Service Tax Analysis of Finance Bill 2011 - Circulation

Budget 2011 – Analysis
on Service Tax
[For Private Circulation]
AYG & ASSOCIATES

CHARTERED ACCOUNTANTS
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Compiled by : CA. Ashit Shah, Partner

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Budget 2011 – Analysis on Service Tax
Finance Minister, Mr. Pranab Mukharjee, has privileged to present his third (lucky
number) consecutive budget for year 2011 – 2012 and 80 th budget of Independent India
on 28-02-2011. This year budget proposals were set the grounds of the much awaited
Goods and Service Tax (GST), by bringing more goods and services in the tax net and
removing certain exemptions. In line with this new regime viz. GST, the budget has
brought 130 new items under Excise coverage and 240 items are still excluded and would
be covered on the rollout of GST. Rate of Service tax and Excise duty remains unchanged
to 10%.
Highlights of the Budget:
I. Rate of Tax remain unchanged to 10.3% [ST+ED+SHE]

II. Introduction of two new services viz. Restaurant and Hotel Services.
III. Expansion in the scope of existing seven services viz. Authorized Service Station,
Health Services, Club or Association Services, Commercial Training or Coaching
Services, Business Support Services, Life Insurance Business & Legal Services.
IV. Introduction of Point of Taxation Rules, 2011 i.e. service tax to be discharged on
raising of invoices i.e. mercantile basis instead of on realization of consideration i.e.
cash basis from 01-04-2011.
V. Rationalization of Interest, Penalties and Prosecutions.
VI. Amendments in Service Tax Rules, 1994 on introduction of Point of Taxation Rules.
VII. Amendment in availment of Cenvat Credit of 40% for contractors who executes
Works Contract Services.
VIII. Major amendments Cenvat Credit Rules, 2004.
IX. Amendment in Export and Import of Services Rules, 2005.
X. Exemption to certain class of assessee’s and categories of services.
AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 2

I. Chapter V of the Finance Act, 199
a. Introduction of new services:
It is proposed to introduce two new services in the gamut of taxable services from a date
to be notified after the enactment of Finance Bill, 2011 as under:
1 Restaurant Services [Section 65 (105) (zzzzv)]:

It is proposed to cover services provided by Restaurants having facility of air
conditioning in any part of the establishment, at any time during the financial year,
and which has license to serve alcoholic beverages, including alcoholic beverages or
both, in its premises.
The proposed levy is on high-end restaurants, which provides conditions and

ambience in a manner that service provided may assume predominance over the food
in many situations. It will not cover mere eating houses where such services are
materially absent or so minimal that it will be difficult to establish that any service in
any meaningful way is being provided.
The levy is intended to be confined to the value of services contained in the composite
contract and shall not cover either the meal portion in the composite contract or mere
sale of food by way of pick up or home deliveries. Meal portion or sale of food in the
composite contract also attracts Local VAT. Further, Finance Minister has announced
in his speech that 70% abatement on this service, which means service tax would be
attracted on such portion which relates to deemed sale of meal and beverages.
Notification of the same would be issued when the levy is operationalized after the
enactment of the Finance Bill.
Restaurant: Public premises where meals may be bought and eaten.

2. Hotel Services [Section 65 (105) (zzzzw)]:
It is proposed to cover services provided by a Hotel, Inn, Guest House, Club or
Campsite for providing accommodation for a continuous period of less than three
months.
Finance Minister has announced in his speech that only those Hotels or Inn’s who’s
declared tariff is in excess of Rs. 1,000 per day. Further an abatement of 50% on the
declared tariff is announced. Notification of the same would be issued when the levy
is operationalized after the enactment of the Finance Bill.
It appears that even if Hotel or Inn whose declared tariff is more than Rs. 1,000 but
charges to client, less than Rs. 1,000, even than service tax would be attracted on the
declared tariff. Moreover, it is felt that Centre is transgressing in to the tax territory
reserved for the State by proposing levy of service tax on Hotel accommodations. At
present Hotels are paying Luxury tax and Local VAT.
b. Expansion in the scope of the existing taxable services:

It is proposed that in respect of following existing taxable services, scope have been
altered either to expand their scope or to remove certain difficulties during the tax
implementation. These modifications would come into effect from a notified date after
the enactment of the Finance Bill, 2011.
1. Authorized Service Centre: [Section 65(105)(zo)]
Existing Provision:
Any repair, reconditioning or restoration services of Motor Cars, Light Motor Vehicles
[LMV] or two wheeled motor vehicles provided by Authorized Service Stations were
covered within the ambit of Service Tax.

Proposed Provisions:
The scope of taxable service has been expanded in such a way that any person
providing such services would be covered under net. It is not necessary that service
provider must be Authorized Service Station. It covers ‘any motor vehicle” except
three wheeler scooter auth-rickshaw and motor vehicle meant for goods carriage.
Further, decoration or any other services provided in relation to motor vehicle is also
covered with in the net.
Definition of Authorized Service Station provided in Section 65(105)(9) has been

omitted due to amendment in the taxable services.
Effect of amendment:
Any person whether authorized service station or not, providing services of repairs,
reconditioning or restoration or decoration or any other similar services carried out
for Motor Vehicle other than goods carriage would now under Service tax purview.
2. Health Services: [Section 65(105)(zzzzo)]

Existing Provisions:
Finance Act, 2010 had introduced levy of service tax on services provided by
Hospitals, nursing home, or multi specialty clinic’s for carrying out health check up or
health treatment of any employee or any person. However, condition was that
payments for such services have to be paid directly by Insurance Companies to such
Hospitals, Nursing home etc.
The taxable service definition has been amended radically. It is proposed to cover
services provided by Clinical establishments, diagnostic centers and services provided
by a doctor from clinical establishments for diagnosis, treatment or care for illness,
disease, injury, deformity, abnormality or pregnancy in any system of medicine.

