CA Swapnil Munot

Article Covers the Following Changes made by Finance Bill 2016 in Service Tax Provisions Related to:-

1. Service Tax Rate

2. Chapter V Of Finance Act 1994 ( Service Tax Provisions)

3. Service Tax Rules 1994

4. Exempted List Of Services

5. Point Of Taxation Rules 2011

6. Abatement Provisions

7. Reverse Charge Provision

8. Interest Rate For Delayed Payment Of Service Tax

9. Clarification Brought In ‘Information Technology Software’ W.R.T Levy Of Excise Duty Or Service Tax

♣ SERVICE TAX RATE:

For the purposes of “Financing and promoting initiatives to improve agriculture”, additional Cess called as “Krishi Kalyan Cess” is to be levied on all Taxable Services at 0.5% of value of service from 1st June 2016. Therefore Total Service Tax Rate will become 15%. For details, refer below table:

TYPE OF SERVICE TAXRATE UPTO

31ST MAY 2016

RATE FROM

1ST JUNE 2016

BASIC SERVICE TAX14%14%
SWACHH BHARAT CESS0.5%0.5%
KRISHI KALYAN CESS0.5%
TOTAL SERVICE TAX RATE14.5%15.0%

 NOTE:

In Budget Speech, Honorable Finance Minister Shri Arun Jaitly categorically mentioned that “Input Tax Credit will be available for payment of Krishi Kalyan Cess”. However required amendment in Cenvat Credit Rules 2004 is not yet made allowing utilization of credit for payment of Krishi Kalyan Cess. Therefore one has to wait for Notification in this regards, so as to get clarity. But as assured in budget speech, government will give credit utilization benefit for payment of Krishi Kalyan Cess.

♣ CHANGES MADE IN CHAPTER V OF FINANCE ACT 1994 ( SERVICE TAX PROVISIONS) BY FINANCE BILL 2016:

(EFECTIVE DATE: Except otherwise provided in this document, Provision of Finance bill 2016 will be applicable from the when President of India gives ascent to same and Finance Act 2016 is enacted and same is published in official gazette)

SECTIONTYPE OF AMENDMENTSUMMARY OF CHANGESANALYSIS
 

Sec 65B(11), Sec 66D(l),

Sec 66D(o)(i)

Sec 66D (p)(ii)

 

OmittedSec 66D deals with Negative List of Services i.e. Services which are out of purview of service.

Now Below services are removed from Negative List Services:

Services by way of :

a)     pre-school education and education up to higher secondary school or equivalent

b)     Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force

c)      Education as a part of an approved vocational education course

d)     Transportation of passengers, with or without accompanied belongings, by a stage carriage ( This clause is deleted with effect from 01.06.2015)

e)     Transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India. ( This clause is deleted with effect from 01.06.2015)

However these services is now covered in Exempted list of Services. ( For details, see our Analysis on Exempted Service )

 

Therefore on such services, there will not be services tax. However in future if government wish to make such services taxable, then it can made by just issue of Notification and there will not be requirement of amendment to the Finance Act 1994.

 

Sec 66E(j)Clause InsertedSec 66E deals with declared list of Services.

Now below service is included in list of declared services:

“Assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof”

In order to avoid litigation, it is now provided that “Assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof” will be service and service tax will be payable on the same.
Sec 67A(2)Sub Section insertedSec 67A deals with date of determination of rate of service tax and value. Now below sub section is inserted:

“(2) The time or the point in time with respect to the rate of service tax shall be such as may be prescribed.”

Point of Taxation Rule, 2011 have been framed under provisions of Sec 94(2)(a) & Sec 94(2)(hhh). Now specific powers is also obtained under section 67A(2) to make rules regarding point in time of rate of service tax. Thus, any doubt about the applicability of service tax Rate or apparent contradiction between section 67A and POTR would be taken care of.
Sec 73AmendmentSec 73 deals with recovery of service tax not levied/not paid/short levied/short paid.

In case of ‘No fraud case’, service tax officer can serve notice for recovery of tax not paid within 18 months. Now said period of 18 months is amended to 30 months.

