LIST OF CHANGES MADE BY SERVICE TAX NOTIFICATIONS AT THE TIME OF BUGDET 2016
First of all we would like to thank the Tax Guru readers for showing overwhelming response to our post dated 26th May’ 2016. https://taxguru.in/service-tax/simplified-approach-service-tax-complete-analysis.html.
In this article, we have herein below summarized the amendments made by notifications in service tax law.
Notification No 08/2016 Dt. 1st March, 2016 (Applicable w.e.f. 01st April’ 2016)
ABATEMENT NOTIFICATION 26/2012 AMENDED
1. Cenvat credit on Input Services allowed for Transportation of Goods by Rail
Cenvat credit on Input Services has now been allowed for the services of transportation of goods by Rail (Other than transport of goods in containers by rail by any person other than Indian Railways). (There is an abatement of 70% for transportation of goods and passengers by rail, still the government allowed the cenvat credit on Input Services.) – S. No 2 of Notification.
2. Taxable Portion increased from 30% to 40% for Transport of goods in containers by Rail by any person other than Indian Railways
In case of transport of goods in containers by Rail by any person other than Indian Railways the taxable portion has been increased to 40% from the earlier 30%. Further, cenvat credit on Input Services shall still be allowed. It is to be noted that cenvat credit on Inputs and Capital Goods shall not be taken. – S. No 2A of Notification.
3. Cenvat credit on Input Services allowed for Transportation of Passengers by Rail
Cenvat credit on Input Services has now been allowed for the services of transportation of Passengers by Rail. (There is an abatement of 70% for transportation of goods and passengers by rail, still the government allowed the cenvat credit on Input Services.) – S. No 3 of Notification.
4. Taxable Portion increased from 30% to 40% for services of Goods Transport Agency in relation to transportation of used household goods.
Pre amendment, the abatement for services of Goods Transport Agency in relation to transportation of all goods was 70 % without the facility of cenvat credit.
Post amendment, the abatement for services of Goods Transport Agency in relation to transportation of used household goods reduced from 70% to 60 %. There is no change in cenvat credit scheme. – S. No 7A of Notification.
5. Abatement for “Service provided by a foreman of Chit in relation to Chits” has been restored.
Pre Amendment, the abatement of 30% was withdrawn by Notification 08/2015 w.e.f. 1st April’ 2015. Thus, the services in relation to Chits were made taxable at 100% with full cenvat credit.
Post amendment, the abatement of 30% is restored and the taxable portion would be 70%. Further, no cenvat credit shall be allowed. Thus, service provided by a foreman of Chit in relation to Chits shall now be made taxable @ 70% with no cenvat credit.
6. Abatement of 60% in case of Transport of Passengers has been extended to “A Stage Carriage”. (This change is to be effective from 1st June’ 2016).
The Negative List entry that covers “service of transportation of passengers, with or without accompanied belongings, by a stage carriage” is proposed to be omitted [section 66D (o)(i)] with effect from 1.06.2016. As a consequence, the above services become taxable with effect from 1.06.2016. However, such services by a non-air-conditioned contract carriage will continue to be exempted by way of exemption notification [Notification No. 25/2012-ST, as amended by notification No. 09/2016-ST, dated 1st March, 2016]. The service of transportation of passengers by air-conditioned stage carriage is being taxed at the same level of abatement (60%) as applicable to the transportation of passengers by a contract carriage, with same conditions of non-availment of Cenvat credit. – S. No 9A of Notification.
Further, at present, there is abatement of 60% on the gross value of renting of motor-cab services, provided no cenvat credit has been taken. It is being made clear by way of inserting an explanation in the notification No. 26/2012-ST that cost of fuel should be included in the consideration charged for providing renting of motor-cab services for availing the abatement. – S. No 9 of Notification. (Insertion of Explanation ‘BA’ in notification No. 26/2012-ST)
7. Cenvat credit on Input Services allowed for Transportation of Goods in a Vessel.
Cenvat credit on Input Services has now been allowed for the services of transportation of Goods in a Vessel. (There is an abatement of 70%, still the government allowed the cenvat credit on Input Services.) – S. No 10 of Notification.