Clinical establishment have been defined in Section 65(105) (25a) and it means a
hospital, maternity home, nursing home, dispensary, clinic, sanatorium, or an
institution having in its establishment, the facility of central air conditioning either
whole or in part and having more than 25 beds for in-patient treatment. Such clinical
establishment is offering services for diagnosis, treatment or care for illness, disease,
injury, deformity, abnormality or pregnancy in any system of medicine.
In patient (Dictionary Meaning): A patient who is admitted to a hospital or clinic for

treatment that requires at least one overnight stay.
Central Air Conditioning (Dictionary Meaning): Central air conditioning, commonly

referred to as central air (U.S.) or air-con (UK), is an air conditioning system that uses
ducts to distribute cooled and/or dehumidified air to more than one room, or uses
pipes to distribute chilled water to heat exchangers in more than one room, and which
is not plugged into a standard electrical outlet.
Diagnostic Centre is also defined in Section 65(105)(25a) and it means an entity

owned, established, administered or managed by any person or body of persons,
whether incorporated or not, either as independent entity or as a part of any clinical
establishment. Diagnostic Centre is providing services of diagnosis of diseases
through pathological, bacteriological, genetic, radiological, chemical, biological
investigations or other diagnostic or investigative services with the aid of laboratory
or other medical equipment.
If any Clinical or Diagnostic Centre is owned or controlled by the Government or

Local authority, they are not covered with in the definition of Clinical establishment.

Medical Treatment Services are now fully covered under service tax except services
provided by Government or Local authorities. Even Pre medical services such as
diagnostic services are under the purview. Various conditions of Health Services such
as payments required to be made directly by the Insurance company or business
entity would no longer be operational. Individual doctor when provides services to
clinical establishment even such doctors would be under the purview.
3. Club or Association Services: [Section 65(105)(zzc)]

Services provided by Club or Association to its members in relation to provision of
services, facilities or advantage for a subscription or any other amount were covered
under the service tax from 2005.
Scope of the services has been expanded so as to cover services provided by Club or
Association to non members within its ambit.
Definition of “Club or Association” has been renumbered as 65(105)(25aa).
Contribution made by the non-members to Club or Association at the time of
obtaining membership. Moreover, number of clubs allows non-members to use their
facilities in their own capacity for a separate charge. Further, Clubs also entertain
members of other affiliated clubs. All such services to non members would now be
covered under the service tax net.

4. Commercial Training or Coaching Services: [Section 65(105)(zzc)]
Training Center’s or Institute’s which issues certificate or diploma or degree or any
educational qualifications recognized by law were specifically excluded from the
definition of Commercial Coaching and Training. Thus Institute’s or Training Center’s
i.e parallel collages, which were not recognized by law were also out of the purview of
service tax as was held by Hon’ble High Court in Mallapuram District Parellel Collage
Association – 2006 (2) STR 321 (Ker) and St. Antony’s Educational & Charitable
Society – 2006 (1) STR 137 (Ker).
In order to correct such anomaly between recognized colleges and parallel colleges, it
is proposed to amend the definition of commercial coaching or training centre as
provided in Section 65(105)(27) so as to cover within its ambit all training centers or
institutes whether recognized or unrecognized by law, including pre school coaching
and training. However, it has been clarified that suitable exemption will be given after
the enactment of the Finance Bill to preschool coaching and training and to coaching
or training relating to educational qualifications that are recognized by law.
All commercial training or coaching center’s whether recognized or not would be
under service tax purview.
5. Business Support Services: [Section 65(105)(104c)]

Business Support Services in relation to operational assistance in marketing were
covered under the ambit.

It is proposed to expand and include “operational or administrative assistance of any
kind” with in the definition of Business Support Services.
It is evident that now day business organizations out source their certain operational
and administrative functions to outsiders for a fee or charge and now such services
would be under service tax purview. It may so happen that certain services already
taxed under any other head of more specific description. The correct classification will
continue to be governed by Section 65A.
6. Life Insurance Business : [Section 65(105) (zx)]

Life Insurance Companies provides services relating to risk cover of life as well as
managing investments for the policy holders. At present, service of life insurance
business is covered with in the ambit of Service tax. Similar services provided by way
of ULIP are already subject to service tax since 2008.
In order to provide level playing field, it is proposed to tax not only insurance
premium but also portion of premium which kept aside for investment from the total
premium received from the policy holders. Insurance companies have been given an
option to discharge service tax liability at composition rate, which has been enhanced
from 1% to 1.5% of the gross amount of premium charged from a policy holder. Such
option shall not be available in cases where the entire premium paid by the policy
holder is only towards risk cover in life insurance. [Rule 6(7A) of the Service tax Rules,
1994]

Life Insurance Service is being widened to cover all services provided to a
policyholder by an Insurer, including re-insurer carrying on life insurance business.
7. Legal Services : [Section 65(105)(zzzzm)]

A service provided by a business entity to other business entity in relation to advice,
consultancy or assistance in any branch of law, in any manner is covered from 01-09-
2009.
It is proposed to expand the scope of legal services to bring with in its ambit:
i. Service provided by a business entity to any person, in relation to advice,
consultancy or assistance in any branch of law, in any manner;
ii. Services provided by any person to any business entity in relation to
representational services before any court, tribunal or authority. Representational
services provided to individuals are continued to be out of service tax purview.
iii. Arbitration services provided to any business entity by an arbitral tribunal.
Arbitrational services provided to individuals are out of the service tax purview.
Arbitration pursuant to Section 2(a) of the Arbitration and Conciliation Act, 1996
means “any arbitration whether or not administered by permanent arbitral institution”.
Arbitral Tribunal pursuant to Section 2(d) of the Arbitration and Conciliation Act,
1996 means “a sole arbitrator or a panel of arbitrators.”

