Leaf No : Budget Supplement
Month : March
Year : 2012
editor’s desk

Greetings from Team SA!

“ Instead of adding to the number of subclauses why cant the government tax all services and specify what is not taxable -??????” . This is the question any tax lawyer/consultant would hear from clients at the beginning/middle or end of any discussion. While listening to Hon’ble Finance Minister delivering his speech who earnestly wanted to take care of service tax having reached its adulthood, it was felt that the government has finally done that. An hour later, when the details came pouring in as amendment to Finance Act, 1994, Rules and notifications, the real picture brings nothing more than ‘Old wine in new bottle’. The major part of negative list and exempted list is nothing but existing exemptions provided under various categories of taxable services. The declared services is nothing but existing taxable services bundled under broad categories. In short, we are not in for any surprise. Same questions and problems would continue more vigorously in light of new groupings and additions. However, it is welcome news that the new additions would put an end to much much debated issues as construction of single residential unit and free supplies. And it is equally worth celebrating (for right or wrong reasons) that after 18 years services has got a definition finally!!!!!!

The hype that the negative list has created has eclipsed the excise duty and customs duty amendments. The standard rate of excise duty has increased from 10% to 12% and concessional rate from 5% to 6% and 1% to 2%. This budget has not failed expectation on simplifying refund procedure under Rule 5 of Cenvat Credit Rules, 2004 which has been done almost every year with no result. Optional 5% payment under Rule 6 of under Cenvat Credit Rules has been increased to 6%. The damage caused by ghost of judgment of apex court in ‘Ind swift’ has been attempted to be partially exorcised by amendment to effect that Interest is payable only on Cenvat Credit wrongly taken and utilised. The most appreciable amendment in customs duty is the simplification of computation of education cess on import of goods.

TRU corner..

1. TRU letter on Service tax... 

2. Draft Guidance Paper : A 

3. Draft Guidance paper : B 

(Click here for the common link)



service tax

# Positive list to give way to negative list – a major paradigm shift - (Click here for copy of the Negative & Declared list).

# Service Tax Rate raised from 10% to 12 % with effect from 1.4.2012. (Notification 8/2009, prescribing 10 % - rescinded - (Click here for copy of the Notification 2/2012).

# Composition rate for Works Contract service raised from 4 % to 4.8 % w.e.f. 01.04.2012
(Click here for copy of the Notification No. 10/2012).

# Optional 5 % payment on exempted services under Rule 6 of CCR, raised to 6 %.

# Exemption to transport of goods by rails by railways extended upto July 2012 (Click here for copy of the Notifications 7-9/2012).

Amendments in ST Rules, 1994 & POT Rules (Click here for copy of the Notifications 3/2012 & 4/2012).

# Time limit for raising invoices raised to 30 days (Rule 4A amended).

# No blanket immunity to professionals from POT.

# All Service providers being individuals / partnership firms, having turnover of less than Rs. 50 lakhs can pay service tax on realization basis.

# Self adjustment of excess paid ST relaxed. Limit of Rs. 2 lakhs removed. Rule 6(4B) substituted.

# Minor excess amounts received upto Rs.1000 – ST not payable on such excess payments on receipt.

# Best judgement for difficult cases where date of invoice / date of payment not available.
SSI Exemption aligned with POT (Click here for copy of the Notification 5/2012).

# Normal demand period raised from one year to 18 months - Section 73 amended (Click here for the relevant Clause 143 K of the Finance Bill 2012).

# For renting of immovable property service – penalty waiver if ST is paid within 6 months of passage of Finance Bill (Click here for the relevant Clause 143L of the Finance Bill 2012).

# Settlement Commission and Revisionary Authority for ST too. (Click here for the relevant Clause 143 M of the Finance Bill 2012).

# Time limit for filing appeal before Commissioner Appeals reduced to 2 months, with delay condonation for one month & Time limit for fliing appeal before Tribunal, for department enhanced from 3 to 4 months (Click here for the relevant  Clause 143 N & O of the Finance Bill 2012).

# Mens rea required for prosecution (Click here for the relevant Clause 143 Q of the Finance Bill 2012).

before parting ...         -jk

# Central Excise rates increased from 10% to 12%, 5% to 6% and 1% to 2% with effect from 17/3/2012.

# 1% levy continues for Coal, Jewellery, Mobiles and Non fertilisers under Chap 31.

# Abatement for Readymade garments increased from 55% to 70%. (Click here for copy of the Notification 17/2012 CE NT).

# Cement, Cigarettes and Footwear brought under Section 4A. (Click here for copy of the Notification 7/2012 CE NT).

# Cigarettes notified under the Third Schedule of the CE Act. (Click here for The Sixth Schedule).

# Procedural changes on return of Readymade garments (Click here for copy of the Notification 8/2012 CE).

# Unbranded Articles of Jewellery to attract 1% levy – Tariff Value at 30% of transaction value notified (Click here for copy of the Notification 9/2012 CE NT).

