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HIGHLIGHTS OF BUDGET-2014

SERVICE TAX PROPOSALS IN UNION BUDGET 2014-15

New Services Brought under Service Tax Net w.e.f the date of assent by President

a) Radio Taxi Services

b) Renting of Space for advertisement in Online & Mobile

Penal Interest on delay Payment of Tax is now more stringent Effective E Dated: 1/10/2014

Delay upto 6 months -18%

Delay more than 6-12 months -24%

Delay more than 12 months -30%

Exemption Under Notification 25/2012 had been Reviewed as follows: WITH IMMEDIATE EFFECT

a) 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

b) In Respect of services received by educational institute the concept of ‘auxiliary educational services’ omitted and specify in the notification the services received by education institute to exempt as follows

(i) transportation of students, faculty and staff;

(ii) catering service including any mid-day meals scheme sponsored by the Government;

(iii) security or cleaning or house-keeping services in such educational  institutions; and

(iv) services relating to admission to such institution or conduct of examination

New Exemption: effective date 11.7.2014

1) 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.

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

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

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

5) 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.

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

Service tax on service portion in Works Contracts- Rationalization: w.e.f 1-10-14

In Rule 2A of the Service Tax Valuation Rules, category ‘B’ and ‘C’ of works contracts proposed to be merged into one single category, with service portion as 70%; this change will come into effect from 1st October, 2014.

It means all works contract other than execution of original works service tax shall be payable @ 70% of the work value

Pre-Deposit Requirement for Filling Appeal effective date: From the date finance Bill  Receives the Assent of president

Vide section 83, Section 35F of the Central Excise Act is already applicable to service tax.  Section 35F of the Central Excise Act is now being substituted with a new section which  prescribes a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty  imposed or both, for filing appeal before the Commissioner (Appeals) or the Tribunal at  the first stage and 10% of the duty demanded or penalty imposed or both, for filing the  second stage appeal before the Tribunal. The amount of pre-deposit payable would be  subject to a ceiling of Rs.10 Crore. All pending appeals/stay applications would be governed  by the statutory provisions prevailing at the time of filing such stay applications/appeals.

When the amended section 35F in the Central Excise Act comes into force, it would, mutatis  mutandis, apply to service tax by virtue of section 83 of the Finance Act, 1994.

New Inclusion in Reverse Charge Mechanism

1) Service provided by a Director to a body corporate to be brought under the reverse charge mechanism; service receiver, who is a body corporate will be the person liable to pay service tax.

2) Services provided by Recovery Agents to Banks, Financial Institutions and NBFC to be brought  under the reverse charge mechanism; service receiver will be the person liable to pay service tax.

Changes in Partial in Reverse Charge Mechanism

In renting of motor vehicle, portion of service tax payable by service provider and service receiver will be 50% each. This will come into effect from 1st of October 2014.

Changes in CENVAT Credit Rule

a) Under Full Reverse Charge Mechanism, cenvat credit can be availed on payment of  service tax without payment to service provider

b) 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 [with effect from 1st October 2014].

c) Time limit for taking credit on input and input services: credit shall be taken  within six months from the date of the invoice or challans or other documents  specified [change to have effect from 1st September, 2014].

PENALTY PROVISION MORE STRINGENT IN CASE OF SERIOUS OFFENCE

In case of serious offences, waiver of penalty not to be available U/S 80 

CA Bikash Agarwala,

B Com, LLB, FCA, CS, DISA

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