Sr. Service Provider Service Recipient Nature of Service Taxability

No.
1 Any Assessee Business Entity Representational Taxable
Service
2 Business Entity Business Entity Representational Taxable
Service
2 Business Entity Individual Representational Not Taxable
Service
4 Individual Business Entity Service of Advice, Not Taxable
Consultancy or
assistance
5 Business Entity Business Entity Service of Advice, Taxable
Consultancy or
assistance
6 Business Entity Any Assessee Service of Advice, Taxable
Consultancy or
assistance
7 Arbitral Tribunal Business Entity Arbitration Service Taxable
8 Arbitral Tribunal Individual Arbitration Service Not Taxable
c. Procedural changes:
Existing scheme relating to compliance has been proposed for a total revamp with a view
to strike a healthy balance between the interest of the revenue and legitimate business
and to promote voluntary compliance. This philosophy is based on the following
principal’s:
(i) Improve voluntary compliance by encouraging self correction, wherever the
deviations are unintentional omissions;
(ii) Reduced penalties may be imposed if the transactions are captured fully and
truthfully in records and further abated if timely admission and payment is made;
(iii) Intentional and unrecorded violations should be dealt with severely with no
concessions whatsoever.
These procedural changes would be applicable from a date to be notified after the
enactment of Finance Bill, 2011.
1. Late filing fees for furnishing half yearly service tax return:
Every person who is liable pay the service tax shall himself assesess the tax due on
the services provided by him and furnish the same on or before 25 th of the following
month from the end of the relevant half year. In case if assessee furnish return
beyond due date, he is required to pay late filing fees. However such late filing fees
should not be more than Rs. 2,000. It is proposed to enhance such late filing fees to
Rs. 20,000.
2. Penalty under Section 73(1A)

If cases of non levy of tax or non payment of tax or short levied or short payment by
reason of fraud, collusion or any willful mis-statement or suppression of fact, with
intent to evade payment of service tax, assessee were eligible to pay reduced rate of
penalty of 25% of the service tax specified in notice. Such payment has to be made
within 30 days of the receipt of notice. With a view to discourage such un-lawful
assesses benefit of reduced penalty is proposed to be withdrawn. Further both the
proviso’s of Section 73(2) is also proposed to be withdrawn in line with above.
3. Penalty under Section 73(4A)

During the course of any audit, investigation or verification, it is found that service
tax has not been levied or paid or has been short levied or short paid or erroneously
refunded, assessee is liable to make the payment of taxes along with interest and
penalty. However, if true and complete details of transactions are available in the
specified records, the assessee is liable to make payment of taxes, interest under
section 75 and penalty of 1% of such tax for each month for the period during which
the default continues. Further, maximum penalty chargeable would be 25% of the tax
amount. It is also provided that assessee can make the payment, before issuance of

notice, on his own volition and inform the same, in writing, to the Central Excise
Officer. On such intimation, no notice would be issued and proceedings in respect of
such matter are deemed to be concluded.
Specified records has been defined in Explanation to Section 73(4A) as “records

including computerized data as are required to be maintained by an assessee in
accordance with any law for the time being in force or where there is no such
requirement, the invoices recorded by the assessee in the books of account shall be
considered as specified records.”
4. Interest on delayed payment of Service Tax [Section 75]

If assesee fails to make the payment of service tax in accordance with provisions
Section 68 read with Rule 6, he is liable to make the payment tax along with simple
Interest @ 13% p.a. for such delay. This rate of interest has been enhanced to 18% p.a.
w.e.f. 01-04-2011 [Notification No. 15/2011 – dated 01-03-2011]
It is proposed by inserting proviso to Section 75 that assessee whose turnover of

taxable service is less than Rs. 60 Lacs in the preceding financial year or less than Rs.
60 Lacs during any financial years, rate of interest for delayed payment of service tax
would be reduced by 3% p.a. i.e. 15% p.a.
5. Penalty for failure to pay Service Tax [Section 76]

If assessee fails to make the payment of service tax in accordance with provisions of
Section 68 read with Rule 6, he is liable to make the payment of tax along with
interest pursuant to Section 75 and a penalty of amount not exceeding Rs. 200 per day
or 2 % p.m. of such tax, whichever is higher. Further it was provided that maximum
penalty payable shall not exceed the service tax payable i.e. 100%

It is proposed to reduce the penalty amount to half from the existing rate i.e. penalty
would be Rs. 100 per day or 1% p.m. which ever is higher and maximum amount of
penalty would be 50% of tax payable.
6. Penalty for contravention of rules and provisions of Act for which no penalty is
prescribed elsewhere: [Section 77]
It is proposed to enhance the penalty amount from existing Rs. 5,000 wherever occur
to Rs. 10,000.
7. Penalty for suppressing the value of taxable services: [Section 78]

In cases of non levy of tax or non payment of tax or short levied or short payment by
reason of fraud, collusion or any willful mis-statement or suppression of fact or
contravention of any provisions of this Chapter, assessee is liable to make the
payment of tax as determined under Section 73(2) along with a penalty equivalent to
100% of service tax so not levied or paid or short levied or short paid.
However, if true and complete details of the transactions are available in the
specified records, penalty shall be equivalent to 50% of service tax so not levied or
paid or short levied or short paid. Further, if such taxes, interest and penalty are paid
within 30 days from the communication of the order, the penalty would be further
reduced and 25% of such taxes have to be paid by way of penalty. Relaxation has
been provided to service provider whose taxable services provided does not exceeds
Rs. 60 Lacs during any of the years covered under the notice or during the last
preceding financial year, such penalty to be paid within 90 days from the
communication of order, instead of 30 days.
It is explicitly made clear that if penalty is payable under section 78, penalty
prescribed under section 76 would not be applicable.

8. Penalty not to be imposed in certain cases [Section 80]
Penalties are not imposable pursuant to section 76, 77 and 78, if assesse proves there
was a reasonable cause of such default.
It is proposed to amend the provision of Section 80 by retaining the penalties leviable

under section 76 & 77. However, penalty under section 78 is waived only in cases
where the transactions are captured in the specified records.
9. Power to search premises: [Section 82]

Commissioner of Central Excise (CCE) has reason to believe that any documents or
books in his opinion relevant for proceeding under this chapter are secreted in any
place; he may authorize any Assistant Commissioner of Central Excise (ACCE) or
Deputy Commissioner of Central Excise (DCCE) to search and seize such documents
or records.
It is now proposed to delegate such powers to Joint Commissioner of Central Excise

(JCCE) instead of CCE. JCCE may authorize Superintendent of Central Excise (SCE)
instead of ACCE or DCCE.
10. Application of certain provisions of Central Excise Act, 1944 [Section 81]
Certain sections of Central Excise Act, 1944 is also applicable in Service Tax. It is
proposed to insert 6 (six) more sections of Central Excise Act as under:
Section Particulars
9A Certain offence to be non-cognizable
9AA Offence by Companies
9B Power of Court to publish name, place of business etc of persons
convicted under the Act.
9E Application of Section 562 of the Code of Criminal Procedure 1898 and

Probation of Offenders Act, 1958
34A Confiscation of penalty not to interfere with other punishments.
35R
11. Charge on the property of the defaulter of tax [Section 78]

