SERVICE TAX

I. Broadening the tax base:

    (i) Review of the Negative List of services:

        • Service tax leviable currently on sale of space or time for advertisements in broadcast media, namely radio or television, has been extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media, however, would remain excluded from service tax. Print media is being defined in service tax law for the purpose. This change will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

        • Service tax to be levied on the services provided by radio taxis or radio cabs, whether or not air-conditioned. The abatement presently available to rent-a-cab service would also be made available to radio taxi service, to bring them on par. Service tax on radio taxi services will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

    (ii) Review of general exemptions extended under Notification No. 25/2012-ST in exercise of powers conferred under section 93(1) of the Finance Act,1994:

        • Exemption extended to clinical research on human participants is being withdrawn.

        • Exemption extended to air-conditioned contract carriages like buses is being withdrawn.

    (iii) Rationalization of general exemptions extended under Notification No. 25/2012-ST in exercise of powers conferred under section 93(1):

        • Exemption in respect of services provided to Government or local authority or governmental authority, will be limited to services by way of water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation.

        • At present, all services provided by educational institutions [providing educational services specified in the negative list] to their students, faculty and staff does not attract service tax; this will continue. However, in respect of services received by such educational institutions, presently, exemption is being operated through the concept of ‘auxiliary educational services’. Doubts have been raised and clarifications have been sought regarding the scope and meaning of ‘auxiliary educational services’. To bring clarity, it is proposed to omit the concept of ‘auxiliary educational services’ and specify in the notification, the services which will be exempt when received by the educational institutions. Accordingly, in respect of services received by an eligible educational institution: (i) transportation of students, faculty and staff; (ii) catering service including any mid-day meals scheme sponsored by the Government;

     (iii) security or cleaning or house-keeping services in such educational institutions; and (iv) services relating to admission to such institution or conduct of examination, are being exempted from service tax. In view of this rationalization, exemption extended so far in respect of renting of immovable property service received by educational institutions, stands withdrawn.

        • Exemption available to accommodation services provided by hotels, dharamshalas or ashrams when they provide rooms for less than Rupees One Thousand per day, is being re-worded to bring out the intent clearly.

          However, in cases of (ii) and (iii) above, where the general exemptions are withdrawn, if the aggregate value of taxable service provided in a financial year does not exceed Rupees Ten Lakh, exemption will be available in terms of Notification 33/2012-ST. Changes in the exemption notification No. 25/2012-ST to come into effect immediately.

 

See:- Mega exemption notification - Notification No. - 25/2012 Dated - June 20, 2012 - [As amended]

Service tax expansion: online/mobile advertising and radio taxi services included; exemptions narrowed, educational exemptions restructured. The Finance (No.2) Bill, 2014 expands the service tax net by extending levy to online and mobile advertising and to radio taxi services (with rent a cab abatement parity) and narrows general exemptions by withdrawing relief for clinical research and certain contract carriages, restricting government service exemptions to core public services, and restructuring exemptions for educational institutions to list incoming exempt services while withdrawing exemption for renting immovable property; small value supplier relief under Notification 33/2012 ST remains where applicable and amendments to Notification No. 25/2012 ST take immediate effect.