proposed changes to service tax on cross border transactions by finance bill 2007 n.
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Proposed changes to service tax on cross border transactions by Finance Bill, 2007. - CA Nilesh M Kapadia. Agenda. Few General Changes Change in Exports Rules Imports Rules Works Contract on EPC Content services Reverse Charge. Few General Changes.

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proposed changes to service tax on cross border transactions by finance bill 2007

Proposed changes to service tax on cross border transactions by Finance Bill, 2007

- CA Nilesh M Kapadia

agenda
Agenda
  • Few General Changes
  • Change in Exports Rules
  • Imports Rules
  • Works Contract on EPC
  • Content services
  • Reverse Charge
few general changes
Few General Changes
  • No change in rates – SHE Cess of 1% introduced
  • Threshold increase from 4 Lakhs to 8 Lakhs
  • Revised return now possible
changes in exports rules
Changes in Exports Rules
  • Rule 3(2) – “Delivered outside India and used outside India” changed to “provided from India and used outside India”.
  • Seeks to clarify ambiguity about delivery of an intangible like service
exports rules
Exports Rules
  • Consider following cases:
    • Agent getting orders for foreign principal from customers in India –
      • If agent is in India
      • If agent is from outside India
    • Agent getting orders for foreign principal from customers outside India –
      • If agent is in India
      • If agent is from outside India
imports rules
Imports rules
  • No change made
  • Hence overseas agent of Indian exporter will continue to be taxable inspite of service having been rendered outside India
  • Whether Ishikawajima Harima Heavy Industries (288 ITR 408 (SC)) can be relied upon – territorial nexus necessary for taxation of income from services in India
works contracts
Works Contracts
  • Constitutional Validity questionable –
    • Gannon Dunkerly and other cases
  • Seeks to levy service tax on taxable service involved in execution of works contract.
  • Term as defined includes EPC contracts, excluding in respect of certain specified types of infrastructure projects like roads, airports, railways, etc.
works contracts1
Works Contracts
  • Valuation can be based on actual records of assessee, or under composition scheme (to be announced) where service tax is paid @ 2% entire works contract. Details awaited.
  • No cenvat credit will be available on capital goods, inputs and input services.
content services
Content Services
  • Many websites get content from overseas vendors
  • Content may be write up on events, e.g. cricket matches, or fashion shows; or even mundane items like weather
  • Content on tangible media would also amount to goods ( TCS case (178 ELT 22(SC)) – Double taxation???
reverse charge
Reverse Charge
  • Reverse charge on sponsorship services
  • Service tax was payable by sponsor, if the sponsor was body corporate of firm
  • Now sponsor liable only if he is located in India; else reverse charge will not apply.