jodhpur seminar 2012

53
1 Company Secretary Company Secretary The Visionary Professional The Visionary Professional & & Value Added Service Provider Value Added Service Provider A A Presentation by Presentation by Dr. Sanjiv Agarwal Dr. Sanjiv Agarwal FCA, FCS, ACIS (UK) FCA, FCS, ACIS (UK) Jodhpur Jodhpur 1 April 2012 1 April 2012

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Page 1: Jodhpur seminar 2012

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Company SecretaryCompany Secretary

The Visionary Professional The Visionary Professional &&

Value Added Service ProviderValue Added Service Provider A A

Presentation byPresentation byDr. Sanjiv AgarwalDr. Sanjiv Agarwal

FCA, FCS, ACIS (UK)FCA, FCS, ACIS (UK)

Jodhpur Jodhpur 1 April 2012 1 April 2012

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

Company SecretaryCompany SecretaryCompanyCompany

Secretary Secretary Secretary of company Secretary of company Principal officer Principal officer Key Management Personnel Key Management Personnel Eyes & ears of Board Eyes & ears of Board A visionary professional A visionary professional A true professional – doing things right and doing the A true professional – doing things right and doing the

right thingsright things

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

Attributes of a good Secretary: Changing role Attributes of a good Secretary: Changing role

Compliance to Compliance to business solution providerbusiness solution provider

Promoter / share holder oriented to Promoter / share holder oriented to stakeholder’s welfarestakeholder’s welfare

Value driven – Value driven – 360360oo value addition value addition

Company Law to Company Law to versatile knowledge and multi versatile knowledge and multi taskingtasking

Change victim to Change victim to change agentchange agent

New qualification - New qualification - Values and ethicsValues and ethics

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

New Role for C.S. New Role for C.S. Expanding Expanding

Exceeding Exceeding

Excelling Excelling

E.E. E. E. EE

(The fine picture)(The fine picture)

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

Essentials of Professionalism Essentials of Professionalism Personal & Professional EffectivenessPersonal & Professional EffectivenessEmotional Intelligence Emotional Intelligence Administrative Competencies Administrative Competencies Communication and Active Listening Communication and Active Listening Conflict Resolution and Positive Discipline Conflict Resolution and Positive Discipline Planning and Setting Priorities and Performance Planning and Setting Priorities and Performance Management Management Mentoring and Coaching Mentoring and Coaching Team Building Team Building Professional Best Practices Professional Best Practices

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

Expectations from a C. S.Expectations from a C. S.be a versatile and strategic resource to company be a versatile and strategic resource to company / industry / industry wealth creation, fund management and business wealth creation, fund management and business management management ethical practices in dealing with external world / ethical practices in dealing with external world / stakeholdersstakeholdersgood governance in place good governance in place CSR, sustainability and inclusive growth.CSR, sustainability and inclusive growth.Follow core values Follow core values

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

Core Values Core Values a belief followed in personal / professional life a belief followed in personal / professional life a way of lifea way of lifecore values include core values include

• IntegrityIntegrity – inner sense of wholeness, strength – inner sense of wholeness, strength • EthicsEthics – moral character, sense of right or wrong – moral character, sense of right or wrong• Reliability Reliability – assurance of quality and commitment – assurance of quality and commitment • Ownership Ownership – responsibility, accountability and – responsibility, accountability and

empowerment empowerment • Being stakeholder centricBeing stakeholder centric – most valued constituency – most valued constituency

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

New areas of Engagement New areas of Engagement Intellectual Property Rights Intellectual Property Rights Banking and InsuranceBanking and InsuranceForeign trade and foreign exchange management Foreign trade and foreign exchange management Rehabilitation and reconstruction of sick companiesRehabilitation and reconstruction of sick companiesFDI and other foreign investments FDI and other foreign investments Merchant banking services Merchant banking services Registrar and transfer agent services Registrar and transfer agent services Telecom laws and regulations Telecom laws and regulations Electricity laws and regulationsElectricity laws and regulations

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

New areas of EngagementNew areas of EngagementTaxation – Direct and Indirect TaxesTaxation – Direct and Indirect TaxesInvestment banking Investment banking Securitization and asset reconstruction Securitization and asset reconstruction Mergers and acquisitions Mergers and acquisitions Limited Liability Partnerships Limited Liability Partnerships Labour laws Labour laws Environmental lawsEnvironmental lawsCooperative societies Cooperative societies NGO’s NGO’s Education Education

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CS : The Visionary Professional CS : The Visionary Professional & Value Added Service Provider& Value Added Service Provider

Future OpportunitiesFuture Opportunities NCLT NCLT Competition law Competition law Insolvency law Insolvency law Rehabilitation and revival of sick companies Rehabilitation and revival of sick companies Valuation Valuation IT and cyber laws IT and cyber laws Private equity Private equity KPOs and LPOsKPOs and LPOsInfrastructure and real estate Infrastructure and real estate

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CS : The Visionary Professional CS : The Visionary Professional &Value Added Service Provider&Value Added Service Provider

Challenges Challenges skills like decision making / leadership / team workskills like decision making / leadership / team workexpertise in new areas of – expertise in new areas of –

governance governance sustainability sustainability value based business value based business

