Amendment in Indirect tax for IPC exams

Basic Concepts of Service Tax

Amendments by Finance Act, 2015:

1. (i) Service tax rate enhanced from 12% to 14% and

(ii) Levy of education cesses on taxable services ceased to have effect [Section 66B]

Thus, the new service tax rate has come into effect from 01.06.2015.

2. 2% Swachh Bharat Cess to be levied on value of all or any of taxable services [Section 119 of the Finance Act, 2015] [But actually levied 0.5% from 15th November, 2016]

3. Activities undertaken by

(i) chit fund foremen in relation to chit and

(ii) lottery distributors and selling agents in relation to lotteries are not transactions in money or actionable claim and are thus, liable to service tax - Explanation 2 substituted in the definition of �service� [Explanation 2 to section 65B(44)] [Effective from 14.05.2015]

4. Definition of Government incorporated in the Act:

�Government means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder�. [Effective from 14.05.2015]

5. Services by way of carrying out any process amounting to manufacture/production of potable liquor made liable to service tax [Section 66D(f)]:

�

Services by way of carrying out any process amounting to manufacture or production of goods were covered in the Negative List under clause (f) of section 66D. Clause (f) has been substituted by a new clause to exclude process for production or manufacture of alcoholic liquor for human consumption from the ambit of negative list. The substituted clause (f) reads as under: �Services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption�

6. Admission to entertainment events or access to amusement facilities made liable to service tax [Section 66D(j)] [Effective from 01.06.2015]

Significant Notifications/Circulars Issued:

Services provided by the members of the Joint Venture (JV) to the JV and vice versa or between the members of the JV:

In accordance with Explanation 3(a) of the definition of service under section 65B(44) of the Finance Act, 1994, JV (an unincorporated temporary association constituted for the limited purpose of carrying out a specified project) and the members of the JV are treated as distinct persons and therefore, taxable services provided for consideration, by the JV to its members or vice versa and between the members of the JV are taxable.

Cash calls (capital contributions) made by the members to the JV:

If cash calls are merely a transaction in money, they are excluded from the definition of service provided in section 65B(44) of the Finance Act, 1994. Whether a �cash call� is �merely�. a transaction in money� [in terms of section 65B(44) of the Finance Act, 1994] and hence not in the nature of consideration for taxable service, would depend on the comprehensive examination of the Joint Venture Agreement, which may vary from case to case. Detailed and close scrutiny of the terms of JV agreement may be required in each case, to determine the service tax treatment of cash calls. [Circular No. 179/5/2014 ST dated 24.09.2014]

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