Chapter - 8. DDOs Role - Tax Laws, Direct & Indirect Taxes, VAT and CENVAT

Transcription

1 Chapter - 8 DDOs Role - Tax Laws, Direct & Indirect Taxes, VAT and CENVAT BSNL, India For Internal Circulation Only 1

2 Income Tax 1.1 Income tax is a composite tax on all incomes received by, or accruing or arising to, a taxpayer during a year. 1.2 In the language of the Income Tax Act, the year during which the income is received or is otherwise earned is called the Previous year and that income is assessed to tax in the year commencing on 1 st April next following the close of previous year. This latter year is termed Assessment year. 1.3 Though income Tax is a single Tax on the aggregate of incomes from various sources the taxable income is first computed under different heads of income. 1.4 If there are two or more sources of income falling under a head of income the income is computed separately for each source of income. These are then aggregated. From the aggregated amount, certain deductions are made before the taxable income is reached. The various heads of income are:- i) Salaries ii) Income from House Property iii) Profits and Gains of Business or Profession iv) Capital Gains; and v) Income from Other Sources 2. Income that is exempt from tax (only items related to salary) 2.1 Leave Travel concession in India (Only two journeys in a block of 4 years is exempt) [(Sec.10 (5)] 2.2 Gratuity [Sec.10 (10] Government Employee: - Fully exempt BSNL, India For Internal Circulation Only 2

3 Non Government Employee (Covered by Payment of Gratuities Act) The least of the following is exempt 15 days salary Last drawn (includes DA) X length of Service Rs.3,50,000 Actually Received Less than 6 months service ignored. 6 months & above service is treated as full year Non Government Employee ( Not covered by Payment of Gratuities Act) The least of the following is exempt Half months average salary(includes DA) (average of 10 months preceding the month of retirement) X Completed years of Service Rs.3,50,000 Actually Received Fraction of a year is ignored Average of 10 months preceding the month of retirement However, the assessee can claim relief under Sec Commuted Value of Pension [Sec.17(1)(iii)] Employee of Central/State Fully Exempt Govt., Local Authority & Statutory Corporation Non Government Employee If Gratuity is received If Gratuity is not received 1 / 3 rd of Pension Exempt ½ of Pension Exempt However, the assessee can claim relief under Sec.89 Any payment received by way of commutation of pension by an individual out of annuity plan of the LIC from a fund set up by that corporation shall be exempt under sec. 10 (10A). 2.4 Leave Encashment During Service: - Chargeable to Tax. However, relief can be taken under section 89. At the time of retirement/leaving job Government Employee Fully Exempt BSNL, India For Internal Circulation Only 3

4 Non Government Employee: - Least of the following is exempt (No. of months) EL at credit as per records X Average month salary 10 X Average month salary Rs.3,00,000 Actual Amount received Average month salary = Last 10 months (Basic salary + DA)/10 EL at credit to be 30 days per year of service ( fraction ignored) leave availed/ encashed during service 2.5 House Rent Allowance: [Sec.10(13A)] If an employee lives in rented house and paying rent, the least of the following is exempt from tax 1. 50% of salary, where residential house is at Bombay, Calcutta, Delhi or Madras and 40% of salary, where residential house is at any other place 2. HRA received for the period during which rental accommodation is occupied 3. The excess of rent paid over 10 percent of salary Salary includes Dearness Allowance, if the terms of employment so provide, but exclude all other allowances and perquisites. Salaried employees drawing HRA up to Rs.3000 p.m. will be exempted from production of rent receipt. 2.6 Special allowances prescribed as exempt under section 10(14): 1. Traveling allowance/transfer allowance 2. Conveyance allowance 3. Daily Allowance 4. Uniform allowance 5. Special Compensatory allowance (Hilly areas, High altitude, uncongenial climate, snow bound area, avalanche) [Rs. 300 p.m. to Rs.7000 p.m.) 6. Border area allowance (remote locality, difficult area, disturbed area) [Rs.200 p.m. to Rs.1300 p.m.] 7. Tribal areas/scheduled areas allowance: Rs. 200 p.m. 8. Children Education allowance: Rs.100 p.m. per child up to a maximum of two children 9. Hostel expenditure allowance: Rs.300 p.m. per child up to a maximum of two BSNL, India For Internal Circulation Only 4

5 10. Compensatory field area allowance: Rs.2600 p.m. in some cases. 11. Compensatory modified area allowance: Rs.1000 p.m. in some cases. 12. Counter insurgency allowance: Rs.3900 per month in some cases. 13. Transport allowance: up to Rs.800 p.m. (Rs.1600 per month in the case of an employee who is blind or orthopaedically handicapped 14. Underground allowance: Rs.800 per month 15. High altitude allowance: Up to Rs.1060 per month (for altitude of 9000 to feet) or Rs.1600 per month (for altitude above feet) 16. High active field area allowance up to Rs.4200 per month 17. Island duty allowance: Up to Rs.3250 per month 3. Taxable Perquisites 3.1 Rent free unfurnished accommodation: (a) (a) Accommodation provided by Central Government /State Government: Licence Fee chargeable (As per amended section 17 (2)(ii) of Income Tax Act 1961, vide Finance Act 2007) In a case where an unfurnished accommodation is provided by any employer other than the Central government or any State Government (AY ) City having population 15% exceeding 25 lakhs as per 2001 census City having population 10% exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 census Any other place 7.5% Accommodation owned by the Employer Accommodation is taken on lease or rent by the employer Lease rent or 15% of salary whichever is lower Salary includes all monetary payments except exempted allowance & perquisites, DA if not considered for retirement Benefits 3.2 Rent free furnished accommodation (not being in a Hotel) BSNL, India For Internal Circulation Only 5

6 The charges at para 3.1 above + [ 10% of cost of furniture (P.A.) or Actual hire charges of furniture, if hired.] Rent free furnished accommodation in a Hotel (includes Guest House) 24% of salary or Actual charges paid by Employer whichever is lower 3.3 Accommodation provided at concessional rent In a case where an unfurnished accommodation is provided by any employer other than the Central government or any State Government (AY ): Difference between the amount arrived as per 3.1 above (A) and the rent recoverable from, or payable by, the assessee (B) [If A is more than B only] 3.4 Interest free loan or loan at concessional rate of interest It is taxable in the hands of all employees. The value of perquisite will be = Interest SBI for the year Less Interest actually recovered for the year The basis of calculation shall be the maximum outstanding balance on the last day of each month. SBI lending Rates (AY ) Housing loan Up to 5 years % Above 5 years but up to 15 years % Above 15 years but up to 20 years % Car Loan Up to 3 years (Rs.7.5 Lakhs & 11.5 % above) Up to 3 years (below 7.5 Lakhs) % Above 3 years and up to 5 years % Above 5 years and up to 7 years 12 % Two wheeler % loan Education Loan amount up to Rs.4 Lakh 11.5 % Loan Loan amount above Rs.4 Lakh 13.25% Personal Loan 15.25% BSNL, India For Internal Circulation Only 6

7 When perquisite is not chargeable to tax 1. If a loan is made available for medical treatment in respect of diseases specified in rule 3A (the exemption is, however, not applicable to so much of the loan as has been reimbursed to the employee under any medical insurance scheme). 2. Where the amount of original loan (loans) does not exceed in the aggregate Rs Use of Movable assets The value of benefit to the employee resulting from the use by the employee of any movable asset belonging to the employer shall be = 10% per annum of the actual cost of such asset (or amount of rent paid /payable by the employer, if hired) Less amount paid or recovered from the employee for such use. It is taxable in the hands of all employees. Nothing is taxable if laptop or computer is provided. 3.6 Movable assets sold by an employer to its employees at a nominal price:- Perquisite in respect of sale of movable assets to employees Cost of the asset Less normal wear and tear for completed years during which the asset was used by the employer for his business Less amount recovered from the employee Taxable value of the perquisite Electronic items/ computers Actual cost to the Employer 50% for each completed year by reducing balance method Consideration recovered from the employee Motor car Actual cost to the Employer 20% for each completed year by reducing balance method Consideration recovered from the employee Any other asset Actual cost to the Employer 10% for each completed year of actual cost Consideration recovered from the employee Balancing amount Balancing amount Balancing amount BSNL, India For Internal Circulation Only 7

8 3.7 Medical facilities: 1. Fixed medical allowance is always chargeable to tax. 2. The perquisite in respect of medical facilities is generally taxable in the hands of only specified employees. If, however, bills are issued in the name of an employee and the employer makes payment, then it is taxable in the hands of all employees whether specified or not. Hospital ( including clinic, dispensary or nursing home) Maintained by the employer Maintained by --Central/ State Government -Local authority -Any other person but approved by the Government for the treatment of its employees Approved by the Chief Commissioner Health insurance policy (i.e., group medical insurance premium for employees or medical insurance premium for employees and family members) Maintained by any other person (for example a private clinic) Nature of medical facility made available to employees & their family Any Any For prescribed diseases Any Expenditure Incurred by the employer Incurred or reimbursed by employer Incurred or reimbursed by employer Medical insurance premium paid or reimbursed by the employer Incurred or reimbursed by employer Is it chargeable to tax Not chargeable to tax (no monetary ceiling) Not chargeable to tax (no monetary limit) Not chargeable to tax (no monetary limit) Not chargeable to tax (no monetary ceiling) Not chargeable to tax up to Rs in aggregate per assessment year Tiffin allowance & Servant allowance are taxable. Tax is to be deducted at source by Employer / Payer BSNL, India For Internal Circulation Only 8

9 I. From Salary (Sec.192) Rate of tax deduction at source Normal rates applicable to an individual Income Tax Rates (A.Y ) (F.Y ) Individual/HUF/AOP/BOI/Artificial person Net income range Income-tax rates Education cess Up to Rs.1,10,000 Up to Rs.1,45,000 (Resident Woman below 65 years) Up to Rs.1,95,000 (Senior citizen) Above Rs.1,10,000 to Rs.1,50,000 Above Rs.1,50,000 to Rs.2,50,000 NIL NIL NIL 10% of the net income in excess of Rs.1,00,000 [10% of the net income in excess of Rs.1,45,000 (Resident Woman below 65 years)] Rs.4000 plus 20% of the net income in excess of Rs.1,50,000 [Rs.500 plus 20% of the net income in excess of Rs.1,50,000 (Resident Woman below 65 years)] 2% of income tax 2% of income tax Secondary & Higher education cess (1/4/2007) 1% of income tax 1% of income tax Above Rs.2,50,000 [20% of the net income in excess of Rs.1,95,000 (Senior Citizen)] Rs.24,000 plus 30% the net income in excess of Rs.2,50,000 2% of income tax 1% of income tax [Rs.20,500 plus 30% of the net income in excess of Rs.2,50,000 (Resident Woman below 65 years)] [Rs.11,000 plus 30% of the net income in excess of Rs.2,50,000 (Senior Citizen)] BSNL, India For Internal Circulation Only 9

