This Article Covers the following Topics-
1. Increase in rate of Service tax
2. Swachh Bharat Cess – Enabling Provision
3. Changes in relation to the Negative List – Section 66D of the Finance Act, 1994
4. Various other Sections under the Finance Act, 1994
5. Service Tax Rules, 1994 amended vide Notification No. 5/2015-ST dated 01-03-2015
|SERVICE TAX CHANGES FROM DATE TO BE NOTIFIED AFTER THE ENACTMENT OF FINANCE BILL, 2015|
|Increase in Rate of Service tax||From 12.36% (including Education Cess and Secondary and Higher Education Cess) to flat 14%.The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the new Service tax rate.Balance lying in ‘Education Cess’ and ‘Secondary and Higher Education Cess’ may be allowed to be adjusted with liability of Service tax but the CBEC needs to be clarify this issue.|
|Swachh Bharat Cess – Enabling Provision||An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess (“SB Cess”) on all or any taxable services at a rate of 2% on the value of all or any taxable services. The proceeds from this Cess would be utilized for Swachh Bharat initiatives.The Government will specify the categories of taxable services on which SB Cess would be leviable.Open issues:a) What all services are going to be covered under the levy of SB Cess?In the absence of clearly defined provisions, it is likely that the SB Cess may re-ignite the tussle on ‘classification’ of services.b) Whether Cenvat credit of SB Cess would be available or not because there are no amendments proposed in the Credit Rules?
c) Whether there will be restriction as regards utilisation of SB Cess as was in case of Education Cess and Secondary & Higher Education Cess?
|Changes in relation to the Negative List – Section 66D of the Finance Act||Section 66D(a): Under clause (iv), the words ‘support services’ has been proposed to be substituted by the words ‘any service’.Accordingly, after such amendment, all services provided by the Government or local authority to a business entity would be exigible to Service tax, except for the services that are specifically exempted, or covered by any another entry in the Negative List.Section 66D(f): Services by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption brought under the Service tax net.Section 66D(i): Explanation inserted whereby the expression “betting, gambling or lottery” shall not include the activity as specified in substituted explanation 2 to Clause (44) of Section 65B of the Finance Act.Section 66D(j): Proposed to be Omitted. At present, it covers ‘admission to entertainment event or access to amusement facilities’.Consequently, Service tax to be levied on the services provided by way of access to amusement facility such as rides, bowling alleys, amusement arcades, water parks, theme parks, etc;Service tax to be levied on services by way of admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts and award functions, if the amount charged for admission is more than Rs. 500.
Whereas services by way of admission to exhibition of the cinematographic film, circus, dance, or theatrical performances including drama, ballets or recognized sporting events shall continue to be exempt; [Read with the Notification No. 6/2015-ST dated 01-03-2015 vide which changes has been made in the Mega Exemption List of Services]
|Various other Sections under the Finance Act||Section 65B: Definitions of certain terms omitted [Section 65B(9): ‘amusement facility’, Section 65B(24): ‘entertainment event’ and Section 65B(49): ‘support services’ has been omitted;]Definitions of certain terms amended [Section 65B(40): ‘process amounting to manufacture or production of goods’ excluding alcoholic liquors for human consumption]Definitions of certain terms has been inserted [Section 65B(23A): ‘foreman of chit fund’, Section 65B(26A):‘Government’ and Section 65B(31A):‘lottery distributor or selling agent’]Change in definition of ‘Service’ [Section 65B(44)]:Explanation 2 to Section 65B(44) of the Finance Act, defining the term ‘Service’ is amended to specifically state the intention of the legislature to levy Service tax on activities undertaken by Chit fund foremen in relation to Chit, and lottery distributors and selling agents, in relation to lotteries.Section 66B: to substitute the rate of Service tax from 12% to 14%.Section 66F: 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 in the following manner:
“The services by the Reserve Bank of India, being the main service within the meaning of clause (b) of section 66D, does not include any agency service provided or agreed to be provided by any bank to the Reserve Bank of India. Such agency service, being input service, used by the Reserve Bank of India for providing the main service, for which the consideration by way of fee or commission or any other amount is received by the agent bank, does not get excluded from the levy of service tax by virtue of inclusion of the main service in clause (b) of the negative list in section 66D and hence, such service is leviable to service tax.”
Section67: Amendment in definition of the term ‘Consideration’ to include:
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: New sub-section (1B) inserted 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 up to 50% of Service tax liability, if true and complete details of transaction are available on specified records has been omitted.
Section 76: Rationalization of penal provisions in cases not involving fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Finance Act or rules with the intent to evade payment of Service tax, in the following manner:
a) Ceiling of 10% of Service tax amount as 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) of the Finance Act;
c) Reduced penalty equal to 25% of the penalty (i.e. 2.5% of the Service tax liability) imposed by the Central Excise officer by way of an Order is to be paid if the Service tax, interest and reduced penalty is paid within 30 days of receipt of the aforesaid Order; 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% of penalty imposed) shall be admissible if Service tax, interest and reduced penalty is paid within 30 days of such Appellate Order.
