Changes proposed in service tax by union budget 2016 17

1. Changes in Service Tax Law
Union Budget 2016-17
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2. There shall be levied and collected in accordance with the
provisions of this Chapter, a cess to be called the Krishi Kalyan
Cess, as service tax on all or any of the taxable services at the rate
of 0.5 per cent. on the value of such services for the purposes of
financing and promoting initiatives to improve agriculture or for any
other purpose relating thereto. Credit of KKC paid on input service
shall be allowed for payment of proposed cess on output services.
Particular Rate of Service Tax
Service Tax 14.00% of Taxable Services
Swachh Bharat Cess 0.50% of Taxable Services
Krishi Kalyan Cess 0.50% of Taxable Serviecs
Effective Rate of Service Tax 15% of Taxable Services
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3. Legislative Changes
Amendment in Definition of Service Section 65B- (44)
Earlier Scenario:-
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 were
taxable .
Changes in Budget:-
Services by a lottery distributor or selling agent on behalf of State Government in
relation to promotion, marketing, organising, selling of lottery or facilitating in
organising lottery of any kind, in any other manner in accordance with the provision
of the lotteries (regulations) act 1998.
Crux:-
Now the lottery services which has been provided in accordance with the provisions
of the lotteries (regulations) act are taxable as the other services which are contrary
to Lottery (regulations) act 1998 are ultra-vires and not legally enforceable.
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4. Changes in Section 66D- Negative List of Services
S. No. Description of Service Before Budget
2016
After Budget 2016
Services by way of—
(i) pre-school education and
education up to higher
secondary school or
equivalent Exempt as per
Clause(l) of
Negative Listed
Services
Exempt as per Sr. No. 9 of Mega-exemption
list E/N 25/2012(ii) education as a part of a
curriculum for obtaining a
qualification recognised by
any law for the time being
in force
(iii) education as a part of an
approved vocational
education course;
Exempt as per
Clause(l) of
Negative Listed
Services
New Exemption point 9D is inserted in
Mega-exemption list E/N 25/2012:- .
services provided by training providers
under vocational training courses certified
by National Council For Vocational
Training.”;
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5. Legislative Changes with effect 01 June 2016
Section 66D- Negative list of services
b) Clause (o), sub-clause (i) shall be omitted:-
Clause (o) of Negative list cover services by way of—
Transportation of passengers, with or without accompanied
belongings, by—
(i) a stage carriage;
In entry 23 of Mega exemption list E/N 25/2012,-
(A) after clause (b), the following clause shall be inserted with
effect from 1st June 2016, namely,-
“(bb) stage carriage other than air-conditioned stage carriage;”;
Now only non-air conditioned Stage Carriage is exempt from service
tax under entry 23(bb)
So air-conditioned stage carriages are liable to service tax.
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6. Legislative Changes
Section 66D- Negative list of services
c) Clause (p), sub-clause (ii) shall be omitted:-
Clause (p) of Negative list cover services by way of—
Transportation of goods—
(ii) by an aircraft or a vessel from a place outside India to the first
customs station of landing in India; or
Consequent to this omission, new exemption is granted by way of
entry no 53 in mega-exemption which reads as under:-
“53. Services by way of transportation of goods by an aircraft from
a place outside India upto the customs station of clearance in
India.”;”
Effect:- Now, services by transportation of goods by VESSEL are
taxable. Domestic shipping lines shall pay tax themselves
whereas in case of services availed from foreign shipping lines,
the business entity located in India shall pay tax under reverse
charge.
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7. Insertions
Section 66E- Declared Services
In the 1994 Act, in section 66E, after clause (i), the
following clause shall be inserted, namely:—
“(j) assignment by the Government of the right to use the
radio-frequency spectrum and subsequent transfers
thereof.”
Transfer of right to use radio frequency spectrum is not
Sale of Intangible goods.
Now this service shall be covered in “any service
provided by government to business entity” and
therefor tax shall be payable by the business entity
under reverse charge.
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8. Insertions
Section 67A-
67A. The rate of service tax, value of a taxable service and rate of exchange,
if any, shall be the rate of service tax or value of a taxable service or rate
of exchange, as the case may be, in force or as applicable at the time
when the taxable service has been provided or agreed to be provided.
Changes in Budget:-
In the 1994 Act, in section 67A, the [existing section] shall be renumbered as
sub-section (1)
and after sub-section (1), the following sub-section shall be inserted,
“(2) The time or the point in time with respect to the rate of service tax shall
be such as may be prescribed.”.
(Point of time with respect to the rate is prescribed in Point of Taxation
Rules,2011)
Effect:- To decide about the applicability of service tax rate, POTR has to be
referred and apparent contradiction b/w Sec. 67A and POTR has been
removed.
