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Service Tax Updates For Nov 2015 Exam

Service Tax Updates For Nov 2015 Exam

Provisions introduced for authentication of invoices by digital signatures [New rule 4C]

A provision has been added for authentication of invoices by means of digital signatures by inserting new rule 4C.  New rule 4C provides that any invoice, bill or challan issued under rule 4A or consignment note issued under rule 4B may be authenticated by means of a digital signature. The Board may specify the conditions, safeguards and procedure to be followed by any person issuing digitally signed invoices, by way of a notification.

[Effective from 01.03.2015]

Service Tax Updates For Nov 2015 Exam

Provisions introduced for preservation of records in electronic form with authentication by digital signatures [New sub-rules (4) and (5) inserted in rule 5]

Rule 5 has been amended by inserting a new sub-rule (4), which provides that records under rule 5 may be preserved in electronic form and every page of the record so preserved would be authenticated by means of a digital signature.

The Board may specify the conditions, safeguards and procedure to be followed by an assessee preserving digitally signed records [Sub-rule (5)].

For the purpose of rule 4C and sub-rule (4) and (5) of rule 5:

(i) The expression “authenticate” shall have the same meaning as assigned in the Information Technology Act, 2000.

(ii) The expression “digital signature” shall have the meaning as defined in the Information Technology Act, 2000 and the expression “digitally signed” shall be construed accordingly.”

[Effective from 01.03.2015]

Service Tax Updates For Nov 2015 Exam

Cost Accountant/ Chartered Accountant nominated under section 72A also empowered to call for records and audit reports for scrutiny purposes [Rule 5A(2)]

Rule 5A(2) was quashed by the Delhi High Court in the case of M/s. Travelite (India) 2014 (35) STR 653 (Del.)1 on the ground that the powers to conduct audit envisaged in the rule did not have appropriate statutory backing.

The said rule has been substituted with a new rule vide Notification No. 23/2014 ST dated 05.12.2014 whereby authorized officers, audit party deputed by Commissioner or the C&AG, Cost Accountant or Chartered Accountant nominated under section 72A of the Finance Act, 1994 have been empowered to call for the specified records for scrutiny purposes and the assessee will be obliged to provide these documents within the time period as prescribed by the above mentioned persons.

In addition, Circular No. 181/7/2014 ST dated 10.12.2014 issued thereafter clarified that the said new rule is within the scope of rule making powers under section 94(2)(k) as amended by the Finance (No.2) Act, 2014*.  The said amended section provides a clear statutory backing for rule 5A(2).  The expression “verified” used in section 94(2)(k) is of wide import and would include within its scope, audit by the departmental officers, as the procedure prescribed for audit is essentially a procedure for verification mandated in the statute.

New rule 5A(2) provides as follows:

“Every assessee, shall, on demand make available to the officer so empowered or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, or a cost accountant or chartered accountant nominated under section 72A of the Finance Act, 1994,-

  • the records maintained or prepared by him in terms of rule 5(2);
  • the cost audit reports, if any, under section 148 of the Companies Act, 2013; and
  • the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961,

for the scrutiny of the officer or the audit party, or the cost accountant or chartered accountant, within the time limit specified by the said officer or the audit party or the cost accountant or chartered accountant, as the case may be.”

Section 94(2) of the Finance Act, 1994 was amended by the Finance (No.2) Act, 2014 and clause (k) was inserted in said sub-section to empower Central Government to make rules in respect of imposition, on persons liable to pay service tax, for the proper levy and collection of the tax, of duty of furnishing information, keeping records and the manner in which such records shall be verified.

[Effective from 05.12.2014]

Service Tax Updates For Nov 2015 Exam

Amendments in Reverse Charge Notification

Taxable services in respect of which service tax is payable under section 68(2) of Finance Act, 1994, i.e., under reverse charge are notified under Notification No. 30/2012 ST dated 20.06.2012.  The said notification has been amended vide Notification No. 7/2015 ST dated 01.03.2015 as under:

(i) 100% service tax to be paid under reverse charge in case of service provided by (a) mutual fund agent/ distributor to mutual fund/ asset management company, (b) selling/marketing agent of lottery tickets to lottery distributor/selling agent and (c) person involving an aggregator

Following services have been added in the list of services on which service tax is payable under full reverse charge (100% service tax to be paid by the person liable for paying service tax other than the service provider):

(a) Taxable services provided or agreed to be provided by a mutual fund agent or distributor, to a mutual fund or asset management company – Effective from 01.04.2015

(b) Taxable services provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent – Effective from 01.04.2015

(c) Taxable services provided or agreed to be provided by a person involving an aggregator in any manner

Effective from 01.03.2015

Updates For Nov 2015 Exam

(ii) Scope of reverse charge widened

The scope of reverse charge provisions has been widened with the introduction of concept of aggregator under service tax.  Earlier, service tax was payable either by the service provider (normal charge) or the service receiver (reverse charge – full or partial).  However, now under reverse charge provisions, service tax may be payable by any other person (who is liable for paying service tax) who may or may not be the service receiver (e.g., an aggregator).  Thus, an amendment has been made in paragraph II of the notification to give effect to this amendment.

Further, in the Table in column (4), the column heading “percentage of service tax payable by the person receiving the service” has been substituted with “percentage of service tax payable by any person liable for paying service tax other than the service provider” as person liable to pay service tax may not necessarily be service receiver.

[Effective from 01.03.2015]

(iii) Entire service tax to be paid under reverse charge in case of manpower supply and security services 

Earlier, in respect of services provided or agreed to be provided by way of supply of manpower for any purpose or security services by any individual, HUF or partnership firm including association of persons to a business entity registered as body corporate, 25% of service tax was payable by the person providing the service and remaining 75% by the service receiver.

However, now the entire service tax i.e., 100% service tax would be payable by the person liable for paying service tax other than the service provider (service recipient in this case). [Effective from 01.04.2015]

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