TaxTMI 
TaxTMI 
Union Budget 2016 - Changes relating to Service Tax
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....; These and other changes are being given effect to by inserting new entries, and amending/omitting existing entries in notification Nos. 25/2012-ST, 26/2012-ST, 30/2012-ST, 32/2012-ST, all dated 20-6-2012, 23/2004-CE(NT) dated 10.09.2004 and 27/2012-C.E. (N.T.) dated 18.06.2012 and by issuing new notifications. 2.1 It may be noted that changes being made in the Budget are coming into effect on various dates, as indicated below: (i) Changes coming into effect immediately w.e.f. the 1st day of March, 2016; (ii) Changes coming into effect from the 1st day of April, 2016; (iii) The amendments which will get incorporated in the Finance Act, 1994 on enactment of the Finance Bill, 2016; (iv) The amendments made in the Finance Act, 1994, which will come into effect from 1st day of June, 2016 after the enactment of the Finance Bill, 2016; and (v) Chapter VI of the Finance Bill, 2016, regarding levy of Krishi Kalyan Cess on all taxable services will come into effect from 1st June 2016. For ease of reference, the Table at Annexure-I lists the changes being made and indicates the dates on which these changes would come into effect. The salient features ....
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....t that covers services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance [section 66D (p)(ii)] is proposed to be omitted with effect from 1.06.2016. Clause 146 of Finance Bill 2016 may please be seen in this regard. However such services by an aircraft will continue to be exempted by way of exemption notification [Not. No. 25/2012-ST, as amended by notification No. 09/2016-ST dated 1st March, 2016 refers]. The domestic shipping lines registered in India will pay service tax under forward charge while the services availed from foreign shipping line by a business entity located in India will get taxed under reverse charge at the hands of the business entity. The service tax so paid will be available as credit with the Indian manufacturer or service provider availing such services (subject to fulfillment of the other existing conditions). It is clarified that service tax levied on such services shall not be part of value for custom duty purposes. In addition, Cenvat credit of eligible inputs, capital goods and input services is being allowed for providing the service by way of transportation of goods by a ....
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....that is, from eighteen months to thirty months by making suitable changes to section 73 of the Finance Act, 1994. (Clauses 149 of the Finance Bill, 2016 refers) E. Amendment to section 75 of Finance Act Section 75 of the Finance Act is proposed to be amended so that a higher rate of interest would apply to a person who has collected the amount of service tax from the service recipient but not deposited the same with the Central Government. (Clause 150 of Finance Bill 2016 refers) F. Amendment in section 78A of the Finance Act, 1994 It is proposed to provide that penalty proceedings under section 78A shall be deemed to be closed in cases where the main demand and penalty proceedings have been closed under section 76 or section 78, by making suitable changes to section 78A by addition of an explanation. (Clause 151 of Finance Bill 2016 refers) G. Section 89 of the Finance Act, 1994 The monetary limit for filing complaints for punishable offences is proposed to be enhanced to Rs. 2 crore. (Clause 152 of Finance Bill 2016 refers) H. Sections 90 and 91 of the Finance Act, 1994 The power to arrest in service tax law is proposed to be restricted only to....
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...., 2016 refers) L. Restoration of certain exemptions withdrawn last year for projects, contracts in respect of which were entered into before withdrawal of the exemption. (a) Exemption from Service Tax on services provided to the Government, a local authority or a governmental authority by way of construction, erection, etc. of - (i) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (ii) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; (iii) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65B of the said Act; was withdrawn with effect from 1.4.2015. The same is being restored for the services provided under a contract which had been entered into prior to 01.03.2015 and on which appropriate stamp duty, where applicable, had been paid prior to that date. The exemption is being restored till 31.03.2020. [Notification No. 25/2012-ST as amended by notification No. 09/2016-ST dated 1st March, 2016....
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....e being experienced in the assessment of such media to Central Excise duty/CVD besides giving rise to the issue of double taxation - levy of Central Excise duty/CVD as well as service tax. In order to resolve the issue, media with recorded Information Technology Software which is not required to bear RSP, is being exempted from so much of the Central Excise duty/CVD as is equivalent to the duty payable on the portion of the value of such Information Technology Software recorded on the said media, which is leviable to service tax. In such cases, manufacturer/importer would therefore be required to pay Central Excise duty/CVD only on that portion of value representing the value of the medium on which it is recorded along with freight and insurance. The exemption is subject to the fulfillment of certain conditions. Thus, the levy of Central Excise duty/CVD and service tax will be mutually exclusive. (Notification No. 11/2016-CE and 11/2016-Customs, both dated 1st March 2016 refers) 6.0 Review of Exemptions: 6.1 Exemption in respect of the following services is being withdrawn,- * Services provided by a senior advocate to an advocate or partnership firm of advocates, and * ....