# Silver Jewellery & Branded Coins of Gold and Silver exempted subject to purity (Click here for Sl.No.199 & 200 of Notification 12/2012 CE).

# Option of Job worker of jewellery to register dispensed – Rule 12AA of CE Rules.(Click here for copy of the Notification 8/2012 CE NT).

# Cars to cost dearer (Click here for copy of the Notification 12/2012 CE).

# Parts of Mobiles for OE purpose – Fully exempted (Refer – Sl.No.272 of Notification 12/2012 CE) - Spares to attract 2% (Click here for copy of the Notification 16/2012 CE).



# Inter-connected Undertakings under Section 4 of Central Excise Act redfined – No more reference to MRTP Act. (Click here for the relevant clause 129 of the Finance Bill 2012).

# Limit to prosecute under Section 9 increased from 1 lac to 30 Lac. (Click here for the relevant Clause 130 of Finance Bill 2012).

# Offences under amended Section 9/Section 9A classified as cognisable/noncognisable – offshoot of Supreme Court Verdict (Click here for the relevant Clause 131 of the Finance Bill 2012).


# Increase in Baggage allowance - 25K to 35K for pax of Indian origin & 12K to 15K for children upto 10 yrs.

# Education Cess on CVD exempted. (Click here for copy of the Notification 13/2012 - Cus - E Cess & Notification 14/2012 - Cus - SHE Cess).

# Importer of specified goods to declare State of first sale of such goods and VAT Registration number - w.e.f. 1/5/2012 (Click here for copy of the Notification 21/2012 - Cus).

# Analogous provisions brought in Customs Act in respect of Arrest and Prosecution. Section 104 substituted and Section 104A introduced (Click here for the relevant Clause 120 & 121 of Finance Bill 2012).

# Section 28AAA introduced to facilitate demand on import using export promotion instruments. (Click here for the relevant Clause 116 of the Finance Bill 2012).

# Major Changes in Cenvat Credit Rules - effective from 1/4/2012 (Click here for copy of the  Notification 18/2012 CE NT).

# Optional 5% payment on exempted goods and services under Rule 6 of CCR – increased to 6%.

# Removal of capital goods redefined – Refer Rule 3(5) & 3(5A) - the credit to be reversed either as per depreciation route or as per transaction value, whichever is higher – no distinction between used capital goods and scrap – to be effective from 17/3/2012.

# Cenvat Credit allowed on Capital goods and inputs to service providers based on documentary evidence for delivery at the location – No need to bring it to the registered premises. (Refer Rule 4(1) & 4(2) of CCR).

# Rule 5 refund simplified; New Formula [{(Export turnover of goods + Export turnover of Services) * Net Cenvat Credit} / Total turnover] – one year transition period permitted to stay with old provisions.

# Rule 6(3C) – 20% reversal for insurance and reinsurance service provider dispensed with – to fall in line with Rule 6 obligation.

# ISD Restricted – Credit attributable to a specific unit should be distributed only to that unit – Common credit to be distributed proportionately based on turnover (Refer Rule 7 of CCR).

# Rule 10 A introduced to facilitate transfer of unutilised SAD credit at the end of a quarter to other units of the same manufacturer.

# P-AND-OR-A box opened by Supreme Court is closed – Interest only if Cenvat Credit is wrongly taken and utilised – Penalty remains for even wrong taking. (Refer Rule 14 of CCR).


The views expressed and the information provided in this newsletter are of general nature and is not intended to address the circumstances of any particular individual or entity. Further the above content should neither be regarded as comprehensive nor sufficient for making decisions. Although we endeavor to provide accurate and timely information, there is no assurance or guarantee in this regard. No one should act on the information or views provided in this publication without appropriate professional advice. It should be noted that no assurance is given for any loss arising from any actions taken or to be taken or not taken by anyone based on this publication.

Should you have any feedback or require any clarifications, please do write to :

contact sa
team sa
s. jaikumar +91 93400 34455
g. natarajan +91 93400 54477
m. karthikeyan +91 93400 66688
a. p. ravi +91 93400 54466
p. dwarakanath +91 93963 31929
k.s. ramesh +91 93420 45442
sindhu mangat +91 93400 11034
ganesh.k.s. iyer +91 95033 66677
chennai     •     coimbatore     •     bengaluru     •     hyderabad     •     pune     •     ahmedabad    •     nagpur