Union Budget – 2015 Clarifications regarding increase in Service Tax RateSource: servicetax.gov.in
Doubts have been expressed in various forums regarding the proposed increase in the rate of service tax from 12.36% (including education cesses) to 14% on the value of taxable service.
2. It may be noted that changes proposed in the Budget have/are coming into effect on various dates as already indicated in JS (TRU-II) D.O. letter dated 28th February, 2015. Certain amendments made in the Finance Act, 1994, including the change in service tax rate, will come into effect from a date to be notified by the Government after the enactment of the Finance Bill, 2015.
3. In this regard your attention is invited to clause 106 of the Finance Bill, 2015 and paragraph 3 of JS (TRU-II) D.O. letter, which is reproduced below:-
3.1 The rate of Service Tax is being increased from 12% plus Education Cesses to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the revised rate of Service Tax. Thus, the effective increase in Service Tax rate will be from the existing rate of 12.36% (inclusive of cesses) to 14%, subsuming the cesses.
3.2 In this context, an amendment is being made in section 66B of the Finance Act, 1994. Further, it has been provided vide clauses 179 and 187 respectively of the Finance Bill, 2015 that sections 95 of the Finance Act, 2004 and 140 of the Finance Act, 2007, levying Education Cess and Secondary and Higher Education Cess on taxable services shall cease to have effect from a date to be notified by the Government.
3.3 The new Service Tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015.
3.4 Till the time the revised rate comes into effect, the ‘Education Cess’ and ‘Secondary and Higher Education Cess’ will continue to be levied in Service Tax.”
4. The paragraph reproduced above is self-explanatory and it is clear that the new Service Tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015. The date will be notified in due course after the enactment.
5. Similarly, certain doubts have been raised with regard to abatement on value of services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year. Valuation of services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess is determined as provided in rule 2C of the Service Tax (Determination of Value) Rules, 2006.
5.1 In the Union Budget, 2015, no change has been made in these rules; therefore, any confusion is unwarranted. Further, as explained above, the rate of service tax on the specified portion of the amount charged for such supply which is 40% continues to be 12.36% (including cesses) at present i.e. 4.944 %. The rate of Service tax, as discussed above, will continue unchanged till a date which will be notified in due course.
6. Wide publicity may be given so that the assesses and public are aware of the above. All the major Industry/Trade Associations may be informed accordingly.
(Dr. Abhishek Chandra Gupta)
12.36% SHALL BE CONTINUE:
Until new service tax rate 14% shall not be notified, service tax rate 12.36% shall be continue as service tax rate.
Institute of Chartered Accountants of India has also issued clarification regarding it. Read it here
SWACHH BHARAT CESS ON SERVICE TAX:
Central government can levy Swachh Bharat Cess on any or all services. The date shall be notified by central government regarding to it. Until that, no need to worry about it and confuse yourself.
HOW TO CALCULATE ABATEMENT / EXEMPTIONS?
Calculate taking 12.36% as base rate. Consider changes applicable from 1/4/15 in abatements. There are few changes in abatement rate. The changes are in abatement rate for manpower service and security service and transportation business. Abatement rate for other services are the same as before budget 2015. So the service tax rate for other services are same as before budget.Once the new service tax rate 14% is notified, new article regarding new rate ( with and without abatement ) shall be published by us.
UPDATE- 19/5/15- SERVICE TAX RATE APPLICABILITY:
New rate applicability of service tax 14%: WILL BE APPLICABLE FROM June 1, 2015. The honorable president gave assent to bill 2015 on 14,2015. But the date is notified on 19/5/2015 via notification 14-2015-ST.New rate of service tax will become applicable and education cess shall be abolished. Charge service tax at 12.26% till May 31, 2015.
Read notification here.
Swachh Bharat cess provision:
The swachh Bharat cess shall be levied on all or any services. The effective date of charging swachh Bharat cess will be notified later. We will update article when there is new notification.
If you are availing benefits of abatement, continue it with changes made in abatement rate in financial bill, 2015. You can read about service tax rate and changes in service tax in budget through following links.
For current rate – read our article current service tax rate chart ( Updated with budget 2015 changes.)
Service tax changes effective from 1st Arpil, 2015:
Introduction of new exemption.
Withdrawal of exemption available.
Changes in rate of reverse charge mechanism.
Changes in abatement rate.
Changes in cenvat credit definition.
You can get detailed guidelines of above from our post.