Baroda Branch of WIRC of ICAI

How to File Service Tax Returns and its Challenges

CA. Manilal Parsiya

How to File Service Tax ReturnsHow to fill Service Tax Return

How to file Service Tax Return

Challenges in filing of ST3 Complexity is due to complex Service Tax Law and badly structured Service Tax return. Partial reverse charges always requires registration for specific service covered by

reverse charge mechanism (for “Works Contract Service”). Difficult to cross verify the data due to bad structure of ST3. Hence ST3 is the most

error prone return. Poor structure in terms of link of one cell to another in the ST3. Same amount in

subsequent cells has to be entered manually. Some fields in the ST3 are seemed not relevant. ST3 Return Excel Utility for the period July-Sept. 2012 was issued on 29.04.2013.

Whereas ST3 Return Excel Utility for the period Oct-12 to March-13 has been issued on 31.07.2013.

Govt. has taken almost 3 months to add one line in ST3 in PART K – Self Assessment Memorandum “I/We have filed this return within specified time limit and incase of delay, I/we have deposited the amount towards late filing as prescribed under rule 7C of ST Rules”.

Whereas Govt. has given to the assessee less than one Month to file the ST3. ST3 demands lot of patience to go through entire lengthy and complex ST3. Many debugging problems have been encountered in case of software for Service Tax.

Structure of Service Tax Return

PART A – General Information

PART B – Value of Taxable Service and Service Tax Payable

PART C – Service Tax Paid in Advance

PART D, E, F – Service Tax, EC, HSEC Paid in Cash and through CENVAT Credit

PART G – Arrears, Interest, Penalty and any other amount etc. paid

Structure of Service Tax ReturnPART H1-Details of ChallansPART H2-Source Documents for details

of payment made in advance and adjustment

PART I – Details of CENVAT PART J – Credit details for Input

Service DistributorPART K – Self Assessment

Memorandum

PART A – General InformationField with * (red asterisk) is compulsory to

be filed for validate the sheet

Some field like Name of the Assessee, premises code shall come automatically while uploading the return

Most of fields except fields having amount to be filled are having drop down selection

Most of grey fields are having pre-fixed selection options

PART A – General InformationAdd all services for which registration has been

taken.Separate sheets shall be available for each services

we have added.Service after added cannot be edited; it can be

deleted by “delete service” option keeping cursor on red colored cell.

Majority time assessee is either a service provider or a service receiver for a particular category of service except few exceptions.

After selecting option in green cells “Yes”, grey cells shall be turned in to green and data can be entered in that cell.

PART A – General InformationData is to be filled in respective sheet either as a

service receiver or as a service provider or for both.More than one exemptions and/or abatement

notifications and serial nos. can be selected by “add notification” menu.

Case of partial reverse charge is being treated as an exemption and we have to select ‘Yes’ in exemption menu.

Rebate on service tax on export of services under notification can be shown in Point B1.12 – Any other amount claimed as deduction, please specify

Serial No. appears after selection of exemption notification

Exemption Notifications listed in Drop Down List

Notification No.

Nature of exemption

36/2010 Service tax on advances received prior to 1-7-2010 in respect of services as per amended definition if service provided after 1-7-2010

45/2010 Exemption on taxable services relating to transmission and distribution of electricity for the period up to 21.06.2010

25/2012 Mega Exemptions27/2012 Exemptions to services to foreign diplomatic

mission30/2012 Exemption by way of partial reverse charge

mechanism31/2012 Exemption to exporter for transport of goods from

place of removal to freight station, container depot, port, airport (only in case of GTA on reverse charge basis)

32/2012 Exemption of services provided by a Technology Business Incubator(TBI) or a Science and Technology Entrepreneurship Park(STEP)

33/2012 Exemption to small service provider(up to 10 lakh)40/2012 Exemptions on services provided to SEZ authorized

operations

Exemption Notifications listed in Drop Down List

Notification No.

Nature of exemption

41/2012 Rebate of service tax i) in case of excisable goods on services used beyond place of removal and in other case taxable service used in such export of goods

42/2012 Service provided by a commission agent located outside India and engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported by him.

43/2012 Notification No. 43/2012-St, dated 2-7-20121. Service of transportation of passengers, with or

without accompanied belongings, by railways in --

(A) first class; or(B) an air conditioned coach

2. Services by way of transportation of goods by railways

(Only in case of Transportation of goods by rail)

Abatement Notifications listed in Drop Down List

Notification No.

Nature of Abatement Serial No.

