The petitioners challenged the levy of service tax on construction of residential complexes, arguing that it amounts to taxation of immovable property, which is not within the legislative competence of Parliament. The Revenue argued that construction involves various taxable services. The court held that while construction involves both goods and services, the dominant nature is transfer of immovable property and hence service tax cannot be levied. It ruled the levy was beyond Parliament's legislative competence.

1. Changes in Service Tax Law by Union
Budget 2016-17 & There after till date
CA. Vijay Maheshwari
Study Circle Meeting 22th June 2016 CPE Chapter Bilapsur of CIRC

2. There shall be levied and collected, 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

3. 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
Peiod Effective
Rate
Remark
Till 31-05-15 12.36 EC +SHEC
01-06-15 to 14-11-15 14.00 ST Only
15-11-15 to 31-05-16 14.50 SBC
From 01-06-16 15.00 SBC+KCC
Breakup of Present Effective Rate

4. KKC Some Critical Issues
KKC would be required to be mentioned separately in invoice & to pay separately?
Yes, It is a levy separate from Service Tax
KKC in case of Abated value of Services?
Would apply in same percentage of taxable value as mentioned for ST
(NT 26/2012 & NT 28/2016)
For Example :-
Goods Transport Agency Service – Taxable % = 30%
Accordingly 0.50x30% = 0.15 would be KCC
KKC in case of Reverse Charge (NT 30/2012) ?
Same as Service Tax
KKC in case of Service Tax (Determination of Value Rules)?
Taxed on same value as Service tax (NT 28/2016 )

5. KKC Some Critical Issues
KKC CENVAT ?
To whom allowed : Provider of Output Service
On what input : on Taxable service (Input Services)
Against which tax : KCC on Taxable service against KCC on taxable service only
Other tax can be adjusted to pay KCC
No ST/ED can not be adjusted against KCC on taxable service
(NT CE- 28/2016 )
Practical's :-
X a manufacturer pays KCC to Security agency service : can he take CENVAT ?
X a manufacturer an also service provider then ?
X ‘s KCC payable for Jun 16 month comes to Rs. 1000/-, he is having CENVAT on
service tax paid on reverse charge ST- 5000/- , KCC –Rs. 179/-, can he adjust Rs. 1000/-
to KCC payable?

6. KKC Some Critical Issues
KKC and POT ?
Rule 5 of POT will apply on new levy (WEF 01-03-16)
No Tax if :
a ) Invoice issued and payment received
b) Payment received and Invoice issued within 14 days
In all other cases tax payable
Practical's :-
Service completed & Invoice issued on 15-05-2016 & money received on 01-06-2016 ?
Service completed on 31-05-16 & Invoice issued on 14-06-2016 & money received on 15-
06-2016 ?
Service completed on 31-05-16 & money received on same day & Invoice issued on 14-
06-2016?
Service completed on 31-05-16 & money received on same day & Invoice issued on 16-
06-2016?

7. Legal Services (Advocates)
Position till 31-03-2016 (Sl. No. 6 of NT 25/2012)
Exemption of legal services provided to :
1. An advocate of firm of advocates
2. Any person other then a business entity
3. A business entity with TO < 10 Lacs in preceding FY
In other words was Legal services was taxable in case of services received by
a business entity T.O. > 10 L in preceding FY.
100% Reverse charge was applicable by virtue of Sec. 68(2), Rule 2 & NT 30/2012

8. Legal Services (Advocates)
Amendment made by Finance Act 2016 W.e.f. 01-04-2016 (Sl. No.
6 of NT 25/2012)
Exemption of legal services provided by an advocate (other than Sr. Adv) to :
1. An advocate of firm of advocates
2. Any person other then a business entity
3. A business entity with TO < 10 Lacs in preceding FY
Exemption of legal services provided by an Sr. advocate to Any person other then a
business entity
Amendment also made in Rule 2 and NT 30/2012.
In other words
W.e.f .01-04-2016 Legal services by Sr. advocate to any Business entity
became taxable with his liability to collect and pay taxes (No RCM)

9. Legal Services (Advocates)
Amendment by NT 32, 33 & 34/2016 w.e.f. 06-06-2016
Exemption of legal services provided by an Sr. advocate to
• Any person other then a business entity
• A business entity with TO < 10 Lacs in preceding FY
(NT- 32/2016 amending Nt 25/2016 )
Consistent amendments have been made in Rule 2 of STR & NT 30/2012
In other words
W.e.f 06-06-2016 Legal services by Sr. advocate to any Business entity with
TO < 10 Lacs in preceding FY, became taxable with 100% RCM.

10. Legal Services (Advocates)
Amendment by NT 32, 33 & 34/2016 w.e.f. 06-06-2016

11. Legal Services (Advocates)
Amendment by NT 32, 33 & 34/2016 w.e.f. 06-06-2016

12. 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 5years.

13. Section 75-
“Interest on delayed payment of Service Tax”
W.e.f 14-05-16
Note : Rebate of 3% in rate is still available to Service provider if value
of taxable services > 60 Lacs
S.
no.
Particular Existing Interest
Rate (P.A.)
ProposedInterest
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%

14. Changes
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 toArrest”
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.