It is proposed to insert a new section so as to create first charge of the property of the
defaulter of service tax for recovery of taxes due from such defaulter subject to the
provisions of Section 529A of the Companies Act, Recovery of Debt due to Bank and
Financial Institution Act, 1993 and Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002.
12. Offences and Penalties [Section 89]

Provisions relating to prosecution which were omitted from 16-10-1998 are re-
introduced and shall apply in following situations:
i. Provision of service without issuance of invoice;
ii. Availment and utilization of Cenvat Credit without actual receipt of inputs or
input services;
iii. Maintaining false books of accounts or failure to supply any information or
submitting false information;
iv. Non payment of amount collected as service tax to the treasury of Central
Government beyond a period of more than six months from the date on which
payment becomes due.
such person shall be punishable as under:
Offence Penalty
(i) Amount involved is more than Rs. 50 Lacs Imprisonment for a period may
extend to 3 years.
In the absence of special and adequate reasons to Imprisonment shall not be for a
the contrary to be recorded in the judgment of term of less than 6 months.

the Court.
(ii) In any other case Imprisonment for a period may
extend to 1 year.
(iii) Second offence or any subsequent offence. Imprisonment for a period may
extend to 3 years.
In the absence of special and adequate reasons to Imprisonment shall not be for a
the contrary to be recorded in the judgment of term of less than 6 months.
the Court.
It is explicitly made clear that determination of special and adequate reasons for
awarding a sentence of imprisonment for a term of less than 6 months, following
reason would not be considered:
i. Accused has been convicted for the first time;
ii. In proceedings, other than offence, accused has been ordered to pay a penalty or
any other action has been taken against him for the same act;
iii. Accused was not the principal offender and was acting as a secondary party in the
commission of offence;
iv. Age of the accused.
The sanction for the prosecution will have to be granted by Chief Commissioner of
Central Excise.
II. Service Tax Rules, 1994:

Certain consequential changes have been carried out in the Service Tax Rules by
introducing Service Tax (Amendment) Rules, 2011 with effect from 01-04-2011
[Notification No. 3/2011 – dated 01-03-2011] as under:
a. Issuance of Invoices on provision of services: [ Rule 4A]

On introduction of Point of Taxation Rules, 2011, bills / invoices have to be issued
within 14 days from date of provision of such taxable services by replacing with
date of completion of such taxable services.
b. Date of determination of rate of tax: [Rule 5B]
New rule has been inserted so as to provide the rate of tax in case of services
provided or to be provided shall be the rate prevailing at the time when services are
deemed to have been provided under the rules made in this regard.
c. Payment of Service Tax: [Rule 6]

On introduction of Point of Taxation Rules 2011, changes or omissions have been
brought, in sub rules and provisos of this rule, in line with Point of Taxation Rules.
Sub rule (1) has been amended so as to provide that payment of service tax to be
made when service is deemed to be provided as per the rules framed under POTR
2011. Similar amendment made in the provisos. In other words, tax has to be
discharged on (i) provision of service; or (ii) issuance of invoice; or (iii) receipt of
payment, whichever is earlier.
Sub rule (3) has been amended so as to provided that when an invoice has been
issued or a payment received for a service which is not subsequently provided, the
assessee may take the credit of the service tax earlier paid when the amount has
been refunded by him to the recipient or by the issue of credit note, as the case may
be.
Adjustment of excess amount of tax paid pursuant to sub rule (4B) was Rs. 1 Lacs
has been enhanced to Rs. 2 Lacs.
New sub rule (6A) has been inserted so as to provide that if an amount of service tax
has been self assessed at the time of filing of half yearly return, but not paid, either

in full or part, it would be recoverable along with interest under section 87 of the
Act. Thus, there is no need to resort to the requirement of section 73 for the recovery
of such self assessed amounts.
The composition rate provided in sub rule (7B) in relation to purchase or sale of
foreign currency, including money changing, has been reduced from 0.25% to 0.1%
and the proviso and illustration is omitted.
III. Works Contract (Composition Scheme for payment of Service Tax), Rules 2007
Amendment have been carried out in Works Contract (Composition Scheme for
payment of Service Tax), Rules 2007 by introducing Works Contract (Composition
Scheme for payment of Service Tax) Amendment Rules, 2011 with effect from 01-03-
2011 [Notification No. 1/2011 – dated 01-03-2011] as under:
New sub rule (2A) has been inserted so as to restrict the Cenvat Credit to 40% of the
tax paid on services relating to Erection, Commissioning & Installation (zzd);
Commercial or Industrial Construction (zzq); Construction of Residential Complex
(zzzh), in cases where tax has been paid in full value of the services after availing
Cenvat Credit on inputs i.e. without availing exemption Notification No. 1/2006
dated 01-03-2006. This provision has been introduced to ensure that the credit on
inputs is not availed of indirectly while availing of the composition scheme.
IV. Service Tax (Determination of Value) Rules, 2006

Amendment has been carried out in Service Tax (Determination of Value), Rules
2006 by introducing Service Tax (Determination of Value) Amendment Rules, 2011
with effect from 01-04-2011 [Notification No. 2/2011 – dated 01-03-2011] as under:
New Rule (2B) has been inserted to determine the value of services rendered in
relation to money changing. Taxable value of such services would be equal to the
difference in the buying or selling rate, as the case may be, and the RBI reference rate

for that currency for that day, multiplied by the total units of currency. It appears
that now money changers have to pay less tax on the basis of new valuation
mechanism.
Explanation has been added after rule (5) to clarify that for the purpose of
Telecommunication services [Section 65(105)(zzzx)], value shall be the gross amount
paid by the person to whom the service is provided by telegraph authority. Thus in
case of service provided by way of recharge coupons or prepaid cards or the like, the
value shall be the gross amount charged from the subscriber or the ultimate user for
the service and not the amount paid the distributor or any such intermediary to the
telegraph authority. This amendment shall come in to effect from 01-03-2011.
V. Exemptions to certain class of service providers or services or amendment in

exemptions:
i. Exemption is being provided to service provided by an organizer of business
exhibitions in relation to business exhibitions held outside India. [Notification
No. 5/2011 – dated 01-03-2011]
ii. Revision in the rate of tax in respect of travel by air services. These new rates
would be effective from 01-04-2011 as under: [Notification No. 4/2011 – dated
01-03-2011]
Journey Class Tax
Domestic Economic Exempted in excess of 10% of Gross value of ticket

or Rs. 150 which ever is less.
Domestic Other then Exempted in excess of 10%

Economic
International Economic Exempted in excess of 10% of Gross value of ticket

or Rs. 750 which ever is less.

