Thursday, October 9, 2014

Note on Whether Trading is Exempted Service or Not



Up to 30 June 2012
Exempted services means taxable services which are exempt from whole of the service tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act and taxable services whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken.

Explanation.- For the removal of doubts, it is hereby clarified that
exempted services includes trading

From 01 JULY 2012
Exempted service means a -
1. Taxable service which is exempt from the whole of service tax leviable thereon ; or
2. service , on which no service tax is leviable under section 66 B of the finance act ;or
3. taxable service whose part of value is exempted on the condition that no credit of inputs and input services ,used for providing such taxable service ,shall be taken
but shall not include a service which is exported in terms of rule 6A OF THE SERVICE TAX RULES ,1994


Sec 66 B Charging section of service tax
There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.

Sec 66 B is not applicable on negative listed service .It means negative listed services are exempted services 

Negative list services are defined in sec 66D of finace act 1994 which has been come from 01/07/2012

Sec 66 D Negative list of services
The negative list shall comprise of the following services, namely:––
(e)  trading of goods;

As per my opinion trading is exempted service

1.From the above we can say that intention of government is same as before 01/07/2012
means Trading is exempted service

2. CIRCULAR NO.943/04/2011 in which point no.  6. and point no. 7 also says trading is exempted service

3.From 01/07/2012 Rule 6 of Cenvat Credit Rules 2004 has been amended in which one explanation has been
added 

Rule 6 is for reversal /payment of cenvat credit if common inputs and /or common inputs service is used for both dutiable goods and exempted services

“Explanation I. - “Value” for the purpose of sub-rules (3) and (3A),—
(a) shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made there under or, as the case may be, the value determined under section 3, 4 or 4A of the Excise Act, read with rules made there under;

(b)in the case of a taxable service, when the option available under sub-rules  (7),(7A),(7B) or (7C) of rule 6 of the Service Tax Rules, 1994, has been availed, shall be the value on which the rate of service tax under section 66B  of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed; or

(c) in case of trading, shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten per cent of the cost of goods sold, whichever is more.

(d) in case of trading of securities, shall be the difference between the sale price and the purchase price of the securities traded  or one per cent. of the purchase price of the securities traded, whichever is more.

(e) shall not include the value of services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount;”


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