14/2012 Exemption in case of taxable service involving import of technology

Always 1

24/2012 Value of taxable services in terms of Service Tax (Determination of Service Rule), 2006 (Valuation of certain service on the basis of statutorily prescribed percentage in case of Works Contract Service, Restaurant or Outdoor Catering Service & prescribed slab in case of Service in relation to Money Changing

Always 1

26/2012 Exemption to specified services by way of abatement

(as per next slide)

29/2012 Exemption on property tax from renting of immoveable property

Always 1

Abatement to specified services – w.e.f. 1.7.2012(26/2012-ST)

Sl. No.

Description of taxable service Taxable Percent

Conditions

1 financial leasing including hire purchase

10 Nil

2 Transport of goods by rail 30 Nil3 Transport of passengers by rail 30 Nil4 Bundled service by way of

supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention centre, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises

70 CENVAT on any goods classifiable under Chapter 1 to 22 of Central Excise Tariff Act, 1985 has not been taken

5 Transport of passengers by air 40 CENVAT credit on inputs and capital goods has not been taken

Abatement to specified services – w.e.f. 1.7.2012(26/2012-ST)

Sl. No.

Description of taxable service Taxable Percent

Conditions

6 Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes.

60 CENVAT credit on inputs and capital goods has not been taken

7 Services of goods transport agency

25 CENVAT has not been taken

8 Services provided in relation to chit

70 Same as above

9 Renting of any motor vehicle designed to carry passengers

40 Same as above

10 Transport of goods in a vessel 50 Same as above11(i)

Package tour by tour operator 25 Same as above

11 (ii)

services solely of arranging or booking accommodation for any person in relation to a tour

10 Same as above

Abatement to specified services – w.e.f. 1.7.2012(26/2012-ST)

Sl. No.

Description of taxable service Taxable Percent

Conditions

11 (iii)

Services by a tour operator in case other than above

40 Same as above

12 Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly exceptwhere entire consideration is received after issuance of completion certificate by thecompetent authority,-

1. CENVAT credit on inputs used has not taken.

2. The value of land is included in the amount charged from the service receiver.

(i) for residential unit having carpet area upto 2000 square feet and where the amountcharged is less than rupees one crore;

25

(ii) For other than the (i) above. 30

PART B – Value of Taxable Service and Service Tax Payable – Service Provider

Quarter/month wise gross amount(excluding ST) for which bills/invoices/challans are issued less amount on which Service Tax has already charged on advance receipt basis in earlier quarter/month and bills/invoices/challans on which Service Tax charged on partial reverse charge basis is to be shown against Sl. No. B1.1.

Gross amount is the value of all services, other than those services specified in the negative list provided any where except in the State of Jammu and Kashmir(B1.1).

Gross amount shall include amount charged towards export service, exempt service, amount charged as pure agent, amount includible in terms of rule 5(1) (reimbursement of expenses ) and rule 6(1) of ST(Determination of Value Rule), 2006 etc.

Post POTR, tax obligation generally arises on accrual or realization of consideration, whichever is earlier (subject to few exceptions). Amount received in advance for service whether taxable or exempt is to be shown against S. No. B1.2.

PART B – Value of Taxable Service and Service Tax Payable – Service Provider As per third proviso to Rule 6(1) of Service Tax Rules, 1994, in case of

individual and partnership firms whose aggregate value of taxable services is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax up to a total of rupees fifty lakhs in the current financial year on receipt basis.

If assessee has opted to pay Service Tax on receipt basis as above than such amount taxable on receipt basis is to be shown against Sl. No. B1.3.

Amount taxable for service provided for which no bills, invoices, challans or any other documents have been issued (Rule 4A(1) of ST Rules) is to be shown against Sl. No. B1.4

The value of consideration charged other than in money, is to be estimated in equivalent money value of such consideration in terms of the Service Tax (Determination of Value) Rules, 2006 is to be shown against Sl. No. B1.5.

Gross amount on which Service Tax is payable on partial reverse charge whether on accrual or advance basis is to be shown against Sl. No. B1.6.

PART B – Value of Taxable Service and Service Tax Payable – Service Receiver Quarter/month wise gross amount(excluding ST) for which

bills/invoices/challans are received less amount on which Service Tax already charged on advance payment in earlier quarter/month and bills/invoices/ challans on which Service Tax charged on partial reverse charge basis is to be shown against Sl. No. B2.1.

Amount paid in advance for service whether taxable or exempt is to be shown against S. No. B2.2.