iii. Exemption from whole of service tax is being provided under Works Contract
Services when provided for the construction of residential complexes or
completion and finishing of new residential complex under Jawaharlal Nehru
National Urban Renewal Mission (JNNUR) or Rajiv Awaas Yojana (RAY).
[Notification No. 6/2011 – dated 01-03-2011]
iv. Exemption from whole of service tax is being provided to insurer carrying on
General Insurance business for providing insurance under Rashtriya Swasthya
Bima Yojana. [Notification No. 7/2011 – dated 01-03-2011]
v. In respect of transportation of goods by Air or road or rail provided to a person

who is located in India but goods transported from a place located outside India
to a final destination which is also located outside India, exemption has been
granted from payment of service tax leviable under section 66 of the Act from 01-
04-2011. [Notification No. 8/2011 – dated 01-03-2011]
vi. Exemption has been given to air craft operator, in relation to transport of goods
by air craft, from value of taxable services an amount equal to the amount of air
freight included in the value determine under section 14 of the Custom Act for
the purpose of charging custom duties with effect from 01-04-2011 [Notification
No. 9/2011 – dated 01-03-2011]
vii. Exemption has been provided to service provider for execution of works under
Works Contract Services when provided wholly within Air port, from whole of
service tax with effect from 01-03-2011 [Notification No. 10/2011 – dated 01-03-
2011]
viii. Exemption has been provided to service provider for execution of works
under Works Contract Services when provided wholly within port or other port

for construction, repair, alteration and renovation of wharves, quaya, docks,
stages, jetties, priers and railways from whole of service tax with effect from 01-
03-2011 [Notification No. 11/2011 – dated 01-03-2011]
ix. Rate of interest on delayed payment of service tax has been enhanced from 13%
p.a.to 18% p.a. with effect from 01-04-2011 [Notification No. 14/2011 – dated 01-
03-2011] Similarly rate of interest on amount collected in excess pursuant to
section 73B has also been enhanced from 13% p.a. to 18% p.a. with effect from 01-
04-2011 [Notification No. 15/2011 – dated 01-03-2011]
x. Exemption by way of abatement of 25% from the taxable value being provided in
respect of services rendered in relation to “transport of coastal goods”, “goods
transported through “national waterways” or “inland water ways” with effect
from 01-03-2011 [Notification No. 16/2011 – dated 01-03-2011]
xi. Special exemption on membership fees collected by a club or association formed

for representing industry or commerce, during the period from 16-06-2005 to 31-
03-2008. Those assessee who had paid taxes can file refund application within 6
months from the assent of Finance Bill 2011.[Section 96(J)]
VI. Point of Taxation Rules, 2011

At present every person who providing taxable service is liable to pay service tax.
However, such taxes have to be paid in Government treasury, on receipt of
consideration from client. In other words, liability of service tax crystallizes on
provision of services but such tax liability has to be discharged on receipt of
consideration. [Section 68 r.w. Rule 6]. As our economy is moving towards much
awaited Goods and Service Tax (GST), uniform regulation of Indirect tax was
expected and hence Point of Taxation Rules, 2011 (POTR) is introduced from 01-04-

2011 vide Notification no. 18/2011 – dated 01-03-2011. Salient feature of the POTR
are as under:
1. Determination of Point of Taxation: [Rule 3]

A provision of service shall be treated as having taken place at the time when service
is provided or to be provided. However, if any bill or invoice is issued or receives
the payment, before provision of such services, it is deemed to have been provided
the services at the time the invoice was issued or the payment was received which
ever is earlier.
The general rule will be that the time of provision of service will be the earliest of the
following dates:
i. Date on which service is provided or to be provided;
ii. Date of invoice;
iii. Date of payment
Sr. No. Services Invoice Payment Point of

provided on issued on Received on taxation
1 15-05-2011 25-05-2011 31-08-2011 15-05-2011

2 15-05-2011 01-04-2011 31-08-2011 01-04-2011
3 15-05-2011 25-05-2011 01-05-2011 01-05-2011
2. Determination of point of taxation in case of change in rate of tax:

Provision of Invoice Payment Point of Rate applicable
Service Taxation
Before change After change of After change of Issuance of bill New rate
of rate rate rate or date of

payment which
ever is earlier.
Before rate of After change of Date of issuing Old rate
change rate of invoice
After change Before rate Date of Old rate
rate change payment
After change of Before change After change of Date of New rate
rate of rate rate payment
Before change Before change Issuance of bill Old rate
of rate of rate or date of
payment which
ever is earlier.
After change Before change Date of issuing New rate
rate rate of invoice
3. Determination of tax in case of new services:

a. If invoice is issued and payment is received against such invoice before such
service became taxable, no tax to be payable.
b. If payment has been received before the service becomes taxable and invoice for
the same has been issued with the period of 14 days as prescribed under rule 4A of
Service tax Rules, 1994, no tax to be payable.
The above provisions are not applicable in case of Continuous Supply of Services.
4. Determination of point of taxation in case of Continuous Supply of Services:

Continuous supply of service is defined in Rule 2 (c ) of POTR means any service
which is provided or to be provided continuously, under a contract, for a period
exceeding three months, or where the Central Government, by a notification in the

Official Gazette, prescribes provision of a particular service to be a continuous supply
of service, whether or not subject to any condition.
a. The point of taxation in case of continuous supply of service will be the date on
which payment is liable to be made periodically or from time to time, as
prescribed in the contract.
b. If any payment is received or any invoice is issued before the period mentioned in
the contract, then the point of taxation will be the date on which payment is
received or the date of which invoice is issue, which ever is earlier.
c. In case of import of service under section 66A, the point of taxation will be the date
on which payment is made or the date on which invoice is received, which ever is
earlier.
5. Determination of point of taxation in case of associated enterprise:

Point of taxation in respect of associated enterprise shall be –
i. the date on which the payment has been made;
ii. invoice under rule 4A of the Service tax Rules, 1994 has been issued;
iii. the date of debit or credit in books of accounts of the person liable to pay service
tax,
which ever is earlier.
6. Determination of point of taxation in case of copyrights, etc:

Point of Taxation incase of royalties or payment pertains to copyrights, patents, etc.
where the amount of consideration is not ascertainable at the time when service is
performed, will be deemed to be provided each time on the date on which the
provider of such service receives any consideration from the use or benefit of such
rights or invoice issued by the provider, whichever is earlier.

