Service Tax Interest Calculation as per New Budget 2014

Full Budget for 2014-15 was presented in the Parliament on 10th July, 2014 by the new Union Government wherein it has been said that Government’s objective is to prepare the indirect tax regime for smooth transition to Goods and Service Tax and keeping this in mind, amendments have been minimal. The twin objectives of indirect tax proposals are to widen tax base and enhance compliance.

To broaden the tax base, negative list and exemptions have been pruned to the extent possible. The negative list has been reviewed and Service Tax currently leviable on sale of space or time for advertisements in broadcast media has been extended to cover such sales on other segments like online and mobile advertising (except in print media). Tax on services provided by radio-taxies has been levied to bring them on par with rent-a-cab services. Certain exemptions have been withdrawn including those on services by air-conditioned contract carriage and technical testing of newly developed drugs on human participants. Some exemptions have been expanded and few new exemptions announced as well as rationalized including those in education, agriculture, transportation and insurance sectors. Interest on delayed payment of tax has been made more stringent by enhancing rate of interest upto 30 percent if delay is more than one year. Valuation rules in respect of works contracts have been rationalized. Services by directors to body corporates and services of recovery agents have been included in reverse charge. In case of serious offences, waiver of penalty shall not be allowed under section 80.

Pre-deposit requirements for filing appeals have been made mandatory vide new section 35F in Central Excise Act, 1944 and as made applicable to Service Tax. Some changes have also been brought in Cenvat Credit Rules, Place of Provision of Services Rules, valuation rules, advance ruling provisions etc.

On GST it has been stated that the question of whether to introduce Goods and Service Tax (GST) should be introduced or not must now come to an end. It is hoped that Government would be able to find a solution to issues of surrendering tax jurisdiction by states and compensation so that a solution is found in the course of year itself and legislative scheme is introduced which enable the introduction of GST. The budget states that this will streamline the tax administration, avoid harassment of business and result in higher revenue collection, both for the centre and the states. The aim has been to prepare the indirect tax regime for a smooth transition to goods and service tax.


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