10 If the net income exceeds Rs.10, Surcharge shall be of Income tax plus Education Cess 2% and Secondary & Higher education Cess 1% on [Income tax & Surcharge] 4. Permissible deductions from Salary Income (Sec16) 4.1 Standard Deduction [Sec.16 (i) ]: It is not available from Assessment year Entertainment Allowance [Sec.16 (ii)]: In the case of Government employee, the lease of the following is deductible: a. Rs.5000; b. 20% of basic salary or c. Amount of entertainment allowance granted during the previous year In the case of non-government employee entertainment allowance is not deductible 4.3 Professional Tax or Tax on Employment [Sec.16 (iii)]: Actual amount paid during the year 5. Computation of relief when salary has been received in arrears or in advance (Sec. 89) 1. Calculate the tax payable on the total income, including the additional salary (arrears/advance salary), of the relevant previous year in which the same is received. 2. Calculate the tax payable on the total income, excluding the additional salary, of the relevant previous year in which the additional salary is received. 3. Find out the difference between the tax at (1) and (2) 4. Compute the tax on the total income after including the additional salary in the previous year to which such salary relates. 5. Compute the tax on the total income after excluding the additional salary in previous year to which such salary relates. 6. Find out the difference between tax at (4) and (5) BSNL, India For Internal Circulation Only 10

11 7. The excess of tax computed at (3) tax computed at (6) is the amount of relief admissible under section 89. No relief is, however, admissible if tax computed at (3) is less than tax computed at (6). In such a case, assessee-employee need not apply for relief. Income from House Property Let Out House Property Gross annual value (Municipal valuation or Fair rent whichever is higher subject to a maximum of Standard Rent (Rent control Act) If the actual rent received/receivable is higher than the above, then that is gross annual value Less Municipal Taxes xxxx xxxx Net annual value Less Deduction under Section 24 Standard deduction 30% of net annual value Interest on borrowed capital (Accrual basis) (no maximum limit) Interest on pre-construction period in 5 equal installments from the construction year. Income from house property Self Occupied House Property (one) Gross annual value Less Municipal Taxes Net annual value Less Deduction under Section 24 Standard deduction 30% of net annual value Interest on borrowed capital Capital is borrowed before : (Max. ) Rs.30,000 Capital is borrowed on or after & the house is acquired/constructed within 3 years from the end of F.Y in which the capital is borrowed: (Max.) Rs.1,50,000 (Accrual basis) (Interest on pre-construction period in 5 equal instalments from the construction year) Income from self occupied property xxxx xxxx xxxx xxxx NIL NIL NIL NIL xxxx xxxx BSNL, India For Internal Circulation Only 11

12 Where a house is self occupied for a part of the year and let out for remaining part of the year, Income will be computed as if the property is let out. If there if a loss under the head Income from house property it can be set-off against any income under other heads of income during the current year (No loss can be set-off against winnings from lotteries, races etc.) If it is not possible to set-off the loss (fully or partly), it can be carried forward to the next year for being set-off against the income under the head Income from house property. Income from other sources a. Dividends b. Any winnings from lotteries, crossword puzzles, races including horse-races, card games and other games of any sort or form, gambling or betting of any form or nature whatsoever c. Income by way of interest on securities if the income is not chargeable to tax under the head Profits and gains of business or profession. [ Interest from P.O. Savings Bank Account & Post Office CTD is exempt from Tax] d. Where any sum of money exceeding Rs is received without consideration by an individual from any person, the whole of such sum e. Family Pension received by family members of deceased employee [Deduction Rs or 33 1 / 3 % of such income, whichever is less] f. Interest on bank deposits and loans 6. DEDUCTIONS FROM GROSS TOTAL INCOME The aggregate amount of deductions under sections 80C to 80U cannot exceed gross total income (i.e. gross total income after excluding long-term capital gains, short-term capital gain taxable under section 111A, winning from lotteries, races, etc.) These deductions are to be allowed only if the assessee claims these and establishes the circumstances warranting such deductions. BSNL, India For Internal Circulation Only 12

13 6.1 [Sec.80C[: (Only Individual or HUF) (From AY ) The investments eligible for deduction include life insurance premia, contributions to provident fund or schemes for deferred annuities, purchase of infrastructure bonds, payments of tuition fees, repayment of principal amount of housing loans, etc. However, in order to minimise distortions, there are no sectoral caps in the new section and the assessee is free to invest in any one or more of the eligible instruments within the overall ceiling specified. Amount deductible under section 80C is equal to (a) 100% of the investment eligible or (b) Rs.1 Lakh, whichever is lower. From AY investments in fixed deposits in scheduled banks for a term of not less than five years included in Sec. 80 C. The maximum amount deductible under sections 80C, 80CCC and 80CCD cannot exceed Rs.1 Lakh. 6.2 [Sec.80CCC] (only individual): Amount deposited under an annuity plan of the LIC or any other insurer for receiving pension, is allowed as deduction (Maximum Rs )(AY ). Other points:- 1. Where the assessee or his nominee surrenders the annuity before maturity date of such annuity, the surrender value shall be taxable in the hands of the assessee or his nominee, as the case may be, in the year of receipt. 2. The amount received by the assessee or his nominee as pension will be taxable in the hands of the assessee or the nominee, as the case may be, in the year of receipt. 3. If deduction is claimed under section 80C, in respect of the same investment, deduction will not be available under section 80CCC. 6.3 Medical Insurance Premia [Sec.80D]: Conditions:- 1. The Tax payer is an individual BSNL, India For Internal Circulation Only 13

14 2. Insurance premium is paid by the taxpayer in accordance with scheme of GIC and approved by Central Government or a similar scheme of any other insurer who is approved by IRDA. 3. The premium is paid by cheque 4. The policy taken on the health of taxpayer, spouse, dependent parents or dependent children. Amount of deduction: - Insurance premium paid or Rs [AY ]whichever is lower. [Rs (AY ) where the assessee or his wife or her husband or dependant parents or any member of the family is a senior citizen. (65 year of age at any time during the year)] 6.4 Maintenance including medical treatment of a dependent being a person with disability [Sec.80DD] The tax payer is an individual/huf. The tax payer has opted for any (or both) of the following options Option 1 Option 2 The taxpayer has incurred an expenditure The tax payer has paid or deposited under for the medical treatment, training and any scheme of LIC or any other insurer or rehabilitation of a dependent with disability the administrator or specified company and approved by the Board in this behalf, for maintenance of dependent with disability Amount of deduction: Rs.50000, irrespective of the amount incurred or deposited under Option 1 and /or Option2. A higher deduction of Rs shall be allowed, where such dependent is a person with severe disability having any disability over 80% If Dependent predeceases the taxpayer: An amount equal to the amount paid or deposited as stated above shall be deemed to be the income of the assessee of the previous year in BSNL, India For Internal Circulation Only 14

15 which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year. 6.5 Medical Treatment (Sec.80DDB) Conditions 1. The tax payer is an individual./huf 2. The tax payer has actually incurred expenditure for the medical treatment of a specified disease or ailment as prescribed by the Board. 3. The expenditure actually incurred for medical treatment of the assesse himself or wholly/ mainly dependent husband/wife, children, parents, brothers and sisters of the taxpayer. 4. The assessee shall have to submit a certificate in the prescribed form (10-I) from a specialist working in a Government Hospital. Amount of deduction:- Rs or the expenditure actually incurred whichever is lower. Where the expenditure incurred is in respect of the assessee or his dependant who is a senior citizen, then Rs.60,000 or actual expenditure, whichever is lower. Deduction under this section shall be reduced by the amount received, if any, under an insurance from an insurer, or reimbursed by an employer, for the medical treatment of the person referred to above. 6.6 Payment of interest on loan taken for higher Education (80E) (Individual) (no ceiling on amount A.Y ) The above deduction is allowed from the assessment year relevant to the previous year in which the assessee starts paying the interest on the loan and 7 immediately succeeding assessment years or until the above interest is paid in full, whichever is earlier. BSNL, India For Internal Circulation Only 15

16 From F.Y , it is extended to also include interest on such loan taken for higher education of his relative i.e. or her spouse and children. 6.7 Donations to certain Funds, Charitable Institutions, etc. (Sec.80G) The taxpayer may be individual, company, firm or any other person. Donee Amount deductible a. National Defence Fund set up by the Central Government 100% Yes b. Jawaharlal Nehru Memorial Fund 50% Yes c. Prime Minister s Drought Relief Fund 50% Yes d. Prime Minister s National Relief Fund 100% Yes e. National Children s Fund 50% Yes f. Indira Gandhi Memorial Trust 50% Yes g. Rajiv Gandhi Foundation 50% Yes h. National foundation for Communal Harmony 100% Yes i. An approved University/ Educational Institution of national 100% yes eminence j. Zilla Saksharta Samiti 100% k. National Blood Transfusion council and State council for 100% Yes Blood Transfusion l. Fund set up by a State government for the medical relief to 100% the poor m. Central Welfare Fund of the Army and Air Force and the 100% Yes Indian Naval Benevolent Fund n. National Illness Assistance Fund 100% Yes o. Chief Minister s Relief fund or Lieutenant Governor s 100% Yes Relief fund p. National Sports fund or National Cultural fund or Fund for 100% Yes Technology Development and Application q. Any other fund or any institution which satisfied 50% conditions mentioned in sec. 80G(5) r. Government or any local authority to be utilized for any charitable purpose other than the purpose of promoting family planning 50% s. Any authority constituted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both 50% t. Any corporation specified in sec.[10(26bb)] for promoting 50% interest of minority community u. Government or any approved local authority, institution or 100% Deduction can be allowed by DDO BSNL, India For Internal Circulation Only 16

17 association to be utilized for the purpose of promoting family planning v. Any notified temple, mosque, gurdwara, church or other place (for renovation or repair) w. The Indian Olympic Association or to an institute notified by the Central govt. for the development of infrastructure for sports and games in India (only donation by a company) x. National trust for Welfare of Persons with Autism, cerebral Palsy, Mental Retardation and Multiple disabilities 50% 100% 100% Yes The amount of deduction mentioned under q. to v. above should not exceed the 10% of gross total income of the assessee as reduced by the following:- 1. Amount deductible under sec. 80CCC to 80 U (except 80G) 2. Such incomes on which income-tax is not payable 3. Long-term capital gains 4. Short term capital gain which is taxable under sec.111a@ 10% (plus surcharge plus education cess) 5. Incomes referred to in section 115A to 115D 6.8 Deduction in the case of a person with disability [Sec.80 U] Amount of deduction: Rs [Rs in respect of a person with severe disability i.e. having any disability over 80%] Tax Liability-How to find out Assessment Year Rs. Rs. 1. Find out gross total income Less: Deductions 2.1 Under Section 80C 2.2 Under sections 80 CCC to 80 U Find out net income [(1) - (2) Find out income-tax on net income Add Surcharge Find out the total [ (4) + (5)] Add: Education cess [2% of (6)] Add: Sec. & High Education Cess [1% of 6] 9. Find out the total [ (6) to (8)] BSNL, India For Internal Circulation Only 17

