CA Amit Lath
Finance minister while delivering his budget speech stressed on the importance of stability of taxation regime. With this view in mind very few changes has been introduced in the already destabilized regime of service tax.
In this article an effort has been made to compare the changes introduced in the budget 2013-2014.
Change in mega exemption notification
A mega exemption notification no.25/2012 dated 20th June 2012 superseding notification no. 12/2012 had been issued by the ministry last year. The activities appearing in the mega exemption has been exempted from the payment of service tax. Notification no.3/2013 issued by the ministry as part of the budget has brought few amendments to the mega exemption list.
i) Services provided to educational institution in respect of auxiliary education services or renting of immovable property as well as service provided by educational institution in respect of auxiliary education services or renting of immovable property had been exempted in the notification No. 25/2012(before amendment).
As per the amendments, only Services provided to educational institution in respect of auxiliary education services or renting of immovable property has been exempted and auxiliary education service or renting of immovable property provided by educational institution will not be exempted.
ii) Temporary transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical, artistic works or cinematograph films had been exempted in the notification No. 25/2012(before amendment).
A full exemption was there on copyright relating to cinematograph films however with the amendments introduced by Notification no. 3/2013, the benefit of exemption is restricted to films exhibited in cinema halls only
iii) Services relating to serving of food and beverages by the restaurant, eating joint or a mess had been exempted however those restaurants which has the facility of air-conditioning, at any time during the year, and a licence to serve alcoholic beverages had not been exempted in the notification no. 25/2012(before amendment).
With the amendments introduced by Notification no. 3/2013 there is no more requirement of a license of serving alcoholic beverages for determining the taxability of the service provided by the restaurant. All restaurants, eating joint or mess having the facility of air condition during any time of the previous year is now under the tax ambit.
iv) Transportation by rail or vessel of some specified goods had been exempted in the notification no. 25/2012(before amendment).
Petroleum and petroleum products, postal mail or mail bags, household effects has been removed from the list of specified goods and their transportation has been made subject to tax.
v) Services provided by a goods transport agency by way of transportation of fruits, vegetables, eggs, milk, food grains or pulses had been exempted in the earlier notification.
However this budget has enlarged the scope of exemption in relation to services provided by GTA and has covered the transportation of following goods:-
• Agricultural produce,
• Foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages,
• chemical fertilizer and oilcakes,
• Newspaper or magazines registered with the Registrar of Newspapers,
• Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap or
• Defence or military equipments.
vi) Service by way of vehicle parking to general public had been exempted in the earlier notification. This exemption was also causing confusion in the mind of assesse regarding taxability of payment made towards parking space in the buildings.
The exemption has altogether withdrawn and now onwards the service by way of vehicle parking for public as well as private purpose is taxable.
vii) Services provided to Government, a local authority or a governmental authority for specified activities such as water supply, public health, repair or maintenance of a vessel or an aircraft had been exempted in the earlier notification.
Repairs or maintenance of aircraft has been removed from the list and now the service provided to govt. for repair or maintenance of an aircraft is taxable.
viii) Service by an entity by way of “charitable activities” has been exempted. The earlier definition of charitable activities covered public health, advancement of religion or spirituality, advancement of educational programmes or skill development relating to specified person, preservation of environment, advancement of any other object of general public utility up to a value of 25 lacs.
The definition of charitable activities has been amended and now the advancement of any other object of general public utility up to a value of 25 lacs has been excluded from the definition.
Changes in abatement
Notification no. 26/2012 provides abatement for specified activities.
Entry no. 12 of the notification relates to 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.75% abatement has been provided on this entry subject to the condition of inclusion of value of land and non-availment of cenvat credit.
Notification no.2/2013 amends the entry no. 12 of the notification and introduces a new category of construction for reduced abatement. For Residential properties having a carpet area of above 2000 sq ft and where amount charged is equal to or more than Rs. 1 crore or commercial property, abatement has been provided at the rate of 70% .All other conditions has not changed.
Amendment in negative list
Section 66D specifies negative list. Service tax is applicable on all services except those mentioned either in the Negative List or in the Mega Exemption notification.
• Sub-clause (i) of clause (d) of section 66D reads as “Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing”.The entry is being modified by deleting the word “seed”. This will allow the benefit to all other testing in relation to production of agricultural produce or agriculture.
• Education as a part of an approved vocational education course is in the negative list. Definition of “Approved vocational education course” has been amended. courses run by industrial training institute or an industrial training centre affiliated to state council for vocational training has also been covered and a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India has been excluded from the definition.
• The definition of “process amounting to manufacture or production” in section 65B(40) is being expanded to include processes under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955
Few amendments in the mega exemption list, Negative list, abatements can be justified by the Finance minister on the ground of stability in the tax regime. However it would have been a wiser step to add some explanations, clarifications, definitions to overcome the difficulty faced by the person associated with the execution of the provisions. It would have added some comfort to the assesse if apart from just increasing the penalties, some clarifications could have been added in the various definition and provisions of the act.
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