Unlisted companies and SME sector.Unlisted companies and SME sector.Services to non corporate entities – Trusts, NGO’s, SME sector, banks, Services to non corporate entities – Trusts, NGO’s, SME sector, banks, autonomous bodies etc. autonomous bodies etc. New areas – environmental laws, cyber laws, IPR, Taxation, Capital market, New areas – environmental laws, cyber laws, IPR, Taxation, Capital market, arbitration, Legal drafting, Risk management, competition lawarbitration, Legal drafting, Risk management, competition lawCorporate mishaps and frauds Corporate mishaps and frauds Competition – Local / global Competition – Local / global Technological changes Technological changes

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Service Tax in IndiaService Tax in India

Introduced in India in 1994 as a simple, modest tax with Introduced in India in 1994 as a simple, modest tax with just three services. just three services. Service tax – an indirect tax.Service tax – an indirect tax.Approach to Service Tax – Selective as against Approach to Service Tax – Selective as against comprehensive one .comprehensive one .Desirable from revenue, equity and economic view point.Desirable from revenue, equity and economic view point.Governed by Finance Act, 1994 and a dozen of rules. Governed by Finance Act, 1994 and a dozen of rules. Legislative dependence on other laws.Legislative dependence on other laws.Jurisdictional application. Jurisdictional application. Scattered and heterogeneous large mass of service Scattered and heterogeneous large mass of service providers as well as wide spectrum of services. providers as well as wide spectrum of services.

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Brief Overview of Services / Service TaxBrief Overview of Services / Service TaxShare of Services in GDPShare of Services in GDP

GDP CO MPO SITIO N IN MARCH, 2012

Service Sector

59%Industry

22%

Agriculture

19%

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Share of services in GDP tracked Share of services in GDP tracked

Year Year % of GDP % of GDP19501950 151519701970 333319801980 363619941994 404019951995 414120002000 474720052005 535320102010 575720112011 5959

In 2011-12, services have grown by 9.6% which is more In 2011-12, services have grown by 9.6% which is more than GDP growth ratethan GDP growth rate

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Growth of Service TaxGrowth of Service Tax

Year No. of Services

Rs. (in crores)

1994 3 407

2001 26 2612

2005* 72 14199

2008 103 51301

2010 112 58000

2011 120 68000

2012 120 95000

2013 All 126000(B)

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Legal Validity of Service TaxLegal Validity of Service Tax

Article 246 of Constitution Article 246 of Constitution Distribution of legislative powers between Union and State Distribution of legislative powers between Union and State

Legislatures with reference to lists under VII Schedule Legislatures with reference to lists under VII Schedule List IList I Union Parliament has exclusive power to Union Parliament has exclusive power to

legislate specified matters legislate specified matters List IIList II State legislature has exclusive powers to State legislature has exclusive powers to

legislate specified matters legislate specified matters List IIIList III Concurrent power to both, Union and State Concurrent power to both, Union and State

legislatures for specified matters legislatures for specified matters

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Service tax – Some Interesting FactsService tax – Some Interesting Facts

Present contribution of services to GDP- 59 percent Present contribution of services to GDP- 59 percent Total tax collection in India is Rs. 9.32 lakh crore of which Rs. 3.97 lakh Total tax collection in India is Rs. 9.32 lakh crore of which Rs. 3.97 lakh crore is indirect tax. (42%)crore is indirect tax. (42%)Current share of service tax to total indirect taxes is 31percent at Rs. 95000 Current share of service tax to total indirect taxes is 31percent at Rs. 95000 crore crore Assessees expected to be around 8 lakh.Assessees expected to be around 8 lakh.Top contributions from tele-communication general insurance, stock Top contributions from tele-communication general insurance, stock brokers, banking, courier, ports and consulting engineers .brokers, banking, courier, ports and consulting engineers .C.S. Profession contributes about Rs 35 croreC.S. Profession contributes about Rs 35 croreOver 8000 cases pending > 5 yearsOver 8000 cases pending > 5 years

““The Avoidance of taxes is the only intellectual pursuit that still carries The Avoidance of taxes is the only intellectual pursuit that still carries

any reward – J.M. Keynes" any reward – J.M. Keynes"

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Service Tax : Reforms & Issues Service Tax : Reforms & Issues

Threshold exemption limit Threshold exemption limit No levy of service tax on export of services No levy of service tax on export of services Inter sectoral credit Inter sectoral credit Centralised registration Centralised registration E payment and e filing E payment and e filing Self adjustment of excess service tax Self adjustment of excess service tax Filing of belated returns. Filing of belated returns. Revision of service tax returns Revision of service tax returns Composition scheme for works contractsComposition scheme for works contractsExemption and refund to ExportersExemption and refund to ExportersValuation of services Valuation of services Point of Taxation Rules Point of Taxation Rules Reverse charge Reverse charge

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Classification / Consolidation of ServicesClassification / Consolidation of Services