8. Major changes in “Services by a Tour Operator”.
- In cases where the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour, abatement of 90% is available with specified conditions. However, this abatement of 90% cannot be claimed in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation. There is no change in the rate of abatement or the conditions required to be fulfilled for claiming the said abatement. – S. No 11 of Notification.
- Abatement rates in respect of services by a tour operator in relation to a tour other than above (i.e. other than providing services solely of arranging or booking accommodation) , is being rationalised from 75% and 60% to 70%. Consequently, the definition of “package tour” as provided in the relevant notification is being omitted. – S. No 11 of Notification.
Thus, post amendment; there are only 2 types of abatement viz, 90% and 70%.
9. Uniform abatement @ 70% for Services of Construction of Complex, etc
At present, two rates of abatement have been prescribed for services of construction of complex, building, civil structure, or a part thereof,- (a) 75% of the amount charged in case of a residential unit having carpet area of less than 2000 square feet and costing less than Rs 1 crore, and (b) 70% of the amount charged in case of other than (a) above, both subject to fulfillment of certain conditions prescribed therein. A uniform abatement at the rate of 70% is now being prescribed for services of construction of complex, building, civil structure, or a part thereof, subject to fulfillment of the existing conditions. – S. No 12 of Notification.
Notification No 09/2016 Dt. 1st March, 2016 (Applicable w.e.f. 1st April, 2016)
MEGA EXEMPTION NOTIFICATION AMENDED
SOME EXEMPTIONS CHANGED
1. Entry No 6 relating to Legal Services provided by Advocates substituted
Following services are now made taxable:-
- Services provided by a Senior Advocate to an Advocate or Partnership Firm of advocates, and
- A person represented on an arbitral tribunal to an arbitral tribunal;
Further, these are now made taxable under direct charge and existing exemption regarding legal services provided by a firm of advocates or an advocate other than senior advocate is being continued.
2. Entry No 16 modified
The threshold exemption limit of consideration charged for services provided by a performing artist in folk or classical art forms of music, dance or theatre, is being increased from Rs 1 lakh to Rs 1.5 lakh per performance.
SOME EXEMPTIONS WITHDRAWN
1. Entry No 14 relating to Exemption for construction, erection, commissioning or installation of original works pertaining to monorail or metro is being withdrawn.
Construction, erection, commissioning or installation of original works pertaining to monorail or metro is now made taxable. However, contracts entered into before 1st March 2016 shall continue to be exempted. The other exemptions under S. No. 14 of notification No. 25/12-ST shall continue unchanged.
2. Entry No 23 relating to transportation passengers by Ropeway, cable car or aerial tramway is now being made taxable.
This change shall be effective from 1st March’ 2016.
Further, services of transportation of passengers by a stage carriage is made taxable pursuant to amendment in Negative List w.e.f. 01st June’ 2016. However, the services of transportation by non air-conditioned stage carriage continued to be exempted under the present exemption entry. Thus, only air-conditioned stage carriage is taxable and that too after the abatement of 60%.
RESTORATION OF CERTAIN EXEMPTIONS WITHDRAWN LAST YEAR
1. Entry at S. No. 12A
Notification 06/2015 dated 1st March’ 2015 had withdrawn the exemption given to certain construction related services to Government, Local Authority or a governmental authority w.e.f. 01st April’ 2015. Now, as a matter of relief, the present entry 12A has reintroduced the same exemption for the contracts entered into prior to the 1st March’ 2015 upto 1st April’ 2020.
2. New entry at S. No. 14A
Notification 06/2015 dated 1st March’ 2015 had withdrawn the exemption given to certain construction related services for Airport or Port. Now, as a matter of relief, the present entry 14A has reintroduced the same exemption for the contracts entered into prior to the 1st March’ 2015 upto 1st April’ 2020.
NEW EXEMPTIONS GIVEN
3. New entry at S. No. 26C
The services of life insurance business provided by way of annuity under the National Pension System (NPS) regulated by Pension Fund Regulatory and Development Authority (PFRDA) of India is being exempted from service tax.
4. New entry at S. No. 51
Services provided by Securities and Exchange Board of India (SEBI) set up under SEBI Act, 1992, by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market are being exempted from service tax.
