Ankit Bidasaria, CA & CS
Over the last decade the service tax collections have shown tremendous growth, thus it is becoming more important to the Government Exchequer. After the introduction of Negative List based Service Tax regime, to broaden the tax base of service tax, only option available is to snip the negative list and the exemptions. Thus, the following new services have been brought into service tax net:
- Sale of Space or time on online, mobile ads- Earlier service tax was applicable on only broadcast media. Now service tax will be levied on advertisements on Internet and mobile. However, print media shall remain excluded from service tax.
- Radio Taxi Services- Service provided by radio-taxis has been brought under the Service tax net. The abatement as give to rent-a-cab service shall be allowed to radio taxi service, to keep them at par.
Changes in exemptions
- Exemption given to air conditioned contract carriages is being withdrawn and an abatement of 60% shall be given, therefore effective ate shall be 4.944%.
- Exemption given to clinical research organizations for services by way of technical testing or analysis on human participants shall been withdrawn.
- Exemption in respect of services of water supply, public health, sanitation conservancy, solid waste management or slum improvement or upgradation provided to Government, local authority or Governmental authority shall remain. But, exemption shall not be available to services not directly connected with these services.
- Concept of “Auxiliary educational services” has been omitted and only the following specified services received by eligible educational institutes shall be exempt from service tax-
o transportation of students, faculty and staff of the eligible educational institution;
o catering service including any mid-day meals scheme sponsored by the Government;
o security or cleaning or house-keeping services in such educational institution;
o services relating to admission to such institution or conduct of examination.
- Currently, exemption is given services by way of renting of hotel, inn, guest house, club or other commercial places meant for residential or lodging purpose having declared tariff less than Rs. One thousand. The exemption to other commercial places is being removed, by the removal of the word “Other commercial places”.
- Exemption extended to life micro-insurance schemes for the poor, approved by IRDA, where sum assured does not exceed Rupees Fifty Thousand.
- Transport of organic manure by vessel, rail or road (by GTA) is being exempted. Therefore, organic manure shall be at equal footing with fertilizers which are already exempted.
- Services provided by way of loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled is being exempted.
- Exemption is being given to Services provided by common bio-medical waste treatment facility operators to clinical establishments.
- Specialized financial services received by RBI from outside India, in the course of management of foreign exchange reserves, e.g. external asset management, custodial services, securities lending services, are being exempted.
- Exemption is being given on services provided by the Indian tour operators to foreign tourists in relation to tours wholly conducted outside India.
- New section (Section 100) is being inserted to provide retrospective exemption for services provided to Employee’s State Insurance Corporation during the period prior to July 01, 2012.
Interest on late payment of Service Tax made more stringent to regularize payment of service tax
|Extent of Delay
||Simple Interest Rate per annum
|up to six month
|Six month to one year
||18% for first six months and 24% for beyond six month
|More than one year
||18% for first six months 24% for next six month and 30% for beyond one year
Changes in Reverse Charge Services
- Services provided by a Director to a body corporate to be brought under the reverse charge mechanism. Thus, service receiver, i.e., the body corporate shall be the person liable to pay service tax.
- Services provided by Recovery Agents to Banks, Financial Institutions and NBFC also been brought under the reverse charge mechanism, i.e. service receiver will be the person liable to pay service tax.
- In renting of motor vehicle, portion of service tax payable by service provider and service receiver will be 50% each.
Changes in abatement
- Abatement in respect of transport of goods by vessel to be increased from 50% to 60%.
- Service receiver in GTA service may avail abatement, without having to obtain non-availment of Cenvat Credit certificate from service provider.
- The service of tour operator is also being allowed to avail Cenvat credit on the input service of another tour operator, which are used for providing the taxable service.
Changes in place of Provision of Service
- Provision for prescribing conditions for determination of place of provision of repair service carried out on temporarily imported goods, to be omitted. However it may be noted that exclusion does not apply to goods that arrive in the taxable territory in the usual course of business and are subject to repair while such goods remain in the taxable territory.
- The definition of intermediary is being amended to include the intermediary of goods in its scope. An intermediary of goods shall be covered under Rule 9(c) of the place of provision Rules.
- Hiring of vessels or aircrafts, will be covered by the general rule, i.e., location of the service receiver.
Changes in Cenvat Credit
- Time limit for availment of credit on input and input services is being amended and credit shall be taken within six months from the date of the invoice or challans or other documents specified.
- The condition to pay invoice value to the service provider for availing credit of tax paid shall be withdrawn in case of service tax paid full under reverse charge.
- Re-credit of Cenvat credit reversed on account of non-receipt of export proceeds within the specified period, to be allowed, if such export proceeds are received within one year from the specified period. This can be done on the basis of documentary evidence of receipt of payment.
SEZ- Procedural Simplification
- The Central Excise Officer would issue Form A-2, within fifteen days from the date of receipt of Form A-1.
- Exemption would be available from the date when list of service on which SEZ is entitled to, provided Form A-1 is furnished to the jurisdictional Central Excise Officer within fifteen days of its verification. If furnished later, exemption would be available from the date on which Form A-1 is so furnished.
- In case of pending issuance of Form A-2, exemption will be available subject to condition that authorization issued by the Central Excise officer will be furnished to service provider within a period of three months from the date of provision of specified service. If the same is not provided within the said period of 3 months, the service provider shall pay Service tax on the service so provided.
- As regards services covered under full Reverse Charge, it is mentioned specifically in Form that the requirement of furnishing service tax registration number of service provider shall be dispensed with.
- A service shall be treated as exclusively used for SEZ operations, if the recipient of service is a SEZ unit or developer, invoice is in the name of such unit/developer and the service is used exclusively for furtherance of authorized operations in the SEZ.
Changes in Point of taxation Rules
- The Point of Taxation in respect of Reverse Charge under the first Proviso to Rule 7 of the POT Rules has been amended to bring certainty in determining the point of taxation. It is proposed to provide that point of taxation shall be the payment date or the first day after three months from the date of invoice, whichever is earlier.
Changes in the Service Tax (Determination of Value) Rules
- In Rule 2A of the Service Tax Valuation Rules, category ‘B’ and ‘C’ of works contracts proposed to be merged into one single category, with percentage service portion as 70% for the chargeability of Service Tax.
- Section 67A is amended enabling Government to prescribe rules for determination of rate of exchange for calculation of taxable value in respect of certain services. Rules will be prescribed in due course, after the Bill receives the assent.
- Reference to first proviso to sub-section (1) of section 78, in section 80, to be omitted, wherein power was grated to waive the 50% penalty imposable in cases where Service Tax has not been levied, not paid or short levied or short paid.
- Section 73 is amended providing time limits for completion of adjudication which are to be followed, as far as possible.
- Vide section 83; Section 35F of the Central Excise Act is already applicable to service tax. Section 35F of the Central Excise Act is being substituted with a new section which prescribes a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both, for filing appeal before the Commissioner (Appeals) or the Tribunal at the first stage. Further, 10% of the duty demanded or penalty imposed or both, for filing the second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs.10 crores. All pending appeals/stay applications would be governed by the statutory provisions prevailing at the time of filing such stay applications/appeals. When the amended section 35F in the Central Excise Act comes into force, it would, mutatis mutandis, apply to service tax.
- E-payment of Service tax will be made mandatory with effect from October 1, 2014. Relaxation from e-payment may be allowed by the Deputy Commissioner/ Asst. Commissioner on case to case basis.
(Author may be contacted at firstname.lastname@example.org)