Budget 2015 -16

3/31/2015 2
This presentation has been made as
a part of initiatives to provide
educational assistance in
understanding the levy of service
tax. It does not command any
statutory status and the users are
strictly advised to refer to only the
legal texts while drawing any
inference on any issue

Topics
Changes made in Finance Act,1994
– Section 65B, 66D (Negative List), 67 , 76 & 78
Service Tax Rules,1994 ( Rule
Cenvat Credit Rules,2004
Review of exemptions
– With drawl of exemptions
– New exemptions
– Reverse charge Mechanism
– Change in Abatement

Rate of service tax is being
increased
The rate of Service Tax is being increased from
12% plus Education Cesses to 14%. The ‘Education
Cess’ and ‘Secondary and Higher Education Cess’
shall be subsumed in the revised rate of Service
Tax.
The effective increase in Service Tax rate will be
from the existing rate of 12.36% (inclusive of
cesses) to 14%, subsuming the cesses.
[Ref: Clauses 179 and 187 respectively of the
Finance Bill, 2015]

Edu., and SHE Cess subsumed
Levying Education Cess and Secondary
and Higher Education Cess on taxable
services shall cease to have effect from a
date to be notified by the Government.
‘Education Cess’ and ‘Secondary and
Higher Education Cess’ will continue to be
levied in Service Tax, till the time the
revised rate comes into effect, the

Swachh Bharat Cess
An enabling provision is being incorporated
in the Finance Bill, 2014 (Chapter VI/clause
117) to empower the Central Government to
impose a Swachh Bharat Cess on all or any of
the taxable services at a rate of 2% on the
value of such taxable services.
This cess shall be levied from such date
as may be notified by the Central
Government after the enactment of the
Finance Bill, 2015.

Pruning - Negative List
The certain changes proposed in the
Negative List in Section 66 D so as to
widen the scope of service tax.
Changes in the Negative List shall come
into effect from a date to be notified later,
after the enactment of the Finance Bill,
2015.

Pruning - Negative List
 All services provided by the Government or local authority to a
business entity, except the services that are specifically
exempted, or covered by any another entry in the Negative
List, shall be liable to service tax. [ 66D(a)(iv)]
 Service Tax shall be levied on contract manufacturing/job
work for production of potable liquor for a consideration.
[66D-(f)]
 Service Tax shall be levied on the service provided 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. [66D-(j)]

66D(a)(iv)
Before Budget
 (a)services by Government or a
local authority excluding the
following services to the extent they
are not covered elsewhere—
 (i)
 (ii)
 (iii)
 (iv) support services, other than
services covered under clauses (i) to
(iii) above, provided to business
entities;
After Budget
 (a) services by Government or a
local authority excluding the
following services to the extent they
are not covered elsewhere—
 (i)
 (ii)
 (iii)
 (iv) any, other than services covered
under clauses (i) to (iii) above,
provided to business entities;
Scope of amendment
All Services provided by Government to business entities
henceforth attract levy of service tax.

66D-Negative List (f)
Before Budget
 (f) any process
amounting to
manufacture or
production of goods;
After budget
 “(f) services by way of
carrying out any process
amounting to manufacture
or production of goods
excluding alcoholic liquor
for human consumption;”;
Scope of amendment:
Manufacturers of Indian Made Foreign Liquor on
job work basis will come under the purview of
Service Tax

66D-Negative List (j)
Before
 (j) admission to
entertainment events or
access to amusement
facilities;
After
 (j) omitted
Scope of amendment:
Service Tax shall be levied on the service provided 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.

