Service Tax Amendment
Finance Act 2016
Also Read :Finance Bill 2016 assented to by President
Changes with effect from 14.05.2016
1. Right to use the Radio-Frequency Spectrum is included as declared services
Prior to 01.04.2016, services covered by the definition of the support services (as defined under section 65B(49) of the Finance Act, 1994) provided by Government or Local Authority were subject to service tax.
However, w.e.f. 01.04.2016, all services provided by Government or Local Authority to a business entity have been made subject to service tax by excluding them from the Negative List of services.
Now, with effect from 14.05.2016, clause (j) is proposed to be inserted in Section 66E, which provides the list of declared services so as to make it clear that assignment by Government of the right to use the spectrum as well as subsequent transfers of assignment of such right to use is a service leviable to service tax and not sale of intangible goods.
2. Shifting of ‘specified educational services’ from Negative list to Exemption Notification
Prior to 14.05.2016, clause (l) of section 66D of the Act (Negative List) covers specified educational services. These services have been omitted from the Negative List, but the service tax exemption on them is continued by incorporating them in the general exemption notification (Notification No. 25/2012-ST as amended by notification No. 09/2016-ST, dated 1st March, 2016 refers).
3. Amendment in Section 67A
Section 67A has been amended to obtain specific rule making powers in respect of Point of Taxation Rules, 2011. Point of Taxation Rules, 2011 has also been amended accordingly.
4. Enhancement of time-limit for issuing Show Cause Notice in respect of cases not involving fraud, collusion, suppression etc.
The limitation period for issuing show cause notice for recovery of service tax not levied or paid or short-levied or short paid or erroneously refunded, for cases not involving fraud, collusion, suppression etc. has been enhanced by one year, that is, from 18 months to 30 months by amending section 73 of the Finance Act, 1994
5. Changes in Prosecution Provision
Section 89 has been amended to enhance the monetary limit for filing complaints for punishable offences from 50 lacs to Rs. 2 crore.
Section 90 and 91 of Finance Act, 1994 has also been amended to restrict the power to arrest in service tax law only to situation where the tax payer has collected the tax but not deposited it with the exchequer, and amount of such tax collected but not paid is above the threshold of Rs 2 crore.
6. Restoration of certain exemptions withdrawn last year for projects, contracts in respect of which were entered into before withdrawal of the exemption.
(a) Exemption from Service Tax on specified construction, erection, etc. services provided to the Government, a local authority or a governmental authority was withdrawn with effect from 1.4.2015. The same was restored for the services provided under a contract which had been entered into prior to 01.03.2015 and on which appropriate stamp duty, where applicable, had been paid prior to that date. The exemption has been restored till 31.03.2020. (Notification No. 25/2012-ST as amended by notification No. 09/2016-ST dated 1st March, 2016 refers).
Further the services provided during the period from Page 3 of 5 01.04.2015 to 29.02.2016 under such contracts have also been exempted from service tax by inserting section 102 of Finance Act, 1994
(b) Exemption from Service Tax on services by way of construction, erection, etc. of original works pertaining to an airport, port was withdrawn with effect from 1.4.2015. The same was restored for the services provided under a contract which had been entered into prior to 01.03.2015 and on which appropriate stamp duty, where applicable, had been paid prior to that date subject to production of certificate from the Ministry of Civil Aviation or Ministry of Shipping, as the case may be, that the contract had been entered into prior to 01.03.2015. The exemption has been restored till 31.03.2020.
(Notification No. 25/2012-ST as amended by notification No. 09/2016-ST dated 1st March, 2016 refers].
Further the services provided during the period from 01.04.2015 to 29.02.2016 under such contracts have also been exempted from service tax by inserting section 103 of Finance Act, 1994
7. Activity of Promotion and Marketing of Lottery
Section 4(c) of the Lotteries (Regulation) Act, 1998 provides that the State Government shall sell the tickets either itself or through distributors or selling agents. Thus, as per the provisions of the Lotteries (Regulation) Act, 1998, the transaction between the State Government and the distributors or selling agents is on principal to agent basis.
Relying on above, to reaffirm department’s stand on taxability, explanation 2 in section 65B(44) has been amended to provide that activity carried out by a lottery distributor or selling agents of the State Government under the provisions of the Lotteries (Regulation) Act, 1998 (17 of 1998), is leviable to service tax.
Changes with effect from 01.06.2016
8. Transportation of goods by a vessel from a place outside India up to the customs station of clearance become taxable
The entry in the Negative List that covers services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance [section 66D (p)(ii)] has been omitted with effect from 01.06.2016.
However, such services by an aircraft will continue to be exempted by way of exemption notification [Not. No. 25/2012- ST, as amended by notification No. 09/2016-ST dated 1st March, 2016].
Accordingly, w. e. f. 01.06.2016, services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance, shall be subject to service tax.
9. Services of transportation of passengers, with or without accompanied belongings, by a stage carriage:
Services are covered by the section 66D(o)(i) of the Finance Act, 1994, which provides the list of negative services. This entry is proposed to be omitted.
However, the Notification No. 25/2012-Service Tax dated 20.06.2012 is being amended to provide exemption to said services when provided by a stage carriage other than airconditioned stage carriage.
Therefore, now services of transportation of passengers by an air-conditioned stage carriage shall be subject to service tax.
The service of transportation of passengers by air-conditioned stage carriage shall be taxed at the same level of abatement (60%) as applicable to the transportation of passengers by a contract carriage, with same conditions, i.e., non-availment of CENVAT credit.
CA. Vikas Khandelwal,