Section 78: Rationalization of penal provisions relating to penalties in cases involving fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Finance 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% of the Service tax amount alleged in the SCN shall be imposable if Service tax, interest and reduced penalty is paid within 30 days of issuance of SCN under Section 73(1) of the Finance Act;
c) Reduced penalty equal to 25% of the Service tax amount, determined by the Central Excise officer by an Order, shall be imposable 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.
New Section 78B inserted after Section 78A: A new Section 78B has been inserted to prescribe transition provision in the following manner:
a) Amended provisions of Sections 76 and 78 of the Finance Act 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) thereof, before the date of enactment of the Finance Bill, 2015; and
b) In respect of cases covered under Section 73(4A) of the Finance Act, 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) thereof, before the date of enactment of the Finance Bill, 2015, penalty shall not exceed 50% of the Service tax amount.
Section 80 omitted: At present, it provides for waiver of penalty under Section 76 and 77 of the Finance Act, on Reasonable cause.
Section 86: 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 (“the Excise Act”)(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 Excise Act.
Section 94: 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”.
Section 83: Certain changes have been made in the provisions relating to Settlement Commission under the Excise Act which are made applicable to the Finance Act by virtue of Section 83 thereof.
|Service Tax Rules, 1994 amended vide Notification No. 5/2015-ST dated 01-03-2015||Under Rule 2:· The term ‘support’ has been omitted from the Rule 2(1)(d)(i)(E) which provides 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 with certain exceptions.Under Rule 6:· Rule 6(6A) 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 as the same has been now been incorporated in Section 73 of the Finance Act;· Explanation (i) to Rule 6(7C) has been omitted which defined the term ‘distributor or selling agent’;· Consequent to the upward revision in Service tax rate, the composition rate is proposed to be revised proportionately under Rule 6(7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules on specified services, namely,- Air Travel Agent: From “0.6%” and “1.2 %”, to “0.7 per cent.” and “1.4 per cent of Basic fares in the case of domestic bookings and international bookings respectively.
– Life insurance service: From “3%” and “1.5%”, to “3.5%” of the premium charged from policy holder in the first year and “1.75% in the subsequent year”.
– Money changing service provided by banks or authorized dealers:
o From “0.12%” to “0.14%” of gross amount of currency exchanged for an amount upto Rs.1,00,000/-subject to minimum amount of “Rs.35”which was “Rs. 30 earlier or;
o From “Rs. 120 and 0.06%” to “Rs. 140 and 0.07%” of gross amount of currency exchanged for an amount exceeding Rs.1,00,000/- upto Rs. 10,00,000/ or;
o From “Rs. 660 and 0.012%” to “Rs. 770 and 0.014%” of gross amount of currency exchanged for an amount exceeding Rs.10,00,000/- subject to maximum amount of Rs. 7000/- which was Rs. 6000/- earlier
– Service provided by lottery distributor and selling agent:
o Guaranteed price payout is more than 80%: Rs. 8200/- (earlier Rs. 7000/-) on every Rs. 10,00,000/- (or part of Rs. 10,00,000/-) of aggregate face value of lottery tickets printed by organizing State for a draw or
o Guaranteed price payout is less than 80%: Rs. 12,800/- (earlier Rs.11,000/-) on every Rs. 10,00,000/- (or part of Rs. 10,00,000/-) of aggregate face value of lottery tickets printed by organizing State for a draw.
|Changes in Mega Exemption Notification No. No. 25/2012-ST dated 20-06-2012 vide Notification No. 6/2015-ST dated 01-03-2015||Exemptions withdrawn by amending Entry 30:Entry 30: Services by way of carrying out an intermediate production process as job work in relation to alcoholic liquors for human consumption.New Exemption:Entry 47: Services by way of right to admission to:· exhibition of cinematographic film, circus, dance, or theatrical performances including drama or ballet;· recognized sporting events;· award functions, concerts, pageants, musical performances or any sporting events other than recognized sporting event, where the consideration for such admission is upto Rs. 500 per person
[This Will be exempted effective from the date the amendments being made in the Negative List concerning the service by way of admission to entertainment events come into effect]
Definition of ‘recognized sporting events’ provided.
|Changes in Reverse Charge Mechanism vide Notification No. 7/2015-ST dated 01-03-2015 amending Notification No. 30/2012-ST dated 20-06-2012||In paragraph I, clause (A) sub clause (iv) Item C, the term ‘support’ has been omitted for services provided or agreed to be provided by Government or Local authority from a date to be notified by the Central Government.|
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: email@example.com)
Service Tax Changes Effective from April 1, 2015