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Impact of Budget 16 changes in Service tax and Excise on Builders

Ajay Chandramouli 
on 05 March 2016

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Change in rate of Abatement:

A uniform abatement at the rate of 70% is prescribed for services of construction of complex, building, civil structure, or a part thereof, subject to fulfillment of the existing conditions. Therefore tax is payable on 30% of value of service.

Effective from 01.04.2016

Change in Rate of Excise Duty

Ready Mix Concrete [3824 50 10] manufactured at the site of construction for use in construction work at such site is being fully exempted from excise duty. 

Effective from 01.03.2016

Exemption for Construction of Individual house under PMAY/HFA

Exemption from Service tax is provided to Services by way of construction, erection etc., of a civil structure or any other original works pertaining to the “Beneficiary-led individual house construction / enhancement” component of Housing for All (HFA) (Urban) Mission/ Pradhan Mantri Awas Yojana (PMAY).

Effective from 01.03.2016

Exemption for construction works used for specified purpose (Restored)

Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of specified structures used for specified purposes (Sl. No 12A of 25/2012-ST)

Effective from 1st March, 16

Exemption for Construction of low cost houses up to a carpet area of 60 sq.m

Exemption from Service tax is provided to Services by way of construction, erection, etc., of original works pertaining to low cost houses up to a carpet area of 60 sq.m per house in a housing project approved by the competent authority under the “Affordable housing in partnership” component of PMAY or any housing scheme of a State Government.

Effective from 01.03.2016

Changes in Rule (6) of CENVAT Credit Rules

The Rule that obliges the service provider to apportion the common CENVAT credit based on the prescribed formula is amended to include the activity which is not a service as a part of formula.

Effective from 1st April, 16

General Changes as applicable to Builders

Levy of New Cess: A new cess called Krishi Kalyan Cess is levied with effect from 1st June, 2016 on any or all the taxable services at the rate of 0.5% on the value of such taxable services making effective rate of service tax to 15%. Credit of Krishi Kalyan Cess paid on input services shall be allowed to be used for payment of the proposed Cess on the service provided by a service provider.

Effective from 01.06.2016

New Annual Return

A new annual return in addition to the existing two half yearly returns need to be filed by every assessee on or before 30th November every year. The prescribed format is yet to be notified. Penalty of Rs.100/- per day subject to a maximum of Rs. 20000/- is levied in c a case of delay in filing. Return can be revised within one month

Effective from 2016-2017

Change in Interest rates for delay in payment of service tax

The existing rates of interest for delay in filing are revised to i) 24% where service tax is collected and no paid and ii) 15% in other cases.

Effective from date of assent of Finance bill

Dispute resolution scheme

Declarations of tax dues pending before Commissioner (appeals) can be made on or before 31St December, 16. Sufficient to pay 25% of penalty imposed.

Effective from 1st June 2016

Services provided by Government are taxable

Any Services provided by Government are now taxable under Reverse charge. Earlier only support services defined are taxable. A threshold limit of Rs.10lakhs is prescribed.

Effective from 1st April 2016

Services by Senior Advocate

The services provided by Senior advocate to a business entity are taxable under forward charge in the hands of Service provider (i.e. is Senior Advocate)

Effective from 1s April,16

Period of limitation extnded

The current normal period of limitation up to which department can initiate the proceedings is modified to increase the time limit up to 30 months from existing 18 months. Whereas in case of Central Excise it is increased from one year to two years

Effective from date of assent of Finance Bill

The author can be reached at ajaymouli1996@gmail.com

This is purely based on the analysis of Budget Changes. It cannot be taken as a advice or opinion.


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