Budget IX - Legislative changes
Budget IX: Service Tax Overhaul - Entertainment, Government Services Now Taxable, New Penalties Introduced, Advance Ruling Expanded The legislative changes in Budget IX focus on amendments to service tax regulations. Key changes include the removal of certain entries from the negative list, such as admission to entertainment events, and the inclusion of government services to business entities as taxable unless specified otherwise. The definition of 'Government' is clarified, and activities like organizing lotteries and chit funds are now subject to service tax. New penalties for non-payment of service tax are introduced, with provisions for reduced penalties under specific conditions. Transitional changes and expanded advance ruling provisions for resident firms are also proposed. (AI Summary)
BUDGET - IX (LEGISLATIVE changes)
Introductory | Explanations |
Negative List | - Entry removed “admission to entertainment event or access to amusement facility”. Consequently the same is introduced in the exemption notification.
- Process amounting to manufacture or production of goods is being pruned to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption. Similar change made in exemption notification also.
- Earlier support services provided by government to business entities were taxable now the same is amended to provide that all the services provided by the government to business entities are liable to service tax unless specified anywhere else.
- Organizing a lottery not to be covered in Negative List.
- The changes shall come into effect from the date to be notified after the enactment of Finance Bill 2015.
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Definition of Government | In order to end interpretational issues the word Government is defined as “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 of otherwise, the account of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder.65B(26A) |
Section 65B (44) | The activity of foreman of chit fund for conducting or organizing a chit specifically excluded from the definition of ‘transaction in money or actionable claim’ so as to make it liable to service tax. |
Section 67 | Expenditure/cost recovered from service recipient includible in Value of Taxable service. |
| | Margin or discount received by Lottery distributor/selling agent is a consideration for services -liable for service tax. |
| | Expansion of Central Government’s rule making power for valuation. |
Section 73 (1B) | Service tax determined on self assessment but not paid is recoverable without issuance of SCN |
Section 73 (4A) | Provision for conclusion of proceedings where tax, interest and prescribed penalty upto 25% is paid during audit, investigation or verification is proposed to be deleted. |
Section 76 | Penalty for failure to pay Service tax without an intent to evade tax Existing Penalty | Not less than 100/- per day during which default continues or 1% of the service tax per month, whichever is higher but restricted to 50% of the amount of service tax. | Proposed Penalty | - Maximum - upto 10% of tax
- Penalty - Nil, if tax and interest paid within 30 days of service of SCN
- Penalty - 25% of penalty imposed under order u/s 73(2), if the service tax, interest and such reduced penalty is paid within 30 days of receipt of the order.
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Section 78 | Penalty for non-payment of tax with an intent to evade tax Existing Provision | - Penalty - 100% of the Service Tax
- Penalty - where true and complete details of transactions are available in the “specified records”
- 25% of tax, where, the tax, interest and penalty of 25% of the tax is paid within 30 days (90 days in case of assesses having value of taxable services less than 60lacs) from the date of receipt of order.
- 50% of tax in all other cases
| Proposed Penalty | - Penalty - 100% of service tax
- Penalty - 15% of the service tax amount if tax, interest and such reduced penalty is paid within 30 days of service of SCN
- Penalty - 25% of Service tax amount determined if the service tax, interest and such reduced penalty is paid within 30 days of receipt of order.
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Section 80 | Discretion to condone penalties u/s 76 and 77 on “reasonable cause” ground proposed to be dispensed with. |
Advance Ruling | Extended to resident firm and resident firm includes LLP, sole proprietorship firm and even OPC. |
Transitional changes | Section 78B is proposed to introduce transitional changes for making applicable amended penal provisions to existing cases or situations or defaults or otherwise. |
CA Akash Phophalia
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