Latest Updates on DVAT & Service Tax

i) DVAT – Online submission of information regarding Central Declaration form by 20th July,2012
ii) Service Tax – Accounting Codes for ST payment under Negative list approach
iii) Board Clarification on Point of Taxation Rules

DVAT – No.F. 7(420)/PolicyVAT/2012/ 282 

Dated: 29/6/2012

Sub:- Online submission of information regarding Central Declaration form

The dealers making stock transfer or central sales on concessional rate of tax are required to furnish Central Declaration Forms and are required to file a reconciliation return giving details of Central Declaration Forms furnished to the Department, Central Declaration Forms missing and tax deposited on account of the missing forms for every quarter. This reconciliation return is to be filed in form DVAT-S1 within three months after the end of each quarter.

However, it has been observed that some dealers do not submit all Central Declaration Forms together. Often, they file the Central Declaration Forms for a single quarter in several batches. In such cases, it becomes difficult to reconcile the central sale made with the Central Declaration Forms filed, necessitating appearance of dealer or his authorized representative before the Assessing Authority, even if all Central Declaration Forms for the entire stock transfer or central sales made on concessional rate of tax have been furnished.

In order to obviate such inconvenience to the dealers, it has been decided to introduce the facility for online filing of information regarding Central’ Declaration Forms submitted, Central Declaration Forms missing and tax deposited on account of missing forms. This application can be accessed through the link titled “Central Forms” on dealer login page on the website of the Department www.dvat.gov.in.

The Department is currently in the process of short listing the cases which are required to be assessed on account of the missing Central Declaration Forms for the financial years 2009-10 and 2010-11. It is intended that the assessment of only those cases may be taken up where Central Declaration Forms have not been submitted for all, or part, of the stock transfer or central sales made. on concessional rate of tax.

In order to ensure that nd; inconvenience is caused to the dealers, all dealers are requested to kindly furnish the quarter wise details of Central Declaration Forms submitted, Central Declaration Forms missing and tax deposited on account of the missing forms, online. The information furnished by the dealers online will be verified from the available records and electronic data received from other states; and default assessment will be framed only to the extent of missing and unverified Central Declaration Forms in respect of which due tax and interest has not been deposited by the dealers.

However, in cases where no information is furnished online, it will be presumed, that no Central Declaration Forms have been submitted for the entire stock transfer or central sale made on concessional rate of tax and such cases will be assessed on priority basis.

All registered dealers, who have made stock transfer or central sales on concessional rate of tax during 2009-10 and 2010-11, are requested to kindly file the requisite information online, positively by 20^th July 2012, so as to avoid inconvenience, adverse assessment and penalty at a later date.

The said link would be disabled after 20^th July 2012.

Subject:  Accounting Code for payment of service tax under the Negative List approach to taxation of services, with effect from the first day of July 2012 – regarding.

Negative List based comprehensive approach to taxation of services came into effect from the first day of July, 2012. For payment of service tax under the new approach, a new Minor Head – ‘All taxable Services’ has been allotted under the Major Head “0044-Service Tax”.

2.  Accounting codes for the purpose of payment of service tax under the Negative List approach, with effect from 1^st July, 2012 is as follows:

NOTE: (i) service specific accounting codes will  also continue to operate, side by side, for accounting of service tax  pertaining to the past period (meaning, for the period prior to 1^st July, 2012); (ii) Primary Education Cess on all taxable services will be booked under 00440298 and Secondary and Higher Education Cess on all taxable services will be booked under 00440426; (iii) a new sub-head has been created for payment of “penalty”; the sub-head “other receipts” is meant only for payment of interest etc. leviable on delayed payment of service tax; (iv) the sub-head “deduct refunds” is not to be used by the assessees, as it is meant for use by the Revenue/Commissionerates while allowing refund of tax.

Subject:  Clarification on Point of Taxation Rules – regarding.

Consequent to the changes introduced at the time of Budget 2012 in the Point of Taxation Rules, 2011, together with revision of the service tax rate from 10% to 12% and the subsequent changes that have been made effective from 01.07.2012, the following clarifications have been desired:

(a)   Point of taxation and the rate applicable in respect of continuous supply of services at the time of change in rates effective from 01.04.2012;

(b)  Applicability of the revised  rule 2A of the Service Tax (Determination of Value) Rules, 2006 to ongoing works contracts for determination of value when the value was being determined under the erstwhile Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007; and

(c)  Applicability of partial reverse charge provisions in respect of specified services.

2.1  The issues have been examined.  The continuous supply of services was governed by rule 6 until 31.03.2012.  The rule started with the wordings “notwithstanding anything contained in rules 3, 4 …” Therefore, the point of taxation in respect of services provided in terms of the said rule on or before 31.03.2012 would remain unaffected by rule 4.

2.2  To clarify the matter further, if the invoice had been issued or payment received in respect of such services on or before 31.03.2012, the point of taxation would stand determined under rule 6 accordingly and shall not alter due to the subsequent changes in the Point of Taxation Rules, 2011 that became effective only from 1.4.2012.

3.1 However the position has undergone a change at the time of transition towards the Negative List and the introduction of other accompanying changes in Service Tax (Determination of Value) Rules, 2006 and partial reverse charge.  At the said time rule 6 stood omitted and the point of taxation was required to be determined ordinarily in such cases under the main rule i.e. rule 3.   This rule is, however, overridden by rule
4 when there is a change in effective rate of tax.  The “change in effective rate of tax” has been defined in clause (ba) of rule 2 to include a change in the portion of value on which tax is payable.

3.2   To illustrate, the following would be changes in effective rate of tax:-
(i)    the change in the portion of total value liable to tax in respect of works contract other than original works (from @ 4.8% earlier to @ 12% on 60% of the total amount charged, or effectively @ 7.2% now).
(ii)  exemption granted to certain works contracts w.e.f. 1^st July 2012 which were earlier taxable.
(iii)  taxability of certain works contracts which were hitherto exempted.
(iv)  change in the manner of payment of tax from composition scheme under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 to payment on actual value under clause (i) of rule 2A of the Service Tax (Determination of Value) Rules, 2006.

3.3  However, the following will not be a change in effective rate of tax:-
(i)  works contracts earlier paying service tax @ 4.8% under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 and now required to pay service tax @12% on 40% of the total amount charged, keeping the effective rate again at 4.8% (as only the manner of expression has been altered).

(ii)  works contracts which were outside the scope of taxation (and not merely exempted) but have become now taxable e.g. construction of residential complex comprising of  2 to 12 residential units,  construction of buildings meant for use by NGOs etc. (Rule 5 of the Point of Taxation Rules, 2011 shall apply to such services.)

3.4   Thus the point of taxation for services provided in respect of taxable works contracts in progress on 01.07.2012 would need to be determined under rule 4 of the Point of Taxation Rules unless there is no change in effective rate of tax.

4.  It is further clarified that the provisions of partial reverse charge would also be applicable in respect of such services where point of taxation is on or after 01.07.2012 under the applicable rule in respect of the service provider.

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|The above information has been compiled by CA.Ankit Gulgulia. He is practicing Chartered        Accountant in New Delhi specializing in Indirect Taxes (Delhi/NCR) , Corporate Laws & Management Consultancy. He can be reached at ankitgulgulia@gmail.com or +91-9811653975.   
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Disclaimer: Views are purely of the author and for education purpose only. For any purposive actions, you are advised to take professional help and refer applicable statutes.

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