Notification of Service tax effective from 1st June, 2007
Dear Friend,
This is to inform you that CBEC has issued notifications No. 23/2007 to 32/2007 through which the services introduced in Finance Bill 2007 have become applicable from Ist June 2007. The salient features of notification issued are as follows:
1. The New Services become applicable through Notification No. 23/2007 from 1st June 2007.
2. In the Renting of Immovable Properties, Notification No. 24/2007 provides a abatement for the Property tax paid on the property. In case one is receiving rent for lesser month and paid property tax for the whole year, then proportionate abtement will be available.
3. To determine your service tax liability in Renting of Immovable Properties, divide your Property tax paid by the months for which one has given property on rent. then pay tax.
4. The services of construction and Works Contract in relation to Port are exempted through Notification No. 25/2007
5. Department has clearly defined that Construction/Works Contract exempted for port does not include the services of completion and finishing, repair, alteration, renovation, restoration, maintenance or repair provided in relation to existing port or other port.
6. Rule 4C in Service Tax Rules has been inserted to provide facility of Self adjustment in Renting of Immovable property on accountof Property Tax paid.
7. To determine the value of Works Contract, the value on which VAT/Sales Tax has been paid can be deducted. Moreover the VAT/Sales Tax so paid will also be deducted from the total contract value. On rest of the amount tax @ 12.36% will be leviabel. Thus the value of such contract will include:labour charges for execution of the works; amount paid to a sub-contractor for labour and services;charges for planning, designing and architect's fees; charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; cost of consumables such as water, electricity, fuel, used in the execution of the works contract; cost of establishment of the contractor relatable to supply of labour and services; other similar expenses relatable to supply of labour and services; and profit earned by the service provider relatable to supply of labour and services.(refer Notification No. 29/2007)
8. Alternatively, CBEC has released a seperate Rule called the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Under These rules Assesee has the option to pay a tax @2% on the Total value of works contract less VAT/Sales TAx paid. If an Assessee will follow these rules, he will not be entitled to claim CENVAT on Inputs and he has to follow the rule for the entire said works contract till it completion.
