union budget 2015_amendment in indirect taxes

UNION BUDGET 2015 : HIGHLIGHTS

Amendments in Service Tax

a warm up match before ‘The Match’

“Its like a warm up match before ‘The Match’. Increased rate of service tax to 14% seems

unfavorable, inflationary in nature to a common man but it’s a preparation for GST,

as proposed rate of tax in GST is 18%.

Undoubtedly, it is a move towards single indirect taxation mechanism in India and

avoidance of double taxation in indirect taxation.

It’s a bitter pill for cure of prolonged diseases.”

CA Gaurav [email protected]

+91-9560607530

Deepak [email protected]

+91-8377838738

From Authors’ Desk

mailto:[email protected]

mailto:[email protected]

Newly Added Provisions

Clause Amendment

105 Amendment in Section 65B(44)

106EC&SHEC Abolished. New rate of Service Tax is 14%.

108 Amendment in Section 66F

109 Amendment in Section 67




114 Amendment to Section 80


116 Changes in Amendment Notification

Clause Amendment

107 Insertion of Explanation in Section 66D

113 New Section 78B

Amended Provisions

Chapter V of Finance Act, 1994

Clause Amendment

117 Enabling provision for levy of “Swachh Bharat Cess”

Chapter VI of Finance Act, 1994

Focusing on revenue collection through increased Rate,

withdrawal of exemptions, shrinking of negative list etc.

Definition of Service

Following services have been taken into ambit of taxable services by

inserting explanation into definition of service :

activities undertaken by chit fund foremen in relation to chit, and lottery distributors and selling agents, in relation to lotteries

Sec 65B (44) Amended

Also an explanation is being added in entry (i) of section 66D to specifically state that above nature of services are

outside the nature of Negative List.

Swachh Bharat Cess / Clean India

Cess

Description Rate Clause

Basic Service Tax 14% Clause 106

Clean India Cess 2% Clause 117

Total Tax 16%

Chapter VI / Clause 117 Swachh Bharat Cess on all or any of the

taxable services at a rate of 2% on the value of such taxable services.Effective date of levy of such cess will

notified by the Central Government after the enactment of the Finance Bill, 2015.

Integration towards GST

through increase rate of service -

tax

Statutory ProvisionsSection Provision

66F Section 66F (1) prescribes that unless otherwise specified, reference to a service shall not include reference to any input service used for providing such services. An illustration is being incorporated in this section to exemplify the scope of this provision.

IllustrationService provided by the Reserve Bank of India (RBI), in section 66D (b) does not include any agency service provided by other banks to RBI, as such agency services are input services used by RBI for provision of its main service. Accordingly, banks providing agency service to or in relation to services of RBI, are liable to pay Service Tax on the agency services so provided by virtue of the existing section 66F (1).

67 Reimbursement of ExpensesIt 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. The intention has always been to include reimbursable expenditure in the value of taxable service.


73 New Sub Section (1B)No Notice is required to recover Service Tax amount self-assessed and declared in the return but not paid .

73(4A) Omittedsub-section (4A) provides for reduced penalty if true and complete details of transaction were available on specified Records

76 Rationalization of provisions related to penalties where there is no fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of Service Tax. New Provision is read as follows : -a)Penalty<=10% of Service Tax involved in such casesb)No Penalty = Service Tax & interest paid within 30 days of issuance of

notice u/s 73(1)c)Reduced Penalty = 25% of penalty imposed by CEO

Fails to address issues on double taxation in

case of software, restaurant services etc.


86 Amendment regarding the remedy against the order passed by Commissioner (Appeal), in a matter involving rebate of Service Tax, shall lie in terms of section 35EE of the Central Excise Act.

It is also being provided that all appeals filed in Tribunal after the date the Finance Act, 2012 came into effect and pending on the date when the Finance Bill, 2015 receives assent of the President shall be transferred and dealt in accordance with section 35EE of the Central Excise Act.

