Rationalization of Abatements

[Admin TMI]

Question - What are amendments proposed in Abatements in service tax in Finance Bill 2015 ?

[Admin TMI]

Rationalization of Abatements:

• At present, service tax is payable on 30% of the value of rail transport for goods and passengers, 25% of the value of goods transport by road provided by a goods transport agency and 40% for goods transport by vessels. The conditions also vary. A uniform abatement is now being prescribed for transport by rail, road and vessel. Service Tax shall be payable on 30% of the value of such services subject to a uniform condition of non-availment of Cenvat Credit on inputs, capital goods and input services.

• 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• Abatement is being withdrawn from chit fund service. Consequently, Service Tax shall be paid by the chit fund foremen at 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.

AI Summary

Finance Bill 2015: Service Tax Changes in Transport and Chit Fund Services; New Abatement Rules Effective April 1 The discussion addresses amendments in service tax abatements proposed in the Finance Bill 2015. A uniform abatement is introduced for transport services by rail, road, and vessel, with service tax payable on 30% of the value, provided Cenvat Credit is not availed. For air transport, the abatement for non-economy classes is reduced, requiring service tax on 60% of the value. Abatement for chit fund services is withdrawn, mandating full service tax payment, but allowing Cenvat Credit. These changes are effective from April 1, 2015.