VII. Export of Service Rules, 2005 and Taxation of Services (Provided from Outside India
and Received in India) Rules, 2006
Globally the taxation of services across different taxing jurisdiction is increasingly

moving towards destination based levy in respect of B2B services while origin based levy
is largely applicable to B2C services. In tune with this practice, certain services are being
re-classified as under with effect from 01-04-2011 vide Notification No. 12 & 13/2011 –
dated 01-03-2011.
(i) The category of builders providing preferential location [Section 65(105)(zzzzu)] is
added to the list containing immovable property related services in Rule 3(1)(i). The
said service introduced from 01-07-2010 was covered by Rule 3(1)(iii) having a
criterion of location of recipient outside India rather than location of immovable
property.
(ii) Categories of rail travel agent and health check-up or preventive care are shifted
from the recipient based criterion in Rule 3(1)(iii) to performance based criterion in
Rule 3(1)(ii). Thus, these services will be considered exported only if they are
wholly or partly performed outside India.
(iii) Categories of credit rating agency, market research agency, technical testing or
analysis, transportation of goods by air, goods transport agency, opinion poll and
transport of goods by rail are shifted from performance based criterion in Rule
3(1)(ii) to recipient based criterion in Rule 3(1)(iii). These services therefore would be

treated as exports if recipient is located outside India and would not have to satisfy
the condition of “performance outside India”.
Identically, Import Rules are also amended by regrouping the above stated services
under corresponding sub-rules of Rule 3.
VIII. Cenvat Credit Rules, 2004

In terms of Notification No. 3/2011 – CE (NT) dated 01-03-2011, the Government has
effect some fundamental changes in the Cenvat Credit Scheme, which would drastically
affect Industry. All the amendments will be applicable from 01-04-2011 except otherwise
specified.
I. Amendment in the definitions:

a. Capital Goods: [Rule 2(a)(A)]
The definition of the capital goods has been amended to extend the credit of the
duty paid on goods which are used outside the factory of the manufacturer for
generation of electricity for captive use within the factory.
b. Exempted Goods: [Rule 2(d)]

The scope of the goods that are termed as “Exempted Goods” under Rule 2(d) has
been enhanced by inserting the words “and goods in respect of which the benefit of
an exemption under notification No. 1/2011 – CE, dated the 1st March, 2011 is
availed”. This amendment is applicable from 01-03-2011.
c. Exempted Services: [Rule 2(e)]
The meaning of the term “Exempted Service” under Rule 2(e) included only those
services which are specifically exempted from the levy of service tax or those
services on which no service tax is levied u/s 66. The scope of the same has been
enhanced by including services on which abatement has been taken & notification

providing abatement is subject to condition that no credit of duty on inputs or
capital goods or service tax paid on input services. Further, it has been clarified by
inserting Explanation that exempted service also includes trading activity.
Effect of this amendment is that assessee who avails abatement from gross amount
eg. Rent –a-cab operator avails abatement of 60% and discharge service tax on 40%
of value of taxable services, such Rent-a-cab operator is eligible for 40% of Cenvat
Credit as 60% value shall be considered as Exempt services.
Similarly, in case of a service provider provides any taxable services along with
indulge in sale and purchase of goods i.e. trading activity, it is clarified the he can
avail the credit by taking in to consideration the profit earned from such trading
activity. This amendment is in line with the observation held be Tribunal in Orion
Appliances Ltd. – 2010 (19) STR 205 (Tri – Ahem).
d. Input: [Rule 2(k)]

Definition of “input” is substituted as under:
(k) “input” means–
(i) all goods used in the factory by the manufacturer of the final product; or
(ii) any goods including accessories, cleared along with the final product, the value
of which is included in the value of the final product and goods used for
providing free warranty for final products; or
(iii) all goods used for generation of electricity or steam for captive use; or
(iv) all goods used for providing any output service;
but excludes-
(A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol;
(B) any goods used for-
(a) construction of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods,
except for the provision of any taxable service specified in sub-clauses (zn),
(zzl), (zzm),(zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance
Act;
(C) capital goods except when used as parts or components in the manufacture of a
final product;

(D) motor vehicles;
(E) any goods, such as food items, goods used in a guesthouse, residential colony,
club or a recreation facility and clinical establishment, when such goods are used
primarily for personal use or consumption of any employee; and
(F) any goods which have no relationship whatsoever with the manufacture of a
final product.
Explanation. – For the purpose of this clause, “free warranty” means a warranty
provided by the manufacturer, the value of which is included in the price of the final
product and is not charged
Following are the important changes when compared with the existing definition of
“input”
 At present, it was a mandatory requirement to qualify any goods as Input; it
has to be used in or in relation to manufacture of final products whether
directly or indirectly. Now under amended definition it provides that such
goods have to be used in the factory. Thus all goods used by the manufacturer
of final product in the factory shall be covered with in definition of Input.
 All goods used for generation of electricity or steam being used for captive
consumption have specifically been included in the said definition.
 There is no change in the eligibility of goods used for providing output
services.
 Specifically excluded goods used for construction of building or civil structure
or laying foundation for making of structure for support of capital goods
except for the provision of certain specified taxable services such as Port (zn),
Other Port (zzl), Airport (zzm), Commercial or Industrial Construction Services
(zzq), Construction of Complex Services (zzzh) and Works Contract Services
(zzzza).
 Motor Vehicle exclusion is applicable to service provider as well as
manufacturer.
 Specific exclusion of any goods, such as food items, goods used in a guest
house, residential colony, club or recreation facility and clinical establishment,

when such goods are used primarily for personal use or consumption of any
employee.
 Specific exclusion of any goods, which have no relationship whatsoever with
the manufacture of a final product.
e. Input Services [Rule 2(l)]

