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ASSOCHAM Interactive Session on “Service Tax: The Changing Dimensions” July 20, 2006; Hotel Le Meredien, New Delhi ASSOCHAM organized a full day interactive session on “Service Tax: The Changing Dimensions” on July 20, 2006 in New Delhi. The conference aimed at bringing to light various issues and problems faced by the industry due to changing dimensions of the service tax laws. The interactive session covered a gamut of issues pertaining to changes made by the Finance Act, 2006, case of disputes in the absence of desired clarifications, CENVAT credit, procedural problems and administrative and implementation bottlenecks. Shri Anil K. Agarwal, President, ASSOCHAM while delivering the welcome address, highlighted the fact that given the service sector’s prominent share in India’s economic disposition, it was reasonable to expect the sector to contribute a share to the tax pool, commensurate with its size. He urged that the Service Tax circulars, which have become redundant, should be withdrawn and there should not be any service tax on exports and imports of services as it makes us less competitive globally. Mr. J.K. Mittal, Co-chairman of the ASSOCHAM Expe rt Committee on Indirect Taxes gave the presentation on key service tax issues concerning the industry. The important issues highlighted were: Confusion and doubts regarding interpretation of Export and Import of Services Rules. Refund of CENVAT Credit to exporters of Goods/ Services. Hardship faced by the industry due to date of payment of Service Tax. Valuation issues under Service Tax. Issues related to abatement Speaking on the occasion, Mr. S. C. Mathur, Chief Commissioner of Central Excise, Delhi, urged the taxpayers to regularly pay their dues to avoid any action from the authorities. He said that there might be some unresolved issues and perceived ambiguity in the Service Tax law, which can always be dealt with, provided industry and government keeps interacting regularly. In his inaugural address Mr. V.P. Singh, Chairman, Central Board of Excise & Customs (CBEC) highlighted that pending service tax issues would shortly be resolved to provide the service taxpayers respite and relief. He said that the revenue collections from service tax would touch Rs. 40,000 crore (as against the target of Rs. 34500 Crore for FY 07) towards the end of current fiscal, as the Finance Ministry has widened and broad based the service tax net which contributes more than 54% to the national GDP. He declared that Large Tax Payers Units (LTUs) would start functioning from 1st October 2006 in Bangalore and subsequently from 1st January 2007 in Chennai and later in Kolkata also. These LTUs would become effectively operational in Delhi and Mumbai from mid-2007 .Due to various reasons, the schedule for LTUs could not be made effective by the government but now there would not be any delay and the corporates would greatly benefit with these centres for tax collections being operational. The Chairman, CBEC also announced that the Finance Ministry has identified 22 Post Offices in the capital from which the service tax payers can collect applications and have them deposited there only as per the schedule given for service tax deposits. This will help the taxpayers to escape bureaucratic hurdles and even harassment from the lo wer echelons of bureaucracy in other places, as Post Offices are perhaps the best models for deposit of service tax. Technical Session –I Service Tax Issues from the Industry Perspective (Policy Issues) When service tax was introduced it was simple to understand and easy to implement. But, over the years with the addition of new services it has become fairly complex. There is no clarity on the definition and classification of services as most services are intangible and unlike goods, there is no physical event, which can define that they have been provided. Also, there are many overlapping services like convention services and mandap keeper. In the light of this, various operational issues regarding the service tax were discussed. The conflict between policy and administration was brought to light by citing examples such as abatement eligibility when tax is paid by recipient of goods transported by road, CENVAT credit eligibility to supporting manufacturers for common expenses, abatement denial for goods used for a service when CENVAT is availed (construction, rent-a-cab, Mandap)etc. The issues arising from legal ambiguity were also identified which envisaged taxability of cost sharing arrangements, taxability of Banking and other financial services (BOFS): Capital markets & investment banking, taxability of operating lease for equipments, Scope of “cash management” excluded from BOFS services, forex broking V/s forex trading. The discussions encapsulated policy issues concerning double taxation of outward freight (Excise & Service tax provisions), Ocean freight for transhipment (Custom duty & service tax), deeming fiction applying to service imports and not to exports, service tax on sale of flats before completion of building and no abatement for interna tional airfares. Various problems of the service providers were cited, which included Cenvat credit not available on input goods and services until agreement is operationalized, not be able to utilize input credit subsequently and the credit may, in effect, lapse. Problems of the service receiver that they can not utilize the credit of Service Tax on advance when he has not received services was also highlighted. The possible solution identified regarding the confusion about the definition of services were: Negative lists of services Fewer groups Standardized definition akin to WTO groupings. Technical Session II Procedures and CENVAT Credit (Policies) The officials of the service tax commissionerate interacted with the participants and clarified various procedural issues. It was also specified that any clarification with regard to Cenvat Credit Rules will be responded by the Department within 15 days of receipt of any representation. During the interaction, the senior officials also suggested that ASSOCHAM may prepare a consolidated representation and bring it to the notice of CBEC for issuing any clarification in procedures and CENVAT Credit. The issues raised included Input Service Tax credit, abatement benefits etc. Technical Session III Service Tax Administrative Problems and Practical Difficulties & Concurre nt Juris diction by Service Tax Dept. and DGCEI The service tax procedures from the Commissionerate viewpoint was discussed. Information regarding registration, refund and rebate procedures was given to the delegates. It was also brought to light that there is need for a single registration for all services provided or received. The various requirements required for the E- filing of service tax returns were also laid down.
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