PERHAPS the reason for not printing the Budget Bulletins this year was a genuine one.The JS(TRU-II) letter alone ran into 124 pages and by deciding not to print multiple copies of these booklets(?), probably a number of trees were saved. The environment friendly letter even says that the insertion of new sub-section 1A in Section 73 of Finance Act, 1994 is going to save lot of paper. But, unfortunately, there are several other proposals, which will contribute to deforestation and defeat the objective of inserting sub-section 1A i.e., saving paper.
Under reverse charge mechanism, certain amendments are proposed for specified services. In relation to these services, the liability to pay service tax will be partly on the service provider and partly on the service receiver. The services notified under this part reverse charge are renting of motor vehicle, supply of manpower service and works contract service. The other services, which are notified for 100% reverse charge, include services like service provided by an individual advocate, support services by Government or local authority etc.
This simply means for the same service, for which hitherto one return was filed by the service provider, there will be multiple returns as more number of personsare required to obtain registration, pay service tax and comply with all the statutory requirements as recipients of service. This consumes lot of time of not only the tax payers, but the departmental officers also as there will be inflow of multiple returns. The verification of tax payment during audit etc is also going to be difficult as the correctness of payment of service tax requires verification at the service providers' end and also the receivers'end.Further if any demand has to be issued on the dispute of taxability of service, Show Cause Notices need to be issued to multiple taxpayers in respect of the same service/dispute. Often the service provider and service receiver do not fall under the same territorial jurisdiction and there is a scope of divergent and conflicting decisions on the same issue in different jurisdictions. Board may even have to appoint common adjudicating authorities in such cases.
Another problem in such reverse charge mechanism is, many of the services operate under conditional exemptions and the conditions attached to the notification are to be fulfilled by the service providers while the service tax liability is on the service receiver. In this type of cases, the quantum of liability of service tax on the recipient will depend on the compliance of the conditions by the service provider and the service receiver has to be penalized for non-compliance by the service provider.
Let us re-collect the imbroglio with the GTA service where Board had to issue 37 B order to finally settle the CAG audit paras that the 75% abatement is not admissible to the service receivers. This kind of problems will arise with works contract service, rent-a-cab service also.
Another important change is, the proposed abatement brings back the condition of non-availment of CENVAT Credit on inputs, capital goods and input services in respect of Goods Transport Agency Service for availing abatement of 75% value (Ref: Entry No 7 in the Table given at page 82 of the JS(TRU) letter). After much debate on this issue, the condition of non-availment of CENVAT Credit was done away with vide Notification No 13/2008- ST, dated 01.03.2008 to provide unconditional abatement of 75% to GTA service. But the new proposal takes us to the position pre- March 1, 2008.
The above issuesneed to be addressed before going ahead with the new reverse charge scheme, considering the constraints of manpower and explosion of number of assessees in the ensuing GST era.
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