Section 73 is being amended so as to increase the period of limitation from 18 month to 30 month in cases not involving fraud, suppression of facts, willful mis-statement, etc.
Sec 78AExplanation addedSec 78A deals with penalty proceeding against director, manger or other officer who knowing concerned with offences mentioned in Sec 78A.

Now Explanation is added to clarify,

Where any Service tax not levied/not paid/short levied/short paid/erroneously refunded and proceeding in respect of such offence is completed ( i.e. issue of SCN & payment of duty), then proceedings pending under Sec 78A against director/manager/other officer for said offence shall also be deemed to have been concluded

Relief to Director/Manager/officer in charge. Now no need to pay penalty by said person, if matter under litigation is concluded.

 

Sec 89AmendmentSec 89 deals with penalty in case of prescribed offences. It was provided that In case, amount of specified offence exceeds Rs 50 lakhs, then person who committed offence was liable for Imprisonment for a term which may extend to 3 years.

Now punishment of Imprisonment will be applicable if amount of offence is greater than Rs 200 lakhs.

So now for small amount of Offence which is less than Rs 200 lakhs, there will not be imprisonment.
Sec 93AAmendmentSec 93A deals with power to grant rebate of service tax paid on input services for goods/services exported.

Now it is provided that manner of such rebate will be specified by notification

Amendment is made to allow government to issue Notification u/s 93A for grant of Rebate

 CHANGES MADE IN SERVICE TAX RULES 1994 BY NOTIFICATION NO 19/2016 ST DATED 1ST March 2016:

  • All below explained amendment will be applicable from 1st April 2016
RULETYPE OF AMENDMENTSUMMARY OF CHANGESANALYSIS
 

 

 

Rule 2(1)(d)(i)(D)(II)

 

 

 

 

 

 

 

Rule 2(1)(d)(i)(EEA)

SubstitutionThis rule defines the person liable for paying service tax. Below changes are made :

1)     Earlier it is provided that In case of service of Individual Advocate or Firm of advocate to Business entity, recipient of service is liable to pay service tax.

However now in case service are provided by senior advocate to business entity, then such advocate is supposed to charge and pay service tax to government.

2)     Earlier it was provided that in relation to service provided by a mutual fund agent or distributor to a mutual fund or asset management company, the recipient of the service is liable to pay service tax

However now it is provided that henceforth such agent/distributor will charge & pay service tax to government

·       Now senior advocate has to charge service tax on its invoice.

·       In last fiscal budget (Budget 2015-16), it was provided that is case of services of mutual fund agent/distributor to Mutual Fund/Asset Management Company, recipient of service will be liable to pay service tax.

However this amendment is exactly opposite to what was incorporate in last budget.

·       Consequent to above changes, necessary amendment is also made in reverse charge Notification No 30/2012 through Notification No 18/2016 ST dt 1.3.16

Proviso to Rule 6(1)

 

Proviso SubstitutedIt is now provided that,

1)     quarterly service tax payment benefit is available to:

a)     Individual / Proprietary Firm

b)     Partnership Firm

c)      HUF

d)     One Person Company, whose total taxable value of service in preceding year is less than Rs 50 lakhs.

Service Tax liability on cash basis (that is Service Tax will be payable, when payment for service is received and not on accrual basis) facility is now allowed to:

a)     Individual / Proprietary Firm

b)     Partnership Firm

c)      One Person Company,

whose total taxable value of service in preceding year is less than Rs 50 lakhs.

·       HUF was unnecessarily deprived off benefit of quarterly payment facility of service tax till date, unlike individual or Firm.

Late but finally HUF is now allowed quarterly payment facility.

However HUF is still required to make service tax payment on accrual basis as per Point of Taxation Rules and not as per cash basis.

·       Boost to One Person Company (OPC) concept. Now OPC can also pay service tax quarterly, provided his turnover in preceding year is less than Rs 50 lakhs.

Also OPC can pay service tax only after payment received for services.

