Forex

Changes in Income Tax & Service Tax in 2008 as published in the Gazette of India on 10th May 2008 as Act No.18 of 2008.

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Income of an Agricultural produce market Committee, not to be taxable. Clause 26AAB inserted in section 10 of the Income Tax Act.
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Income Tax benefit to EOU/FTZ extended till 01-04-2011. Section 10A and 10B amended.
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Rule 40 (a)(ia) regarding TDS on interest, commission, brokerage, rent, royalty etc. amended. Deduction for royalty, fee, etc. allowed only if TDS is paid before the last day of the previous year.
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Compulsory Audit of certain persons - report to be submitted by 30th September instead of 31 st October; Section 44AB amended.
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Deduction for Oil refineries – only PSU refineries beginning refinery on or after 1-4-2009 will get the benefit. Section 80IB amended.
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Fringe Benefit Tax: Notice Limitation Changed. As per section 115WE, the assessing officer can serve Notice within 12 months from the date of filing the return. Now this is changed to within 6 months from the end of the financial year.
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TDS: To be deducted for payments to Association of Persons. Section 194C amended.
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Commissioner (Appeals) can use evidence recorded by the Settlement Commission. Section 251 amended.
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Notice to be deemed valid. A new Section 292BB was introduced in the Finance Bill to stipulate that an assessee who had participated in the proceedings cannot challenge the validity of the Notice. Now a proviso has been added that he can raise an objection before the assessment is completed.
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Income tax rate for Senior Citizen - error in finance bill corrected. As per Finance Bill, the income tax payable by Senior Citizens having Income more than Rs.2,25,000 but not more than Rs. 3 Lakh was 10% of the amount in excess of Rs. 3 Lakh. This was impossible as the Income itself is less than Rs. 3 Lakh, This is corrected to Rs. 2,25,000/-.

Service Tax: Central Government has issued seven notifications relating to service tax so as to give effect to various provisions of the Finance Act, 2008. The seven new Services will come under the tax net from May 16, 2008

The details are as follows:

Transaction between associated enterprises:

In the Finance Act, 2008, section 67 has been amended. As per this amendment, service tax is required to be paid by the person liable to pay service tax on the taxable services provided even if the consideration for the taxable services provided is not actually received. In such cases, service tax is required to be paid immediately after crediting/debiting of the amount in the books of accounts or receipt of payment, whichever is earlier. However, this provision is restricted to transaction between associated enterprises and shall come into force w.e.f. 10th May, 2008.

Explanation to Rule 6(1) of the Service Tax Rules, 1994 states that any payment received towards the value of taxable service shall include any amount credited or debited, as case may be, to any account, whether called ‘Suspense account’ or by any other name, in the books of account of a person liable to pay service tax [notification No.19/2008-Service Tax dated 10.05.08].

Certain provisions relating to the levy of service tax in the Finance Act, 2008 shall come into force from a date to be notified. For this purpose, notifications No.18/2008 to 24/2008-Service Tax, all dated 10th May, 2008 have been issued.

Following changes/amendments shall come into force w.e.f. 16.05.2008:

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Seven services which are specifically mentioned in the category of taxable services and amendments made relating to existing taxable services.
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Amendments made in section 65 (defines taxable services and specified terms used in relation to taxable services) and section 66 (charging section) vide the Finance Act, 2008.
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Amendments made in Export of Services Rules, 2005 and the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 so as to categorise the newly specified taxable services under Rule 3 [notification No.20/2008-Service Tax dated 10.05.08 & notification No.21/2008-Service Tax dated 10.05.08].
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Service tax is leviable on purchase or sale of foreign currency, including money changing, provided by an authorized dealer in foreign currency or an authorised money changer, or a foreign exchange broker. Where the consideration for the services provided in relation to purchase or sale of foreign currency is not explicitly indicated, the person liable to pay service tax has been given the option to pay service tax calculated at the rate of 0.25% of the gross amount of currency exchanged. The method is prescribed under rule 6(7B) of the Service Tax Rules, 1994. [notification No.19/2008-Service Tax dated 10.05.08].
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Government of India has already notified, vide notifications No.41/2007-Service Tax, dated 06.10.07 and 43/2007-ST, dated 29.11.07, sixteen taxable services attributable to export goods, whether or not in the nature of input services, providing refund of service tax paid on the said sixteen taxable services. Consequent upon the enactment of the Finance Act, 2008, Government has notified 16.05.2008 as the effective date for the specifically included taxable services vide the Finance Act, 2008. Out of the said taxable services, refund of service tax paid by exporters has been extended to the following additional 3 services:

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Purchase or sale of foreign currency under banking and other financial service,
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Purchase or sale of foreign currency under foreign exchange broking service,