Changes in Service Tax by Finance Bill 2016

Source:TaxGuru

CA Kamlesh Singh Chauhan

Prevailing Service Tax Rate: @14% Cenvat Available

Swachchh Bharat Cess@ 0.5% [w.e.f. 15/11/2015]- Cenvat Not Available

Krishi Kalyan Cess@ 0.5% [w.e.f. 01/06/2016] New Levy- Cenvat Available

1. CHANGES IN NEGATIVE LIST AS GIVEN U/S 66D OF CHAPTER-V OF FINANCE ACT, 1994

♠ ENTRY RELATED TO EDUCATIONAL SERVICES PROPOSED TO BE REMOVED FROM NEGATIVE LIST

  • Presently, clause (I) of section 66D of the Act [Negative List] covers specified educational services. These services are proposed to be omitted from the Negative List.
  • But the service tax exemption on them is being continued by incorporating them in the general exemption notification (Notification No. 25/2012-ST as amended by notification No. 09/2016-ST, dated 01.03.2016);
  • Consequently, the definition of “approved vocational education course” [clause (11) of section 65B] is also proposed to be omitted from the Finance Act and is being incorporated in the general exemption notification (Notification No. 25/2012-ST as amended by notification No 09/2016- ST, dated 01.03.2016). This amendment in the notification shall come into effect from the date of enactment of Finance Bill, 2016.

♠ ENTRY RELATED TO “SERVICE OF TRANSPORTATION OF PASSENGERS” PROPOSED TO BE REMOVED FROM NEGATIVE LIST;

  • The Negative List entry that covers “service of transportation of passengers, with or without accompanied belongings, by a stage carriage” is proposed to be omitted [section 66D (o) (i)] with effect from 01.06.2016.
  • However, such services by a non-air-conditioned contract carriage will continue to be exempted by way of exemption notification [Notification No. 25/2012-ST, as amended by notification No. 09/2016-ST, dated 01.03.2016]
  • Therefore, Service Tax will be levied on transportation of passengers by air conditioned stage carriage with effect from 01.06.2016, at the same level of abatement as applicable to the transportation of passengers by a contract carriage that is 60% without credit of inputs, input services and capital goods.
  • As per Existing provision, Service of Transportation of passengers, with or without accompanied belongings, by a stage carriage is covered under the negative list, hence not liable to service tax. Consequently cenvat for the same are also not available.

♠ ENTRIES RELATED WITH “SERVICE OF TRANSPORTATION OF GOODS” OF NEGATIVE LIST PROPOSED TO BE AMENDED;

  • The entry in the Negative List that covers services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance [section 66D (p) (ii)] is proposed to be omitted with effect from 01.06.2016.
  • However such services by an aircraft will continue to be exempted by way of exemption notification [NN 25/2012-ST, as amended by NN. 09/2016-ST dated 01.03.2016].
  • Therefore, Service Tax will be levied on provided services provided by a vessel by way of transportation of goods from outside India up to the customs station in India with effect from 01.06.2016.
  • The domestic shipping lines registered in India will pay service tax under forward charge while the services availed from foreign shipping line by a business entity located in India will get taxed under reverse charge at the hands of the business entity. The service tax so paid will be available as credit with the Indian manufacturer or service provider availing such services (subject to fulfilment of the other existing conditions).
  • Cenvat credit of eligible inputs, capital goods and input services is being allowed for providing the service by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India.
  • 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 shipping lines to take credit on inputs and input services used in providing the said service. [Amendment in rule 2, clause (e) refers]
  • As per Existing provision, Service of Transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance in India is covered under the negative list, hence not liable to service tax. Consequently cenvat for the same are also not available.

EXEMPTED SERVICES CLARIFIED:

  • Export of service under Rule 6A of Service Tax Rules, 1994 has excluded the Service by way of transportation of goods by vessel from custom station of clearance in India to place outside India.
  • The exclusion of outward transportation of goods by vessel from exempted services would enable the shipping lines to avail CENVAT credit of input services. The same is vital since the service of inward transportation of goods by shipping lines has been made taxable by excluding the same from negative list.

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 Business Entity [Section 109(1) of the Finance Act, 2015 read with Notification No. 06/2016-ST dated February 18, 2016]. However, the services provided by Government or Local authority to a Business Entity having turnover upto Rs. 10 lakh in the preceding Financial Year would remain exempt [New entry inserted vide after Entry No. 47 in the Mega Exemption Notification No. 25/2012- ST dated June 20, 2012 (“the Mega Exemption Notification”) amended vide Notification No. 07/2016-ST dated February 18, 2016].

– See more at: http://taxguru.in/service-tax/service-tax-finance-bill-2016.html#sthash.v7tI2FwH.dpuf

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