5. New entry at S. No. 49
Services provided by Employees‟ Provident Fund Organisation (EPFO) to employees are being exempted from service tax.
6. New entry at S. No. 52
Services provided by National Centre for Cold Chain Development under Department of Agriculture, Cooperation and Farmer‟s Welfare, Government of India, by way of knowledge dissemination are being exempted from service tax.
7. New entry at S. No. 50
Services provided by Insurance Regulatory and Development Authority (IRDA) of India are being exempted from service tax.
8. New entry at S. No. 26(q)
Services of general insurance business provided under “Niramaya‟ Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability in collaboration with private/public insurance companies are being exempted from service tax.
9. New entry at S. No. 9D
Services provided by way of skill/vocational training by Deen Dayal Upadhyay Grameen Kaushalya Yojana training partners are being exempted from service tax.
10. New entry at S. No. 9C
Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development & Entrepreneurship are being exempted from service tax.
11. New entry at S. No. 13 (ba)
Services by way of construction, erection etc. of a civil structure or any other original works pertaining to the “In-situ Rehabilitation of existing slum dwellers using land as a resource through private participation” component of Housing for All (HFA) (Urban) Mission / Pradhan Mantri Awas Yojana (PMAY), except in respect of such dwelling units of the projects which are not constructed for existing slum dwellers, is being exempted from service tax.
12. New entry at S. No. 13 (bb)
Services by way of construction, erection etc., of a civil structure or any other original works pertaining to the “Beneficiary-led individual house construction/enhancement” component of Housing for All (HFA) (Urban) Mission/ Pradhan Mantri Awas Yojana (PMAY) is being exempted from service tax.
13. New entry at S. No. 14 (ca)
Services by way of construction, erection, etc., of original works pertaining to low cost houses up to a carpet area of 60 sq.m per house in a housing project approved by the competent authority under the “Affordable housing in partnership” component of PMAY or any housing scheme of a State Government are being exempted from service tax.
14. New entry at S. No. 9B
Services provided by the Indian Institutes of Management (IIM) by way of 2 year full time Post Graduate Programme in Management(PGPM) (other than executive development programme), admissions to which are made through Common Admission Test conducted by IIMs, 5 year Integrated Programme in Management and Fellowship Programme in Management are being exempted from service tax. These exemptions are clarificatory in nature.
The above changes in notification No. 25/12-ST, except the change mentioned in S.No 10, 11, 12 & 13 (which will come into effect from 1st March, 2016), shall come into effect from the 1st day of April 2016.
NEW EXEMPTIONS GIVEN PERSUANT TO AMENDMENT IN NEGATIVE LIST
1. New entry at S. No. 23(bb)
Services by a stage carriage were in the negative list of services [clause (o) (i) of section 66D]. As this entry is proposed to be omitted through the Finance Bill 2016, a new entry is being inserted in notification No.25/2012-ST so as to exempt services by a stage carriage other than air conditioned stage carriage.
2. New entry at S. No. 53
Services by way of transportation of goods by an Aircraft from a place outside India up to the customs station of clearance in India were in negative list of services [clause (p)(ii) of section 66D]. As this entry is proposed to be omitted through the Finance Bill 2016[para 4.1(C) above refers], the said service is being exempted by amending notification No.25/2012-ST.
SOME DEFINITIONS INSERTED
(ba) “Approved Vocational Education Course” means, –
(i) A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961); or
(ii) A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship;‟;
(oa) “Educational Institution” means an institution providing services by way of:
(i) Pre-school education and education up to higher secondary school or equivalent;
(ii) Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
(iii) Education as a part of an approved vocational education course;”;
(zdd) “Senior Advocate‟ has the meaning assigned to it in section 16 of the Advocates Act, 1961 (25 of 1961);‟
Notification No 10/2016 Dt. 1st March, 2016 (Applicable w.e.f. 1st March, 2016)
POINT OF TAXATION RULES AMENDED
The Point of Taxation Rules, 2011 have been framed under provisions of clause (a) and (hhh) of section 94(1). Now specific powers is also being obtained under section 67A to make rules regarding point in time of rate of service tax. Thus, any doubt about the applicability of service tax rate or apparent contradiction between section 67A and POTR would be taken care of.
