SERVICE TAX - Finance Bill, 2017

SERVICE TAX A. Legislative changes Existing Proposed 1. The Negative List entry in respect of services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption , is proposed to be omitted. However, the same entry is being placed in exemption notification No. 25/2012-Service Tax dated 20th June, 2012. Consequently, the definition of process amounting to manufacture [clause (40) section 65B] is also proposed to be omitted from the Finance Act, 1994 and is being incorporated in the general exemption notification. (Clauses 120 121 of the Bill refers) Nil Nil 2. Service tax exemption to taxable services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government, is being made effective from 10th day of September, 2004, the date when services of life insurance became taxable ( Clause 127 of the Bill refers ). 14% Nil 3. Benefit of the exemption notification No. 41/2016-ST dated 22.09.2016 is being extended with effect from 1.6.2007, the date when the services of renting of immovable property became taxable. Notification No.41/2016-ST dated 22.09.2016, exempts one time upfront amount (called as premium, salami, cost, price, development charges or by whatever name) payable for grant of long-term lease of industrial plots (30 years or more) by State Government industrial development corporations/undertakings to industrial units from Service Tax ( Clause 127 of the Bill refers ). 14% Nil 4. Rule 2 A of Service Tax (Determination of Value) Rules, 2006 is being amended with effect from 01.07.2010 so as to make it clear that value of service portion in execution of works contract involving transfer of goods and land or undivided share of land, as the case may be, shall not include value of property in such land or undivided share of land ( Clause 128 of the Bill refers ). 4.2% 4.2% B. Other Legislative Changes regarding Authority for Advance Ruling Clause of Finance Bill, 2017 5. Clause (d) of section 96A is being amended so as to substitute the definition of Authority to mean the Authority for Advance Ruling as constituted under section 28E of the Customs Act, 1962. [122] 6. Section 96B relating to vacancies not to invalidate proceedings is being omitted. [123] 7. Sub-section (3) of section 96C is being amended so as to increase the application fee for seeking advance ruling from rupees two thousand five hundred to rupees ten thousand on the lines of the Central Excise Act. [124] 8. Sub-section (6) of section 96D is being amended so as to provide time limit of six months by which Authority shall pronounce its ruling on the lines of the Central Excise Act. [125] 9. A new section 96HA is being inserted so as to provide for transferring the pending applications before the Authority for Advance Rulings (Central Excise, Customs and Service Tax) to the Authority constituted under section 245-O of the Income-tax Act from the stage at which such proceedings stood as on the date on which the Finance Bill, 2017 receives the assent of the President. [126] C. New Exemptions 1. Services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government is being exempted from service tax from 2nd February, 2017. 14% Nil 2. The exemption vide S. No. 9B of notification No. 25/2012-ST dated 20.06.2012, is being amended so as to omit the word residential appearing in the notification. The exemption remains the same in all other respects. S. No. 9B of notification No. 25/2012-ST exempts services provided by Indian Institutes of Management (IIMs) by way of two year full time residential Post Graduate Programmes (PGP) in Management for the Post Graduate Diploma in Management (PGDM), to which admissions are made on the basis of the Common Admission Test (CAT), conducted by IIM. 14% Nil 3. Under the Regional Connectivity Scheme (RCS), exemption from service tax is being provided in respect of the amount of viability gap funding (VGF) payable to the selected airline operator for the services of transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a Regional Connectivity Scheme (RCS) airport, for a period of one year from the date of commencement of operations of the Regional Connectivity Scheme (RCS) airport as notified by Ministry of Civil Aviation. 14% Nil D. Rationalisation measure 1. Explanation-I (e) for the purpose of sub-rule (3) and (3A) of Rule 6 of Cenvat Credit Rules, 2004 is being amended so as to exclude banks and financial institutions including non-banking financial companies engaged in providing services by way of extending deposits, loans or advances from its ambit. It has been provided in the Cenvat Credit Rules, 2004 that value for the purpose of reversal of common input tax credit on inputs and input services used in providing taxable services and exempted services, shall not include the value of service by way of extending deposits, loans or advances against consideration in the form of interest or discount.