Amendments in Service Tax Provisions as per Budget 2015

Amendments in Service Tax Provisions as per Budget 2015

** Service Tax rate shall remain to be at 12.36% as on 1^st April, 2015. The enhanced rate of 14% shall become effective from a date to be notified by Government **

Effective from 01.03.2015

·               Registration Procedure - Rule 4 of Service Tax Rules which deals with registration under service Tax law is being amended to provide that the board, by way of an order specify the conditions, safeguards and procedure for registration in service tax. It has also been prescribed that henceforth registration for single premises shall be granted within 2 days of filing of application, thus simplifying the registration procedure.

·               Electronic Invoices - New Rule 4C has been introduced making provision for issuing digitally signed invoices, bill or Challan has been added along with the option of maintaining of records in electronic form and their authentication by means of digital signatures.

·               Electronic Records - Rule 5 of the Service Tax Rules has been amended stating that the all the records may be preserved in electronic form in such manner that every page of the record so preserved shall be authenticated by means of digital signature.

·               Cenvat Credit Rules -

a.      The time limit to avail the Cenvat Credit of Service Tax paid on Input Services has been increased from 6 months to 1 year. Credit can now be availed on input services invoices within 1 year from the date of invoice.

b.      Rule 4(7) is being amended that in respect of input service where the service tax is liable to be paid under reverse charge by the recipient of service, credit of such service tax can be availed immediately after payment of value of service tax irrespective of the fact whether payment of value of service has been made to the service provider or not.

Effective from 01.04.2015

·               Supply of Manpower Services - Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism.

Exemptions being withdrawn

·               Construction Services provided to a Governmental authority - Services provided to the Government, a Local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

§   Civil Structure or any other original work meant predominantly for use other than commerce or industry or any other business or profession

§   Structure meant predominantly for use as (i) Educational; (ii) Clinical; or (iii) art or cultural establishment

§   A residential complex predominantly meant for use of employees or other specified persons (MPs, MLAs, etc.)

Exemption provided to these services shall now stand withdrawn

·               Original Construction work pertaining to Airport or port - Exemption on Services provided by way of construction, erection, commissioning, or installation of original works pertaining to an airport or port is withdrawn.

·               Specified telephone Services – Exemption on the following services is withdrawn. Services of making telephone calls from -

§   Departmentally run public telephone;

§   Guaranteed public telephone operating only local calls; and

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

·               Services in relation to mutual fund and lottery -  services provided by

§   A mutual fund agent to a mutual fund or assets management company,

§   Distributor to a mutual fund or Asset Management Company,

§   Selling or marketing agent of lottery ticket to a distributor

Services in relation to mutual fund and lottery as mentioned above are being brought under full reverse charge.

Exemptions newly introduced

The following mentioned services are now exempted -

·               Services in respect of fruits & Vegetables - Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables.

·               Common effluent treatment plant operator - Service provided by a Common Effluent Treatment Plant operator for treatment of effluent.

·               Movie Exhibition Service - Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or association of persons consisting of such exhibitor as one of its members.

·               Admission to Museum, zoo, etc - Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve.

·               Admission to entertainment events - Service by way of right to admission to,-

§    Exhibition of cinematographic film, circus, dance, or theatrical performances including drama or ballet.

§    Recognized sporting events.

§    Concerts, pageants, award functions, musical or sporting event not covered by the above exemption, where the consideration for such admission is upto Rs. 500 per person.

Exemptions curtailed

·               Services of performing Artists - Exemption to Services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theatre, has been restricted only to such cases where amount charged is not exceeding Rs. 1,00,000/- for a performance (except brand ambassador).

·               Transportation of Goods by Rail/Vessel - Exemption on transportation of food stuff by rail or vessels from one place in India to another will be limited to milk, salt and food grains including flours, pulses and rice. Transportation of agricultural produce is separately exempt and this exemption would continue.

Exemptions Expanded

·               Health Care Services - All ambulance services including transportation of patients in an ambulance by any person are exempted.

·               Specified Life Insurance Services – Alongwith currently specified schemes of life insurance Life insurance; service provided by way of “Varishtha Pension Bima Yojna” is being exempted.

·               Goods transport agency - Goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is exempt from service tax. Scope of this exemption is being widened to exempt such services when provided for transport of export goods by road from the place of removal to a land customs station (LCS).

Changes in Abatement

·               Services of transport by Rail, Road and vessel - A uniform abatement of 70% has been prescribed for transport by rail, road and vessel to bring parity in these sectors. Service tax shall be payable on 30% of the value of such service subject to a uniform condition of non-availment of Cenvat credit on Inputs, Capital goods and Input services.

·               Chit fund - Abatement for the services provided in relation to Chit fund stands withdrawn. Consequently, Service tax shall be paid on full consideration received by the Chit fund foremen.

Effective from the date to be notified by Government after enactment of Act

·               Change in Service tax Rate

a.            The Service tax Rate is being increased from 12% plus Education cess to 14%. Effective increase in Service Tax rate will be from existing rate of 12.36% (inclusive of cesses) to 14%.

b.            Till the time the revised rate comes into effect, the levy of ‘Education cess’ and ‘Secondary and Higher Education cess’ shall continued to be levied in Service Tax.

c.             New Cess ‘Swachh Bharat Cess’ introduced - An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% of the value of such taxable services with the objective of financing and promoting Swachh Bharat initiatives.

·               Production or manufacture of alcoholic liquor  - Section 66D(f) has been proposed to  be substituted to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption under the Service tax net. In other words, service tax shall be levied on contract manufacturing/Job work for production of Alcoholic Liquor.

·               Amusement Parks - Earlier the service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places was covered in the Negative list. Budget 2015-16 has proposed to omit the clause (j) of Section 66D. Hence, the same will be taxable from the date to be notified by the Central Government.

·               In respect of certain services like money changing service, service provided by air travel agent, insurance service and service provided by lottery distributor and selling agent the service provider has been allowed to pay service tax at an alternative rate subject to the conditions as prescribed under rule 6 (7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994. Consequent to the upward revision in Service Tax rate, the said alternative rates shall also be revised proportionately. Amendments to this effect have been proposed in the Service Tax Rules. This amendment will come into effect as and when the new service tax rate comes into effect.