CA. Sanjeev Singhal

1)   Change in Service tax Rate :-

  The Service tax Rate is being increased from 12% plus Education cess to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the revised rate of service tax. Thus, effective increase in Service Tax rate will be from existing rate of 12.36% (inclusive of cesses) to 14%.

  The new Service Tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015.

  Till the time the revised rate comes into effect, the levy of ‘Education cess’ and ‘Secondary and Higher Education cess’ shall continued to be levied in Service Tax.

2) Swachh Bharat Cess :-

  An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% of the value of such taxable services with the objective of financing and promoting Swachh Bharat initiatives.

  This Cess shall be levied from a date to be notified by the Central Government in this regard and will not have immediate effect.

3) Changes in relation to the Negative List :-

  • An enabling provision is being made, by amending [section 66D (a)(iv)], to exclude all services provided by the Government or local authority to a business entity from the Negative List. Consequently, the definition of “support service” [section 65B(49)] is being omitted
  • section 66D(f) has been proposed to  be substituted to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption under the Service tax net. In other words, service tax shall be levied on contract manufacturing/Job work for production of Alocholic Liquor.
  • Earlier the service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places was covered in the Negative list. Budget 2015-16 has proposed to omit the clause (j) of Section 66D. Hence, the same will be taxable from the date to be notified by the Central Government.
  • Service Tax to be levied on service by way of admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts, award functions, if the amount charged is more than INR 500 for right to admission to such an event.

Other Changes

Section 65B of the Finance Act, 1994:

Definitions Omitted :

  • amusement facilities [Section 65B(9)]
  • entertainment event [Section 65B(24)
  • support services [Section 65B(49)]

Definitions inserted :

  • ‘foreman of chit fund’ – Section 65B(23A)
  • ‘Government’ – Section 65B(26)
  • ‘lottery distributor or selling agent’ – Section 65B(31A)

Section 66F of the Finance Act, 1994:

  Section 66F(1) prescribes that unless otherwise specified, reference to a service shall not include reference to any input service used for providing such services. An illustration has been incorporated in the stated Section to exemplify the scope of this provision.

Section 67 of the Finance Act, 1994:-

  • Explanation (a) to Section 67 is amended to specifically include the following in the definition of the term ‘Consideration’:

a) any reimbursable expenditure or cost incurred and charged by the service provider;

b) any amount retained by the lottery distributor or selling agent of lottery from gross sale amount of lottery ticket, or, as the case may be, the discount received, that is the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such tickets.

Section 73 of the Finance Act, 1994:-

  Section 73 has been amended to insert a new sub-section (1B) to provide that the Service tax amount self-assessed and declared in the return but not paid (either in part or full) shall be recovered under Section 87 thereof, without service of any notice under Section 73(1).

  Further, Section 73(4A) providing for reduced penalty if true and complete details of transaction are available on specified records has been omitted.

Section 76 of the Finance Act, 1994:-

  Section 76 has been amended to rationalize the provisions relating to penalties in cases not involving fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of Service tax, in the following manner:

a)Ceiling of 10% of Service tax amount on penalty has been incorporated.

b)No penalty leviable if Service tax and interest is paid within 30 days of issuance of SCN under Section 73(1).

c)Reduced penalty equal to 25% leviable if the Service tax, interest and reduced penalty is paid within 30 days of receipt of Order of the Central Excise Officer; and

d)If the Service tax amount gets reduced in any Appellate proceeding, then the penalty amount shall also stand modified accordingly, and benefit of reduced penalty (i.e. 25%) shall be admissible if Service tax, interest and reduced penalty is paid within 30 days of such Appellate Order.

Section 78 of the Finance Act, 1994:-

  Section 78 has been amended to rationalize the provisions relating to penalties in cases involving fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of Service tax, in the following manner:

a)    Penalty shall be of 100% of Service tax amount.

b)   Reduced penalty equal to 15% shall be leviable if Service tax, interest and reduced penalty is paid within 30 days of issuance of SCN under Section 73(1).

c)   Reduced penalty equal to 25% leviable if the Service tax, interest and reduced penalty is paid within 30 days of receipt of Order of the Central Excise Officer; and

d)If the Service tax amount gets reduced in any Appellate proceeding, then the penalty amount shall also stand modified accordingly, and benefit of reduced penalty (i.e. 25%) shall be admissible if Service tax, interest and reduced penalty is paid within 30 days of such Appellate Order.

