SECTION 30 OF KVAT - OMITTED

The Karnataka VAT (Amendment) Act, 2012 has omitted Section 30 of Karnataka VAT Act w.e.f. 1.4.2012. The effect of the said omission that a dealer can no more issue credit notes or debit notes altering his sales turnover. The amendment has been brought to nullify the judgement of Karnataka High Court in re Reliance Industries case wherein the Honourable High Court has clearly upheld that a dealer can give trade discount subsequent to issue of sales Invoice by way of issue of credit note which can have the effect of reducing the taxable turnover under the Act. 

The effect of the said amendment is that trade discount can now be given by the dealer in the sales invoice only at the time of sale as laid down in Rule 3(2) of Karnataka VAT Rules. Such discounts can be given subsequent to issue of sales invoice also but the same shall not have effect of reducing the taxable turnover i.e., the selling dealer shall be not be entitled to vat credit in respect of such trade discount given. 

Since the entire section has been omitted, a question now arises that if there any is a post sale event which has effect of reduction in sales turnover, how the same needs to be tackled? For Example, In case of sale of goods CIF, if the quantity or quality of goods received by the buyer is not as per the sale contract, then it shall have the effect of reduction of Invoice Price and must, therefore, result in reduction of corresponding VAT Liability also. But the same cannot happen pursuant to omission of Section 30 since it was the only provision which enabled the adjustment in taxable sales turnover pursuant to events arising after sale. There are many commodities whose prices fluctuates on daily basis. In such cases, it is not possible for the selling dealer to guard the effect of downward fluctuation in prices without issuing debit notes or credit notes. 

The question remaining unanswered is as to how a dealer will be able to save loss of VAT on such transactions which were earlier allowed under section 30? While the Act provides that if there is any upward revision in price pursuant to post sale event, the same need to be brought within the purview of taxable turnover by issue of supplementary invoice but the vice versa is not true... the Government do not intend to pass on the tax benefit of reduction in price to the consumers.

This amendment is bound to be questioned before the court of law as to its validity and till then more litigations and harrassments are expected on the said issue until the same is settled by Judiciary or the Government.

RATE OF SERVICE TAX WEF 1.4.12- CLARIFICATION

Circular No. 158/9/ 2012 – ST

F.No 354/69/2012- TRU

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise and Customs

Tax Research Unit

Room No 146, North Block, New Delhi

Dated : 8^th May 2012

To

Chief Commissioner of Customs and Central Excise (All)

Chief Commissioner of Central Excise & Service Tax (All)

Director General of Service Tax

Director General of Central Excise Intelligence

Director General of Audit

Commissioner of Customs and Central Excise (All)

Commissioner of Central Excise and Service Tax (All)

Commissioner of Service Tax (All)

Madam/Sir,

Subject: - Clarification on Rate of Tax - regarding.

    

  

1.             The rate of service tax has been restored to 12% w.e.f. 1^st April 2012.  Representations have been received requesting clarification on the rate of tax applicable wherein invoices were raised before 1^st April 2012 and the payments shall be after 1^st April 2012. Clarification has been requested in case of the 8 specified services provided by individuals or proprietary firms or partnership firms, to which Rule 7 of Point of Taxation Rules 2011 was applicable and services on which tax is paid under reverse charge.

2.             The rate of service tax prevalent on the date when the point of taxation occurs is rate of service tax applicable on any taxable service. In case of the 8 specified services and services wherein tax is required to be paid on reverse charge by the service receiver the point of taxation is the date of payment. Circular No 154/5/2012 – ST dated 28^th March 2012 has also clarified the same. Thus in case of such 8 specified services provided by individuals or proprietary firms or partnership firms and in case of services wherein tax is required to be paid on reverse charge by the service receiver, if the payment is received or made, as the case maybe, on or after 1^st April 2012, the service tax needs to be paid @12%.

