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Service Tax Budget -2015-Sectoral Changes

 

1.   Key Features

 

  • Increase in Service Tax Rate from 12.36% to 14% w.e.f. 01-06-2015 (14/2015-ST)
     
  • No education cess or Higher education cess w.e.f. 01-Jun-2015

     
  • Time to avail Cenvat credit increased from 6 months to one year
     

1.1.Swachh Bharat Cess

 

W.e.f. date to be notified after enactment of FB,2015. Cenvat Provisions silent on credit of SBB.

  • Chapter VI, Clause 117 provides for levy of cess to be called Swachh Bharat Cess
     
  • As service tax on all or any of the taxable services
     
  • At the rate of 2%
     
  • On the value of such services
     
  • For purpose of financing and promoting Swachh Bharat initiatives
     
  • Or for any other purpose relating thereto.
     
  • SBB cess is in addition to any cess or service tax

 

2.   Sectoral Changes

 

Synopsis of Budget-2015 impact on Categories

Particulars

Remarks

W.e.f.

Entertainment and Amusement events

Scope of exemption restricted

01-Jun-2015

Process with respect to production of alcoholic liquor

Production exempted earlier now taxable

Services provided by Government

All services provided by Govt. taxable under reverse charge

Construction , Erection, Commissioning and Installation, Maintenance, Repair service provided to Government, a local authority

Some exemptions Omitted

01-Apr-15

Manpower Supply/ Security

Now recipient liable for 100% amount instead of 75%

Transport Services

Exemption to transport of Food items restricted and taxable amount increased to 30%

Ambulance Service

Exempted

Fruit Vegetable packing

Exempted

 

2.1.Construction

 

  • Service provided to Government, a local authority or a governmental authority of the nature of Construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration is exempted u/n 25-2012-ST.

 

  • Earlier Provision: Exemption to activities related to below is retained:

    • A historical monument, archaeological site as specified
       
    • Canal, dam or other irrigation works
       
    • Pipeline, conduit or plant for (i) water supply (ii) water treatment (iii)sewerage treatment or disposal

 

  • Budget Provision: Exemption revoked for following works

    • Civil structure or any other original works meant predominantly for a non-industrial or non-commercial use or non business or non professional use
       
    • A structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment
       
    • A residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to 65B(44)[MP, MLA…]

 

  • Implication: Above works will be taxable even if services provided to government or such bodies
     
  • Date of Applicability: w.e.f. 01-Apr-15
     
  • Imp. Note: In addition to above, exemption to construction, erection, commissioning and installation of original works service provided for ports, and airports is also revoked w.e.f. 01-Apr-2015 as it is now more on private participation model.

 

2.2.Admission to entertainment event and Amusement facility

 

  • Earlier provision: Admission to entertainment and amusement facilities covered under negative list u/s 66D(j)
     
  • Budget provision: Negative list entry deleted along-with definition of “entertainment event” and “amusement facility”
     
  • Implication: Entry to above events/facilities  is now taxable alongwith entertainment tax levied by various states (Double taxation)
     
  • New Exemption: u/n 25-2012: Services by way of right to admission to,-

    (i) exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet


    (ii) recognised sporting event

    (iii) award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is not more than Rs 500 per person.”.

 

  • Definitions:

“Recognised sporting event” means any sporting event,-

(i) organised by a recognised sports body where the participating team or individual represent any district, state, zone or country;

(ii) covered under entry 11(Services by way of sponsorship of sporting events organized by bodies recognized therein)

 

  • Date of Applicability: 01-Jun-15 (14/2015-ST)

 

2.3.Process amounting to manufacture or production of goods

 

  • Provision: Any process amounting to manufacture or production of goods is not taxable under Negative list 66D(f).

    U/s 65B(40) "process amounting to manufacture or production of goods" means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or the Medicinal and Toilet Preparations (Excise Duties) Act,1955 or any process amounting to manufacture of FB 2015alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force.
     
  • New Exemption: u/n 25-2012: Carrying out an intermediate production process as job work in relation to any goods FB 2015 {excluding alcoholic liquors for human consumption} on which appropriate duty is payable by the principal manufacturer
     
  • Implication: Both manufacture and intermediate process w.r.t. alcoholic liquor will be taxable. However Schedule VII– List II authorizes State to levy tax on manufacture/production of liquor. (Double taxation)
     
  • Date of Applicability: 01-Jun-2015(14/2015-ST)

 

2.4.Services provided by Government

 

  • Earlier provision: Services provided by government is covered under negative list vide Sec 66D(a) except support services provided to business entities which are taxable under reverse charge basis.
     
  • Budget provision: “Support service” substituted by “any service” and definition of support service deleted.
     
  • Implication: All services provided by government will now be taxable except as exempted otherwise. Consequently notification 30-2012-ST is also amended and therefore ALL services provided by government to business entities will be covered under reverse charge.
     
  • Date of Applicability: TO BE NOTIFIED
     
  • Note: “Government” defined as 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 or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder.

 

2.5.Manpower supply/ Security

 

Supply of manpower or security services are covered under reverse charge where:

 

  • Service Provider =  Individual, HUF, Partnership or AOP “AND”
     
  • Service Receiver = Corporate business entity in taxable territory.

% liability

Service Provider

Service Receiver

Present {partial reverse charge}

25%

75%

Proposed {Full Reverse Charge)

0%

100%

 

  • Date of Applicability: 01-Apr-2015

 

2.6.Transport Services

Services provided by a goods transport agency by way of transportation of following goods is exempted u/n 25-2012.

