Union budget 2015_Amendment In Indirect Taxes
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Transcript of Union budget 2015_Amendment In Indirect Taxes
UNION BUDGET 2015 :
HIGHLIGHTS
Amendments in Service Tax
a warm up match before ‘The Match’
“Its like a warm up match before ‘The Match’.
Increased rate of service tax to 14% seems
unfavorable, inflationary in nature to a common
man but it’s a preparation for GST, as proposed
rate of tax in GST is 18%.
Undoubtedly, it is a move towards single indirect
taxation mechanism in India and avoidance of
double taxation in indirect taxation.
It’s a bitter pill for cure of prolonged diseases.”
CA Gaurav [email protected]
+91-9560607530
Deepak [email protected]
+91-8377838738
From Authors’ Desk
Newly Added Provisions
Clause Amendment
105Amendment in Section 65B(44)
106EC&SHEC Abolished. New rate of Service Tax is 14%.
108 Amendment in Section 66F
109 Amendment in Section 67
110 Amendment in Section 73
111 Amendment in Section 76
112 Amendment in Section 78
114 Amendment to Section 80
115 Amendment in Section 86
116Changes in Amendment Notification
Clause Amendment
107Insertion of Explanation in Section 66D
113 New Section 78B
Amended Provisions
Chapter V of Finance Act, 1994
Clause Amendment
117Enabling provision for levy of “Swachh Bharat Cess”
Chapter VI of Finance Act, 1994
Focusing on revenue collection through increased Rate, withdrawal of exemptions, shrinking of negative
list etc.
Definition of Service
Following services have been taken into ambit of taxable services by
inserting explanation into definition of service :
activities undertaken by chit fund foremen in relation to chit, and
lottery distributors and selling agents, in relation to lotteries
Sec 65B (44) Amended
Also an explanation is being added in entry (i) of section 66D to
specifically state that above nature of services are outside the nature
of Negative List.
Swachh Bharat Cess /
Clean India Cess
Description Rate Clause
Basic Service Tax 14% Clause 106
Clean India Cess 2% Clause 117
Total Tax 16%
Chapter VI / Clause 117Swachh Bharat Cess on all or any of the taxable
services at a rate of 2% on the value of such taxable services.
Effective date of levy of such cess will notified by the Central Government after
the enactment of the Finance Bill, 2015.
Integration towards GST through
increase rate of service -tax
Statutory ProvisionsSection Provision
66F Section 66F (1) prescribes that unless otherwise specified, reference to a service shall not
include reference to any input service used for providing such services. An illustration is
being incorporated in this section to exemplify the scope of this provision.
Illustration
Service provided by the Reserve Bank of India (RBI), in section 66D (b) does not include
any agency service provided by other banks to RBI, as such agency services are input
services used by RBI for provision of its main service. Accordingly, banks providing agency
service to or in relation to services of RBI, are liable to pay Service Tax on the agency
services so provided by virtue of the existing section 66F (1).
67 Reimbursement of Expenses
It is being prescribed specifically in this section that consideration for a taxable service
shall include all reimbursable expenditure or cost incurred and charged by the service
provider. The intention has always been to include reimbursable expenditure in the value
of taxable service.
Statutory ProvisionsSection Provision
73 New Sub Section (1B)
No Notice is required to recover Service Tax amount self-assessed and declared in
the return but not paid .
73(4A) Omitted
sub-section (4A) provides for reduced penalty if true and complete details of
transaction were available on specified Records
76 Rationalization of provisions related to penalties where there is no fraud or collusion
or wilful misstatement or suppression of facts or contravention of any provision of
the Act or rules with the intent to evade payment of Service Tax. New Provision is
read as follows : -
a)Penalty<=10% of Service Tax involved in such cases
b)No Penalty = Service Tax & interest paid within 30 days of issuance of notice u/s 73(1)
c) Reduced Penalty = 25% of penalty imposed by CEO
Fails to address issues on double taxation in case of
software, restaurant services etc.
Statutory ProvisionsSection Provision
86 Amendment regarding the remedy against the order passed by Commissioner
(Appeal), in a matter involving rebate of Service Tax, shall lie in terms of section
35EE of the Central Excise Act.
It is also being provided that all appeals filed in Tribunal after the date the Finance
Act, 2012 came into effect and pending on the date when the Finance Bill, 2015
receives assent of the President shall be transferred and dealt in accordance with
section 35EE of the Central Excise Act.
