Broadening of tax base - Review of general exemptions extended under Notification No. 25/2012-ST, dated 20.6.2012

[Admin TMI]

Question - What are amendments proposed in exemption under Notification No. 25/2012- ST, dated 20-6-2012 in Finance Bill 2015 ?

[Admin TMI]

Review of general exemptions extended under Notification No. 25/2012-ST, dated 20.6.2012:

• Exemption presently available on specified services of construction, erection, commissioning, etc. provided to the Government, a local authority or a governmental authority ( vide S. No. 12 of the said notification ) shall be limited only to,-

(a) a historical monument, archaeological site or remains of national importance, archeological excavation or antiquity;

(b) canal, dam or other irrigation work; and

(c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal. Exemption to other services presently covered under S. No. 12 of notification No. 25/12-ST is being withdrawn.

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to construction, erection, commissioning or installation of original works pertaining to an airport or port is being withdrawn.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

• 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 ₹ 1,00,000 for a performance.

• 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.

• Exemptions are being withdrawn on the following services:

(a) services provided by a mutual fund agent to a mutual fund or assets management company,

(b) distributor to a mutual fund or AMC,

(c) selling or marketing agent of lottery ticket to a distributor.

Service tax on these services shall be levied on reverse charge basis.

• Exemption is being withdrawn on the following service,-

(a) Departmentally run public telephone;

(b) Guaranteed public telephone operating only local calls; and

(c) Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued.

All the above changes in notification No. 25/12-ST, dated 20.6.2012 shall come into effect from the 1st day of April, 2015.

AI Summary

Service tax exemptions narrowed, with specific construction, transport, artist and telephony exemptions curtailed and some services shifted to reverse charge. Notification No. 25/2012 ST exemptions are narrowed: construction and related services to government are limited to national archaeological monuments, irrigation works, and water/sewerage pipelines or plants; airport and port original works exemption withdrawn; performing artist exemption limited by fee threshold; transportation exemption limited to specified food staples; exemptions for mutual fund agents, distributors and lottery selling agents withdrawn and made taxable on a reverse charge basis; certain public telephony exemptions withdrawn. Changes effective from the first day of April, 2015.