Budget 2015

Service Tax

CA. Amish Khandhar

Khandhar Mehta and Shah

Contents
Service Tax Rates
Negative List
Exemption Withdrawn / ST Scope Expanded
New Exemptions / ST Scope Reduced
Abatements

Reverse charge mechanism

CENVAT Credit
Pre-deposit for filing of Appeal
Penalty Provisions
Interest Rates on late Payment of Service Tax
Miscellaneous

Budget in favour of
Assessee

Department

CENVAT Credit

Service Tax Rate

Registration
Process

Government
Construction

Penalty

Abatement Rate

Statistics Tax Revenue in India

(Rs. In Crores)

Revenue

2011-12

2012-13

2013-14

2014-15

(Actual)

(Revised)

2015-16

(Estimated)

Gross Tax
Revenue

8,89,176

10,36,234

11,38,734

12,51,391

14,49,491

Corporation
Tax

3,22,816

3,56,326

3,94,678

4,26,079

4,70,628

Income Tax

1,70,342

2,01,486

2,42,857

2,78,599

3,27,367

Customs

1,49,328

1,65,346

1,72,085

1,88,713

2,08,336

Central Excise

1,45,608

1,76,535

1,70,197

1,85,480

2,29,809

Service Tax

97,509

1,32,601

1,54,778

1,68,132

2,09,774

Service Tax Rates

Service Tax Rate

w.e.f. date to be notified

Service Tax Rate Swachh Bharat Cess

w.e.f. date to be notified

Swachh Bharat Cess

@
2% on VALUE OF TAXABLE SERVICE

Service Tax Rate Swachh Bharat Cess

ISSUE

Whether Abatement / Exemption can also be availed by service provider for

Swachh Bharat Cess?

Whether CENVAT Credit can be availed / utilized of Swachh Bharat Cess?

Service Tax Rate Real Estate Sector

Sr.
No.

Nature of Service

ST Rate
Existing Rate

w.e.f. notified
date

1.

Construction of Residential Flats

3.09%
[12.36% * 25%]

3.50%
[14% * 25%]

2.

Construction of High End Residential flats

3.708%
[12.36% * 30%]

4.20%
[14% * 30%]

3.

Construction of Commercial Complexes

3.708%
[12.36% * 30%]

4.20%
[14% * 30%]

4.

Works Contract Services

a) Original works

4.944%
[12.36% * 40%]

5.60%
[14% * 40%]

8.652%
[12.36% * 70%]

9.80%
[14% * 70%]

b) Maintenance, Repair work in relation to

goods and immovable property

Negative List

Negative List

(w.e.f. date to be notified)

Admission to entertainment event or access to amusement

facility TAXABLE

Entry Fees charged by Water Kingdom

Liable to ST @ 14%

Negative List

(w.e.f. date to be notified)

Manufacture or production of alcoholic

liquor for human consumption
TAXABLE
Thus, manufacturing & intermediate
process relating to manufacture Liable
for ST
Manufacturing of Alcohol is State Levy --Whether Cent. Govt. can charge ST ?

Negative List

(w.e.f. date to be notified)

All service provided by government to business entity - TAXABLE

Business Entity liable to pay ST on

services provided by Government
under Reverse Charge

E.g. License fees paid for 3G by telecom

operators Liable ?

Exemption Withdrawn / Scope Expanded

Exemption withdrawn w.e.f. 01-04-2015

Services provided to Government, a local authority or a Governmental Authority for

construction, erection, repair, maintenance, renovation, or alteration of:
- any civil structure or any other original works predominantly used for non
commercial purpose.
- structure meant for use as educational, clinical, art or cultural establishment
- residential complex of Government employees and specified persons.
EXEMPTION WITHDRAWN

Service to Government in relation to Canal, Dams, Irrigation works, Water Supply,

Water/Sewerage treatment Still Exempt

Exemption withdrawn w.e.f. 01-04-2015

M/s. PQR Ltd. is engaged in the construction business. M/s. PQR was awarded contract

for renovation of Income Tax Department building. The work commenced in the month
of December, 2014 and would continue for 2 years.

ISSUE : Whether ST would be levied for the service provided upto March, 2015 & post
March, 2015?

