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ANALYSIS OF SERVICE TAX PROPOSALS IN BUDGET 2015
By CA Krishan GargEmail - [email protected] - 9826052060
Index
Changes with immediate effect (from 01-03-2015).
Changes effective from 01-04-2015.
Changes from the enactment of Finance Bill.
Changes with date to be notified.
Other.
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Changes with immediate effect (from 01-03-2015).
The period for taking Cenvat Credit is being extended from six months from the date of invoice to one year from the date of invoice.
Credit of input and capital goods(50%) available upon delivery/ receipt directly at the job worker’s premises on direction of the manufacturer / output service provider.
Cenvat credit of inputs allowable even on transfer to subsequent job worker from the premises of the principal job worker for undertaking specified activities, provided the same are received back within 180 days.
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Increase in time limit for return of capital goods sent to job worker for carrying out specific activities from 180 days to 2 years.
Power of recovery of Cenvat credit extended even to cases where Cenvat credit has been wrongly taken but not utilized.
Cenvat credit utilized shall for a month shall be in following order
First – Opening Balance of the month.
Second – Admissible credit taken during the month.
Last – Inadmissible credit taken during the month.
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Registration for single premises shall be granted within two days of filing the application.
Liability of payment of service tax on aggregator of a service where service is provided under the brand name of the aggregator.
Meaning of Aggregator –
“Aggregator” means a person, who owns and manages a web based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator.
Advance Ruling has been extended to all resident firms (earlier allowed only to company).
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Changes with effect from 01-04-2015Change in rate of abatement in
case of GTA-
At present abatement of 75% is available under GTA. This has been reduced to 70% which will make effective rate from 3.09% to 3.708%. Further after increase in rate of tax from 12.36% to 14% this will further increase to 4.20% from the date to be notified.
Exemption to services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theatre, will be limited only to such cases where amount charged is up to Rs 1,00,000 for a performance.
Exemption to artist
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Exemptions withdrawn Exemption to construction, erection,
commissioning or installation of original works pertaining to an airport or port is being withdrawn. Exemption is being withdrawn on the following service: a) services provided by a mutual fund agent to a mutual fund or assets management company, b) distributor to a mutual fund or AMC, c) selling or marketing agent of lottery ticket to a distributorExemption to transportation of
food stuff
Exemption to transportation of food stuff by rail, or vessels or road will be limited to food grains including rice and pulses, flour, milk and salt. (e.g. – tea, coffee, sugar, edible oil now taxable).
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Exemption of construction/maintenance services to Government Following Exemptions given in clause 12 of exemption notification no. 25/2012 has been withdrawn:- Exemption given for construction/
maintenance services for a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession has been withdrawn.
A structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment.
A residential complex predominantly meant for self-use or the use of their employees. 8
EFFECT- Exemption available on specified services of
construction, repair, maintenance, renovation or alteration service provided to the Government, a local authority, or a governmental authority shall be limited only to:-
Historical monument, archaeological site or remains of national importance, archaeological excavation or antiquity;
canal, dam or other irrigation work; and pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal.
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Following services have been exempted :-
Transportation of a patient to and from a clinical establishment by a clinical establishment.
Life insurance service provided by way of Varishtha Pension Bima Yojna.
Pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables.
Admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve.
Exhibition of movie by the exhibitor (theatre owner) to the distributor or an AOP consisting of such exhibitor as one of it’s members
Transport of export goods by road from the place of removal to a land customs station.
Service by a Common Effluent Treatment Plant operator
Exemptions allowed on new services
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Credit of ST paid under partial reverse paid by the service receiver allowed on payment of Service tax without linking it to the payment to the service provider.
Credit of ST paid under partial reverse
Partial Reverse charge to Full reverse charge Manpower and Security Supply services which
are presently covered under partial reverse charge has been shifted to full reverse charge.
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EFFECT
Nature of Service
Present rate of reverse charge
Present Effective rate
Change in rate of reverse charge (from 01/04/2015)
Effective rate from 01/04/2015
Proposed rate (@14%) from the date to be notified
Manpower Supply & Security Services
75% 9.27% 100% 12.36% 14.00%
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Changes from the date of enactment of Finance
Bill
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UNDER SECTION 76
PENAL PROVISIONS
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Nature of Offence Description Duty & Interest
Penalty Limit
Cases not involving fraud or collusion or willful misstatement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of service tax
Normal Penalty Yes 10% of S.Tax amount involved
if service tax and interest is paid within 30 days of issuance of notice under section 73 (1)
Yes Nil
if the service tax, interest and reduced penalty is paid within 30 days of order
Yes 25% of the penalty imposed in the order
if the service tax amount gets reduced in any appellate proceeding
penalty amount shall also stand modified accordingly and benefit of reduced penalty ( 25% of penalty imposed) shall be admissible
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UNDER SECTION 78
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CA KRISHAN GARG
Nature of Offence Description Duty & Interest
Penalty Limit
cases involving fraud or collusion or willful misstatement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of service tax
Normal Penalty Yes 10o% of S.Tax amount involved
if service tax, interest and reduced penalty is paid within 30 days of service of notice
Yes 15% of the service tax amount
if the service tax, interest and reduced penalty is paid within 30 days of order
Yes 25% of the S.tax amount
if the service tax amount gets reduced in any appellate proceeding
penalty amount shall also stand modified accordingly and benefit of reduced penalty ( 25% of penalty imposed) shall be admissible
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CA KRISHAN GARG
TRANSITION PROVISION – SECTION 78 B
Amended provisions of section 76 and 78 shall apply to cases where either no notice is served , or notice is served under sub section (1) of section 73 or proviso thereto but no order has been issued under sub section (2) of section 73, before the date of enactment of the Finance Bill ,2015; and
In respect of cases covered by sub-section (4A) of section 73, if no notice is served , or notice is served under sub section (1) of section 73 or proviso thereto but no order has been issued under sub section (2) of section 73, before the date of enactment of the Finance Bill ,2015, penalty shall not exceed 50% of the Service Tax amount.