Sl. No. B2.3 is not relevant in case of service receiver since third proviso to rule 6(1) of Service Tax Rules, 1994 is applicable only to service provider

The value of consideration paid other than in money, is to be estimated in equivalent money value of such consideration in terms of the Service Tax (Determination of Value) Rules, 2006 is to be shown against Sl. No. B2.4.

Amount paid for service received from non-taxable territory – imports is to be shown against Sl. No. B2.5.

Amount paid for service received from non-taxable territory – other than imports is to be shown against Sl. No. B2.6.

Amount on which Service Tax is payable on partial reverse charge whether on accrual or advance basis is to be shown against Sl. No. B2.7.

PART B – Value of Taxable Service and Service Tax Payable – Exemption and Deductions Amount of service exported is to be shown against Sl. No. B1.8. Amount charged for exempted service other than export (and amount

paid in case of service receiver) including non-taxable portion of value of service included under partial reverse charge is to be shown against Sl. No. B1.9 and B2.9 respectively.

Against Sl. No. B1.10 and B2.10 amount received/paid as pure agent (for example Taxes, Duties, Fees etc paid on behalf of service receiver and claim reimbursement through bills/invoices).

Abatement on specified services under Notification such as 26/2012-ST dated 20.06.2012 (details as per earlier slides) is to be shown against Sl. No. B1.11 and B2.11

Sl. No. B1.12 and B2.12 covers any deductions which is not mentioned in any other clause. (For example, deduction of property tax paid in respect of the taxable service of renting of immovable property in terms of 6(4C) of Service Tax Rules, 1994 read with Notification No. 29/2012-ST. or exemption in case of taxable service involving import of technology under Notification No. 14/2012-ST dated 17.07.2012)

PART B – Value of Taxable Service and Service Tax Payable – Service Tax Rate wise Break up Different rate of Service Tax like 12%, 10%, 8%, 5% can be entered

by adding row and quarter/month wise Net Taxable Value is to be entered for advalorem rate and specific rate (Rule 6 of ST Rules provides for specific rate in case of air travel agent service, foreign exchange broker service and service of promotion, marketing, organizing lottery).

Taxable amount is to be converted into taxable unit in case of specific rate(For ex. In case of the services of booking of tickets for travel by air provided by an air travel agent, shall have the option, to pay an amount calculated at the rate of 0.6% of the basic fare in the case of domestic bookings, and at the rate of 1.2% of the basic fare in the case of international bookings, of passage for travel by air, during any calendar month or quarter.)

Aggregate quarter/month wise total of service tax rate wise break up value must match with Net Taxable Value at B1.14 & B2.14.

Amount can only be entered against R & D Cess cell, if exemption Notification No. 36/2010-ST has been selected at exemption menu.

PART C – Service Tax Paid in Advance

Rule 6(1A) provides that every person liable to pay service tax, may, on his own volition, pay an amount as service tax in advance and adjust the amount so paid against the service tax which he is liable to pay for the subsequent period :

Provided that the assessee shall,—(i) intimate the details of the amount of service tax

paid in advance, to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such payment; and

(ii) indicate the details of the advance payment made, and its adjustment, if any in the subsequent return to be filed under section 70 of the Act.]

PART D, E, F – Service Tax, EC, HSEC Paid in Cash and through CENVAT Credit

1 Amount paid by challan

2 Amount paid by CENVAT (not applicable in case of service receiver)

3 Amount of Service Tax paid in Advance adjusted in terms of Rule 6(1A) of ST Rules.

4 Rule 6(3) of ST Rules allows adjustment of Service Tax amount which was paid earlier in respect of taxable service not provided wholly or partially by the service provider or where the amount of invoice is re-negotiated. Such adjustment is to be shown here.

5 Rule 6(4A) of ST Rules allows adjustment of Service Tax amount paid in preceding months or quarter, which is in excess of the Service Tax liability for such month or quarter. Such adjustment is to be shown here.

6 Rule 6(4C) of ST Rules allows adjustment of Service Tax amount paid in preceding months or quarter, which is in excess of the amount required to be paid towards Service Tax liability for such month or quarter on account of non-availment of deduction of property tax paid in terms of Notification No. 29/2012-ST from the gross amount of rent charged for the immovable property. Such adjustment is to be shown here.

7 Details of Source Documents relating to Sl. No. D,E&F(3,4,5,6&7) are to be provided in Part H2 of the return.

PART G – Arrears, Interest, Penalty and any other amount etc. paid

1. Arrears of revenue includes-a) Amount that was payable earlier but

not paid;

b) Amount pending recovery on finalization of adjudication or appellant stage, as the case may be;

c) Amount pending in appeals without having any stay for recovery; or

d) Amount arising on finalization of provisional assessment etc.

