L B Jha & Co,

Chartered Accountants,
New Delhi

Union Budget
2014-15 :
Changes in
Service Tax Law

Negative list of services : Section 66 D

Before Budget

After Budget

Implication

Entry no (g) read as Service

related to selling of space or
time slots for advertisements
except advertisement broad
cast by radio or television is a
negative list service.

The levy of service tax would further

extended to advertisements in internet
websites, out of home media, on film
screens in theatres, bill boards,
conveyances, buildings, cell phones,
Automated teller
machines,tickets,commercial publications,
aerial advertising etc.

Thus, it can be said that

selling of space for
advertisement in print
media would only fall
within the purview of
Negative list and sale of
space or time slots for
advertisement in any
other
way shall be subject to
Service Tax.

Services provided by radio

taxis or radio cabs were nontaxable.

Services provided by radio taxis, cabs

whether or not air-conditioned are taxable
services. However the abatement currently
available to rent a cab service is also
available to radio taxi or cab service. Hence
definition of radio taxi is being included in
exemption notification no 25/2012.

Service tax base has

been extended to bring
these services under the
levy of S.T law and it is
immaterial whether
radio taxi or cab is AC or
NON AC , service tax will
be levied on it.

Amendments in general exemptions

Before Budget

After Budget

Implication

Service of passenger
transportation by a contract
carriage other than for the
purposes of tourism, conducted
tour ,charter or hire is exempt
from service tax.

Service provided by
transport of passenger by
air-conditioned contract
carriage including which are
used for point to point travel
will attract service tax on
abated value of 40% i.e..
rate of S.T will be 4.944%.

Scope of exemption is being

reduced by withdrawing
exemption on AC contract
carriages. However service
provided by Non-AC contract
carriages are continue to be
exempted from S.T

Services by way of technical

testing or analysis of newly
developed drugs, including
vaccines and herbal remedies on
human participants by a clinical
research organization approved
to conduct clinical trials by the
Drug Controller is exempted
service.

Now become taxable

Exemption withdrawn.

Simplification of exemptions
Before Budget
All the services provided by
educational institutions
( services specified in
negative list) to their
students, faculty and staff
are exempted services.
In respect of services
received by educational
institutions exemption is
allowed through the concept
of auxiliary educational
services
Service provided by way of
renting of immovable
property to an educational
institution is an exempted
service.

After Budget
Continue as it is.
Concept of auxiliary
education services has been
omitted and now only the
following services received by
eligible educational institution
are exempted from S.T :
(a) transportation of students,
faculty and staff ;
(b) catering service including
mid-day meals scheme.
(c) security, cleaning or
housekeeping
(d) services related to
admission and conduct of
examination.
Exemption withdrawn.
Note : Education institution is
defined as institution providing
educational services specified in
negative list.

Implication
No change
Earlier there were many doubts
regarding the scope of auxiliary
education services now to bring
clarity the concept stands
withdrawn and only specified
services received by institute are
exempted.
Services in relation of renting of
immovable property to an
educational institution stands
withdrawn.

Before budget

After Budget

Implication

Services provided to govt, a local

authority or a govt authority by
way of carrying out any activity in
relation to water supply, public
health, sanitation conservancy
,solid waste management or slum
improvement and up gradation
are exempt from service tax.

Exemption is same as earlier.

However the said exemption
would not be extendable to
other services such as
consultancy, designing etc.

For greater clarity this exemption has

been made more specific.
Government has clarified that
services which are not directly
connected to specified services are
not covered under exemption. For
instance ,consultancy, designing
services related to water supply,
slum improvement etc. are not
covered under this exemption.

Service by way of renting of a

hotel, inn, guest house, club or
campsite or other commercial
places meant for residential or
lodging purposes, having a
declared tariff of a unit of
accommodation below Rs
1000/day or equivalent is exempt
from service tax.

Exemption is same as earlier.

However the word
Commercial is being omitted.

