Union Budget 2014-15 Key Features and Highlights - Service Tax
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(A) Key Highlights – Service Tax
2. Broadening the Taxbase:
2.1 Changesin the Negative List (section 66D):
(a) Selling of space or time slots for advertisements have been excluded from negative list with the exception of selling of space for advertisements in print media.
(b) Service tax to be levied on the services provided by radio taxis or radio cabs, whether or not air-conditioned. The abatement presentl available to rent-a-cab service would also be made available to radio taxi service.
2.2 Withdrawal of exemption granted by Notification 25/2012:
(a) Exemption to clinical research on human participants is withdrawn.
(b) Exemption to air-conditioned contract carriages like buses is withdrawn.
2.3 Rationalization of general exemptions granted by Notification 25/2012:
(a) Exemption in respect of services provided to Government or local authority or governmental authority, will be limited to services by way of water supply, public health, sanitation conservancy, solid waste managementor slum improvement and upgradation.
(b) The concept of ‘auxiliary educational services omitted and exempt services notified as under:
(i) transportation of students, faculty and staff;
(ii) catering service including any mid-day meals scheme sponsored by the Government;
(iii) security or cleaning or house-keeping services in such educational institutions; and
(iv) services relating to admission to suchinstitution or conduct of examination
(c) The exemption of renting of immovable property service received by educational institutions, stands withdrawn.
(d) Exemption available to accommodation services provided by hotels, dharamshalas or ashrams when they provide rooms for less than Rupees One Thousand per day, is being re-worded to bring out the intent clearly.
Changes in the exemption notification No. 25/2012-ST shall come into effect immediately.
3. Service tax onservice portion in Works Contracts - Rationalization
In Rule 2A of the Service Tax Valuation Rules, category ‘B’ and ‘C’ of works contracts proposed to be merged into one single category, with service portion as 70%; this change will come into effect from 1st October, 2014
4. Service tax ontaxable portion in respect of transportation service by vessels
Taxable portion in respect of transport of goods by vessel to be reduced from 50% to 40%.Effective service tax will decrease from the present 6.18% to 4.944%. This will come into force from 1st October 2014.
5. New exemptions
( a) Life micro-insurance schemes for the poor, approved by IRDA, where sum assured doesnot exceed Rupees Fifty Thousand to be exempted from service tax.
(b) Transport of organic manure by vessel, rail or road (by GTA) is being exempted.
(c) Loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled, is being exempted.
(d) Services provided by common bio-medical waste treatment facility operators to clinical establishments are being exempted.
(e) Specialized financial services received by RBI from global financial institutions in the course of management of foreign exchange reserves, e.g., external asset management, custodial services, securities lending services, etc. are being exempted.
(f) Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India are being exempted.
6. RetrospectiveExemptions
:
Service provided by Employees’ State Insurance Corporation (ESIC) during the period prior to 1.7.2012 exempted
7. Other amendments inChapter V
:
(a) Non waiver of Penalty
–Penalty imposable for fraud, collusion, wilful mis-statement, suppression of acts, contravention of provisions with intent to evade payment of service tax shall not be waived on the ground that there was reasonable cause for the said failure.
(b) Search and Seizure Authorization-
Joint Commissioner or Additional Commissioner or anyother officer notified by the Board can authorize any Central Excise Officer to search and seize.
(c) Applicability ofthe certain provisions of the Act
-Section 83 to be amended to include a reference to sections 5A (2A), 15A and 15B of the Central Excise Act : Section 5A(2A) prescribes that insertion of an explanation in notifications/orders within oneyear shall have the effect as if it had always been part of the notification. Section15A is being inserted in the Central Excise Act to prescribe that specified third party sources shall furnish periodic information in the manner as may be prescribed;. Section 15B is being inserted in the Central Excise Act to prescribe that failure to provide information under section 15A would attract penalty.
(d) Fixed Pre-deposits of demands-
Section 35F of the Central Excise Act which applies to service tax is substituted prescribes a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both, for filing appeal before the Commissioner (Appeals) or the Tribunal at the first stage and 10% of the duty demanded or penalty imposed or both, for filing the second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs.10 Crore. All pending appeals/stay applications would be governed by the statutory provisions prevailing at the time of filing such stay applications/appeals.