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9. Changes
Section 73-
“Recovery of Service tax not levied or paid or short levied or short paid
or erroneously refunded”
Where any service tax has not been levied or paid or has been short-levied
or short-paid or erroneously refunded, the 4[Central Excise Officer] may,
within ‘eighteen months’ from the relevant date, serve notice on the person
chargeable with the service tax which has not been levied or paid or which
has been short-levied or short-paid or the person to whom such tax refund
has erroneously been made, requiring him to show cause why he should not
pay the amount specified in the notice
Changes in Budget:-
In the 1994 Act, in section 73,––
(i) in sub-sections (1), (1A), (2A) and (3), for the words “eighteen months”,
wherever they occur, the words “thirty months” shall be substituted;
Effect:- The normal period of SCN would be 30 months and the extended period
would continue to be 5 years.
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10. Section 75-
“Interest on delayed payment of Service Tax”
Changes in Budget:-
‘‘Provided that in the case of a person who collects any amount as service tax
but fails to pay the amount so collected to the credit of the Central
Government, on or before the date on which such payment is due, the Central
Government may, by notification in the Official Gazette, specify such other rate
of interest, as it may deem necessary:
S.
no.
Particular Existing Interest
Rate (P.A.)
Proposed Interest
rate (P.A.)
1. Interest on delayed payments
-upto 6 months 18% 15%
-upto 12 months 24% 15%
-beyond 12 months 30% 15%
2. Interest on Service tax
collected but not paid within
the due date
24%
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11. Section 78A-
“Where a company has committed any of the [given] contraventions
then any director, manager, secretary or other officer of such
company, who at the time of such contravention was in charge of, and
was responsible to, the company for the conduct of business of such
company and was knowingly concerned with such contravention, shall
be liable to a penalty which may extend to one lakh rupees:—”
Changes in Budget:-
In the 1994 Act, in section 78A, the following Explanation shall be
inserted, namely:––
“Explanation.–– It is proposed that penalty proceedings under
section 78A shall be deemed to be closed in case where the main
demand and the penalty proceedings have been closed u/s 76 or 78.
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12. Section 89-
“Offences and Penalties”
Changes in Budget:-
The monetary limit for launching the prosecution is
increased from 1 crore to 2 crore of service tax evasion.
Section 91-
“Power to Arrest”
Changes in Budget:-
The power to arrest in service tax is being restricted only
in the situations where the tax payer has collected service
tax but has not deposited it to the exchequer and amount
exceeds Rs. 2 crore.
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13. New Section Introduced
Section 101-
“Special provision for exemption in certain cases relating to
construction of canal, dam, etc..”
For services provided by way of construction, erection &
commissioning of canal dam or other irrigation work provided to
governmental authority for the period 01 July 2012 to 29 Jan 2014.
From 30 Jan 2014, after amendment in definition of ‘Governmental
Authority’, it is already covered by exemption.
Application for refund of service tax paid on said services during the
period 01/07/12 to 29/01/14 can be filed within a period of 6 months
from the date of enactment of finance Act 2016.
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14. New Section Introduced
Retrospective Exemption given under Section 102 & 103 for the period
01/04/2015 to 29/02/2016 for following services:-
1. Services provided to government, local authority or governmental
authority by way of construction erection 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;
(b) a structure meant predominantly for use as––
(i) an educational establishment;
(ii) a clinical establishment; or
(iii) an art or cultural establishment;
(c) a residential complex predominantly meant for self-use or for the use
of their employees
2. Construction of original works pertaining to an airport or port (Section 103)
Condition: Where a contract entered into before the 1st day of March, 2015
and on which appropriate stamp duty, where applicable, had been paid before
that said date. The exemption is restored till 31/03/2020.
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15. Changes in Mega exemptions
Broadening of Tax Base
1. Exemption on services provided by,-
(i) a senior advocate to an advocate or partnership firm of advocates providing legal
service; and
(ii) a person represented on an arbitral tribunal to an arbitral tribunal,
is being withdrawn with effect from 1st April, 2016 and Service Tax is being levied under
forward charge.
2. Exemption on construction, erection, commissioning or installation of original works
pertaining to monorail or metro, in respect of contracts entered into on or after 1st
March 2016, is being withdrawn with effect from 1st March, 2016
3. Exemption on the services of transport of passengers, with or without accompanied
belongings, by ropeway, cable car or aerial tramway is being withdrawn with effect from
1st April, 2016.
