Service Tax Rates and Changes effective from 1st April
2015
1) Rate of Service Tax
Finance Bill, 2015 has proposed increase in rate of
Service Tax from 12.36% to 14%. News reports are being broadcasted and
published stating that the rate has been increased from 01st April
2015, are incorrect. These reports have caused wide spread confusion amongst
all.
In order to clear the confusion, we would like to apprise all that the rate
of service tax can only be changed after the Budget, i.e. Finance Bill 2015,
gets assent from the President and becomes the Finance Act 2015. The change in
rate of tax has been proposed by way of an amendment to section 66B of the
Finance Act 1994 and an amendment to the Finance Act can only be made by the
Parliament after receiving assent from the President.
Historically the assent is obtained from the President in
the first half of May, as the assent has to be obtained with 75 days from the
presentation of the Budget in Parliament. Hence, the notification regarding
increase in rate of service tax will be issued somewhere around 15th May,
2015.
Thus it is to be noted that there is no change in rate of Service Tax
w.e.f. 1st April, 2015.
Also given hereunder is the tabular analysis of the applicable rate of
service tax considering all the three events which occasions the liability upon
a service provider/recipient to charge/pay service tax
Tabular analysis about applicable Rate of Tax on change
in Rate of Tax
|
Case
|
Date of Provision of
Service
|
Date of Issue of
Invoice
|
Date of Receipt of
Payment
|
Applicable Rate
|
|
I
|
Old Rate
|
New Rate
|
New Rate
|
New Rate
|
|
II
|
Old Rate
|
Old Rate
|
New Rate
|
Old Rate
|
|
III
|
Old Rate
|
After
|
Old Rate
|
Old Rate
|
|
IV
|
New Rate
|
Old Rate
|
New Rate
|
New Rate
|
|
V
|
New Rate
|
Old Rate
|
Old Rate
|
Old Rate
|
|
VI
|
New Rate
|
New Rate
|
Old Rate
|
New Rate
|
Based on the above table prepared in accordance with Rule 4 of Point of
Taxation Rules, a service tax assessee may discharge their service tax
liability in case of the change in rate of service tax.
Further, we would also refresh the changes which were
announced with the Budget but are effective from 01st April
2015
2) Exemptions Withdrawn
w.e.f.01.04.2015 (Vide Notification No. 6/2015-ST dated 1.3.2015)
following exemption have been withdrawn and the following activities
undertaken by service providers will attract service tax with effect
from 1st April 2015:
o Services provided to
government, local authority or a governmental authority by way of construction,
erection, commissioning, installation, completion, fitting out, repair, maintenance,
renovation, or alteration of:
o a civil structure meant
for use other than for commerce, industry,
o a structure meant
predominantly for use as an educational, clinical, or an art or cultural
establishment.
o a residential complex
predominantly meant for self-use or the use of their employees.
o Services provided by way
of construction, erection, commissioning or installation of original works
pertaining to an airport or port
o Services provided by a
performing artist in folk or classical art form of (i) music, or (ii) dance, or
(iii) theater, where amount charged is more than Rs. 1,00,000 for a
performance;
o Transportation of food
stuff by rail, or vessels or road will be limited to food grains including rice
and pulses, flour, milk and salt.
o Services provided by a
mutual fund agent or distributor to a mutual fund or assets management company.
o Services of selling or
marketing agent of lottery ticket to a distributor.
o Telecommunication
services by
i. Departmentally run public telephone;
ii. Guaranteed public telephone operating only local calls;
iii. Service by way of making telephone calls from free
telephone at airport and hospital where no bill is issued.
3) Certain New Exemptions have also
been made effective from 01st April 2015. They are as under:
o All ambulance
services. Notification No. 6/2015-ST dated 1.3.2015
o Life insurance service
provided by way of Varishtha Pension Bima Yojna Notification No. 6/2015-ST
dated 1.3.2015
o Service provided
by a Common Effluent Treatment Plant operator for treatment of effluent. Notification
No. 6/2015-ST dated 1.3.2015
o Services by way of
pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of
fruits and vegetables. Notification No. 6/2015-ST dated
1.3.2015
o Service provided by way
of admission to a museum, zoo, national park, wild life sanctuary and a tiger
reserve. Notification No. 6/2015-ST dated 1.3.2015
o 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. Notification No. 6/2015-ST dated 1.3.2015
o Goods transport agency
service provided for transport of export goods by road from the place of
removal to a land customs station (LCS). Notification No. 4/2015-ST dated
1.3.2015
4) Abatements
a. A tabular presentation of changes in abatement is as under:
|
Entry No.
|
Description of Taxable
Services
|
Taxable Percentage
|
Effective Rate
|
Taxable Percentage
|
Effective rate
|
|
Upto 31.03.2015
|
Upto 31.03.2015
|
w.e.f.01.04.2015
|
W.e.f.1.4.15
|
|
5
|
Transport of
passengers by air, with or without accompanied belongings in(i)economy class
(ii) other than economy
class
|
40%
40%
|
4.944%
4.944%
|
40%
60%
|
4.944%
7.416%
|
|
7
|
Services of goods
transport agency in relation to transport of goods
|
25%
|
3.09%
|
30%
|
3.708%
|
|
8
|
Services provided in
relation to chit
|
70%
|
8.625%
|
100%
|
12.36%
|
|
10
|
Service in relation to
Transport of Goods in a Vessel.
|
40%
|
4.944%
|
30%
|
3.708%
|
b. Restriction on the availment of CENVAT Credit in respect of services of
“Transport of goods by rail” and “Transport of passengers, with or without
accompanied belongings by rail”
5) Reverse Charge Mechanism
a. Manpower supply and security services when provided by
non corporate to a body corporate are being brought to full reverse
charge as a simplification measure. Presently, these are taxed under
partial reverse charge mechanism.- Notification No.
7/2015-ST Dated: March 01, 2015
b. Services provided by mutual fund agents, mutual fund
distributors and lottery agents- Notification No. 7/2015-ST Dated:
March 01, 2015
6) Cenvat Credit Rules,
2004
Credit of service tax paid under partial reverse charge by
the service receiver without linking it to the payments of value of
service to service provider.