18 10. Deduct: Relief under Section Tax liability [(9) (10)] Add : Interest/penalty, etc Less: pre-paid taxes [i.e. advance tax, selfassessment tax, TDS, TCS] 14. Tax payable [(11) + (12) (13)] Different payments Form No. In case of salary payment to a resident individual where the income 16AA from salary before deduction under section 16 does not exceed Rs.1,50,000 In case of salary payment not covered by above 12 BA and 16 In case of payment other than salary 16A De-materialisation of TDS and TCS certificates: The payer of income shall furnish a quarterly statement of tax deducted at source (in digital format) to the prescribed income tax authority in respect of tax deducted at source on or after April 1, 2005 (form 24Q for salary and 26Q for others). Such statement should be submitted within 15 days from the end of each quarter (30 days in the case of last quarter). The prescribed income-tax authority will in turn furnish an annual statement (in digital format) in form No.26AS of tax deducted to the recipient. The recipient will get tax credit in respect of tax deducted at source without production of a certificate in respect of tax deducted on or after March 31, Time limit for payment of tax deduction at source to the Government Different situations When amount under Sec. 194 A, 194 C, 194 H, 194 I and 194 J is credited to the account of the recipient as on the last date of the accounting year Time limit for deposit of tax Time limit for issue of certificate to the recipient Within one week from the last date of the month in In case of salary within 30 days from the close of the which tax deduction is financial year; Otherwise made within one month from the end of the month in which Within two month from the last date of the accounting year tax is deducted at source Within two months and seven days from the last date of the accounting year BSNL, India For Internal Circulation Only 18

19 Annual return to the Income-tax Department Different payments In case of a company Time limit for submission of return Salary Form No.24 in electronic format and Form No.27A May 31 immediately after the end of the financial year Payment (other than salary) to a resident Form No.26 in electronic format and Form No.27A June 30 immediately after the end of the financial year The above return (in electronic format) is to be prepared on the data structure provided by the NSDL and copied on a floppy. The floppy is to be affixed with a label indicating name, permanent account number, tax deduction account number and address of the person deducting tax, the period to which the return pertains, the form number of the return and the volume number of the floppy in case there is more than one volume of one return. Separate floppy is to be used for each form of TDS (i.e. Forms 24, 26 ) and each form on floppy is to be submitted along with the statement in form 27A. Tax deduction and collection account number (Sec.203A) Every person deducting tax or collecting tax, who has not been allotted a tax deduction account number or, as the case may be, a tax collection account number, shall, within one month from the end of the month in which tax is deducted/collected, apply to the Assessing Officer for the allotment of a tax deduction and collection account number in form no.49b. Where a tax deduction account number or tax collection account number or tax deduction and collection account number, has been allotted to a person, such person shall quote such number: a. In all challans for the payment of any sum in accordance with the provisions of section 200 or section 206 C (3); b. In all certificates furnished under section 203 or section 206 C (5); c. In all other documents pertaining to such transactions as may be prescribed. Compliance of TDS Provisions & consequences if the provisions are not followed From A.Y BSNL, India For Internal Circulation Only 19

20 [TDS provisions for Interest (Sec.194 A), Commission (Sec.194 H), Fees technical/professional services (Sec.194 J) & Payment to contractors (Sec. 194 C)] Different situations Tax has been deducted and paid to the Government in a subsequent year but after the expiry of time limit Tax has not been deducted or Tax has been deducted but not paid to the Government Expenditure deductible in which year Deductible in the year in which tax has been paid Not deductible BSNL, India For Internal Circulation Only 20

21 INCOME TAX RATES FOR TAX DEDUCTION AT SOURCE AY (F.Y ) If the recipient is (a) an individual, HUF, BOI or AOP and payment does not exceed Rs.10,00,000 or (b) a Co-Operative Society or (c) a local authority or (d) Domestic company or firm and payment does not exceed 1 crore If the recipient is (a) an individual, HUF, BOI or AOP and payment exceeds Rs.10,00,000 or (b) Domestic company or firm and payment exceeds 1 crore Interest other than interest on securities to resident (Sec. 194A) [Exceeds Rs.5000] [Exceeds Ra Interest paid by Banks] a. Payment to Domestic company 20% 20% b. Payment to other than Domestic company 10% 10% Payment to a resident contractor/ sub contractor (sec.194c)[exceeds Rs (aggregate Rs.50000)] a. Payment to a contractor (advertising) 1% 1% b. Payment to a contractor (other than advertising) 2% 2% c. Payment to sub contractor 1% 1% Commission or brokerage to a resident (Sec.194 H) [Exceeds Rs.2500] [Except to (PCO) franchisees of BSNL/MTNL] Rent to a resident (Sec.194-I) [Exceeds Rs.1,20,000] [Other than P&M] 10% ( ) 5% (up to ) a. Rent to an Individual or a HUF 15% 15% b. Rent to a person other than individual or a HUF 20% 20% No Surcharge Education cess on Intcome tax2% Secondary & Higher Education Cess on Income tax 1% 10% (1-6-07) 5% (up to ) Surcharge on Income tax 10% Education Cess on Income Tax and Surcharge 2% Secondary & Higher Education Cess on Income tax & Surcharge 1% BSNL, India For Internal Circulation Only 21

22 Fees for professional or Technical services to a resident (Sec.194 J) [Exceeds Rs.20,000] Payment to Non Resident (rent etc.) * Non Domestic Company 10% ( ) 5% (up to ) 30% 40% 10% (1-6-07) 5% (up to ) 30% 40% 2.5% BSNL, India For Internal Circulation Only 22

23 Tax collection at source [Sec.206 C] Who is responsible to collect tax at source: Every person, being a seller, shall collect from the buyer of goods specified in section 206 C tax at source Seller means the Central government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any accompany or firm or co-operative society. It also includes an individual or a HUF whose books of account are required to be audited under Sec.44AB(a)(b) during the financial year immediately preceding the financial year in which goods are sold. Buyer means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the table section 206 C (1) or the right to receive any such goods. It, however, does not include the following:- a. A public sector company, the Central Government, a State Government, and an embassy, a High Commission, Legation, commission, consulate and the trade representation, of a foreign State and a club, or b. A buyer in the retail sale of such goods purchased by him for personal consumption When tax has to be collected at source: Tax has to be collected by the seller at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the buyer in cash or by issue of cheque/draft, or by an other mode, whichever is earlier. How to compute tax collected at source Nature of goods/nature of contract or license or lease Alcoholic liquor for human consumption 1 Tendu leaves 5 Timber obtained under a forest lease 2.5 Percentage rate of tax collection at source (TCS) applicable 23

24 Timber obtained by any mode other than under a 2.5 forest lease Any other forest produce (not being timber or tendu 2.5 leaves) Scrap 1 Parking lot, toll plaza, mining and quarrying (to a 2 person other than PSU) The above rates are subject to surcharge & Education Cess Meaning of Scrap:- waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons Buyer exempt from tax: If income of buyer is exempt from tax, tax cannot be collected at source. Percentage is applicable on purchase price No tax will be collected at source from a buyer who purchases goods for the purposes of manufacturing, processing or producing any article or thing and not for the purpose of trading. If a buyer gives a declaration in Form No.27C to the seller that the goods to be purchased are to be utilized in the carrying on of any of the activities referred to above, no tax will be collected under section 206 C. Deposit of tax: Tax collected under sec.206c shall be deposited within one week from the last day of the month in which collection is made to the credit of Central government. For non-payment or late payment, interest is payable at the rate of 1 percent per month or part thereof. Issue of certificate: Within a period of one month from the end of the month in which tax is collected, the person collecting tax should issue a certificate of tax collected in form no.27d. 24

25 Quarterly statement of tax collected: Every person collecting tax shall be required to furnish quarterly statements in form no.27eq to the prescribed income tax authority, for the tax collected on or after April 1, Such statement should be given within 15 days from the end of each quarter (30 days in the case of last quarter). Return to the Government: Every person collecting tax at source under sec.206c is required to send yearly return in form no.27e. W.E.F , the annual TCS return will be in computer readable media along with form No.27B. Return/Assessment of Income When return is to be filed as statutory obligation Taxpayer Company A person other than a company Minimum income to attract the provision of filing return of income Any income or loss If the total income without giving effect to the provisions of sections 10A, 10B, 10BA and sections 80C to 80U exceeds the maximum amount which is not chargeable to income-tax (Rs.1,00,00/Rs.1,35,000/Rs.1,85,000) Time for filing return of income Where the assessee is a company October 31 Other cases (Individual) July 31 Banking Cash Transaction 0.1% w.e.f and restriction on withdrawal of Rs.1 lakh or more from bank from With reference to above, it is mentioned that Banking Cash Transaction Tax is introduced by Chapter VII of the Finance Act, It shall apply to all taxable banking transactions entered into on or after 1 st day of June,

26 It provides that a banking cash transaction 0.1% shall be charged in respect of every taxable banking transactions entered into on or after the 1 st day of June, 2005 of the value of every such taxable banking transaction. The value of taxable banking transaction shall be, the amount of cash withdrawn or the amount of cash received on encashment of term deposit or deposits as the case may be. Taxable banking transaction means---- (a) a transaction, being withdrawal of cash (by whatever mode) on any single day from an account (other than a savings bank account) maintained with any scheduled bank exceeding, (i) Rs.50,000/- (ii) one lakh rupees, in case such withdrawal is from the account maintained by a person other than any individual or Hindu Undivided Family (b) a transaction, being receipt of cash from any scheduled bank on any single day on encashment of one or more term deposits, whether on maturity or otherwise, from that bank, exceeding, (i) Rs.50,000/- (ii) one lakh rupees, in case such term deposit or deposits are by any person other than any individual or Hindu Undivided Family 26