The distinction between goods and services is diminishing and many goods can be
received as services. Accordingly the definition of “input service” has been aligned
with the definition of “input” such that goods that do not constitute “input” do not
qualify as “input service”. Thus a service relating to construction of civil structure
will not constitute “input service” unless it is provided by a sub-contractor to the
main contractor.
The inclusive part of the definition has been amended to exclude the words
“activities relating to business” and accordingly credit is eligible only for service
specifically mentioned in the said inclusive clause, as under:
i. Modernization, renovation, or repair ii. Modernization, renovation, or repair
of factory; of premises of provider of output
service;
iii. Modernization, renovation, or repair iv. Advertisement or sales promotion;
of office relating to such factory or
premises;
v. Market research; vi. Storage up to place of removal;
vii. Procurement of input; viii. Accounting;
ix. Auditing; x. Financing;
xi. Recruitment and quality control; xii. Coaching and Training;
xiii. Computer networking; xiv. Credit rating;
xv. Share registry; xvi. Security;
xvii. Business exhibition; xviii. Legal services;

xix. Inward transportation of input or xx. Outward transportation up to place
capital goods; of removal
Certain specified services are categorically excluded viz. Architect (p), Port (zn),
Other Port (zzl), Airport (zzm), Commercial or Industrial Construction (zzq),
Residential Complex Service (zzzh), Works Contract Services (zzzza), not to be
treated as “Input Services” if they are used for –
(i) Construction of building or Civil Structure or part thereof; or
(ii) Laying foundation or making of structures for support of capital goods.
Certain specified services are categorically excluded viz. General Insurance (d),
Rent-a-cab (o), Authorized Service Station (zo) and Supply of tangible goods service
(zzzj), not to be treated as “Input Service” if they relate to Motor Vehicle. However,
said exclusion shall not be applicable if the said motor vehicle is used for providing
taxable service and the same is treated as capital goods.
Certain specified services such as those provided in relation to outdoor catering,

beauty treatment, health services, cosmetic and plastic surgery, membership of a
club, health and fitness centre, life insurance, health insurance and travel benefits
extended to employees on vacation such as Leave or Home Travel Concession, when
such services are used primarily for personal use or consumption of any employee is
not eligible for Cenvat Credit.
f. Manufacturer or Producer: [Section 2 (naa)]

The scope of the definition has been expanded to include persons in relation to
goods falling under chapters 61,62 or 63 of the Central Excise Tariff Act, 1985 & who
are liable to pay duty under rule 4(1A) of Central Excise Rules, 2002. This
amendment is effective from 01-03-2011.

II. Availment of Cenvat Credit: [Rule 3]
a. In sub rule (1) after clause (i) a proviso has been inserted so Cenvat credit of Excise
duty paid shall not be allowed to be taken when the same has been paid on any
goods after availing benefit of an exemption notification no. 1/2011 – CE dated 01-
03-2011. This proviso is applicable from 01-03-2011.
b. In sub rule (1) after clause (vii) a proviso has been inserted so Cenvat Credit shall
not be allowed in excess of 80% of the additional duty of customs (CVD) paid under
section 3(1) of Custom Tariff Act on Ships, boats, and other floating structure for
breaking up falling under tariff item 8908 00 00 of the First Schedule to Custom
Tariff Act. This proviso is applicable from 01-03-2011.
c. In sub rule (4) a proviso has been inserted so Cenvat Credit shall not be utilized for
payment of any Excise duty on goods in respect of which benefit of exemption
under notification no. 1/2011 – CE dated 01-03-2011 is availed. This proviso is
applicable from 01-03-2011.
d. In sub rule (5) a proviso has been inserted so as to provide that payment is not
required to be made where any inputs are removed outside the factory for providing
free warranty for final products. This proviso is applicable from 01-03-2011.
e. Manufacturer or Service providers were liable to pay an amount equivalent to

Cenvat Credit availed, if inputs or capital goods, before being put to use, on which
Cenvat Credit has been taken , are fully written off in the books of account. Now
Rule 5B has been amended to provide that even in case of partial write-off, the said
rule shall be applicable. This amendment is applicable from 01-03-2011.

III. Condition for allowing Cenvat Credit: [Rule 4]
a. Definition of capital goods been amended from 01-04-2011 so as to include credit of
duty paid on goods which are used outside factory for generation of electricity for
captive use within factory. Similarly, sub rule (2) has been amended to provide such
inclusion. Thus, credit on the said items shall also be restricted to 50% of the duty
paid on such goods in the same financial year.
b. Sub rule 7 provides that Cenvat Credit with respect of “Input Service” is eligible on
payment basis. Proviso has been inserted to provide that in case any payment or
part thereof has been refunded on such services then the proportionate Cenvat
Credit availed on the same will have to be paid.
Further an Explanation I provide payment of such proportionate Cenvat Credit by the

manufacturer of goods or provider of output service by debiting then Cenvat Credit or
otherwise make payment on or before 5th of following month except for the month of
March. Payment of the month of March needs to paid on or before 31st March.
Explanation II provides, in cases manufacturer or provider of output services fails to

make the payment of amount payable under this sub-rule, it would be recovered in the
manner as provided in rule 14 for recovery of Cenvat credit wrongly taken.
IV. Obligation of manufacturer of dutiable and exempted goods and provider of

taxable and exempt service: [Rule 6]
Major changes have been brought in this rule which are applicable from 01-04-2011 and
salient feature of the same are as under:

a. Heading of the rule has been changed from “Obligation of manufacturer of dutiable
and exempted goods and provider of taxable and exempt service” to “Obligation of
a manufacturer or producer of final products and provider of taxable service”.
b. Cenvat Credit is not allowed on such quantity of “input” which is used in or in
relation to the manufacture of exempted goods or for provision of exempted
services. Similarly, “input services” which is used in or in relation to the
manufacture of exempted goods and their clearance up to the place of removal or
for provision of exempted services. [Rule 6(1)]
c. Manufacturer or provider of output service, manufactures or provides output

services which are chargeable to duty or tax as well as exempted goods or services
then have to maintain separate accounts for receipt, consumption and inventory of
input and input services and shall take the Cenvat Credit as under: [Rule 6(2)]
Receipt, consumption and Cenvat Receipt, consumption and Cenvat