Exemption withdrawn w.e.f. 01-04-2015

As a result of this amendment, services provided for following Government constructions shall
be taxable w.e.f. 01.04.2015

GSPHCL / Police Station

R & B Department

Government Hospital / School

Municipality buildings

Government Staff Quarters

Court Buildings

Exemption withdrawn w.e.f. 01-04-2015

Construction, erection, commissioning or installation of original works pertaining to

- Airport
- Port

LIABLE TO S TAX

Exemption withdrawn w.e.f. 01-04-2015

Pre 31.03.2015

w.e.f. 01.04.2015

Services by performing artist in

Services by performing artist in

folk or classical art form of

folk or classical art form of

dance, music, theatre No

dance, music, theatre where

threshold limit for exemption

the amount charged is < Rs.

1,00,000/-

Threshold

prescribed for exemption

limit

Exemption withdrawn w.e.f. 01-04-2015

Exemption to transportation of Foodstuff by Road / Vessel / Rail is limited to

foodgrain including rice, pulses, milk and salt. ---- Thus, transportation of any other
foodstuff like tea, edible oil, Sugar, Jaggery, milk products etc. would be taxable.

Exemption given to Departmentally run public telephone, free telephone at airport/

hospital, etc. is withdrawn.
Exemption to services by agent / distributor to mutual fund or AMC; and services by
agent of lottery ticket to distributor or selling agent is withdrawn.

New Exemptions / Scope Reduced

New Exemptions w.e.f. 01-04-2015

Upto 31.03.2015
Ambulance services provided
by

clinical

medical

establishment

practitioner

paramedics was only exempt

w.e.f. 01.04.2015
Ambulance service provided on
a

standalone

exempted

basis

is

also

New Exemptions w.e.f. 01-04-2015

Life insurance service provided under Varishtha Bima Yojana exempted

Pre-Conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and
vegetables exempted
Service by exhibition of movie by exhibitor to distributor or AOP consisting of exhibitor
is exempted
GTA service for export goods upto ICD, CFS, port or airport was exempt. The said
exemption is also granted from Place of Removal to LCS.

New Exemptions w.e.f. 01-04-2015

Admission to museum, zoo, national park, wild life sanctuary, tiger reserve is
exempted. [New entry is pursuant to deletion of negative list entry]

Exemption is provided to services by way of right to admission to:

- exhibition of cinematographic film, circus, dance, or theatrical performance
including drama or ballet;

- recognized sporting event;

- award function, concert, pageant, musical performance or any sporting event other
than a recognised sporting event, where admission fee is not more than Rs. 500 per
person.

Abatements

Abatement

A uniform

(w.e.f. April,1 2015)

Transport of
rate
is been
Goods
by
Rail

Old
prescribed
for transport by rail, road, and vessel
Taxability
30% with
Credit

Vessel

40% without
Credit

Road (GTA)

25% without
Credit

30%
without
credit

Abatement

Transport by air

(w.e.f April,1 2015)

Old Taxability

Passenger with or
without
40% without Credit
accompanied
belongings

40% Economy Class

without credit
60% Higher Class
without credit

Abatement

(w.e.f April,1 2015)

Particulars

Old Taxability

New Taxability*

Service provided by Chit

Fund Foremen in relation to
Chit

70%

100%

* CENVAT credit now allowed to be taken

Abatement Table New

Sr.
No.

Name of Service

Abatement
(w.e.f. 1.4.15)

ST Rate @ 14%
(notified. dt.)

Financial leasing including Hire purchase

90%

1.40%

Transport of goods/passenger by rail

70%

4.20%

Bundled service by way of supply of food or any drink, in a

premises together with renting it

30%

9.80%

Transport of Passengers by Air

(i)

Economy Class

60%

5.60%

(ii)

Other

40%

8.40%

Renting of hotels, inns, guest houses, clubs, campsites or other

commercial places meant for residential or lodging purposes

40%

8.40%

Services of GTA in relation to transportation of goods

70%

4.20%

Renting of Motor cab

60%

5.60%

Abatement Table New

Sr.
No.

8
9

Name of Service

Abatement
(w.e.f. 1.4.15)

ST Rate @ 14%
(notified. dt.)

(i)

Transport of passengers by a contract carriage

60%

5.60%

(ii)

Transport of passengers by a radio taxi

60%

5.60%

70%

4.20%

Transport of goods in vessel

Services by a tour operator in relation to-

10

(i)

Packaged Tour

75%

3.50%

(ii)

Only arranging, booking, accommodation

90%

1.40%

(iii)

Services other than (i) & (ii)

60%

5.60%

Reverse Charge Mechanism

Reverse Charge Changes in Notification No. 30/2012-ST

Sr.
No.

