Service Tax Notice Puts Sub-Brokers In Fix- March 12, 2009

Tax authorities have served notices to hundreds of sub-brokers and asked them for payment of service tax for the last four years. This move is creating difficulties for them. The arrears and penalty only total to huge amount and at present, this could make many of them out of business, said a stockbroker. More than 200 sub-brokers of Geojit Financial Service Ltd, a Kerala-based broking firm, received notices asking them to pay service tax from October 2004.

The tax authorities, it is learnt, have acted on the basis of an observation made by the Comptroller and Auditor-General (CAG) that services rendered by a sub-broker to the main broker are taxable under “Business Auxiliary Services” (under Section 65(19) of the Service Tax Rules).

However, according to the brokers, sub-brokers are not registered with the Service Tax Department as they do not directly issue bills and collect payments from clients. They are registered with the main broker and the service taxes on brokerages are collected and paid by the main broker.

SEZ To Claim Service Tax Refund - March 5, 2009

The government has permitted companies situated in Special Economic Zones (SEZs) to claim service tax refund for services done outside the tax-free export zones too. SEZ developers are also permitted to do the same. The benefit would flow in the shape of "refund of service tax" and not through an exemption.

As per previous norms, if a unit was transporting raw material from a port located outside the SEZ, service tax would have to be paid. Now the unit will be able to apply for refund. The refund will be allowed only for services that are related to authorized operations like activities within SEZs.

Along with this, there is one more change regarding services provided between units located within an SEZ. Earlier, this was exempted but now firms have to claim refund instead of blanket exemption.

L B Singhal, director general of Export Promotion Council for Export Oriented Units (EoUs) and SEZs, greeted the decision and said to reveal some issues, "Service tax has to be paid first and then refund has to be claimed. It would result in unnecessary blockage of funds, paper work and transaction costs. Hence it would be appropriate if exemption could be provided."

Finance Minister Announces The Third Stimulus Package - Feb 25, 2009

The Finance Minister Pranab Mukherjee announced the much-awaited third stimulus package. The stimulus has offered across-the-board cut in excise and service tax rates to save and support the domestic economy. He said the general reduction in excise duty rates by 4 percentage points, from December 7, 2008 would extend beyond March 31, 2009.

The stimulus includes 2% cut in service tax rates to 10%. The minister announced that on goods that attract 10% excise duty will now be charged at 8%. However, excise rates on items that attract 8% and 4% excise duty will not be changed. Further the rate of excise duty on bulk cement has also been reduced from 10 per cent or Rs. 290 per tonne to 8 per cent or Rs. 230, whichever is higher. The customs duty on Naphtha will continue beyond March 31, 2009.

The government is keen on restoring business confidence in the services sector. It is also our objective that the dispersal between CENVAT rate and the service tax rate is reduced with a view to moving towards the Uniform Goods and Service Tax, the Minister said.The Lok Sabha later approved the Interim Budget, including the Finance Bill, 2009 and related Appropriation Bills, by voice vote, with walkout by the Opposition National Democratic Alliance and the Left parties. The fiscal sops given to provide stimulus to the slowing down economy will be effective from midnight and will have revenue implications of over Rs. 29,000 crore.

Govt To Review Tax Exemptions - Feb 17, 2009

The government on Monday said it will review continuation of various tax concessions and duty cuts, which was announced earlier, before March 31 said the Finance Ministry.

It (Cenvat cut) runs out of time on March 31. Lets wait for March 31... government can always take a view on exemption, Revenue Secretary P V Bhide said at the customary post-budget interaction when asked whether the tax concessions would be extended beyond March 31.Noting that duty exemptions were neither given as a part of an interim budget nor budget, he said, I am not in a position to say what decision will be taken on March 31. He also said that the government to deal with the impact of global financial meltdown has been taking specific measures.

Service Tax Return Preparers Likely To File For Cos As Well

The self-employed people who will be trained to become service tax return preparers are likely to be permitted to file returns for companies as well as individual service providers. They are also likely to be paid a fixed sum per return for each new assessee, as against the income-tax return preparers, who get a variable percentage of the tax paid. The new service tax return preparer scheme was declared in Budget 2008-09 to assist service-tax payers and bring in new assessees under the tax net. The Central Board of Excise and Customs (CBEC) formed a committee to prepare the broad contours of the scheme. The board likely to give preference to income-tax return preparers as they have been selected via a proper screening process and have some experience. The income-tax department had trained 3,700 tax return preparers in 2007.

FM Likely To Hold Service Tax At 12%

The Finance Minister might hold the service tax rate at the current rate of 12 per cent in the upcoming Budget.With the Centre and States working to move towards a uniform tax system, the Goods and Service tax, a hike in key indirect taxes at this stage could create imbalances between State and central taxes.

But to make good the notional loss of revenue by this step, new service are going to come under the service tax hammer in the Budget.Policy shifts are likely in the way the finance ministry is looking at key indirect taxes just before the Budget and the trigger for this is the pressure to chart out the roadmap for an uniform GST.Although the dateline for GST is April 1, 2010, policy watchers say that the timeframe is not enough considering the fact that all central and State taxes will finally converge at one rate.

