Archive for the ‘Clarifications’ Category


Circular No. 162/13 /2012 –ST,  F. No. 354/111/2012-TRU dated 6th July 2012.

To

Chief Commissioner of Customs and Central Excise (All)

Chief Commissioner of Central Excise & Service Tax (All)

Director General of Service Tax

Director General of Central Excise Intelligence

Director General of Audit

Commissioner of Customs and Central Excise (All)

Commissioner of Central Excise and Service Tax (All)

Commissioner of Service Tax (All)

Consequent to the changes introduced at the time of Budget 2012 in the Point of Taxation Rules, 2011, together with revision of the service tax rate from 10% to 12% and the subsequent changes that have been made effective from 01.07.2012, the following clarifications have been desired:

(a) Point of taxation and the rate applicable in respect of continuous supply of services at the time of change in rates effective from 01.04.2012;

(b) Applicability of the revised  rule 2A of the Service Tax (Determination of Value) Rules, 2006 to ongoing works contracts for determination of value when the value was being determined under the erstwhile Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007; and

(c) Applicability of partial reverse charge provisions in respect of specified services.

2.1. The issues have been examined.  The continuous supply of services was governed by rule 6 until 31.03.2012.  The rule started with the wordings “notwithstanding anything contained in rules 3, 4 …” Therefore, the point of taxation in respect of services provided in terms of the said rule on or before 31.03.2012 would remain unaffected by rule 4.

2.2. To clarify the matter further, if the invoice had been issued or payment received in respect of such services on or before 31.03.2012, the point of taxation would stand determined under rule 6 accordingly and shall not alter due to the subsequent changes in the Point of Taxation Rules, 2011 that became effective only from 1.4.2012.

3.1. However the position has undergone a change at the time of transition towards the Negative List and the introduction of other accompanying changes in Service Tax (Determination of Value) Rules, 2006 and partial reverse charge.  At the said time rule 6 stood omitted and the point of taxation was required to be determined ordinarily in such cases under the main rule i.e. rule 3.   This rule is, however, overridden by rule 4 when there is a change in effective rate of tax.  The “change in effective rate of tax” has been defined in clause (ba) of rule 2 to include a change in the portion of value on which tax is payable.

3.2. To illustrate, the following would be changes in effective rate of tax:-

(i) the change in the portion of total value liable to tax in respect of works contract other than original works (from @ 4.8% earlier to @ 12% on 60% of the total amount charged, or effectively @ 7.2% now).

(ii) exemption granted to certain works contracts w.e.f. 1st July 2012 which were earlier taxable.

(iii) taxability of certain works contracts which were hitherto exempted.

(iv) change in the manner of payment of tax from composition scheme under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 to payment on actual value under clause (i) of rule 2A of the Service Tax (Determination of Value) Rules, 2006.

3.3. However, the following will not be a change in effective rate of tax:-

(i) works contracts earlier paying service tax @ 4.8% under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 and now required to pay service tax @12% on 40% of the total amount charged, keeping the effective rate again at 4.8% (as only the manner of expression has been altered).

(ii) works contracts which were outside the scope of taxation (and not merely exempted) but have become now taxable e.g. construction of residential complex comprising of  2 to 12 residential units,  construction of buildings meant for use by NGOs etc. (Rule 5 of the Point of Taxation Rules, 2011 shall apply to such services.)

3.4. Thus the point of taxation for services provided in respect of taxable works contracts in progress on 01.07.2012 would need to be determined under rule 4 of the Point of Taxation Rules unless there is no change in effective rate of tax.

4. It is further clarified that the provisions of partial reverse charge would also be applicable in respect of such services where point of taxation is on or after 01.07.2012 under the applicable rule in respect of the service provider.

5.  This Circular may be communicated to the field formations and service tax assessees, through Public Notice/ Trade Notice. Hindi version to follow.

Click here to view the complete text of the above Circular- Circular No. 162/13 /2012 –ST dated 6th July 2012.

Source: Directorate of Service Tax.