Classification of Taxable ServicesClassification of Taxable ServicesSection 65ASection 65AW.e.f. 14.05.2003W.e.f. 14.05.2003Where any taxable service is classifiable in more than one category, Where any taxable service is classifiable in more than one category, category of service to be selected as undercategory of service to be selected as under-- Service which gives most specific description of service to Service which gives most specific description of service to be be preferred over general descriptionpreferred over general description-- In case of a In case of a composite servicecomposite service where specific description where specific description based based classification is not possible, look for classification is not possible, look for essential characteressential character of of

service.service.-- If neither could be done, service to be classified under If neither could be done, service to be classified under category category which appears first amonst the probable categories which appears first amonst the probable categories under under section section 65(105)65(105)

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Classification / Consolidation of ServicesClassification / Consolidation of Services

How to do itHow to do it- Decision to be made on question of facts and lawDecision to be made on question of facts and law

- Bothe form and substance of the transaction are to be taken into Bothe form and substance of the transaction are to be taken into accountaccount

- Guiding principle is to identify the essential features of transactionGuiding principle is to identify the essential features of transaction

- Method of charging does not in itself determine whether the service Method of charging does not in itself determine whether the service provided is a single service or multiple servicesprovided is a single service or multiple services

- Scope of coverage of individual services should be interpreted Scope of coverage of individual services should be interpreted

strictly in accordance with statutory provisionstrictly in accordance with statutory provision . .

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Classification / Consolidation of ServicesClassification / Consolidation of Services

There are about ten services where overlapping in classification exist and There are about ten services where overlapping in classification exist and there is no scientist on this earth (except Excise Officer) who can do the there is no scientist on this earth (except Excise Officer) who can do the classification with confidence.classification with confidence.

Mandap / event / convention/ catering /Club;Mandap / event / convention/ catering /Club;

CA/CS/CWA/ management consultant;CA/CS/CWA/ management consultant;

Consulting engineer/ technical & scientific consultancy / repair & Consulting engineer/ technical & scientific consultancy / repair & maintenance/ erection, commissioning;maintenance/ erection, commissioning;

IPR/ Franchise/ business auxiliary services / licensed production agreementsIPR/ Franchise/ business auxiliary services / licensed production agreements

Management consultancy/ banking services (mergers & acquisitions)Management consultancy/ banking services (mergers & acquisitions)

Business auxiliary and business support services Business auxiliary and business support services

CHA and Cargo handling servicesCHA and Cargo handling services

Courier & GTA services Courier & GTA services

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Classification / Consolidation of ServicesClassification / Consolidation of Services

-- Consolidation of services - need of the dayConsolidation of services - need of the day

- Telecommunication servicesTelecommunication services6 services merged – telephone, pager, leased circuit, telegraph, 6 services merged – telephone, pager, leased circuit, telegraph, telex and facsimile servicestelex and facsimile services

- Interpretational issues Interpretational issues - For clarity to services provider and tax administrationFor clarity to services provider and tax administration- Broad groups could be insurance, construction, advertisement Broad groups could be insurance, construction, advertisement

& business promotion, banking & financial services , business & business promotion, banking & financial services , business support, communication and transportation support, communication and transportation

- Opportunity to rationalize services – now or 2011 or never?Opportunity to rationalize services – now or 2011 or never?

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Registration (Form ST-1, ST-2)• Within 30 days from the date on which service tax is levied on any service or within 30 days of commencement of

business by the assessee whichever is later. [Rule 4(1)]

• In case of registration of non-resident, refer rule (6).

• Centralised registration — same as in rule 4(1) or as decided by the service provider [Rule 4(2)]

• Registration of specified categories of persons, i.e., service receivers and input services distributors is required under Service Tax (Registration of Specified Categories of

Persons) Rules, 2005, w.e.f. 16-6-2005.

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Payable by individuals, proprietary concerns, partnership firms:

Payable on amounts Due date (W.e.f.received during the quarter (upto 31-3-2005) 1-4-2005)

1st April to 30th June 25th July 5th July1st July to 30th September 25th October 5th October1st October to 31st December 25th January 5th January1st January to 31st March 31st March 31st March

Payable by persons other than individuals, proprietary concerns, partnership firms , LLPs:Payable on amounts Due date (W.e.f.received during the quarter (upto 31-3-2005) 1-4-2005)

April 25th May 5th MayMay 25th June 5th JuneJune 25th July 5th JulyJuly 25th August 5th August-----

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January 25th February 5th FebruaryFebruary 25th March 5th MarchMarch 31st March 31st March

e-paymentWhere electronic payment of service tax is required to be made, the last date of payment shall be sixth (6th) day of the month, instead of fifth day. e-payments made upto 8 pm of the day shall be considered to have been paid on that day.

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Rates of Service Tax as per Section 66

Period Tax Rate (%) Education Cess (%)1-7-1994 to 13-5-2003 5 (five) —14-5-2003 to 9-9-2004 8 (eight) —10-9-2004 to 17-4-2006 10 (ten) 2 (two)

(Effective tax rate including education cess is 10.2 per cent w.e.f. 10.9.2004)18-4-2006 to 10-4-2007 12 (twelve) 2 (two)and w.e.f. 1.4.2012

(Effective tax rate including education cess is 12.24 per cent w.e.f. 18-4-2006).11-5-2007 to 23-2-2009 12 (twelve) 2 (two)

1 (one) Secondary & HigherEducation Cess

(Effective tax rate including education cess and secondary & higher education shall be 12.36 per cent w.e.f. 11-5-2007).w.e.f. 24-2-2009 10 (ten) 2 (two)

1 (one) Secondary & HigherEducation Cess

(Effective tax rate including education cess and secondary and higher education cess shall be 10.30 per cent w.e.f. 24-2-2009.

