CHANGES W.E.F. 01.06.2015 Section 66B – Rate of Service Tax - Increased The rate of service tax has been increased from 12% to 14% subsuming cess.

1. Page 1 of 5
K. VAITHEESWARAN & Co.
Advocates & Tax Consultants
No.9, Thanikachalam Road, T. Nagar, Chennai – 600 017.
Tel.: 2433 1029 / Mob.: 98400 96876
Email: vaithilegal@yahoo.co.in / vaithilegal@gmail.com
SERVICE TAX ALERT 22nd
May 2015
A. CHANGES W.E.F. 01.06.2015
1. Section 66B – Rate of Service Tax - Increased
 The rate of service tax has been increased from 12% to 14% subsuming cess.
 The applicable rates based on the Point of Taxation Rules, 2011 is given in the
following table:
S.
No.
Taxable
Service
Provided
Issue of
Invoice
Receipt of
Payment
Point of Taxation Rate
Applicable
1. Before
01.06.2015
After
01.06.2015
After
01.06.2015
Date of payment or issue
of invoice whichever is
earlier
14%
2. Before
01.06.2015
Before
01.06.2015
After
01.06.2015
Date of issue of invoice 12.36%
3. Before
01.06.2015
After
01.06.2015
Before
01.06.2015
Date of payment 12.36%
4. After
01.06.2015
Before
01.06.2015
After
01.06.2015
Date of payment 14%
5. After
01.06.2015
Before
01.06.2015
Before
01.06.2015
Date of payment or Issue
of invoice whichever is
earlier
12.36%
6. After
01.06.2015
After
01.06.2015
Before
01.06.2015
Date of issue of invoice 14%
 The TRU Circular dated 19.05.2015 confirms this position. Without prejudice, it
may also be worthwhile to examine whether PoT Rules by itself, would have
relevance in the light of Section 67A which was introduced subsequently by
Finance Act, 2012 and which provided that rate of service tax shall be the rate as
applicable at the time when the taxable service has been provided or agreed to be
provided. This is specifically relevant in a situation where service has been
provided before 01.06.2015 but the invoice is raised and payment is received after
01.06.2015. When Section 67A was introduced by Finance Act, 2012, Para C-
1(2) of the TRU Circular dated 16.03.2012 explaining the provisions had clarified
that a new Section 67A is being inserted to prescribe the relevant date for the
application of rate of exchange, valuation, or rate of service tax.

2. Page 2 of 5
2. Entertainment and Amusement
 Section 66D(j) dealing with negative list and which covered “admission to
entertainment event or access to amusement facility” has been omitted paving
way for a levy of service tax through the route of general levy except for certain
exemptions in the following manner:
(i) Services by way of right of admission to exhibition of cinematographic
film, circus, dance, or theatrical performance including drama or ballet;
(entry 47 Notification No. 25/2012)
(ii) Services by way of right of admission to recognised sporting event; (Entry
47, Notification No.25/2012). Recognised sporting event means any
sporting events organized by recognised sports body where the
participating team or individual represents any District, State, Zone or
Country or a sporting event referred to in Entry 11 of Notification
No.25/2012.
(iii) Services by way of right of admission to award function, concert, pageant,
musical performance or any sporting event other than a recognised
sporting event, where the consideration for admission is not more than
Rs. 500 per person. (Entry 47, Notification No.25/2012).
 Therefore with effect from 01.06.2015 other than the exempted items, service tax
shall be levied on the services provided by way of admission to entertainment
event as well as access to amusement facility. To illustrate, establishments which
provide fun or recreation by means of rides, gaming devices or bowling alleys,
amusement parks, amusement arcades, water parks, theme parks, etc. would fall
within the ambit of the new levy. Similarly, apart from the list of specific events
referred in the exemption Notification whereby service tax would apply if the
consideration for admission exceeds Rs.500/-, admission to other entertainment
events would also attract service tax.
 Taxes on entertainments, amusements fall under Entry 62, State List, Seventh
Schedule and only the State has the power to levy tax. In fact, States have levied
entertainment tax on IPL, amusement parks, bowling, gaming centres etc.
3. Betting, Gambling and Lottery
 An explanation has been introduced to Section 66D(i) of the Finance Act, 1994
dealing with betting, gambling and lottery in order to specify that it does not
include the activity specified in Explanation 2 to Section 65B(44).
 The TRU Circular dated 19.05.2015 indicates that the amendment is to make it
explicitly clear that betting, gambling or lottery shall not include the activity
carried out by a lottery distributor or selling agent in relation to promoting,
marketing, organizing, selling of a lottery or facilitating in organizing of lottery of
any kind.
 It is also relevant to note that taxes on betting and gambling also fall under Entry
62, State List, Seventh Schedule of the Constitution of India.

