTIES:

If the case of the assesse is that he disclosed the transactions fully in the books and records but did take the registration but tax not paid due to cenvat available or any other non malafide intention then this case to be treated of section 76 only irrespective of the quantum of the period involved. Otherwise always the case of section 78. This ruling to be followed by audit teams truly.

7. RETURNS

The due date of filing returns for first half to be 30.10 and for second half to be 30.07. The second return cannot be revised and first return can be revised multiple times.

The facility to put any remarks or the self assessment notes by the assessee may please be provided in case of service tax returns like excise returns. Return cannot be filed without the delay filing fee if any payable.

8. SCRUTINY:

The scrutiny to be done only in the cases where tax paid in last year was 100 lakhs or above but less than 2 core. The scrutiny should result in a scrutiny report or order duly sealed and signed. The scrutiny should be completed within 30 days after informing the party.

9. AUDITS:

The audit to be done in the cases where there is tax payment above 2 cr.in previous year.The audit report to be issued to assessee invariably before the MCM. The assessee and the auditors and the designated authority should sit and discuss and finalise the paras. The audit to be completed within 40 days of allotment.

10. ASSESSMENTS

The cases of compulsory assessments to be selected on the basis of the tax payments in previous year which is less than one crore. The assessments with final orders to be issued by the authorities (within 40 days of intimation to the assesses) as under:

a. By Range Inspectors - up to Rs 10 lakhs Tax payments

b. By Superintendents- up to Rs 50 lakhs tax payments

c. By AC - 50 lakhs to Rs. 1 crore tax payments.

11. ADJUDICATION:

All the SCNs to be decided invariably within 6 months of issuance.

Let us have a system of checking whether recently issued circular regarding quality of adjudications is scrupulously followed or not.

THE review of orders favoring the department should also be there. The officers who issued the SCN and OIO should himself be present before the higher forums at the time the appeal against his order is heard by such higher forums.

If the order is set aside by higher authorities then the original authority should be penalized.

LAST BUT NOT THE LEAST: If the government really wants to be different and bring ease of the doing business then it should do the following at least in service tax provisions:

1. Remove the POT RULES as the section 67 A is very clear on the point of taxation.

2. Remove reverse charge (the direct tax in indirect tax) on legal fees paid to the advocates in case of businesses where the total amount of fees paid in a year is less than Rs. 10 lakhs.

3. Bring provision of compulsory registration fee of Rs. 1000/- for every assessee.

4. Make compulsory the need to give the ground plan of the premises to be registered.

5. Surrender of registration whether centralized or single one, to be done by superintendent or AC with a fee of 1000/-

6. Supremacy of the auditors to be decided between C&AG and departmental team. Either of them can only do the audit of the particular period. As such power of access to the premises of the assessee to be made clear in the law.

7. A system of issuing no dues or ST clearance certificate to be initiated.

8. In all cases of government contractors the service tax should be deducted like TDS and to be deposited by the service receivers. (there will be huge collection without difficulties to the tax payer or the exchequer)

9. If the service provider is having any office or establishment out of INDIA then the importer of the service has to pay single rate tax @10% within 30 days of any agreement or MOU of the transaction or the payment or remittance of money in foreign currency.

10. If the service receiver is having any office or so in the foreign country then every or any service provided to him whether in India or abroad shall be treated as export of service if the payment is receivable in foreign currency.

11. The service tax in case of GTA service is to be paid by the GTA only. Rule 2(1) (d)(v) of service tax rules is to be deleted. The basic freight exemption in can be given upto 24 lacs. The flat rate in all such cases may be kept at 6%.

12. The facility of payments of tax determined for old periods from cenvat credit account may please be provided likewise it is there in excise. (Circular dt. 08.03.2012).

13. The system of making payments in 120 or so accounting codes may be dispensed with. The grouping of services sector wise is a need of the hour. E.g. construction related services, food and accommodation related, tourism and transportation related, property related, mining related services.etc

14. A new and welcoming VCES taking care of the complications that arose in the old scheme of 2013 and expansive in scope.

Let us enter the GST regime with a clean slate.


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Make service tax laws more democratic

the correct date of circular is 28.03.2012 bearing no . 962/05/2012 regarding point no 12 in the article.

we also need immediate clarity on the non taxability of the parceal sales, counter sales, take away sales from any restaurent, eating joint, mess, canteen or an establishment doing the activity of supply of food and drinking items for human consumption as there is no service portion involved as enumerated or desired in the item no I DECLARED SERVICES AS PER SECTION 66 E.

Posted by Navin Khandelwal
 

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