Important Decisions on Indirect Tax Related Issues
The decisions
regarding financial matters in the country are taken by the Union Finance
Minister of the Country. At present the Union Finance Minister of India is Shri
P. Chidambaram. He takes financial decisions and solves the financial disputes
in the country. For taking financial decisions a Forum for discussing the
financial matters regarding financial disputes was formed in the month of July
2013 by the Union Finance Minister Shri P. Chidambaram. I consisted of the
members and Chairman Dr. Parthasarathi Shome, who is Adviser to the Finance
Minister and the officers of Central Board of Direct Taxes (CBDT) and the
Central Board of Excise and Customs (CBEC) were also included.
We are going to
discuss here the special decisions taken by the Union Finance Minister Shri P.
Chidambaram regarding Indirect Tax related issues in the country. The decisions
are taken on the basis of issues raised by the Forum by hearing various
industry groups and associations which were being brought to the notice of the
Finance Minister during the months of August and September, 2013. The special
decisions regarding the Indirect Tax related issues are given here under:
Ø Unpaid Service Tax
Refund: The issue was that the entity has to fulfill the requirements of
certain documents and other formalities supporting the Service Tax Refund from
different financial departments such as matching of FIRCs with export invoices
by banks and such issues are not in under the control of the entity. To
overcome the above issue following decision was taken by the Union Finance Minister Shri P. Chidambaram in
favour of the entities whose Service tax refunds are still pending:
o
Union Finance Minister Shri P. Chidambaram
has given instruction for formation of field as on 4th September,
2013 to accept the certificate issued by self that will be submitted by the
claimant for claiming refund under notification 5/2006-Central Excise dated
14.03.2006.
Ø Rebates for
export of services: The issue was that the entity faced problems
on failure of Problems are being faced in establishing nexus of input services
with exports. To overcome the above issue following decision was taken by
the Union Finance Minister Shri P. Chidambaram
in favour of the entities whose Rebates on Export services were at stake:
o
Union Finance Minister Shri P. Chidambaram
has given instructions to carry out the procedure for calculating the refund on
the basis of the ratio of export turnover to total turnover that was introduced
in 2012. The same method will be applied for pending refund cases. And the s
related instructions will be issued accordingly on the basis of the above
procedure. Mathematically the procedure for calculating the Rebates on exports
of Services will be as follows:
% of Rebate on exports of Services = Export turnover X 100
Total turnover
Ø Service tax in
respect of services provided by reinsurance agents: The issue was raised
by the whole industry that the business is organized in such a way that the
reinsurance premium for reinsurance is paid to the broker including brokerage
and such premium is net of brokerage and is passed on by the broker to the
reinsurer. The issue was created on the fact that service tax was paid on total
amount on aggregate of reinsurance premium and brokerage both which is paid paid
to the broker and also it is separately charged on the brokerage So the service
tax is charged twice on the Brokerage and it created the double taxation
effect. To overcome the above issue following decision was taken by the Union Finance Minister Shri P. Chidambaram in
favour of the insurance industry who faced the issue of double taxation on
Brokerage:
o
Union Finance Minister Shri P. Chidambaram
has given instruction that the service tax department will ask for the input
data regarding the service tax paid twice on brokerage to agent And when it
finds that it really creates the double taxation effect, it will issue the
circular to nullify the double taxation effect created due to twice collection
of Service Tax on the Brokerage paid to reinsurance agents.
Ø Dispute related
to CENVAT Credit on endorsed bill of entry: The issue related
to CENVAT credit arose because the practice of endorsing the Bill of Entry to
an importer by the customs officer was still in carried out. This created
problems as to how the receiver of imported goods who is a manufacturer may
avail CENVAT credit without any instrument in proof. To overcome the above
issue following decision was taken by the
Union Finance Minister Shri P. Chidambaram to resolve the issue for
availing CENVAT credit by the importer manufacturer:
o
The decision taken by our Union Finance
Minister Shri P. Chidambaram was that the process of registering the importers
with the department is being designed so that the CENVAT CREDIT can be easily
availed by the importer and this new practice will be in effect from 31st
December, 2013.
Ø Ambiguity due
to non clarity in Central Excise Notification No.33/2012: The Central
Excise Notification No.33/2012 was related to the Status Holder Incentive
Scheme (SHIS). It stated that the government has allowed to pay the excise duty
under the Status Holder Incentive Scheme (SHIS) while acquiring Domestic
Machines. The problem arouse when some department of Indirect Tax treated it as
exemption notification while due to non clarity some departments have issued
demand notice to the entities who have paid excise duty under the Status Holder
Incentive Scheme (SHIS). To overcome the above issue following decision was
taken by the Union Finance Minister Shri
P. Chidambaram to bring clarity in the above mentioned notification:
o
The decision taken by our Union Finance
Minister Shri P. Chidambaram to clarify the Notification and has issued
circular which clarifies the above issue. It was clarified that reversal of
credit is not being required. The circular that clarifies the same is with
reference Number 973/07/2013/CX which
was issued on 4th November, 2013.
Ø Dispute as to
reversal of CENVAT Credit on removal of capital goods after use: The issue was
created on amendment of CENVAT Credit Rules, 2004 on 1st April,
2012. It states that the CENVAT payable on the removal of capital goods is
payable on the basis of higher of the following two:
1.
Removal as capital goods on the basis of
depreciation at the rate of 2.5% per quarter or
2.
Removal of capital goods as waste and scrap,
In case when the 1st option is being exercised, the
useful life of the asset is assumed to be 10 years. But many a times it
happened that the useful life of the asset is below 10 years So the industry
wanted that the amendment should be brought and the 2nd method
should be used to calculate the duty liability on the basis of removal of
capital Goods st transaction value as waste and scrap only and the Input tax
credit should be reversed on the same basis. To overcome the above issue
following decision was taken by the Union Finance Minister Shri P. Chidambaram
to solve the problem of calculating duty liability on removal of capital goods:
o
The decision taken by our Union Finance
Minister Shri P. Chidambaram to solve the above issue was that notification was
issued which stated that in case of removal of capital goods, the entities
should be allwed to reverse the credit on the basis of transaction value of
capital goods if they are cleared as waste and scrap from the factory. The
notification bears the Number 12/2013-CE(NT) dated 27th September, 2013. This
notification will act as an amendment CENVAT Credit Rules, 2004.
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