CA Vinay Gandhi Billapati

Union Finance Minister, Shri Arun Jaitley has tabled the Finance Bill, 2017 in Lok Sabha today. As the Government is determined to introduce Goods and Services Tax (GST), the biggest ever indirect tax reform of Independent India, the Finance Bill,2017 amendments with respect to Service Tax is kept at minimum. This article discusses on proposed changes to Finance Act, 1994 and the amendments made vide amendment to Mega Exemption Notification.

Amendment to Negative List

The Negative List entry in respect of “services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption” is proposed to be omitted. However, the same entry is being placed in exemption notification No. 25/2012-Service Tax dated 20th June, 2012. Consequently, the definition of ‘process amounting to manufacture’ is also proposed to be omitted from the Finance Act, 1994 and is being incorporated in the general exemption notification.

New exemptions

Services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government is being exempted from service tax from 02.02.2017. Bill also further proposes to extend this exemption benefit for the period 10.01.2004 to 01.02.2017.

Exemption with respect to Service tax leviable on one time upfront amount (called as premium, salami, cost, price, development charges or by whatever name) payable for grant of long-term lease of industrial plots (30 years or more) by State Government industrial development corporations/undertakings to industrial units during the period 01.06.2007 to 21.09.2016. Any tax already paid can be claimed refund within 6 months from the date on which Finance Bill 2017 receives president’s assent.

Amendment to Service Tax (Determination of Value) Rules, 2006

Rule 2A of Service Tax (Determination of Value) Rules, 2006 is being amended with effect from 01.07.2010 so as to make it clear that value of service portion in execution of works contract involving transfer of goods and land or undivided share of land, as the case may be, shall not include value of property in such land or undivided share of land.

Amendments with respect to Advance Rulings

Following Amendments were proposed with respect to Advance Rulings under Authority for Advance Rulings (Central Excise, Customs and Service Tax)

  • Authority for Advance Rulings of Income Tax, Central Excise, Customs and Service tax are being merged.
  • Application fee for seeking advance ruling increased from Rs. 2,500 to Rs. 10,000 in line with Income Tax.
  • Bill also proposed to extend the existing time limit of 90 days to 6 months by which time the Authority shall pronounce its ruling.

Repeal of Research and Development Cess Act, 1986

Research and Development Cess Act, 1986 is proposed to be repealed Consequent to the repeal of the Act, with effect from the enactment of the Finance Bill, 2017, the exemption from service tax under notification No. 14/2012-ST would be not available to a taxable service involving import of technology on which Research and Development Cess is not payable. Full service tax along with cesses (Swachh Bharat Cess and Krishi Kalyan Cess) would be applicable to such taxable service.

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