Finance Bill 2016

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Service Tax is a form of indirect tax imposed on services.
Service tax now levied on all service except specifically exempt or covered under
negative list of services.
Service Tax was first brought into force with effect from 1st July 1994. All service
providers in India, except those in the state of Jammu and Kashmir, are required to
pay a Service Tax in India.
Initially only three services were brought under the net of service tax and the tax
rate was 5%. Gradually most of the services came under the ambit of Service Tax.
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To be paid on 5th or 6th of the month immediately following the calendar month in
which Services were provided.
However, in case of month of March, Service Tax is to be paid by 31st March.
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Changes in Rate of
Service Tax
• Levy of “Krishi Kalyan Cess” (KKC) [effective from
01.06.2016]: .05% on all Taxable Services. Thereby
increasing the effective rate of Service Tax Rate to
15%, earlier being 14.5%.
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5. Till 31.05.2015,
service tax rate
was 12% plus 3%
education cesses
(Effective rate
12.36%)
W.e.f. 01.06.2015,
service tax rate
has been
increased to 14%
(subsuming
education cesses)
W.e.f. 15.11.2015,
Swachh Bharat
Cess, as service
tax on all the
taxable
services at the
rate of 0.5% of
the value of
taxable service.
(Effective rate -
14.50%)
W.e.f.
01.06.2016,
Levy of “Krishi
Kalyan Cess”
(KKC)
(Effective rate
-
15.00%)
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Recent Amendments in Service Tax
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6. Changes in Negative List:
Earlier, Education services
• of preschool, higher secondary, recognized degree courses and
certain approved vocational courses were included in negative list.
Such services have been proposed to be introduced in Exemption
notification from the date of enactment of Finance Bill, thus
implying that they may be taxable soon.
All Services of Government to Business entity made
taxable:
• Earlier only support services (other than renting) when provided by
Government to a business entity, were liable for payment of Service
Tax.
• Now, All services provided by government to a Business Entity shall
hence forth be taxable
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Recent Amendments in Service Tax
Services of transportation of passenger by stage carriage
made taxable: Earlier, transportation of passenger by stage
carriage was in negative list. The entry is being deleted.
Mode of transportation of passenger by Road Taxability post
01.06.2016
Change in position
prior to 01.06.2016
Transportation of passenger by Non air-conditioned
Contract carriage other than for tourism, conducted
tour, hire or charter Includes Maxi cab and motor cab
Non - Taxable No Change
Transportation of passenger by air conditioned
Contract carriage
Taxable No Change
Radio Taxi Taxable No Change
Air-conditioned Stage Carriage Taxable Changed from non
taxable
Non Air conditioned Stage carriage Exempt Non taxable
Rent- a-cab Taxable Taxable
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4. Transportation of goods from outside India to India made taxable:
Earlier, Services by way of transportation of goods by an aircraft or a vessel from a
place outside India upto the customs station of clearance in India was in
negative list and was thus, non taxable.
Finance Bill 2016 has proposed to delete the entry from negative list.
However, services by way of transportation of goods by an aircraft from a place
outside India up to the customs station of clearance in India have been placed
in Mega Exemption Notification.
5. Period Limitation increased to 30 months: The limitation period for recovery
of service tax not levied or paid or short levied or short paid or erroneously
refunded, for cases not involving fraud, collusion, suppression etc. is proposed
to be enhanced by one year, that is, from eighteen months to thirty months.
The period of limitation in case of fraud, collusion, suppression etc remains five
years.
Recent Amendments in Service Tax
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6. Changes to sustain levy of rate change as per Point of
Taxation: Earlier, Swachh Bharat Cess is not covered vide provisions
of POTR. Amendments are being made to bring such levies within
the ambit of POTR. Accordingly, the new levy shall be as under:
S.No. Events before 01.06.2016 Events After
01.06.2016
Rate of Tax
1 •Invoice has been issued
• Payment received against such invoice
•Services rendered
N.A. 14.5% (no
KKC)
2 •Invoice has been issued
•Services rendered
Payment received
against such invoice
15%
3. •Invoice has been issued
•Payment received against such invoice
Services rendered 14.5% (no
KKC)
4. •Payment received
•Services rendered
Invoice issued within
14 days of 01.06.2016
14.5% (no
KKC)
5. All other cases 15%
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• Exemption in case of construction activities of monorail or metro
withdrawn: Exemption against services by way of construction, erection,
commissioning, or installation of original works pertaining to monorail or metro
has been withdrawn in respect of contracts entered into on or after 1st March
2016. Exemption to Railway contract shall continue.
• Exemption in case of services provided to an Arbitral Tribunal withdrawn:
Services provided by a person represented on an arbitral tribunal to an arbitral
tribunal has now been made taxable.