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Returns (Form ST-3, ST-3A)2For the half year: To be filed by 1st April to 30th September 25th October1st October to 31st March 25th April

Notes:(1) For delayed filing of returns, late fee is payable as prescribed in Rule

7C of the Service Tax Rules, 1994.

(1) Return can be revised within sixty days (90 days w.e.f. 1-3-2008) from the date of submission of return under rule 7.

(2) First return should be accompanied by list of records and booms of account maintained by the assessee.

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Service tax ( Determination of Value ) Rules, 2006Service tax ( Determination of Value ) Rules, 2006

Manner of determination of Taxable Value (Rule 3)Manner of determination of Taxable Value (Rule 3)Taxable Value where Consideration is not wholly or partly in Taxable Value where Consideration is not wholly or partly in MoneyMoneyValue of taxable service is determined in cases where Value of taxable service is determined in cases where consideration is not wholly or partly in money terms, i.e., part of consideration is not wholly or partly in money terms, i.e., part of it is in cash and part of it is otherwise than for cash. In such it is in cash and part of it is otherwise than for cash. In such cases, value of taxable service shall be equivalent to the gross cases, value of taxable service shall be equivalent to the gross amount charged by service provider in ordinary course of trade amount charged by service provider in ordinary course of trade and gross amount charged will be the sole consideration. and gross amount charged will be the sole consideration.

While the money consideration would be on actuals and can be While the money consideration would be on actuals and can be determined without any problem, there may be some determined without any problem, there may be some subjectivity in ascertaining the value where consideration is not subjectivity in ascertaining the value where consideration is not in money but in kind of some money equivalent value. in money but in kind of some money equivalent value.

Valuation RulesValuation Rules

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Taxable Value where Consideration is not Taxable Value where Consideration is not ascertainableascertainableWhere the taxable services provided are for a Where the taxable services provided are for a consideration in money term but such consideration consideration in money term but such consideration or value is not ascertainable, the value of such or value is not ascertainable, the value of such services shall be determined by service provider as services shall be determined by service provider as equivalent money value of such consideration which equivalent money value of such consideration which shall in no case be less than the cost of providing shall in no case be less than the cost of providing such taxable service. such taxable service. Rejection of value (Rule 5)Rejection of value (Rule 5)Rule 5 provides powers to Central Excise Officer to Rule 5 provides powers to Central Excise Officer to reject the valuation done under Rule (3) reject the valuation done under Rule (3)

Valuation RulesValuation Rules

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Books of Accounts and DocumentsBooks of Accounts and Documents

Salient Features for Service TaxSalient Features for Service Tax

No separate records prescribed. Books as maintained by No separate records prescribed. Books as maintained by assessee to be accepted [Rule 5(1)]assessee to be accepted [Rule 5(1)]

List of books of accounts to be furnished to Department List of books of accounts to be furnished to Department with first Service Tax Return [Rule 5(2)]with first Service Tax Return [Rule 5(2)]

Records to be preserved for a period of 5 years [Rule Records to be preserved for a period of 5 years [Rule 5(3)]5(3)]

Records to be made available for inspection and Records to be made available for inspection and examination [Rule 5(4)]examination [Rule 5(4)]

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Books of Accounts and DocumentsBooks of Accounts and Documents

Mandatory issuance of invoice, bill or challan [Rule 4A]Mandatory issuance of invoice, bill or challan [Rule 4A]

Element of service tax to be shown separately [Section Element of service tax to be shown separately [Section 12A of Central Excise Act]12A of Central Excise Act]

Documents and accounts to be kept for receipt and Documents and accounts to be kept for receipt and consumption of input services, Cenvat credit taken etc. consumption of input services, Cenvat credit taken etc. [Rule 9 of Cenvat Credit Rules][Rule 9 of Cenvat Credit Rules]

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Books of Accounts and DocumentsBooks of Accounts and Documents

Service Tax InvoiceService Tax Invoice

Invoice should contain the following payment details –Invoice should contain the following payment details –

Fees or service chargesFees or service charges

Reimbursement of expenses, if anyReimbursement of expenses, if any

Material or goods sold, if anyMaterial or goods sold, if any

Service tax on value of service [Fees + RE, if applicable]Service tax on value of service [Fees + RE, if applicable]

Excise Duty, if applicableExcise Duty, if applicable

Sales tax / VAT on salesSales tax / VAT on sales

Education cess on service tax / excise dutyEducation cess on service tax / excise duty

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Areas of Non Compliance Areas of Non Compliance

- Incorrect exemption. Incorrect exemption. - Incorrect availment / utilisation of Cenvat credit for payment of service Incorrect availment / utilisation of Cenvat credit for payment of service

tax on input service. tax on input service. - Non payment of service tax on services rendered by foreigners Non payment of service tax on services rendered by foreigners - Non levy of service tax on services rendered by domestic service providers Non levy of service tax on services rendered by domestic service providers

– telecom , clearing & forwarding , equipment leasing , business auxiliary , – telecom , clearing & forwarding , equipment leasing , business auxiliary , ports, interior decoration , broadcasting etc.ports, interior decoration , broadcasting etc.