Earlier some doubts have arisen on

account of the word commercial as
whether accommodation services
provided by dharmsalas, ashram or
any such entity are taxable .Hence
the word commercial has been
removed and govt has clarified that
exemption upto specified limit is
available to all such entities providing
accommodation services.

Note : The purpose of all the above exemptions and exclusions is to widen the tax base. However if the
services provided by a person in a F.Y does not exceed Rs 10 lacs, exemptions will be available in terms of
notification no 33/2012-ST.

Service tax on service portion in Works

contracts
Description

Before Budget

After Budget

Implication

In case of works
contract :

Service tax shall be

computed on :

Service tax shall be

computed on :

(A) entered into for

execution of original
works

40% of the total amount

charged for works
contract

SAME AS IT IS

No change

(B) entered into for

maintenance, repairing,
reconditioning,
restoration or servicing
of movable goods

70% of the total

amount charged for
works contract

SAME AS IT IS

(C) entered into for all

other cases not covered
above i.e.. in case of
maintenance of
immovable property.

60% of the total amount Has been omitted

charged for works
contract.

Earlier valuation of
service portion in case of
maintenance of movable
and immovable property
is done at different
rates. Hence to bring
more clarity and
removal of disputes
category B and C has
been merged and now
60% valuation rule
stands withdrawn .

Compliance enhancement
measures
Before budget

After Budget

Extent of delay

Simple interest rate on

delayed payment of
service tax : per annum

Simple interest rate on

delayed payment of
service tax : per annum

Upto 6 months

18%

18%

More than 6 months

but upto 1 year.

18%

18% for the first 6

months and 24%
beyond 6 months.

More than 1 year

18%

18% for first 6

months,24% for next six
months and 30%
beyond 1 year.

Implication

Earlier rate of interest

was same in every case
of delayed payment.
Now to encourage
timely payment there is
an increase in rate of
interest according to the
extent of delay i.e.
higher the delay, higher
will be the rate of
interest.

Note : As specified in the proviso to section 75, 3% concession on the

applicable rate of interest will continue to be available to the small service providers .
E-payment of service tax is being made mandatory with effect from the 1st Oct 2014. Relaxation from
e-payment may be allowed by the Deputy Commissioner/Asst Commissioner on case to case basis
[Notification 09/2014-ST].

Service tax rules:

Before Budget

After Budget

Implication

Service provided by a Director to a

body corporate is being brought under
the reverse charge mechanism; service
receiver, who is a body corporate will
be the person liable to pay service tax.

New Provision and it is

introduced in view of the
requests by body corporates
such as Reserve bank of India.

Services provided by Recovery Agents

to Banks, Financial Institutions and
NBFC is being brought under the
reverse charge mechanism; service
receiver will be the person liable to pay
service tax.

[Notification 9/2014 -ST and

10/2014-ST]

Place of Provision of service rules :

Before Budget

After budget

Implication

As per Rule 4 of POP of service

rules,2012,the place of provision
of the services specified in this
rule shall be the location where
the services are actually
performed.
As per clause(a) provided further
that this rule shall not apply in
case of a service provided in
respect of goods that are
temporarily imported into India
for repairs, reconditioning or reengineering for re-export, subject
to the conditions as specified in
this regard.

As per clause(a) of rule 4

:Provided further that this clause
shall not apply in the case of a
service provided in respect of
goods that are temporarily
imported into India for repairs
and are exported after the repairs
without being put to any use in
the taxable territory, other than
that which is required for such
repair.

Earlier clause(a) would applied

when conditions as specified in
this regard satisfied. Obviously
there were no conditions
specified in the rule and therefore
now govt has draft the clause(a)
as such that this clause will not
applicable where goods imported
for repair purpose and then reexport without being put to use
in India except for the use which
is required for such repair
purpose.
Hence now condition is
goods shall be re-exported.
And goods shall not be put to
use in India except for such
use which is required during
repairing.

Note : The above clause(a) will not applicable in those cases where goods arrived in India in usual course
of business and are subject to repair while such goods remain in India.

