Budget 2013: Changes in Service Tax Compare to Budget 2012

Service taxThe Budget announced no change in the standard rate of excise duty and service tax, include two services in the negative service-tax list and exempt vocational courses and testing services from service tax.

An extra-large exemption notification no.25/2012 dated 20th June 2012 superseding notification no. 12/2012 had been issued by the ministry last year. The activities appearing in the mega exemption has been exempted from the payment of service tax. Notification no.3/2013 issued by the ministry as part of the budget has brought few amendments to the mega exemption list.

i) Temporary transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical, artistic works or cinematograph films had been exempted in the notification No. 25/2012(before amendment).

A full exemption was there on copyright relating to cinematograph films however with the amendments introduced by Notification no. 3/2013, the benefit of exemption is restricted to films exhibited in cinema halls only

ii) Services provided to educational institution in respect of auxiliary education services or renting of immovable property as well as service provided by educational institution in respect of auxiliary education services or renting of immovable property had been exempted in the notification No. 25/2012(before amendment).

As per the amendments, only Services provided to educational institution in respect of auxiliary education services or renting of immovable property has been exempted and auxiliary education service or renting of immovable property provided by educational institution will not be exempted.

iii) Services provided by a goods transport agency by way of transportation of fruits, vegetables, eggs, milk, food grains or pulses had been exempted in the earlier notification.

However this budget has enlarged the scope of exemption in relation to services provided by GTA and has covered the transportation of following goods:-

• Agricultural produce,

• Foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages,

• Chemical fertilizer and oilcakes,

• Newspaper or magazines registered with the Registrar of Newspapers,

• Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap or

• Defense or military equipments.

iv) Services provided to Government, a local authority or a governmental authority for specified activities such as water supply, public health, repair or maintenance of a vessel or an aircraft had been exempted in the earlier notification.

Repairs or maintenance of aircraft has been removed from the list and now the service provided to govt. for repair or maintenance of an aircraft is taxable.

v) Services relating to serving of food and beverages by the restaurant, eating joint or a mess had been exempted however those restaurants which has the facility of air-conditioning, at any time during the year, and a licence to serve alcoholic beverages had not been exempted in the notification no. 25/2012(before amendment).

With the amendments introduced by Notification no. 3/2013 there is no more requirement of a license of serving alcoholic beverages for determining the taxability of the service provided by the restaurant. All restaurants, eating joint or mess having the facility of air condition during any time of the previous year is now under the tax ambit.

vi) Transportation by rail or vessel of some specified goods had been exempted in the notification no. 25/2012(before amendment).

Petroleum and petroleum products, postal mail or mail bags, household effects has been removed from the list of specified goods and their transportation has been made subject to tax.

vii) Service by an entity by way of “charitable activities” has been exempted. The earlier definition of charitable activities covered public health, advancement of religion or spirituality, advancement of educational programmes or skill development relating to specified person, preservation of environment, advancement of any other object of general public utility up to a value of 25 lacs.

viii) Services by way of vehicle parking to general public had been exempted in the earlier notification. This exemption was also causing confusion in the mind of assessee regarding taxability of payment made towards parking space in the buildings.

The exemption has altogether withdrawn and now onwards the service by way of vehicle parking for public as well as private purpose is taxable.

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