83 Changes in the provisions of Settlement Commission
No announcement on speedy disbursements of
refunds is demotivating for export industry
Negative List
Section Particulars Amendment
66D (j)“Admission to entertainment event
or access to amusement facility”Deleted
65 B (9) Definition of “amusement facility” Deleted : Hence, Taxable
65B(24) Definition of “entertainment event”
Still Exempt –
Entry 46 of Mega Exemption 25/2012
and clause (zab) of definitions
Non -Taxable (If amount charged < Rs.500)
Pageants Musical
performancesConcerts Award functions
Unrecognised Sporting event
Non-Taxable Exhibition of
cinematographic film
Circus Dance
Theatrical performance
including drama and ballet
Recognized sporting event
Entry 46 of Mega Exemption 25/2012
Negative List
Consequential Amendments
section 65 B (40) Process amounting to manufacture or production of goods
S. No. 30 of notification
No. 25/12-ST
Exemption to intermediate production of alcoholic liquor for
human consumption Withdrawn
Ongoing Provision Amendment
Section 66D (f) excluded
Service by way of any process
amounting to manufacture or
production of goods
Service by way of carrying out any processes for
production or manufacture of alcoholic liquor for
human consumption.
Section Existing Provision New Provision
Section 66D (a)
Exclusion from negative list(a) …..(b) ……(c) ……(d) Services by Government or a
local authority in the natureof support services to abusiness entity
Exclusion from negative list(a) …..(b) ……(c) ……(d) Services by Government or a local
authority in the nature of support servicesto a business entity
Now all services provided by government tobusiness entities are taxable
Effect All services provided by the Government or local authority to a business entity,except the services that are specifically exempted, or covered by any other entry inthe Negative List, shall be liable to Service Tax .
Effective Date
To be notified by the Central Government in this regard after the enactment of theFinance Bill, 2015.
OtherEffect
Government has been defined in the Act [section 65 B (26A)].
Negative List
Mega Exemption Notification
Entry
No. Exemption Withdrawn Effective
Date
12Services provided to the Government, a local authority or a
governmental authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant predominantly for use other
than for commerce, industry, or any other business or profession e.g. School,
Colleges, Hospitals, Government Offices etc.
(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or
(iii) an art or cultural establishment;.
(f) a residential complex predominantly meant for self-use or the use of their
employees or other persons specified in the Explanation 1 to clause 44 of section
65 B of the said Act;
1st April,
2015
Mega Exemption Notification
Entry
No. Exemption Withdrawn Effective
Date
14 Exemption to construction, erection, commissioning or installation
of original works pertaining to an airport or port is being
withdrawn
1st April,
2015
20
21
Transportation of food stuff by rail, or vessels or road will be limited to food
grains including rice and pulses, flour, milk and salt.
Transportation of agricultural produce is separately exempt, and this
exemption would continue
1st April,
2015
29 Exemption withdrawn on below services and are now taxable under
reverse charge mechanism: -
a) services by mutual fund agent to a mutual fund or assets management company,
b) distributor to a mutual fund or AMC,
c) selling or marketing agent of lottery ticket to a distributor.
1st April,
2015
Mega Exemption Notification
Entry
No. Exemption Withdrawn / LimitedEffective
Date
30 Carrying out of intermediate production process of alcoholic liquor
for human consumption on job work from this entry.
Will be
notified
by CG
32 Exemption is being withdrawn on the following service,-
a) Departmentally run public telephone
b) Guaranteed public telephone operating only local calls
c) Service by way of making telephone calls from free telephone at airport and
hospital where no bill is issued.
1st April,
2015
16 Exemption Limited
Exemption to services provided by a performing artist in folk or classical art form of
(i) music, or (ii) dance, or (iii) theater will be limited only to such cases where
amount charged is upto Rs 1,00,000 for a performance
1st April,
2015
Mega Exemption Notification
Entry No. New Exemptions
2All ambulance services for transportation of patients are exempt.
Earlier, only ambulance services by clinical establishments were exempt.
26ALife insurance service provided by way of Varishtha Pension Bima Yojna is
being exempted.
43
New Entry
Service provided by a Common Effluent Treatment Plant operator for
treatment of effluent is being exempted.
Effective Date : 01st April, 2015
Focusing on Revenue collection through increased rate, withdrawal of exemptions,
shrinking of Negative List etc.
Mega Exemption Notification
Entry No. New Exemptions
44
New Entry
Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing,
labelling of fruits and vegetables is being exempted.
45
New Entry
Service provided by way of admission to a museum, zoo, national park, wild
life sanctuary and a tiger reserve is being exempted.
These services when provided by the Government or local authority are already
covered by the Negative List.
46
New Entry
Service provided by way of exhibition of movie by the exhibitor (theatre owner)
to the distributor or an association of persons consisting of such exhibitor as one of
it’s members is being exempted.
Effective Date : 01st April, 2015
Abatement Notification
BusinessPresent
Abatement
New Abatement
EffectRemarks / Condition
Effective Date
Air Travel
Economy Class 60% 60% No Change01st April
2015
Business Class 60% 40%
Move to collect
more taxes from
rich
Chit Fund
Business70% NIL
Counter-balance
effect as CENVAT
Credit allowed.