Before budget

After Budget

Implication

As per rule 9(d) of POP of

Rule 9(d) in relation of vessels Earlier Rule 9(d) applied in
service rules,2012 the place of
and aircraft is being excluded
case of hiring of these two
provision of service related to
and now the service related to
item i.e.. vessels and
hiring of vessels and
hiring of vessels and
aircraft but after
aircraft upto a period of 1
aircraft whether short and
amendment the place of
month will be the location of
long term will be covered by
provision will be decided on
the service provider.
general rule i.e.. Rule 3 and
the basis of rule 3.However
accordingly the place of
Vessels here excludes
provision will be the location
Yachts( a recreational boat
of servicer receiver.
or ship) and hence it is
continue to be covered in Rule
9(d).

As per rule 9 (c) of POP

Definition of rule 9(c)
rules,2012 the definition of
amended and it also includes
intermediary is read as it
intermediaries in respect of
means a broker, an agent or
goods i.e.. a commission
any other person by whatever
agent or selling agent or
name called, who arranges
consignment agent.
and facilitates a provision of a
service(main service) between
two or more persons and
does not include
intermediaries in respect of
goods i.e.. a commission
agent, selling agent)

Widen the tax base by

including intermediaries in
respect of goods.

POT rules,2011
Before Budget

After Budget

Implication

As per rule 7 of POT rules,

Point of taxation, in case of
person liable to pay tax
under reverse charge or in
case of associated
enterprise, shall be the
date of payment. However
if the payment is not made
within a period of 6
months from the date of
invoice, the point of
taxation shall be
determined as per Rule
3(main rule).

The first proviso to rule 7

is amended to provide
that point of taxation in
respect of reverse charge
will be the payment date
or the first day that
occurs immediately after
a period of 3 months
from the date of invoice,
whichever is earlier.

Only first proviso of Rule 7

is amended i.e..
amendment is in relation
of reverse charge not in
case of associated
enterprises.
Moreover this amendment
will be apply only to invoices
raised after 1st October,2014.

Cenvat Credit Rules,2004

Before Budget

After Budget

Implication

A manufacturer or a service provider

shall take credit on inputs and input
services
within a period of six months from the
date of issue of invoice, bill or challan
w.ef 1st September,2014.

Newly inserted proviso to

rule 4(1) and fifth proviso to
rule 4(7). Earlier there was
no such time limit for
availing Cenvat credit.

In case of full reverse

charge, service receiver can
avail the cenvat credit on
input services only when he
makes the payment of
invoice value to service
provider.

Service receiver can book the cenvat

credit immediately on availing the
input service.

The condition of
availement has been
withdrawn. However,
there is no change in
respect of partial reverse
charge .

Re-credit of Cenvat credit reversed

Newly inserted proviso to
on account of non-receipt of export
rule 6(8)
proceeds within the specified period
or extended period to be allowed, if
export proceeds are received within
1 year from the period so specified or
extended period. This can be done on
the basis of documents evidencing
receipt of export proceeds.

Before budget

After Budget

Implication

As per notification No
26/2012,in case of goods
transport agency service, service
tax will be charged on 25% value
of service i.e.. there is an option
of availing the abatement on
75% value if CENVAT credit on
inputs and capital goods, used
for providing the taxable service,
has not been taken under the
provisions of the CENVAT Credit
Rules, 2004.

As per notification no 8/2014-ST,

26/2012,in case of goods transport
agency service, service tax will be
charged on 25% value of service
i.e.. there is an option of availing
the abatement on 75% value if
CENVAT credit on inputs and capital
goods used for providing taxable
service has not been taken under
CENVAT credit rules,2004 by
Service Provider only.

Earlier it was not cleared that who

has to comply with the condition
laid down, if the abatement
option is taken, as liability to
discharge whole service tax is on
service
recipients. However, the term by
the service provider has been
inserted to make it clear
that condition for non- availment
of cenvat credit is required to be
satisfied by the service
providers only and service
recipient will not be required to
establish satisfaction of this
condition.

As per notification no 30/2012,

renting of vehicle to any person
who is not engaged in the
similar line of business to carry
passenger by individual, HUF,
Firm or AOP and service
receiver is a body corporate
then RCM will be applicable.

