ABATEMENTS IN SERVICE TAX

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ABATEMENTS IN SERVICE TAX

				By: Dr. Sanjiv Agarwal
				July 15, 2013
All Articles by: Dr. Sanjiv Agarwal View Profile

Contents

What is Abatement

According to Oxford English Dictionary, the word, 'abatement' means 'to fell', 'to beat'. Abate' means becoming less intense or vide spread. It also means to diminish or take away.

According to Wikipedia, abatement refers generally to a lessening, diminution, reduction, or moderation of something ….it could be debt, legacies, tax etc.

In commercial law, it means an allowance of discount made for prompt payment. In reverse law, abatement is a deduction from or refunding of duties on taxes on goods etc. In case of debts, abatement would mean reduction of payment where a fund is insufficient to meet all the claims.

One who abates is called abator.

Abatements allowed

Apart from full exemption available to 39 categories of services vide Notification No. 25/2012-ST dated 20.6.2012, the abatements as available under Notification No. 1/2006-ST have since been superseded vide Notification No. 26/2012-ST dated 20.6.2012. All statements available for services of specified categories have now been merged in one exemption notification No. 26/2012-ST, dated 20-6-2012 which is applicable w.e.f. 1-7-2012. The increase in taxable portion of value are accompanied with liberalization in input tax credits following the principle of neutrality of taxes that the burden of taxes should not raise the cost per se but passed on to the point of consumption. It is expected that, though the taxable portion of services may appear a little higher, but the availability of credits will lead to reduction in costs and hence prices for the consumers.

The new abatements shall be as follows w.e.f. 1-7-2012 :

In terms of the Notification No. 26/2012-ST, exemption is granted from so much of the service tax leviable, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the following Table, of the amount charged (or in some cases of specified amount) by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the Table:

Sl. No.	Description of taxable service	%	Conditions
(1)	(2)	(3)	(4)
1	Services in relation to financial leasing including hire purchase	10	Nil
2	Transport of goods by rail	30	Nil
3	Transport of passengers, with or without accompanied belongings by rail	30	Nil
4	Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises	70	CENVAT credit on any goods classifiable under chapter 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) has not been taken under the provisions of the CENVAT Credit Rules, 2004.
5	Transport of passengers by air, with or without accompanied belongings	40	CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
6	Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes	60	CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
7	Services of goods transport agency in relation to transportation of goods.	25	CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
8	Services provided in relation to chit	70	CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
9	Renting of any motor vehicle designed to carry passengers [This entry has been quashed in Delhi Chit Fund Association v. UOI (Delhi); 2013 (4) TMI 630 - DELHI HIGH COURT].	40	CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
10	Transport of goods in a vessel	50	CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
11.	Services by a tour operator in relation to,- (i) a package tour (ii) a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour	25 10	(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour. (i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii) The invoice, bill or challan issued indicates that it is towards the charges for such accommodation. (iii) This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.
	(iii) any services other than specified at (i) and (ii) above.	40	(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii) The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.
12	Upto 28.02.2013 Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority w.e.f. 1.3.2013 upto 7.5.2013 (i) for residential unit having carpet area upto 2000 square feet or where the amount charged is less than rupees one crore; (ii) for other than the (i) above. W.e.f. 8.5.2013 (i) for a residential unit satisfying both the following conditions, namely:- the carpet area of the unit is less than 2000 square feet; and the amount charged for the unit is less than rupees one crore; (ii) for other than the (i) above.	25 25 30 25 30	(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii) The value of land is included in the amount charged from the service receiver.