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Union Budget 2016: Important changes in Service Tax and Credit Rules effective from April 1, 2016

Budget - By: - Bimal jain - Dated:- 1-4-2016 Last Replied Date:- 2-4-2016 - Dear Professional Colleague, Affirming that the economy is right on track, the Hon ble Finance Minister Shri. Arun Jaitley presented the Union Budget for 2016-17 on February 29, 2016. Although, Shri. Arun Jaitley in his Make in India Budget speech laid more emphasis on agriculture, farmers welfare, infrastructure, social sector etc., but there are slew of changes in Indirect Taxes also, requiring attention of the Trade & .....

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les, 2004 that are effective from April 1, 2016 for easy digest: A: Service Tax leviable under Reverse Charge on any services provided by Government or Local Authority to a Business Entity w.e.f April 1, 2016 Effective from April 1, 2016, under clause (iv) of Section 66D(a) of the Finance Act, 1994 ( 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 .....

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y 18, 2016]. Amendment in the Reverse Charge Notification: The Union Budget, 2016 vide Notification No. 18/2016-ST dated March 1, 2016, has amended Reverse Charge Notification No. 30/2012-ST dated June 20, 2012 ( the Reverse Charge Notification ), to delete the words by way of support services appearing at Sl. No. 6 of the Table in the said notification with effect from April 1, 2016. Corresponding changes in the Service Tax Rules, 1994 ( the Service Tax Rules ) & the Finance Act:Correspondi .....

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on 66D of the Finance Act. Immediate clarification required:Given that the definition of the term service under Section 65B(44) of the Finance Act is wide enough to cover any activity carried out by a person for another for consideration, it appears that effective from April 1, 2016, all Governmental services (sovereign, regulatory fees, statutory charges etc.) would be exigible to Service tax - Immediate clarification is required from the Board to provide exclusion list ofthe Governmental servi .....

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ent by Government of the right to use the spectrum as well as subsequent transfers of assignment of such right to use is a service leviable to Service tax and not sale of intangible goods and the liability to pay Service tax will on the Business Entity under Reverse Charge. But such changes shall be effective from the date of enactment of Finance Bill, 2016 , leading to dispute for taxability for the interim period i.e. from April 1, 2016 to date of enactment of Finance Bill, 2016 . B: Changes i .....

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e. However, legal services provided by a firm of advocates or an advocate other than senior advocate is being continuedunder Reverse Charge[Read with Notification No. 18/2016 - ST dated March 1, 2016, amending the Reverse Charge Notification] Entry No. 23(c) Exemption to services for transport of passengers, with or without accompanied belongings, by ropeway, cable car or aerial tramway Exemption Amended Entry 16 The threshold exemption limit of consideration charged for services provided by a p .....

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agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training Entry No. 26(q) Services of general insurance business provided under Niramaya Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability Act, 1999 (44 of 1999) Entry No. 26C Services of life insur .....

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ority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999) Entry No. 51 Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market Entry No. 52 Services provided by National Centre for Cold Chain Development under .....

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ntly available is continued but with Cenvat credit of input services being made available S. No. 3 Transport of passengers by rail - Cenvat credit of input services available: Abatement of 70% presently available is continued but with Cenvat credit of input services being made available S. No. 10 Transport of passengers by vessel - Cenvat credit of input services available: Abatement of 70% presently available is continued but with Cenvat credit of input services being made available S. No.7 Ser .....

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n in relation to a tour, abatement of 90% is available with specified conditions; This abatement of 90% cannot be claimed in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation. There is no change in the rate of abatement or the conditions required to be fulfilled for claiming the said abatement; Abatement rates .....

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(in other cases)is amended to provide a uniform abatement at the rate of 70%, subject to fulfilment of the existing conditions. New Insertions S. No. 2A Transport of goods in containers by rail by any person other than Indian Railway: Reduced abatement rate of 60% with Cenvat credit of input services S. No. 7A Transport of used household goods by a GTA: Abatement at 60% without availment of Cenvat credit on inputs, input services and capital goods by the service provider (as against abatement of .....

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nvat credit on inputs, capital goods and input services (subject to specified conditions) D: Changes in Reverse Charge Mechanism Vide Notification No. 18/2016-ST dated March 1, 2016 amending Notification No. 30/2012-ST dated June 20, 2012 Relevant clause/sub-clause Particulars Paragraph I, in clause (A), sub-clause (ib) Omitted to provide that services provided by mutual fund agents/distributor to a mutual fund or asset management company are being put under forward charge In Paragraph I, in cla .....

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on No. 19/2016-ST dated March 1, 2016 Relevant Rule Particulars Rule 2 Legal services provided by a senior advocate shall be on forward charge[Rule 2(1)(d)(i)(D)(II)] Services provided by mutual fund agents/distributor to a mutual fund or asset management company put under forward charge [Rule 2(1)(d)(EEA)] Liability to pay Service tax on any service provided by Government or local authorities to business entities shall be on the service recipient underreverse charge [Rule 2(1)(d)(i)(E) read wit .....

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ed to HUF. Rule 6(7A): The Service tax liability on single premium annuity (insurance) policies is being rationalised and the effective alternate Service tax rate (composition rate) is being prescribed at 1.4% of the total premium charged, in cases where the amount allocated for investment or savings on behalf of policy holder is not intimated to the policy holder at the time of providing of service Rule 7 Annual Return: Service tax assessees above a certain threshold limit shall also submit an .....

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ion of capital goods; Cenvat credit on inputs and capital goods used for pumping of water, for captive use in the factory, is being allowed even where such capital goods are installed outside the factory. Rule 2(e) Definition of exempted service : Service by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India is being excluded from the definition of exempted service . This would allow domestic shipping lines to take credit on inputs and .....

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intended to be used in the premises of job-worker or another manufacturer, who manufactures the goods as per specification of manufacturer of final products. It is also being provided that a manufacturer can send these goods directly to such other manufacturer or job-worker without bringing the same to his premises; Rule 4(6): The validity of permission given by an Assistant Commissioner or Deputy Commissioner to a manufacturer of the final products for sending inputs or partially processed inp .....

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inputs and input services used in manufacture of exempted goods or for provision of exempted services, on following broad principles : Option 1 - The assessee can pay an amount equal to 6% of value of the exempted goods and 7% of value of the exempted services. This amount will be capped at a maximum of the total credit taken with the assessee at the end of the period to which the payment relates; Option 2 - Pay an amount as determined under Rule 6(3A) Formula. Cenvat credit on common inputs/in .....

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uted towards exempted goods and exempted services by multiplying the common credit with the ratio of value of exempted goods manufactured or exempted services provided to the total turnover of exempted and non-exempted goods and exempted and non-exempted services in the previous financial year; Final reconciliation and adjustments are provided for after close of financial year by 30th June of the succeeding financial year, as provided in the existing Credit Rules No Cenvat credit on capital good .....

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t credit by Input Service Distributor ( ISD ) Credit can be distributed to outsourced manufacturing unit - Outsourced manufacturing unit means job-worker paying duty under 10A of Central Excise Valuation (Determination of Price Of Excisable Goods) Rules, 2000 or contract manufacturer paying under Section 4A of the Central Excise Act, 1944; Credit common to more than one unit to be distributed to respective unit; Credit common to all units to be distributed to all the units; Credit on services wi .....

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