Queries on taxation and service tax liabilities, addressed by
Vivek Sharma & Manav Saneja of Ernst & Young
We have been informed that a ?One Time Amnesty Scheme? has been introduced in the Union Budget 2013-14 for assessees who have not paid their tax dues from 1 October 2007 to 31 December 2012. Further, it has also been informed that we need to file a declaration with service tax authorities so that we can get immunity from interest/ penalty/any other proceedings. Please let us know in which format we need to file the declaration.
Union Budget 2013-14 vide Finance Bill 2013 has proposed a ?One time Amnesty Scheme? (the scheme) in service tax by granting immunity from interest, penalty and prosecution/any other proceedings to all assessees who have not paid their dues and/ or have filed service tax returns with incorrect liability from 1 October 2007 to 31 December 2012. Under the scheme, 50% of the tax dues have to be paid before 31 December 2013 and balance by 30 June 2014.
However, the scheme will come into force from the date of enactment of the Finance Act 2013 i.e. after the President’s consent, which is expected shortly. As of now, no format of declaration has been specified by the central government.
The same would be notified by the central government in due course.
Service tax on leasing and renting
We have taken a land in Sikkim on lease from a landlord for 99 years, as the state laws of Sikkim do not permit any sale of land to non-domicile persons. We have paid the entire lease premium to the landlord on a one-time basis. We wish to understand whether this transaction amounts to renting of immovable property and hence leviable to service tax.
The central government vide Union Budget 2010-11 amended the definition of ?Renting of Immovable Property? to include vacant land, given on lease or licence for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce.
In this case, you have taken the land on lease, presumably for setting up a factory or commercial purposes. Accordingly, it can be said that the vacant land will be used in the furtherance of business of commerce. However, there has been no clarity on the issue. On a strict interpretation of law, taxability of renting of vacant land has an exposure. However, 99-year leases with an option of free-hold conversion take the nature of a permanent transfer of immovable property, on which there is no service tax. But this position has not yet been examined by the courts
Advance ruling on excise, service tax
We are engaged in the production of medicinal herbs under a specific brand name in India. Our factory is located in Haryana. As part of diversification, we propose to start a new line of business of dairy products, by setting up another factory in Haryana. In this regard, we wish to get clarifications on issues regarding the classification of the product proposed to be manufactured. Would we be entitled to take an advance ruling on excise classification of the goods to be manufactured?
Until recently, the facility of advance ruling?on clarifications sought under excise and service tax?was available only to joint ventures with foreign entities, an Indian subsidiary of an overseas company. After 22 September 2011, ?Resident Public Limited Company? was notified to be eligible as an ?Applicant? for Advance Rulings under Customs. The finance ministry issued a notification number 67/2011-Customs (NT) dated 22 September 2011, bringing Domestic Public Limited Company within the ambit of Section 28E of the Customs Act, 1962.
Prior to March 2013, an applicant resident public limited company was not eligible to seek an advance ruling on the new line of business it proposes to start in the course of its existing import trade? i.e. the applicant is not eligible to seek a ruling on its proposed business activity with respect to excise and service tax clarifications.
However, after 1 March 2013, the government has extended the benefit of advance rulings to ?domestic public limited companies? in respect to excise and service tax. This facility, which gives companies a clear idea about their prospective tax liability before venturing into any transaction or a business activity, limited to customs duty liability, has now been extended to central excise and their service tax liability as well.
Therefore, you can obtain advance ruling with respect to excise & service tax clarifications on the new line of business.
The replies do not constitute professional advice. Neither E&Y nor FE is liable for any action taken on the basis of these replies. Readers may mail their queries to sme@expressindia.com
