Penalties and appeals
Penalty for late payment of service tax
If service tax is not paid or belatedly paid, penalty will be minimum Rs. 200 per day or @ 2% per month, whichever is higher, starting with the first day after due date till date of actual payment of outstanding amount. Penalty cannot exceed the service tax which was payable [section 76]. Penalty can be reduced if sufficient cause is shown [section 80].
No penalty if service tax and interest paid on own before SCN
No penalty can be imposed if service tax and interest is paid before show cause notice, except in case of fraud, suppression of facts etc.[Explanation 2 to section 73(3)]
Penalty for contravention of rules
There is heavy penalty for contravention of rules, not obtaining registration, not maintaining books of account, not paying tax electronically etc [section 77]. Penalty can be reduced if sufficient cause is shown [section 80]. No penalty can be imposed if service tax and interest is paid before show cause notice, except in case of fraud, suppression of facts etc.[Explanation 2 to section 73(3)]
Penalty for fraud, suppression of facts. Wilful mis-statement
If non-payment was on account of fraud, suppression of facts etc., penalty shall not be less than amount of service tax but can be upto twice the amount of service tax amount of service tax not levied or not paid or erroneously refunded. Penalty will be reduced to 25% if paid with tax and interest within 25 days of receipt of order [section 78]. Penalty can be reduced if sufficient cause is shown [section 80].
Appeals to Commissioner (Appeals)
Appeal against order of authority lower than Commissioner lies withCommissioner (Appeals), by assessee or as well as by department[section 85].
Next appeal to Tribunal
Appeal against order of Commissioner (Appeals) or Commissioner lies with Appellate Tribunal (Customs, Excise and Service Tax Appellate Tribunal) [Section 86]. Further appeal lies with High Court and Supreme Court. Appeals can be filed both by assessee and department.
Export of Service
No tax on export of service
No service tax is payable if taxable service is exported as per Export of Service Rules.
Refund if tax paid on exported service
No tax is payable on export of service. If paid, it is refundable. Rebate/refund of service tax paid on input services is obtained if taxable service is exported
Conditions to treat a service as ‘export’
Common condition in respect of all taxable services, for treating the service as export of service is that payment for such service is received by the service provider in convertible foreign exchange. In addition, there are some conditions based on the category of service (e.g. immovable property outside India, service performed outside India, recipient is located outside India).
Import of service
Tax payable by recipient under reverse charge
In case of import of service, tax is payable by recipient of services under method of ‘reverse charge’. Tax should be paid by cash i.e. GAR-7 challan and then Cenvat credit can be availed of the tax so paid, as it is his input service.
Tax only if service is received in India
Tax is payable only when service is received in India. Services provided and used outside India cannot be taxed in India.
Conditions to treat a service as ‘import’
To determine the issue whether a provision of service is ‘import of service’, services have been classified in three categories. Criteria for each category has been specified e.g. immovable property India, service performed in India, recipient is located in India
Disclaimer: In this note, we have attempted to summarise some of the significant aspects to be kept in mind by readers to ensure compliance of tax laws and regulations. Readers should ensure to verify specific provisions as applicable to each case before taking any business decisions. It would be pertinent to note that some changes are being made to the tax laws and rules and regulations on a continuous basis by way of notifications, clarifications etc issued by the department based on their practical experience in implementing the legislation.
It may be noted that nothing contained in this note should be regarded as our opinion. Professional advice should be sought for applicability of legal provisions based on specific facts. Though reasonable efforts have been taken to avoid errors or omissions in this note we are not responsible for any liability arising to readers directly or indirectly due to any mis-statements or error contained in this note. It must be noted that the views expressed in the note are based on our understanding of the law and regulations as published by the Government authorities and we may or may not agree or subscribe to such views.
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