BUDGET 2015 has introduced numerous changes with respect to Service Tax. These changes are discussed in chronological order i.e. changes applicable from 1 st March 2015,changes applicable from 1 st April 2015, changes applicable from date of assent to Finance Bill & changes applicable from the date of notification after assent to Finance Bill.
At the outset, it may be relevant to note that the rate of service tax remains 12.36% as it will change to 14% only with effect from a date to be notified after enactment of Finance Bill, 2015.
1. Amendments applicable from 1 March 2015
a. Aggregator brought under Reverse Charge Mechanism
Service Tax liability is cast on the ‘ aggregator’, or any of his representative office located in India, if the service is so provided using the ‘brand name’.
It is also provided that 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.
[Refer Not. No. 5/2015-ST and Not. No. 7/2015-ST]
b. Issuing digitally signed invoices and maintaining records electronically made possible
A provision for issuing digitally signed invoices is being introduced along with the option of maintaining of records in electronic form. The conditions andprocedure in this regard shall be notified later by the CBEC.
[Refer Not. No. 5/2015-ST]
c. ‘Single’ premises registrations to be granted within 2 days
To enhance the ease of doing business in India, now, it has been provided that service tax registration for ‘single’ premises shall be granted within two days of filing the application with requisite documents. Verification, if any, by the Service Tax Authorities can be done post-facto.
[Refer Not. No. 5/2015-ST read with Order 1/2015- ST]
d. Time for availing CENVAT credit extended to 1 year
At present, an assessee is required to avail CENVAT credit on inputs and input service within 6 months of the date of issue of any of the documents specified in sub-rule (1) of Rule 9 else the credit may lapse. In this regard, representations were made by the industry chambers to extend the time limit of 6 months.
Accordingly, after paying heed to the demand, now the period for availing CENVAT Credit is being extended to 1 year.It is possible to take a view that this amendment will be applicable for all invoices on which credit is availed after 1 March 2015 irrespective of date of invoice by relying on the judgment of Apex Court in case of Osram Surya (P) Ltd. Appeal (Civil) – 2002-TIOL-64-SC-CX
It is pertinent to note that there is no time limit restriction for availment of CENVAT credit on capital goods.
[Refer Not. No. 6/2015-CE (NT)]
e. CENVAT credit availment on directly dispatched goods permitted
Now, it is permissible to avail /pass-on the CENVAT Credit on the goods which are directly dispatched to the end customerspremises without bringing the same to the registered dealer’s/ registered importer’s customers. This is beneficial provision.
[Refer Not. No. 6/2015-CE (NT) and 8/2015-CE (NT)]
f. CENVAT credit availed but not utilised can be recovered
Earlier there was no specific provision for recovery of CENVAT Credit taken but not utilized. Now, CENVAT Credit taken but not utilized can be recovered under the provision of section 73. Interest will not be applicable on such recovery, however, (strangely!) penalty could be applicable.
[Refer Not. No. 6/2015-CE (NT)]
g. Advance ruling extended to resident firms
Now, resident firms can also obtain Advance ruling. Thus, afterextending that facility to public limited companies (from 1 March 2013) and private limited companies (from 11 July 2014), now Advance ruling facility is extended to all ‘ resident firms’.
In this regard, the term ‘ resident firms’ is defined to include Limited Liability Partnerships (LLP), sole proprietorship and one person company.
[Refer vide Not. No. 9/2015-ST]
h. Not. No. 42/2012-ST rescinded
Not. No. 42/2012-ST provided for exemption from service tax (subject to certain conditions) on amounts paid to non-resident commission agent.
From 1 October 2014, in view of the amendment in Rule 9 of Place of Provision of Services Rules, 2012 (‘POPSR’),the place of provision of a non-resident ‘intermediary’ is outside the taxable territory and in-turn no service tax is payable. Thus, as Not. No. 42/2012-ST had lost it’s relevance, the has been rescinded.
[Refer vide Not. No. 3/2015-ST]
2. Amendments applicable from 1 St April2015
New exemptions included in the Not. No. 25/2012-ST [vide Not. No. 6/2015-ST]
a. At present, ‘services by way of transportation of the patient to and from a clinical establishment’ by a clinical establishment is not liable to service tax.
Service tax exemption now would be available even when an entity other than clinical establishment (such as say an individual or firm) provides ambulance for transportation of a patient.
[refer Sr. No.2 of Not. No.25/2012-ST)
b. At present, construction, erection, commissioning, repairs etc of a Common Effluent Treatment Plant (‘CETP’) is not liable to service tax.
Service tax exemption now would be available, even in respect of service of treatment of effluent provided by an operator of CETP. This appears to be in line with Governments pet project ‘Swachha Bharat Abhiyan’
[refer Sr. No.43 of Not. No.25/2012-ST]
c. At present, services such as cooling, bulk packaging etc in respect of agricultural produce carried out at farm to make it marketable for primary market is not liable to service tax [vide Section 66D (d)].
Service tax exemption now would be available, even in respect of service by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetablesprovided it does not alter the essential characteristics of fruits or vegetables.