27 Scope of the term FRINGE BENEFIT [sub sec.(1) of Sec.115WB] Any consideration for employment provided by way of:- (a) any privilege, service, facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees (including former employee or employees); any contribution by the employer to an approved superannuation fund for employees. Value of fringe benefits vide sub sec.(1) of Sec.115 Aggregate of the actual amount of contribution made by the employer to an approved superannuation fund for the employees Does not include perquisites in respect of which tax is paid or payable by the employee sub sec.(3) of Sec. 115WB From AY , any benefit or amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence shall not form part of FB. The contribution to approved gratuity or provident fund would not attract levy of FBT. The contribution by an employer to an approved superannuation fund to the extent that it does not exceed Rs.1 Lakh per employee in respect of whom contribution is made, shall not be liable to FBT. 27

28

29 Scope of the term FRINGE BENEFIT DEEMED to have been provided [sub sec. (2) of Sec.115WB] If the employer has incurred any expense on, or made payment for, the purposes summarized below: Value of fringe benefits Clarifications by MOF Heads of Accounts & Instructions for Fringe Benefit Tax in BSNL (A) Entertainment 20% of expenses It includes all expenditure in connection with exhibition, performance, amusement, game or sport, for affording some sort of amusement and gratification / Entertainment (Liable to FBT) shall be utilized for incurring expenditure on furnishing accommodation, refreshment, good cheer or diversion; mental enjoyment, amusement, providing gratification or diversion, receiving a host, hospitable/public reception, hospitable provision for the wants of a guest, a formal or elegant meal etc., a hospitable resort, a banquet, receiving and accommodating guest. (Expenditure on items shall be other than those mentioned under Hospitality) The expenditure incurred for non-festival occasions (including annual day) shall be treated as expenditure on entertainment. The expenditure on entertainment is something, which may be beneficial for the mental or physical well being but is not essential or indispensable for human existence. 29

30 (B) Provision of hospitality of every kind to any person, whether by way of food or beverage or in any other manner excluding food or beverages provided to the employees in the office or factory or non transferable paid vouchers usable only at eating joints or outlets; 20% of expenses If an employer owns an exclusive training center used to train its employees (construed as an office or a factory ), any expenditure on food or beverages provided by the employer at such training center to the employees is not liable to FBT. If an employer reimburses to the employee, expenditure on food or beverages consumed by the employee in the office, such reimbursement will be liable to FBT / Hospitality given to employees at Admn./Operative Office premise of BSNL (Not liable to FBT) shall be utilized for booking expenditure incurred by BSNL for giving food or beverages to the employees of BSNL at office (both Administrative & Operative) premises of BSNL. Even expenditure on or payment through paid vouchers for providing food and beverages to employees of BSNL shall be booked under above mentioned accode provided such vouchers are not transferable and can be used only at eating joints or outlets / Hospitality given to any person anywhere and /or employees not at Admn./Operative Office premise of BSNL (Liable to FBT) shall be utilized for booking expenditure incurred by BSNL on food and beverages provided to any person anywhere and employees of BSNL at places other than Admn./Operative office. 30

31 (C) Conference excluding fee for participation by the employees in any conference; 20% of Expenses Expenditure incurred for attending training programmes organized by trade bodies or institutions or any other agency falls within the scope of this provision / Fee for participation in conference by employees (Not liable to FBT) shall be utilized for booking expenditure on fee paid by BSNL for its employees for attending the conference/seminars/training programs organized by trade bodies, institutions or any other agency It is liable to FBT, irrespective of whether the conference is of agents or dealers or development advisors or any other persons / Conference Expense other than fee for participation (Liable to FBT) shall be utilized for booking expenditure on items other than fee for participation, such as travel expense, charges towards hotel, boarding and lodging ( if allowed as per rules & regulation of BSNL to the employees for attending seminar/conference /training program) Expenditure incurred for conducting any conference and seminars (including conference organized for agents, dealers or development advisors) other than those mentioned under Exhibition, fair & Press conference shall also be booked. 31

32 (D) sales promotion including publicity but excluding specified expenditure on advertisement 20% of expenses FBT is not payable on brokerage and selling commission paid for selling goods (selling expenses). Discounts or rebates or bonus points (credit card customers) allowed to customers or wholesale dealers are in the nature of selling expenses & are not liable to FBT. Product-marketing research through a separate marketing agency is not liable to FBT. Any expenditure in the nature of call center charges for canvassing sales (cold calls) and carrying out post-sale activities is in the nature of selling cost and is not liable to FBT. Expenditure incurred for the purpose of providing incentives given to distributors for meeting sales targets (including free goods for achieving certain sales target and cash incentives adjustable against future supplies) do not liable to FBT. Any samples of products distributed to trade or consumers would be liable to FBT. Any expenditure on making an ad-film is not liable to FBT. Any expenditure (including on artwork and royalty charges) on free offers (with products) such as freebies like tattoos, cricket cards or similar products, to trade or consumers (excluding employees) is for the purposes of sales promotion and, publicity liable to FBT. Any expenditure incurred for the purposes of lodging and boarding, or travel of customer/clients liable to FBT [(D) or (G)] / Sales promotion & Publicity Expenditure (Liable to FBT) will be utilized for classifying any expenditure on sales promotion. Examples of sales promotion & publicity are expenditure (including expenditure on artwork and royalty charges) on free product, free offer (with product) distributed to trade or consumers etc. Any expenditure on photography & video (other than ad-film) for the purpose of sales promotion shall be booked under this head. Any expenditure on photography & video other than for sales promotion & publicity (including ad-film) shall be treated as general expense and booked under accodes for General Expenses under difference Administrative Expense schedules. 32

33 / / Advertisement & Publicity (Not liable to FBT) shall be utilized for expenditure (including rental) on advertisement of any form in any print (including journals, catalogues or price lists) or electronic media or transport system. The above mentioned code shall also be utilized for booking expenditure on advertisement by way of signs, artwork, paintings, banners, awnings, direct mail, electric spectaculars, hoardings, bill boards or by way of such other medium of advertisement. Any expenditure is by way of payment to any advertising agency for the purpose of accomplishing the advertising works mentioned above shall also be booked to above accodes. The expenditure on Ad-film shall also be booked under above-mentioned accodes , , , Exhibition, fair & Press Conference (Not liable to FBT) shall be utilized for booking expenditure on press conference, business convention, fair, exhibition held or participated by BSNL / Sponsorship of sports event or any other event (Not liable to FBT) For booking expenditure of any sports event or any other event organized by any Government agency or trade association or body. Any expenditure is by way of payment to any agency for the purpose of accomplishing the works mentioned above shall also be booked to above accodes. 33

34 (E) employee welfare excluding any expenditure or payment made to fulfill any statutory obligations or mitigate occupation al hazards or provide first aid facilities in the hospital or dispensary run by the employer; 20% of expense s If the expenditure is incurred for treatment of injuries suffered in the course of performance of duties but the treatment is at a hospital/dispensary not maintained by the employer, such expenditure is liable to FBT. However, if such expenditure is pursuant to a statutory obligation, it will not be liable to FBT. Any subsidy provided to a school not meant exclusively for employee s children is liable to FBT. Any expenditure incurred for the provision of facilities like garden, site cleaning, light decoration school, library, mess, television, cable connection etc. employees colonies are liable to FBT. Expenditure incurred on providing safety shoes or uniform or equipment to the employees or incurred for the purposes of reimbursement of washing charges, is exempt from FBT to the extent such expenditure is incurred to meet such statutory obligation. Any reimbursement of expenditure on books and periodicals to employees is liable to FBT Any expenditure incurred on prizes/rewards to employees for achievements is liable to FBT. Expenditure incurred for the purpose of providing transport facility to the children of employees is liable to FBT. The payment to any person of repute for promoting the sale of goods or services i.e. brand endorsement, shall not be included as part of Sales promotion and publicity expenditure for levy of FBT (AY ). Sch 151 to 166 xxx1000 Staff Welfare (Liable to FBT) shall be utilized for booking expenditure on welfare of employee. This may include any free product/ free offer (with product) given to the employees by BSNL as per existing rules & regulation. However, any expenditure incurred or payment made to fulfill any statutory obligation or mitigate occupational hazards or provide first aid facilities shall not be considered as expenditure for employees welfare Provision of facilities in staff colonies (Liable to FBT) Expenditure incurred by BSNL for the provision of facilities like garden, site cleaning, light decoration, school, library, mess, television, cable connection etc. in employees colonies 34

35 (Q) Tour and travel (including foreign travel); 5% of expenses (AY ) This expenditure paid by the client to the lawyer or auditor is treated as professional fee & not liable to FBT in the hands of the client. FBT would not be payable on payment of advance towards expenses to be incurred in the future. Rent paid or payable for an operating lease of a motor-car is expenditure for the purposes of conveyance, tour and travel. Sch.171 to 185, 192 & 471 xxx0901 Inland Travel-expense on journey, personal effects & conveyance shall be utilized for booking the expenditure on fare, road mileage, cost of transportation of personal effects, cost of transportation of conveyance in connection with TA on tour, TA for local journey, TA when deputed for training, TA on temporary transfer, TA on Transfer, TA on retirement etc. (Liable to FBT) / Foreign Travel-Expense on Journey (Liable to FBT) Sch.171 to 185, 192 & 471 xxx0903 Daily allowance for Inland travel (Not liable to FBT) The daily allowance portion of traveling allowance (excluding the lodging charges in case of stay in hotel etc. in connection with inland travel i.e. TA on tour, TA for local journey, TA when deputed for training, TA on temporary transfer shall be booked under this head / Daily Allowance for foreign travel (Not liable to FBT) The expenditure on foreign travel shall be booked by all units under these heads [(Basic segment Sch.171) (CMTS sch.471)] [Sch.171, 175, 177, 179, 180, 182, 183, 471 xxx1907 Expense on journey-branch Auditor Sch.171, 175, 177, 179, 180, 182, 183, 471 xxx1908 Expense on journey-internal Auditor Sch.171, 179, 180, 183, 471 xxx1909 Expense on journey-cost Auditor Sch.171, 179, 180, 183, 471 xxx1910 Expense on journey-tax Auditor Sch.171, 175, 177, 179, 180, 182, 183 xxx1912 Daily allowance, hotel charges of Branch/Internal/Tax/Cost Auditor (not liable to FBT)] / Expenses on journey-professional other than Branch /Internal/ Tax/ Cost Auditors (Liable to FBT) 35