Policy makers say that one of the steps most likely in the coming Budget would be to hold the service tax rate at 12 per cent. Reason being that under GST manufacturers might be able to set off the service tax paid against State taxes like VAT.Under those circumstances, service tax would be more of an input tax with VAT being the output tax, as the GST framework cannot permit an inverted duty structure.

Appeal To Waive CHA From Service Tax On Exim Trade

Kochi: The Cochin Custom House Agents Association (CHA) has asked the visiting Parliamentary Sub Committee on Commerce to do away with it and other agencies such as steamer agents, terminal operators etc from the purview of service tax for the services rendered by them for the export of goods.The Association President, Mr C.P. Xavier, said that exporters could not do away with the services of these intermediaries and connected agencies which are essential and vital pertaining to exports. The exporters are bearing these expenses in order to strictly adhere to the norms that the country should export only goods and not the taxes and duties thereon. Additionally, the Association pointed out that exporters and importers are facing considerable difficulties to conduct the inspection of export/import consignments due to shortage of sufficient number of personnel in the Plant Quarantine and Fumigation Station in the sea port and air port. With the Plant Quarantine Order 2003, the number of items covered has also increased. Besides, the personnel at the PQ office at Kochi had to attend to the work at Mangalore, Kollam for cashew, Palakkad and Ernakulam for rice and Thrissur for mango. The Plant Quarantine office situated at Willingdon Island is also looking after the exports/imports through Cochin International Air port. At present the exporters/ CHA''s have to take the Plant Quarantine officers from W Island to Cochin International Airport which is situated quite far away and there is always the element of the Air Cargo which is so perishable missing the scheduled flight.

The Association also highlighted the delay in getting the test results for import samples from the Regional Analytical Lab in the nearby Kakkanad, which had put the importer in considerable difficulties.

Hudco May Float Tax-Free Bonds

NEW DELHI: You may soon be able to get another tax-free option to park your capital gains. The government is likely to allow Hudco to float capital gains exemption bonds on the lines of National Housing Board (NHB), Rural Electrification Corp (REC), Nabard and NHAI.

The ministry of urban housing proposal is with the finance ministry and an announcement is expected in Budget 2008.
The conditions to park capital gains arising out of sale of asset will remain the same. This means no individual investor or corporate investor will be allowed to park capital gains of over Rs 50 lakh in such bonds.

To ensure the bonds are not cornered by large investors or corporates, the finance ministry, in 2006, had put a limit of Rs 50 lakh per investor per year with respect to capital gains bonds issued by NHAI and REC under Section 54EC of the Income-Tax Act.

“Capital gains bonds under Section 54EC have been allowed to NHB, REC, Nabard and NHAI. Hudco has not been included till now. Since Hudco is the only agency that earmarks 55% of its funds for housing for the lower income group, it is suggested the concession be made available to Hudco to enable it to access funds at a cheaper rate,” a source said.

The money thus generated would be pumped into development of housing infrastructure, especially for low-cost housing. National Housing & Habitat Policy that was cleared by the Cabinet in November has also made a recommendation in this regard.

Experts said the move would benefit not just investors by giving them another avenue to park capital gains but also help Hudco raise long-term funds it needs. Experience with REC and NHAI has shown that the PSUs have been able to raise over Rs 10,000 crore per year to be invested in road and power infrastructure.

Hudco provides long-term finance for construction of houses. It also undertakes housing and urban development programmes. Hudco promotes, establishes, assists, collaborates and provides consultancy services for the projects of designing and planning of works relating to housing and urban development programmes in the country and abroad.

States Seek Bigger Service Tax Share

NEW DELHI: The Centre may have to be content with select services of inter-state nature like financial services and telecom. The states now want a bigger pie in services of inter-state nature. They have made a pitch for levying and collecting tax on such services.

The joint working group met on Friday to deliberate on the issue. Consensus also seems to be building in favour of a single rate for service tax both at the central and state levels.

The joint working group will now work out a revenue-neutral rate after which the report would be submitted to the empowered group of state finance ministers, sources told ET. The empowered committee will submit its recommendations to the finance minister for implementation.

The GST report had suggested the states should tax intra-state services while inter-state services should remain with the Centre. Representatives of some states, especially large ones, felt the services that are clearly inter-state in nature like financial services and telecom can be passed on to the Centre, but the ones without a clear identity should remain with the states.

The panel comprises state finance secretaries, commissioners of commercial taxes and concerned joint secretaries in the Union finance ministry and empowered committee member secretary Satish Chandra.

After the finalisation of the model, the empowered committee would call a meeting of chambers of commerce & industry and trade associations, and work out a draft white paper on GST that would be put on the Website for public comments.

GST is proposed to be introduced from April 1, 2010, to integrate all indirect taxes on goods and services at the central and state levels. In November, the empowered committee had accepted the recommendations of a working group on GST for dual GST structure, one at the state level and the other at the central level.