Presented by : CA Jitendra Panwar 1 Amendments in Service Tax made by Finance Bill, 2015

Service Tax Rate (From notified date by CG after enactment of Finance Bill, 2015) SERVICE TAX RATE proposed to be increased from present rate of 12.36% to 14%. SWACHH BHARAT 2% ON VALUE OF ALL OR ANY TAXABLE SERVICES. Accumulated Cenvat Credit of Edu. & SHE Cess prior to ? For inputs & input services received in the factory of manufacturer after Cenvat credit of Edu. Cess & SHE Cess can be utilised against excise duty. Capital goods received in factory in F.Y , 50% Cenvat credit of Edu. Cess & SHE cess can be utilised against payment of duty Swachh Bharat Cess- Cenvatable ?

Service Tax Rates ( From a date to be notified by the CG) ParticularsExistingProposed Service of Booking of air ticket by Air Travel Agent- Domestic Booking International Booking 0.6% 1.2% of Basic fare 0.7% 1.4% of Basic fare Life Insurance Business by Insurer Ist Year 3%3.5% Subsequent years 1.5%1.75% Purchase or sale of Foreign Currency Upto Rs. 1,00,000/- 0.12% or Rs % or Rs. 35 1,00,000/- to Rs. 10,00,000/- 0.06% or Rs % or Rs. 140 Above Rs. 10,00,000/ % or Rs % or Rs. 770 Distributor or selling agent of lottery Guaranteed Price Payout is more than 80% 7,000/-8,200/- Guaranteed Price Payout is less than 80% 11,000/-12,800/- on every Rs. 10 lacs or part thereof

Amendments in Service Tax Sec. 66D : Negative list (w.e.f. notified date) CLAUSEEXISTINGPROPOSED (a) Services by Govt. or Local Authority excluding Certain services (iv) ‘Support Services’, other than services covered under clause ( i) to (iii) (iv) ‘Any Service’, other than services covered under clause ( i) to (iii) (f) Manufacturing or production of goods Any process amounting to manufacture or production of goods Services by way of carrying out any process amounting to manufacture or production of goods excluding Alcoholic Liquor for human consumption. (j) Entertainment events or amusement facility Admission to entertainment events or access to amusement facility Omitted

Amendments in Service Tax Legislative Changes (effective from the date of enactment of Finance Act 2015 Section 65B- INTERPRETATIONS ‘(26A) “Government” means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made there under; { Article 150- Form of Accounts of the Union and of the States Government ‘Accounting Rules,1990’ }

Amendments in Service Tax Legislative Changes Section 65B- INTERPRETATIONS (44) “ Service ” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (iii)A transaction in money or actionable claim Explanation 2. – For the purposes of this clause, the expression “transaction in money or actionable claim” shall not include–– (i) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; (ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out–– (a) by a lottery distributor or selling agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner; (b) by a foreman of chit fund for conducting or organising a chit in any manner.’

Amendments in Service Tax Legislative Changes Section 66F- PRINCIPLES OF INTERPRETATIONS Illustration: The services by the Reserve Bank of India, being the main service within the meaning of clause (b) of section 66D, does not include any agency service provided or agreed to be provided by any bank to the Reserve Bank of India. Such agency service, being input service, used by the Reserve Bank of India for providing the main service, for which the consideration by way of fee or commission or any other amount is received by the agent bank, does not get excluded from the levy of service tax by virtue of inclusion of the main service in clause (b) of the negative list in section 66D and hence, such service is leviable to service tax.’ Accordingly, banks providing agency service to or In relation to services of RBI, are liable to pay service tax.

Amendments in Service Tax Legislative Changes Section 67- Valuation of Taxable Services (a) “consideration” includes– (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.’ {Decision of Delhi High Court in case of Intercontinental Consultants & Technorats Pvt. Ltd.- 28 taxmann 213 [2012] nullified}

Amendments in Service Tax Legislative Changes Section 73- Recovery of Service Tax “(1B) Notwithstanding anything contained in sub-section (1), in a case where the amount of service tax payable has been self-assessed in the return furnished under sub-section (1) of section 70, but not paid either in full or in part, the same shall be recovered along with interest thereon in any of the modes specified in section 87, without service of notice under sub-section (1).” Sub-section (4A) has been proposed to be omitted. This sub-section provides that in course of audit, investigation, verification it is found that any S.T is not paid but true and complete details are available in the records, in such case the maximum penalty for default would be 25% of the tax amount. If it is paid before SCN and informed to C. E. Officer, no SCN would be issued and proceedings deemed to be concluded.