The condition against entry no 9 in

notification no 30/2012 is amended
with effect from 1st October 2014,
to allow the credit of input service
of renting of a motor cab if such
services are received
from a person engaged in the
similar line of business i.e.. a subcontractor providing
services of renting of motor cab to

Entry no 9 is amended and

moreover as per substituted entry
the whole cenvat credit is
allowed with respect of input
service received from person
paying S.T on 40% value. On the
other hand in case if abatement is
not availed then cenvat credit
eligibility is restricted to 40% of
credit of input service.

Before Budget

After Budget

Implication

By amending the entry of

serial No. 11 of notification no
26/2012 , tour operator
service providers are also
allowed to avail CENVAT credit
on the input service of
another tour operator, which
are used for providing the
taxable service.

The words input services,

wherever occurring, the words
input services other than the
input service of a tour
operator shall be substituted
with effect from the 1st day of
October, 2014.This is
substituted to avoid cascading
effect of taxation. Now tour
operators are eligible to avail
cenvat credit on input services
received from other tour
operators.

As per entry no 10 of
notification no 26/2012-in
case of transport of goods by
vessel, service tax will be paid
on 50% value if the condition
of non availement of cenvat
credit is satisfied.

Rate of 50% is reduced to

40%.

Effective service tax will

decrease from the present
6.18% to 4.944%, with
effect from 1st October, 2014.

Simplification of Partial Reverse Charge

mechanism and Advance Ruling
Description

Before Budget

After Budget

Implication

Renting of vehicle
to any person to
carry passenger by
individual, HUF, firm
or AOP and service
receiver is a body
corporate and no
abatement is availed
then liability under
RCM is as :

Service
provider
liability

Service
receiver
liability

Service
provider
liability

Service
receiver
liability

Changes applicable
from 1st October,2014

60%

40%

50%

50%

The resident private limited company is being included as a class of persons

eligible to make an application for Advance Ruling in service tax [Notification
No.15/2014-ST]. This change will come into effect immediately i.e. w.e.f. 11the July,2014

Exemptions to Social sector

Before Budget After Budget

Implication

No exemption

All life micro-insurance schemes approved by

IRDA, where sum assured does not exceed
Fifty Thousand
Rupees are being exempted from service tax

New entry Sl. No.26A of Notification

25/2012-ST amended by Notification
No.06/2014-ST].

No exemption

Transport of organic manure by vessel, rail or

road (by GTA) is being
exempted from service tax.

organic manure will be

on par with fertilizer which is already
exempted

No exemption

Services by way of loading, unloading,

packing, storage or warehousing,
transport by vessel, rail or road (GTA), of cotton,
ginned or baled, is being exempted

Amendment of entry at Sl. No. 20

& 21 and 40 of notification no
25/2012.

No exemption

Services provided by Common Bio-medical

Waste Treatment Facility
operators by way of treatment, disposal of bio
medical waste or processes incidental to
such treatment or disposal are being exempted.

New entry at Sl. No.2B is inserted.

No exemption

Service provided by Employees State

Insurance Corporation (ESIC) during
the period prior to 1.7.2012 is proposed to be
exempted from service tax.

It may be noted that any service

provided by ESIC
to is already exempt for the
period commencing from 1.7.2012.

Technical exemptions
Before Budget

After Budget

Implication

No exemption

Specialized financial services received by RBI

from outside India, in the course of management
of foreign exchange reserves, e.g. external asset
management, custodial
services, securities lending services, are being
exempted

New entry at Sl. No. 41 of

25/2012-ST.

No exemption

Services provided by the Indian tour operators to

foreign tourists in relation to tours wholly
conducted outside India are being exempted

This exemption is available to

Indian tour operators in
cases where they organize
tours for a foreign tourist
wholly outside India, e.g.,
service provided to a Sri
Lankan for a tour conducted
in Bhutan. It may be noted
that service provided by a
tour operator in relation to
an inbound or an outbound
tours continue to be liveable
to service tax.