SUMMARY OF AMENDMENTS IN SERVICE TAX BY UNION BUDGET-2014

[CA SOHRABH JINDAL]

The Finance Minister has announced the Union Budget 2014 on 10-7-2014. There are various changes in Law related to Service Tax.

I have tried to compile the major amendment in the following lines.

MAJOR EFFECTED / TOUCHED SERVICE PROVIDERS

1-Tour Operator

2-Rent a cab operator / Radio taxi Operator / GTA

3-School / Educational Institution

4-Earning Income from advertisement from website, mobile advertisement etc.

5-Works Contract Service Provider

6-Owner of Immovable Property given on Rent to Educational Institution

 

CATEGORY-1

CHANGES EFFECTED FROM 11-7-2014

1- Amendment in Notification no-25/2012 providing exemption to some further services

(A) Services provided by operators of the Common Bio-medical Waste Treatment Facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto;”;

(B) for entry 9, (Regarding Service by and to the Educational Institute) the following entry shall be substituted, namely:-

“9. Services provided,-

(a) by an educational institution to its students, faculty and staff;

(b) to an educational institution, by way of,-

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Government;

(iii) security or cleaning or house-keeping services performed in such educational institution;

(iv) services relating to admission to, or conduct of examination by, such institution;”;

the exemption available to services provided by way of renting of immovable property to educational institutions stands withdrawn, with immediate effect

(C) Rail and Road Transportation of the following goods have now been exempted

(1) chemical fertilizer, organic manure and oil cakes;

(2) cotton, ginned or baled.”;

(D) Services by way of loading, unloading, packing, storage or warehousing of rice, cotton, ginned or baled; (Entry No-40)

(E) Services provided by an Indian tour operator to a foreign tourist in relation to a tour conducted wholly outside India.”. (New Entry No-42 Introduced)

2- Amendment in Notification no-25/2012 making taxable to some already exempted services

(a) Services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organisation approved to conduct clinical trials by the Drug Controller General of India;

(b) An Air conditioned contract carriage for the transportation of passengers, excluding tourism, conducted tour,charter or hire; (Entry No-23(b)) (Earlier Ac and NON Ac both were exempt now exemption withdrawn for AC)

(c ) the exemption available to services provided by way of renting of immovable property to educational institutions stands withdrawn, with immediate effect

3-Amendment in Notification no-26/2012 (Abatement)

(A)Major change in Motor Cab Services. Now service Tax paid by a motor cab service provider on the motor cab services received, shall be available to him as Cenvat Credit. (Effected w.e.f 1-10-2014)

(B)Earlier Motor Cab and other Passenger Transport vehicle were at same footing. But Now Motor Cab has been taken in separate category from other Passenger Transport vehicle.

Further Cenvat Credit on Motor cab only will be allowed. No Service Tax Credit on other Passenger Transport vehicle.

(C)Now Tour operators are allowed to take Cenvat Credit on Input service of Tour Operator. Earlier No Credit was allowed on any Input Service. (Effected w.e.f 1-10-2014)

4- CHANGES IN CENVAT CREDIT RULES

1. A manufacturer or a service provider shall take credit on inputs and input services within a period of six months from the date of issue of invoice, bill or challan w.e.f. 1st September,2014 [ newly inserted proviso to rule 4 (1) and fifth proviso to rule 4(7) refer]

2. In case of service tax paid under full reverse charge, the condition of payment of invoice value to the service provider for availing credit of input services is being withdrawn. i.e. The service receiver can take Cenvat credit immediately after payment of service tax pending the payment of service charges. However, there is no change in respect of partial reverse charge. [Refer amended proviso to rule 4(7)].

3. Re-credit of CENVAT credit reversed on account of non-receipt of export proceeds within the specified period or extended period, to be allowed, if export proceeds are received within one year from the period so specified or extended period. This can be done on the basis of documents evidencing receipt of export proceeds [Refer the newly inserted proviso to rule 6(8)].

CATEGORY-2

CHANGES EFFECTED FROM THE DATE OF ON WHICH THE FINANCE BILL WILL BE PASSED

Insertion of Sub Section 4B in Section Section 73

1-Till now there was no limitation on passing of the assessment order under service tax laws. But Now this limit has been prescribed --

Within 6 months from the dt of notice- For Normal SCN Issued

Within 12 months from the dt of notice – For SCN of Tax Evasion cases

CATEGORY-3

CHANGES EFFECTED FROM THE DATE OF NOTIFICATION TO BE ISSUED AFTER THE FINANCE BILL WILL BE PASSED

1-Services Provided by Radio Taxis (Whether AC or Not) will be taxable. (Till now this service was not covered under service tax. Only Rent a cab services was taxable.) However abatement available to Rent a cab services will be available to Radio Taxis also.

2-The Exemption given to online and Mobile advertisement has now been withdrawn. The new levy would further extend to advertisements in internet websites, out-of-home media, on film screen in theatres, bill boards, conveyances, buildings, cell phones, Automated Teller Machines, tickets, commercial publications, aerial advertising, etc.

3-Now the Advertisement in Print Media is only Exempt .

CATEGORY-4

CHANGES EFFECTED W.E.F 1-10-2014

CHANGES IN SERVICE TAX RULES

1- Now Every Person is required to deposit service electronically. Rule 6 of STR

2- Amendment in Notification no-30/2012 (Reverse Charge)

Earlier under Rent a cab services, the Service Receiver was required to pay 40% service tax, If the service provider is providing services on non abated value,

But now the service provider and service receiver both will have to pay 50%

3- CHANGES IN VALUATION RULES (WORKS CONTRACT SERVICES)

1-Earlier For works contract there were 3 rates –

40% , 60%, 70%

Now There are only two rates 40% (For new construction) and 70% For all other contracts belonging to Movable or immovable Property)

4- CHANGES IN RATE OF INTEREST

S.I. NO.	Period of Delay	Rate of Simple Interest P.A. basis
(1)	(2)	(3)
1.	Up to Six Months	18 per cent.
2.	More than six months and up to one year	18 per cent. For the first six months of delay and 24 per cent. For the delay beyond six months.
3.	More than One Year	18 per cent. For the first six months of delay ; 24 per cent. For the period beyond six months up to one year and 30 per cent. For any delay beyond one year.

As specified in the proviso to section 75, three per cent concession on the applicable rate of interest will continue to be available to the small service providers.

5- CHANGES IN POINT OF TAXATION RULES (Change in Rule -7)

In case of Service tax payable as recipient of services, the point of taxation is the date of payment.

Earlier the time allowed to pay the service tax was 6 months of the date of invoice But now it has been reduced to 3 months.

This amendment will apply only to invoices issued after 1st October, 2014

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards

CA SOHRABH JINDAL

FCA, DISA(ICAI)

F-14B, Ground Flr, Street No-29,

Madhu Vihar, Patparganj,

Delhi-110092.

Desktel: +91-11-47603624

Mobile: +91 9810216640

Email: sohrabh2006@gmail.com

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