Rule 6(7a)(ia)Clause InsertedInsurer carrying on life Insurance Business shall have below additional option to pay tax:

“In case of single premium annuity policies other than (i) above, 1.4 percent of the single premium charged from the policy holder”

Service tax liability on single premium annuity policies is being rationalized and the effective alternative service tax rate is being prescribed @ 1.4 % of the total premium charged.
Rule 7(3A), (3B)Sub-rule InsertedRule 7 provides for service tax returns.

Now Annual Service Tax Return is incorporated in service tax to be filed before 30th November of the succeeding financial year.

Annual Service Tax Return is introduced as step towards GST and in line with Excise Annual Return Requirement.

Form of Annual Return Form is yet to be prescribed

 

Rule 7B(2)Sub-rule InsertedThis Rule provides that revised Annual Return can be filed within one month from date of submission of original Annual Return, provided original return is submitted within due date.Revised Return facility is also allowed for Annual Return.
Rule 7C(2)Sub-rule insertedThis Rule provides that, if Annual Return is filed after due date, then penalty is payable as under:

a)     Rs 100 per day delay in filing of Annual Return

b)     Subject to maximum of Rs 20,000/-

Penalty for delayed filing of Annual Return is incorporated in line with ST 3 Return.

♣ CHANGES MADE IN EXEMPTED LIST OF SERVICES IS AS UNDER:

(Amendment to Mega Exemption Notification 25/2012 ST is made vide Notification No 9/2016 ST dt 1st March 2016)

TYPE OF CHANGEEntry No.PARTICULARS OF SERVICEAPPLICABLE FROM
 

 

 

 

 

 

NEW EXEMPTIONS

 

 

 

 

 

 

 

 

 

 

 

NEW EXEMPTIONS

 

 

 

 

 

 

 

 

 

 

NEW EXEMPTIONS

9BService provided by the Indian institute of the Management to their students by way of education programs except Executive Development Program,1st March 2016
9CServices of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme.1st April 2016
9DServices provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana by way of offering skill or vocational training courses;1st April 2016
12AServices provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

1) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

2) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment;

3) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause (44) of section 65 B of the said Act;

Under a contract which is entered prior to 01.03.2015 and on which appropriate stamp duty as applicable is paid prior to such date.

provided that nothing contained in this entry shall apply on or after the 1st April, 2020

(This exemption was withdrawn last year wide Notification No 06/2015 ST dtd 01.03.2015)

1st March 2016
13(ba) & (bb)Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

1.      (ba) a civil structure or any other original works pertaining to the In-situ rehabilitation of existing slum dwellers using land as a resource through private participation, only for existing slum dwellers.

2.      (bb) a civil structure or any other original works pertaining to the Beneficiary-led individual house construction / enhancement.

1st March 2016
14(ca)Services by way of construction, erection, etc., of original works pertaining to low cost houses up to a carpet area of 60 sq.mtr. per house in a housing project approved by the competent authority under the “Affordable housing in partnership” component of PMAY or any housing scheme of a State Government are being exempted from service tax.1st March 2016
14AServices by way of construction, erection, commissioning, or installation of original works pertaining to an airport or port provided under a contract which had been entered into prior to 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date:

provided that Ministry of Civil Aviation or the Ministry of Shipping in the Government of India, certifies that the contract had been entered into before the 1st March, 2015:

provided further that nothing contained in this entry shall apply on or after the 1st April, 2020;”

1st March 2016
23(bb)Transport of passengers, with or without accompanied belongings, by Stage carriage other than air-conditioned stage carriage1st June 2016
26(q)Services of general insurance business provided under “Niramaya‟ Health Insurance Scheme implemented by Trust constituted under the provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).”1st April 2016
26CServices of life insurance business provided by way of annuity.1st April 2016
49

 

Services provided by Employees‟ Provident Fund Organization (EPFO) to persons governed under the Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952);1st April 2016
50

 

Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999)1st April 2016
51

 

Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market;1st April 2016
52Services provided by National Centre for Cold Chain Development under Ministry of Agriculture, Cooperation and Farmers Welfare by way of cold chain knowledge dissemination1st April 2016
53Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India.1st June 2016
EXEMPTION WITHDRAWN23(c)Transport of passengers, with or without accompanied belongings, by ropeway, cable car or aerial tramway;1st June 2016
EXEMPTION AMENDED6(b)A Partnership firm of advocates or individual advocate other than a senior advocate, by way of legal services to-

