Service Tax Latest Changes - 2015-16

Disclaimer• This presentation is for the purpose of information

and is based on changes implemented through the Act and Notifications. It does not constitute a legal opinion or advisory.

• The position can change if there are any modifications or amendments or decisions to the contrary.

• Please refer to the Finance Act, Rules, Notifications available on www.cbec.gov.in

ACKNOWLEDGEMENT

Kakinada Commissionerate heartily thanks

Sri Fredrick Cooper, Superintendent, Service Tax

who had taken efforts to prepare this presentation for the benefit of

assessees.

A. CHANGES W.E.F. 01.06.2015

• Section 66B – Rate of Service Tax - Increased

• The rate of service tax has been increased from 12% to 14% subsuming cess.

The applicable rates based on the Point of Taxation Rules, 2011 r/w Sec 67A of FA’94 is given in the

following tableSl.

No.Taxable Service

Provided

Issue of Invoice

Receipt of Payment

Point of Taxation Rate Applicable

1 Before 01.06.2015

After 01.06.2015

After 01.06.2015

Date of payment or issue of invoice whichever is

earlier 14%

2 Before 01.06.2015

Before 01.06.2015

After 01.06.2015 Date of issue of invoice 12.36%

3 Before 01.06.2015

After 01.06.2015

Before 01.06.2015 Date of payment 12.36%

4 After 01.06.2015

Before 01.06.2015

After 01.06.2015 Date of payment 14%

5 After 01.06.2015

Before 01.06.2015

Before 01.06.2015

Date of payment or Issue of invoice whichever is

earlier 12.36%

6 After 01.06.2015

After 01.06.2015

Before 01.06.2015

Date of issue of invoice 14%

Entertainment and Amusement

Section 66D(j) of Negative List and which covered “admission to entertainment event or access to amusement facility” has been omitted

“Admission to Entertainment event or access to amusement facility” now taxable to service tax

Exemptions in the following manner: • (i) Services by way of right of admission to exhibition of cinematographic film, circus, dance, or

theatrical performance including drama or ballet; (entry 47 Notification No. 25/2012)

• (ii) Services by way of right of admission to recognised sporting event; (Entry 47, Notification No.25/2012). Recognised sporting event means any sporting events organized by recognised sports body where the participating team or individual represents any District, State, Zone or Country or a sporting event referred to in Entry 11 of Notification No.25/2012.

• (iii) Services by way of right of admission to 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. (Entry 47, Notification No.25/2012).

Betting, Gambling and Lottery

• An explanation has been introduced to Section 66D(i) of the Finance Act, 1994 dealing with betting, gambling and lottery in order to specify that it does not include the activity specified in Explanation 2 to Section 65B(44).

• The TRU Circular dated 19.05.2015 indicates that the amendment is to make it explicitly clear that betting, gambling or lottery shall not include the activity carried out by a lottery distributor or selling agent in relation to promoting, marketing, organizing, selling of a lottery or facilitating in organizing of lottery of any kind

Process amounting to Manufacture or Production of Goods - Liquor

• The entry in the Negative List that covered service by way of any process amounting to manufacture or production of goods (Section 66D (f)) is being trimmed to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption.

• Amendments have also been made to Entry 30(c) of Notification No.25/2012 in order to impose service tax on contract manufacturing /job work for production of potable liquor for human consumption for a consideration.

Rule 6 (7) of Service Tax Rules – Air Travel Agent – Rate modified

• The option provided to an air travel agent to pay service tax on booking tickets at the rate of 0.6% has been enhanced to 0.7% of the basic fare for domestic bookings and from 1.2% to 1.4% of the basic fare for international bookings.

Rule 6(7A) of Service Tax Rules – Life Insurance premium - Rate modified

• The rate of service tax payable on the premium charged by the Insurance Company from the policy holder has been enhanced from 3% to 3.5% for the first year and from 1.5% to 1.75% for the subsequent years.

