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TMI BlogUnion Budget 2015 - Changes in Service TaxX X X X Extracts X X X X X X X X Extracts X X X X ..... re being given effect to by inserting new entries, and amending/omitting existing entries in notification Nos. 25/2012-ST, 26/2012-ST, 30/2012-ST and 31/2012-ST . Further, notification No. 42/2012-ST is being rescinded. 2. It may be noted that changes being made in the Budget are coming into effect on various dates, as indicated in the following paragraphs. These changes are categorized below based on the above criterion: (i) Changes coming into effect immediately w.e.f. the 1st day of March, 2015; (ii) Changes coming into effect from the 1st day of April, 2015 ; (iii) The amendments which will get incorporated in the Finance Act, 1994 immediately on enactment of the Finance Bill, 2015; (iv) The amendments made in the Finance Act, 1994 , including the change in service tax rate that will come into effect from a date to be notified by the Government in this regard after the enactment of the Finance Bill, 2015 ; (v) Certain fresh entries and amendments to existing entries in notification No. 25/12-ST , and certain amendments in the Service Tax Rules that will come into effect as and when the amendments in the Negative List and revised rate of Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or access to amusement facility is being omitted [ section 66D (j) ]. Consequently, the definitions of amusement facility [ section 65 B (9) ] and entertainment event [ section 65B(24) ] are also being omitted. The implication of these changes are as follows,- (a) 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. (b) Service tax to 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 is being inserted in notification No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term government is being incorporated in the Act [ section 65 B (26A) ]. ( Clauses 105 of the Bill refers) (ii) The intention in law has been to levy Service Tax on the services provided by: (a) chit fund foremen by way of conducting a chit. (b) distributor or selling agents of lottery, as appointed or authorized by the organizing state for promoting, marketing, distributing, selling, or assisting the state in any other way for organizing and conducting a lottery. However, Courts have taken a contrary view in some cases, while in some cases the levy has been upheld. An Explanation is being inserted in the definition of service to specifically state the intention of the legislature to levy Service Tax on activities undertaken by chit fund foremen in relation to chit, and lottery distributors and selling agents, in relation to lotteries [ section 65 B (44) ]. Further, an explanation is being added in entry (i) of section 66D to specifically state that these activities are not covered by the Negative List. ( Clauses 105 and 107 of the Bill refers) (iii) Section 66F (1) prescribes that unless otherwise specified, reference to a service sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Tax amount involved in such cases; (b) no penalty is to be paid if Service Tax and interest is paid within 30 days of issuance of notice under section 73 (1) ; (c) a reduced penalty equal to 25% of the penalty imposed by the Central Excise officer by way of an order is to be paid if the Service Tax, interest and reduced penalty is paid within 30 days of such order; and (d) if the Service Tax amount gets reduced in any appellate proceeding, then the penalty amount shall also stand modified accordingly, and benefit of reduced penalty ( 25% of penalty imposed) shall be admissible if service tax, interest and reduced penalty is paid within 30 days of such appellate order. ( Clause 111 of the Bill refers) (vii) Section 78 is being amended to rationalize penalty, in cases involving fraud or collusion or wilful mis-statement of suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of Service Tax, in the following manner,- (a) penalty shall be hundred per cent of Service Tax amount involved in such cases; (b) a reduced penalty equal to 15% of the Service Tax amount is to be paid if Service Tax, interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails, the D.O. letter of J.S. (TRU-I) may please be referred to. The above stated changes in the Finance Act, 1994 , shall get incorporated in the said Act on the day the Finance Bill, 2015 is enacted. 6 Review of Exemptions : 6.1 Exemption presently available on specified services of construction, repair, maintenance, renovation or alteration service provided to the Government, a local authority, or a governmental authority ( vide S. No. 12 of the notification No. 25/12-ST ) shall be limited only to,- (a) a historical monument, archaeological site or remains of national importance, archeological excavation or antiquity; (b) canal, dam or other irrigation work; and (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal. Exemption to other services presently covered under S. No. 12 of notification No. 25/12-ST is being withdrawn. 6.2 Exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port is being withdrawn ( S. No 14 of the notification No. 25/12-ST ). The other exemptions covered under S. No. 14 of notification No. 25/12-ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at para 6.6 shall come into effect from a date to be notified after the enactment of the Finance Bill, 2015 . The change mentioned at S. No. 6.8 comes into effect immediately. 