Finance Bill 2015 got President’s assent : Service Tax Changes applicable from 14th May, 2015

 CA Saravanan Paramasivam

The Finance Bill 2015 presented by the Hon’ble Finance Minister in the Lok Sabha on 28th February, 2015 had proposed for various amendments in the provisions dealing with Service Tax under Finance Act, 1994 and Service Tax Rules, 1994. Also, the same had undergone various amendments post discussions in Lok Sabha vide Notice of Amendments dt 29th April, 2015.

Finally, the Bill has got assented by the Hon’ble President on 14th May, 2015. The changes that become effective in this regard are detailed as below:

 ♠ Definition of the term ‘Government’ has been inserted [Section 65B (26A)] to mean Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder.

 ♠  Explanation 2 to clause (44) of Section 65B dealing with definition of ‘Service’ has been substituted to provide that transaction in money or actionable claim shall not include-

1) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

2) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out-

a) by a lottery distributor or selling agent in relation to promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any other manner;

b) by a foreman of chit fund for conducting or organizing a chit in any manner.

 ♠  An illustration has been added in the Principles of interpretation of specified descriptions of services or bundled services [Section 66F (1) of Finance Act, 1994]. The illustration reads as follows:

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.’.

 ♠  The definition of consideration as per Explanation for clause (a) to Section 67 has been substituted to provide that:

‘Consideration’ includes-

(i) any amount that is payable for the taxable services provided or to be provided;

(ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed;

(iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.

 ♠ New subsection (1A) has been added in Section 73 to provide that in a case where the amount of service tax payable has been self-assessed in the return furnished under section 70(1), but not paid either in full or in part, the same shall be recovered along with interest thereon in any of the modes specified in Section 87 (Recovery of any amount due to Central Government), without service of notice under Section 73(1).

 ♠  Section 76 has been amended to provide a mandatory penalty for failure to pay service tax @ 10% of service tax. However, where such service tax and interest is paid within 30 days of the date of service of notice, no penalty shall be payable. Further where the service tax and interest is paid within 30 days of the date of receipt of order from the Central Excise officer, the penalty shall be 25% of the penalty imposed only if the reduced penalty is also paid within such period. Also further, where the Commissioner (Appeals) or the Tribunal modifies the service tax determined under Section 73(2), then the amount of penalty payable thereon shall also stand modified accordingly.

 ♠  Section 78 has been amended to increase the quantum of penalty from 50% to 100% in the cases involving suppressing etc, of value of taxable services. Provided that where the service tax is paid within 30 days of the date of service of notice, the rate of penalty would be 15% of service tax. Further, where the service tax and interest is paid within 30 days of receipt of date of receipt of the order of Central Excise Officer, the penalty shall be 25%. Further, where the Commissioner (Appeals) or the Tribunal modifies the service tax determined under Section 73(2), then the amount of penalty payable thereon shall also stand modified accordingly

 ♠  Section 78B has been inserted to provide that where service tax has not been levied or paid or has been short-levied or erroneously refunded and no notice has been served under Section 73(1) or under the proviso thereto, before the date on which the finance bill 2015 receives the assent of the President (i.e. 14.05.15), where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded and a notice has been served under Section 73(1) or under the proviso thereto, but no order has been passed under Section 73(2), before the date on which the finance bill 2015 receives the assent of the President (i.e. 14.05.15), the provisions of Section 76 and 78 as the case may be as amended by the Finance Act, 2015 shall be applicable. Further, in respect of cases falling under Section 73(4A) (i.e. cases covered under audit, investigation or erroneous refunds), where no notice has been served under Section 73(1) or when so served no order has been passed under Section 73(2), before such date, the penalty shall not exceed 50% of the Service Tax.

 ♠  Section 80 dealing with Penalty not to be imposed on certain cases stands omitted.

 ♠  Proviso has been inserted in Section 86 (Appeals to Appellate Tribunal) to provide that where an order, relating to a service which is exported, has been passed under section 85 and the matter relates to grant of rebate of service tax on input services, or rebate of duty paid on inputs, used in providing such service, such order shall be dealt with in accordance with the provisions of section 35EE of the Central Excise Act, 1944:

Provided further that all appeals filed before the Appellate Tribunal in respect of matters covered under the first proviso, after the coming into force of the Finance Act, 2012, and pending before it up to the date on which the Finance Bill, 2015 receives the assent of the President, shall be transferred and dealt with in accordance with the provisions of section 35EE of the Central Excise Act, 1944.”.

 ♠  Certain amendments have been made in the provisions in relation to Settlement Commission as applicable to Central Excise law.

 ♠  In Service Tax Rules, 1994 Rule 6(6A) which provided for recovery of service tax self-assessed and declared in the return under Section 87 is being omitted consequent to the amendment in section 73 for enabling such recovery.

(Author may be reached at sarav@live.in)