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....No. 32/2012-ST refers) 7.5 Services provided by National Centre for Cold Chain Development under Department of Agriculture, Cooperation and Farmer‟s Welfare, Government of India, by way of knowledge dissemination are being exempted from service tax. (New entry at S. No. 52 of notification No. 25/2012-ST refers) 7.6 Services provided by Insurance Regulatory and Development Authority (IRDA) of India are being exempted from service tax. (New entry at S. No. 50 of notification No. 25/2012-ST refers) 7.7 Services of general insurance business provided under „Niramaya‟ Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability in collaboration with private/public insurance companies are being exempted from service tax. (New entry at S. No. 26(q) of notification No. 25/2012-ST refers) 7.8 The threshold exemption limit of consideration charged for services provided by a performing artist in folk or classical art forms of music, dance or theatre, is being increased from Rs. 1 lakh to Rs. 1.5 lakh per performance. (Notification No.09/201....
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....14 and 5th February, 2014 that MHRD is vested with the power to recognise educational courses [DoPT O.M. dated 08.01.1975], for the purpose of recruitment to posts under Government of India. It has been further stated by MHRD in their above mentioned letters that IIMs have been conducting Post Graduate Programmes in Management and Fellowship Programmes which are equivalent to MBA and Ph.D degrees. It has been reiterated by Secretary, MHRD vide letter D.O. 3/5/2013-TS.V dated 15.1.2016 that the IIMs have been conducting Post Graduate Programmes in Management and Fellowship Programmes which are equivalent to MBA and Ph.D degrees, respectively, (as also clarified by associations like Association of Indian Universities, Inter -University Board of India etc.). In view of this, the exemption being given to the above programmes of IIMs is clarificatory in nature and in view of the same, liability to pay service tax in respect of the said programmes for the past period will also become infructuous. (New entry at S. No. 9B of notification No. 25/2012-ST refers) The above changes in notification No. 25/12-ST, except the change mentioned in para 7.11, 7.12, 7.13 and 7.14 (which wi....
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.... 1982 are proposed to be taxed at an abated value of 70% [i.e., with abatement of 30%], subject to the condition that Cenvat credit of inputs, input services and capital goods has not been availed. (Amendment in entry at S. No. 8 of notification No. 26/2012-ST refers) 9.4 At present, there is abatement of 60% on the gross value of renting of motor-cab services, provided no cenvat credit has been taken. It is being made clear by way of inserting an explanation in the notification No. 26/2012-ST that cost of fuel should be included in the consideration charged for providing renting of motor-cab services for availing the abatement. (Insertion of Explanation 'BA' in notification No. 26/2012-ST refers) 9.5 At present, two rates of abatement have been prescribed for services of construction of complex, building, civil structure, or a part thereof,- (a) 75% of the amount charged in case of a residential unit having carpet area of less than 2000 square feet and costing less than Rs. 1 crore, and (b) 70% of the amount charged in case of other than (a) above, both subject to fulfilment of certain conditions prescribed therein. A uniform abatement at the rate of 70% is now b....
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....ion Budget, 2015, as a policy decision to prune exemptions, the exemption to services provided by mutual fund agents/distributors to an asset management company was withdrawn. However these services were put under reverse charge liability, i.e., the Asset Management Company was made liable to pay service tax for the services received from such agents/distributors. Services provided by mutual fund agents/distributor to a mutual fund or asset management company are being put under forward charge, i.e. the service provider is being made liable to pay service tax. The small sub-agents down the distribution chain will still be eligible for small service provider exemption [threshold turnover of Rs. 10 lakh/year] and a very small number will be liable to pay service tax. Accordingly, Rule 2(1)(d)(EEA) of Service Tax Rules, 1994 making service recipient, that is, mutual fund or Asset Management Company as the person liable for paying service tax is being deleted along with consequential changes in notification No. 30/2012-ST. 10.2 The liability to pay service tax on any service provided by Government or a local authority to business entities shall be on the service recipient. ....
