Taxation of Services
In conformity with the international principle of ‘taxed unless exempt’, the Government of India has published a negative list of services, which will bring about a radical change in the manner services are taxed. The term ‘service’ itself has been defined in a manner that is likely to have far-reaching effect and would include even those arrangements where there is an obligation to restrain from engaging in a particular activity or to do an act. The term ‘consideration’ also has been defined and various charges such as liquidated damages, late payment/penalties for delayed payments, etc could get covered in its scope. Particularly, in these cases, determining the point of taxation would be important.
There is also a proposal to introduce Place of Provision of Services Rules, which will replace the current rules that govern import and export of services. These Rules would change the manner of determination of whether services have been exported or imported and could adversely affect the positions currently adopted.
It is most opportune now, when the law is undergoing a thorough makeover, to review all your service tax liabilities, and most importantly, export and import of services, to ensure that the positions taken thus far are still valid.
Deloitte’s offerings in this regard include a diagnosis of your existing positions, validation with the proposed law and recommendations. Our team of experienced professionals can also help you put in place suitable Standard Operating Procedures, to ensure you are compliant and audit-ready.