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Budget session: No budget, but circulars galore for tax payers

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The govt will announce clarifications aimed at making life easier for taxpayers — both in the direct and indirect taxes. The govt will announce clarifications aimed at making life easier for taxpayers — both in the direct and indirect taxes.
SummaryThe govt will announce clarifications aimed at making life easier for taxpayers — both in the direct and indirect taxes.

With the General Elections around the corner, the yearly ritual of presenting the General Budget will be curtailed to what is known as a vote-on-account. For taxpayers, this essentially means that no new announcements related to levy of taxation would be made till a new government takes charge.

However, that does not mean a ‘no show’ for the finance ministry during the Budget Session. The government will announce clarifications aimed at making life easier for taxpayers — both in the direct and indirect taxes.

The Central Board of Excise and Customs (CBEC) and the Central Board of Direct Taxes (CBDT) have been issuing a series of such circulars and notifications for common taxpayers to iron out kinks in tax administration that will benefit taxpayers while making the administration more robust. Here are a some of the steps taken by the tax department in recent weeks.

Levy of service tax on services provided by RWAs to members

In one such instance, the tax department has made a clarification on the service tax chargeable on services provided by resident welfare associations (RWA). RWAs are civic bodies representing interests of residents of specific localities. The membership to the RWAs is voluntary. All resident welfare associations are registered under Co-operative Societies Act.

The services such as providing security to the residential locality are chargeable at 12 per cent service tax. According to the clarification, such a tax will not be levied if the contribution by member is below Rs 5,000 per month. However, if the contribution breaches the Rs 5,000-ceiling, the entire amount would be chargeable under the service tax.

This brings a huge relief for the RWAs and residents who have been struggling with tax demands from the department officials.

“This is indeed a welcome clarification. There was no clarity as to what happens when the Rs 5,000-limit breaches. The tax department has also clarified that even if the amount for services is paid in lumpsum, it will not be charged with service tax,” Bipin Sapra, tax partner, EY, said.

According to the clarificatory circular, “However, a monetary ceiling has been prescribed for this exemption, calculated in the form of Rs 5,000 per month, per member contribution to the RWA, for sourcing of goods or services from third person for the common use of its members. If per month, per member contribution of any or some members of a RWA exceeds Rs 5,000,

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