The Federation of Andhra Pradesh Chambers of  Commerce and Industry (FAPCCI) organized the first ever full day symposium on Goods and Service Tax in KLN Prasad AC Auditorium, Hyderabad on 5.5.2010, which is inaugurated by Sri Asutosh Misra, IAS, Principal Secretary, Revenue, Government of Andhra Pradesh. The auditorium is full with participants from trade & industry, tax professionals and officers from Government. Sri Arbind Modi, IRS, Chairman, Tax Force on GST, 13th Finance Commission, Sri Satya  Poddar, International expert on GST, Sri V. Laxmi Kumaran, Senior Advocate, Supreme Court of India and Dr. N. Ramesh Kumar, IAS, Principal Secretary to Governor of Andhra Pradesh have actively participated and expressed their views. Sri Nitin Parekh, Chairman, Trade & Commerce Committee of FAPCCI did his best to make the symposium a grand success. Sri P.V. Subba Rao, National Vice President of AIFTP delivered the following speech in the symposium.

Pursuant to the mandate of carrying out tax reforms before the introduction of goods and service tax in the country, the Government of India have issued a circular on 12.1.2010 in regard the internship program for the Revenue Department for the Officers particularly in the Sales Tax Division who can interact with young scholars with brilliant academic background from reputed Academic Institutes.

The duration of internship would be 6 months with a token remuneration of Rs.5000/- per month alongwith the necessary logistic support. At the end of the duration the Intern is required to submit a report to the Sales Tax Division. The circular also have provided that the candidate interested in applying for internship program may submit application in the prescribed format alongwith the latest passport photographs alongwith their C.V.

Source 2010-11 (16) TNCTJ Pg.30

Full Bench of the Haryana Tax Tribunal held that Tax Invoice was mandatory and a certificate in Form VAT C4 cannot by pass the provisions of the Act. The Tribunal also held that the cash memo issued by selling VAT dealer will also be not sufficient in absence of a Tax Invoice containing all the particulars prescribed under the Act. In deciding the matter Full Bench referred to the well laid down principle of law that when the manner of doing a particular Act was prescribed under the Act, the same must be done in that manner or not at all.

The Hon’ble Finance Minister has pronounced the certain reliefs in relation to service tax in The Finance Bill, 2010 in the Parliament on 29th April, 2010. The Finance Bill is enacted and received the accent of the President on 8th May, 2010. The gist of the changes in the Finance Bill is given below:

• Service Tax on domestic air travel is to be restricted to Rs.100/- per travel by economic class and Rs. 500/- per travel for international journey by economic class. Further, domestic air travel to & from the North Eastern Sector would be totally exempt.

• Under construction service (which is extended to the builders and developers by introducing deeming fiction) 75% abatement on sale consideration is promised. We have been told that this takes care of land cost involved in sale of commercial, industrial or residential units. It is not clear whether this abatement replaces 67% abatement allowed under Construction Service.
  
  Further, other issues relating to Completion Certificate, etc. would be simplified.

• Low cost housing schemes for urban poor under Jawaharlal Nehru Urban Renewal Mission (JNNURM) and Rajiv Awas Yojna would be exempt.

Though the Finance Act, 2010 is enacted, the necessary notifications, TRU Circular, etc. are yet to be issued. The effective date of amendments to be effective from the date to be notified upon enactment of the Finance Bill is not yet pronounced. With the enactment of Finance Act, the only change pertaining to penalty section 73 (3) of the Finance Act 1994 is now effective from 8th May, 2010. The changes finally effected by the Finance Bill will be discussed in details when necessary details are known.

On a question that whether charges paid for detention of marine containers for a period more than pre–determined period is liable to service tax under Business Support Service or Business Auxiliary Service, it has been clarified that such charges can best be regarded as penal rent for retaining the containers beyond the pre-determined period. It is neither service provided on behalf of client (Business Auxiliary Service) nor it is an Infrastructural Support in the business of either the shipping line or the customer (Business Support Service). Therefore the amount collected as detention charges is not chargeable to service tax.