Clarification to the “Guidelines for Business Continuity Plan (BCP) and Disaster Recovery (DR) Circular dated April 13, 2012”

CIRCULAR, CIR/MRD/DMS/ 17 /2012, dated June 22, 2012

All Stock Exchanges / All Depositories

1. SEBI vide circular no CIR/MRD/DMS/12/2012 dated April 13, 2012 had issued broad guidelines for Business Continuity Plan and Disaster Recovery for Stock Exchanges and Depositories.

2. In this regard, Stock Exchanges and Depositories have sought guidance and clarifications regarding some of the provisions of the circular.

3. Upon examination it has been decided to modify the guidelines as under:

a. Clause 1. ii. may be read as:

“Apart from DRS, stock exchanges should have a Near Site (NS) to ensure zero data loss whereas, the depositories should also ensure zero data loss by adopting a suitable mechanism”.

b. Clause 1. v. b) may be read as:

“Exchanges / Depositories should have Recovery Time Objective (RTO) and Recovery Point Objective (RPO) not more than 4 hours and 30 minutes, respectively”.

c. Clause 1. vii. c) may be read as:

“Stock Exchanges / Depositories / Clearing Houses or Clearing Corporations of Stock Exchanges should also demonstrate their preparedness to handle any issue which may arise due to trading halts in stock exchanges and / or failure or stoppages at other Stock Exchanges / Depositories / Clearing Corporations”.

4. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

5. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Circulars”.

Yours faithfully,

B. J. Dilip

Deputy General Manager

+91-22-26449682

dilipbj@sebi.gov.in

Click here to download the complete text of the above Circular in PDF Format- CIRCULAR, CIR/MRD/DMS/ 17 /2012, dated June 22, 2012.

Source: Securities and Exchange Board of India.


Circular No. 158/9/ 2012 – ST, F.No 354/69/2012- TRU, Dated: 8th May 2012

To

Chief Commissioner of Customs and Central Excise (All)

Chief Commissioner of Central Excise & Service Tax (All)

Director General of Service Tax

Director General of Central Excise Intelligence

Director General of Audit

Commissioner of Customs and Central Excise (All)

Commissioner of Central Excise and Service Tax (All)

Commissioner of Service Tax (All)

Madam/Sir,

1. The rate of service tax has been restored to 12% w.e.f. 1st April 2012.  Representations have been received requesting clarification on the rate of tax applicable wherein invoices were raised before 1st April 2012 and the payments shall be after 1st April 2012. Clarification has been requested in case of the 8 specified services provided by individuals or proprietary firms or partnership firms, to which Rule 7 of Point of Taxation Rules 2011 was applicable and services on which tax is paid under reverse charge.

2. The rate of service tax prevalent on the date when the point of taxation occurs is rate of service tax applicable on any taxable service. In case of the 8 specified services and services wherein tax is required to be paid on reverse charge by the service receiver the point of taxation is the date of payment. Circular No 154/5/2012 – ST dated 28th March 2012 has also clarified the same. Thus in case of such 8 specified services provided by individuals or proprietary firms or partnership firms and in case of services wherein tax is required to be paid on reverse charge by the service receiver, if the payment is received or made, as the case maybe, on or after 1st April 2012, the service tax needs to be paid @12%.

3. The invoices issued before 1st April 2012 may reflect the previous rate of tax (10% and cess). In case of need, supplementary invoices may be issued to reflect the new rate of tax (12% and cess) and recover the differential amount. In case of reverse charge the service receiver pays the tax and takes the credit on the basis of the tax payment challan. Cenvat credit can be availed on such supplementary invoices and tax payment challans, subject to other restrictions and conditions as provided in the Cenvat Credit Rules 2004.

4. Trade Notice/Public Notice may be issued to the field formations accordingly.

5. Please acknowledge the receipt of this circular. Hindi version to follow.

(Dr. Shobhit Jain)

OSD, TRU

Fax: 011-23093037

Source: Directorate of Service Tax.


