changes in service tax law
TRANSCRIPT
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8/10/2019 Changes in Service tax law
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Union Budget
2014-15 :Changes inService Tax Law
L B Jha & Co,
Chartered Accountants,New Delhi
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Negative list of services : Section 66 D
Before Budget After Budget Implication
Entry no (g) read as Service
related to selling of space or
time slots for advertisements
except advertisement broad
cast by radio or television is a
negative list service.
The levy of service tax would further
extended to advertisements in internet
websites, out of home media, on film
screens in theatres, bill boards,
conveyances, buildings, cell phones,
Automated teller
machines,tickets,commercial publications,
aerial advertising etc.
Thus, it can be said that
selling of space for
advertisement in print
media would only fall
within the purview of
Negative list and sale of
space or time slots for
advertisement in any
other
way shall be subject to
Service Tax.
Services provided by radio
taxis or radio cabs were non-
taxable.
Services provided by radio taxis, cabs
whether or not air-conditioned are taxable
services. However the abatement currently
available to rent a cab service is also
available to radio taxi or cab service. Hence
definition of radio taxi is being included in
exemption notification no 25/2012.
Service tax base has
been extended to bring
these services under the
levy of S.T law and it is
immaterial whether
radio taxi or cab is AC or
NON AC , service tax will
be levied on it.
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Amendments in general exemptionsBefore Budget After Budget Implication
Service of passenger
transportation by a contract
carriage other than for the
purposes of tourism, conducted
tour ,charter or hire is exempt
from service tax.
Service provided by
transport of passenger by
air-conditioned contract
carriage including which are
used for point to point travel
will attract service tax on
abated value of 40% i.e..rate of S.T will be 4.944%.
Scope of exemption is being
reduced by withdrawing
exemption on AC contract
carriages. However service
provided by Non-AC contract
carriages are continue to be
exempted from S.T
Services by way of technical
testing or analysis of newly
developed drugs, including
vaccines and herbal remedies on
human participants by a clinicalresearch organization approved
to conduct clinical trials by the
Drug Controller is exempted
service.
Now become taxable Exemption withdrawn.
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Simplification of exemptionsBefore Budget After Budget Implication
All the services provided by
educational institutions
( services specified innegative list) to their
students, faculty and staff
are exempted services.
In respect of services
received by educational
institutions exemption is
allowed through the conceptof auxiliary educational
services
Service provided by way of
renting of immovable
property to an educational
institution is an exemptedservice.
Continue as it is.
Concept of auxiliary
education services has beenomitted and now only the
following services received by
eligible educational institution
are exempted from S.T :
(a) transportation of students,
faculty and staff ;
(b) catering service includingmid-day meals scheme.
(c) security, cleaning or
housekeeping
(d) services related to
admission and conduct of
examination. Exemption withdrawn.
Note : Education institution is
defined as institution providing
educational services specified in
negative list.
No change
Earlier there were many doubts
regarding the scope of auxiliaryeducation services now to bring
clarity the concept stands
withdrawn and only specified
services received by institute are
exempted.
Services in relation of renting of
immovable property to aneducational institution stands
withdrawn.
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Before budget After Budget Implication
Services provided to govt, a local
authority or a govt authority by
way of carrying out any activity in
relation to water supply, public
health, sanitation conservancy,solid waste management or slum
improvement and up gradation
are exempt from service tax.
Exemption is same as earlier.
However the said exemption
would not be extendable to
other services such as
consultancy, designing etc.
For greater clarity this exemption has
been made more specific.
Government has clarified that
services which are not directly
connected to specified services arenot covered under exemption. For
instance ,consultancy, designing
services related to water supply,
slum improvement etc. are not
covered under this exemption.
Service by way of renting of a
hotel, inn, guest house, club or
campsite or other commercial
places meant for residential or
lodging purposes, having a
declared tariff of a unit of
accommodation below Rs1000/day or equivalent is exempt
from service tax.
Exemption is same as earlier.
However the word
Commercial is being omitted.
