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Union Budget 2015 Clarifications regarding increase in Service Tax Rate

Service Tax - By: - Mr.Manoj Agarwal - Dated:- 7-3-2015 - Amid huge expectations and challenges facing the economy, the Hon ble Finance Minister Shri Arun Jaitley has presented his 1st Full-year Union Budget for the year 2015-16 on 28th February, 2015. In his Budget Speech, he has proposed to increase the effective rate of service tax from 12.36% to 14%. This proposal has created doubts in the minds of some assessee s and professionals as well. The objective of this article is to identify vario .....

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rate of service tax from 01-03-2015 onwards like we do in case of changes in rates of central excise? No, you don t have to charge new rate of service tax from 01-03-2015 onwards as the new rate has not yet come into effect. Till then, the existing rate of 12% (service tax) + 2% (Education Cess on tax) + 1% (SHE Cess on tax) i.e. effective rate of 12.36% shall continue. 2. Whether the new enhanced rate of service tax going to be effective from 1st April, 2015? No, the proposed service tax rate w .....

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from such date as the Central Government may, by notification in the Official Gazette, appoint, for the words twelve per cent. , the words fourteen per cent. shall be substituted. Further, the Tax Research Unit of CBEC has issued instructions vide F. No. 334/5/2015TRU dated 28-02- 2015 and clarified at para 3.3 as quoted below:- 3.3 The new Service Tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015. It means, that th .....

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her Education Cess of 1% over service tax of 14%? Yes, once the new rate is effective, there won t be any requirement of charging 3% education cesses on the service tax. 4. Does it mean that the consolidated rate of 14% is inclusive of education cesses? In other words, the tax break-up is 13.59% (service tax) + 0.27% (Education Cess @2%) + 0.14% (SHE Cess @1%) aggregating to 14%. No, there is no break-up of 14% tax rate which entirely constitute of service tax. The 14% rate has been proposed by .....

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s and Secondary and Higher Education Cess on taxable services shall cease to have effect from a date to be notified by the Government. 5. Ok, now it s clear that 14% is the FINAL effective rate of service tax from the date to be notified by the Central Government? Yes, subject to Swachh Bharat Cess (SBC) of 2%!! 6. What is Swachh Bharat Cess (SBC) and how is that related to service tax? An enabling provision is being incorporated in the Finance Bill, 2015 (Chapter VI/clause 117) to empower the C .....

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ffective rate of service tax at 14.28%? No, it is wrong to say that the levy of education cesses has been removed and replaced by SBC @ 2% on service tax. I quote below the proposed levy of SBC vide Clause 117(2) of Bill:- (2) There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable services at the rate of two per cent on the value of such services for the purposes of financing a .....

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