Dear Professional Colleagues

CBEC has come out with a clarification regarding tax payments done in pursuance of Voluntary Compliance Encouragement Scheme.

Gist of the Circular are -

1. Time Limit for issuance of Discharge Form

Rule 7 of the Service Tax VCES Rules 2013, the acknowledgement of discharge in form VCES-3 shall be issued within a period of 7 working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant.

2. Availment of Cenvat Credit
Eligibility of the Cenvat Credit is governed by the Cenvat Credit Rules, 2004. Same has been clarified in the answer to question No.22 of FAQ issued by CBEC dated 08.08.2013, eligibility of CENVAT credit would be governed by the CENVAT Credit Rules, 2004.

Extracts of the Circular

Circular No.:

176/2014

Circular Date:

20 Jan 2014

File Number:

F. No. B1/19/2013-TRU (Pt)

New

F. No. B1/19/2013-TRU (Pt)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise and Customs

Tax Research Unit

*****

New Delhi, dated the 20^th January, 2014

To,

Chief Commissioners of Central Excise and Customs (All),

Director General (Service Tax), Director General (Systems),

Director General (Central Excise Intelligence), Director General (Audit),

Commissioners of Service Tax (All),

Commissioners of Central Excise (All),

Commissioners of Central Excise and Customs (All)

Madam/Sir,

Subject: Clarification regarding issue of Discharge Certificate under VCES and availment of CENVAT credit - regarding.

Trade and Industry has sought clarification as to whether the first installment of tax dues paid under Voluntary Compliance Encouragement Scheme (VCES), 2013 would be available as Cenvat Credit immediately after payment or Cenvat credit can be availed only after payment of tax dues in full and receipt of Acknowledgement of Discharge in form VCES-3.
The issue has been examined. As per VCES, under Section 108 (2) of the Finance Act, 2013, a declaration made under Section 107 (1) shall become conclusive only upon issuance of acknowledgement of discharge under Section 107 (7). Further, in terms of Rule 7 of the Service Tax VCES Rules 2013, the acknowledgement of discharge in form VCES-3 shall be issued within a period of 7 working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant.
It would be in the interest of VCES declarants to make payment of the entire service tax dues at the earliest and obtain the discharge certificate within 7 days of furnishing the details of payment. As already clarified in the answer to question No.22 of FAQ issued by CBEC dated 08.08.2013, eligibility of CENVAT credit would be governed by the CENVAT Credit Rules, 2004.
Chief Commissioners are also advised that upon payment of the tax dues in full, along with interest, if any, they should ensure that discharge certificate is issued promptly and not later than the stipulated period of seven days.

Yours sincerely,

(S. Jayaprahasam)

Technical Officer, TRU

Tel: 011-2309 2037

Friday, 17 January 2014

Brush Up -6 # Income Tax & Service Tax# - Yuppie.........No Tax on Tax - No TDS on Service Tax.‏‏‏

Dear Professional Colleagues

At the time of my first audit during the CA articleship period, my first question to the respective senior is why they are deducting TDS on Service Tax? Service Tax is not the Income of the vendor infact it is his liability towards the government. Moreover TDS is part of "Pay As You Earn Scheme" and Service tax is not the earning of vendor while he is mere acting as an agent of the government.

My senior replied you are right but as per the TDS section, deductee have to deduct tax on payment made to vendor. So there is TDS on Service Tax also. I didn't say anything further and change my prospective while auditing books of accounts. But still I was thinking - Why it is that So????????? How there can be Tax on Tax? It seems to be ridiculous but no one is above law.

After six years of the crazy questions of grooming mind, Government of India awaken and CBDT bring out the Circular that there is no requirement to DEDUCT TAX ON SERVICE TAX PORTION, if it is separately mentioned in the invoice.

INCOME TAX - Circular No. 1/2014 - (DEDUCTION OF TAX AT SOURCE - RENT – CLARIFICATION OF TDS UNDER CHAPTER XVII-B ON SERVICE TAX COMPRISED OF PAYMENTS MADE TO RESIDENTS), dated 13.01.2014.

Extracts of Circular is as follows

The Board had issued a Circular No. 4/2008 dated 28/04/2008 wherein it was clarified that tax is to be deducted at source under section 194-I of the Income-tax Act, 1961 (hereafter referred to as 'the Act'), on the amount of rent paid/payable without including the service tax component. Representations/letters has been received seeking clarification whether such principle can be extended to other provisions of the Act also.

Attention of CBDT has also been drawn to the judgment of the Hon'ble Rajasthan High Court dated 1-7-2013, in the case of CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure (Income-tax Appeal No. 235, 222, 238 and 239/2011), holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.

The matter has been examined afresh. In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

Copy of Circular is attached for your kind perusal.

Regards

Gaurav Arya

Chartered Accountant