Earlier some doubts have arisen on
account of the word commercial as
whether accommodation services
provided by dharmsalas,ashramor
any such entity are taxable .Hence
the word commercial has been
removed and govt has clarified thatexemption upto specified limit is
available to all such entities providing
accommodation services.
Note: The purpose of all the above exemptions and exclusions is to widen the tax base. However if the
services provided by a person in a F.Y does not exceed Rs 10 lacs, exemptions will be available in terms of
notification no 33/2012-ST.
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Service tax on service portion in Works
contractsDescription Before Budget After Budget Implication
In case of workscontract :
Service tax shall becomputed on :
Service tax shall becomputed on :
(A) entered into for
execution of original
works
40% of the total amount
charged for works
contract
SAMEAS IT IS No change
(B) entered into for
maintenance, repairing,
reconditioning,
restoration or servicing
of movable goods
70% of the total
amount charged for
works contract
SAMEAS IT IS Earlier valuation of
service portion in case of
maintenance of movable
and immovable property
is done at different
rates. Hence to bring
more clarity and
removal of disputescategory B and C has
been merged and now
60% valuation rule
stands withdrawn .
(C) entered into for allother cases not covered
above i.e.. in case of
maintenance of
immovable property.
60% of the total amountcharged for works
contract.
Has been omitted
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Compliance enhancement
measuresBefore budget After Budget Implication
Extent of delay Simple interest rate on
delayed payment of
service tax : per annum
Simple interest rate on
delayed payment of
service tax : per annum
Upto 6 months 18% 18% Earlier rate of interest
was same in every case
of delayed payment.Now to encourage
timely payment there is
an increase in rate of
interest according to the
extent of delay i.e.
higher the delay, higher
will be the rate of
interest.
More than 6 monthsbut upto 1 year.
18% 18% for the first 6months and 24%
beyond 6 months.
More than 1 year 18% 18% for first 6
months,24% for next six
months and 30%
beyond 1 year.
Note : As specified in the proviso to section 75, 3% concession on the
applicable rate of interest will continue to be available to the small service providers .
E-payment of service tax is being made mandatory with effect from the 1st Oct 2014. Relaxation from
e-payment may be allowed by the Deputy Commissioner/Asst Commissioner on case to case basis[Notification 09/2014-ST].
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Service tax rules:
Before Budget After Budget Implication
- Service provided by a Director to a
body corporate is being brought under
the reverse charge mechanism; service
receiver, who is a body corporate will
be the person liable to pay service tax.
New Provision and it is
introduced in view of the
requests by body corporates
such as Reserve bank of India.
- Services provided by Recovery Agents
to Banks, Financial Institutions and
NBFC is being brought under the
reverse charge mechanism; servicereceiver will be the person liable to pay
service tax.
[Notification 9/2014 -ST and
10/2014-ST]
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Place of Provision of service rules :Before Budget After budget Implication
As per Rule 4 of POP of service
rules,2012,the place of provisionof the services specified in this
rule shall be the location where
the services are actually
performed.
As per clause(a) provided further
that this rule shall not apply in
case of a service provided in
respect of goods that are
temporarily imported into India
for repairs, reconditioning or re-
engineering for re-export, subject
to the conditions as specified in
this regard.
As per clause(a) of rule 4
:Provided further that this clauseshall not apply in the case of a
service provided in respect of
goods that are temporarily
imported into India for repairs
and are exported after the repairs
without being put to any use in
the taxable territory, other than
that which is required for such
repair.
Earlier clause(a) would applied
when conditions as specified inthis regard satisfied. Obviously
there were no conditions
specified in the rule and therefore
now govt has draft the clause(a)
as such that this clause will not
applicable where goods imported
for repair purpose and then re-
export without being put to use
in India except for the use which
is required for such repair
purpose.
Hence now condition is
goods shall be re-exported. And goods shall not be put to
use in India except for such
use which is required during
repairing.
Note : The above clause(a) will not applicable in those cases where goods arrived in India in usual courseof business and are subject to repair while such goods remain in India.
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Before budget After Budget Implication
As per rule 9(d) of POP of
service rules,2012 the place of
provision of service related to
hiring of vessels and
aircraft upto a period of 1month will be the location of
the service provider.