3. Page 3 of 5
4. Process amounting to Manufacture or Production of Goods - Liquor
 The entry in the Negative List that covered service by way of any process
amounting to manufacture or production of goods (Section 66D (f)) is being
trimmed to exclude any service by way of carrying out any processes for
production or manufacture of alcoholic liquor for human consumption.
 Amendments have also been made to Entry 30(c) of Notification No.25/2012 in
order to impose service tax on contract manufacturing /job work for production of
potable liquor for human consumption for a consideration.
5. Rule 6 (7) of Service Tax Rules – Air Travel Agent – Rate modified
 The option provided to an air travel agent to pay service tax on booking tickets at
the rate of 0.6% has been enhanced to 0.7% of the basic fare for domestic
bookings and from 1.2% to 1.4% of the basic fare for international bookings.
6. Rule 6(7A) of Service Tax Rules – Life Insurance premium - Rate modified
 The rate of service tax payable on the premium charged by the Insurance
Company from the policy holder has been enhanced from 3% to 3.5% for the first
year and from 1.5% to 1.75% for the subsequent years.
7. Rule 6(7B) of Service Tax Rules – Foreign Currency - Rate modified
 The rate of service tax payable on the purchase and sale of foreign currency had
been fixed instead of discharging service tax at the rate of 14%. The previous
rates and the new rates are given below:
(a) 0.12% of the gross amount of currency exchanged for an amount upto
Rs.1,00,000/- subject to minimum of Rs.30 stands increased to 0.14 % and
the minimum amount to Rs.35 respectively.
(b) Rs.120 and 0.06% of the gross amount of currency exchanged for an amount
exceeding Rs.1,00,000/- and upto Rs.10,00,000/- stands increased to Rs. 140
and 0.07% respectively.
(c) Rs.660 and 0.012% of the gross amount of currency exchanged for an
amount exceeding Rs. 10,00,000/- subject to maximum of Rs.6,000 stands
increased to Rs.770 and 0.014% and the maximum amount to Rs.7,000
respectively.
8. Rule 6(7C) of Service Tax Rules – Lottery
 The service tax payable by the distributor or selling agent of lottery on promotion,
marketing and organizing fixed based on the slab amounts has been increased as
under:
Sl. No. Rate
1. Rs.7000 stands increased to Rs.8200 on every Rs.10 lakh (or part of
Rs.10 lakh) of aggregate face value of lottery tickets printed by the

4. Page 4 of 5
organizing State for a draw.
2. Rs.11,000 stands increased to Rs.12,800 on every Rs.10 lakh (or part
of Rs.10 lakh) of aggregate face value of lottery tickets printed by the
organizing State for a draw.
9. Cenvat Credit
 Rule 6 of the Cenvat Credit Rules, 2004 is being amended to provide for
payment for 7% of the value of exempted service as against 6% of the value of
exempted services. This is to factor the increase in rate of service tax. The
percentage for value of exempted goods continues at 6%.
B. CHANGES w.e.f. 14.05.2015
1. Government
 A definition of ‘Government’ is introduced through Section 65B(26A).
Accordingly, “Government” means the Departments of the Central Government,
a State Government and its Departments and a Union territory and its
Departments, but shall not include any entity, whether created by a statute or
otherwise, the accounts of which are not required to be kept in accordance with
Article 150 of the Constitution or the rules made thereunder;
2. Chit Fund and Lottery
 Amendments have been made to the definition of ‘service’ in terms of Section
65B(44) in order to bring within the ambit of taxation, the services by a lottery
distributor or selling agent in relation to promotion, marketing, organising, selling
of lottery or facilitating in organising lottery of any kind, in any other manner;
and services by a foreman of chit fund for conducting or organising a chit in any
manner.’
3. Bundled Service
 An illustration has been inserted to Section 66F(1) to explain the concept. The
illustration reads as under:-
The services of the Reserve Bank of India being the main service within the
meaning of Section 66D(b) does not include any agency service provided or
agreed to be provided by any bank to the Reserve Bank of India. Such agency
service being input service used by the Reserve Bank of India for providing the
main service for which consideration by way of fee or commission or any other
amount is received by the agent bank does not get excluded from the levy of
service tax by virtue of inclusion of the main service in 66D(b) and hence such
service is liable to service tax.
4. Section 67 – Consideration
 The term ‘consideration’ in the explanation to Section 67 is now being substituted
by a new definition.

5. Page 5 of 5
 Consideration would include
(i) Any amount that is payable for the taxable services provided or to be
provided;
(ii) Any reimbursable expenditure or cost incurred by the service provider and
charged, in the course of providing or agreeing to provide a taxable
service, except is such circumstances, and subject to such conditions, as
may be prescribed;
(iii) Any amount retained by the lottery distributor or selling agent from gross
sale amount of lottery ticket in addition to the fee or commission, if any,
or, as the case may be, the discount received, that is to say the difference
in the face value of lottery ticket and the price at which the distributor or
selling agent gets such ticket;
 The TRU while explaining the scope of Budget 2015 vide Circular dated
28.02.2015 has clarified that the intention has always been to include
reimbursable expenditure in the value of taxable service and since in some cases
courts have taken a contrary view, the intention of the legislature is being stated
specifically in Section 67.
 It is also relevant to note that Section 118 of the Finance Act, 2015 has substituted
Section 94(2)(aa) to enable the framing of Rules for determination of the amount
and value of taxable service, the manner thereof and the circumstances and
conditions under which an amount shall not be consideration, under Section 67.
5. Other amendments
 Amendments have been carried out to Section 73 to enable recovery action in
respect of self-assessed tax reflected in the return.
 A new system of reduced penalties has been introduced through amendments to
Section 76 and 78.
 The provision which allowed waiver of penalty in terms of Section 80 is no longer
available.
 Where the First Appellate Authority rejects a claim of rebate of service tax on
input services or duties on inputs in respect of service exports then appeal to
Tribunal is no longer available but revision to Central Government is available
akin to excise rebate matters.
Disclaimer:- This note is in the form of an alert for the purpose of information and is based on changes
implemented through the Act and Notifications. The position can change if there are any modifications or
amendments or decisions to the contrary. The Note does not constitute a legal opinion or advisory. If any
clarifications are required, professional advice will have to be sought.
*****