Honeymoon of IT Sector with Service Tax is Over

Tariff Value for import of Brass Scrap is 3801 and for poppy seeds 4256-Customs Non-Tariff Notification No. 20 No approval for procurement of service “Rental” of immovable property for office outside the Special Economic Zone/FTWZ can be given-SEZ Instruction No. 49 on Clarifications on FTWZ issues Consolidated list of default authorized operations which can be undertaken by the developer/approved co-developer by default from the date of notification-SEZ Instruction No.50 Himachal Government hikes VAT from 4 per cent to 5 per cent on all items, except edible oils and foodgrains Authority for Advance Ruling rules no capital gains accrued or arose at the time of conversion of partnership firm into a private limited company under Part IX of the Companies Act and therefore, notwithstanding the non-compliance with clause (d) of proviso to Section 47(xiii) of the Income Tax Act, by reason of premature transfer of shares, the said company is not liable to pay capital gains tax-AIT-2010-93-AAR Authority for Advance Ruling rules if the purchasers are non-residents other than the applicant, the applicant is liable to pay tax in India on the amount received by it for the support services rendered through the branch office in India-AIT-2010-92 -AAR Jurisdiction of Dispute Resolution Panel-Income Tax Order No.3 Employment of washing process in the manufacture of agglomerates etc from imported plastic waste and scrap-SEZ Instruction No.48 Haryana Government imposes surcharge ranging from 0.25 per cent to 0.7 per cent on VAT Service Tax Notification No. 17/2010 which exempts the taxable service providing packaged or canned software, intended for single use and packed accordingly amended-Service Tax Notification No.18 Procurement, Import and Export of Prohibited and Restricted Goods by SEZ Units-SEZ Instruction No. 47 Tractors are chargeable to tractor cess in terms of the Tractor Cess Rules, 1992 read with the IDRA Act, 1951-Central Excise Circular No. 916 Authority for Advance Ruling rules the amounts received/receivable by Technopromexport from NTPC under contract for Offshore supply of all plant and equipment including mandatory spares are not liable to tax in India under the provisions of the Income-tax Act, 1961 and DTAA between India and Russia-AIT-2010-79-AAR whether Cess levied under section 5 of Textile Committees Act, 1963 is includable as a component of CVD-AIT-2010-78-HC Toilet linen and kitchen linen, of terry toweling or similar terry fabric, of cotton and of other textile materials added in Focus Product Scheme for exports made after 1st Jan 2010-DGFT PN 46 Duty Credit Scrips can also be used / debited towards payment of Customs Duties in case of EO defaults under Authorizations issued under Chapters 4 and 5 of the Policy-DGFT Notification No.32

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Honeymoon of IT Sector with Service Tax is Over

By RS Sharma Advocate

IT Industry which is already hit by recession in US is no more immune from service tax.The Finance Bill has proposed withdrawal of exemption hereto being availed by IT Sector under Business Auxiliary Service by amending Section 65 of the Finance Act 1994 and also specifically including information technology software service under service tax net. The only solace to IT firms is that service tax will be effective after passing of the Finance Bill 2008 by both the Houses of Parliament and after rubber stamp of the President.

In addition the excise duty on packaged software has also been hiked to 12 per cent.

Section 65 is being amended to specifically include and define the following services in the list of taxable services,namely:

(i) information technology software service,

(ii) management of investment under Unit Linked Insurance Plan (ULIP) service,

(iii) stock exchange service,

(iv) recognised association or registered association commonly known as commodity exchange service,

(v) processing and clearing house service,

(vi) supply of tangible goods for use service;

(vii) internet telecommunication service.

Taxable service means any service provided or to be provided to any person, by any other person in relation to information technology software for use in the course, or furtherance, of business or commerce, including,—

(i) development of information technology software,

(ii) study, analysis, design and programming of information technology software,

(iii) adaptation, upgradation, enhancement, implementation and other similar services related to information technology software,

(iv) providing advice, consultancy and assistance on matters related to information technology software, including conducting feasibility studies on implementation of a system, specifications for a database design, guidance and assistance during the startup phase of a new system, specifications to secure a database, advice on proprietary information technology software,

(v) acquiring the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in other information technology software products,

(vi) acquiring the right to use information technology software supplied electronically;

The definition and scope of the following taxable services is being amended as a result of on levy of service tax on information technology software service, namely:-

(i) Business auxiliary service [section 65(19)], so as to omit the reference to exclusion of information technology service;

(ii) Consulting engineer service [section 65(105)(g)], so as to omit the exclusion of computer software engineering consultancy and provide that services provided by a consulting engineer in relation to advice, consultancy or technical assistance in the disciplines of both computer hardware engineering and computer software engineering shall also be classifiable under this service;

(iii) Technical testing and analysis service [section 65(106)] so as to specifically include testing or analysis of information technology software;

(iv) Technical inspection and certification service [section 65(108)] so as to specifically include inspection, examination and certification of information technology software;

(i) Banking and other financial services [section 65(12)] so as to levy service tax on purchase or sale of foreign currency, including money changing by an authorized dealer and authorized money changer;

(ii) Foreign exchange broker services provided by individual [section 65(105)(zzk)] so as to levy service tax on purchase or sale of foreign currency, including money changing by an authorized dealer and authorized money changer;

(iii) Business auxiliary service [section 65(19)] so as to clarify as a removal of doubt, that “service in relation to promotion or marketing of service provided by the client” includes any service provided in relation to promotion or marketing of games of chance, organized, conducted or promoted by the client;

(iv) Cargo handling service [section 65(23)] so as to specifically include services of packing together with transportation of cargo or goods, with or without one or more other services like loading, unloading, unpacking;

(v) Tour operator’s service [section 65(115)] so as to include any person engaged in the business of operating tours in a contract carriage and to provide that “tour” does not include a journey organized or arranged for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre;

(vi) Renting of immovable property so as to clarify as a removal of doubt, that renting of immovable property service includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the immovable property.

Further, the rate of Service Tax on Works Contract service under composition scheme has also been hiked to 4 per cent vide Service Tax Notification No. 7/2008 with effect from 1^st March 2008.

(The Writer is an Advocate & Consultant based in Delhi and is advising several MNCs and Indian Corporates on Service Tax, Central Excise & Customs matters. He can be mailed at rssharma@gmail.com)

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