Queries on taxation and service tax liabilities, addressed by Vivek Sharma & Manav Saneja

We provide engineering and architectural consultancy to our corporate clients in Delhi. Due to certain commercial and administrative reasons, we didn?t pay any service tax or file our service tax return in the last few years. Our consultant has informed us that the budget has introduced a ?One Time Amnesty Scheme? for assessees who have not paid their tax dues between 1 October 2007 and 31 December 2012. Please advice whether we are eligible for claiming the benefit under the scheme.

Union Budget 2013-14 vide Finance Bill 2013 has proposed a ?One Time Amnesty Scheme? in service tax by granting immunity from interest, penalty and prosecution/ any other proceedings to all the assessees who have not paid their dues and/or filed service tax returns with incorrect liability, from 1 October 2007 to 31 December 2012. Under the scheme, 50% of the the tax dues have to be paid before 31 December 2013 and the balance by 30 June 2014.

However, the scheme will come into force from the date of enactment of the Finance Act 2013 i.e. after the President?s consent. Accordingly, on a truthful declaration of your service tax dues, and subject to other conditions, you may file an application under the said scheme for waiver of interest and penalty once the Finance Act comes into force.

However, since the scheme has not been enacted yet, it must be borne in mind that the scheme may be subject to certain changes prior to its enactment, and further the central government has been empowered to make rules to operationalise the scheme.

VAT composition scheme

We are civil contractors functioning as a one-stop-shop for all civil construction needs. We undertake construction of building structures, repair works, sanitary works and electrical fitting work. We are based out of Delhi and have been paying VAT @ 2.5% under the composition scheme of Delhi VAT. Our consultant has informed us that there have been rate changes under the composition scheme, depending upon the kind of work one undertakes. Please let us know what would be the applicable rate on our activities.

The Delhi VAT authorities vide Notification No 3(13)/Fin.(Rev-I)/2012-13/dsvi/180/Dated 28 February 2013 (effective from 1 April 2013) has made significant changes in the ?composition scheme? available to dealers executing works contracts in the state. Under the new scheme, any contract involving civil construction, electrification, sanitary, repair maintenance etc. attracts 3% VAT in case there are no interstate procurements or sale of goods. Further, in case you are engaged in inter-state procurement/ sale of goods, the applicable rate would be 6%.

Service tax on AC restaurant

We run a small eating joint, with a seating capacity of 10-12 people, in the University area. Our major clientele is students from close by colleges and local residents. Since the seating capacity is limited, the air-conditioning (AC) facility is provided by us only during summers. We have been informed that we will be liable to pay service tax as we have an AC in our premises. Please suggest whether the understanding is correct.

Prior to Union Budget 2013, service tax on restaurants had a restricted scope and the coverage was limited to air-conditioned restaurants serving liquor at anytime during the year. Accordingly, AC restaurants not serving liquor and non-AC restaurants were not liable to service tax. However, the Budget vide Finance Bill 2013 has expanded the scope of levy of service tax on restaurants. Accordingly, all air-conditioned restaurants, whether serving liquor or not, are now covered under the service tax net. Further, it has been clarified that restaurants having AC facility in any part of the restaurant at any time during the year are liable to discharge service tax.

The replies do not constitute professional advice. Neither E&Y nor FE is liable for any action taken on the basis of these replies. Readers may mail their queries to sme@expressindia.com