NEW EXEMPTIONS IN SERVICE TAX

[Dr. Sanjiv Agarwal]

Services by authorized persons / sub-brokers

Vide Notification No. 03/2014-ST dated 03.02.2014, a retrospective exemption from service tax payable on the services provided by an authorized person or sub-broker to the member of a recognized association or a registered association has been granted, in relation to a forward contract where such service tax was not being levied during the period from 10th September, 2004 to 30th June, 2012 in accordance with the generally prevalent practice during the said period.

Services in relation to rice

W.e.f. 17.02.2014, vide Notification No. 4/2014-ST benefits available to agricultural produce in the negative list have been extended to rice by way of exemptions under Notification No. 25/2012-ST. These are in relation to the following services carried out on or for 'rice':

1. transportation of rice by a rail or a vessel [Entry No. 20(i)]
2. transportation of rice by a goods transport agency [Entry No. 21(d)]
3. Loading, unloading, packing, storage and warehousing of rice (Entry No. 40]
4. Milling of paddy into rice being an intermediate production process in relation to agriculture [Entry No. 30(a)]

Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation

Vide Notification No. 4/2014-ST, 17.02.2014, the services provided by the cord bold banks by way of preservation of stem cells or any other services in relation to such preservation are exempt from service tax. Health care services by a clinical establishment, authorized medical practitioner or para medics are already exempt from levy of Service Tax. Now w.e.f. 17.2.2014, cord blood banks have also been added to this category of exemptions. These services of cord blood bank were previously taxable and liable to pay service tax as these services were not covered under the ‘health care services’ defined in clause 2(t) of the Notification No. 25/2012-ST dated 20.06.2012.

All blood banks shall not be exempt. What has been specifically exempted is specified services provided by cord blood banks. Such services shall be –

1. by way of preservation of stem cells, or
2. any other service in relation to such preservation of stem cells.

All other services of blood banks shall subject to tax.

Cord blood is a sample of blood taken from a new born baby's umbilical cord. It is a rich source of stem cells, which is used in the treatment of diseases like leukemia, lymphoma, anemia etc.

By Finance Act, 2014 (w.e.f. 06.08.2014)

Exemption in respect of taxable services provided by the Employees State Insurance Corporation

Finance Act, 2014 has inserted section 100 to provide for retrospective exemption upto 30.06.2012 in relation to services provided by the Employee’s State Insurance Corporation (ESIC) set up under the Employee’s State Insurance Act, 1948. The text of this section is as follows-

“100 Notwithstanding anything contained in section 66 as it stood prior to the 1^st day of July, 2012, no service tax shall be levied or collected in respect of taxable services provided by the Employees ‘ State Insurance Corporation set up under the Employees’ State Insurance Act, 1948, during the period prior to the is day of July , 2012".

This section provides a retrospective exemption for the period prior to the 1^st day of July, 2012 to Employees State Corporation set up under the Employee’s State Insurance Act, 1948. W.e.f. 1.7.2012, the services of Employee’s State Insurance Corporation are already exempted in Entry No. 36 of the Notification No. 25/2012-ST dated 20.6.2012.

Amendments made by Notification No. 06/2014-ST dated 11.07.2014 w.e.f. 11.07.2014

The following changes have been made w.e.f. 11.07.2014 by Notification No. 06/2014-ST dated 11.07.2014. The para wise and entry wise changes are as follows –

1. Entry 2B - services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto exempted
2. Entry 7 - exemption to clinical testing, analysis of drugs, vaccines etc by clinical research organizations omitted
3. Entry 9 - substituted to provide as follows :

• Educational institution clarified – divided in services to educational institution and services by educational institution
• Services by educational institution to faculty, staff and students fully exempt
• Specified services to educational institutions exempt
• Concept of auxiliary education service withdrawn and hence no longer applicable
• Exemption for renting of immovable property services to educational institutions withdrawn

4. Entry 18 - amended so as to provide that services of hotel, inn, guest house etc. need not be for 'commercial purposes'. This may cover now services provided by dharamshalas, ashrams, etc
5. Entry 20 and 21 - transportation of ginned or baled cotton and organic manure by rail or vessel or by Goods Transport Agency exempted.
6. Entry 23(b) - exemption in respect of transport of passengers by air conditioned contract carriage including for point to point travel withdrawn.
7. Entry 25 (a) - substituted to provide exemption to services provided to Government, a Local Authority or a Governmental Authority by way of water supply, public health, sanitation, conservancy, solid waste management or slum improvement and up-gradation; exemption made more specific; other services not directly connected with these will be taxable.
8. Entry 26A(c) – insurance scheme of life micro –insurance products as approved having maximum amount of cover upto fifty thousand rupees has been exempted.
9. Entry 40 - services by way of loading, unloading, packing, storage or warehousing of cotton, whether ginned or baled, has been exempted
10. Entry 41- services received by the Reserve Bank of India, from outside India in relation to management of foreign exchange reserves has been exempted
11. Entry 42 - Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India has been exempted.