Description of
Service

Upto
31.03.2015

From
01.04.2015

% of ST
by SP

% of ST
by SR

% of ST
by SP

% of ST
by SR

Manpower Services

25%

75%

Nil

100%

2.

Security services

25%

75%

Nil

100%

Note: Reverse Charge is applicable only if service provider is individual / HUF / AOP / Firm / LLP and
service receiver is body corporate.

Reverse Charge Changes in Notification No. 30/2012-ST

Security Service

Ind / Firm /
LLP / AOP

Body
Corporate
Manpower Service

[ RCM 100% ]

Reverse Charge Changes in Notification No. 30/2012-ST

EXAMPLE 1
Ramesh Enterprise, a partnership firm is engaged in providing manpower service to
Anand Infrastructure LLP who is engaged in providing construction service.

Whether Forward Charge or Reverse Charge would be applicable in the present

case and at what rate ?

Reverse Charge Changes in Notification No. 30/2012-ST

EXAMPLE 2
Rajput Securities Ltd, a security agency company is engaged in providing security
service to Mr. Mukesh Adani, who is an individual running trading business.

Whether Forward Charge or Reverse Charge would be applicable in the present

case and at what rate ?

Reverse Charge Changes in Notification No. 30/2012-ST

EXAMPLE 3
Rathod Security, a partnership firm engaged in providing security service to Star
Fisheries Ltd. Invoice of Rs. 50,000/- is raised by Rathod Security in the month of
June, 2015 for security services provided in month of May, 2015.

Whether Forward Charge or Reverse Charge would be applicable in the present

case and at what rate ?

Reverse Charge Changes in Notification No. 30/2012-ST

In above example 3, what will be the taxability if Invoice is issued in month of

March, 2015 & payment is received in April, 2015?

Note -

Rule 7 of PoTR (point of taxation determining in case of RCM) is

notwithstanding to Rule 3, 4, 8 of PoTR.

Reverse Charge Changes in Notification No. 30/2012-ST

Sr.
No.

Description of
Service

Service by Mutual Fund Agent /

Distributor to Mutual Fund / AMC

2.

Service by Selling or Marketing agent to

lottery distributor / selling agent

Upto
31.03.2015

Exempt

From
01.04.2015
% of ST
by SP

% of ST
by SR

Nil

100%

Nil

100%

[NN. 25/2012]

Exempt
[NN. 25/2012]

Reverse Charge Changes in Notification No. 30/2012-ST

Sr.
No.

Description of
Service

Service provided by person involving an

Upto
31.03.2015

From
01.04.2015
% of ST
by SP

% of ST
by SR

Nil

100%

Aggregator in any manner

OLA / Taxi for Sure / Easy Cabs liable to pay service Tax @ 12.36% on service
provided to the customers

CENVAT Credit

CENVAT Credit

W.e.f. 01.03.2015, time limit for availment of CENVAT Credit on inputs / input services has
been extended from period of 6 months to 12 months from the date of issue of invoice /
challan.

Time Limit of 1 year Applies to the first time availment of CENVAT Credit.
Thus, CENVAT Credit of input service for invoice dated 10.03.2014, can be availed post this
amendment.

CENVAT Credit - Chart

CC on Input
Service
Avail CC
Invoice is recd.
Availment > 1 year
from dt. of invoice
NO

CC can be availed

YES

CC lapses forever

CENVAT Credit - Chart

Payment within 90 days
of dt. of invoice

YES

CC availed remains
valid

NO

CC to be availed at the
time of payment in
future

NO
CC to be reversed
Payment within 1 yr
from dt. Of invoice
YES
CC availed on the date
of payment

CENVAT Credit

CENVAT Credit under Partial RCM

CENVAT Credit

Conditions

Upto

From

31.03.2015

01.04.2015

Service Tax paid under

On payment of

On payment of

Partial Reverse Charge

VALUE & TAX

TAX

CENVAT Credit Utilization Manner

The manner of utilization of CENVAT credit in case wrongly taken credits has now been

specified as under:
opening balance of the month will be deemed to be utilized first;
credit admissible in terms of these rules taken during the month has been utilized next;
credit inadmissible in terms of these rules taken during the month has been utilized
thereafter.