15. Changes
Annual Return W.e.f. FY 2016-17 (Rule 7)
• Existing system of half yearly return ?
• Periodicity : Annual
• Due date : 30th Nov of next FY
• Revision : within 1 month
• Late fees : Rs. 100 per day of delay maximum Rs. 20K
• CG may exempt any person or class

16. Changes w.e.f. 01-04-2016
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%.
70%
Without credit
70%
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%.
70%
Without credit
70%
With input
service credit
3 Credit of input services is being allowed on transport of
goods in containers by rail
70%
Without credit
60%
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%.
70%
Without credit
70%
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
70 & 75 % 70%

17. Changes w.e.f. 01-04-2016
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%
75/60%
of amount
charged
70%
of amount
charged
7 Abatement on shifting of used household goods by a Goods
Transport Agency (GTA)
70% 60%
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
0 30%
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%.

18. Suresh Kumar Bansal Vs. Union of India & Ors;
Anuj Goyal & Ors Vs. Union of India & Others [2016-TIOL-1077-HC-DEL-ST]
Facts & Ground:-
• Petitioners entered into into a composite contract for purchase of flats with M/s
Sethi Buildwell Pvt. Ltd. In housing project
• Builder recovered Service tax apart from consideration on the services ‘in relation to
construction of complex’ as defined under Section 65(105)(zzzh) of the Finance Act,
1994 (“the Finance Act”)
• Being aggrieved, the Petitioners filed Petitions before the High Court of Delhi.
Petitioners’ contentions:-
• The entries relating to taxation in List I and List II of the Seventh Schedule to the
Constitution of India were mutually exclusive and the Parliament did not have the
power to levy tax on immovable property; thus beyond the legislative competence of
the Parliament;
• Their Agreement is a composite contract and in absence of specific provisions for
ascertaining the service component of the said Agreement, the levy would be beyond
the legislative competence of the Parliament;

19. Suresh Kumar Bansal Vs. Union of India & Ors;
Anuj Goyal & Ors Vs. Union of India & Others [2016-TIOL-1077-HC-DEL-ST]
Revenue’s Contention:-
• Development of a project results in the substantial value addition on bare land and
includes various services such as consulting services, engineering services,
management services, architectural services, These services are subsumed in the
taxable service as contemplated under Section 65(105)(zzzh) of the Finance Act.
• Taxable value is only 25% due to abatement available (Nt 1/2006)
Court’s Observation:-
• No impinges on the legislative field reserved for the States under Entry-49 of List-II
of the Seventh Schedule to the Constitution of India The imposition of Service tax
by virtue of the impugned explanation is not a levy on immovable property as
contended.
• While the legislative competence of the Parliament to tax the element of service
involved cannot be disputed but the levy itself would fail, if it does not provide for a
mechanism to ascertain the value of the services component which is the subject of
the levy.

20. Suresh Kumar Bansal Vs. Union of India & Ors;
Anuj Goyal & Ors Vs. Union of India & Others [2016-TIOL-1077-HC-DEL-ST]
Court’s Observation continue………
• None of the Rules under the Service Tax (Determination of Value) Rules, 2006 (“the
Service Tax Valuation Rules”), cater to determination of value of services in case of a
composite contract which involves sale of land.
• The abatement to the extent of 75% by a notification or a circular cannot substitute
the lack of statutory machinery provisions to ascertain the value of services involved
in a composite contract.
Comment
• From July 2012, all services except specified in the Negative List, were subjected to
service tax.
• However, the Act and Rules pertaining to service tax do not contain any provision for
exclusion of value of land.
• An abatement is provided vide a Notification and, therefore, the legal situation from
July 2012 till date is exactly same as was there in the above judgment.

21. 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.

22. 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.”;

23. Legislative Changes with effect 01-06-16
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—
with or without accompaniedTransportation of passengers,
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.

24. 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.

25. Section 66E- Declared Services
Insertions 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.

26. 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.

27. 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.

28. New Section Introduced
in certain cases relating to
Section 101-
“Special provision for exemption
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.

29. 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.

30. Changes in Mega exemptions
Broadening of Tax Base
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
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.

31. 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
Health
• 3. Services by EPFO, IRDA and SEBI ( effective from 01 April 2016
• 4. Services of General insurance provided under ‘Nirmaya’
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

32. Changes in Mega exemptions: Exemption
• 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 (wef1-4-2016)

33. 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.

34. 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.

35. 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. Benefit of quarterly payment of service tax extended to OPC and HUF.
4. Facility of payment of service tax on receipt basis extended to OPC.

36. • 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.

37. Thank You
CA. VIJAY MAHESHWARI
12/B, 1st Floor, Vaishali Complex
Deendayal Square, Shrikant Verma Marg
BILASPUR(C.G.)-495001
Phone No. : (07752)407555
Cell : 98271 13251
Email- vaainho@gmail.com