Section 78B inserted after Section 78A of the Finance Act, 1994:-

  A new Section 78B has been inserted to prescribe transition provision in the following manner:

a)  Amended provisions of Sections 76 and 78 shall apply to cases where either no notice is served, or notice is served under Section 73(1) or proviso thereto but no Order has been issued under Section 73(2), before the date of enactment of the Finance Bill, 2015; and

b)  In respect of cases covered by Section 73(4A), if no notice is served, or notice is served under Section 73(1) or proviso thereto but no Order has been issued under Section 73(2), before the date of enactment of the Finance Bill, 2015, penalty shall not exceed 50% of the Service tax amount.

Section 80 of the Finance Act, 1994 :- Omitted.

Section 86 of the Finance Act, 1994:-

Section 86 has been amended to prescribe that remedy against the Order passed by the Ld. Commissioner (Appeals), in a matter involving rebate of Service tax on Input services, duty paid on Inputs, used in providing service which is exported, shall lie in terms of Section 35EE of the Central Excise Act, 1944 (i.e. Revision by the Central Government).

It is also provided that all appeals filed before the Hon’ble Tribunal after the date the Finance Act, 2012 came into effect and pending on the date when the Finance Bill, 2015 receives assent of the President shall be transferred and dealt in accordance with Section 35EE of the Central   Excise Act, 1944.

Section 94 of the Finance Act, 1994:

  Clause (aa) of Section 94(2) has been substituted with “determination of the amount and value of taxable service, the manner thereof, and the circumstances and conditions under which an amount shall not be a consideration, under Section 67”.

Changes in service tax rules,1994

Rule 2 of the Service Tax Rules, 1994: [Notification No. 5/2015-ST dated 01-03-2015 Effective from 1.03.2015 ]

  • In respect of any service provided under aggregator model, the aggregator, or any of his representative office located in India, is being made liable to pay Service Tax if the service is so provided using the brand name of the aggregator in any manner. This change comes into effect immediately i.e., w.e.f. 1st March, 2015.
  • The term ‘support’ has been omitted from the Clause (E) providing for liability of service receiver to pay Service tax under Reverse Charge in relation to support services provided or agreed to be provided by Government or Local authority;
  • Services provided by mutual fund agents, mutual fund distributors to a mutual fund or asset management company and agents of lottery tickets to a lottery distributor or selling agent has also been included in Rule 2(1)(d) making mutual fund/ asset management company and lottery distributor/ selling agent liable for payment of Service tax under Reverse Charge vide the Notification No. 30/2012-ST dated 20.6.2012.

Rule 4 of the Service Tax Rules, 1994 [Notification No. 5/2015-ST dated 01-03-2015 Effective from 1.03.2015]

  • This rule is being amended to provide that the CBEC, by way of an order specify the conditions, safeguards and procedure for registration in service tax. It has also been prescribed that henceforth registration for single premises shall be granted within 2 days of filing of application.

New Rule 4C has been inserted after Rule 4B of the Service Tax Rules, 1994 –

  • Provision for issuing digitally signed invoices, bill or challan has been added along with the option of maintaining of records in electronic form and their authentication by means of digital signatures.

Rule 6 of the Service Tax Rules, 1994:

  • Rule 6(6A) of the Service Tax Rules has been omitted which provided for recovery of Service tax self-assessed and declared in the return in the manner prescribed under Section 87 of the Finance Act, 1994.

The same has been done consequent to the amendment brought in Section 73 of the Finance Act, 1994 enabling such recovery. This change will come into effect from the date of enactment of the Finance Bill, 2015.

  • In respect of certain services like money changing service, service provided by air travel agent, insurance service and service provided by lottery distributor and selling agent the service provider has been allowed to pay service tax at an alternative rate subject to the conditions as prescribed under rule 6 (7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994. Consequent to the upward revision in Service Tax rate, the said alternative rates shall also be revised proportionately. Amendments to this effect have been proposed in the Service Tax Rules. This amendment will come into effect as and when the new service tax rate comes into effect.