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....ot only support services) provided by Government or local authorities to business entities shall be taxable. Consequently, 1st April, 2016 is being notified as the date from which the word "support" shall stand deleted from rule 2(1)(d)(i) (E) of Service Tax Rules, 1994 so as to provide that the liability to pay service tax on any service provided by Government or local authorities to business entities shall also be on the service recipient on reverse charge basis. 11.5 Recipient of services availed from foreign shipping line by a business entity located in India will get taxed under reverse charge at the hands of the business entity. (No fresh provision is being made in this regard, as it is already covered by Place of Provision of Service Rules.) 11.6 Technical amendment to rule 6 (4) Rule 6(4) is being amended so as to substitute the reference to the Central Excise (No. 2) Rules, 2001, with a reference to the Central Excise Rules, 2002. The above changes, except the changes mentioned in para 11.5 (which will come into effect from 1st June, 2016), shall come into effect from the 1St day of April 2016. 12. The Pont of Taxation Rules (POTR). The Point of Taxation ....
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....companies (CCRS) 15.1.1 High Level Committee (HLC) in their Second Half Yearly Report in December 2015 have stated that Air Travel Agents (ATA) reportedly have been representing to CBEC since 2012 for a clarification about levy of service tax on the incentives received by them from the Companies providing Computer Reservation System (CCRS) like Galileo, Amadeus, etc. The CCRS do not charge any amount for providing access to their internet system for booking of air tickets by the ATAs. Rather, the CCRS are providing certain incentives either for achieving the targeted booking of air tickets or for loyalty for booking of air tickets using their software system. 15.1.2 It is clarified that incentives received by the Air Travel Agents (ATAs) from the Companies providing Computer Reservation System (CCRS) are for using the software and platform provided by the CCRS like Galileo, Amadeus, etc. The CCRS are providing these incentives either for achieving the targeted booking of air tickets or for loyalty for booking of air tickets using their software system. Thus, the service provided by CCRS is to the Airlines and Air Travel Agent is promoting the service provided by CCRS to Airli....
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....5.5 Indirect tax Dispute Resolution Scheme, 2016 Indirect tax Dispute Resolution Scheme, 2016, wherein a scheme in respect of cases pending before Commissioner (Appeals), the assessee, after paying the duty, interest and penalty equivalent to 25% of duty, can file a declaration, is being introduced. In such cases the proceedings against the assessee will be closed and he will also get immunity from prosecution. However, this scheme will not apply in certain specified type of cases. 15.6 Returns. Service tax assessees above a certain threshold will also be required to file an annual return. This change shall come into effect from 1st April, 2016. 15.7 Services provided by institutes of language management (ILMs) 15.7.1High Level Committee (HLC) on Tax Laws in its IInd Half Yearly Report has observed that Institutes of Language Management (ILMs) are engaged by various schools/institutions to develop knowledge and language skills of students. Since the ILMs are providing coaching/teaching to the students in a school or college, as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force it should be clar....
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....hnical Officers, Dr Abhishek Chandra Gupta, Dr. Ravinder Kumar and Shri Abhishek Verma, who put in their best. With regards, Yours sincerely, (Amitabh Kumar) To: All Chief Commissioners / Director Generals All Principal Commissioners/Commissioners of Service Tax All Principal Commissioners/Commissioners of Central Excise ANNEXURE-I LIST OF CHANGES BEING MADE AND THE DATES ON WHICH THEY WOULD COME INTO EFFECT. SUBJECT Para Para A. With immediate effect (from 01.03.2016) (i) Restoration of exemption on services provided to the Government, a local authority or a governmental authority. 4.2L(a) (ii) Restoration of exemption on services to an airport, port. 4.2L(b) (iii) Withdrawal of exemption on services to monorail or metro, in respect of contracts entered into on or before 01.03.2016 6.3 7.11 to 7.13 (iv) Exemption to services by way of construction etc. in respect of- (a) housing projects under Housing For All (HFA) (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY); (b) low cost houses up to a carpet area of 60 square metres in a housing project under "Affordable housing in Partnership" component of PMAY, (c) ....