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16. Changes in Mega exemptions – New Exemptions
• 1. Services by way of construction of low cost houses (upto carpet area of
60 sq mtr.) in any approved housing project scheme
• 2. Services of Life insurance business provided by way of annuity under
NPS
• 3. Services by EPFO, IRDA and SEBI ( effective from 01 April 2016
• 4. Services of General insurance provided under ‘Nirmaya’ Health
Insurance scheme
• 5. Services provided by National Centre for Cold Chain development by
way of knowledge dissemination
• 6. Services provided by vocational training under Deen Dayal Upadhyay
Gramin Kaushal Yojna
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17. Changes in Mega exemptions – New Exemptions
• 7. Services provided by bio-technology industry research assistance council
(BIRAC) approved biotechnology incubators to incubatees
• 8. Services of bodies empanelled by Directorate General of Training, Ministry
of Skill Development & Entrepreneurship
• 9. Services provided by IIM by way of 2 years Post graduate program in
management & Five year integrated program in management and fellowship
programme in management.
• 10. The threshold exemption for services provided by a performing artist in
folk or classical art form of music, dance or theatre is enhanced from 1 lacs to
1.50 lacs per event (wef 1-4-2016)
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18. Changes in Abatements (w.e.f. 1-4-2016)
S. No. Service Existing
Abatement
Proposed
Amendment
1 Credit of input services is being allowed on transport of
passengers by rail at the existing rate of abatement of
70%.
4.2%
Without credit
4.2%
With input
service credit
2 Credit of input services is being allowed on transport of
goods, other than in containers, by rail at the existing
rate of abatement of 70%.
4.2%
Without credit
4.2%
With input
service credit
3 Credit of input services is being allowed on transport of
goods in containers by rail at a reduced abatement rate
of 60%.
4.2%
Without credit
5.6%
With input
service cred
4 Credit of input services is being allowed on transport of
goods by vessel at the existing rate of abatement of 70%.
4.2%
Without credit
4.2%
With input
service credit
5 The abatement rate in respect of services by way of
construction of residential complex, building, civil
structure, or a part thereof
3.5%/ 4.2% 4.2%
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19. Changes in Abatements
S. No. Service Existing
Abatement
Proposed
Amendment
6 Abatement rate in respect of services by a tour operator in
relation to packaged tour (defined where tour operator
provides to the service recipient transportation,
accommodation, food etc) and other than packaged tour
rationalized to 70%
3.5%/ 5.6%
of amount
charged
4.2%
of amount
charged
7 Abatement on shifting of used household goods by a Goods
Transport Agency (GTA)
4.2% 5.6%
8 Abatement rate on services of a foreman to a chit fund is being
rationalised at the rate of 30%, without CENVAT credit on
inputs, input services and capital goods
14% 9.8%
In case of renting of motor cab service, cost of fuel should be included in the
‘consideration’ charged for availing the abatement.
In case of tour operator providing solely services of booking accommodation should
include cost of such accommodation while claiming abatement of 90%.
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20. Reverse Charge E. No. 30/2012 (Effective from 01 April 2016)
Reverse Charge withdrawn in following case:-
Description of service
The services provided by mutual fund agent/distributor to a
mutual fund or asset management company, are being made
taxable under forward charge with effect from
Reverse Charge introduced in following case:-
Description of service
Any Service provided by government or a local authority to a
business entity having turnover of more than 10 lakhs.
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21. Notification No. 41/2012- ST, dated the 29th June, 2012 was amended vide
notification No.1/2016-ST dated 3rd February, 2016 so as to, inter alia, allow
refund of service tax on services used beyond the factory or any other place or
premises of production or manufacture of the said goods, for export of the said
goods. The said amendment is being given retrospective effect from the date of
application of the parent notification, i.e., from 01.07.2012.
Time period of one month is proposed to be allowed to the exporters whose
claims of refund were earlier rejected in absence of amendment carried out
vide notification No.1/2016-ST dated 3rd February, 2016.
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22. Other Changes
1. Service tax on the services of Information Technology Software on media
bearing Retail Sell Price is being exempted from Service Tax with effect from
1st March, 2016 provided Central Excise duty is paid on RSP in accordance
with Section 4A of the Central Excise Act. (Effective from 01/03/2016)
2. Mutual exclusiveness of levy of excise duty and Service Tax on Information
Technology Software in respect of software recorded on media “NOT FOR
RETAIL SALE” is being ensured by exempting from excise duty only that
portion of the transaction value on which Service Tax is paid. (Effective from
01/03/2016)
3. Service tax assessee above a certain threshold will also be required to file
an annual return. (Effective from 01/04/2016)
4. Benefit of quarterly payment of service tax extended to OPC and HUF.
5. Facility of payment of service tax on receipt basis extended to OPC.
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23. • As per this scheme, in respect of cases pending before
Commissioner (Appeals), the assessee can file a declaration
after paying the duty, interest and penalty equivalent to 25% of
duty. In such cases the proceedings against the assessee will be
closed and he will also get immunity from prosecution.
• Applicable for appeals pending as on 1-3-2016.
• Declaration for settlement can be made b/w 1-6-2016 to 31-12-
2016.
• Scheme not apply to cases of search & seizure, prosecution
launched before 1-6-2016 and orders relating to narcotic
drugs/prohibited goods.
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