(i)      an advocate or partnership firm of advocates providing legal services;

(ii)    any person other than a business entity; or

(iii)   a business entity with a turnover up to rupees ten lakh in the preceding financial year; or

1st April 2016
6(c)A senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession;”;1st April 2016
14(a)Services by way of construction, erection, commissioning, or installation of original works pertaining to railway excluding monorail and metro

Explanation.-The services by way of construction, erection, commissioning or installation of original works pertaining to monorail or metro, where contracts were entered into before 1st March, 2016, on which appropriate stamp duty, was paid, shall remain exempt.”

1st March 2016
16“Services by an artist by way of a performance in folk/classical art forms of (i) music, or (ii) dance, or (iii) theatre, if the consideration charged for such performance is not more than one lakh and fifty thousand rupees,

Provided that the exemption shall not apply to service provided by such artist as a brand ambassador”

1st April 2016

DEFINITIONS INSERTED/AMEDNED W.R.T EXEMPTION NOTIFICATION:

Approved vocational education course means(i)     A course run by an industrial training institute or an industrial training Centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961); or

(ii)    A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship

Applicable from date when Finance Bill receive ascent of President of India
Educational Institution means(i)               Pre-school education and education up to higher secondary school or equivalent;

education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;

(ii)              Education as a part of an approved vocational education course;”;

Applicable from date when Finance Bill receive ascent of President of India
Senior Advocate meansIt has the meaning assigned to it in section 16 of the Advocates Act, 1961 (25 of 1961)1st April 2016

CHANGES MADE IN POINT OF TAXATION RULES 2011 (POTR) BY NOTIFICATION NO 10/2016 ST DATED 1ST March 2016:

RULETYPE OF AMENDMENTSUMMARY OF CHANGESANALYSISApplicable w.e.f
Opening ParagraphAmendmentNow opening paragraph of POTR is read as under:

“In exercise of the powers conferred under sub-section (2) of section 67A and clause (a) and clause (hhh) of subsection (2) of section 94 of the Finance Act, 1994, the Central Government hereby makes the following rules for the purpose of collection of service tax and determination of rate of service tax

POTR , 2011 have been framed under provisions of Sec 94(2)(a) & Sec 94(2)(hhh), now specific powers is also obtained under section 67A to make rules regarding point in time of rate of service tax. Thus, any doubt about the applicability of service tax Rate or apparent contradiction between section 67A and POTR would be taken care of.1st March 2016
Rule 5(b)

 

Explanation InsertedRule 5 deals with Point of Taxation in case of New service taxed first time. Now In rule 5, after clause (b), below Explanation is added to bring clarity

·     Explanation 1- This rule shall apply mutatis mutandis in case of new levy on services.

·     Explanation 2- New levy or tax shall be payable on all the cases other than specified above.

·Rule 5 of POTR applies when a new service is taxed first time. Although in the case of new levy, service tax is applicable, however in past, doubts have been raised regarding its applicability in case of new levy. Therefore, an Explanation is being inserted.

·    It is provided in Rule 5 that, in two specified situations the service tax is not applicable in case of new levy.

Now Explanation is inserted stating that, service tax will be applicable on all cases except two specified cases given in Rule 5.

1st March 2016

♣ CHANGES MADE IN NOTIFICATION NO. 26/2012 ST ( ABATEMENT NOTIFICATION) OF SERVICE TAX BY NOTIFICATION NO 8/2016 DT 1ST MAR 2016 :

(All below provisions are EFFECTIVE FROM 1ST April 2016 unless otherwise provided in this document)