Section 65B Interpretations
‘(23A) “foreman of chit fund” shall have the same
meaning as is assigned to the term “foreman” in
clause (j) of section 2 of the Chit Funds Act, 1982;’
‘(31A) “lottery distributor or selling agent” means
a person appointed or authorised by a State for
the purposes of promoting, marketing, selling or
facilitating in organising lottery of any kind, in any
manner, organised by such State in accordance
with the provisions of the Lotteries (Regulation)
Act, 1998’;

‘(26A) “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;’;

Before Budget
• (40) "process amounting to
manufacture or production of
goods" means a process on
which duties of excise are
leviable under section 3 of the
Central Excise Act, 1944 (1 of
1944) or any process amounting
to manufacture of alcoholic
liquors for human
consumption, opium, Indian
hemp and other narcotic drugs
and narcotics on which duties of
excise are leviable under any
State Act for the time being in
force;
After Budget
• (40) "process amounting to
manufacture or production of
goods" means a process on
which duties of excise are
leviable under section 3 of the
Central Excise Act, 1944 (1 of
1944) or any process amounting
to manufacture of, opium,
Indian hemp and other narcotic
drugs and narcotics on which
duties of excise are leviable
under any State Act for the time
being in force;

Service Tax Rules, 1994
in rule 2, in sub-rule (1),-
‘(aa) “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;’

Scope of Services
“aggregator”
Electronic commerce business model where a firm
(that does not produce or warehouses any item)
collects (aggregates) information on goods and/or
services from several competing sources at its
website. The firm's strength lies in its ability to
create an 'environment' which draws visitors to its
website, and in designing a system which allows
easy matching of prices and specifications
Eg: Flipkart, Meru, Uber, Youtube,Myindra,
Amazon, ebay , snapdeal etc

Valuation of taxable services
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. However, in some
cases courts have taken a contrary view.
Therefore, the intention of legislature is
being stated specifically in section 67.

Section 67 Explanation
• (a) "consideration" includes any amount that is payable for the taxable
services provided or to be provided;
Before Budget
• ‘(a) “consideration” includes–
• (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 in 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.’.
After Budget

Section 73
A new sub-section (1B) is being inserted to
provide that recovery of the Service Tax
amount self-assessed and declared in the
return but not paid shall be made under
section 87, without service of any notice
under sub-section (1) of section 73; and
 Sub-section (4A) that provides for reduced
penalty if true and complete details of
transaction were available on specified
records, is being omitted.

Penalty- Section 76
No penalty is to be paid if Service Tax and
interest is paid within 30 days of issuance
of notice under section 73 (1);
 a reduced penalty equal to 25% of the
penalty imposed by the Central Excise
officer by way of an order is to be paid if
the Service Tax, interest and reduced
penalty is paid within 30 days of such
order;

Section 76
 Section 76 is being amended to rationalize the provisions relating to
penalties, in cases not involving 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, in the following manner,-
 (a) penalty not to exceed ten per cent. of Service Tax amount
involved in such cases;
 (b) no penalty is to be paid if Service Tax and interest is paid within
30 days of issuance of notice under section 73 (1);
 (c) a reduced penalty equal to 25% of the penalty imposed by the
Central Excise officer by way of an order is to be paid if the Service
Tax, interest and reduced penalty is paid within 30 days of such
order; and

Penalty -Section 76
Penalty under Section 76 Conditions
No penalty Service Tax and interest is paid within
30 days of issuance of notice under
section 73 (1);
25% of the Penalty imposed under
Section 76
Service Tax, interest and penalty is
paid within 30 days of such order;
Penalty not to exceed ten per cent. of
Service Tax amount involved
in such cases;
Other then above

Section 78
Section 78 is being amended to rationalize penalty
in the following manner,-
– penalty shall be hundred per cent of Service Tax
amount involved in such cases;
– a reduced penalty equal to 15% of the Service Tax
amount is to be paid if Service Tax, interest and
reduced penalty is paid within 30 days of service of
notice in this regard;
– a reduced penalty equal to 25% of the Service Tax
amount, determined by the Central Excise officer by
an order, is to be paid if the Service Tax, interest and
reduced penalty is paid within 30 days of such order;
and

Penalty -Section 78
Penalty under Section 78 Conditions
15% of the Service Tax amount
Service Tax and interest is paid within
30 days of issuance of notice under
section 73 (1);
25% of the service tax amount
Service Tax, interest and reduced
penalty is paid within 30 days of such
order;
Penalty e equal to 100 per cent. of
Service Tax amount involved
in such cases;
Other then above

Waiver of penalty
Section 80, that provided for waiver of
penalty in certain circumstances, is being
omitted.