7 New Exemptions: 7.1 Hitherto, any service provided by way of transportation of a patient to and from a clinical establishment by a clinical establishment is exempt from Service Tax. The scope of this exemption is being widened to include all ambulance services. (Amended in the entry at S. No. 2 of notification No. 25/12-ST refers). 7.2 Life insurance service provided by way of Varishtha Pension Bima Yojna is being exempted. (Amendment in entry at S. No. 26A of notification No. 25/12-ST refers) 7.3 Service provided by a Common Effluent Treatment Plant operator for treatment of effluent is being exempted. (New entry at S. No. 43 of notification No. 25/12-ST ). 7.4 Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables is being exempted. (New entry at S. No. 44 of notification No. 25/12-ST) . 7.5 Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tige ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilment of Cenvat Credit on inputs, capital goods and input services. 9.2 At present, Service Tax is payable on 40% of the value of air transport of passenger for economy as well as higher classes, e.g. business class. The abatement for classes other than economy is being reduced and Service Tax would be payable on 60% of the value of such higher classes. 9.3 Abatement is being withdrawn from services provided in relation to chit. Consequently, Service Tax shall be paid by the chit fund foremen on the full consideration received by way of fee, commission or any such amount. They would be entitled to take Cenvat Credit. The proposed rationalization in abatements shall come into effect from the 1st day of April, 2015. 10. Reverse Charge Mechanism 10.1 Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism. 10.2 Services provided by,- (i) mutual fund agents, mutual fund distributors; and (ii) agents of lottery distributor are being brought under reverse charge consequent to withdrawal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der has been allowed to pay service tax at an alternative rate subject to the conditions as prescribed under rule 6 (7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994 . Consequent to the upward revision in Service Tax rate, the said alternative rates shall also be revised proportionately. Amendments to this effect have been proposed in the Service Tax Rules. The amendments specified in para 11.5 shall come into effect as and when the revised Service Tax rate comes into effect. 12. Cenvat Credit Rules, 2004 12.1 Rule 4(7) is being amended to allow Cenvat Credit of Service Tax paid under partial reverse charge by the service receiver without linking it to the payment to the service provider. This change will come into effect from 1.4.2015. 12.2 The period for taking Cenvat Credit is being extended from six months from the date of invoice to one year from the date of invoice. 12.3 Certain other changes are being made in the provisions of the Cenvat Credit Rules, 2004 , which, inter-alia, include allowing Cenvat Credit on input and capital goods received directly by job workers, defining export goods for the purposes of rule 5 , defining exempt goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to chit (v) Amendment in reverse charge mechanism,- To prescribe full reverse charge on manpower supply and security service provided by individual, HUF, partnership firm to a body corporate Prescribing reverse charge on service provided by a mutual fund agent, mutual fund distributor and agents of lottery distributor (vi) Amendment in rule 4(7) of the Cenvat Credit Rules to allow credit of service tax paid by recipient of service in partial reverse charge immediately on payment of tax 6.1 to 6.5 6.7 7.1 to 7.7 9.1 to 9.3 10.1 and 10.2 12.1 Changes in the Finance Act, 1994 that would get incorporated on enactment of the Finance Bill 2015 (i) Insertion of new definition to specify the term government [ section 65 B (26A) ] (ii) Insertion of a new Explanation in the definition of service [ section 65 B(44) ] (iii) Insertion of an illustration in sub-section (1) of section 66F(1) to explain the scope of this subsection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are not intended to be exhaustive and are meant only to draw attention to major changes. The text of the statutory provisions and the wordings of the notifications should be read carefully for interpreting the law. 15.2 Field formations are requested to go through the changes made in the Budget carefully. Any issues or doubts which may arise or any omission/error observed may kindly be brought to the notice of the undersigned, or Dr. Abhishek Chandra Gupta, Technical Officer at [email protected] as soon as possible. I would like to express my appreciation of the pre-budget suggestions and inputs received from field formations. I would also thank the officers in TRU who had worked as a cohesive team during the Budget exercise. A special word of thanks to Shri G. D. Lohani who, though promoted as Commissioner mid-way through the exercise, continued to work as a part of the team with unabated enthusiasm. With regards, Yours sincerely, (M. Vinod Kumar) To: All Chief Commissioners / Director Generals All Principal Commissioners/Commissioners of Service Tax Al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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