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Service tax leviable on any services provided by Government or Local Authority to a Business Entity w.e.f 1-4-2016 and issues therein

Service Tax - By: - Bimal jain - Dated:- 27-2-2016 - Dear Professional Colleague, Background Presently, in terms of Section 66D(a)(iv) of the Finance Act, 1994 ( the Finance Act ) read with Rule 2(1)(d) of the Service Tax Rules, 1994 ( the Service Tax Rules ), only support services provided by Government or a Local authority to a Business Entity are liable to Service tax under Reverse Charge except (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) o .....

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Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) support services other than services covered under clauses (i) to (iii) above, provided to business entities; However, the Finance Act, 2015 vide Section 109(1) thereof, proposed to substitute the words support services by the words any service , which was supposed to come into effect from such date as the Central Government ma .....

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April 1, 2016, under clause (iv) of Section 66D(a) of the Finance Act, the words support services will be substituted by the words any service thereby, to exclude from the Negative List, any services provided by the Government or Local authority to a Business Entity. Exemption granted to the services provided by Government or Local authority to Business Entity having turnover upto ₹ 10 lakhs in the preceding Financial Year Further to the above, the Ministry of Finance, Department of Reven .....

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dment, any service provided by the Government or Local authority to a Business Entity with turnover exceeding ₹ 10 lakhs in the preceding Financial Year, would be exigible to Service tax, except for the services that are specifically exempted, or covered by any another entry in the Negative List of services. Impact of above changes on chargeability of Service tax on Governmental Services Given that the definition of the term service under Section 65B(44) of the Finance Act is wide enough t .....

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s, Motor Vehicles Inspection charges, fees payable to Registrar of Companies for filing statutory forms, Building inspection etc. A Business Entity is also required to pay fees for getting various authorisations, permissions, licenses etc. for various purposes like import and export etc. Even, the Government collects big chunk of money by allocation of coal blocks/grant of mining license, telecom spectrum etc., which are in the nature of payment of royalty to Government for use of natural resour .....

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f regulatory fees, there is no service rendered and thus, no Service tax may be exigible. But, the same is definitely prone to litigation unless some clarification to this effect is provided from the Board, restricting the extent of Governmental services covered under the Service tax net. No consequential amendments made in Reverse Charge Notification: It would not be out of place here to mention that Notification No. 6, appoints April 1, 2016 as the date from which the changes in Section 66D(a) .....

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to be provided by Government or Local authority with certain exceptions, as stated supra. Earlier vide Notification No. 05/2015-ST dated March 1, 2015, it was provided that the word support from the sub-rule shall be deleted from the date as the Central Government may notify, by notification in the Official Gazette. Notification No. 30/2012-ST dated June 20, 2012 - Reverse Charge Notification: Further, in parity with the above proposed changes in the Negative list of services, consequential amen .....

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