36 Sch.171 to 185, 192 & 471 xxx0906 Composite Transfer Grant (Not Liable to FBT) The composite transfer grants, which are given to the employees at the time of transfer and retirement, shall be booked under this head. (F) Conveyance (G) use of hotel, boarding and lodging facilities; 5% of Expenses (Telecommunication infrastructure treated as Business construction) 20% of expenses Fixed conveyance allowance is not liable to FBT 171 to 185, 192, 471 XXX1000 Conveyance charges Sch.171 to 185, 192 & 471 (Liable to FBT) xxx0904 Hotel/Guest house-lodging charges for inland travel For stay in hotel/guest house/lodges/rest house/other establishment etc. in connection with inland travel, the eligible portion of lodging charges paid shall be booked under this head. Sch.171 to 185, 192 & 471 (Liable to FBT) xxx0905 Hotel/Guest house-other than lodging charges for inland travel For stay in hotel/guest house if any expenditure other than lodging charges & daily allowances allowed, the same shall be booked under this head / Hotel / Guest House-lodging charges for foreign travel / Hotel/ Guest House-other than lodging charge for foreign travel (Liable to FBT) The expenditure on foreign travel shall be booked by all units under these heads [(Basic segment Sch.171) (CMTS sch.471)] 36

37 (H) Repair, running (including fuel) and maintenance of motorcars and the amount of depreciation thereon; 20% of expenses For the purposes of payment of advance of tax on fringe benefits tax, depreciation should be taken on a pro-rata basis. Depreciation on motor-car or any other asset shall be computed under the provisions of sec. 32 of IT Act. Rent paid or payable for a financial lease of a motor-car is in the nature of expenditure on running or maintaining of a motor-car. Delivery/display vans, trucks/lorries, ambulance and tractor are not motor cars and the expenditure on the running, repair and maintenance of such vehicles is not liable to Sch.171 to 185, 192& 471 xxx0701 Vehicle-(Other than truck, Delivery van) hiring expense (liable to FBT) xxx0703 Hiring of vehicle-truck/lorry, Delivery van. Tractor, ambulance (not liable to FBT) Sch.171 to 173, 175 to 185, 192& 471 xxx0804 Motor vehicles & Launches shall be utilized for booking expenditure on repair & maintenance of departmental truck, lorry, delivery van, tractor, ambulance, omnibus, motor cycle, launches (not liable to FBT) Sch.171 to 185, 192& 471 xxx0812 Motor car other than truck, lorry, delivery van, tractor (repair &maintenance) (liable to FBT) / Salary of driver of departmental vehicle shall be utilized for booking the salary of driver of departmental vehicle. Here departmental vehicle means the vehicle other than departmental truck, lorry, tractor, ambulance, transport vehicle, omnibus, and delivery/display vans. The pay & allowance, other benefits such as LTC, Pension contribution, medical allowances etc. of such driver shall initially be booked under respective remuneration schedule, however the same shall be transferred to the above accode by crediting the respective accodes for pay, DA etc. (liable to FBT) 37

38 (I) Maintenance of any accommodation in the nature of guest house other than accommodation used for training purposes; 20% of expenses Expenditure on items like refrigerators, televisions, furniture and similar items in a guest house would not fall within the scope of this clause (acquisition of capital asset) Expenditure incurred for the purposes of maintenance of all guest houses is liable to FBT irrespective of whether they are used as holiday homes or not. Expenditure on provision of food at the guest house maintained by the employer, contract charges paid to guest house staff and rent paid or payable in respect of the guest house building are liable to FBT / Maintenance expense of Guest House, Holiday Home (Liable to FBT) shall be utilized for booking expenditure incurred on upkeep and running of guest house & holiday homes. The expenditure on salary of guest house and holiday home staff shall be treated as expenditure on upkeep and running of guest house, holiday home. Similarly if guesthouse, holiday home building is taken on rent, the said rent will be booked under this accode. If food is provided to the guest free of cost the cost of it shall also be booked under this accode. However, the expenditure on repair of guesthouse, holiday home building and depreciation on guesthouse & holiday home building and other depreciable assets of guesthouse & holiday home will not be booked under this accode. The cost of capital items i.e. fridges, TVs etc. provided in Guest house, holiday home shall not be booked under this accode. 38

39 (J) Use of telephone (including mobile phone) other than expenditure on leased telephone lines; 20% of expenses (K) Festival celebrations: 50% of expenses Expenditure on meeting/ get-togethers of employees and their family members on the occasion of any festival (except Independence Day, Republic Day) is expenditure on festival celebrations / Expenditure on celebration of Festival If any expenditure on lighting, decorating, feast etc., is incurred for celebrating festivals such as New Year, Navratri, Diwali, Id, Christmas, shall be booked under this head. (Liable to FBT) / / Expenditure on ceremonies shall be utilized for booking expenditure for celebrating Independence Day & Republic Day. (Not liable to FBT) 39

40 (L) Use of health club and similar facilities; (M) Use of any other club facilities; 50% of expenses 50% of expenses Entrance or membership fee of a club or health club or similar facility are liable to FBT / Expenditure on Health club and similar facility (Liable to FBT) / Expenditure on club (other than health club) (Liable to FBT) If any expenditure on items such as membership fee etc/ is incurred for extending the facility of health club and Club (other than health club) to the eligible employees the same shall be booked under this head. 40

41 (N) Gifts; and 50% of expenses Expenditure on gifts under trade schemes or for promotion of company s products to distributors/retailers is liable to FBT. A gift to a customer would fall within the scope of the clause. Any expenditure incurred on gifts provided to employees, whether on the occasion of marriage or otherwise is liable to FBT (including gift in kind) / / Gift will be utilized for booking expenditure on gift if given by BSNL to distributor/subscriber/employee under proper sanction. Product/service given free to trade /subscribers shall not be booked under this head. (Liable to FBT) (O) scholarships 50% of expenses Expenditure on the education of employees sent to an educational institution would fall within the scope of this clause. FBT is payable on the expenditure incurred or payment for the purposes of scholarship irrespective of whether the recipient is an employee or his relative or any other person 41

42 * Where the employer is engaged in the construction business, 5% of the expenses in the nature of conveyance, tour and travel (including foreign travel) is treated as Fringe Benefit (instead of 20%)(AY ) What is the meaning of the term business of construction whether only civil construction or even other construction work like construction of plants, telecommunication infrastructure, etc. are also covered? The term business of construction must be understood by giving the ordinary English language meaning to the words. Hence, all activities involving construction would be covered within the scope of the term business of construction referred to in section 115WC of the Income tax Act. Important Clarifications:- 1. The amount of expense incurred or payment made, for the purposes listed in clauses (b) and (c) of sub-section (1) and clauses (A) to (P) of sub-section (2) of section 115WB, is to be determined according to the books of account. 2. If there is no provision for computing the value of any particular fringe benefit (as per sec.115wc), such fringe benefit, even if it may fall within clause (a) of sub-section (1) of section 115WB, is not liable to FBT. 3. FBT is payable in the year in which the expenditure is incurred irrespective of whether the expenditure is capitalized or not. However, the same expenditure will not be liable to FBT again in the year in which it is amortized and charged to profit. 4. There is no requirement to segregate the various expenses referred to in sec.115wb, between those incurred for official purposes and personal purposes. 5. The value of fringe benefits shall be determined with reference to the net expenditure i.e. Gross expenditure incurred by the employer less recovery from the employees. 6. to the extent the expenses incurred by the employer are personal in nature and have, therefore, been disallowed under section 37 of the Income-tax Act, such disallowance would not be liable to FBT. BSNL, India For Internal Circulation Only 42

43 7. An employer is liable to FBT if it is engaged in business or profession or any activity, whether or not such activity is carried on with the object of deriving income, profits or gains. 8. If any sum is paid by the employer for expenditure actually incurred by the employee for medical treatment in an unapproved hospital and it does not exceed Rs.15000/- during the year, not liable to income- tax in the hands of the employee. Such sum is liable to FBT. (Exceeding Rs.15000/- is taxable in the hands of the employee as per IT Act) 9. Expenditure on ay capital asset in respect of which depreciation is allowable u/s 32 of the Income-tax Act does not fall within the scope of sub-section (2) of sec.115wb and such expenditure is not liable to FBT (except depreciation on motor cars or aircrafts). Taxable entities (who is liable to pay the tax? The FBT is payable by an employer who is:- (i) a company; (ii) a firm; (iii) an association of persons or a body of individuals, excluding any fund, trust or institution eligible for exemption under clause (23C) of section 10 or registered under section 12AA; (iv) a local authority; or (v) an artificial juridical person The tax on fringe benefits is payable by the employer even if he is not liable to pay income tax on his total income computed in accordance with the provisions of the Income tax Act other than the provisions of Chapter-XIIH. Tax Rate: - 30% of the value of fringe benefits Payment of FBT: - The employer is required to pay advance tax at the rate of 30% of the current fringe benefits paid or payable in each quarter. The advance tax is to be paid on or before the 15 th of the month following that quarter. However, in the case of BSNL, India For Internal Circulation Only 43

44 last quarter ending on 31 st March of the financial year, the advance tax shall be payable on or before the 15 th day of March of that year. Any excess advance tax paid for the preceding quarter can be adjusted against the advance tax for the subsequent quarter(s). Failure to pay advance tax for any quarter, or payment less than 30% of the value of fringe benefits in that quarter, will attract 1% on the shortfall, for each month or part of the month for which such shortfall continues. Return of Fringe Benefits:-In case of a company, the due date is 31 st of October of the assessment year (in the prescribed form). Failure to furnish a return of fringe benefits or delayed filing of such return will result in the levy of for each month of delay or till the assessment is made, on the amount of tax on the value of fringe benefits. Treatment of FBT: The FBT shall not be allowed as a deduction in computing the income chargeable under the head profits and gains of business or profession. However, FBT is an allowable deduction in the computation of book profit under section 115JB of IT Act. SERVICE TAX Service tax is imposed under Finance Act, 1994 as amended from time to time. There is no Service Tax Act. Rates of Service Tax 5% w.e.f % w.e.f % w.e.f (Education cess on Service Tax 2%) 12% w.e.f (Education cess on Service Tax 2%) * TDS (income tax) will be on gross amount of the bill i.e. inclusive of service tax and education cess charged by the contractor/professional etc. * Service tax is payable on gross amount charged by service provider for service provided or to be provided. Thus, tax is payable as soon as advance is received.(w.e.f ) BSNL, India For Internal Circulation Only 44