CENVAT Credit Utilization- Illustration

Particulars

April, 2015

May, 2015

Opening Balance

110

40

Cr. availed during the month

50

90

Ineligible credit

20

Total Credit

180

130

Credit Utilised

140

100

Closing Balance

40

30

Inadmissible Cr. Of Rs. 20 utilised in May, 2015 Interest to be paid

Pre-Deposit for filing of Appeal

Pre-Deposit for Filing Appeal

SCN for demand <= ` 50 Lacs

Mandatory Pre-Deposit *

Sr.

No.

Filing of Appeal

Duty or (Duty + Penalty)

Only Penalty

Before CCE (A)

7.5% of the Duty

7.5% of the Penalty

Before CESTAT

Addn. 2.5% of duty

Addn. 2.5% of Penalty

* Mandatory pre-deposit shall not exceed ` 10 Crores

Pre-Deposit for Filing Appeal

SCN for demand > ` 50 Lacs

Mandatory Pre-Deposit*

Sr.
No.
1

Filing of Appeal

Before CESTAT

Duty or (Duty + Penalty)

Only Penalty

7.5% of the Duty

7.5% of the Penalty

* Mandatory pre-deposit shall not exceed ` 10 Crores

Pre-Deposit for filing Appeal

ST Demand : Rs. 1 crore

ST Demand : Rs. 20 Lacs

Penalty : Rs. 1 crore

Penalty : Rs. 20 Lacs

Order by Jt. Commissioner

Order by Commissioner
Appeal before CCE(A)

Appeal before CESTAT

Pre-Deposit = 1.5 Lacs

(7.5% of 20 Lacs)
Appeal before CESTAT

Pre-Deposit = 15 Lacs.
(7.5% of 1 cr.)

Further Pre-Deposit
Rs. 0.5 L (2.5%)

Penalty Provisions

Penalty Provisions Rationalized

Section 76 is amended as under:

a. to be applicable only in cases NOT INVOLVING fraud or collusion or willful misstatement or suppression of facts
b. penalty can be imposed only upto 10% of Service Tax involved (against 50% at
present)
c. no penalty is to be paid if service tax and interest is paid within 30 days of
service of Show Cause Notice (SCN) issued under Section 73 (1).
d. penalty shall be reduced to 25% of penalty imposed in case service tax, interest
and penalty are paid within 30 days of receipt of order issued under Section 73
(2).

Penalty Provisions Rationalized

EXISTING

PROPOSED

Penalty

u/s 76

Max 10%

1% per month

of ST

Or
Rs. 100 per day

If ST+ Int. paid within 30

days of service of notice

If ST + Int + Penalty paid

within 30 days
of receipt
of order

Nil Penalty

25 % of penalty
imposed

Penalty Provisions Rationalized

SCN of Rs. 50,00,000/- was issued on 5th June, 2015 for the period of 2014-15 levying
penalty u/s. 76 of Rs. 5,00,000/- (10% max.)
ST + Int paid before
5.7.15

Yes

Penalty - Nil

No
OIO recd. on
11.11.15

ST + Int +
Penalty paid
by 12.12.15
No
Max. Penalty =
Rs. 5,00,000/-

Yes

Penalty
1,25,000/-

Penalty Provisions Rationalized

Section 78 is amended as under:

a. to be applicable only in cases INVOLVING fraud or collusion or willful misstatement or suppression of facts
b. penalty not to exceed 100% of Service Tax involved.
c. penalty shall be reduced to 15% of Service Tax involved if service tax, interest
and penalty is paid within 30 days of service of Show Cause Notice issued under
Section 73 (1).
d. penalty shall be reduced to 25% of Service Tax involved in case service tax,
interest and penalty are paid within 30 days of receipt of order issued under
Section 73 (2).

Penalty Provisions Rationalized

EXISTING

PROPOSED

Penalty
u/s. 78

100% of
ST

If ST+ Int+ penalty paid

within 30 days of service of
notice

If ST + Int + penalty paid

within 30 days of receipt of
order

15% of ST

25 % of ST

Penalty Provisions Rationalized

SCN of Rs. 50,00,000/- was issued on 5th June, 2015 for the period of 2011-12 to 2014-15
levying penalty u/s. 78 of Rs. 50,00,000/- (100% max.)
ST + Int + Penalty
paid before 5.7.15