 Changes in Reverse charge Mechanism

  Changes in Reverse Charge Mechanism [Vide Notification No. 7/2015-ST dated March 1, 2015]

  • Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism. [This change will come into effect from 1.04.2015.]
  • Services provided by

a)  Mutual fund agents, mutual fund distributors to a mutual fund or asset management company; and

b)  Selling or marketing agents of lottery tickets to a lottery distributor or selling agent are being brought under the Full Reverse Charge consequent to withdrawal of the exemption on such services. [Applicable from 1.04.2015.]

 Changes in Cenvat Credit Rules,2004

 Rule 4 of the Cenvat Credit Rules: [Notification No. 6/2015-Central Excise (N.T) dated 1-3-2015]

  • Cenvat credit shall now be taken within one year of the issue of any documents specified in Rule 9(1) of the Cenvat Credit Rules, whereas, earlier, it was 6 months’.
  • Rule 4(7) is being amended that in respect of input service where whole or part of the service tax is liable to be paid by the recipient of service, credit of service tax payable by the service recipient shall be allowed after such service tax is paid.
  • Cenvat credit of inputs can be taken immediately where the inputs are directly sent to the job workers premises in pursuance of the direction of the manufacturer or output service provider.
  • Cenvat credit on capital goods can be taken immediately where the capital goods are directly sent to the job workers premises in pursuance of the direction of the manufacturer or output service provider.

Rule 5 of the Cenvat Credit Rules:

   “Exports goods” now be defined in Rule 5, which means any goods which are to be taken out of India to a place outside India.

 Rule 6 of the Cenvat Credit Rules:

  Explanation-1 and Explanation-2 inserted in sub-rule 1: For the purpose of this Rule, Non excisable goods covered within the definition of the exempted goods or final products as defined in clauses (d) and (h) of Rule 2 of the Cenvat Credit Rules.

Rule 14 of the Cenvat Credit Rules:

 Recovery of CENVAT credit wrongly taken or erroneously refunded: –

1) (i) Instances where the CENVAT credit has been availed wrongly but not utilised, the same shall be recovered from the manufacturer or the provider of output service in terms of the provision of the Section 11A of the Excise Act or Section 73 of the Finance Act, 1994, as the case may be, shall apply mutatis mutandis for effecting such recoveries.

ii)instances where the CENVAT credit has been availed and utilised wrongly or has been erroneously refunded, the same shall be recovered along with interest from the manufacturer or the provider of output service in terms of the provisions of Sections 11A and Section 11AA of the Excise Act or Sections 73 and 75 of the Finance Act, 1994, as the case may be, shall apply mutatis mutandis for effecting such recoveries.

(2)   For the purposes of sub-rule (1), all credits taken during a month shall be deemed to have been taken on the last day of the month and the utilisation thereof shall be deemed to have occurred in the following manner, namely: –

(i)the opening balance of the month has been utilised first;

(ii)(ii) credit admissible in terms of these rules taken during the month has been utilised next;

(iii)credit inadmissible in terms of these rules taken during the month has been utilised thereafter.

Rule 15 of the Cenvat Credit Rules:

  In the said Rule 15, with effect from the date on which the Finance Bill, 2015 receives the assent of the President, Penalty provisions are changed appropriately as the case may be in terms of Section 11 AC of the Excise Act or Section 78 of the Finance Act.

Changes in Mega Exemptions

Changes effective from 1.04.2015

  • All ambulance services provided to patients are exempted.
  • Exemption presently available on Services 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, shall be restricted only t o:

a) a historical monument, archaeological site or remains of national  importance, archeological excavation or antiquity;

b)       canal, dam or other irrigation work;

c)       pipeline, conduit or plant for (i) water supply (ii) water treatment, or sewerage treatment or disposal.

  • Exemption to Services by way of construction, erection, commissioning, or installation of original works pertaining to an airport or port stands withdrawn.
  • Exemption to Services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theatre, has been restricted only to such cases where amount charged is not exceeding Rs. 1,00,000/- for a performance (except brand ambassador).
  • Exemption under Entry 20(i) Substituted, transportation of food stuff by rail or vessels from one place in India to another will be limited to milk, salt and food grains including flours, pulses and rice. Transportation of agricultural produce is separately exempt, and this exemption would continue.

Exemptions being withdrawn and applicable under reverse charge:

a)   services provided by a mutual fund agent to a mutual fund or assets management company,

(b)  distributor to a mutual fund or AMC,

(c) selling or marketing agent of lottery ticket to a distributor. –

Exemption is being withdrawn:- [Applicable from 1.04.2015]

(a)     Departmentally run public telephone;

(b)     Guaranteed public telephone operating only local calls; and

(c)     Service by way of making telephone calls from free telephone at airport

and hospital where no bill is issued.