Circular No.155/6/ 2012 – ST, F. No 334/1/2012- TRU, Dated: 9th April 2012.

To

Chief Commissioner of Customs and Central Excise (All)

Chief Commissioner of Central Excise & Service Tax (All)

Director General of Service Tax

Director General of Central Excise Intelligence

Director General of Audit

Commissioner of Customs and Central Excise (All)

Commissioner of Central Excise and Service Tax (All)

Commissioner of Service Tax (All)

1. Notification No. 2/2012 – Service Tax dated the 17th March 2012 has rescinded Notification No.   No. 8/2009 – Service Tax, dated the 24th February, 2009, thus restoring the effective rate of service tax to 12% wef 1st April 2012. Further the Notification No. 26/2010-Service Tax, dated the 22nd June, 2010 has been superseded by Notification No. 6/2012 – Service Tax dated the 17th March, 2012, wef 1st April 2012.

2. It has been brought to the attention of the Board that some airlines are collecting differential service tax on tickets issued before 1st April 2012 for journey after 1st April 2012, causing inconvenience to passengers. Representations have also been received in this regard. The position of law in the above respect is clear and is detailed below.

3. Rule 4 of the Point of Taxation Rules 2011 deals with the situations of change in effective rate of tax. In case of airline industry, the ticket so issued in any form is recognised as an invoice by virtue of proviso to Rule 4A of Service Tax Rules 1994. Usually in case of online ticketing and counter sales by the airlines, the payment for the ticket is received before the issuance of the ticket. Rule 4(b)(ii) of the Point of Taxation Rules 2011 addresses such situations and accordingly the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier. Thus the service tax shall be charged @10% subject to applicable exemptions plus cesses in case of tickets issued before 1st April 2012 when the payment is received before 1st April 2012.

4. In case of sales through agents (IATA or otherwise including online sales and sales through GSA) the payment is received by the agent and remitted to airlines after some time.  When the relationship between the airlines and such agents is that of principal and agent in terms of the Indian Contract Act 1872, the payment to the agent is considered as payment to the principal. Accordingly as per Rule 4(b)(ii), the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier. Thus the service tax shall be charged @10% subject to applicable exemptions plus cesses in case of tickets issued before 1st April 2012 when the payment is received before 1st April 2012 by the agent.

5. However, to the extent airlines have already collected extra amount as service tax and do not refund the same to the customers, such amount will be required to be paid to the credit of the Central Government under Section 73A of the Finance Act 1994 (as amended).

6. Trade Notice/Public Notice may be issued to the field formations accordingly.

7. Please acknowledge the receipt of this circular. Hindi version to follow.

Source: Directorate of Service Tax.


CIRCULAR- CIR/MRD/DP/ 8 /2012 dated February 27, 2012

The Managing Director and CEO

Bombay Stock Exchange Limited

Phiroze Jeejeebhoy Towers

Dalal Street

Mumbai – 400001

The Managing Director

National Stock Exchange of India Ltd.

Exchange Plaza, Bandra Kurla Complex

Bandra (E)

Mumbai – 400 051

1. This has reference to SEBI circular No CIR/MRD/DP/05/2012 dated February 1, 2012 and CIR/MRD/DP/07/2012 dated February 23, 2012 on the subject.

2. It is clarified that the contents of the advertisement, if any, to be issued in terms of Para 4 (a) of the aforementioned circular dated February 1, 2012, shall be restricted to the contents of the notice as given to the stock exchange under Para 5 (b) of the said circular.

3. All other provisions of the aforesaid circulars remain unchanged.

4. Stock Exchanges are advised to:

a. take necessary steps and put in place necessary systems for implementation of the above.

b. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.

c. bring the provisions of this circular to the notice of the member brokers of the stock exchange and also to disseminate the same on the website.

 d. communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Development Report.

5. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Click here to download the complete text of the above Circular- Offer for Sale of Shares by Promoters through the Stock Exchange Mechanism -Clarification- Feb 27, 2012.

Source: Securities and Exchange Board of India.