  • Agricultural produce
     
  • w.e.f. 01-Apr-15 Milk, Salt and food grain including  flour, pulses and rice
     
  • w.e.f. 01-Apr-15 Foodstuff including flours, tea, coffee, jaggery, sugar, milk products,  salt and  edible oil, excluding alcoholic beverages
     
  • Chemical fertilizer and  oilcakes
     
  • Newspaper or magazines registered with the Registrar of Newspapers
     
  • Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap
     
  • Defense or military equipment
     
  • Cotton, ginned or baled
     
  • Consignment in single carriage <=1,500/-
     
  • Consignment for a single consignee <=750/-
     

Agriculture- Cultivation of plants and rearing or breeding of animals and other species of life forms for foods, fibre, fuel, raw materials or other similar products but does not include rearing of horses.

Agricultural produce- Any produce of agriculture on which either no processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. . {[Note: fruits, vegetables, eggs, milk, food grains are well covered under definition of agricultural produce.]

Transport of Export goods: GTA service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is widened w.e.f. 01-Apr-2015 to include such services when provided for transport of export goods by road from the place of removal to a land customs station. (31-2012-ST)

Transport services by rail or vessel : 25-2012 is amended w.e.f. 01-Apr-2015 providing exemptions to transport in similar lines to that of GTA services.

Abatement

 

Nature of transport

Present Taxable %

Proposed Taxable %

Impact

Rail transport for goods  and passengers

30%

30%

-None-

Goods transport by road

25%

Tax increased

Goods transport by Vessels

40%

Air transport-Passengers-Economy class

40%

40%

-None-

Air transport-Passengers-Other than economy class

40%

60%

-None-

 

Pre-condition: No Cenvat allowed on inputs, capital goods and input services used for providing these services

 

2.7.Betting, gambling or lottery/ Chit fund foreman

 

  • Provision: Definition of Service u/s Sec 65B(44) excludes any transaction in money or actionable claim.

    Amendment is proposed in Explanation 2 to state that “transaction in money or actionable claim” shall not include any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out by:

(a) A lottery distributor or selling agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner;

(b) A foreman of chit fund for conducting or organising a chit in any manner.

Appropriate amendment in made in Negative list entry 66D (i) to incorporate the above change

 

  • Date of Applicability: 01-Jun-2015 (14/2015-ST)
     
  • Implication: In Future Gaming Solutions Pvt. Ltd. 2015, Sikkim HC stated that Parliamentary power to regulate under Entry 40 of List 1 does not include power to tax lottery and gaming conferred to State under entries 34/62 of List II-Sch VII (Double taxation)
     
  • Note: No abatement u/n 26/2012 to the services provided w.r.t. chit. W.e.f. 01-Apr-2015

 

2.8. Other Categories

 

Exemptions are provided under Notification no. 25-2012-ST to categories below w.e.f. 01-Apr-2015 except as provided otherwise:

  • Ambulance Service: Transportation of a patient in an ambulance.
     
  • Insurance : Service provided by way of Varishtha Pension Bima Yojna {Welfare of senior citizen}

New Proposals w.e.f. 30-04-2015, Notification no. 12/2005-ST
 

  • Service tax on services of General Insurance business provided under Pradhan Mantri Suraksha Bima Yojana (PMSBY)
     
  • Service tax on services of Life Insurance business provided under Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
     
  • Service tax on services of Life Insurance business provided under Pradhan Mantri Jan Dhan Yojana (PMJDY)
     
  • Service tax on services by way of collection of contribution under Atal Pension Yojana (APY)
     

Effluent treatment plant operation: Service provided by a Common Effluent Treatment Plant operator for treatment of effluent.

 

Fruits and vegetable packing: Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables

 

Tourist Place: Admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve.

 

Movie Exhibitor: Service provided by way of exhibition of movie by exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of it’s members.

 

Performing artist: In folk or classical art form of (i) music, or (ii) dance, or (iii) theater, limited only to such cases where amount charged is upto Rs 1,00,000 for a performance. Services provided as a brand ambassador is not exempted at all.

 

Mutual fund/ Lottery ticket agents: Exemption revoked on services by following agents {as tax is proposed to be levied on reverse charge w.e.f. 01-Apr-15}:
 

  • Mutual fund agent to a mutual fund or asset management company;
     
  • Distributor to a mutual fund or asset management company;
     
  • Selling or marketing agent of lottery tickets to a distributer or a selling agent

 

However, service tax charged by sub- distributors and sub-agents is not exempted leading tax on same service twice.

 

Telephone service: Exemption withdrawn on following telephones, a) department run, b) guaranteed local call public telephone and c) free telephones at airport and hospitals.

 

Commission agent: Services provided by a commission agent outside India to an exporter located in India u/n 42/2012-ST is rescinded immediately (w.e.f. 01-Mar-2015) as this exemption has become redundant in view of the amendments made in law in previous budget FB-2014 in definition of “intermediary” in the Place of Provision of Services Rules, making place of provision of a service provided by such agents as outside the taxable territory.

 

Aggregator: In respect of service provided under aggregator model, aggregator, or any of his representative office located in India, is made liable to pay Service Tax if service is so provided using brand name of aggregator in any manner. If an aggregator does not have any presence, including that by way of a representative, in such a case any agent appointed by the aggregator shall pay the tax on behalf of the aggregator (under reverse charge).

“Aggregator” is defined as an owner and manager of a web based software application who, by means of such application and a communication device, enables a potential customer to connect with persons providing specific service under trade or brand name of such aggregator. (Date of applicability: W.e.f. 1st March, 2015.)