1) Rate of Service Tax

Finance Bill, 2015 has proposed increase in rate of Service Tax from 12.36% to 14%. News reports are being broadcasted and published stating that the rate has been increased from 01st April 2015, are incorrect. These reports have caused wide spread confusion amongst all.

In order to clear the confusion, we would like to apprise all that the rate of service tax  will be effective from the date to be notified after enactment of Finance Bill, 2015.  The change in rate of tax has been proposed by way of an amendment to section 66B of the Finance Act 1994 and an amendment to the Finance Act can only be made by the Parliament after receiving assent from the President.

Historically the assent is obtained from the President in the first half of May, as the assent has to be obtained with 75 days from the presentation of the Budget in Parliament. Hence, the notification regarding increase in rate of service tax will be issued somewhere around 15th May, 2015.

Thus it is to be noted that there is no change in rate of Service Tax w.e.f. 1st April, 2015.

Also given hereunder is the tabular analysis of the applicable rate of service tax considering all the three events which occasions the liability upon a service provider/recipient to charge/pay service tax

Tabular analysis about applicable Rate of Tax on change in Rate of Tax

Case Date of Provision of Service Date of Issue of Invoice Date of Receipt of Payment Applicable Rate
I Old Rate New Rate New Rate New Rate
II Old Rate Old Rate New Rate Old Rate
III Old Rate After Old Rate Old Rate
IV New Rate Old Rate New Rate New Rate
V New Rate Old Rate Old Rate Old Rate
VI New Rate New Rate Old Rate New Rate

Based on the above table prepared in accordance with Rule 4 of Point of Taxation Rules, a service tax assessee may discharge their service tax liability in case of the change in rate of service tax.

Further, we would also refresh the changes which were announced with the Budget but are effective from 01st April 2015

2)      Exemptions Withdrawn w.e.f.01.04.2015 (Vide Notification No. 6/2015-ST dated 1.3.2015)

following exemption have been withdrawn and the following activities undertaken by service providers will attract service tax with effect from 1st April 2015:

  • Services provided to government, local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of:
    • a civil structure meant for use other than for commerce, industry,
    • a structure meant predominantly for use as an educational, clinical, or an art or cultural establishment.
    • a residential complex predominantly meant for self-use or the use of their employees.
  • Services provided by way of construction, erection, commissioning or installation of original works pertaining to an airport or port
  • Services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theater, where amount charged is more than Rs. 1,00,000 for a performance;
  • Transportation of food stuff by rail, or vessels or road will be limited to food grains including rice and pulses, flour, milk and salt.
  • Services provided by a mutual fund agent or distributor to a mutual fund or assets management company.
  • Services of selling or marketing agent of lottery ticket to a distributor.
  • Telecommunication services by

i. Departmentally run public telephone;

ii. Guaranteed public telephone operating only local calls;

iii.   Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued.

3)    Certain New Exemptions have also been made effective from 01st April 2015. They are as under:

4)      Abatements

a. A tabular presentation of changes in abatement is as under:

Entry No. Description of Taxable Services Taxable Percentage Effective Rate Taxable Percentage Effective rate
Upto 31.03.2015 Upto 31.03.2015 w.e.f.01.04.2015 W.e.f.01.04.2015
5 Transport of passengers by air, with or without accompanied belongings in(i)economy class(ii) other than economy class  

40%

 

 

40%

 

4.944%

 

 

4.944%

 

40%

 

 

60%

 

4.944%

 

 

7.416%

 

7 Services of goods transport agency in relation to transport of goods 25% 3.09% 30% 3.708%
8 Services provided in relation to chit 70% 8.625% 100% 12.36%
10 Service in relation to Transport of Goods in a Vessel. 40% 4.944% 30% 3.708%

b. Restriction on the availment of CENVAT Credit in respect of services of “Transport of goods by rail” and “Transport of passengers, with or without accompanied belongings by rail”

5)      Reverse Charge Mechanism

a. Manpower supply and security services when provided by non corporate to a body corporate are being brought to full reverse charge as a simplification measure. Presently, these are taxed under partial reverse charge mechanism.- Notification No. 7/2015-ST Dated: March 01, 2015

b. Services provided by mutual fund agents, mutual fund distributors and lottery agents- Notification No. 7/2015-ST Dated: March 01, 2015

6)      Cenvat Credit Rules, 2004

Credit of service tax paid under partial reverse charge by the service receiver without linking it to the payments of value of service to service provider.

(Abhijeet Shrivastava (Advocate), O/o H.S. Shrivastava (Sr. Advocate), Opp. Super Market Ganjipura, Jabalpur, Mobile- 9893276878)

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26 responses to “Service Tax Rates and Changes effective from 1st April 2015”

  1. Shailesh Jain says:

    Dear Sir,
    I have pvt ltd company in which last year first time we have received service of goods transportation by road of Rs 6500/-, In which transporter has issued invoice stated that Service tax @4.2% and SBT@0.15 have to pay by consignee, So what to do in this case, we have no service tax no. so should we pay service tax and in which account it should pay

  2. ashif says:

    Dear sir,
    please provide information related to service tax on freight and including its abatement etc.

  3. g s reddy says:

    we are manpower supply agency. For the month of March in every year, service will be completed in the month of March 31st. But we raised invoice on or after 01-04-2015, when we pay service tax on or before March 31st or April Month. please clarify.

  4. Priya says:

    Dear sir
    When does service tax liablity of the receiver arise on Transporter’s invoice dated 31.3.15 and its payment made on April 2015?
    anticipating ur valuable reply

  5. DHANABALAN says:

    New service tax cess of 0.5% whether applicable for GTA by roads.

    Regards,
    Dhanabalan

  6. BACHAN SINGH BISHT says:

    as regards security agencies service tax 100% liable to service receiver

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