Jul. 3 – India’s Ministry of Finance has agreed to exempt service tax charges on developers and units operating within the country’s special economic zones (SEZs). The exemption will be available as a service tax refund for specified services received by units and developers within the SEZs. Taxes levied on services used exclusively for operations in the SEZs will further be eligible for a tax exemption in advance.
The new tax benefit package was announced this week following a ruling by the Karnataka high court to allow the implementation of a minimum alternate tax (MAT) and dividend distribution tax (DDT) on units and developers working within India’s SEZs.
By Himanshu Joshi, Accounts Associate, Dezan Shira & Associates
Mar. 27 – Service taxes were first introduced to India through the Finance Act (1994) in the 1994-95 Union Budget, however the service tax rules have gone through various changes since their introduction. There was previously an exhaustive list of services that were subject to service tax, but since the 2012-13 Union Budget, a new concept has been introduced.
Services of all kinds are now subject to a service tax, and only those that are mentioned in the “Negative List” and those specifically noted by the government of India are exempted from service tax.
There has been much confusion among service providers as to when a service becomes taxable. With the service tax rules being significantly changed, it is now doubly necessary for enterprises in India to fully understand their tax obligations so as to determine whether or not tax shall be charged on a service.
By Himanshu Joshi
Feb. 28 – A new taxation scheme for the services sector that came into effect on July 1, 2012, states that both the service provider and the recipient of the service must now pay the requisite service taxes. Prior to this, the liability to pay such services tax was only born by either the service provider or the service recipient.
For the services where both the provider and the recipient are liable to pay service tax, please see the below chart:
Apr. 5 – Service tax is the tax charged on services offered, which has to be collected from the clients and paid to the government. If these taxes increase, there is an increase in many expenses such as mobile bills, insurance premiums, professional consultations, property purchases from the builder, courier expenses, and credit card bills. There are almost 125 services on which service tax is levied.
In the Annual Budget for 2012-13, the Finance Minister has proposed to increase service tax to 12 percent from the previous rate of 10 percent. The new rate came into effect from April 1, 2012.
Mar. 22 – Before the new budget was issued, there was ambiguity surrounding the dealing of director’s remuneration. There is inconsistency about whether it is considered salary income or business income chargeable under the head business and profession. However, in the new union budget, India has issued a new clause – clause 194(J) – clarifying that any payment or commission paid to the director of a company is liable to tax deduction at source at the rate of 10 percent.