The Finance Minister submitted the budget for the financial year 2016 – 17 on 01.02.2017. In this article the changes brought out in the Finance Bill 2017 and in notification in respect of service tax are discussed.
Changes in Finance Bill 2017
Omission of Sections
The following sections are proposed to be omitted by the Finance Bill, 2017 (‘Bill’ for short)-
- Clause 120 proposes to omit Section 65B(40) -
- Clause 121 proposes to omit Section 66D(f) - services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption;
- Clause 123 proposes to omit 96B - Vacancies, etc., not to invalidate proceedings - No proceeding before, or pronouncement of advance ruling by, the Authority under this Chapter shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority;
Insertion of new Sections
The following clauses propose to insert new Sections in the Finance Act, 1994-
Section 104 is a special provision for exemption in certain cases relating to long term lease of industrial plots. Section 105 is a special provision for exemption in certain cases relating to life insurance services provided to members of armed forces of Union.
- Clause 126 proposes to insert a new Section 96HAwhich is the transitional provision. The new Section provides that on and from the date on which the Finance Bill, 2017 receives the assent of the President, every application and proceeding pending before the erstwhile Authority for Advance Rulings (Central Excise, Customs and Service Tax) shall stand transferred to the Authority from the stage at which such application or proceeding stood as on the date of such assent;
- Clause 127 proposes to insert a new Section 104 and 105
- Section 104 (1) provides that notwithstanding anything contained in Section 66, as it stood prior to the 01.07.2012 or in Section 66B, no service tax, leviable on one time upfront amount (premium, salami, cost, price, development charge or by whatever name called) in respect of taxable serviceprovided or agreed to be provided by a State Government industrial development Corporation or undertaking to industrial units by way of grant of long term lease of 30 years or more of industrial plots, shall be levied or collected during the period commencing from 01.06.2007 and ending with 21.09.2016 (both days inclusive).
- Section 104(2) provides that refund shall be made of all such service tax which has been collected, but which would not have been so collected, had sub-section(1) been in force at all material times;
- Section 104 (3) provides that notwithstanding anything contained in this Chapter, an application for claim of refund of service tax shall be made within a period of six months from the date on which the Finance Bill, 2017 receives the assent of the President;
- Section 105(1) provides that notwithstanding anything contained in Section 66, as it stood prior to 01.07.2012 or in Section 66B, no service tax shall be levied or collected in respect of 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, respectively under the Group Insurance Schemes of the Central Government, during the period commencing from 10.09.2004 and ending with 01.02.2016 (both days inclusive);
- Section 105(2) provides that refund shall be made of all such service tax which has been collected but which would not have been so collected, had sub-section (1) been in force at all material times;
- Section 105(3) provides that notwithstanding contained in this Chapter, an application for the claim of refund of service tax shall be made within a period of 6 months from the date on which the Finance Bill, 2017 receives the assent of the President.
Substitution of provisions
The following clauses of the Bill propose to substitute certain provisions of the Finance Act, 1994-
- Clause 122 of the bill proposes to substitute the definition of ‘Authority’ under Section 96A (d) – The newly substituted definition provisions that ‘Authority’ means the Authority for Advance Rulings as defined in Clause (e) of Section 28E of the Customs Act, 1962;
- Clause124 of the bill proposes to substitute Section 96C(3) which deals with fee payable for Advance Ruling.The bill proposes to increase the fee to ₹ 10,000/- from ₹ 2,500/- the existing rate;
Amendment - Service Tax (Determination of Value) Rules, 2006
Clause 128 of the Bill proposes to bring an amendment of Rule 2A of Service Tax (Determination of Value) Rules, 2006 retrospectively. This amendment would come into effect from 01.07.2010 so as to make it clear that the 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.
Notification No. 7/2017-ST, dated 02.02.2017
This notification comes into effect from 02.02.2017. This notification makes certain amendments in Notification No. 25/2012-ST, dated 20.06.2012 which deals with mega exemption.
The exemption vide Sl. No. 9B is being amended so as to omit the word ‘residential’ appearing in the notification. The exemption remains the same in all other aspects. Sl. No. 9B exempts services provided by Indian Institutes of Management by way of two year full time residential Post Graduate Programmes in Management for the Post Graduate Diploma in Management to which admissions are made on the basis of Common Entrance Test, conducted by IIM.
Clause 1(ii) of the Notification proposes to insert the following entry after entry No. 23-
23A – Services provided to the Government by way of transport of passengers, with or without accompanied belongings, by air, embarking from or terminating at a Regional Connectivity Scheme Airport, against consideration in the form of Viability Gap Funding (VGF):
Provided that nothing contained in this entry shall apply on or after the expiry of a period of one year from the date of commencement of operations of the Regional Connectivity Scheme Airport as notified by the Ministry of Civil Aviation.
Clause 1(iii) of the Notification seeks to insert entry 26D after the entry 26C. The newly inserted entry 26D provides that services of life insurance business provided or agreed to be provided by the Army, Navy and Air Force, respectively, under the Group Insurance Schemes of the Central Government.
Clause 1(iv) of the Notification seeks to substitute the existing entry 30 which will come into effect from the date on which the Finance Bill, 2017 receives the assent of the President. The newly substituted entry 30 provides that services by way of carrying out-
- any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption; or
- any intermediate production process as job work not amounting to manufacture or production in relation to-
- agriculture, printing or textile processing;
- cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, failing under Chapter 71 of the Central Excise Tariff Act, 1985;
- any goods excluding alcoholic liquors for human consumption, on which appropriate duty is payable by the principal manufacturer; or
- process of electroplating, zinc plating, anodizing, heat treatment, power coating, painting including spray painting or auto black, during the course of manufacture of parts of cycles or sewing machines up to an aggregate value of taxable service of the specified processes of ₹ 150 lakhs in a financial year subject to the condition that such aggregate value had not exceed ₹ 150 lakhs during the preceding financial year.
Clause 2 of the Notification seeks to insert a new clause after Para 2(y) which defines the phrase ‘process amounting to manufacture or production of goods’. According to the new insertion, the phrase ‘process amounting to manufacture or production of goods’ means a process on which duties of excise are leviable under Section 3 of the Central Excise Act, 1944 or the Medicinal and Toilet Preparation (Excise Duties) Act, 1955 or any process amounting to manufacture of opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force. This new insertion will come into effect from the date on which the Finance Bill, 2017 receives the assent of President of India.
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