- Short levy of service tax.Short levy of service tax.- Unregistered service providers (777) identified in only four services.Unregistered service providers (777) identified in only four services.- 22 % of due returns not submitted .22 % of due returns not submitted .- Ineffective scrutiny of returns. Ineffective scrutiny of returns. - Suppression of taxable value .Suppression of taxable value .- Delayed adjudication .Delayed adjudication .- Internal audit was not effective in detection of evasion / short payment of Internal audit was not effective in detection of evasion / short payment of

service tax service tax - Only few search and seizure made on very limited scale.Only few search and seizure made on very limited scale.

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Company Secretary’s ServicesCompany Secretary’s Services

Who is practicing company secretaryWho is practicing company secretaryAs per Section 65(85), practising company secretary has been As per Section 65(85), practising company secretary has been defined to mean a person who is a member of the Institute of defined to mean a person who is a member of the Institute of Company Secretaries of India, New Delhi and is holding a certificate Company Secretaries of India, New Delhi and is holding a certificate of practice granted under the Company Secretaries Act, 1980 and of practice granted under the Company Secretaries Act, 1980 and includes any concern engaged in rendering the services in the field includes any concern engaged in rendering the services in the field of Company Secretaries. of Company Secretaries.

it would include :it would include :(i)(i) practising company secretariespractising company secretaries(ii)(ii) practising associate or fellow memberspractising associate or fellow members(iii)(iii) practising individuals or firms.practising individuals or firms.

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Company Secretary’s ServicesCompany Secretary’s Services

To be treated as a practising company secretary the following To be treated as a practising company secretary the following basic basic tests tests must be satisfied—must be satisfied—

(i)(i) He must be a person;He must be a person;

(ii)(ii) He must be a member of the Institute to which he belongs (ICSI); He must be a member of the Institute to which he belongs (ICSI);

(iii) He must hold a certificate of practice granted by the Institute;(iii) He must hold a certificate of practice granted by the Institute;

(iv) In case of firm of company secretaries, it must be a concern (iv) In case of firm of company secretaries, it must be a concern engaged in rendering services in the field of company engaged in rendering services in the field of company secretaryship.secretaryship.

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Company Secretary’s ServicesCompany Secretary’s Services

Section 65(105)(u) defines ‘taxable service’ as under —Section 65(105)(u) defines ‘taxable service’ as under —““taxable service” means any service provided or to be provided to any taxable service” means any service provided or to be provided to any person by a practising Company Secretary in his professional capacity person by a practising Company Secretary in his professional capacity in any manner.in any manner.

Taxable service should be—Taxable service should be—(i)(i) provided (includes to be provided) to a client (any person w.e.f. 16-5-provided (includes to be provided) to a client (any person w.e.f. 16-5-

2008);2008);(ii)(ii) provided (includes to be provided) in the professional capacity;provided (includes to be provided) in the professional capacity;(iii)(iii)provided in any manner;provided in any manner;(iv)not be any exempted service for company secretaries.(iv)not be any exempted service for company secretaries.

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Company Secretary’s ServicesCompany Secretary’s ServicesTaxable Services includeTaxable Services include

Services relating to profession of company secretaries in relation to any company.Services relating to profession of company secretaries in relation to any company. Performing services in relation to the promotion, forming incorporation, amalgamation, Performing services in relation to the promotion, forming incorporation, amalgamation,

reconstruction,reconstruction, re-organisation or winding up of companies.re-organisation or winding up of companies. Services relating to :Services relating to :

(i)(i) authorised representative of a company with respect to filing, registering presenting, authorised representative of a company with respect to filing, registering presenting, attesting or verifying any documents, by or on behalf of companies/clientsattesting or verifying any documents, by or on behalf of companies/clients

(ii)(ii) share transfer agentshare transfer agent

(iii)(iii) issue houseissue house

(iv)(iv) share brokershare broker

(v)(v) secretarial auditor or consultantsecretarial auditor or consultant

(vi)(vi) issuing certificates for client companies :issuing certificates for client companies :

(a)(a) on corporate matters and consultancy serviceson corporate matters and consultancy services

(b)(b) on other professional matters.on other professional matters.

(vii)(vii) corporate advisory servicescorporate advisory services

(viii)(viii) professional services or assistance on matters of principal or detail relating to practice as professional services or assistance on matters of principal or detail relating to practice as C.S. C.S.

(ix)(ix) Other services as permitted by ICSI.Other services as permitted by ICSI.

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Budget 2012-13 Changes in Service TaxBudget 2012-13 Changes in Service Tax

Objective to widen tax baseObjective to widen tax base

Effects to harmonise Central Excise and Service Tax for eventual Effects to harmonise Central Excise and Service Tax for eventual goal of transition to goods and service tax (GST). A study group to goal of transition to goods and service tax (GST). A study group to be setup.be setup.