Therefore, consequent modifications have been done in POTR.
(a) Rule 5 of POTR applies when a new service comes into the service tax net. Although in the case of new levy, provisions of Chapter V of the Finance Act, 1994, and rules made thereunder, are invariably made applicable in relation to the levy and collection of the new levy. However, doubts have been raised regarding its applicability in case of new levy. Therefore, an Explanation is being inserted in Rule 5 stating that the same is applicable in case of new levy on services.
(b) Further, in Rule 5 of POTR, it is provided that in two specified situations the new levy would not apply. Another Explanation is being inserted therein stating that in all other situations, the new levy or tax shall be payable.
Notification No 11/2016 Dt. 1st March, 2016 (Applicable w.e.f. 1st March, 2016)
NEW EXEMPTION GIVEN TO INFORMATION TECHNOLOGY SOFTWARE
With effect from 21.12.2010, media falling under Chapter 85 with recorded Information Technology Software has been notified under section 4A of the Central Excise Act. Accordingly, Central Excise duty/CVD is to be paid on the value of such media with recorded Information Technology Software and the assessable value of such media is required to be determined on the basis of the retail sale price (RSP) affixed on the package of such media under the Legal Metrology Act, 2009 or the rules made thereunder. In respect of transactions involving supply of such media bearing RSP, not amounting to sale/deemed sale, service tax is being exempted. Thus, only Central Excise duty is levied on such transactions.
In certain situations like delivering customised software on media, such media with recorded Information Technology Software, is not required to bear the RSP when supplied domestically or imported. Difficulties are being experienced in the assessment of such media to Central Excise duty/CVD besides giving rise to the issue of double taxation – levy of Central Excise duty/CVD as well as service tax. In order to resolve the issue, media with recorded Information Technology Software which is not required to bear RSP, is being exempted from so much of the Central Excise duty/CVD as is equivalent to the duty payable on the portion of the value of such Information Technology Software recorded on the said media, which is leviable to service tax. In such cases, manufacturer/importer would therefore be required to pay Central Excise duty/CVD only on that portion of value representing the value of the medium on which it is recorded along with freight and insurance. The exemption is subject to the fulfillment of certain conditions. Thus, the levy of Central Excise duty/CVD and service tax will be mutually exclusive.
Notification No 12/2016 Dt. 1st March, 2016 (Applicable w.e.f. 1st April, 2016)
NEW EXEMPTION GIVEN
The exemption given to services provided by a Technology Business Incubator (TBI) or a Science and Technology Entrepreneurship Park (STEP) recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology has been extended to services provided by bio-incubators recognized by the Biotechnology Industry Research Assistance Council, under Department of Biotechnology.
Notification No 13/2016 and 14/2016 both Dt. 1st March, 2016 (Applicable on the enactment of Finance Bill ’2016)
INTEREST RATES REVISED
Vide the present Notifications, the provisions of interest across all Indirect Taxes has been rationalised.
Interest rates on delayed payment of duty/tax across all indirect taxes is proposed to be made uniform as follows:-
| Case | Rate of Interest |
| Service Tax collected but not deposited with the Central Government | 24% |
| In other Cases | 15% |
The present rates of Interest shall be applicable both under section 73B and section 75 of the Finance Act, 1994.
It is pertinent to note that, in case of assessees, whose value of taxable services in the preceding year/years covered by the notice is less than Rs. 60 Lakh, the rate of interest on delayed payment of service tax will be 12%.
Notification No 15/2016, 16/2016 and 17/2016 all Dt. 1st March, 2016 (Applicable w.e.f. 1st April, 2016)
SERVICES PROVIDED BY GOVERNMENT OR LOCAL AUTHORITY
Finance Act, 1994 was amended vide Finance Act, 2015 so as to make any service (and not only support services) provided by Government or local authorities to business entities taxable from a date to be notified later. 1st April, 2016 has already been notified as the date from which any service provided by Government or local authorities to business entities shall be taxable.