45 * If gross amount charged by service provider is inclusive of service tax (i.e. service tax not charged separately in invoice), value of taxable service will be calculated by back calculations such that with addition of service tax payable, the total is equal to the gross amount charged. ( Value of taxable service plus service tax payable is equal to gross amount charged ) [section 67(2)] * Gross amount charged for taxable services can be before, during or after provision of service [section 67(3)] * Service tax is payable on value of taxable service and not on entire value of contract. Service tax is not payable on value of goods and material supplied to the service recipient while providing service. (Such exclusion is permissible only if Cenvat credit on such goods and material is not taken). There should be evidence about its value. In case of some services, service tax is payable at lower rates, i.e. partial abatement is available from gross value. The lower rate is applicable if the service provider does not avail cenvat credit of duty/tax on inputs, input services and capital goods. [Example construction service, goods transport agency etc.] * Small service providers whose turnover less than Rs.four lakhs per annum are exempt from service tax. This small service providers shall not avail the CENVAT credit of service tax paid on any input services. The exemption shall apply to the aggregate value of all such taxable services from all premises of service provider taken together and not separately for each premises or each services. Person providing taxable service in excess of Rs. Three lakhs per annum (but less than Rs. Four lakhs ) will have to register with Superintendent of Central Excise under Service Tax provisions, though they will be eligible for exemption if turnover is less than Rs. Four lakhs per annum. Person liable to pay Service tax BSNL, India For Internal Circulation Only 45

46 In most of the cases, service provider, i.e. person who is providing taxable service is liable to pay service tax. Exceptions: * In relation to taxable service provided or to be provided by any person from a country other than India and received by any person under section 66A of finance Act, service tax is payable by recipient of service [rule2(1)(d)(iv)]. In such case, person receiving the service will have to register. * In case of services of Goods transport Agency (GTA), service tax is payable by consignor/consignee who is paying freight [rule2(1)(d)(v)] [However, the consignor/consignee is not entitled to avail exemption available to a small service provider] * In case of sponsorship service provided to a body corporate or firm, the body corporate or firm receiving such sponsorship service will be liable to pay service tax [rule 2(1)(d)(vii)]. The body corporate or firm paying such service tax will be eligible to avail Cenvat credit of the service tax paid, on the basis of TR-6 challan by which the tax is paid w.e.f It may be noted that when person receiving service is liable to pay service tax, he is not entitled to exemption of Rs. Four lakhs which is available to a small service provider. Procedures * There are no prescribed form of records. The records maintained by assessee including computerized data maintained by assessee in accordance with various other laws are acceptable [rule 5(1)] * In the first return, the assessee should furnish a list of all accounts maintained by assessee including the memoranda received from his branch offices [rule 5(2)] * Rule 5(3) makes it obligatory for an assessee to preserve records at least for a period of five years. BSNL, India For Internal Circulation Only 46

47 * Rule 5(4) provides that an assessee shall make available records maintained by him at the registered premises (includes all premises or offices from where an assessee is providing taxable service) to a Central Excise Officer authorized by jurisdictional AC/DC, for the purpose of inspection or examination. Registration Following will require registration as per the rules (a) (b) Input Service distributors Service provider who is exempt but whose aggregate value of taxable service exceeds Rs. Three lakhs. A person should register within 30 days from date of commencement of the business of providing taxable service. They have to apply for registration in form ST-1, along with the following documents:- (i) copy of PAN (ii) proof of residence (iii) constitution of applicant Provisional payments As per rule 6(4A) of Service Tax Rules (w.e.f ), you can pay tax on higher side. You can yourself adjust the excess tax paid against tax liability of subsequent period. After adjustment, you should inform Superintendent of Central Excise within 15 days from date of adjustment. Note that such adjustment is possible only when excess tax was paid as details of payments received at other offices or premises was not received in time. Excess payment was for some other reason; such self adjustment will not be permissible. Invoice by service provider Assessee should prepare invoice in respect of his services. The invoice should be prepared within 14 days from date of completion of taxable service or receipt of payment towards the value of taxable service, whichever is earlier. BSNL, India For Internal Circulation Only 47

48 As per rule 4A(1) of Service Tax Rules, the invoice/challan/bill should be signed by authorized person of provider of input services. The invoice/bill/challan should be serially numbered The Invoice should contain following details:- (section 12 A Central Excise Act) (1) Name, address and registration number of person providing taxable service (2) Name and address of person receiving taxable service (3) Description, classification and value of taxable service provided or to be provided and (4) Service tax payable on taxable service The rule does not make mention of date, but actually, date should be mentioned Service tax and education cess should be shown separately in invoice. Education cess should be paid by TR-6 challan by showing separate account head in TR-6 challan, indicating appropriate code. Payment of Tax The service tax is payable 5 th of the month following the month in which payments are received towards value of taxable services except in March. Service tax on value of taxable services received during month of March is required to be paid by 31 st March. Assessee should first utilize Cenvat credit available. Balance amount is payable in cash. TR-6 challan: - the tax is payable by a Yellow colour challan in the bank where excise duty is accepted. The major account head is 044. In addition, separate accounting code has been given to each service. BSNL, India For Internal Circulation Only 48

49 Rule 6(2A) provides that cheque of proper amount should be deposited with bank on or before due date. If last day of payment and filing return is a public holiday, tax can be paid and return can be submitted on next working day. Interest for late payment service tax In case of delayed payment of service tax, there is mandatory payment of simple interest under section 75 for period which the payment is delayed. The interest rate is 13% w.e.f Department is not required to issue any show cause notice or demand, as interest payment is automatic by virtue of statutory provisions. Returns Half yearly return in form ST-3 in triplicate within 25 days of the end of the half year. Half year means 1 st April to 30 th September and 1 st October to 31 st March of financial year. The return should be accompanied by TR-6 challans, evidencing payment of duty. If assessee is providing more than one taxable service, he should file only one return. However, details of each taxable service shall be shown separately. If no service is provided in a particular period, NIL return should be submitted. If return of service tax is not filed within prescribed period, Penalty is leviable under section 77, which can be up to Rs the penalty can be waived under section 80, if assessee proved that failure was due to reasonable cause. Assessment of Service Tax Like Income tax and central excise, service tax assessment is basically selfassessment. Show cause cum demand notice can be issued within one year. Notice beyond one year (within five years) can be issued only if there if fraud, suppression of facts, willful misstatement or collusion. Amount collected representing as service tax must be paid to Government If a person liable to pay service tax collects from recipient of taxable service, an amount representing as service tax, in excess of service tax assessed or determined BSNL, India For Internal Circulation Only 49

50 and paid on any taxable service, the excess amount must be deposited forthwith with government [section 73A(1)] If a person collects from any person an amount representing it as service tax when not required to be collected, he shall forthwith deposit the amount so collected to Government [section 73A(2)] Really, service tax provisions do not require any tax to be collected. Tax is required to be paid, whether or not collected. Penalties If service tax is not paid or belatedly paid, penalty shall be imposed, which will be minimum Rs.200 per day during which such failure continues per month, whichever is higher, starting with the first day after due date till date of actual payment of outstanding amount. Mercifully, the penalty cannot exceed the service tax which was payable. In addition, of course, service tax and interest is payable (section 76). Penalty for contravention of any provision of the chapter or rules of service tax, can be up to Rs.1000 (section 77). Where any tax is not levied or paid erroneously refunded, the person shall be liable to pay penalty which shall not be less than of service tax but can be up to twice the amount of service tax amount of tax not levied or not paid or erroneously refunded (section 78). [The penalty will be reduced to 25%, if tax, interest and penalty is paid within 30 days from date of receipt of order of Central Excise Officer.] As per section 80, penalty under sections 76, 77 or 78 can be waived if assessee proves that he had reasonable cause for the failure. Appeals BSNL, India For Internal Circulation Only 50

51 If adjudication order is passed by authority lower than Commissioner of Central Excise, first appeal will be with Commissioner (Appeals) under section 85(1) within three months from date of receipt of order of adjudicating authority. Second and final appeal is with Appellate Tribunal (Customs, Excise and Service Tax Appellate Tribunal-CESTAT) under section 86(1). Appeal is required to be filed within three months. The appeal of assessee should be in form ST-5 in quadruplicate and should be accompanied by equal number of copies of order appealed against. One of the copies should be certified copy of order [rule 9(1)]. Telephone, pager, fax, telex, telegraph or leased circuit services * Local PCO (PCO meant for only local calls) is exempted from service tax. * Free telephone at airports and Hospitals where no bills are being issued. (Notification No.3/94 ST dated ) * Taxable services (telephone connections) provided by the telegraph authority to the Diplomatic missions or members thereof are exempted from Service Tax (Notification no.5/96 ST[GSR 174(E)] dated ) * The amount of service tax shall be calculated on the total amount of the telephone bill before adjustment of excess/double payment/deposit etc. * In case of OYT connections, the service tax at prescribed rate should be calculated on the amount of rent payable before allowing admissible OYT rebate. * It has been clarified by Department of Revenue that service tax is not leviable on the amount of surcharge collected for delayed payment of telephone bills. [MF (DR) Service Tax circular No.32/3/2000 CX dated ] * The value of taxable services in relation to telephone connections provided to the subscribers is the gross total amount received by the telegraph authority. In BSNL, India For Internal Circulation Only 51

52 case where the telegraph authority has extended services at a discounted price, the service tax liability is only in respect of the discounted price so received. (BSNL HQ No.2-20/2000-BSNL/TR dated ) [M.F. circular no.23/3/97(f.no.149/1/96-cx.4) dt ] * No service tax is leviable for (i) (ii) Rental for junction links (charges for using junction links of the BSNL from one exchange to another) Port charges (iii) Infrastructure charges from both the BTSPs and CMSPs Service tax is leviable on interconnection link charges recovered by BSNL from BSTPs as well as CMSPs. (Circular No.46/9/2002 [F.No.149/2/2002-CX.4] dated ] Interconnect Usage charges (IUC) would not be chargeable to service tax (M.O.F. Dept. of Rev. No.149/2/2004-CX.4 dt ) Since the Service Tax and Education Cess are being charged and accounted for separately, the same have to be rounded off individually. (M.O.F. No.137/59/2004-CX-4 dt ) Cenvat Credit Rules, 2004 Cenvat scheme allows credit of excise of duty paid on inputs and capital goods and service tax paid on input service. This credit can be utilized for payment of service tax on output services. Cenvat credit is available only if there is provision of taxable output service. Input Goods for CENVAT Duty paid on input goods used by service providers for providing output service is eligible for Cenvat credit. As per rule 2(k)(ii), all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for BSNL, India For Internal Circulation Only 52

53 providing any output service is input. Credit of duty on inputs can be taken up instantly, i.e. as soon as inputs are received. CENVAT credit of input service Any service in relation to business is input service. Credit of service tax on input services is available only after payment is made to service provider for service and also service tax. A service provider will be entitled to credit of service tax paid by him which is used by him directly or indirectly in provision of output services. If some input service is exclusively used for exempted output service, its credit is not available.(rule 7) Service provider may have Head office/regional office at different place/s. The services may be received at head office/regional office, but ultimately, these will be indirectly used for providing output service. Provision has been made to avail cenvat credit of services received and paid for at head office/regional office. Such head office/regional office will be registered with Central Excise as Input Service distributor and it will have to issue invoice on the service provider. They have to apply for registration in form ST-1. As per rule 9(1)(g), invoice, bill or challan issued by an input service distributor under rule 4A of service tax credit rules is an eligible document for purpose of taking cenvat credit. The input service distributor should issue an invoice, bill or challan on monthly basis after consolidating the service tax paid on services received during the month. Requirement of invoice, bill or challan: (rule 4A(2) of service tax rules) It shall be signed by authorized person The document should be for each recipient of the credit distributed Document should be serially numbered The invoice should contain following details: (i) Name, address and registration number of the person providing input services and Serial number and date of invoice, bill or challan issued by service provider under rule 4A(1) BSNL, India For Internal Circulation Only 53

