Budget on Abatement

[Akash Phophalia]

BUDGET 2014-15

Changes in Abatement Notification

A BRIEF

The new notification 08/2014 dated 11^th July 2014 have introduced the following changes in Abatement Notification 26/2012 ST dated 20^th June 2012:-

1. The condition regarding non utilisation of CENVAT credit on inputs, capital goods and input services, used for providing the taxable services of goods transport agency in relation to transport of goods has been clarified by introducing “CENVAT credit on inputs, capital goods and input services used for providing the taxable services, has not been taken by the service provider. Thus Service recipient is not required to establish satisfaction of this condition by service provider.
2. From 1^st October 2014 the abatement of 60% will be available on “renting of motor cab” instead of “any motor vehicle designed to carry passengers”.

Further some relaxation has been provided in Cenvat Credit also as under :-

Cenvat credit on Inputs	Not available
Cenvat credit on Capital Goods	Not available
Cenvat credit on Input Services of renting of motorcab	Available as under :- (1) Full Cenvat credit provided that service tax is paid only on 40% value of input service. (2) 40% Cenvat credit if service tax is paid on full value of input service.
Cenvat credit on other input services	Not Available

3. Abatement of 60% has been provided for “Transport of passengers by a contract carriage other than motorcab. The abatement is with the condition that Cenvat credit of Inputs or Capital goods or Input services has not been taken.

Further it is also proposed to enhance the scope of such service by adding radio taxi alongwith other contract carriages. However, such amendment is to be brought by the Central Government by notification on some date.

4. The abatement for services provided by transport of goods in a vessel has been increased from 50% to 60% resulting in change in effective rate of service tax from the present 6.18% to 4.944% with effect from 1^st October 2014.

5. The tour operators are provided some relief in Cenvat credit. Now they can avail the Cenvat credit of service tax paid on input services of a tour operator. But the benefit of such credit is made effective from 1^st October 2014.

CA Akash Phophalia

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