Service Tax Amendments

Following changes shall be applicable w.e.f. June 1, 2015

• Tax rates

Section 66B of Finance Act, 1994 wasamended by Finance Act, 2015 so as to increase rate of service tax from 12% to 14%. This new rate of 14% shall be applicable from June 1, 2015. Education Cess and Secondary & Higher Education Cess shall not be levied on taxable services w.e.f. June 1, 2015.

New Service Tax rates for composition schemes were introduced vide Notification No. 5/2015-ST dated 1-3-2015. These rates shall also be effective from June 1, 2015. Government issued Notification no 14/2015-ST and 15/2015-ST both dated 19-5-2015 in this regard.

Under Rule 6(3) of Cenvat Credit Rules, 2004, manufacturer or service provider is liable to pay an amount equal to certain percentage of value of exempted goods manufactured or value of exempted services rendered where he utilizes Cenvat credit in manufacture/provision of exempted as well as of dutiable goods/services and doesn't maintain separate account in this regard. Earlier this rate was 6% which had been increased to 7% w.e.f. June 1, 2015 vide Notification no 14/2015 – C.E. (N.T.) dated 19-5-2015.

• Access to amusement facilities

Till now, access to amusement facilities wasn't chargeable to service tax being covered under negative list provision, i.e., Section 66D(j). Now, such activities shall be subjected to service tax w.e.f. June 1, 2015 as Section 66D(j) had been omitted. Meaning of 'amusement facility' u/s 65B(9) had also been omitted.

• Admission to entertainment events

Till now this activity was covered under negative list provision, Section 66D(j).It is tobe noted that meaning of 'entertainment event' u/s 65B(24) had been omitted. Since said sections had been omitted, the obvious corollary would be that such activity will now be subjected to service tax. But such activity had been covered under exemption Notification No. 25/2012-ST dated 20-6-2012 vide Notification no 6/2015-ST dated 1-3-2015. Therefore, admission to those entertainment events which are specified in the said exemption Notification shall not be subjected to service tax.

• Alcoholic liquor for human consumption

Process of manufacture is not chargeable to service tax. Now, it shall not include alcoholic liquor for human consumption as Section66D(j) and Section 65B(40) had been amended accordingly. Therefore, Alcoholic liquor of human consumption shall be subjected to service tax. Further, exemption vide Notification no 25/2012-ST dated 20-6-2012 which is applicable to job work had been curtailed so as to exclude alcoholic liquor of human consumption. Therefore, carrying out an intermediate production process as job work in relation to alcoholic liquor for human consumption shall also be subjected to service-tax.

• Betting, Gambling or Lottery

These activities are not subjected to service tax being covered under negative list provision, Section 66D(i). An Explanation had been added to curtail its scope. Now the activities specified in newly substituted Explanation 2 of section 65B(44) shall be subjected to service tax in respect of betting, gambling or lottery. These activities include:

Activity carried out by a lottery distributor or selling agent in relation to promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any manner.
Activity carried out by a foreman of chit fund for conducting or organizing a chit in any manner.

Following are two amendments which shall come into force from date of notification

Meaning of 'Chit' omitted from Abatement Notification 26/2012-ST

NOTIFCATION NO 13/2015-ST, DATED 19 MAY, 2015

Earlier Government omitted entry relating to 'chit' from Notification no 26/2012-ST dated 20-6-2012 vide Notification no 8/2015-ST dated 1-3-2015. But, meaning of chit in said abatement Notification was not omitted. Now, the Government omitted such meaning of chit from said abatement Notification vide Notification no 13/2015-ST.

Service for Power System Development Fund Scheme

NOTIFICATION NO 17/2015-ST, DATED 19 MAY, 2015

Government has exempted taxable services provided under the Power System Development Fund Scheme of the Ministry of Power by way of:

re-gasification of Liquefied Natural Gas imported by the Gas Authority of India Limited (GAIL);

transportation of the incremental Re-gasified Liquefied Natural Gas (RLNG) (e-bid RLNG) to the power generating companies or plants as specified in thisnotification.

This exemption is subject to certain conditions and is applicable uptoApril 1, 2017.Following amendments are yet to be notified

Swachh Bharat Cess

Government has not notified levy of Swachh Bharat Cess. The enabling provisions in this regard are contained under Chapter VI of Finance Act, 2015.

Any Service by Government to Business Entity

Support services provided by Government to Business Entity are taxable as it is excluded from negative list provision. The Finance Act, 2015 contains provisions to replace 'support services' with 'any service', thus allowing levy of service tax on any service provided by Government to Business Entity. However, date from when such amendment take place had not been notified yet.