New Exemptions:– [Effective from 1.04.2015]

  • Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables is being exempted.
  • Service provided by a Common Effluent Treatment Plant operator for treatment of effluent is being exempted.
  • Life insurance service provided by way of Varishtha Pension Bima Yojna is being exempted.
  • Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or association of persons consisting of such exhibitor as one of it’s members is being exempted.
  • Service provided by way of admission to a museum, zoo, national park, wild life sanctuary,and a tiger reserve is being exempted.
  • Goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is exempt from service tax vide notification No. 31/12-ST dated 20.6.2012. Scope of this exemption is being widened to exempt such services when provided for transport of export goods by road from the place of removal to a land customs station (LCS).

 New entries being incorporated in notification No. 25/12-ST, to continue exemption to some of the services that are presently covered by the Negative List entries which are being omitted.

  • Service by way of right to admission to,-

 

i)  exhibition of cinematographic film, circus, dance, or theatrical performances including drama or ballet.

(ii)  recognized sporting events.

(iii)concerts, pageants, award functions, musical or sporting event not covered by the above exemption, where the consideration for such admission is upto Rs.  500 per person.

  Changes In Abatement Notification No. 26/2012-ST Dated 20-6-2012 (Effective From 01-04-2015):-

  • A uniform abatement of 70% has been prescribed for transport by rail, road and vessel to bring parity in these sectors. Service tax shall be payable on 30% of the value of such service subject to a uniform condition of non-availment of Cenvat credit on Inputs, Capital goods and Input services.
  • Abatement for the services provided in relation to Chit fund stands withdrawn. Consequently, Service tax shall be paid by on full consideration received by the Chit fund foremen.

Advance Ruling Under Section 96A(b)(iii) of the Finance Act:

The facility of Advance Ruling has been extended to all resident firms by specifying such firms as a class of persons for the purposed of Section 96A (b)(iii).

Summary of date of applicability of service tax provisions

S. no. Particulars Date of applicability
1. Change in ST rate from 12.36% to 14%. Date to be notified by central government.
2. Swachh Bharat Cess Date to be notified by central government.
3. Changes in Service tax rules,1994 [Rule 2, Rule 4, Rule 4C and Rule 6] Effective from 1.03.2015.
4. Reverse charge Mechanism Effective from 1.04.2015.
5. Cenvat Credit Rules:
 
a)   Rule 4 (7) Effective from 1.04.2015.
b)     Rule 5, Rule 6 & Rule 14  Effective from 1.03.2015. 
c)       Rule 15 Applicable from the enactment of the Finance Bill, 2015.
6. Changes in Mega Exemptions            Notification No. 25/2012-ST Dated 20.06.2012.
Applicable from 01.04.2015.
7. Changes related to Negative list
Applicable from the enactment of the Finance Bill, 2015.
8. Changes in Abatement Notification No. 26/2012-ST Dated 20-6-2012.  Related to GTA & Chit fund
Applicable from 1.04.2015.

Read Other Article written By CA. Sanjeev Singhal, FCA, DISA [ ICAI]

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Tags : Budget (1473) Budget 2015-16 (272) CA Sanjeev Singhal (68)

0 responses to “Budget 2015- Highlights of Changes in Service tax”

  1. nazuk says:

    Sir,
    I am a govt Contractor working mainly for Govt. Departments .Kindly let me know if Service tax is applicable for which like manpower and construction and horticulture and elec trical dept please reply me sir

  2. NABHA PAPER MILLS PVT.LTD; MALERKOTLA says:

    WE ARE MANUFACTURER UNDER CENTRAL EXCISE & AVAILING EXEMPTION UNDER CE NOTIFICATION NO. 18/2012 DATED 17.03.2012; HAVING OWN VEHICLES FOR REMOVAL OF OUR `FG`. WE ENJOYING THE GTA FACILITY (ON INWARD/OUTWARD FGT.) & PAYING SER.TAX ON ABATED FGT.PART AS FULL FGT.AMT. X 30% X 14.5% INCLUDING S.B.C.PART. WE REMIT SER.TAX DUES IN THE CALCULATTION MANNER AS ABOVE & TAKING CENVAT CREDIT OF THE SAME. WE ARE ALSO TAKING CENVAT CREDIT ON DUTY PAID INPUTS & `CG`.

