Every action has an equal and opposite reaction. This is nature’s law more popularly known as Newton’s Third Law of Motion. Newton could see beyond the obvious what patek philippe replica watches others failed to comprehend. Universal laws are unconditional. They do not work in only particular situations or circumstances. They are the eternal truth and do not have expiry dates. Since past 18 years, since its inception Service Tax was always a blue eyed boy for the Ministry of Finance, as it got them easy revenue without much efforts. The greed to have more is universal too. Finance Act 2012 brings with it many new avenues to tax the public. Negative List, Declared List, Bundled Services, revese charge mechanism and so on.
With introduction of the Negative List, a positive was bound to emerge, that’s what is the universal law – every action has an equal and opposite reaction. However, there are questions which need to be addressed. What is this “positive list”?. Has it been defined in the Finance Act?. What is its validity? What is its scope? Which services are covered under the positive list?. There has been no whisper about this positive list in the Act and neither is it defined elsewhere. Once the Government notified the Negative List, all the activities under the Sun which are outside the parenthesis of this Negative List but confirm to the definition of “Service” will by default find place in a “mega positive list”.
The Negative list is introduced to cover ALL THE SERVICE into service tax net but for 17 items prescribed therein. Further there are 9 services which are declared as Services hence without any shadow of doubt Service Tax will be collected on them. In these 9 declared services a new levy is prescribed, which reads as agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act – hence, vide this particular entry non-compete agreements/monopoly agreements will be covered under Service Tax. Further most important change is that Core sections which governed Service Tax law so far – Sections 65, 65A, 66 shall not apply henceforth. Now Service Tax will be operated vide new sections like 66D (Negative List), 66E (Declared List) and 66F (Concept of Bundled Services).
Another important change is that the period for issue of demands in normal situations is being raised from 12 months to 18 months. This is being done to take care of the shorter period available due to the periodicity of the proposed new return EST-1 (to replace ST-3) being reduced to 1 month for large assessees from the existing 6 months and to have the benefit of audited accounts available for the purpose of scrutiny of returns for departmental officers.
There is an exemption proposed retrospectively vide Section 97. Respectively it reads that No service tax shall be levied or collected in respect of management, maintenance or repair of roads, During the period on and from the 16.06 2005 to 26.07.2009. Another exemption is proposed retrospectively vide Section 98 which reads as no service tax shall be levied or collected in respect of management, maintenance or repair of non-commercial Government buildings, during the period on and from the 16.06.2005 till the date on Finance Act 2012 comes in force. This budget has proposed to introduce the scheme of settlement of cases, in accordance with sections 31, 32 and 32A to 32P of Central Excise Act 1944.
However there is some good news too, in case of Renting of Immovable property Delhi High Court while examining the issue of constitutionality of service tax in the matter of Home Solutions Retail Vs Union of India (STO 2011 Del 468) observed that ‘on the question of penalty due to non-payment of tax, it is open to the Government to examine whether any waiver or exemption can be granted’. Accordingly a new Section 80(2) will be in force and it states that no penalty shall be imposable for failure to pay service tax payable, on the 06.03.2012 on renting of property, subject to the condition that the amount of service tax along with interest is paid in full within a period of six months from the date on which the Finance Bill, 2012 receives the assent of the President – pay Service Tax along with Interest within 6 months from i.e. 28.05.2012. So there is something to cheer about though majority of the new provisions will give sleepless nights to many, who were till date out of the ambit of service tax. Facing the face lift of service tax is going to leave some faces frowned.
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