Amendments in Service Tax Legislative Changes Section 76- Penalty for failure to pay Service tax Penalty in this section where there is no intention of evasion - (a) penalty not to exceed 10% of Service Tax amount; (b) no penalty if Service Tax and interest is paid within 30 days of issuance of SCN and proceedings will be deemed to be concluded; (c) Penalty reduced to 25% of penalty imposed, if the Service tax, interest and reduced penalty is paid within 30 days of receipt of Order. (d) In appeal if the amount of Service Tax is modified, the penalty amount shall also stands modified accordingly provided it is paid within 30 days from receipt of such order.

Amendments in Service Tax Legislative Changes Section 78- Penalty for failure to pay service tax for reason of fraud, etc. Section 78 is being amended to rationalize penalty, in cases involving 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, in the following manner,- (a) penalty shall be 100% of Service Tax amount involved in such cases; (cases where transaction is recorded in books of account and period is from to enactment of Fin. Act, 2015, penalty shall be 50% of the tax) (b) a reduced penalty equal to 15% of the Service Tax amount is to be paid if Service Tax, interest and reduced penalty is paid within 30 days of service of SCN and the proceeding would be deemed to be concluded; (c) a reduced penalty equal to 25% of the Service Tax amount, determined in order passed by the Central Excise officer 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. (e) where Service tax amount is increase in appeal then period of 30 days for reduced penalty shall be counted from the date of the order of the appeal.

Amendments in Service Tax Legislative Changes Section 78B- Transitory provisions A new section 78 B is being inserted to prescribe, by way of a transition provision, that,- (a) amended provisions of sections 76 and 78 shall apply to cases where either no SCN is served, or if SCN is served but no ORDER is passed before the date of enactment of the Finance Bill, 2015; and (b) Where SCN is issued but order has not been passed before the date of enactment of Finance Act, 2015, the period of 30 days will be counted form the date of enactment of Fin. Act.

Amendments in Service Tax Legislative Changes Section 80- Penalty not to be imposed in certain cases No penalty shall be imposable u/s 76 or 77 if the assessee proves reasonable cause for the said failure. Proposed to be omitted Section 86- Appeals to Appellate Tribunal Any order relating to service which is exported and the matter relates to grant of rebate of service tax on input service or duty paid on inputs shall not be decided by Tribunal. For such cases revision application is to filed to the CG in terms of section 35EE of the Central Excise Act. Appeals filed and pending in Tribunal on the date when the Finance Bill, 2015 receives assent of the President shall be transferred accordingly.

Amendments in Service Tax Mega exemption notification- New exemptions (effective from ) Entry No.New Clause 2(ii) Service provided by way of transportation of patient in an ambulance. 26/26A/ 26B Life insurance service provided by way of Varishtha Pension Bima Yojana Pradhan Mantri Jeevan Jyoti Bima Yojana (w.e.f ) Pradhan Mantri Jan Dhan Yogana ‘’ ‘’ Pradhan Mantri Suraksha Bima Yojna ‘’ ‘’ Services by way of collection of contribution under Atal Pension Yojana (APY) ‘’’’ 43Service provided by a Common Effluent Treatment Plant operator for treatment of effluent. 44Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables. 45Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve. 46Service 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.

Amendments in Service Tax Mega exemption notification- New exemptions Entry No. New Clause 47Services 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 Rs 500 per person.”. Effective from the notified date the amendment in Negative list concerning the service by way of admission to entertainment event come into effect Exemption for GTA service to exporter of goods (N.No. 31/2012) (effective from ) Services of transportation of export goods by road from the place of removal to a land custom station (LCS)

Amendments in Service Tax Changes in mega exemption notification (with effect from 01/04/2015) Clause no of 25/2012 Nature of serviceProposed changes 2A.Services provided by cord blood bank by way of preservation of stem cell Exemption Withdrawn 2B.Services provided by operators of Common Bio-medical waste treatment facility by way of treatment or disposal of bio-medical waste 12Service provided to Govt., a local authority or Governmental Authority by way of construction, erection, repair, maintenance, renovation or alteration Following clauses omitted: (a)a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (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.

Amendments in Service Tax Changes in mega exemption notification (with effect from 01/04/2015) Clause no of 25/2012 Nature of serviceProposed changes 14Services by way of construction, erection, commissioning or installation of original works pertaining to In clause (a) the words “an airport or ports” is withdrawn 16 Services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theatre. Exemption will be available where the amount charged for such performance is upto Rs 1 lac. This exemption will not be applicable to Brand Ambassador. 20 & 21Transportation by rail or a vessel or by road of foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil excluding Alcoholic beverage. Limited to food grains including rice and pulses, flours, milk and salt.

