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Service Tax Budget Changes 2014-15

Akshay Garg 
on 10 July 2014

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• Sale of space or time for advertisements on segments such as internet websites, out-of-home media, on film screen in theatres, bill boards, conveyances, buildings, cell phones, Automated Teller Machines, tickets, commercial publications, aerial advertising, etc., will not qualify under negative list of services and hence, will be taxable.

• Radio taxis or Radio cabs (whether AC or Non AC) will be taxable and abatement as given to rent-a-cab has been allowed to radio taxis.

• Exemption extended to air-conditioned contract carriages is being withdrawn and abatement of 60% allowed.

• Exemption extended to services provided by clinical research organizations on human participants is being withdrawn.

• Exemption in respect of services provided to Government or local authority or governmental authority, will be limited to services by way of water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation.

• Only specified services received by educational institutions to be exempt from tax.

• Exemption from service tax is only available to hotel, inn, guest house, club or campsite and will not include any commercial places.

• Life micro-insurance schemes for the poor, approved by IRDA, where sum assured does not exceed Rupees Fifty Thousand to be exempted from service tax.

• Transport of organic manure by vessel, rail or road (by GTA) is being exempted.

• Loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled, is being exempted.

• Services provided by common bio-medical waste treatment facility operators to clinical establishments are being exempted.

• Specialized financial services received by RBI from global financial institutions in the course of management of foreign exchange reserves, e.g., external asset management, custodial services, securities lending services, etc. are being exempted.

• Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India are being exempted.

• Retrospective exemption from service tax has been granted to service provided by Employees’ State Insurance Corporation (ESIC) during the period prior to 01.07.2012

Reverse charge services – point of taxation will be the payment date or first day after three months from the date of invoice, whichever is earlier (changes to take place on invoices issued after 01.10.2014)

However, where invoice was issued prior to 01.10.2014, but payment has not been made, in that case, point of taxation shall be:

• If payment is made within six months of the date of invoice, the date of payment.

• If payment is not made within six months, be determined as per the provisions of rule 7.

Partial reverse charge – renting of motor vehicle – service recipient and service provider to pay 50% each (changes wef 01.10.2014)

Special Economic Zone (SEZ) – simplification of the procedures prescribed

In Rule 2A of the Service Tax Valuation Rules, service portion in relation to works contract other than execution of original works shall be 70%, thereby increasing the service portion for repair, maintenance or reconditioning or restoration or servicing from 60% to 70%.

Changes in abatement Notification No. 26/2012-ST

Abatement in respect of transport of goods by vessel to be increased from 50% to 60%.

Changes in Interest rate in late payment of service tax

Extent of delay

Simple interest rate per annum

For the period up to six months

18%

For the period from six months and upto one year

24%

For the period after one year

30%

Changes in Place of Provision of Service Rules

Provision for prescribing conditions for determination of place of provision of repair services carried out on temporarily imported goods is being omitted. Exclusion does not apply to goods that arrive in the taxable territory in the usual course of business and are subject to repair while such goods remain in the taxable territory.

The definition of intermediary is being amended to include the intermediary of goods in its scope. An intermediary of goods, such as a commission agent or consignment agent shall be covered under rule 9(c) of the Place of Supply of Services Rules.

Hiring of vessels or aircrafts, irrespective of whether short term or long term, will be covered by the general rule, which is place of location of the service receiver [Amendment to rule 9(d)].

CENVAT CREDIT

• Time limit for taking credit on input and input services introduced - Credit shall now be taken within six months from the date of the invoice or challans or other documents specified (changes wef 01.09.2014)

• Service tax paid under full reverse charge – The condition to pay invoice value to the service provider for availing credit of tax paid, to be omitted

• CENVAT credit reversed on account of non-receipt of export proceeds within the specified period, to be allowed as re-credit, if such export proceeds are received within one year from the specified period on the basis of documentary evidence of receipt of payment.

• Rent-a-cab operator and tour operator – Service tax paid by sub-contractor in the same line of business would be allowed as eligible credit to the main service provider to avoid double taxation, subject to certain conditions (changes wef 01.10.2014)

• GTA service – Service receiver may avail abatement, without having to obtain non-availment of CENVAT Credit certificate from service provider.

GENERAL PROVISIONS

• Tribunal may refuse admission of appeal by exercising its discretionary powers - limit raised from the existing Rs. 50,000/- to Rs.2 lakh

• Pre-Deposits in Appeal (First Stage) - Mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal before the Commissioner (Appeals) & Tribunal – It would also mean that, no stay application would be filed henceforth.

• Pre-Deposits in Appeal (Second Stage) - Mandatory fixed pre-deposit of 10% of the duty demanded or penalty imposed or both for filing appeal before the Tribunal – It would also mean that, no stay application would be filed henceforth.

• Ceiling for mandatory pre-deposit fixed at Rs. 10 Crores


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