SR. NO IN NOTIFICATION
DESCRIPTION OF TAXABLE SERVICE
TAXABLE VALUE
ABATED VALUE
CONDITION
ANALYSIS OF AMENDMENT
2
Transport of Goods by Rail( other than service specified below)
30%
70%
Cenvat Credit of Input & Capital Goods used for providing the said service is not availed
Earlier credit of Input service was also not allowed along with Inputs & Capital Goods. However now Cenvat credit of Input Service is allowed
2A
Transport of goods in containers by rail by any person other than Indian Railways
40%
60%
This is newly inserted entry.
3
Transport of passengers, with or without accompanied belongings, by rail
30%
70%
Earlier credit of Input service was also not allowed along with Inputs & Capital Goods. However now Cenvat credit of Input Service is allowed
7
Services of goods transport agency in relation to transportation of goods OTHER THAN USED HOUSEHOLD GOODS
30%
70%
Cenvat Credit of Input, Input Service & Capital Goods used for providing the said service is not availed
Earlier this is applicable for “Services of goods transport agency in relation to transportation of goods”. So, all goods including household goods were covered. Now same is omitted from this Entry & separate entry No 7A is provided for the same.
7A
Services of goods transport agency in relation to transportation of USED HOUSEHOLD GOODS
40%
60%
Cenvat Credit of Input, Input Service & Capital Goods used for providing the said service is not availed
This is newly inserted entry.
8
Services provided by a foreman of chit fund in relation to chit
70%
20%
Cenvat Credit of Input, Input Service & Capital Goods used for providing the said service is not availed
This is newly inserted entry.
(This entry was there earlier. However was omitted by Notification No 8/2015 ST dt 01.03.2015)
9
Transport of passengers, with or without accompanied belongings, by-
a) a contract carriage other than motor cab.
b) a radio taxi
c) a Stage carrier
40%
60%
Cenvat Credit of Input, Input Service & Capital Goods used for providing the said service is not availed
New Clause (c) at Entry No 9 is inserted
This new clause is effective from 1st June 2016
10
Transport of goods in a vessel
30%
70%
Cenvat Credit of Input & Capital Goods used for providing the said service is not availed
Earlier credit of Input service was also not allowed along with Inputs & Capital Goods. However now Cenvat credit of Input Service is allowed
12
Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority
30%
70%
(i) CENVAT credit on inputs used for providing the taxable service has not been availed.
(ii) The value of land is included in the amount charged from the service receiver.
This entry was earlier also in existence, however it includes categories such case carpet area less than 2000 sq ft or more than that etc.
However now these categories are removed and such taxable service is charged at 30% of total value.
11
Services by a tour operator in relation to,-
(i) a tour, only for the purpose of arranging or booking accommodation for any person
ii) Tours other than (i) above
10%
30%
90%
70%
(i) CENVAT credit on inputs, CG & input services other than input services of a tour operator, used for providing the taxable service is not availed.
(ii) The invoice issued indicates that it is towards the charges for such accommodation.
(iii) This exemption shall not apply in such cases where the invoice issued by the tour operator includes only the service charges for arranging accommodation but does not include cost of such accommodation.
(i) CENVAT credit on inputs, capital goods and input services other than input services of a tour operator, used for providing the taxable service is not availed.
(ii) The invoice issued for this purpose indicates that it is inclusive of charges for such a tour and the amount charged in the bill is the gross amount charged for such a tour.
Earlier there were three category in Tour Operator Services for the purpose of deriving taxable value.
However category Package Tour is omitted & accordingly definition of package tour is also deleted.
Now there is exist only two category in case of service of tour operator.

 

 Explanation No BA in inserted for SERVICES OF RENTING OF MOTOR CAB ( Entry No 9 in Notification No 26/2012), which is mentioned below:

“For the purposes of exemption at Serial number 9, the amount charged shall be the sum total of the amount charged for the service including the fair market value of all goods (including fuel) and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract

Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.

CHANGES MADE IN REVERSE CHARGE PROVISION ( NOTIFICATION NO 30/2012 ST) BY NOTIFICATION NO 18/2016 ST DT 1ST March 2016

(Below provisions are effective from 1st April 2016)

  • Service of Mutual Fund Agent/ distributor: Now in case services provided by Mutual Fund Agent / distributor to Mutual Fund or Asset Management Company, then reverse charge is not applicable. Accordingly such agent/distributor will charge service tax on its invoices for services provided to Mutual Fund / Asset Management Company.
  • Services of Lottery Agents:
Provisions upto 31st March 2016Provisions from 1st April 2016Analysis
Reverse charge is applicable in case of :-

Service provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent

Reverse charge is applicable in case of:-

Services provided or agreed to be provided by a selling or marketing agent of lottery tickets in relation to a lottery in any manner to a lottery distributor or selling agent of the State Government under the provisions of the Lottery (Regulations) Act, 1998 (17 of 1998)

Now reverse charge is applicable

–        In relation to lottery in any manner.