83 Changes in the provisions of Settlement Commission

No announcement on speedy disbursements

of refunds is demotivating for export

industry

Negative ListSectio

n Particulars Amendment

66D (j)“Admission to entertainment event or access to amusement facility”

Deleted

65 B (9) Definition of “amusement facility”

Deleted : Hence, Taxable

65B(24) Definition of “entertainment event”

Still Exempt –Entry 46 of Mega Exemption

25/2012and clause (zab) of definitionsNon -Taxable

(If amount charged < Rs.500)

Pageants Musical performances Concerts Award functions Unrecognised

Sporting event

Non-Taxable Exhibition of

cinematographic film

Circus DanceTheatrical

performance including drama

and ballet

Recognized sporting event

Entry 46 of Mega Exemption 25/2012

Negative List

Consequential Amendments

section 65 B (40)Process amounting to manufacture or production of

goods

S. No. 30 of notification No.

25/12-ST

Exemption to intermediate production of alcoholic liquor for human consumption

Withdrawn

Ongoing Provision Amendment

Section 66D (f) excluded

Service by way of any process amounting to

manufacture or production of goods

Service by way of carrying out any processes for production or manufacture

of alcoholic liquor for human consumption.

Section Existing Provision New ProvisionSection 66D (a)

Exclusion from negative list (a) …..(b) ……(c) ……(d) Services by Government

or a local authority in the nature of support services to a business entity

Exclusion from negative list (a) …..(b) ……(c) ……(d) Services by Government or a local

authority in the nature of support services to a business entity

Now all services provided by government to business entities are taxable

Effect All services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any other entry in the Negative List, shall be liable to Service Tax .

Effective Date

To be notified by the Central Government in this regard after the enactment of the Finance Bill, 2015.

Other Effect Government has been defined in the Act [section 65 B (26A)].

Negative List

Mega Exemption NotificationEntry

No. Exemption Withdrawn Effective Date

12Services 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 –

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession e.g. School, Colleges, Hospitals, Government Offices etc.

(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;

.

(f) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;

1st April, 2015


No. Exemption Withdrawn Effective Date

14 Exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port is being withdrawn

1st April, 2015

20

21

Transportation of food stuff by rail, or vessels or road will be limited to food grains including rice and pulses, flour, milk and salt.Transportation of agricultural produce is separately exempt, and this exemption would continue

1st April, 2015

29 Exemption withdrawn on below services and are now taxable under reverse charge mechanism: -a) services by 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 distributor.

1st April, 2015


No. Exemption Withdrawn / Limited Effective Date

30 Carrying out of intermediate production process of alcoholic liquor for human consumption on job work from this entry.

Will be notified by CG

32 Exemption is being withdrawn on the following service,-a) Departmentally run public telephoneb) Guaranteed public telephone operating only local callsc) Service by way of making telephone calls from free telephone at

airport and hospital where no bill is issued.

1st April, 2015

16 Exemption Limited Exemption to services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theater will be limited only to such cases where amount charged is upto Rs 1,00,000 for a performance

1st April, 2015

Mega Exemption Notification

Entry No. New Exemptions

2

All ambulance services for transportation of patients are exempt.Earlier, only ambulance services by clinical establishments were exempt.

26ALife insurance service provided by way of Varishtha Pension Bima Yojna is being exempted.

43 New Entry

Service provided by a Common Effluent Treatment Plant operator for treatment of effluent is being exempted.

Effective Date : 01st April, 2015

Focusing on Revenue collection through increased rate, withdrawal

of exemptions, shrinking of Negative List etc.

Mega Exemption Notification

Entry No. New Exemptions

44 New Entry

Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables is being exempted.

45New Entry

Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve is being exempted.These services when provided by the Government or local authority are already covered by the Negative List.

46New Entry

Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of it’s members is being exempted.


Abatement NotificationBusiness Present

AbatementNew

Abatement Effect Remarks / Condition

Effective Date

Air Travel

Economy Class 60% 60% No Change 01st April 2015

Business Class 60% 40%Move to collect more taxes from rich

Chit Fund Business

70% NILCounter-balance effect as CENVAT Credit allowed.