Consequently, 1st April, 2016 is also being notified
- As the date from which the definition of “Support Services” shall stand deleted from the Finance Act, 1994 and
- As the date of related modifications in Reverse Charge Notification
Notification No 18/2016 Dt. 1st March, 2016 (Applicable w.e.f. 1st April, 2016)
REVERSE CHARGE NOTIFICATION 30/2012 AMENDED
1. Services provided by a Mutual Fund Agent Excluded from Reverse Charge
In Union Budget, 2015, services provided by a Mutual Fund Agent or Distributor, to a mutual fund or asset management company was made taxable. These services were put under Reverse Charge Mechanism, i.e., the Asset Management Company was made liable to pay service tax for the services received from such agents/distributors.
With the present amendment vide the above referred notification; services provided by mutual fund agents/distributor to a mutual fund or asset management company are being put under Direct Charge Mechanism. i.e. the service provider is being made liable to pay service tax. The small sub-agents down the distribution chain will still be eligible for small service provider exemption [threshold turnover of Rs 10 lakh/year] and a very small number will be liable to pay service tax.
2. Services provided by Senior Advocates Excluded from Reverse Charge
As the amendment to Mega Exemption notification during Budget’ 2016, the services provided by a Senior Advocate to an Advocate or Partnership Firm of advocates has been made taxable. As per the present amendment vide the above referred notification; these services are now made taxable under direct charge mechanism. Thus, Reverse Charge Mechanism shall not be made applicable on the legal services provided by Senior Advocates. The term “Senior Advocates” has been defined in Notification 09/2016 as follows:-
“Senior Advocate has the meaning assigned to it in section 16 of the Advocates Act, 1961”.
Notification No 19/2016 Dt. 1st March, 2016 (Applicable w.e.f. 01st April’ 2016)
SERVICE TAX RULES’ 1994 AMENDED
1. First Proviso to Rule 6(1) – Quarterly Payment Facility Extended
- Pre amendment, the quarterly payment facility for service tax was applicable for Individual or Proprietary Firm or Partnership Firm
- Post Amendment, the quarterly payment facility has also been extended to One Person Company whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year and Hindu Undivided Family.
(The concept of One Person Company (OPC) in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity with limited liability. One person Company has been defined in Section 2(62) of the Companies Act, 2013.)
2. Third Proviso to Rule 6(1) – Facility of Payment on Cash / Receipt Basis Extended
- Pre amendment, the payment of service tax on Cash / Receipt basis was allowed for Individual or Partnership Firm
- Post Amendment, the payment of service tax on Cash / Receipt basis has also been extended to One Person Company.
3. Rule 6(1) – Provisional Assessment
After the amendment, the procedure as prescribed in Central Excise Rules’ 2002 shall be followed instead of the procedure prescribed in Central Excise Rules’ 2001.
4. Rule 6(7A) – Special Manner of Payment in case of Insurer carrying on Life Insurance Business
The service tax liability on single premium annuity (insurance) policies is being rationalized and the effective alternate service tax rate (composition rate) is being prescribed at 1.4% of the total premium charged, in cases where the amount allocated for investment or savings on behalf of policy holder is not intimated to the policy holder at the time of providing of service.
5. Rule 7(3A) – New Annual Service Tax Return Introduced in Service Tax
As per the present amendment, the assessee, in addition to filing of half yearly service tax returns, shall also submit an annual return for the financial year to which the return relates, in such form and manner as may be specified in the notification in the Official Gazette by the CBEC, by the 30th day of November of the succeeding financial year;
Further as per Sub Rule (3B), the Central Government may, subject to such conditions or limitations, specify an assessee or class of assesses who may not be required to submit the annual return referred above.
6. Rule 7B(2) – Revision on Annual Service Tax Return
As per the present provisions, an assessee who has filed the annual return by the due date may submit a revised return within a period of one month from the date of its submission.
7. Rule 7C(2) – Late Fees for delay in filing Annual Service Tax Return
As per the present provisions, where the annual return is filed after the due date, the assessee shall pay an amount calculated at the rate of Rs. 100/- per day for the period of delay in filing of such return, subject to a maximum of Rs. 20,000/-.
(CA Raman Singla, Partner – Indirect Tax , Devalya Advisory LLP, Mob: +91 9899834353, Mail: caramansingla@gmail.com)
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