Budget 2010. Highlights of Service Tax

Budget Highlights – Service Tax

1. Rate of tax on services retained at 10 per cent to pave the way forward for GST.
2. Proposals relating to Service Tax are estimated to result in a net revenue gain of Rs 3,000 crore for the year. 
   
3. Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy by making necessary changes in the export procedures.
   
4. Accredited news agencies which provide news feed online that meet certain criteria, exempted from Service Tax.
   

New Services (Proposed)

• Service of Promoting, marketing or organizing of games of chance, including lottery
• Health services, namely: -    Health check up undertaken by hospitals or medical establishments for the employees of business entities and     -    Health services provided under health insurance schemes offered by insurance companies
  
• Services provided for maintenance of medical records of employees of a business entity 
  
• Services of promoting of a ‘brand’ of goods, services, events, business entity etc
  
• Services of permitting commercial use or exploitation of any event organized by a person or organization 
  
• Services provided by Electricity Exchanges 
  
• Services related to two types of copyrights hitherto not covered under existing taxable service ‘Intellectual Property Right (IPR)’, namely, those on (a) cinematographic films; and (b) sound recording 
  
• Special services provided by a builder etc. to the prospective buyers such as providing preferential location or external or internal development of complexes on extra charges 
  

Expansion in the scope of Services (Proposed)

1)    ‘Air Passenger Transport Service’ is being expanded to include domestic journeys, and international journeys in any class.

2)    Presently the taxable service, ‘Information Technology Software Service’ is subjected to tax only in cases where such IT software is used for furtherance of business or commerce. The scope of the taxable service is being expanded to tax such service even if the service provided is used for purposes other than business or commerce.

3)    ‘Commercial Training or Coaching Service’ shall mean that such training or coaching is being provided for a consideration, whether or not such training or coaching is conducted with a profit motive. This change is being given retrospective effect from 01.07.2003.

4)    In the definition of the taxable service ‘Sponsorship Service’ the exclusion relating to sponsorship pertaining to sports is being removed. 

5)    In the definition of the taxable services ‘Construction of Complex service’
and ‘Commercial or industrial construction service’ it is being provided that unless the entire consideration for the property is paid after the completion of construction (i.e. after issuance of completion certificate by the competent authority), the activity of construction would be deemed to be a taxable service provided by the builder / promoter / developer to the prospective buyer and the Service Tax would be charged accordingly.

6)     ‘Renting of immovable property’ - (i) provide explicitly that the activity of ‘renting’ itself is a taxable service. This change is being givenretrospective effect from 01.06.2007; and (ii) provide that renting of vacant land, where the agreement or contract between the lessor and lessee provides for undertaking construction of buildings or structures on such land for furtherance of business or commerce during the tenure of the lease, shall be subjected to Service Tax.

7)    All services provided entirely within the airport / port premises would fall under the ‘Airport Services’, the ‘Port Services’ and the ‘Other Port Services’; and an authorization from the airport / port authority not a precondition for taxing these services. 

8)    Auctioneer’s Service – Expansion of  phrase - ‘auction by government’ means an auction involving sale of government property by any auctioneer and not when the government acts as an auctioneer for sale of the private property.

9)    ‘Management of Investment under ULIP Service’- the value of the taxable service for any year of the operation of policy shall be higher of  the actual amount charged by the insurer or the maximum amount of fund management charges fixed by the Insurance Regulatory & Development Authority (IRDA),