(Circular No. 121/3/2010-ST., Dated April 26, 2010)

The Insurance Companies deduct its commission from the premium paid to the re-insuring company (re-insurer) on the part of risk re-insured by the re-insurer. Notices have been issued to the insurance companies that the deducted amount is a consideration for providing Business Auxiliary Service to the re-insurer on the basis that the insurer company is promoting the business of re-insurer.

The Board has clarified that the arrangement between the insurer company and re-insurer is only sharing of expense and there is no service provided by the insurance company to the re-insurer for a consideration. In fact, in terms of section 101A of the Insurance Act, 1938 every insurer dealing in insurance business is required to re-insure a specified of sum assured with another insurance company. The insurance company pays premium to the re-insurer for this service. However, a part of such premium is deducted and kept by the insurance company to meet the administrative expenditure. In other words the insurance company and the re-insurer jointly bear the expense for running the insurance/ re-insurance business. This shared expense is commonly known as “commission” though strictly it is not in the nature of a commission. The customer/beneficiary deals only with the insurance company and may not even be aware of the role of re-insurer and the backroom operations between the insurance company and the re-insurer.

It has been further clarified that, since, the policy holder may not be aware of the re-insurer, it cannot be said that the payment made by the reinsurer to the insurer company is for its business promotion or a service on behalf of the re-insurer.

It is the re-insurer which provides insurance service to the insurance company. As both the insurance company and the insurer pay service tax on the entire amount of premium charged by them, the question of charging service tax under any other taxable service does not arise.

(Circular 120(a)/2/2010-ST., Dated April 16, 2010)

Board has clarified on levy of service tax on following activities in relation to relevant categories of taxable services (such as Commercial or Industrial Construction, Erection, Commission or Installation, Works Contract, Site Formation/ Excavation/ Earth Moving).

The clarification goes on to explain scope of the aforementioned taxable service. In case of Commercial Industrial Construction Service, it is stated that only such electrical works that are parts of (or which result emergence of a fixture of) Building Civil Structure Pipe Lines or Conduits are covered. In case of Erection Commission Installation Service, the activity is outside the preview of taxable service if does not result in emergence of an erected, installed and commissioned plant, machinery, equipment or structure or in installation of electrical or electronic device. In case of Works Contract Service the abovementioned services are distinguished by the nature of the contract (i.e., a contract wherein the transfer of property in goods involved is leviable to tax as sales of goods) rather than the nature of activities undertaken. In case of Site Formation and Clearance Service it is attracted only if the service providers provide these services independently and not as a part of complete work.

On the basis of above clarifications the following would be the status in respect of some of the activities.

S. No.	Activity	Status
1.	Shifting of overhead cables/wires for any reasons such as widening/renovation of roads	Not a taxable service under any clause of sub-section (105) of section 65 of the Finance Act, 1994
2.	Laying of cables under or alongside roads	Not a taxable service under any clause of sub-section (105) of section 65 of the Finance Act, 1994
3.	Laying of electric cables between grids/sub-stations/transformer stations en route	Not a taxable service under any clause of sub-section (105) of section 65 of the Finance Act, 1994
4.	Installation of transformer/sub-stations undertaken independently	Taxable service, namely erection, commissioning or installation services [section 65 (105] (zzd].
5.	Laying of electric cables up to distribution point of residential or commercial localities/complexes	Not a taxable service under any clause of sub-section (105) of section 65 of the Finance Act, 1994
6.	Laying of electric cables beyond the distribution point of residential or commercial localities/complexes	Taxable service, namely commercial or industrial construction’ or ‘construction of complex’ service [section 65(105) (zzq)/(zzzh)], as the case may be.
7.	Installation of street lights, traffic lights flood lights, or other electrical and electronic appliances/devices or providing electric connections to them	Taxable service, namely Erection, commissioning or installation services [section 65 (105) (zzd].
8.	Railway electrification, electrification along the railway track	Not a taxable service under any clause of sub-section (105) of section 65 of the Finance Act, 1994

The board has clarified that the above conclusions are general in nature and would have to be applied depending on the facts and circumstance of each case and the pending disputes/ cases may be decided on this basis.

(Circular No.123/05/2010.,dated May 24, 2010)