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CA KRISHAN GARG
REIMBURSABLE EXPENDITURE
It is being prescribed specifically in this section that consideration for a taxable service shall include all reimbursable expenditure or cost incurred and charged by the service provider.
Effect :- All the reimbursable claimed by the service provider will form part of taxable service and will be charged to service tax.
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Changes with date to be notifiedRATE OF SERVICE TAX
Present Rate of S.Tax 12.36% (Including Cess)
Proposed Rate of tax (Without Swachh Bharat Cess)
14.00%
Proposed Rate of tax (With Swachh Bharat Cess)
16.00%
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EFFECT Service Tax will have to be charged @12.36%
until the rate of tax is increased to 14% Ed. Cess (2% of Tax) and Higher Ed. Cess(1%
of tax) proposed to be withdrawn from a date to be notified hence it is required to be charged at present.
SWACHH BHARAT CESS Swachh Bharat Cess is proposed to be levied on
value of taxable service hence it will increase the rate of tax by 2%. Thus effective rate would be 16%. This cess will be levied on selected services.
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NEW LEVY
SERVICE TAX ON ENTERTAINMENT EVENT OR AMUSEMENT FACILITY
Service 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 and theme parks were covered under negative list of services. Now this is no more covered in negative list which means now these services now will be liable to be taxed. 2
2
NEW LEVY
SERVICE TAX ON ENTERTAINMENT EVENTS
Admission to entertainment events like Musical performances, award functions etc. will be liable to pay tax if the amount charged is more than Rs. 500/-. However entertainment event, namely, exhibition of cinematographic film, circus, recognized sporting event, dance, theatrical performance including drama and ballet continued to be exempted.
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NEW LEVY
CONTRACT MANUFACTURING/JOB WORK FOR PRODUCTION OF POTABLE
LIQUOR
Any process amounting to manufacture or production of goods is not liable to be taxed however Intermediate production of alcoholic liquor for human consumption is proposed to be excluded from the exemption notification which will make contact manufacturing or job work for production of potable liquor will become taxable.
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NEW LEVY
SERVICES PROVIDED BY GOVERNMENT OR LOCAL AUTHORITY
Presently Services provided by Government or Local Authority are covered under negative list which means there were not taxable. An exception to this provision was support services provided by Government or Local Authority. Now this entry has been withdrawn. Effect:- Every service provided by Govt. or Local Authority will be taxable unless it is given specific exemption.
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NEW LEVY
CHIT FUND AND DISTRIBUTION OR SELLING AGENTS OF LOTTERY
To overcome from the contradictory decisions of various courts an explanation has been added in entry (i) of section 66D to confirm the levy of tax on:- (a) chit fund foremen by way of conducting a chit.(b) distributor or selling agents of lottery, as appointed or authorized by the organizing state for promoting, marketing, distributing, selling, or assisting the state in any other way for organizing and conducting a lottery.
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NEW LEVY
AMOUNT RETAINED BY DISTRIBUTOR OF SELLING AGENT OF LOTTERY
Difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such tickets will be liable for service tax payment.
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OTHER
GST FM has confirmed that GST will be
implemented from 1 April 2016.
Digitally signed Invoice Central excise/Service tax assesses to be
allowed to use digitally signed invoices and maintain record electronically.
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EFFECTIVE RATE OF SERVICE TAX
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Nature of Service
Current effective rate (@12.36%)
W.e.f. 01/04/2015
Proposed rate (@14%) from the date to be notified
Services having normal rate of tax without abatement
12.36% 12.36% 14.00%
Domestic Air Travel Agent
0.618% 0.618% 0.70%
International Air Travel Agent
1.236% 1.236% 1.442%
Mandap Keeper 8.652% 8.652% 9.80%Accommodation Services in Hotels, etc
7.416% 7.416% 8.40%
GTA services by road
3.09% 3.708% 4.20%
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Nature of Service Current effective rate (@12.36%)
W.e.f. 01/04/2015
Proposed rate (@14%) from the date to be notified
Renting of Motorcab 4.944% 4.944% 5.60%Transport of goods by vessel
4.944% 3.708% 4.20%
Package tour 3.09% 3.09% 3.50%Hotel Booking 1.236% 1.236% 1.40%Construction of a complex, building, civil structureCarpet area of the unit is less than 2000 square feet and less than 1 crore
3.09% 3.09% 3.50%
Others 3.708% 3.708% 4.20%
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