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• Exemption against construction activities of low cost
houses:[effective from March 1, 2016]:Exemption has been provided
to Low cost houses up to a carpet area of 60 square metres per house in
a housing project approved by the competent authority under:
(i) the “Affordable Housing in Partnership” component of the Housing
for All (Urban) Mission/Pradhan
(ii) any housing scheme of a State Government Mantri Awas Yojana.
• Exemption to inward transportation of goods by air[effective
April 1,2016]: Exemption in case of services by way of transportation of
goods by an aircraft from a place outside India upto the customs station
of clearance in India.

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• Exemption in case of transport of passengers reduced:
Exemption has been provided in case of transport of passengers by
stage carriage other than airconditioned stage carriage. Thus, now
transportation by air-conditioned Stage carriage has become
taxable.
• Exemption to folk artists enhanced:
For services provided by a performing artist in folk or classical art
forms of music, dance or theatre, is being increased from Rs 1 lakh
to Rs 1.5 lakh per performance.
• Exemption in case of transport of passengers by ropeway,
cable car or aerial tramway has been withdrawn.
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•Exemption in case of services of IRDA [effective April 1,2016]: Exemption in case
of services provided by Insurance Regulatory and Development Authority of India
(IRDA) to insurers under the Insurance Regulatory and Development Authority of
India Act, 1999
•Exemption in case of services by SEBI [effective April 1,2016]: Exemption in case
of services provided by Securities and Exchange Board of India (SEBI) set up under
the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting
the interests of investors in securities and to promote the development of, and to
regulate, the securities market.
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Particular of services Present rate of
abatement
Amended rate of
abatement
Transport of goods and
passengers by Indian Railways
70% 70%
Transport of goods in
containers by a person other
than Indian Railways
70% 60%
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Particular of services Present rate of
abatement
Amended rate of
abatement
Services of Goods Transport
Agency
70% 70%
Services of Goods Transport
Agency in relation to used
households goods
70% 60%
Abatement on transport of used household goods by a Goods Transport Agency
(GTA) is being reduced to 60% without availment of cenvat credit on inputs, input
services and capital goods by the service provider.
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Particular of services Present rate of
abatement
Amended rate of
abatement
Services provided by a
foreman of chit fund in
relation to chit
- 30%
Abatement was withdrawn from this service last year. Abatement of 30% is being
reintroduced on the services of foreman to a chit fund under the Chit Funds Act, 1982
with a condition of non-availment of Cenvat Credit on inputs, capital goods and
input services.
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Particular of services Present rate of
abatement
Amended rate of
abatement
Transport of passengers by a
Stage carriage
- 60%
After Amendments, abatement of 60% is being provided in case of transport of
passengers by a contract carriage (other than motor cab) and a radio taxi.
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Particular of services Present rate of
abatement
Amended rate of
abatement
Construction of a complex,
building, civil structure or a part
thereof, intended for a sale to a
buyer, wholly or partly except
where entire consideration is
received after issuance of
completion certificate by the
competent authority
75% for complex
value being less than
Rs 1 crore and area
less than 2000 sq. ft.
Otherwise 70%.
70%
A uniform abatement of 70% is now being prescribed for services of construction of
complex, building, civil structure, or a part thereof, subject to fulfillment of the
existing conditions. Thus, the beneficial rate of 75% is no longer applicable.
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1. Filing of Annual Service Tax Return introduced:
Rule 7 of Service Tax Rules, 1994 is being amended to introduce annual return in
Service Tax. All assesses other than those notified by CBEC, shall be required to file
an annual return for the financial year to which the return relates, in such form and
manner as may be specified by CBEC, by the 30th day of November of the
succeeding financial year.
Such return can be revised within a period of one month from the date of
submission. Also, penalty for delay of filing such return has been provided at the
rate of one hundred rupees per day for the period of delay in filing of such return,
subject to a maximum of twenty thousand rupees.
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•Scope of Capital Goods widened:
Any equipment or appliance used in an office was earlier excluded from the
definition of Capital goods when used by a manufacturer for production of dutiable
goods. Definition of Capital goods has been amended to delete such restriction
and thus, the same can be understood as allowance of credit on such items.
•Definition of Input widened:
Definition of Input has been widened to include all goods used for pumping of
water for captive use.
Now input shall also include all goods which otherwise fall within the ambit of
Capital goods but have a value of less than Rs 10,000 per piece. Thus, Cenvat credit
on such capital goods will be available out rightly.
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•Services of Container Train Operations (CTO) is taxable at 40%
It is hereby also clarified that service provided by the Indian Railways to CTOs
of haulage of their container train (rake of wagons with containers) is a service
of “Transport of Goods by Rail‟ and is, therefore, eligible for abatement and tax
treatment accordingly, that is, for abatement at the rate of 70% with credit of
input services.
Further services of CTOs shall be taxable at 40% with Cenvat credit of input
services available.
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