PART G – Arrears, Interest, Penalty and any other amount etc. paidG7 Any amount collected in excess of the service

tax assessed or determined and paid on any taxable service from the recipient of taxable service in any manner, has to be paid as per the provisions of Section 73A of the Finance Act, 1994.

Assessee may furnish such amount here.G8 Interest paid (in cash only)G9 Penalty paid (in cash only)G10 Amount of late fee paid for any delayed filing

of return has to be entered here as prescribed under Rule 7C of ST Rules.

G11 Any other amount paid may be specified. (It may include amount paid in terms of any adjudication order, any appellate order, etc.)

PART H Details of Challans and Source Documents Source document details for payment made in advance or

adjustment, for entries made at Sl. No. D, E & F (3, 4, 5, 6 & 7) and G1 to G11.

Enter relevant Sl. No. D, E & F (3, 4, 5, 6 & 7) or G1 to G11 for adjustment or payment of ST at source document detail sheet.

Enter month/quarter in which adjustment or payment is shown at Sl. No. D, E & F (3, 4, 5, 6 & 7) or G1 to G11.

Against source documents, following details may be furnished,-i) For adjustment under rule 6(3) of Service Tax Rules, 1994, furnish details of earlier return, from where excess amount is derived(ii) For adjustment under rule 6(4A), furnish details of acknowledgement No. of intimation to Superintendent as required to be furnished in the rules;

PART H Details of Challans and Source Documents(iii) For arrears, interest and penalty, the source

document/period is as follows,-(a) in case these are paid suo moto by the assessee, the period for which such

amount is paid may be furnished

(b) if paid consequent to a show cause notice (SCN) or order, the source document is relevant SCN No./Demand Notice No., Order-in-Original No. or Order-in-Appeal No., or any other order , etc.;

(iv)   For adjustment of excess amount of service tax paid on the service of ‘Renting of Immovable Property’ in case the taxpayer has not availed the deduction of property tax paid in terms of Rule 6(4C) of the Service Tax Rules, 1994 read with Notification No. 29/2012-ST, dated 20th June, 2012 and he opts to avail such deduction against his service tax liability within 1 year from the date of payment of such property tax, the source document is original receipt issued by the concerned department of State Government showing the payment of such property tax.

PART I – Details of CENVAT Details at Sl. No. I1 is to be given only in case of

assessee provides exempted and non-taxable service or manufacturing exempted excisable goods.

Rules 6(2) of CENVAT Rules, 2004 provides where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts including receipt and consumption of input service and input goods…

PART I – Details of CENVAT Rule 3 of CENVAT Rules, 2004 provides if the

manufacturer of goods or the provider of output service, opting not to maintain separate accounts, then he shall follow any one of the following options, as applicable to him, namely:—(i) pay an amount equal to six per cent of value of the

exempted goods and exempted services; or

(ii) pay an amount as determined under sub-rule (3A); or

(iii) maintain separate accounts for the receipt, consumption and inventory of inputs and pay an amount as determined under sub-rule (3A) in respect of input services;

(Note: Rule 3A prescribed method of deriving CENVAT reversal amount on the basis of formulae and procedure to be followed including advance intimation to Superintendent of Central Excise)

PART I – Details of CENVAT Details at Sl. No. I2 is only to be

provided if separate books are not maintained.

Always check last return for opening CENVAT balance available.

CENVAT Credit can be carried forward without time limit.

Service Tax paid under reverse charge by challan, if CENVATable, can be claim as CENVAT in the same month/quarter.

How to file Service Tax Return1. Fill up the return data2. Validating sheets3. Validate return and generate

XML4. Upload XML file in to ACES

Application5. Status can be Uploaded, Filed or

Rejected6. If rejected, it needs to be

corrected and uploaded again.

New user-friendly features in the Oct. 2012 - Mar. 2013 ST-3 Return:    A. Previously, the assessees were able to view the filed

returns using the option, 'View Original ST3'. This facility has been enhanced with a new feature by displaying in the return, the list of error codes (with corresponding error messages). This will help the assessees to know about the errors so that they can exercise the option of filing Revised return by rectifying the errors. This facility will be made available shortly and the exact date will be intimated on ACES website.

B. As soon as the return uploaded by the assessee is accepted or rejected by the system, a system-generated message will be e-mailed to the assessee. The assessee can rectify the errors and file the corrected return.

Thank you