Cenvat Credit on inputs, capital goods and inputServices not allowed

01st April 2015

Reverse Charge MechanismNature

of Service

Manpower Supply &

Security Services

Sale & Distributionof Mutual Fund

Sale & Distribution of

LotteriesAggregator

Service Provider

Indiviual, HUF, Partnership Firm

MF agents &MF distributors

Lottery Distributor

Agents

Aggregator / Agent or

Representative of Aggregator

Service Recipien

tBody Corporate

Assets Management Co

Mutual Fund Co

Lottery Distributor

Any Person

Earlier Provisio

n

Partial 25% / 75%

Only Recovery Agents / Insurance Agents were covered

Nil

New Provisio

n

Full Reverse Charge

Full Reverse Charge

Full Reverse Charge

Full Reverse Charge


Service Tax RulesRule Description

2 Aggregator Model Presence of Aggregator – By Himself or Representative Office - liable to pay Service Tax if the service is so provided using the brand name of the aggregator in any manner.Non-Presence of Aggregator – Agent is liable to pay the tax on behalf of the aggregator.(Effective Date – 1st March,2014)

4 Registration time-limit reduced from 7 days to 2 days of filing of application. Order No. 1/15-ST, dated 28.2.2015, effective from 1.3.2015 has been issued, prescribing documentation, time limits and procedure for registration.

4, 4A, 5 Paper less work – Digitally Signed Invoices, Records in electronic form through authentication by digital signature

Service Tax RulesRule Description

6 (6A) Recovery of service tax self-assessed and declared in the return under section 87 is being omitted .Suitable amendments in section 73 for enabling such recovery.Effective Date – Date of enactment of the Finance Bill, 2015

6 (7),6(7A),6(7B),6(7C)

Special Rates for certain services like money changing service, service providedby air travel agent, insurance service and service provided by lotterydistributor and selling agent has been revised proportionately consequent to upward revision in Service Tax rateBaby step towards dream of

digital India by making suitable amendments for maintaining

records in digital form, issuing digital invoices – Less paper,

More work

Registration in two days shows government intention of ease of doing business in India.

CENVAT Credit RulesRule Changes

4(7)

In case of partial reverse charge, Cenvat Credit is allowed irrespective of the fact that whether the payment to vendor is made or not. Effective Date – 01.04.2015

4

The period for taking Cenvat Credit is has been extended from six months from the date of invoice to one year from the date of invoice.

4Time limit for return of Capital Goods from a job worker is being increased from the present six months to two years

6 Proportionate Cenvat Credit is to be reversed in case of non-excisable goods in addition to exempted goods and services

14 Manner of Recovery for CENVAT Credit taken but NOT utilized

Penalty ProvisionsProvisions Section 76 Section 78

Reason for Non-Payment, Short-Payment or erroneous refund

Any other case

Fraud or Collusion or Wilful mis-statement or Suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of service tax

Maximum Penalty 10% of Service Tax Amount 100% of Service Tax amount

If Service Tax and Interest /reduced penalty Paid within 30 days

of issuance of notice No Penalty 15% of the service tax amount

order issued by CEO Penalty reduced to 25% Penalty reduced to 25%

Amount reduced in Appellate proceedings

Penalty amount modified accordingly. Benefit of reduced penalty available if 25% amount paid within 30 days of such appellate order

Penalty ProvisionsSection Provision

78-B(Newly added)

Amended Provision of section 76 & 78 shall apply to cases where either –.

a. No notice is servedb. Notice has been served under section 73(1) 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

If the above cases are covered under sub-section 73(4A),penalty shall not exceed 50% of the Service Tax Amount.

80 Waiver of penalty in certain cases is being omittedStringent Provisions

for defaulters

Other Provisions

Advance RulingThe facility of Advance Ruling is being extended to all resident firms by specifying such firms under section 96A (b)(iii) of the Finance Act, 1994.

Notification 42/2012-ST dated 29.06.2012Exemption from service tax on services provided by a commission agent located outside India to an exporter located in India is being rescinded with immediate effect. This exemption has become redundant after the amendments made in law in the previous budget, in the definition of “intermediary” in the Place of Provision of Services Rules, making the place of provision of a service provided by such agents as outside the taxable territory.

Other Provisions

Exemption Agency Transported Goods Mode From To

Current Exemption GTA Export

Goods Road Place of Removal

ICD / CFS/ Port / Airport

Expanded Exemptio

nGTA Export

Goods Road Place of Removal

ICD / CFS/ Port / Airport / Land

Customs Station

Notification 31/2012-ST dated 20.06.2012 – 01st April, 2015

Fails to address issues on double taxation in

case of software, restaurant services etc. THANK YOU

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