Rule 9(d) in relation of vessels
and aircraft is being excluded
and now the service related to
hiring of vessels and
aircraft whether short andlong term will be covered by
general rule i.e.. Rule 3 and
accordingly the place of
provision will be the location
of servicer receiver.
Earlier Rule 9(d) applied in
case of hiring of these two
item i.e.. vessels and
aircraft but after
amendment the place ofprovision will be decided on
the basis of rule 3.However
Vessels here excludes
Yachts( a recreational boat
or ship) and hence it is
continue to be covered in Rule
9(d).
As per rule 9 (c) of POP
rules,2012 the definition of
intermediary is read as it
means a broker, an agent or
any other person by whatever
name called, who arrangesand facilitates a provision of a
service(main service) between
two or more persons and
does not include
intermediaries in respect of
goods i.e.. a commission
agent, selling agent)
Definition of rule 9(c)
amended and it also includes
intermediaries in respect of
goods i.e.. a commission
agent or selling agent or
consignment agent.
Widen the tax base by
including intermediaries in
respect of goods.
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POT rules,2011Before Budget After Budget Implication
As per rule 7 of POT rules,
Point of taxation, in case ofperson liable to pay tax
under reverse charge or in
case of associated
enterprise, shall be the
date of payment. However
if the payment is not madewithin a period of 6
months from the date of
invoice, the point of
taxation shall be
determined as per Rule
3(main rule).
The first proviso to rule 7
is amended to providethat point of taxation in
respect of reverse charge
will be the payment date
or the first day that
occurs immediately after
a period of 3 monthsfrom the date of invoice,
whichever is earlier.
Only first proviso of Rule 7
is amended i.e..amendment is in relation
of reverse charge not in
case of associated
enterprises.
Moreover this amendment
will be apply only to invoicesraised after 1stOctober,2014.
C C di R l 2004
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Cenvat Credit Rules,2004Before Budget After Budget Implication
- A manufacturer or a service provider
shall take credit on inputs and input
serviceswithin a period of six monthsfrom the
date of issue of invoice, bill or challan
w.ef 1stSeptember,2014.
Newly inserted proviso to
rule 4(1) and fifth proviso to
rule 4(7). Earlier there wasno such time limit for
availing Cenvat credit.
In case of full reverse
charge, service receiver can
avail the cenvat credit on
input services only when he
makes the payment of
invoice value to service
provider.
Service receiver can book the cenvat
credit immediately on availing the
input service.
The condition of
availement has been
withdrawn. However,
there is no change in
respect of partial reverse
charge .
- Re-credit of Cenvat credit reversed
on account of non-receipt of export
proceeds within the specified period
or extended period to be allowed, if
export proceeds are received within
1 year from the period so specified or
extended period. This can be done on
the basis of documents evidencing
receipt of export proceeds.
Newly inserted proviso to
rule 6(8)
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Before budget After Budget Implication
As per notification No
26/2012,in case of goods
transport agency service, service
tax will be charged on 25% value
of service i.e.. there is an option
of availing the abatement on
75% value if CENVAT credit on
inputs and capital goods, used
for providing the taxable service,
has not been taken under the
provisions of the CENVAT Credit
Rules, 2004.
As per notification no 8/2014-ST,
26/2012,in case of goods transport
agency service, service tax will be
charged on 25% value of service
i.e.. there is an option of availing
the abatement on 75% value if
CENVAT credit on inputs and capital
goods used for providing taxable
service has not been taken under
CENVAT credit rules,2004 by
Service Provider only.
Earlier it was not cleared that who
has to comply with the condition
laid down, if the abatement
option is taken, as liability to
discharge whole service tax is on
service
recipients. However, the term by
the service provider has been
inserted to make it clear
that condition for non- availment
of cenvat credit is required to be
satisfied by the serviceproviders only and service
recipient will not be required to
establish satisfaction of this
condition.
As per notification no 30/2012,
renting of vehicle to any personwho is not engaged in the
similar line of business to carry
passenger by individual, HUF,
Firm or AOP and service
receiver is a body corporate
then RCM will be applicable.
