CA Bimal Jain
Effective from April 1, 2016, under clause (iv) of Section 66D(a) of the Finance Act, 1994 (“the Finance Act”), the words ‘support services’ have been substituted by the words ‘any service’ thereby, the liability to pay Service tax on any service provided by Government or a Local Authority to Business Entities is on the service recipient under Reverse Charge except in case of (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of Section 66D of the Finance Act.
However, owing to the wide ramifications entangling the extent/ type of Governmental services, there may be lot of queries for the stated applicability of Service tax.
In order to clear the mist, the Central Government/ Board on April 13, 2016, has issued the following important Notifications/ clarification to limit the scope of the Governmental services, which have been brought to Service tax under Reverse Charge w.e.f. April 1, 2016:
|Notification/ Circular No.||Particulars|
|Notification No. 22/2016-ST dated April 13, 2016||Amendment in the Mega Exemption Notification to exempt certain services provided by Government or a local authority to a Business entity|
|Notification No. 23/2016-ST dated April 13, 2016||Proviso inserted in Rule 6(2)(iv) of the Service Tax (Determination of Value) Rules, 2006, to include in value of taxable services, payment of interest/ other consideration payable on Governmental services whose payment is allowed to be deferred on such payment of interest/ other consideration|
|Notification No. 24/2016-ST dated April 13, 2016||Rule 7 of the Point of Taxation Rules, 2011 amended to provide that in case of services provided by the Government or local authority to any business entity, the POT shall be the earlier of the dates on which, –|
(a) Any payment, part or full, in respect of such service becomes due, as specified in the invoice, bill, challan or any other document issued by the Government or local authority, demanding such payment; or
(b) Payment for such services is made.
|Notification No. 24/2016 CE (NT) dated April 13, 2016||Rule 4(7) of the Cenvat Credit Rules, 2004, amended to provide that the Cenvat credit of Service tax paid in a financial year, on the one-time charges payable in full upfront or in instalments, for the service of assignment of the right to use any natural resource by the Government, local authority or any other person, shall be spread evenly over a period of 3 years.|
Further, time limit of 1 year for availment of Cenvat credit on Input services is not applicable in case of services provided by Government, local authority or any other person, by way of assignment of right to use any natural resource.
|Circular No. 192/02/2016-ST dated April 13, 2016||Clarification on taxability of Governmental services & Illustration explaining how the Cenvat credit is to be availed on Service tax paid for assignment of right to use natural resources|
Now, in order to provide complete understanding of the above discussed provisions and corresponding changes brought vide mentioned Notifications/ Circular, Mr. Bimal Jain has recorded a video presentation titled “Service tax on Any services provided by Government or Local Authority to Business Entity”, for easy digest. The video also captures the important changes with practical illustrations in PPT format, facilitating ease of understanding.
You may watch the video presentation by clicking on the link below:
To access our earlier Newsletter on the captioned subject, please click on the link below: