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TAX NEWS - 2010

Service tax

Service tax and service tax exemptions
The new service tax provisions of Finance Act 2010 of India affect you if you are undertaking a journey by air, using services provided at the airports or other ports, sending goods by rail, engaged in construction or buying property. However, there's some relief for you if you have completed the payment formalities fully or partially before 1 July 2010. You need to worry only to extent of the payment pending.

If you are travelling by air:

- Your air-ticket may become 10% dearer or Rs100 per journey, (whichever is less), if you're travelling by air within India.

- If you're travelling abroad in economy class, your ticket may cost you 10% more or Rs500 extra, whichever is less.

- Travelling to north-eastern states (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura) will not cost you extra, though. Passengers travelling to Bagdogra airport in West Bengal, the gateway airport for Sikkim will also be given this benefit.

- Assume you are travelling via multiple airports, a Delhi-Mumbai-Delhi journey will have separate service tax charged for each of the flights. However, if your journey includes a landing or take-off from the north-eastern states or Bagdogra airport, your flights on these routes will be service tax exempt

- There's good news for you if you are on transit in India, or form a part of the aircraft crew. Service tax exemptions for you remain unchanged.

Services provided at ports or airports:

- Service tax paid in relation to or for export of goods are eligible for refund

- Some of the other services which are exempt from tax are as follows:
     - Renting of a cab
     - Storage & Warehousing Service
     - Transport of export goods in an aircraft by an aircraft operator
     - Site formation and clearance, excavation and demolition services

** If you are transporting goods by rail, you will have to pay service tax from January 2011 onwards.

If you plan to acquire property:

- If you plan to buy a house or an apartment in a residential complex, you will be liable to pay service tax if you agree to buy the said property, or make a payment for it, before the certificate of completion is issued.

- If the cost of the property includes the cost of land, you will be liable to pay service tax corresponding to 25% of the gross value of the property. If not, then you pay service tax corresponding to 33% of the gross value of the property.

- If, however, you buy the property after the issue of this certificate, you are free from this liability.

- Also, now, the certificate of completion can be issued by any architect or chartered engineer or a licensed surveyor.

- Construction of industrial or commercial complex will attract service tax to the tune of 25% of the gross value of the property in case the cost of land is included, or 33%, if it the cost of land is not included.

- Construction of complex under the two development schemes - Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Rajiv Awaas Yojana, is exempt from service tax.
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