TMI BlogUnion Budget, 2014-15: Changes in Service Tax - reg.X X X X Extracts X X X X X X X X Extracts X X X X ..... to widen the tax base and enhance compliance. 1.3 The changes being made by amendments in notifications and rules can be categorized into two broad categories based on when they would come into effect: (i) changes which will have immediate effect; and (ii) changes which are proposed to be given effect to only from 1st October, so as to coincide with the Service Tax Return cycle. As far as statutory amendments are concerned, they would come into effect only from the date on which the Bill receives the assent of the President. Regarding certain amendments proposed for widening the tax base, they would come into effect on a date to be notified after the Bill receives the assent of the President. Entries in the Bill and the notifications may be carefully read, for this purpose. 1.4 The changes being made are discussed below under three broad categories: (i) Measures to widen the tax base; [Para 2] (ii) Measures for compliance enhancement; [Para 3] and (iii) Facilitation measures. [Para 4] 2. Measures to widen the tax base: Broadening the tax base is a fiscal objective justified in itself. Primary objective of the negative list approach which came into effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, effective tax will be 4.944%. Services by non-air conditioned contract carriages for purposes other than tourism, conducted tour, charter or hire continue to be exempted. (ii) Exemption to services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies on human participants by a clinical research organization approved to conduct clinical trials by the Drug Controller General of India [Sl.No.7] is being withdrawn. This would be taxable with immediate effect. 2.2.2 Rationalization of Exemptions : (i) Education: At present, all services provided by educational institutions [providing educational services specified in the negative list] to their students, faculty and staff are exempted [ section 66 D (l) of the Finance Act, 1994 ]; this will continue. However, in respect of services received by such educational institutions, presently, exemption is being operated through the concept of auxiliary educational services‟ [Sl.No.9]. Doubts have been raised and clarifications have been sought regarding the scope and meaning of auxiliary educational services‟. To bring clarity, it is proposed to omit the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shram or any such entity which offer accommodation would be covered therein. It may be noted that this exemption, upto the specified threshold level, is available to any entity providing service by way of accommodation, including dharmashalas or ashram or such other entities. To remove any ambiguity, the word commercial‟ is being omitted. Renting of vacant land or buildings for hotels would continue to be taxable irrespective of the hotel‟s declared tariff. Where the exclusions and exemptions are withdrawn to widen the tax base, if the aggregate value of taxable service provided by a person in a financial year does not exceed Rupees Ten Lakh, exemption will be available in terms of Notification 33/2012-ST. 2.3 Service tax on service portion in Works Contracts: In Rule 2A of the Service Tax (Determination of Value) Rules, 2006 , category B‟ and C‟ of works contracts are proposed to be merged into one single category, with percentage of service portion as 70%; this change will come into effect from 1st October, 2014. This rationalization by way of merger of categories has been made to avoid disputes of classification between these two categ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade and industry to delink the conversion from the notified Customs rates of exchange as at present. Any suggestions would be welcome before the Rules are notified. 4.1.2 Service Tax Rules: [changes to have immediate effect]: Service provided by a Director to a body corporate is being brought under the reverse charge mechanism; service receiver, who is a body corporate will be the person liable to pay service tax. This is in view of requests by body corporates such as the Reserve Bank of India. Services provided by Recovery Agents to Banks, Financial Institutions and NBFC is being brought under the reverse charge mechanism; service receiver will be the person liable to pay service tax. [ Notification 9/2014 -ST and 10/2014-ST ] 4.1.3 Place of Provision of Services Rules : [changes to take effect from 1st October, 2014]. (i) Provision for prescribing conditions for determination of place of provision of repair service carried out on temporarily imported goods is being omitted. The second proviso to rule 4(a) is being amended to prescribe that it would suffice for the purpose of exclusion of repair service from applicability of rule 4(a) that the goods imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-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) ]. 4.1.6 Notification 26/2012- ST prescribing Taxable Portion : [ Notification No. 8/2014-ST ] (i) The condition for availing abatement in case of GTA service is being amended with immediate effect to clarify that the condition for non- availment of credit is required to be satisfied by the service providers only. Service recipient will not be required to establish satisfaction of this condition by the service provider [Sl. No. 7 refers]. (ii) Service of transportation of passenger by air-conditioned contract carriages is taxable with immediate effect, as stated earlier. Hence, an entry has been inserted at Sl. No. 9A providing that the taxable portion of such service shall be 40% with the condition that CENVAT credit of inputs or capital goods or input services has not been taken. (iii) The condition against entry No. 9 is amended with effect from 1st O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Specified Officer, the authorization shall have validity from the date of furnishing of Form A-1 to the Central Excise Officer. (iii) SEZ Units or the Developer will, pending issuance of Form A-2 , be entitled to avail upfront exemption on the basis of Form A-1 . However, in such a case, the SEZ Unit/Developer would be required to furnish a copy of authorization issued by the Central Excise Officer within 3 months from the date of receipt of specified services. If a copy of authorization is not provided within the said period of three months, the service provider shall pay service tax on the service so provided availing the exemption. (iv) As regards services covered under full reverse charge, it is being mentioned specifically in Form that there would be no requirement of furnishing service tax registration number of service provider. (v) It is being provided that a service shall be treated as exclusively used for SEZ operations if the recipient of service is 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 SEZ. (vi) Certain doubts have been raised by field fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25/2012-ST amended by Notification No.06/2014-ST ]. 4.2.2 Transport of organic manure by vessel, rail or road (by GTA) is being exempted by amending entries at Sl. No. 20 and 21. Therefore, organic manure will be on par with fertilizer which is already exempted. 4.2.3 Services by way of loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled, is being exempted [amendment of entry at Sl. No. 20 21 and 40]. 4.2.4 Services provided by Common Bio-medical Waste Treatment Facility operators by way of treatment, disposal of bio medical waste or processes incidental to such treatment or disposal are being exempted [new entry at Sl. No.2B]. 4.2.5 Service provided by Employees‟ State Insurance Corporation (ESIC) during the period prior to 1.7.2012 is proposed to be exempted from service tax. This exemption for services by ESIC would come into effect from the date the Finance (No.2) Bill, receives the assent of the President. It may be noted that any service provided by ESIC to persons governed under the Employees‟ Insurance Act, 1948 is already exempt for the period commencing from 1.7.2012 [Sl. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r both for filing of appeal before the Commissioner(Appeal) or the Tribunal at the first stage, and 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of ₹ 10 Crore. All pending appeals/stay application would be governed by the statutory provisions prevailing at the time of filing such stay applications/appeals. This new provisions would, mutatis mutandis, apply to Service Tax. 5.2 Other Amendments : 5.2.1 Section 73 is being amended to prescribe time limits for completion of adjudication as already exists in Central Excise. This time limit would need to be followed, as far as possible. 5.2.2 Section 80 is being amended to exclude the reference of first proviso to section 78 . This amendment, in effect, removes the power to waive the 50% penalty imposable in cases where service tax has not been levied, not paid or short levied or short paid on account of suppression of facts or willful misstatement but details of transactions are available in the specified record. 5.2.3 Section 82(1) is being amended, along the lines of section 12F (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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