Amendments in Service Tax Changes in mega exemption notification (with effect from 01/04/2015) Clause no of 25/2012 Nature of serviceProposed changes 29Services by the following persons in their respective capacities are withdrawn. (c) mutual fund agent to a mutual fund or asset management company; (d) distributor to a mutual fund or asset management company; (e) selling or marketing agent of lottery tickets to a distributer or a selling agent; 30Carrying out an intermediate production process as jobwork in relation to Clause (c)- Services of job-worker for an intermediate production process of alcoholic liquors for human consumption is withdrawn. 32 Services of providing telephone facilities to public in departmental stores, airport, hospitals etc. where no bill is issued Omitted

Abatement – Earlier provisions S.No.DetailsTransport of goods by road - GTA Transport of passengers with or without belongings, by rail Transport of goods by Rail Transport of goods by vessel 1 Value of taxable service, after abatement 25 % (S.No. 7 of Notification 26/2012 ST Dt ) 30 % (S.No. 3 of Notification 26/2012 ST Dt ) 30 % (S.No. 2 of Notification 26/2012 ST Dt ) 40 % (S.No.10 of Notification 26/2012 ST Dt ) 2 ConditionsNo cenvat credit on inputs, capital goods and input services can be availed. No conditions No cenvat credit on inputs, capital goods and input services can be availed.

Changes in Abatement ( N.N. 26/2012 w.e.f. 01/04/2015) S. No.DetailsTransport of goods by road - GTA Transport of passengers with or without belongings, by rail Transport of goods by Rail Transport of goods by vessel 1Value of taxable service, after abatement 30 % 2ConditionsNo cenvat credit on inputs, capital goods and input services can be availed.

Amendments in Service Tax Changes in Abatement ( N.N. 26/2012 w.e.f. 01/04/2015) Description of Taxable serviceAbatement %Condition Services provided in relation to Chit30%Entry omitted. Transport of passenger by air- (i)Economy class (ii)Other than economy class 60% 40% Earlier it was 60% for all categories

Amendments in Service Tax Reverse Charge N. No. 30/2012 (w.e.f ) Description of service% of ST payable by service provider % of ST payable by any person liable to pay ST other than service provider Full Reverse charge service provided by a mutual fund agent or distributor, to a mutual fund or asset management company 100% selling or marketing agent of lottery tickets to a lottery distributor or selling agent. 100% service provided by a person involving an ‘aggregator ‘ (applicable w.e.f. 01/03/2015) 100% Partial Reverse charge Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate. Nil100%

Amendments in Service Tax Changes in Service Tax Rules (effective from ) Rule 2(1)(d)- Person liable for paying service tax: In respect of any service provided under aggregator model, the aggregator, or any of his representative office located in India if the service is so provided using the brand name of the aggregator in any manner. If an aggregator does not have any presence, including that by way of a representative, in such a case any agent appointed by the aggregator shall pay the tax on behalf of the aggregator. Rule 4 is being amended to provide that the CBEC shall, by way of an order, specify the conditions, safeguards and procedure for registration in service tax. In this regard Order No. 1/15-ST, dated , effective from has been issued, prescribing documentation, time limits and procedure for registration. A provision for issuing digitally signed invoices is being added along with the option of maintaining of records in electronic form and their authentication by means of digital signatures. The conditions and procedure in this regard shall be specified by the CBEC (Rule 4, 4A and 5).

EASE OF DOING BUSINESS 24© Dhadda & Co Order No 1/2015-Service Tax w.e.f Procedure for filing of registration applications for SINGLE PREMISES, File the application online on(ACES) website in Form ST-1. (PAN mandatory for registration except for Government Deptt ) -On successful filing of complete application, registration would be granted online in 2 days. -Applicant would be enabled to pay tax with such online registration. -Downloaded Registration from ACES shall be valid reg. Self attested copy of specified documents to be submitted within 7 days of filing of ST-1 in concerned Division for verification purpose.

EASE OF DOING BUSINESS REGSITRATION CAN BE REVOKED BY AC/DC IF (i)the premises are found to be non existent or not in possession of the assessee. (ii) no documents are received within 15 days of the date of filing the registration application. (iii) the documents are found to be incomplete or incorrect in any respect. **An opportunity to represent against the proposed revocation has to be first given to assessee and reply received has to be considered.