Review of Exemptions
Withdrawal of exemptions.
New Exemptions.
Change in the Rate of abatement.
Change in reverse charge mechanism.
Others.

Notification No.25/2012 Sl.No.2
Before Budget
• (2)Health care services by
a clinical establishment,
an authorised medical
practitioner or para-
medics;
After Budget
• “2. (i) Health care services
by a clinical establishment,
an authorised medical
practitioner or para-
medics;
• (ii) Services provided by
way of transportation of a
patient in an ambulance,
other than those specified
in (i) above;”

• (12)Services 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;
• (c) 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 or other persons specified in the Explanation 1 to
clause 44 of section 65 B of the said Act;
Before Budget
• 12, items (a), (c) and (f) shall be omitted;
After Budget

Effect of amendment
Services provided to Government with regard
to construction of various type of buildings
such as an educational, (ii) a clinical, (iii) an
art or cultural establishment or a residential
complex will attract levy of service tax
Example
– CPWD and all contractors of CPWD
– State Public works Department
– Housing Corporations of various government
department Police, Navy etc

Mega Exemption 25/2012
Exemption to construction, erection,
commissioning or installation of original
works pertaining to an airport or port is
being withdrawn (S. No 14 of the
notification No. 25/12-ST). The other
exemptions covered under S.No. 14 of
notification No. 25/12-ST shall continue
unchanged.

Before Budget
• 14. Services by way of
construction, erection,
commissioning, or
installation of original
works pertaining to,—
• (a) an airport, port
or railways, including
monorail or metro;
After Budget
construction, erection,
commissioning, or
installation of original
works pertaining to,—
• (a) railways, including
monorail or metro;

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 (S. No.16 of
notification No. 25/12-ST).

Before Budget
• 16. Services by a performing
artist in folk or classical art
forms of (i) music, or (ii)
dance, or (iii) theatre,
excluding services provided
by such artist as a brand
Ambassador;
After Budget
• 16. Services by an artist by
way of a performance in folk
or classical art forms of (i)
music, or (ii) dance, or (iii)
theatre, if the consideration
charged for such performance
is not more than one lakh
rupees:
• Provided that the exemption
shall not apply to service
provided by such artist as a
brand ambassador.”;

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.
Transportation of agricultural produce is
separately exempt, and this exemption
would continue (S. Nos. 20 and 21 of
notification No. 25/12-ST).

Notification No.25/2012 Sl.No 20
Before Budget
transportation by rail or
a vessel from one place
in India to another of
the following goods—
• (i) foodstuff including
flours, tea, coffee,
jaggery, sugar, milk
products, salt and
edible oil, excluding
alcoholic beverages;
After Budget
transportation by rail or
a vessel from one place
in India to another of
the following goods—
• "(i) milk, salt and food
grain including flours,
pulses and rice;

Before Budget
• 21. Services provided
by a goods transport
agency by way of
transportation of—
After Budget
• 21. Services provided
by a goods transport
agency by way of
transportation of—
• "(d) milk, salt and
food grain including
flours, pulses and
rice;";

Before Budget
• 29 Services by the following
persons in respective
capacities—
• (c) mutual fund agent to a
mutual fund or asset
management company;
• (d) distributor to a mutual
fund or asset management
company;
• (e) selling or marketing
agent of lottery tickets to a
distributer or a selling
agent;
After Budget
• 29(c),(d) and (e) omitted

Before Budget
• 30. Carrying out an
intermediate production
process as job work in
relation to –
• (c) any goods on which
appropriate duty is
payable by the principal
manufacturer; or
After Budget
• 30. Carrying out an
intermediate production
process as job work in
relation to –
• (c) any goods excluding
alcoholic liquors for
human consumption on
which appropriate duty
is payable by the
principal manufacturer;
or

Before Budget
making telephone calls
from—
• (a) departmentally run
public telephone;
• (b) guaranteed public
telephone operating only
for local calls; or
• (c) free telephone at
airport and hospital where
no bills are being issued;
After Budget
• 32. Omitted