3.             The invoices issued before 1^st April 2012 may reflect the previous rate of tax (10% and cess). In case of need, supplementary invoices may be issued to reflect the new rate of tax (12% and cess) and recover the differential amount. In case of reverse charge the service receiver pays the tax and takes the credit on the basis of the tax payment challan. Cenvat credit can be availed on such supplementary invoices and tax payment challans, subject to other restrictions and conditions as provided in the Cenvat Credit Rules 2004.

4.             Trade Notice/Public Notice may be issued to the field formations accordingly.

5.             Please acknowledge the receipt of this circular. Hindi version to follow.

(Dr. Shobhit Jain)

OSD, TRU

Fax: 011-23093037

Service Tax Liability both for Receiver and Provider

Government of India

Ministry of Finance

(Department of Revenue)

New Delhi, the 17^th March 2012

Notification No.15/2012-Service Tax

            GSR. (E).—In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 36/2004-Service Tax, dated the  31^st  December, 2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 849 (E), dated the 31^st December, 2004, except as respects things done or omitted to be done before such supersession, the Central Government hereby notifies the following taxable services and the extent of service tax payable thereon by the person liable to pay service tax for the purposes of the said sub-section, namely:—

I.    The taxable services,—

(A)  (i)   provided or agreed to be provided  by an insurance agent to any person carrying on the insurance business;

(ii)   provided or agreed to be provided  by a goods transport agency in respect of  transportation  of goods by road, where the consignor or the consignee  is,—

(a)  any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(b)  any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India;

(c)  any co-operative society established by or under any law;

(d)  any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder;

(e)  any body corporate established, by or under any law; or

(f)  any partnership firm whether registered or not under any law including association of persons;

(iii) provided or agreed to be provided by way of sponsorship,  to anybody corporate or partnership firm located in the taxable territory;

(iv) provided or agreed to be provided by an arbitral tribunal or an individual advocate or the support service provided or agreed to be provided by Government or local authority, to any business entity located in the taxable territory;

 (v) provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger or supply of manpower for any purpose or  works contract by any individual, Hindu Undivided Family or  proprietary firm or  partnership firm, whether registered or not, including association of persons;  located in the taxable territory to any company formed or registered under the Companies Act, 1956 (1 of  1956) or a business entity registered as body corporate located in the taxable territory;

(B) in relation to any taxable service provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory;

(II) the extent of service tax payable by the person who receives the service and the person who provides the service for the taxable services specified in (I) shall be as specified in the following Table, namely:-

Table

Sl.No.	Description of a service	Percentage of  service tax payable by the person providing service	Percentage of service tax payable by the person receiving the service
1	in respect of  services  provided or agreed to be provided  by an insurance agent to any person carrying on insurance business	Nil	100%
2	in respect of  services  provided or agreed to be provided  by a goods transport agency in respect of  transportation  of goods by road	Nil	100%
3	in respect of  services  provided or agreed to be provided  by way of sponsorship	Nil	100%
4	in respect of  services  provided or agreed to be provided  by an arbitral tribunal	Nil	100%
5	in respect of  services  provided or agreed to be provided  by individual advocate	Nil	100%
6	in respect of  services  provided or agreed to be provided  by way of support service by Government or local authority	Nil	100%
7	(a)   in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on abated value. (b)   in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on non abated value.	Nil 60%	100 % 40%
8.	in respect of  services  provided or agreed to be provided  by way of supply of manpower for any purpose	25%	75 %
9.	in respect of  services  provided or agreed to be provided  by way of works contract	50%	50%
10	in respect of  any taxable services  provided or agreed to be provided  by any person who is located in a non-taxable territory and received by any person located in the taxable territory	Nil	100%

2. Person who pays or is liable to pay freight either himself or through his agent for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

3. This notification shall come into force from the date on which section 66B of the Finance Act, 1994 comes into effect.

 [F.No. 334/1/2012- TRU]

(Samar Nanda)

Under Secretary to the Government of India