(e) Fee payable for appeal to Tribunal u/s 86(6A)
-fee to be paid for any appeal and not only for grant of stay.
(f) Recovery of amount Due u/s 87
-power to recover dues of a predecessor from the assets of a successor purchased from the predecessor shall be as per section 11 of the Central Excise Act.
(g) Central Govt’s power to make rules
– Central Govt may make rules providing for:
- the duty of assessee to furnishing information, keeping records and making returns etc.
- withdrawal of facilities or imposition of restrictions on a service provider or exporter, to check evasion of duty or misuse of CENVAT credit; and
8. Interest on delayedpayment of Service tax:
Varying rate of interest on the basis of extent of delay in payment of service tax shall be payable as under. New rates .to come into force on 1st October 2014.
|
Extent of delay |
Simple interest rate p.a. |
|
Up to six months |
18% |
|
From six months and upto one year |
24% |
|
More than one year |
30% |
9. New services underreverse Charge Mechanism:
(a) Service provided by a Director to a body corporate to be brought under the reverse charge mechanism; service receiver, who is a body corporate will be the person liable to pay service tax.
(b) Services provided by Recovery Agents to Banks, Financial Institutions and NBFC to be brought under the reverse charge mechanism; service receiver will be the person liable to pay service tax.
(a) Service tax paid under full reverse charge: the condition to pay invoice value to the service provider for availing credit of tax paid, to be omitted [change to have immediate effect].
(b) Re-credit of Cenvat credit reversed on account of non-receipt of export proceeds within the specified period, to be allowed, if such export proceeds are received within one year from the specified period on the basis of documentary evidence of receipt of payment [change to have immediate effect].
(c) Rent-a-cab operator and tour operator: service tax paid by sub-contractor in the same line of business would be allowed as eligible credit to the main service provider to avoid double taxation, subject to certain conditions [with effect from 1st October 2014
(d) GTA service: service receiver may avail abatement, without having to obtainnon-availment of Cenvat Credit certificate from service provider [change tohave immediate effect].
(e) Time limit for taking credit on input and input services: credit shall be taken within six months from the date of the invoice or challans or other documents specified [change to have effect from 1st September, 2014]
(a) Provision for prescribing conditions for determination ofplace of provision of repair service carried out on temporarily imported goods,to be omitted.
(b) Intermediary of goods to be given the same treatment as isgiven to intermediary of services.
(c) Vessels (excluding yachts) and aircraft to be excluded fromRule 9(d); hiring of vessels or aircrafts, irrespective of whether short termor long term, will be covered by the general rule, which is place of locationof the service receiver. [The above changes to have effect from 1st October2014]
In case of reverse charge services, it is proposed to provide that point of taxation will be the payment date or first day after three months from the date of invoice, whichever is earlier. The amended point of taxation will apply to invoices issued after 1st October 2014. A transition rule is proposed to be prescribed [change to have effect from 1st October, 2014.
13. Service tax payable ratio in renting of motor vehicles
In renting of motor vehicle, portion of service tax payable by service provider and service receiver will be 50% each. This will come into effect from 1st of October 2014.
14. SEZ – Procedural Simplification:
(a) Central Excise Officer would issue Form A-2, within fifteen days from receipt of Form A-1.
(b) Exemption would be available from the date when list of service on which SEZ is entitled to upfront exemption is endorsed by the authorised officer of SEZ in Form A-1, provided Form A-1 is furnished to the jurisdictional Central Excise Officer within fifteen days of its verification.If furnished later, exemption would be available from the date on which FormA-1 is so furnished.
(c) Pending issuance of Form A-2, exemption will be available subject to condition that authorization issued by the Central Excise officer will be furnished to service provider within a period of three months from provision of service.
(d) For services covered under reverse charge, the requirement of furnishing service tax registration number of service provider shall be dispensed with.
(e) A service shall be treated as exclusively used for SEZ operations if the recipient of service is a SEZ unit or developer, invoice is in the name of such unit/developer and the service is used exclusively for furtherance of authorized operations in the SEZ.
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