Notification No.25/2012 as
amended by 6/2015 ST
43. Services by operator of Common Effluent
Treatment Plant by way of treatment of effluent;
44. Services by way of pre-conditioning, pre-
cooling, ripening, waxing, retail packing, labelling
of fruits and vegetables which do not change or
alter the essential characteristics of the said fruits
or vegetables;
45. Services by way of admission to a museum,
national park, wildlife sanctuary, tiger reserve or
zoo;

Notification No.25/2012 as
amended by 6/2015 ST
 46. Service provided by way of exhibition of movie by an
exhibitor to the distributor or an association of persons
consisting of the exhibitor as one of its members;”;
 47. Services by way of right to admission to,-
 (i) exhibition of cinematographic film, circus, dance, or
theatrical performance including drama or ballet; (ii)
recognised sporting event; (iii) 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.”.

Notification No. 31/12-ST dated
20.6.2012.
Goods transport agency service provided for
transport of export goods by road from the
place of removal to an inland container
depot, a container freight station, a port or
airport is exempt from Service Tax vide
notification No. 31/12-ST dated 20.6.2012.
Scope of this exemption is being widened to
exempt such services when provided for
transport of export goods by road from the
place of removal to a land customs station
(LCS).

Abatement notification
26/2012 ST
A uniform abatement is now being prescribed
for transport by rail, road and vessel and
Service Tax shall be payable on 30% of the
value of such service subject to a uniform
condition of non-availment of Cenvat Credit
on inputs, capital goods and input services.
– ( Abatement for GTA is reduced from 75%
to 70%- effect from the 1st day of April, 2015.
(Refer Notification No: 8/2015 ST dated
01/03/2015)

New rate of abatement
Taxable service Abatement
before budget
Abatement
after Budget
Old Rate New rate
Transport of
Goods by
Transport
Agency
75% 70% 3.09% 4.20%
Transport of
Goods Coastal
Vessel
60% 70% 4.944% 4.20%

Abatement notification
26/2012 ST
 At present, Service Tax is payable on 40% of the value of air
transport of passenger for economy as well as higher classes,
e.g. business class. The abatement for classes other than
economy is being reduced and Service Tax would be payable
on 60% of the value of such higher classes.
 Abatement is being withdrawn from services provided in
relation to chit. Consequently, Service Tax shall be paid by the
chit fund foremen on the full consideration received by way of
fee, commission or any such amount. They would be entitled
to take Cenvat Credit.
 The proposed rationalization in abatements shall come into
effect from the 1st day of April, 2015.

Reverse Charge Mechanism
 Manpower supply and security services when provided by an
individual, HUF, or partnership firm to a body corporate are being
brought to full reverse charge. Presently, these are taxed under
partial reverse charge mechanism.
 services provided or agreed to be provided by a mutual fund agent or
distributor, to a mutual fund or asset management company.
 service provided or agreed to be provided by a selling or marketing
agent of lottery tickets to a lottery distributor or selling agent
 service provided or agreed to be provided by a person involving an
aggregator in any manner
 Come into force on the 1st day of April, 2015. (Refer Notification
No;7/2012 dated 01/03/2015)

Cenvat Credit Rules, 2004
Rule 4(7) is being amended to allow Cenvat
Credit of Service Tax paid under partial
reverse charge by the service receiver without
linking it to the payment to the service
provider. This change will come into effect
from 1.4.2015.
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.

Service Tax Rules, 1994
Rule 4 is amended to for registration in
service tax. Order No. 1/15-ST, dated
28.2.2015 has been issued, prescribing
documentation, time limits and procedure for
registration.
A provision for issuing digitally signed
invoices is being added along with the option
of maintaining of records in electronic form
and their authentication by means of digital
signatures. (Rule 4, 4A and 5).

References
F. No. 334/5/2015-TRU dated 28/02/2015
Notification No. 03/2015 to 09/2015 ST all
dated 28/01/2015
Notification No: 6/2015 CE NT
www.cbec.gov.in
www.indiabudget.gov.in
3/31/2015 50

3/31/2015 51
Presented By:
B.Venkateswaran, Assistant Commissioner
Vizag ST.IA Division, Vizag I Commissionerate.

Budget 2015 -16

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