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 can only be
changed after the Budget, i.e. Finance Bill 2015, gets assent from the
President and becomes the Finance Act 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Exemptions Withdrawn w.e.f. 01.04.2015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 01.03.2015)
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withdrawn and the following activities undertaken by service providers will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:
o
a civil structure meant for use
other than for commerce, industry,
o
a structure meant predominantly for
use as an educational, clinical, or an art or cultural establishment.
o
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
o
Departmentally run public telephone;
o
Guaranteed public telephone operating
only local calls;
o
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:
·
All ambulance services. Notification
No. 6/2015-ST dated 01.03.2015
·
Life insurance service provided by
way of Varishtha Pension Bima Yojna Notification
No. 6/2015-ST dated 01.03.2015
·
Service provided by a Common
Effluent Treatment Plant operator for treatment of effluent. Notification
No. 6/2015-ST dated 01.03.2015
·
Services by way of pre-conditioning,
pre-cooling, ripening, waxing, retail packing, labeling of fruits and
vegetables. Notification
No. 6/2015-ST dated 01.03.2015
·
Service provided by way of admission
to a museum, zoo, national park, wild life sanctuary and a
tiger reserve. Notification
No. 6/2015-ST dated 01.03.2015
·
Service provided by way of
exhibition of movie by the exhibitor (theater owner) to the distributor or an
association of persons consisting of such exhibitor as one of it’s
members. Notification
No. 6/2015-ST dated 01.03.2015
·
Goods transport agency service
provided for transport of export goods by road from the place of removal to a
land customs station (LCS). Notification No. 4/2015-ST dated 01.03.2015
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.
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