54 (ii) Name and address of input service distributor (iii) Name and address of the recipient of the credit distributed (iv) Amount of credit distributed Responsibilities of Input Service Distributor (a) (b) Take reasonable steps to satisfy himself about identity and address of provider of input service [rule 9(3)] Submit half yearly return within one month from close of the half year, in prescribed form ST 3 [rule 9(10)] CENVAT credit of duty paid on Capital goods Only capital goods as defined in rule 2(a) of Cenvat Credit rules are eligible for Cenvat Credit (i) All goods falling under chapter 82, chapter 84, chapter 85, chapter 90, heading no and sub-heading no of the first schedule to Excise Tariff Act. (ii) Pollution control equipment (iii) Components, spares and accessories of the goods spefified at (i) and (ii) above (iv) Moulds and dies, jigs and fixtures (v) Refractories and refractory material (vi) Tubes, pipes and fittings thereof, and (vii) Storage Tank used for providing output service Motor vehicle is not capital goods for BSNL. Service provider (BSNL) is eligible to avail cenvat on equipment or appliance used in an office, if these are used for providing output service. [rule 2A(2)] BSNL, India For Internal Circulation Only 54

55 Capital goods should be used for providing output service. Duration is not specified. Hence, if the capital goods are used for one day, Cenvat eligibility of capital goods is established, as they are used.[rule 2(b)(a)] Capital goods used exclusively for providing exempt service are not eligible for Cenvat credit. [rule 6(4)]. Thus partial use of capital goods for provision of exempt services is permissible. i.e. in such case, Cenvat credit on capital goods will be allowed. Depreciation under section 32 of Income-tax Act should not be claimed on the excise portion of the Capital goods [Rule 4(4)] Cenvat credit on capital goods is required to be availed in more than one year, viz. up to 50% credit can be availed when these are received and balance in any subsequent financial year. As per rule 3(1), Cenvat credit of capital goods can be taken of duty paid on capital goods received in the premises of provider of output service. The rules do not require its installation or commissioning for taking credit. Rule 4(2)(a) of Cenvat Credit Rules provides that in respect of capital goods, Cenvat credit shall be taken only for an amount not exceeding 50% of duty. As per rule 4(2)(b), balance may be taken in any subsequent financial year. Thus, it is not that any credit must be taken in the first year. Assessee can choose to take credit in any subsequent year, even if he taken Nil credit in the first year, he satisfies the requirement of rule 4(2)(a), as obviously Nil does not exceed 50%. Utilisation of Cenvat Credit Rule 3(1) states that following duties/taxes will be available as Cenvat Credit Basic Excise duty on indigenous inputs [paid on goods specified in First Schedule to CETA]. Corresponding CVD on imported goods is allowable. BSNL, India For Internal Circulation Only 55

56 Education cess on manufactured excisable goods and CVD equal to education cess on imported goods. This credit can be utilized only for payment of education cess on output services. Service tax on input services paid u/s 66 of Finance Act. Education cess paid on service tax. This credit can be utilized only for payment of education cess on output services. Credit can be taken as soon as goods are received in the premises of service provider. [rule 4(1)]. Service Provider should take credit at the earliest opportunity. Service provider should maintain record of Cenvat credit availed and of credit utilized. First proviso to Cenvat Credit rule3(4) states that only Cenvat credit available as on last day of the month can be utilized for payment of duty even if duty is payable by 5 th of following month. Thus, Cenvat credit in respect of inputs/capital goods/input services received after end of month cannot be utilized while paying duty on 5 th the credit can be utilized in subsequent month only. Duty Paying Documents for Cenvat Rule 9(1) of Cenvat Credit Rules prescribes that Cenvat Credit can be taken on the basis of: * Invoice of manufacture from factory * Invoice of manufacturer from his depot or premises of consignment agent * Invoice issued by registered importer * Invoice issued by importer from his premises or consignment agent registered with Central Excise * Invoice issued by registered first or second dealer * Supplementary Invoice * Bill of entry * Certificate issued by an appraiser of customs in respect of goods imported through foreign post office BSNL, India For Internal Circulation Only 56

57 * TR-6 Challan of payment of tax where service tax is payable by other than input service provider * Invoice, bill or challan issued by provider of input service on or after * Invoice, bill or challan issued by Input service distributor under rule 4A of Service Tax Rules As per rule 9(2) of Cenvat Credit rules, Cenvat credit cannot be denied as long as the document contains essential aspects of duty/tax payment i.e.- (a) (b) (c) (d) Payment of duty or service tax Description of goods or taxable service Assessable value Name and address of the factory or warehouse or provider of input service Responsibility of person taking CENVAT CREDIT Explanation to rule 9(3) states that a provider of output services or input service distributor taking cenvat credit shall be deemed to have taken reasonable steps if he satisfies himself about identity and address of manufacturer or supplier or provider of input service, who issued the Invoice or other document. Such satisfaction can be:- (a) from his personal knowledge on the strength of a certificate given by a person with whose handwriting or signature is familiar or on the strength of certificate of Range Superintendent within whose jurisdiction the manufacturer or supplier or provider of output service is situated. BSNL, India For Internal Circulation Only 57

58 Thus Cenvat cannot be denied if the documents contains these details and no permission/condonation is required if the invoice/bill/challan contains these basic details. Dealer s Invoice for CENVAT When the inputs are purchased directly from factory of original manufacturer, there is proof regarding amount of duty paid, in the form of Invoice of manufacturer. If goods are imported directly by manufacturer (who is user of inputs), Bill of Entry is proof of payment of CVD. All dealers/depots/consignment agents issuing invoice for Cenvat purposes will have to register with central excise authorities under rule 9 of CE Rules. Only first stage and second stage dealers are allowed to issue Invoices. Cenvatable Depots, consignment agents and importers should be registered with CE. Invoice of depot/consignment agent of manufacturer is eligible for Cenvat under rule 9(1)(a)(i)(I). Invoice of depot/consignment agent of importer is eligible document for cenvat as per rule 9(1)(a)(iii). Invoice raised by manufacturer of inputs will contain details of excise duty paid on total quantity. The wholesaler or distributor may supply the goods received from manufacturer to more than one buyer, dealers or sub-dealers. Amount of duty actually paid on goods should be indicated in the invoice of dealer on prorata basis. (It should not be charged but merely indicated) Exempted Output Services Capital goods used exclusively for providing exempt service are not eligible for Cenvat Credit [rule 6(4)]. If capital goods are partly used for taxable services, Cenvat credit will be available. Duty paid on Inputs and service tax paid on input services used for exempted services cannot be used for payment of tax on services which are not exempt from tax [rule 6(1)]. If service provider uses common inputs both for exempted as well as unexempted services, he should maintain separate records for inputs/input services used BSNL, India For Internal Circulation Only 58

59 for exempted services and should not avail cenvat on such inputs/input services. If he does not maintain separate records of input/input services used in exempted services, he can utilize Cenvat credit only up to 20% of service tax payable on output service. However, rule 6(5) provides an exception to this general rule. In case of specified services, full Cenvat credit of input service is available even if these are partly used in exempted out put services. In other words, entire credit will be available for utilization to the service provider without restriction of 20% of tax payable on output services. Removal of input, capital goods and waste The inputs or capital goods can be removed as such from the premises of service provider on payment of an amount equal to Cenvat credit availed when the credit was taken. In other words, it amounts to reversal of Cenvat credit taken [rule 3(5)] * If capital goods on which Cenvat is availed are cleared as such (i.e. without use), an amount equal to Cenvat credit availed is required to be paid. * If capital goods are sold as scrap, an amount equal to duty payable on scrap value of capital goods is payable. * If capital goods are cleared after use (but not as scrap), legally, neither any amount nor any duty is payable, since it cannot be said that the capital goods are removed as such. * However, to avoid controversies and fruitless litigation, it is advisable to pay amount equal to duty payable on sale price, particularly where buyer is in a position to avail Cenvat credit. Miscellaneous provisions of Cenvat Record of inputs and capital goods BSNL, India For Internal Circulation Only 59

60 The provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the inputs and capital goods. The record should contain relevant information regarding (a) value (b) duty paid (c) Cenvat credit taken and utilized (d) The person from whom inputs/capital goods have been procured. Burden of proof regarding admissibility of Cenvat credit is on the provider of output service taking the credit Rule 9(5) Record of input services The provider of output service shall maintain proper records for receipt and consumption of the input services. The record should contain relevant information regarding-(a) Value of service (b)tax paid (c) Cenvat Credit taken and utilized (d) Person from whom input service has been procured. The burden of proof regarding the admissibility of Cenvat credit shall lie upon the person taking such credit [rule 9(6)] Cenvat credit record It is current account of Cenvat credit received, credit utilized and credit balance. This should give details of (a) credit availed against each input/capital goods (b) credit utilised (c) Balance credit available Returns * Half yearly return within one month from close of half year, by provider of output services [rule 9(9)] Return should be in form ST-3. * Half yearly return with one month from close of half year, by Input Service Distributor [rule 9(10)] Return should be in form ST-3. BSNL Instructions 1. The CENVAT Credit will be availed by all the revenue earning SSAs/Units which are already having service tax registration Number. BSNL, India For Internal Circulation Only 60

