1st April 2016 onwards
Through Notification no. 6/2016-ST dated 18.2.2016, Central Government appoints 1.4.2016 as the date from which the provisions of Section 107(1) of Finance Act, 2015 shall come into effect.
All the services provided by the Government or local authority to a business entity, except the services that are specifically exempted or are covered by any entry of negative list, shall be liable to service tax from 1.4.2016.
Person liable to pay service tax (100%) on the supra stated services is service recipient as per Notification No. 30/2012-ST.
Clause 105 (26A) of S. 65B of Finance Act (amended), 2015 defines “Government” as the 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.
“Services provided by Government or local authority to a business entity with a turnover up to Rs. 10 lakh in the preceeding Financial year”
On perusal of the above notification, it can be concluded that services provided to a business entity up to turnover of ten lakh in previous year will be exempt from service tax.
Prior to 1st April 2016
According to clause (a) of S. 66D of Finance Act’1994, Services by Government or a local authority are exempt from service tax excluding the following services to the extent they are not covered elsewhere-
(i) Services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;
(ii) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
(iii) Transport of goods or passengers;
(iv) Support services, other than those covered under clause (i) to (iii) above, provided to business entities.
“Support services” has been defined as infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis.
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