[refer Sr. No.44 of Not. No.25/2012-ST]
d. At present, services when provided by the Government or local authority are already covered by the Negative List.
Service tax exemption now would be available even in respect of service provided of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve provided by non-government entity.
[refer Sr. No.45 of Not. No.25/2012-ST]
e. Service tax exemption now would be available even in respect of service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of its members. Thus, it can be construed from the amendment that the Government is recognizing the fact that service tax should not be applicable, inter-alia, on profit made by Association of Persons.
[refer Sr. No.46 of Not. No.25/2012-ST]
f. Now, life insurance service provided by way of Varishtha Pension Bima Yojana will not attract service tax.
[refer Sr. No.26A of Not. No.25/2012-ST]
Withdrawal/ amendment to exemptions included in the Not. No. 25/2012-ST [vide Not. No. 6/2015-ST] [serial no. g to l below]
g. Now, exemption will not be available in respect of following services of construction, repair, maintenance, renovation or alteration service provided to the Government, a local authority, or a governmental authority:
· a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;· 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 clause 44 of section 65 B of the said Act;
[refer omission of Sr. No.12 (a), (c) and (f) of Not. No.25/2012-ST]
h. Now, exemptions will not be available in respect of following services:
· Service of Departmentally run public telephone;· Service of Guaranteed public telephone operating only local calls;· Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued
[refer omission of Sr. No.32 of Not. No.25/2012-ST]
i. Now, exemption will not be available in respect of service by way of construction, erection, commissioning, or installation of original works pertaining to an airport and port.
[refer Sr. No.14 (a) of Not. No.25/2012-ST]
j. At present, exemption from service tax is available in respect of services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii)theater, excluding services provided by such artist as a brand ambassador.
Now, the exemption is limited in cases where the consideration for such performance is not more than Rs 1 lac. Services provided by an artist as a brand ambassador will continue to attract service tax.
[refer Sr. No.16 of Not. No.25/2012-ST]
k. At present, exemption is available in respect of service of transportation by rail or a vessel or a goods transport agency of goods being foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages
Now, this exemption is restricted to ‘milk, salt and food grain including flours, pulses and rice’ . Thus, it can be inferred that exemption may not be, inter-alia, available in respect of tea, coffee, jaggery, sugar, milk products and edible oil.
[refer Sr. No.20 and 21 of Not. No.25/2012-ST]
l. Now, exemption will not be available in respect of following services:
· Services provided by a mutual fund agent to a mutual fund or assets management company (‘AMC’)· Services provided by distributor to a mutual fund or AMC· Services provided by selling or marketing agent of lottery ticket to a distributor
It is pertinent to note that for the aforesaid services liability to pay service tax is cast upon the recipient of service.
[refer omission of Sr. No.29 (c), (d) and (e) of Not. No.25/2012-ST]
m. At present, services provided to an exporter for transportation of goods by Goods transport agency to port or airport (including transportation to and from Inland container depot or container freight station) are not liable to service tax vide Not. No. 31/2012-ST.
Now, this exemption is extended even when goods are exported through Land Customs Station (LCS). This will benefit export to Pakistan, Bhutan, Nepal by LCS.
[refer Not. No. 4/2015-ST]
Changes in abatment provided in Not. No. 26/2012-ST [vide Not. No. 8/2015-ST]
a. Transportation of goods by road attracts service tax on 25% value whereas transport of goods and passengers by rail attracts service tax on 30%. In case of passengers transport by vessel service tax is payable on 40%.
Now, uniform taxable value of 30% for all aforesaid services is prescribed. Also, a uniform condition of non-availment of CENVAT Credit on inputs, capital goods and input services is prescribed.
b. At present, transport of passengers by air (without discrimination between aam and khaas aadmi!) attracts service tax on 40% value.
Now, in case of economy class (aam aadmi class!) service tax will continue to be payable on 40% value, however, for the classes other than economy, service Tax would be payable on 60%.
c. Abatement of 30% available to services in relation to chit is withdrawn.
Changes in Reverse Charge Mechanism [vide Not. No. 7/2015-ST]
a. At present, when a manpower supply agency and security service agency being an individual/ firm etc provides services to a body corporate, service tax of 25% is to be paid by service provider and 75% is payable by service receiver.
Now, in aforesaid cases, the entire (100%) liability is cast on the service receiver.
b. In respect of services provided by mutual fund agents/ distributorsto Mutual fund or AMC and services provided by selling or marketing agent of lottery tickets to a lottery distributor or selling agent, the entire liability to pay service tax is cast on service receiver.
Changes in CENVAT Credit [vide Not. No. 6/2015- CE( NT)]
a. Cenvat Credit of service tax paid under partial reverse charge by the service receiver is allowed on payment of service tax (without linking it to the payment to the service provider).
Changes applicable from date of assent to Finance Bill, changes applicable from the date of notification after assent to Finance Bill will be discussed in Part II of this article.
(CA Shankar Rochlani and CA VaishaliKharde also shared their inputs for this article.)