The condition against entry no 9 in
notification no 30/2012 is amendedwith effect from 1st October 2014,
to allow the credit of input service
of renting of a motor cab if such
services are received
from a person engaged in the
similar line of business i.e.. a sub-
contractor providingservices of renting of motor cab to
Entry no 9 is amended and
moreover as per substituted entrythe whole cenvat credit is
allowed with respect of input
service received from person
paying S.T on 40% value. On the
other hand in case if abatement is
not availed then cenvat credit
eligibility is restricted to 40% ofcredit of input service.
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Before Budget After Budget Implication
- By amending the entry of
serial No. 11 of notification no
26/2012 , tour operator
service providers are also
allowed to avail CENVAT credit
on the input service of
another tour operator, which
are used for providing the
taxable service.
The words input services,
wherever occurring, the words
input services other than the
input service of a tour
operator shall be substituted
with effect from the 1st day of
October, 2014.This is
substituted to avoid cascading
effect of taxation. Now tour
operators are eligible to availcenvat credit on input services
received from other tour
operators.
As per entry no 10 of
notification no 26/2012-in
case of transport of goods by
vessel, service tax will be paid
on 50% value if the condition
of non availement of cenvatcredit is satisfied.
Rate of 50% is reduced to
40%.
Effective service tax will
decrease from the present
6.18% to 4.944%, with
effect from 1st October, 2014.
Si lifi ti f P ti l R Ch
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Simplification of Partial Reverse Charge
mechanism and Advance RulingDescription Before Budget After Budget Implication
Renting of vehicleto any person to
carry passenger by
individual, HUF, firm
or AOP and service
receiver is a body
corporate and noabatement is availed
then liability under
RCM is as :
Serviceprovider
liability
Servicereceiver
liability
Serviceprovider
liability
Servicereceiver
liability
Changes applicablefrom 1stOctober,2014
60% 40% 50% 50%
The resident private limited company is being included as a class of persons
eligible to make an application for Advance Ruling in service tax [Notification
No.15/2014-ST]. This change will come into effect immediately i.e. w.e.f. 11the July,2014
E ti t S i l t
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Exemptions to Social sectorBefore Budget After Budget Implication
No exemption All life micro-insurance schemes approved by
IRDA, where sum assured does not exceed
Fifty Thousand
Rupees are being exempted from service tax
New entry Sl. No.26A of Notification
25/2012-ST amended by Notification
No.06/2014-ST].
No exemption Transport of organic manure by vessel, rail or
road (by GTA) is being
exempted from service tax.
organic manure will be
on par with fertilizer which is already
exempted
No exemption Services by way of loading, unloading,
packing, storage or warehousing,
transport by vessel, rail or road (GTA), of cotton,
ginned or baled, is being exempted
Amendment of entry at Sl. No. 20
& 21 and 40 of notification no
25/2012.
No exemption Services provided by Common Bio-medical
Waste Treatment Facility
operators by way of treatment, disposal of bio
medical waste or processes incidental to
such treatment or disposal are being exempted.
New entry at Sl. No.2B is inserted.
No exemption Service provided by Employees State
Insurance Corporation (ESIC) during
the period prior to 1.7.2012 is proposed to beexempted from service tax.
It may be noted that any service
provided by ESIC
to is already exempt for theperiod commencing from 1.7.2012.
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Technical exemptionsBefore Budget After Budget Implication
No exemption Specialized financial services received by RBIfrom outside India, in the course of management
of foreign exchange reserves, e.g. external asset
management, custodial
services, securities lending services, are being
exempted
New entry at Sl. No. 41 of25/2012-ST.
No exemption Services provided by the Indian tour operators to
foreign tourists in relation to tours wholly
conducted outside India are being exempted
This exemption is available to
Indian tour operators in
cases where they organize
tours for a foreign tourist
wholly outside India, e.g.,service provided to a Sri
Lankan for a tour conducted
in Bhutan. It may be noted
that service provided by a
tour operator in relation to
an inbound or an outbound
tours continue to be liveableto service tax.
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