Introduction of negative list approach in service tax (17 broad Introduction of negative list approach in service tax (17 broad categories of negative services announced) and tax all services categories of negative services announced) and tax all services except those in negative listexcept those in negative list

34 services placed in exempted services category vide Notification 34 services placed in exempted services category vide Notification No 12/2012-ST.No 12/2012-ST.

Finance Act, 1994 provisions trimmed by reducing definitions and Finance Act, 1994 provisions trimmed by reducing definitions and number of taxable services, almost reduced by 40% in size.number of taxable services, almost reduced by 40% in size.

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Budget 2012-13 Changes in Service TaxBudget 2012-13 Changes in Service Tax

Introduction of common simplified registration form and common one Introduction of common simplified registration form and common one page return form for Central Excise and Service Tax to be filed on page return form for Central Excise and Service Tax to be filed on monthly/ quarterly basismonthly/ quarterly basis

Revision Application Authority and Settlement Commission provisions Revision Application Authority and Settlement Commission provisions made applicable to service tax.made applicable to service tax.

Place of supply rules being introduced to determine location where a Place of supply rules being introduced to determine location where a service shall be deemed to be provided. Consequently, Export of service shall be deemed to be provided. Consequently, Export of Services Rules and Rules for Import of Services shall be withdrawn .Services Rules and Rules for Import of Services shall be withdrawn .Simplification of export refundsSimplification of export refunds

Proportionate reverse charge mechanism to be introduced Proportionate reverse charge mechanism to be introduced

Amendments proposed in Service Tax Rules, Cenvat Credit Rules , Amendments proposed in Service Tax Rules, Cenvat Credit Rules , Valuation Rules and Point of Taxation RulesValuation Rules and Point of Taxation Rules

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Budget 2012-13 Changes in Service TaxBudget 2012-13 Changes in Service Tax

Option of deferred payment allowed to all service providers upto Rs Option of deferred payment allowed to all service providers upto Rs 50 lakh turnover rather than to specified services .50 lakh turnover rather than to specified services .

Limited Liability Partnership (LLPs) to be considered as firmLimited Liability Partnership (LLPs) to be considered as firmRate of service tax increased from 10% to 12% w.e.f. 1.4.2012Rate of service tax increased from 10% to 12% w.e.f. 1.4.2012Consequent upon change in service tax rates, there is change of Consequent upon change in service tax rates, there is change of service tax rate in composition scheme and specified rates w.e.f. service tax rate in composition scheme and specified rates w.e.f. 1.4.20121.4.2012

Time limit for appeal by assessees to Commissioner (Appeals) Time limit for appeal by assessees to Commissioner (Appeals) reduced from 3 months to 2 months reduced from 3 months to 2 months

Penalty wavier for arrears paid within specified time in respect of Penalty wavier for arrears paid within specified time in respect of renting of immovable property service.renting of immovable property service.

Retrospective exemption to road repairs and repairs etc of non Retrospective exemption to road repairs and repairs etc of non commercial commercial

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Goods & Services Tax (GST) Goods & Services Tax (GST) Nature of GSTNature of GST

GST is a comprehensive value added tax on goods and servicesGST is a comprehensive value added tax on goods and servicesIt is collected on value added at each stage of sale or purchase in the supply chain It is collected on value added at each stage of sale or purchase in the supply chain No differentiation between Goods and Services as GST is levied at each stage in the No differentiation between Goods and Services as GST is levied at each stage in the supply chainsupply chainSeamless input tax credit throughout the supply chainSeamless input tax credit throughout the supply chainAt all stages of production and distribution, taxes are a pass through and tax is borne At all stages of production and distribution, taxes are a pass through and tax is borne by the final consumerby the final consumerAll sectors are taxed with very few exceptions / exemptionsAll sectors are taxed with very few exceptions / exemptionsFull tax credits on inputs – 100 % set off Full tax credits on inputs – 100 % set off GST exists in over 140 countries .GST exists in over 140 countries .In most countries of the world, a single VAT exists which covers both goods and In most countries of the world, a single VAT exists which covers both goods and services.services.Typically it is a single rate VAT but two - three rate VAT systems are also Typically it is a single rate VAT but two - three rate VAT systems are also prevalent.prevalent.Standard GST rate in most countries range between 15-20 percent Standard GST rate in most countries range between 15-20 percent Canada and Brazil alone have a dual VATCanada and Brazil alone have a dual VATIndia has also adopted a dual VAT i.e. a Central VAT and a State VAT – with India has also adopted a dual VAT i.e. a Central VAT and a State VAT – with independent goods & services taxes.independent goods & services taxes.

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Goods & Services Tax (GST) Goods & Services Tax (GST)

GST PrinciplesGST PrinciplesUniform treatment of goods and services with goods and services tax Uniform treatment of goods and services with goods and services tax (GST)(GST)

Re focusing the entire tax system on two taxes- Income tax and GSTRe focusing the entire tax system on two taxes- Income tax and GST

Removal of all barriers to the movement of goods and services across Removal of all barriers to the movement of goods and services across the country to achieve unified common marketthe country to achieve unified common market

Corresponding removal of retrogatory taxes that retard economic Corresponding removal of retrogatory taxes that retard economic growth- transaction taxes, stamp duties, levies etc.growth- transaction taxes, stamp duties, levies etc.