Rule 6(7B) of Service Tax Rules – Foreign Currency - Rate modified

• The rate of service tax payable on the purchase and sale of foreign currency had been fixed instead of discharging service tax at the rate of 14%. The previous rates and the new rates are given below:

• (a) 0.12% of the gross amount of currency exchanged for an amount upto Rs.1,00,000/- subject to minimum of Rs.30 stands increased to 0.14 % and the minimum amount to Rs.35 respectively.

• (b) Rs.120 and 0.06% of the gross amount of currency exchanged for an amount exceeding Rs.1,00,000/- and upto Rs.10,00,000/- stands increased to Rs. 140 and 0.07% respectively.

• (c) Rs.660 and 0.012% of the gross amount of currency exchanged for an amount exceeding Rs. 10,00,000/- subject to maximum of Rs.6,000 stands increased to Rs.770 and 0.014% and the maximum amount to Rs.7,000 respectively.

Rule 6(7C) of Service Tax Rules – Lottery

• The service tax payable by the distributor or selling agent of lottery on promotion, marketing and organizing fixed based on the slab amounts has been increased as under:

• Sl. No. Rate 1. Rs.7000 stands increased to Rs.8200 on every Rs.10

lakh (or part of Rs.10 lakh) of aggregate face value of lottery tickets printed by the organizing State for a draw.

2. Rs.11,000 stands increased to Rs.12,800 on every Rs.10 lakh (or part of Rs.10 lakh) of aggregate face value of lottery tickets printed by the organizing State for a draw.

.

Cenvat Credit

• Rule 6 of the Cenvat Credit Rules, 2004 is being amended to provide for payment for 7% of the value of exempted service as against 6% of the value of exempted services.

• This is to factor the increase in rate of service tax.

• The percentage for value of exempted goods continues at 6%.

B. CHANGES w.e.f. 14.05.2015

Government A definition of ‘Government’ is introduced through Section 65B(26A). Accordingly, “Government” means the 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;

Chit Fund and Lottery Amendments have been made to the definition of ‘service’ in terms of Section 65B(44) in order to bring within the ambit of taxation, the services by 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; and services by a foreman of chit fund for conducting or organising a chit in any manner.’

New Definitions

Bundled Service An illustration has been inserted to Section 66F(1) to explain the concept. The illustration reads as under:-

The services of the Reserve Bank of India being the main service within the meaning of Section 66D(b) does not include any agency service provided or agreed to be provided by any bank to the Reserve Bank of India. Such agency service being input service used by the Reserve Bank of India for providing the main service for which consideration by way of fee or commission or any other amount is received by the agent bank does not get excluded from the levy of service tax by virtue of inclusion of the main service in 66D(b) and hence such service is liable to service tax.

New Definitions

Consideration would include

(i) Any amount that is payable for the taxable services provided or to be provided; (ii) Any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except is such circumstances, and subject to such conditions, as may be prescribed; (iii) Any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket;

New Definitions

Amendments have been carried out to Section 73 to enable recovery action in respect of self-assessed tax reflected in the return.

A new system of reduced penalties has been introduced through amendments to Section 76 and 78.

The provision which allowed waiver of penalty in terms of Section 80 is no longer available.

Where the First Appellate Authority rejects a claim of rebate of service tax on input services or duties on inputs in respect of service exports then appeal to Tribunal is no longer available but revision to Central Government is available akin to excise rebate matters.

Other amendments

Swachh Bharat Cess on all or any of the taxable services

Rate of CESS –2% or lower on the value of taxable Services

List of Services and Rate to be notified by the Government

Date of operation to be notified

Swachh Bharat Cess

Section 66D(a)(iv) amended. All services provided by the Government or local authority to a business entity excluded from the Negative List

Definition of “Support Service” omitted from date to be notified.

As an when this amendment is given effect to, all services provided by the Government or local authority to a business entity, except the services that are specifically exempted shall be liable to service tax.

Support Services to Government

Thank You…