Amendments in Service Tax Changes in Cenvat Credit Rules,2004 (effective from ) Rule 4- Conditions for allowing CENVAT Credit Direct dispatch of inputs and capital goods to job worker on the direction of manufacturer or output service provider without first bringing them to the manufacturer’s /output service provider’s premises. Increase the time limit for taking CENVAT credit on inputs and input services from the present 6 months to 1 year. Increase in the time limit for return of Capital Goods from a job worker from the present period of 6 months to 2 years. 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 Rule 6 – Obligation of a manufacturer or producer of final products No CENVAT Credit is to be allowed for input and input services which is used for non excisable goods cleared from the factory.

EASE OF DOING BUSINESS Rule 4: CENVAT Credit on Inputs & Capital Goods sent to Job Worker Particulars (w.e.f )InputsCapital Goods Time Limit for receiving them back180 days2 years Can be sent from Job worker to Job workerYesSilent Can capital goods be sent by a Job worker to another Job Worker for purpose of production ?

Amendments in Service Tax Changes in Cenvat Credit Rules, 2004 (effective from ) Rule 9 – Documents and accounts Duty credit to be allowed for invoice issued by an importer in same manner as allowed in case of first stage dealer and second stage dealer Rule 14 - Recovery of CENVAT Credit wrongly taken CENVAT Credit has been wrongly taken but not utilized, the same shall be recovered in accordance with section 73 of the Finance Act, 1994 and Section 11A of the Excise Act. Where CENVAT Credit has been taken and utilized wrongly the same shall be recovered with interest. All credits taken during a month shall be deemed to have been taken on the last day of the month. Utilization of CENVAT Credit shall be deemed to have occurred in following manner:- (i) the opening balance of the month has been utilised first; (ii) credit admissible in terms of these rules taken during the month has been utilised next; (iii) credit inadmissible in terms of these rules taken during the month has been utilised thereafter.

Amendments in Service Tax Changes in Cenvat Credit Rules, 2004 (effective from ) Rule 15- Confiscation and Penalty Sub-RuleExisting ProvisionProposed Provision (1)Takes or utilises CENVAT Credit wrongly or in contravention of the provisions- penalty not exceeding the duty or Rs. 2,000/- whichever is greater. Penalty would be as per provisions of section 76(1) - Max. 10% of the amount (2)Takes or utilises CENVAT Credit wrongly by reason of fraud, collusion,etc. by the manufacturer- equal penalty as per 11AC. Penalty would be as per provisions of section 11AC (1) of Central Excise Act. (3)Takes or utilises CENVAT Credit wrongly by reason of fraud, collusion,etc. by the service provider - penalty as per section 78 Penalty would be as per provisions of section 78(1) - Max. 100% of the amount.

Withdrawal of N. No. 42/2012-st dated Existing exemption, vide notification No. 42/12-ST dated , to the service provided by a commission agent located outside India to an exporter located in India is being rescinded with immediate effect In Last Budget Intermediary of goods was enhanced to be covered by Rule 9 of PoPs and thus if intermediary is based outside taxable territory then no service tax. Huge relief to exporter. Implication This exemption has become redundant in view of the amendments made in law in the previous budget, in the definition of “intermediary” in the Place of Provision of Services Rules.

ADVANCE RULING “Class of Person as applicant-Specfied (w.e.f ) A “resident firm”. Where: (a) “firm” shall have the meaning assigned to it in section 4 of the Indian Partnership Act, 1932 (9 of 1932), and includes- (i)the limited liability partnership (ii)the sole proprietorship; or (iii)One Person Company. (c) “resident” shall have the meaning assigned to it in clause (42) of section 2 of the Income-tax Act, 1961 (43 of 1961) in so far as it applies to a resident firm.

Change In Rate of EXCISE DUTY (w.e.f ). Point of DifferenceUpto From Rate of EXCISE DUTY12 %12.5% Education Cess (vide FA 2004) 2%Nil Secondary & Higher Education Cess (vide FA 2007) 1 %Nil Effective Rate of Excise Duty12.36%12.5% No change in specific rate of Excise Duty except exemption from Edu. & SHE Cess CLEAN ENERGY CESS The Rate of Clean Energy Cess, levied on coal, lignite and peat, is being increased from Rs.100 per tonne to Rs.200 per tonne. (N. No.1/2015-Clean Energy Cess, dt )

Moving towards GST In today's Union Budget speech, by reiterating GST multiple times, the Finance Minister has evidently re-affirmed Governments commitment to introduce GST from 1 April Also, following cumulative steps (4 E's) indicate assurance toward GST:  EC and SHEC to be subsumed  ‘Exemption-free' GST regime  Emphasis on leveraging technology for GST  Exchange of information to go up