61 2. The offices/units which are generally not earning revenue and not having Service Tax registration number such as Corporate office, Circle Offices. Telecom Stores, Telecom Factories, Projects/REP/Task Force, Maintenance Region, Civil/Electrical, Data Network, NCES, QA, T&D Circle, Training Centres, CPAO (ITI Bills) etc. will avail the credit of CENVAT [Service tax paid on input services & Central excise duty paid on eligible Capital goods/inputs] through the revenue earning SSAs/Units/Offices situated at the same area which are nominated as Nodal Offices for the purpose. 3. The following offices will be nodal offices for availing Cenvat credit for Service tax paid on input services & Central excise duty paid on eligible Capital goods/inputs by non-revenue earning units Non-revenue earning units who will avail Cenvat credit for Service tax paid on input services & Central excise duty paid on eligible Capital goods/inputs through Nodal office Corporate office, Units of Data Network, NCES, NTP, QA, Telecom Stores any other non-revenue earning units situated at Delhi Units/Circle offices of STP, STR, QA, Telecom Stores, NCES, T&D any other non-revenue earning units situated at Chennai Units/Circle offices of ETP,ETR, QA, NCES, Telecom Stores, Telecom Factory, T&D, any other non revenue earning units located at Kolkata Units/Circle offices of WTP, WTR, QA, NCES, telecom Stores, Telecom Factory, T&D, any other non-revenue earning units located at Mumbai Units of Project Circles/REP/Task Force, Maintenance Region, Data Network, T&D circle, QA circle, CPAO (ITI Bills), Training Centres, NATFM, Civil & Electrical Wing situated at places other than at Mumbai, Chennai, New Delhi & Kolkata Nodal office NTR New Delhi Chennai Telephones Kolkata Telephones Circle office of Maharashtra Circle SSAs situated in the Area where the above mentioned offices are located BSNL, India For Internal Circulation Only 61

62 The PAUs/Divisions of four Project Circles, Task Force Circle, Gauwahati will avail the Cenvat credit (in respect of eligible capital goods /Inputs, Input Services) through the revenue earning SSA/ Metro Circle co-located at the same place. For example GM Project, Lucknow under NTP will avail the Cenvat credit through Lucknow SSA under UP (E) Circle. All the units, who will be availing CENVAT credit directly or through Nodal office, are required to maintain a Register to keep the following information about service tax paid on input service, Central Excise duty paid on eligible goods/ Inputs as well as the credit availed. i. Sl. No. and date of document on which CENVAT credit is availed. ii. Service Tax registration number, name and address of the input service provider iii. Description and value of input service & Service tax paid iv. Central Excise registration number of Ist stage Dealer/IInd stage Dealer/Manufacturer/Importer v. Description and value of eligible capital goods/inputs & Central Excise duty paid vi. CENVAT credit availed vii. CENVAT credit utilized for payment of service tax on output service. The nodal office will keep a separate Register to record the above information in respect of offices/units which will be availing CENVAT credit through the former. The information must be compiled on monthly basis. Accounting Entries On receipt of goods (capital goods/inputs), the following JS is to be passed:- For Value of goods (excluding the excise duty & Education cess on Excise duty) For Excise duty on the above goods Dr. Concerned final head under sch.105/114/117/171 to 185 Dr Excise duty paid on eligible goods (or) BSNL, India For Internal Circulation Only 62

63 For Education Cess on Excise duty For gross value of goods Dr Excise Duty & other levies (other the Education cess) on Inputs Dr Education Cess on Excise duty paid on eligible goods (or) Dr Education cess on Inputs Cr. Sy. Creditors ( etc.) For payment of Service Tax & Education cess on Input Service ( Security Guards, Auditors etc.) by BSNL, Dr. Concerned final head under Administrative expenses Sch.171 to 185, 192 (total amount excluding Service Tax & education cess) Dr Service Tax paid on Input service (service tax) Dr Education cess on service tax paid on Input service (education cess) Cr. Sy creditors (say etc.) (Gross amount) The units/offices which will avail credit on service tax through Nodal office will keep register and at the end of the each month (positively on the last working day of the month) will ascertain the net debit balance under head / , / & / and pass on the net debit balance to the respective Nodal office through ATD, by passing the following JV xx/19902xx Dr / ) Cr / Cr / Cr. The ATD along with xerox copies of the paid bill/voucher, invoice, challans shall be sent directly to the respective Nodal office through SPEED POST /REGISTERED POST/SPL MESSENGER WHEREVER POSSIBLE on the last working day of the month. In case of Remittance-other circle, ATD particulars shall be intimated to Circle office of Nodal office. The ATD shall be marked as ATD FOR AVAILING CENVAT CREDIT to draw the attention of Nodal office so that it can take prompt action. The units/office will ensure that ATD are promptly raised at the end of the each month and get the same accepted by the responding Nodal office and credit availed by the latter. AO (Cash) will be personally responsible to ensure that ATDs are accepted within 7 days of despatch and consequent accounting entries are effected. BSNL, India For Internal Circulation Only 63

64 The Nodal office on receipt of ATD as mentioned above will accept the ATD mmediately by passing the following JV: / Dr / Dr / Dr xx/19904xx Cr. The Nodal office will record the particulars of such service tax paid for input service/central excise duty on eligible Capital goods/inputs in a separate register. It will keep the bill/challans etc. received in safe custody. The Nodal office will ensure that ATDs for availing credit for CENVAT, are not kept pending so that the company does incur a loss on that account. On acceptance of ATDs, AO(Cash) will be personlally responsible to ensure necessary accounting entries are passed. The offices/units/nodal offices which are actually availing the credit of Cenvat through adjustment against service tax payable on output service, will work out the net debit balance under head / , / , / at the end of each month. While paying the service tax for out put service to Central Excise through TR 6 Challan, the net debit balance under head / , / , / , at the end of the month shall be taken into account subject to the limitation of 20% of service tax payable on output service at the end of that month. Before the payment is made the following JV shall be passed by the paying office to adjust the CENVAT Credit [Adjustment of Central excise duty & education cess on eligible capital goods, 50% Ist year & 50% next year] When the above excise duty on eligible goods / Inputs & service tax paid on Input service, adjusted against service collected on output service, JS will be:- Dr Service Tax Payable Cr Excise duty paid on eligible goods Cr Excise Duty & other levies (other the Education cess) on Inputs Cr Service Tax paid on Input service BSNL, India For Internal Circulation Only 64

65 When the above education cess on excise duty on eligible goods / Inputs & Education Cess on service tax paid on Input service, adjusted against service collected on output service, JS will be:- Dr Education Cess payable Cr Education Cess on Excise duty paid on eligible goods (or) Cr Education Cess on Inputs Cr Education Cess on service tax paid on Input service After making adjustment as mentioned above the units/offices/nodal office will pay the balance amount (net credit balance) under head service tax payable under 119/419 schedule by debiting the above head and crediting bank. After making payment, the unit/offices/nodal office will update the Registers mentioned above. The nodal offices will intimate through registered post the particulars of CENVAT CREDIT availed of to the respective offices on behalf of which it has availed the credit during the month. The office/units on receipt of information from the Nodal office will update their register. For the month of March the offices/units which avail credit through Nodal offices will ensure that ATDs along with vouchers are sent to the Nodal office immediately so that the latter will take the same in their accounts of March. The units who are collecting service tax on output service shall take action to print the service tax registration number on the forms used as telephone bills/demand notes/invoice/challan etc. Where manual demand notes/bills/invoices etc. are issued action may action to indicate the service tax registration number with the help of rubber stamp. Similarly the Permanent Account Number (PAN) of BSNL- AABCB5576C shall also be got printed in all the Bills/Challans/demand notes issued by BSNL. Source:-BSNL HQ No /2003-CA-III/BSNL/KW (BSNL HQ No /2003/CA-III/BSNL/Vol.-II 2005) dt & Dated: - 11 th March BSNL, India For Internal Circulation Only 65

66 Proper availment of CENVAT credit and registration as Input service Distributor-Reg Many circles have reported that the Service Tax authorities are not permitting the availment of CENVAT credits in respect of the non-revenue earning circles and units like CIVIL/Electrical wing/ Store Depots, Administrative Office etc. and also insisting for the reversal of the credits availed earlier. Further it is intimated that for availing the credit pertaining to such office, the nonrevenue earning units are required to get themselves registered as Input service distributor under the Service Tax Laws/CENVAT Credit Rules. In view of above requirement under the Service Tax Laws/CENVAT credit Rules, all the non-revenue earning circles/units like project, Maintenance, Q&A, Data Networks, Civil, Electrical, Store Depots, Administrative Office etc. may get registered with the service tax authorities as Input Service Distributors complying with all the requirements of registration and also covering all the taxable services handled by them. Attention is also invited to Rule-7 and 9 of the CENVAT credit Rules. These non-revenue earning circles/units should ensure that the names of all the BSNL offices to whom the Invoices along with ATD are to be raised for availing the credit are indicated while registering as Input Service Distributor. Vide Notification No.31/2005-Service Tax dated Government has introduced New Service Tax Return-in Form-ST-3. It is important to mention vide para-2 Circular No.82/3/2005-ST dated it is clarified that Form ST-3 has been specified for the purpose of furnishing Return under sub rules-(9) and (10) of Rule-9 of the CENVAT credit Rules, 2004 vide Notification No.33/2005-Central Excise(N.T.) dated Every Service Tax paying units/input Service Distributor are required to file an half yearly Return in new Form ST-3 only for the half year ended on and onwards. BSNL, India For Internal Circulation Only 66

67 The copy of the new ST-3 form may be downloaded from the following website:- Immediate action may be taken in the matter and any problems faced in getting the Registration may be brought to the notice of this office. (BSNL HQ No /2005/TAXATION/BSNL/Vol.II dt ) Service Tax on Foreign In-roamers (subscribers of foreign operators) roaming in BSNL GSM network Service Tax is to be levied on the usage of Foreign In-roamers (subscribers of foreign operators) roaming in BSNL GSM of % w.e.f hrs of 1 st July, The same is applicable both in case of roaming via direct Roaming agreements of BSNL with foreign operators as well as in case of roaming via M/s Spice, Punjab. (BSNL HQ No.Mob-53/INT-Roam/2005 dt ) Mandatory payment of Service Tax electronically for major assesses-reg Central Board of Excise & Customs vide Notification No.27/2006-Service Tax dated has decided that with effect from 1 st October 2006, payment of Service Tax electronically through internet Banking shall be mandatory for those assessee, who has paid Service Tax of Rupees Fifty Lakh or above in the preceding Financial year or has already paid Service Tax of Rupees fifty Lakh in the current Financial Year. BSNL, India For Internal Circulation Only 67

68 Questions in Tax Laws, Direct & Indirect Taxes, VAT & Cenvat 1. For Income Tax purpose what are the various heads of income? 2. What are all the important items related to salary which is exempted from Income Tax? 3. List out the important taxable perquisites applicable for an employee 4. Explain briefly as to how Medical facilities to an employee affects his Income Tax 5. Explain briefly the Income Tax impact on income from house property 6. Explain briefly who are all the persons responsible for payment of Service Tax 7. What are all the different services exempted from Service Tax? 8. Explain the provisions regarding availment of Cenvat Credit on Capital goods 9. Explain the provisions regarding availment of Cenvat Credit on Input and Input Services when exempted services are there 10. What is the position of Cenvat Credit already availed when the input or capital are removed from the site? BSNL, India For Internal Circulation Only 68