Yes

Penalty =
Rs. 7,50,000/-

No
OIO recd. on
11.11.15

ST + Int +
Penalty paid
by 12.12.15
No
Max. Penalty =
Rs. 50,00,000/-

Yes

Penalty
12,50,000/-

Interest Rates

Interest Rates on late payment of Service Tax

Period of delay

Assessee having Taxable Turnover

more than Rs. 60 lacs

Assessee having Taxable Turnover up

to Rs. 60 lacs

Up to 6 months

18 %

15 %

More than 6
months Up to 1
Year

18 % (for first 6 months)

plus
24 % (for delay beyond 6 months)

15 % (for first 6 months)

plus
21 % (for delay beyond 6 months)

More than 1 Year

18 % (for first 6 months)

plus
24 % (for delay beyond 6 mnt. to 1 yr.)
plus
30 % (for delay beyond 1 year)

15 %(for first 6 months)

plus
21 % (for delay beyond 6 mnt. to 1 yr.)
plus
27 % (for delay beyond 1 year)

Interest - Example

Due
Date

Payment
Date

Delay in
Days

06.10.14

31.03.15

176

06.08.14

31.03.15

237

06.01.13

31.03.15

06.01.14

31.03.15

Int @ 18%
for the period

Int @ 24%
for the period

Int @ 30%
for the period

07.10.14 to
31.03.15
07.08.14 to
06.02.15

07.02.15 to
31.03.15

814

Upto 30.09.14

01.10.14 to
31.03.15

449

Upto 30.09.14

01.10.14 to
05.01.15

0.01.15 to
31.03.15

Miscellaneous

Miscellaneous

Single premise registration certificate to be issued online within 2 working days. Certificate
downloaded from ACES website requires no attestation by department.
[Order no. 01/2015-ST dated 28.02.15 ] (w.e.f. 01.03.2015)

Assesses allowed to maintain record electronically. Digitally signed invoices and consignment
notes considered to be acceptable. (w.e.f. 01.03.2015)

The term consideration amended to include reimbursable expenditure or cost incurred

charged by Service Provider [s. 67 of the Act] (w.e.f. date to be notified)

Firms / LLPs / Proprietory Concern / One Person Company are eligible to make an application for
Advance Ruling in ST (w.e.f. date to be notified)

Miscellaneous
Rate revision consequent to revising in service tax rate

Air travel agents

Domestic booking - 0.6% to 0.7% of basic fare

International booking - 1.2% to 1.4% of basic fare

Life Insurance

3.0% to 3.5% of premium charged in first year

1.5% to 1.75% of premium charged in subsequent years
Similar amendment:

Foreign Exchange dealers and

Lottery ticket distributors/selling agents

Miscellaneous Special Economic Zone

Rule 18 of Central Excise amended the definition of Exports as follows:

export, with its grammatical variations and cognate expressions, means taking goods out
of India to a place outside India and includes shipment of goods as provision or stores for
use on board a ship proceeding to a foreign port or supplied to a foreign going aircraft..

Rule 5 of CENVAT Credit amended to include definition of Exports Goods as follows:

(1A) "export goods" means any goods which are to be taken out of India to a place outside
India..

Pursuant to the above amendment

Whether goods supplied to SEZ cannot be construed as export and benefit of rebate
u/r. 18 can be denied?

Goods & Service Tax

GST is to be implemented w.e.f. 01.04.2016

Different taxies levied by Centre and States will get subsumed under GST model

Centre
State

Excise
Service Tax
CVD & SAD
CST, Surcharges & Cesses
VAT
Entertainment Tax
Luxury Tax
Entry Tax

122nd Constitutional amendment bill to be passed

50% of the states must agree for implementation.

Petroleum products out of ambit of GST for 3 years

Goods and Service Tax -World Wide

Country

Implementation Date

Current Rate of GST(%)

United Kingdom #

01-Jan-1973

20%

France #

01-01-1976

19.6%

New Zealand

01-Oct-1986

15%

Canada #

01-Jan-1991

5%

South Africa #

01-Jan-1991

14%

Singapore

01-Apr-1994

7%

Australia

01-Jul-2000

10%

Germany

01-Jan-1968

19%

Japan

01-Jan-1989

5%

Sweden

01-Jan-1969

25%

Pakistan

01-Apr-1990

18%

Malaysia

01-Apr-2015

6%

# Known as VAT

Thank You
Khandhar Mehta and Shah

3rd Floor, Devpath Complex

Behind Lal Bunglow
Off C G Road
Ahmedabad 380 009
Tel: 079-2646 1526
Email: amish@kmsindia.in