Reduction in number of taxmen – two for firms, one for individuals Reduction in number of taxmen – two for firms, one for individuals and resultant elimination of administrative overheads and corruption .and resultant elimination of administrative overheads and corruption .

Tax information network (TIN) to be fully used for tax administrationTax information network (TIN) to be fully used for tax administration

Coordination between policies and politics Coordination between policies and politics

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Goods & Services Tax (GST) Goods & Services Tax (GST)

Why is GST preferred?Why is GST preferred?A simple tax structure with only one or two rates of taxesA simple tax structure with only one or two rates of taxesUniform single tax across the supply chainUniform single tax across the supply chainReduced transaction cost in the hands of the tax payersReduced transaction cost in the hands of the tax payersIncreased tax collections due to wider tax base and better Increased tax collections due to wider tax base and better compliancecomplianceImprovement in international cost competitiveness of indigenous Improvement in international cost competitiveness of indigenous goods and services.goods and services.Enhancement in efficiency in manufacture and distribution due to Enhancement in efficiency in manufacture and distribution due to economies of scaleeconomies of scaleGST encourages an unbiased tax structure that is neutral to GST encourages an unbiased tax structure that is neutral to business processes, business models, organization structure, business processes, business models, organization structure, product substitutes and geographical locationsproduct substitutes and geographical locations

“The world hates change yet it is the only thing that has brought progress” – Charles F Kettaing

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Goods & Services Tax (GST)Goods & Services Tax (GST)

Moving Towards a Dual GSTMoving Towards a Dual GST

Agreement by Empowered Committee to roll out dual VAT to adopt GST Agreement by Empowered Committee to roll out dual VAT to adopt GST at centre and states- a landmark decision at centre and states- a landmark decision GST to cover centre, UTs and 35 states .GST to cover centre, UTs and 35 states .Very little known about design, structure, base, rates, administration and Very little known about design, structure, base, rates, administration and implementation at this stage (to be announced on 20 December,2007)implementation at this stage (to be announced on 20 December,2007)Dual GST- perhaps best feasible solution for preserving state’s fiscal Dual GST- perhaps best feasible solution for preserving state’s fiscal autonomy while harmonizing tax system.autonomy while harmonizing tax system.Present tax rates of 16% Excise or 12% state VAT not indicative of Present tax rates of 16% Excise or 12% state VAT not indicative of revenue neutral rates due to multiplicity of taxes and narrow coverage.revenue neutral rates due to multiplicity of taxes and narrow coverage.Rates to be low as high rates would reduce compliance- estimation of RNR Rates to be low as high rates would reduce compliance- estimation of RNR is crucial is crucial

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Goods & Services Tax (GST)Goods & Services Tax (GST)

Moving Towards a Dual GSTMoving Towards a Dual GST

GST must be comprehensive to cover all goods and service except few as GST must be comprehensive to cover all goods and service except few as recommended recommended As a step forward, unified excise rates are expected in next budgetAs a step forward, unified excise rates are expected in next budgetGST should be levied at uniform single rate (alcohol , tobacco, petroleum GST should be levied at uniform single rate (alcohol , tobacco, petroleum products may have special rates to have lower rates)products may have special rates to have lower rates)States should have freedom to fix rates with stipulation of floor price to States should have freedom to fix rates with stipulation of floor price to avoid competition.avoid competition.Multiple rates do not serve the objective, add to compliance costs, increase Multiple rates do not serve the objective, add to compliance costs, increase non compliance and evasion and create administrative complexity .non compliance and evasion and create administrative complexity .Mechanism to resolve inter state and centre state disputes.Mechanism to resolve inter state and centre state disputes.Enforcement of GSTEnforcement of GST

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Goods & Services Tax (GST)Goods & Services Tax (GST)GST will replace various taxesGST will replace various taxesIt is proposed that CGST will subsume the following taxes-It is proposed that CGST will subsume the following taxes-

Central excise duties, additional excise duties, excise duties under Medicinal and Toilet Central excise duties, additional excise duties, excise duties under Medicinal and Toilet Preparation Act,Preparation Act,Service taxService taxAdditional customs duty (CUD) and Special additional Customs Duty (SAD)Additional customs duty (CUD) and Special additional Customs Duty (SAD)SurchargeSurchargeCessCess

The SGST is expected to subsume the following state taxes-The SGST is expected to subsume the following state taxes-Value added tax( or sales tax)Value added tax( or sales tax)Entertainment taxEntertainment taxLuxury taxLuxury taxTax on lottery, betting and gamblingTax on lottery, betting and gambling State cess/ surcharge.State cess/ surcharge.

