F.No.B.11/1/2001-TRU

Government of India

Ministry of Finance

Department of Revenue

9th July, 2001

Subject: Tax on 15 New Services to be effective from 16.7.2001- Instructions regarding.

            Kindly refer to section 137 of the Finance Act, 2001 (14 of 2001) which, inter-alia, provides for the levy of service tax on 15 new services.

2. It has been decided that the levy and collection of service tax on the newly introduced shall be effective from the 16.7.2001. (Vide notification No. 4/2001-ST, dated 9.7.2001)

3. As you are aware, certain legislative amendments were made in sections 67, 69 to 74, 75, 77, 79, 82, 84 to 86 of the Finance Act, 1994 vide section 137 of the Finance Act, 2001. All these changes will be effective from 16.7.2001. The Service Tax Rules, 1994 have also been amended. Notification No. 5/2001-ST dated the 9th July, 2001 has been issued in this regard. These amendments are also effective from the 16.7.2001.

4. Legislative changes:

4.1    The most significant legislative change made in the service tax provisions relates to the introduction of self-assessment procedure vide amendment of section 70 of the Finance Act 1994. Section 71 has also been amended to provide for verification by the Superintendent for correctness of the tax assessed by the assessee on self-assessment basis. Where service tax on any services provided has escaped assessment or has been under assessed, the Assistant Commissioner / Deputy Commissioner of Central Excise (AC/DC) is required to pass an order of assessment. In view of the amended provisions, the Superintendent of Central Excise is not required to pass any order of assessment. He should only refer the matter to AC/DC concerned along with his observation and report.

4.2 Section 67 of the Finance Act, 1994 has been amended to provide for a comprehensive definition of value of taxable service instead of separate definitions for each of the services. However, there is no change in the definitions relating to existing taxable services. Accordingly clarifications/circulars issued in this regard in the past will continue to hold good.

4.3 Section 69 has been amended to specify that application for registration shall be made to the "Superintendent of Central Excise".

4.4 Section 73 has been amended to provide for recovery of service tax in the case of erroneous refunds. Further, the power to initiate action for recovery of service tax has been specifically vested with the Assistant Commissioner / Deputy Commissioner of Central Excise. As such only the designated officer is to exercise the power under section 73.

4.5 Section 75 has been amended to provide for charging of interest at the rate of twenty four percent per annum (instead of the rate of one and half percent per month) for delayed payment of service tax.

4.6    A new section 75A has been inserted to provide for a fixed (non discretionary) amount of penalty of five hundred rupees for failure to apply for registration.

4.7    Section 77 has been amended to provide for a penalty not exceeding rupees one thousand for the failure to file the service tax return within the due date.

4.8 It may be noted that sections 69 to 74, 78, 79, 82, 84, 85 and 86 have also been amended specifying the authority (by designation) empowered to take action under these sections. As such powers under these section may be exercised only by the designated authority.

5. Amendments to Service Tax Rules, 1994

1. Consequential amendments in Service Tax Rules, 1994, have been made in view of introduction of self-assessment procedure and amendment in various sections of Chapter V of the Finance Act, 1994 to provide for specific reference to the designation of the authority empowered to take action. Notification No. 5/2001-ST refers.

2. In relation to "insurance auxiliary services" provided by the insurance agents, it has been prescribed that the service tax shall be paid by the Insurance Company (Insurer). Notification No. 5/2001-ST refers.
   

6. Amendment in Form ST-1: A new column has been inserted in ST-1 form for furnishing PAN number by the assesse. Wherever PAN number has not been allotted or not applied for, same may be indicated in the ST-1 form. Notification No. 5/2001- ST refers.

7. Extension of service tax to fifteen more services: In regard to the new services, which will be subject to service tax from 16th July, 2001, certain issues have been brought to notice during the course of discussion with the concerned Association. These have been discussed and clarified in the Annexures appended as per details below.

The section or clause nos. referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2001.

8. The Commissioners are requested to issue suitable trade notices for the benefit of the new assesses detailing the scope and coverage of the new services, gist of the service tax procedures and formalities to be complied with by the assessees, formats of the application for registration, service tax returns, etc., the manner of payment of service tax, the banks through which service tax payments can be made and other relevant aspects.

9. In case of any doubts or difficulties arising in the implementation of service tax on the new services, which require clarification at the Board’s level, the Commissioners are requested to bring the same to the notice of the undersigned immediately along with their suggestions/views for resolving these difficulties.

(T.R.Rustagi)
Joint Secretary (TRU)
Telephone: 301 2687

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