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....ions thereof in respect of services by,- (i) Tour operator services (ii) transport of passengers by rail. (iii) transport of goods by rail. (iv) shifting of used household goods by a GTA (v) foreman to a chit fund. (vi) renting of motor-cab services. (vii) transport of goods by vessel. (viii) Construction of complex, building, civil structure, etc. 9.1 to 9.9 Service tax Rules,- (i) The benefit of (a) quarterly payment of service tax being extended to OPC and HUF and (b) payment on receipt basis being extended to OPC. (ii) Rule 2(1)(d)(i) (D)(II) modified as an individual advocate other than senior advocate. (iii) The word "support" shall stand deleted from rule 2(1)(d)(i) (E) (iv) Rule 2(1)(d)(EEA) making mutual fund agents/distributor as person liable for paying service tax will be deleted (v) The service tax composition scheme for single premium annuity policies Reverse charge mechanism (i) mutual fund agents/distributors to an asset management company under forward charge. (ii) service provided by Government or local authoritie....
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....2012-ST). (13) Exemption from Service Tax on services provided to the Government, a local authority or a governmental authority. (14) Exemption from Service Tax on services by way of construction, erection, etc. of original works pertaining to an airport, port. (15) Rationalisation of rate of interest in case where is service tax is collected and not credited in Govt. account and others 4.2 A 4.1 (A) 4.2B 4.2C 4.2D 4.2E 4.2 F 4.2G, 4.2H 4.2I 4.2J 4.2K 4.1(A) 4.2L (a) 4.2(L(b) 14 (16) Dispute resolution scheme, 2016 (17) Returns 15.5 15.6 With effect from 1st day of June, 2016 after enactment of the Finance Bill, 2016 in respect of each provision (1) Krishi Kalyan Cess (2) Negative List entry that covers "service of transportation of passengers, with or without accompanied belongings, by a stage carriage" is to be omitted [section 66D (o)(i)] (3) Negative List that covers services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance is to be omitted [section 66D (p)(ii)] ....
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....es. [Amendment in Rule 4(5) (b) refers] (f) Presently, the permission given by an Assistant Commissioner or Deputy Commissioner to a manufacturer of the final products for sending inputs or partially processed inputs outside his factory to a job-worker and clearance there from on payment of duty is valid for a financial year. It is being provided that the same would be valid for three financial years. [Amendment in rule 4(6) refers]. (g) It is being provided that CENVAT credit of Service Tax paid on amount charged for assignment by Government or any other person of a natural resource such as radio-frequency spectrum, mines etc. shall be spread over the period of time for which the rights have been assigned. It is also being provided that where the manufacturer of goods or provider of output service further assigns such right to use assigned to him by the Government or any other person, in any financial year, to another person against a consideration, balance CENVAT credit not exceeding the service tax payable on the consideration charged by him for such further assignment, shall be allowed in the same financial year. It is also being provided that CENVAT credit of annual or m....
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....ditions for calculation of credit allowed and credit not allowed and directs that such credit not allowed shall be paid, provisionally for each month. The four key steps for calculating the credit required to be paid are :- (a) No credit of inputs or input services used exclusively in manufacture of exempted goods or for provision of exempted services shall be available ; (b) Full credit of input or input services used exclusively in final products excluding exempted goods or output services excluding exempted services shall be available; (c) Credit left thereafter is common credit and shall be attributed towards exempted goods and exempted services by multiplying the common credit with the ratio of value of exempted goods manufactured or exempted services provided to the total turnover of exempted and non- exempted goods and exempted and non-exempted services in the previous financial year; (d) Final reconciliation and adjustments are provided for after close of financial year by 30th June of the succeeding financial year, as provided in the existing rule. (vi) A new sub-rule (3AA) is being inserted to provide that a manufacturer or a provider of output service who ....
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....pted Service is aimed at allowing credit of eligible inputs, input services and capital goods for providing the said service and providing Indian shipping lines a level playing field vis a vis the foreign shipping lines. The credit available may be used by Indian shipping lines to pay service tax on the services of transportation of goods by a vessel from outside India to the customs station of clearance in India, which would become taxable w.e.f 1st June 2016 after enactment of Finance Bill 2016. (j) Rule 7 of the Rules dealing with distribution of credit on input services by an Input Service Distributor is being completely rewritten to allow an Input Service Distributer to distribute the input service credit to an outsourced manufacturing unit also in addition to its own manufacturing units. Outsourced manufacturing unit is being defined to mean either a job-worker who is required to pay duty on the value determined under the provisions of rule 10A of the Central Excise Valuation (Determination of Price Of Excisable Goods) Rules, 2000, on the goods manufactured for the Input Service Distributor or a manufacturer who manufactures goods, for the Input Service Distributor under a....