Cenvat Credit
on inputs,
capital goods
and input
Services not
allowed
01st April
2015
Reverse Charge Mechanism
Nature of
Service
Manpower Supply
& Security Services
Sale & Distribution
of Mutual Fund
Sale & Distribution
of LotteriesAggregator
Service
Provider
Indiviual, HUF,
Partnership Firm
MF agents &
MF distributors
Lottery Distributor
Agents
Aggregator / Agent
or Representative
of Aggregator
Service
RecipientBody Corporate
Assets Management Co
Mutual Fund CoLottery Distributor Any Person
Earlier
Provision
Partial
25% / 75%
Only Recovery Agents / Insurance Agents
were coveredNil
New
Provision
Full Reverse
Charge
Full Reverse
Charge
Full Reverse
Charge
Full Reverse
Charge
Effective Date : 01st April, 2015
Service Tax Rules
Rule Description
2 Aggregator Model
Presence of Aggregator – By Himself or Representative Office - liable to pay
Service Tax if the service is so provided using the brand name of the aggregator
in any manner.
Non-Presence of Aggregator – Agent is liable to pay the tax on behalf of the
aggregator.
(Effective Date – 1st March,2014)
4 Registration time-limit reduced from 7 days to 2 days of filing of
application. Order No. 1/15-ST, dated 28.2.2015, effective from 1.3.2015 has been
issued, prescribing documentation, time limits and procedure for registration.
4, 4A, 5 Paper less work – Digitally Signed Invoices, Records in electronic form
through authentication by digital signature
Service Tax Rules
Rule Description
6 (6A) Recovery of service tax self-assessed and declared in the return under section
87 is being omitted .
Suitable amendments in section 73 for enabling such recovery.
Effective Date – Date of enactment of the Finance Bill, 2015
6 (7),
6(7A),
6(7B),
6(7C)
Special Rates for certain services like money changing service, service provided
by air travel agent, insurance service and service provided by lottery
distributor and selling agent has been revised proportionately consequent to
upward revision in Service Tax rate
Baby step towards dream of digital India by making suitable
amendments for maintaining records in digital form, issuing digital
invoices – Less paper, More work
Registration in two days showsgovernment intention of ease ofdoing business in India.
CENVAT Credit Rules
Rule Changes
4(7)
In case of partial reverse charge, Cenvat Credit is allowed irrespective of
the fact that whether the payment to vendor is made or not.
Effective Date – 01.04.2015
4The period for taking Cenvat Credit is has been extended from six
months from the date of invoice to one year from the date of invoice.
4Time limit for return of Capital Goods from a job worker is being
increased from the present six months to two years
6 Proportionate Cenvat Credit is to be reversed in case of non-excisable goods in
addition to exempted goods and services
14 Manner of Recovery for CENVAT Credit taken but NOT utilized
Penalty Provisions
Provisions Section 76 Section 78
Reason for Non-Payment, Short-Payment or erroneous refund
Any other case
Fraud or Collusion or Wilful mis-statement or Suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of service tax
Maximum Penalty10% of Service Tax Amount
100% of Service Tax amount
If Service Tax and Interest /reduced penalty Paid within 30 days
of issuance of notice No Penalty 15% of the service tax amount
order issued by CEO Penalty reduced to 25% Penalty reduced to 25%
Amount reduced in Appellate proceedings
Penalty amount modified accordingly. Benefit of reduced penalty available if 25% amount paid within 30 days of such appellate order
Penalty Provisions
Section Provision
78-B
(Newly added)
Amended Provision of section 76 & 78 shall apply to cases where either –.
a. No notice is served
b. Notice has been served under section 73(1) or proviso thereto but no
order has been issued under sub-section (2) of section 73,.
before the date of enactment of the Finance Bill, 2015
If the above cases are covered under sub-section 73(4A),
penalty shall not exceed 50% of the Service Tax Amount.
80 Waiver of penalty in certain cases is being omitted
Stringent Provisions for defaulters
Other Provisions
Advance Ruling
The facility of Advance Ruling is being extended to all resident firms by specifying
such firms under section 96A (b)(iii) of the Finance Act, 1994.
Notification 42/2012-ST dated 29.06.2012
Exemption from service tax on services provided by a commission agent located
outside India to an exporter located in India is being rescinded with immediate
effect.
This exemption has become redundant after the amendments made in law in the
previous budget, in the definition of “intermediary” in the Place of Provision of
Services Rules, making the place of provision of a service provided by such agents as
outside the taxable territory.
Other Provisions
Exemption AgencyTransported
GoodsMode From To
Current Exemption
GTAExport Goods
RoadPlace of Removal
ICD / CFS/ Port / Airport
Expanded Exemption
GTAExport Goods
RoadPlace of Removal
ICD / CFS/ Port / Airport / Land
Customs Station
Notification 31/2012-ST dated 20.06.2012 – 01st April, 2015
Fails to address issues on double taxation in case of
software, restaurant services etc.