TMI BlogClarification on changes proposed in the Finance Bill, 2006X X X X Extracts X X X X X X X X Extracts X X X X ..... notifications issued. Notifications relating to abatements are being consolidated into a single notification and reissued. The rate of service tax is being increased from 10% to 12%. The increase in service tax rate will be applicable from the date of enactment of the Finance Bill, 2006. Service tax is being proposed on fifteen individually specified services and the scope of certain existing services is being extended or clarified. These proposals will come into effect from a date to be notified after enactment of the Finance Bill, 2006. Certain other changes relating to the Finance Act, 1994 will come into effect from the date of enactment of the Finance Bill, 2006. Changes have also been proposed in Service Tax Rules, 1994. The procedural changes will come into effect from 1.3.2006. (2) RATE OF SERVICE TAX : The rate of service tax is being increased from 10% to 12%. [section 66 refers] (3) TAXABLESERVICES: 3.1 Taxable services are defined under clause (105) of section 65 of the Finance Act, 1994. Classification of taxable services is determined according to the sub -clauses of clause (105) of Section 65. Section 65A provides for principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than in economy class ; [sub-clause (zzzo) of section 65(105) refers] 8) Transport of goods in containers by rail provided by any person other than Government railway; [sub-clause (zzzp) of section 65(105) refers] 9) Business support services; [sub-clause (zzzq) of section 65(105) refers] 10) Auctioneers' service, other than in relation to auction of property under directions or orders of a court of law or auction by the Government; [sub-clause (zzzr) of section 65(105) refers] 11) Public relations service; [sub-clause (zzzs) of section 65(105) refers] 12) Ship management service; [sub-clause (zzzt) of section 65(105) refers] 13) Internet telephony service; [sub-clause (zzzu) of section 65(105) refers] 14) Transport of persons by cruise ship; [sub-clause (zzzv) of section 65(105) refers] 15) Credit card, debit card, charge card or other payment card related services. [sub- clause (zzzw) of section 65(105) refers] 3.5 REGISTRAR TO AN ISSUE: A person engaged by a body corporate and provides various services in respect of sale or purchase of securities. These services include collection of application forms, keeping of records, and assisting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int media is excluded. 3.10 SPONSORSHIP SERVICE: Body corporates or firms involved in business or commerce sponsor events with an intent to obtain commercial benefit or bringing their name or products or services in public image to public attention by associating with a popular or successful event. This is an alternate form of advertisement. Consideration is normally paid in return for naming of the event after the sponsor or displaying the sponsoring company's logo or trading name or giving the sponsor exclusive or priority booking rights. Service tax is leviable only when the sponsor is any body corporate or firm. Sponsorship of sports events is excluded from the scope of this levy. Proposal is also to collect service tax under reverse charge method from the recipient of service namely the body corporate or firm who sponsors the event. It may be noted that the organizers of events are not liable to pay service tax under sponsorship service. 3.11 AIR TRANSPORT OF PASSENGERS EMBARKING FOR INTERNATIONAL TRAVEL: Liability to pay service tax is on the aircraft operator who is the service provider. Economy class passengers are excluded from the levy of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o create a separate service under the name 'Internet Telephony Service'. 3.18 TRANSPORT BY CRUISE SHIPS: Services provided to any person embarking from any port in India for transport by cruise ships is proposed to be taxed. 3.19 CREDIT CARD RELATED SERVICES: Credit card services are presently taxable under banking and other financial services. The proposal is to tax comprehensively all services provided in respect of, or in relation to, credit card, debit card, charge card or other payment card in any manner. The major services provided in relation to such services are specifically mentioned under the definition "credit card, debit card, charge card or other payment card service". 3.20 Amendment to Section 65: An Explanation has been inserted after clause 121 of Section 65. The purpose of this explanation is to make it clear that service provided by an unincorporated association or body of persons such as club or association to its members is treated as a taxable service. In other words, clubs or associations are treated as a person separate and different from their members for the purpose of levy of service tax. 3.21 The above changes will come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to re-insurance vide Notification No. 3/94-Service Tax dated 30.6.1994 has been withdrawn. To make it explicit, it is mentioned that insurer includes re-insurer. 5.3 Maintenance or repair service is renamed as "Management, maintenance or repair service" and management of movable properties is also covered under this service. 5.4 "Erection, commissioning or installation service" is amended to cover erection, commissioning or installation of pre -fabricated structures. 5.5 Consulting engineer's service is amended to specifically include service provided by any firm or body corporate. 5.6 Information technology service is explained under business auxiliary service. Presently, maintenance of computer software and computerized data processing is covered under the scope of information technology service for the purpose of classification under business auxiliary service. It is proposed to exclude the said service from the scope of information technology service under business auxiliary service. As a consequence of this change, maintenance of computer software and computerized data processing shall not be treated as information technology service under business auxiliary s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. (Notification No.7/2006 -Service Tax dated 1.3.2006) 7.2 The above mentioned exemptions will come into effect from 1st March, 2006. 8. AMENDMENTS IN THE ACT: (1) Finance Act, 1994 is being amended to: - (a) substitute references to 'commercial concern', in relation to seventeen taxable services, with 'person', so as to expand the scope of the service provider in the said services; [This change will come into effect from a date to be notified after the enactment of the Finance Bill, 2006] (b) clarify that taxable service includes any service provided or to be provided by an unincorporated association or body of persons to its members. Club or association in such cases is treated as a separate person from its members. (Explanation to section 65); [This change will come into effect from a date to be notified after the enactment of the Finance Bill, 2006] (c) omit the Explanation at the end of section 65(105) providing levy of service tax on taxable services pro vided from outside India to a recipient in India. Separate provision is being inserted to levy service tax on service provided from outside India to a recipient in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure to pay service tax by the due date. It may be noted that penalty for delayed payment is also linked to the amount due; (m) omit reference to section 11 and section 11D of the Central Excise Act, 1944 in section 83 of the Finance Act, 1994, in view of separate recovery provisions for service tax inserted in the said Finance Act; (n) provide for recovery of any amount of service tax due to the Central Government [section 87]; (o) empower the Central Government to issue orders for removal of difficulty in case of classifying, assessing the value of, or implementing any taxable service [section 95]; (p) empower the Authority for Advance Rulings to determine the liability to pay service tax [section 96C]. The above changes [except (1)(a), (1)(b) and (1)(c)] will come into force from the date of enactment of Finance Bill, 2006. 9. AMENDMENTS IN THE SERVICE TAX RULES, 1994 Rule 4(5A) makes it obligatory on the part of the assessee to intimate any change in information submitted at the time of registration within thirty days of such changes. Rule 4(8) provides for cancellation of registration certificate where the assessee makes an application for cancellation. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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