TIME FOR NOTING CHANGES IN SERVICE TAX EXEMPTIONS - PART I

[Dr. Sanjiv Agarwal]

We are at the end of financial year 2014-15 now with only few days left. It is time to realize and accept that exemption regime of Service Tax shall change with effect from 1^st April, 2015 and that it is just not a fool's day but backed by Notification No. 6/2015-ST dated 1.3.2015, amending the mega exemption Notification No. 25/2012-ST dated 20.06.2012. Most of these amendments shall be effective from April 1, 2015 except few which shall be applicable from a notified date after the enactment of Finance Bill, 2015. This may happen sometime in June / July 2015.

The exemptions could be classified into new exemptions, exemptions withdraws and modifications in exemptions. To provide clarity to the scope of exemptions, new definitions of national park, recognized sporting event, tiger reserve, wildlife sanctuary and zoo have been inserted.

The following amendments in exemptions and new amendments w.e.f. dates as indicated are note worthy-

1. With effect from notified date (a notification shall be issued to notify the date after enactment of Finance Act, 2015 :
2. Production of alcoholic liquour [existing clause (30c) of exemption Notification No. 25/2012-ST]

Exemption to intermediate production process for any goods shall be curtailed (clause 30c). The words, 'any goods' have been substituted for 'any goods excluding alcoholic liquor for human consumption'. Thus exemption will not be available to any goods and production process for alcoholic liquour meant for human consumption shall become taxable.This has been done in line with amendment in negative list [section 66D (f)] as the negative list entry of service by way of any process amounting to manufacture or production of goods has been pruned to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption.

Consequently, Service Tax shall be levied on contract manufacturing/job work for production of potable liquor for a consideration. In this context, the definition of the term “process amounting to manufacture or production of goods” [section 65 B (40)] has been amended. Consequent to imposition of Service Tax levy on service by way of manufacture of alcoholic liquor for human consumption, an amendment has been made in the entry at S. No. 30 of notification No. 25/12-ST to exclude carrying out of intermediate production process of alcoholic liquor for human consumption on job work from this entry.

2. Right to admission to exhibition of films, events, functions etc [New Clause 47 of exemption Notification No. 25/2012-ST]

New exemption shall be available for services by way of right to admission to,-

(i) exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet;

(ii) recognised sporting event;

(iii) award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is not more than ₹ 500 per person.”.

The aforesaid exemption shall be available only for services in relation to right to admission to specific events. Right to admission would imply taxation of consideration for gaining entry into the event to watch performance or enjoy the event. It could be in the form of ticket, pass, donor card, season ticket, sponsorship privileges etc.

Right to admission to the following events shall be exempt -

• Exhibition of -

• Cinematographic film (e.g. watching movie in theatre)
• Circus
• Dance
• Theatrical performance
• Drama
• Ballet

• Recognized sporting event, i.e., event organised by recognized sports body where team or an individual represents any district, state, zone or country or those events covered in exemption under clause (11) of exemption notification.

• Events (award function, concert, pageant, musical performance or any sporting event other than recognized sporting events) where consideration for admission (entry fee) is not more than ₹ 500 per person. Exemption would be available for admission fee upto and including ₹ 500 per person. Sometimes tickets are available for couples (2 persons). In such cases, per person cost will have to be ascertained for this exemption.

This exemption shall be made effective from the date the amendment to negative list concerning the exclusion service by way admission to entertainment events from negative list is made effective.

Negative list has been pruned by omission of clause (j) of section 66D, i.e., 'admission to entertainment event or access to amusement facility'. Accordingly, following two definitions shall also stand omitted from a notified date:

• amusement facility [section 65B(9)]
• entertainment event [section 65B (24)]

This change will have the following impact on taxability -

1. Service Tax shall be levied on the service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks and theme parks.

2. Service tax will be levied on service by way of admission to entertainment event of concerts, pageants, musical performances concerts, award functions and sporting events other than the recognized sporting event, if the amount charged is more than ₹ 500 for right to admission to such an event. However, the existing exemption, by way of the Negative List entry, to service by way of admission to entertainment event, namely, exhibition of cinematographic film, circus, recognized sporting event, dance, theatrical performance including drama and ballet shall be continued, through the route of exemption. For this purpose a new entry has been inserted in notification No. 25/12-ST. The term "recognized sporting event" has been defined by the amendment in the said notification.

However, exemption shall be available to services by way of admission to museum, national park, wildlife sanctuary; tiger reserve a zoo (w.e.f. 1.4.2015).

For these exemptions, necessary definitions have been provided in Notification No. 25/2012-ST, viz, definitions of recognized sport event, tiger reserve, wildlife sanctuary and zoo.

(To be continued …………….)