inventory of Input Credit inventory of Input Services Credit
available Available
In or in relation to the No In or in relation to the No

manufacture of exempted manufacture of exempted
goods goods and their clearance
up to the place of removal.
In or in relation to the Yes In or in relation to the Yes

manufacture of dutiable manufacture of dutiable
final products excluding final products excluding
exempted goods exempted goods and their
clearance up to the place of
removal.
For the provision of No For the provision of No

exempted services exempted services
For the provision of output Yes For the provision of output Yes
service excluding exempted service excluding
services exempted services

d. Manufacturer of goods or provider of output service, opting not to maintain
separate accounts to determine the amount attributable to input and input services
used in manufacture of exempted goods or provision of exempted service have
now three options for such determination: [Rule 6(3)]
i. Pay an amount equal to 5% of value of exempted goods or exempted
services; or
ii. Pay an amount as determined under sub rule (3A) i.e. reversal of Cenvat
credit based on the proportionate of dutiable as well as exempted turnover;
or
iii. Maintain separate accounts for receipt, consumption and inventory of
inputs and avail the Cenvat Credit on Inputs which are eligible under rule
6(2). In respect of Input Services, quantum can be determined on the basis of
manner provided in rule 6(3A) i.e. proportionate basis.
In case of services wherein abatement has been availed, an amount equal to 5% is

required to be paid on the value of which exemption has been claimed.
e. New sub rule 3B is inserted for the service providers who are a banking company
and a financial institution including NBFC providing services under the category
of “Banking and Financial Services”. Such assessee .
f. New sub rule 3C is inserted for the service providers who are providing services
under Life Insurance and Management of ULIP services. Such assessee have to
reverse an amount equivalent to 20% of value availed on input and input services.
Further, such assessee need not have to follow any other provisions of Rule 6.

g. Explanation has been inserted to determine the value of service for sub rule (3) and
(3A) as under:
i. Value of such goods and services shall be determined pursuant to Section 67

of the Finance Act, 1994 or under Section 4 or 4A of the Central Excise Act,
1944.
ii. In case of a taxable services, assessee had availed option to discharge service
tax liability pursuant to sub rules (7), (7B) or (7C) of rule 6 of Service tax
Rules, 1994 or under Composition Scheme available under Works Contract
Services, value of services would be equal to the service tax paid divided by
the rate of service tax.
iii. In case of trading goods, value would be difference between sales price and
purchase price of the goods traded.
h. Amount mentioned in sub rules (3), (3A), (3B) and (3C) shall be paid by the
manufacturer of goods or the provider of output services by debiting to the Cenvat
Credit account or other wise on or before 5th of the following month / quarter.
When such payment relates to March, same should be paid on or before 31 st
March. If manufacturer or service provider fails to make such payment, it would
be recovered in the manner as provided in rule 14, for recovery of Cenvat credit
wrongly taken.
i. On introduction of the proportionate allocation and its rationalization, specified

services (17) provided in rule 6(5) wherein full credit was eligible irrespective of
the fact that it was used for dutiable as well as exempted goods or services has
been dispensed with.
j. New rule 6(6A) has been inserted so as to provide that no reversal of Cenvat
Credit is required in cases where services are provided in units located in SEZ or

developer of SEZ without payment of service tax for the authorized operation in
such unit or developer.

Service Tax Analysis of Finance Bill 2011 - Circulation

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Service Tax Analysis of Finance Bill 2011 - Circulation

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Budget 2011 – Analysis

AYG & ASSOCIATES

Compiled by : CA. Ashit Shah, Partner

Highlights of the Budget:

I. Rate of Tax remain unchanged to 10.3% [ST+ED+SHE]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 2

a. Introduction of new services:

1 Restaurant Services [Section 65 (105) (zzzzv)]:

The proposed levy is on high-end restaurants, which provides conditions and

Restaurant: Public premises where meals may be bought and eaten.

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 3

b. Expansion in the scope of the existing taxable services:

1. Authorized Service Centre: [Section 65(105)(zo)]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 4

Definition of Authorized Service Station provided in Section 65(105)(9) has been

2. Health Services: [Section 65(105)(zzzzo)]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 5

In patient (Dictionary Meaning): A patient who is admitted to a hospital or clinic for

Central Air Conditioning (Dictionary Meaning): Central air conditioning, commonly

Diagnostic Centre is also defined in Section 65(105)(25a) and it means an entity

If any Clinical or Diagnostic Centre is owned or controlled by the Government or

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 6

3. Club or Association Services: [Section 65(105)(zzc)]

Definition of “Club or Association” has been renumbered as 65(105)(25aa).

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 7

5. Business Support Services: [Section 65(105)(104c)]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 8

6. Life Insurance Business : [Section 65(105) (zx)]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 9

7. Legal Services : [Section 65(105)(zzzzm)]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 10

Sr. Service Provider Service Recipient Nature of Service Taxability

8 Arbitral Tribunal Individual Arbitration Service Not Taxable

2. Penalty under Section 73(1A)

3. Penalty under Section 73(4A)

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 12

Specified records has been defined in Explanation to Section 73(4A) as “records

4. Interest on delayed payment of Service Tax [Section 75]

It is proposed by inserting proviso to Section 75 that assessee whose turnover of

5. Penalty for failure to pay Service Tax [Section 76]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 13

7. Penalty for suppressing the value of taxable services: [Section 78]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 14

It is proposed to amend the provision of Section 80 by retaining the penalties leviable

9. Power to search premises: [Section 82]

It is now proposed to delegate such powers to Joint Commissioner of Central Excise

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 15

11. Charge on the property of the defaulter of tax [Section 78]

12. Offences and Penalties [Section 89]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 16

II. Service Tax Rules, 1994:

a. Issuance of Invoices on provision of services: [ Rule 4A]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 17

c. Payment of Service Tax: [Rule 6]

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 18

IV. Service Tax (Determination of Value) Rules, 2006

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 19

V. Exemptions to certain class of service providers or services or amendment in

Journey Class Tax

Domestic Economic Exempted in excess of 10% of Gross value of ticket

Domestic Other then Exempted in excess of 10%

International Economic Exempted in excess of 10% of Gross value of ticket

AYG & ASSOCIATES - Chartered Accountants Budget 2011 - Analysis Page 20