    KINDLY ADVISE US WHETHER IT IS ALL O.K. OR SOME OTHERWISE!

  3. Ramesh Gupta says:

    Sir,

    I am a Civil Contractor working mainly for Govt. Departments .Kindly let me know if Service tax is applicable for Working for CPWD, and PWD, BMC Etc.

  4. Col P S Sangwan says:

    Kindly help in knowing the ST liability of an individual working as consultant with a company. Salary of consultant is being paid after deducting ST? Is there any provision to claim it back from Govt if you fall under exempt category of minimum slab applicable to indvl? What all expenditure by a consultant are permitted as deductions?

  5. P M MASHYAL says:

    pleas clarify the S TAX CALULATIONS IN RESPECT OF REVERSE MACHANISIM IN CASE OF MAINTAINANCE WORK CAPITAL WORKS AND RATES THEREOF WITH RESPECT TO APPLICABLE CODE LIKE VB, VD,VH .Y5, Y3 ETC URGENTLY

    MASHYAL P M
    BSNL SOLAPUR

  6. P M MASHYAL says:

    pleas clarify the S TAX CALULATIONS IN RESPECT OF REVERSE MACHANISIM IN CASE OF MAINTAINANCE WORK CAPITAL WORKS AND RATES THEREOF WITH RESPECT TO APPLICABLE CODE LIKE VB, VD,VH .Y5, Y3 ETC URGENTLT

    MASHYAL P M
    BSNL SOLAPUR

  7. PANKAJ says:

    Sir
    I m contractor of cpwd and work for renovation work of NDRI karnal I want to know other device tax applicable from June 2015 due to change of service tax on govt building

  8. Surendar Saini says:

    Sir,
    we are only working in Military Engnieering services as contractor for maintaince of building and electrical items. what will be our liability. whether after calculation of 14% we have to deposite half or full amount . Can this half amount is reimbussable

  9. PANKAJ says:

    sir I want to know what is new changes from 1/4/2015 in civil construction work of govt building of cpwd etc

  10. Rama rao says:

    Sir,

    i am operating photo colour lab. i am also liable to pay service tax or not, kindly suggest me.

    Thanks & Regards,
    Rama Rao

  11. nitin agarwal says:

    Sir I am civil contractor from Rajasthan. I want to know whether service tax applies to construction of government building work contracts.

  12. Divya Arora says:

    Sir,I wish to seek clarification reg. applicability of Service Tax on Govt. welfare schemes, in reference to AAdhar Card. Unique Identification Authority of India has appointed Enrolment Agencies for undertaking enrolment of residents,for which a fixed consideration is paid by UIDAI. Is Service Tax app. on undertaking Aadhar enrolments?
    However, welfare scheme like Rashtriya Swasth Bima Yojna etc. are mentioned in the negetive list, with no reference of Aadhar.
    Kindly Guide.
    Regards

  13. Ajeet singh says:

    Sir

    I want to Know what is the effective date for Change in Rate of Service Tax from 12.36% to 14%.
    i.e from when i have to charge 14 % on my invoice.

  14. ca. kaushik jagad says:

    Sir,
    I have queries,
    (1) if assessee construct government buildings like Office of Income-tax Department, Railway Account Office, Excise Office etc.
    (2) if assessee construct roads, footpath etc.

    What is the position in relation the service tax liability. As per Budget,
    Exemption presently available on Services 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, shall be restricted only t o:
    a) a historical monument, archaeological site or remains of national importance, archeological excavation or antiquity;
    b) canal, dam or other irrigation work;
    c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or sewerage treatment or disposal.
    – are only exempted as per negative list. There is no any exemption given to Road, Footpath work, Government Building Work etc.

    Please guide.

  15. Sachi says:

    REVERSE CHARGE:

    Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism

    Full meaning who will pay to government:

    a. Service Provider.
    b. Service receiver.

  16. SATYANDRA KUMAR JAIN says:

    Sir

    Thanks for article and the same is good but I think an Important Notn.42/12-ST for availing exemption on commission paid to overseas agent by Indian exporter rescinded by the Govt.w.e.f.01.03.15 is not seen by me in your article.

    Regards
    skjain

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