The state governments are finding it difficult to arrive at consensus on following taxes toThe state governments are finding it difficult to arrive at consensus on following taxes to be subsumed in GST-be subsumed in GST-

purchase taxpurchase taxoctroi dutyoctroi dutytax on alcoholic beverages (country liquor / IMFL)tax on alcoholic beverages (country liquor / IMFL)tax on petroleum productstax on petroleum productstax on tobacco itemstax on tobacco items

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Goods & Services Tax (GST)Goods & Services Tax (GST)

Indian Version of Goods and Service Tax (GST)Indian Version of Goods and Service Tax (GST)

- Present focus on generating consensus on its design Present focus on generating consensus on its design - Empowered committee working on Empowered committee working on

-- finalizing structure of GSTfinalizing structure of GST-- modalities of expeditious implementationmodalities of expeditious implementation

- Likely to be introduced in Likely to be introduced in ????- Automation of Central Excise and Service Tax (ACES) Automation of Central Excise and Service Tax (ACES)

rolled outrolled out- Computerization of Commercial taxes in states approved Computerization of Commercial taxes in states approved

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Service Tax: Gateway to new Professional OpportunitiesService Tax: Gateway to new Professional Opportunities

Employment with Corporates- dealing with

Indirect taxes

Representation in Tribunals /

Courts

Advisory Services

Professional Opportunities in

Service Tax

Client Retainerships for Compliances

Knowledge Management & Training

Professional Practice Areas

(planning, compliances)

Advance Ruling Representation

GST awareness

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Service Tax: Gateway to new Professional Service Tax: Gateway to new Professional OpportunitiesOpportunities

Timely and correct feedback on provisions of law

Compliance of Law& Procedures

Dissemination of information to assessees

Knowledge sharing with revenue officials

Help in tax collection

Proper classification of taxable services (Section 65A)

Help in understanding law and its correct interpretation

Knowledge management & training

Tax Planning ,Due Diligence

Representation before Appellate Authorities

ROLE OF PROFESSIONALS UNDER SERVICE TAX

Services to the Government Services to Service Providers

Service tax audit GST preparedness

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Service Tax: Gateway to new Professional Service Tax: Gateway to new Professional OpportunitiesOpportunities

New tax, new assessees, new opportunities New tax, new assessees, new opportunities

Opportunities arising out of ignorance of law, lack of knowledge, poor Opportunities arising out of ignorance of law, lack of knowledge, poor compliance (leading to penalties etc.) frequent amendments in law and compliance (leading to penalties etc.) frequent amendments in law and rules, large assessee base and heterogeneous group of assessees. rules, large assessee base and heterogeneous group of assessees.

Opportunities to grow because of –Opportunities to grow because of – Large number of services covered Large number of services covered Enough scope for expansion of tax netEnough scope for expansion of tax net Rate of tax is higher, yet an upward revision is likely- Rate of tax is higher, yet an upward revision is likely- higher the higher the

rate, larger the evasionrate, larger the evasion..

Service tax and GST are the tax of future and lot of opportunities can be Service tax and GST are the tax of future and lot of opportunities can be explored in service tax, especially by young professionalsexplored in service tax, especially by young professionals

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Service Tax: Gateway to new Professional Service Tax: Gateway to new Professional OpportunitiesOpportunities

Role in classification of servicesRole in classification of services

Opportunities in interpretation of provisionsOpportunities in interpretation of provisions

Emerging opportunities-Emerging opportunities- Advisory and consulting servicesAdvisory and consulting services Tax planning issuesTax planning issues Interpretation of lawInterpretation of law Contesting cases on behalf of clientContesting cases on behalf of client Knowledge dissemination- corporate presentations / training of Knowledge dissemination- corporate presentations / training of

client’s personnel. client’s personnel.

Every crossroad is a choice to play safe or be brave- take a road that your Every crossroad is a choice to play safe or be brave- take a road that your conscience tellsconscience tells

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Humour in Service TaxHumour in Service Tax

Tax Reforms or Question of Survival Tax Reforms or Question of Survival Tax Payer’s Daily PrayerTax Payer’s Daily Prayer

Oh God!Oh God!Give us enough strength, support and capacity to bear and pay Give us enough strength, support and capacity to bear and pay

Income tax, Wealth tax, Service tax, Excise duty, Customs duty, Income tax, Wealth tax, Service tax, Excise duty, Customs duty, Octroi, Stamp duty and local tax, Surcharge, Education cess and Levies Octroi, Stamp duty and local tax, Surcharge, Education cess and Levies , Professional tax, Turnover tax, Property tax, House tax, FBT, STT, , Professional tax, Turnover tax, Property tax, House tax, FBT, STT, MAT and VAT, Road tax, Passenger tax, and toll tax, ESI,PF and MAT and VAT, Road tax, Passenger tax, and toll tax, ESI,PF and bonus.bonus.And - - - - GSTAnd - - - - GST

Besides provide some thing extra for bribes, corruption, donation, Besides provide some thing extra for bribes, corruption, donation, charity, and beggars charity, and beggars but please God, don’t forget to leave some time and money for us so but please God, don’t forget to leave some time and money for us so that we can do some business. that we can do some business.

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THANK YOU FOR

YOUR PRECIOUS TIME

AND ATTENTION

Dr. Sanjiv AgarwalFCA, FCS, Jaipur

[email protected] us at: www.ascoca.org

A person should not be too honest. Straight trees are cut first and Honest people are screwed first. -  Chanakya