–        Such service is provided by agent to Lotter distributor/selling agent of the State Government under the provisions of the Lottery (Regulations) Act, 1998

 Services of Advocate:

Provisions upto 31st March 2016Provisions from 1st April 2016Analysis
Reverse charge is applicable in case of :-

Service is provided or agreed to be provided by Individual Advocate or Firm of advocate by way of legal services to any business entity located in Taxable Territory.

Reverse charge is applicable in case of:-

Service is provided or agreed to be provided by Firm of advocate or Individual Advocate OTHER THAN SENIOR ADVOCATE by way of legal services to any business entity located in Taxable Territory.

Now in case of services of Senior Advocate to Business entity, reverse charge is not applicable.

 CHANGES MADE IN INTEREST RATE FOR DELAYED PAYMENT OF SERVICE TAX BY NOTIFICATION NO 13/2016 ST & 14/2016 ST DATED 1ST March 2016:

NOTIFICATION NO.TYPE OF AMENDMENTSUMMARY OF CHANGESANALYSISAPPLICABLE FROM
Notification 13/2016 STAmendmentEarlier Notification No 12/2014 ST read with Sec 75 of FA 1994, provides service tax Interest rate of 18% / 24% & 30% in case of delayed payment of service tax.

However Now, Interest rates on delayed payment of tax made uniform at 15%

Except in case of service tax collected but not deposited with the Central Government, in which case the rate of interest will be 24% from the date on which the service tax payment became due.

Welcome move and great relief to Industry as Interest rate of 30% was very much highApplicable from the day when Finance Bill 2016 receives the Ascent of President of India.
Notification 14/2016 STAmendmentNotification No 8/2006 ST read with Sec 73B provides for Interest in case of amount collected in excess will be 18%.

Now such interest rate is reduced to 15%.

Welcome moveApplicable from the day when Finance Bill 2016 receives the Ascent of President of India.

CLARIFICATION BROUGHT IN ‘INFORMATION TECHNOLOGY SOFTWARE’ R.T LEVY OF EXCISE DUTY OR SERVICE TAX BY NOTIFICATION NO 11/2016 ST DT 1.3.16 & NOTIFICATION NO 11/2016 CE DT 1.3.16

SUMMARY OF ABOVE NOTIFICATION IS EXPLAINED AS UNDER:

CASE (I)

Service in relation to Information Technology Software

o   which is recorded on media and

o   coming under chapter 85 of First Schedule of CETA 1985 and

o   on which it is required to declare Retail Sale Price ( under Legal Metrology Act, 2009)

( In nutshell, it means, Packaged Software)

In such case, EXCISE DUTY IS APPLICABLE subject to condition that:

o   Value of package of such media has been determined under Sec 4A of CEA 1944 for the purpose of payment of Excise Duty or Custom Duty in case of imported software media.

o   Appropriate Duties of Excise/Custom is paid

o   Declaration is made by service provider on invoice that No amount in excess of RSP mentioned on media is recovered.

CASE (II)

Service in relation to Information Technology Software

o   which is recorded on media and

o   coming under chapter 85 of First Schedule of CETA 1985 and

o   on which it is NOT required to declare Retail Sale Price ( under Legal Metrology Act, 2009)

( In nutshell, it means, Customized Software / Tailor-made Software )

In such case, SERVICE TAX IS APPLICABLE subject to condition that:

o   Person liable to pay service tax is registered under service tax

o   Such person shall make declaration to Principal Commissioner or Commissioner or Central Excise in Annexure I ( Format given in Notification) regarding value of software recorded in media which is liable to Service Tax

 

 (Author is associated with S M Munot & Associates and can be reached at munotswapnil@gmail.com)

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