Numerous procedural changes regarding registration, payment and filing of returns have been proposed in Service Tax and Excise legislation through the Union Budget 2016-17. In line with increasing the ‘Ease of Doing Business in India’, the lawmakers have considerably simplified the compliance procedures to ensure that every hassle in way of business can be mitigated in due time.  This article decodes some of the key procedural changes proposed through the Budget 2016.

Changes in service tax – Budget 2016:

Facility of quarterly payment of Service Tax

At present, provisions of quarterly payment of Service tax and payment of Service tax on receipt basis is only available to individuals and partnership firms. Under Budget 2016, the benefit of such payments options have been extended to the One Person Company (OPC) whose aggregate value of services provided is up to Rs. 50 lakh in the previous financial year.

This change will be effective from 1^st April 2016.

 

Filing of annual returns

Currently under Service tax legislation, there are only two half yearly returns required to be filed. Now as per the proposed changes under Budget 2016, Service tax assessee’s above a certain threshold will also be required to file an Annual return in addition to their normal returns. This change shall come into effect from 1st April, 2016. Thus, there will be three returns to be filed by a notified service tax assessee as compared to two earlier.

 

Enabling provision for levy of “Krishi Kalyan Cess”:

Krishi Kalyan Cess is proposed to be levied with effect from 1st June, 2016 on any or all the taxable services at the rate of 0.5% on the value of such taxable services. Credit of Krishi Kalyan Cess paid on input services shall be allowed to be used for payment of the proposed Cess on the service provided by a service provider.

 

 

Negative List-

1. Specified educational services– These services are proposed to be omitted from the Negative List but the service tax exemption on them is being continued by incorporating them in the general exemption notification.

This amendment in the notification shall come into effect from the date of enactment of Finance Bill, 2016.

 

2. “Service of transportation of passengers, with or without accompanied belongings, by a stage carriage”- proposed to be omitted. Thus, it will become taxable.

This amendment in the notification shall come into effect from 1.06.2016.

 

3. 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– proposed to be omitted. Thus, it will become taxable.

This amendment in the notification shall come into effect from 1.06.2016.

 

POINT OF TAXATION RULES, 2011

Point of Taxation in case of new service– Where a service is taxed for the first time, then-

(a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable;

(b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within fourteen days of the date when the service is taxed for the first time.

This amendment in the notification shall come into effect from the date of enactment of Finance Bill, 2016.

 

Amendment in section 73 of the Finance Act:

The limitation period 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. is proposed to be enhanced by one year, that is, from eighteen months to thirty months by making suitable changes to section 73 of the Finance Act, 1994.

 

Amendment to section 75 of Finance Act–

Rate of interest on late payment of service tax– Legislature in order to penalize the person who collects service tax without authority has inserted a proviso in section 75 of the act. With the insertion of this proviso, central government has been empowered to specify different rate of interest for persons who collect any amount as service tax.

 

Section 89 of the Finance Act, 1994

Offences and Penalties– The limit of Rs. 50 lakhs has been enhanced to Rs. 2crore meaning thereby the prosecution proceedings shall be initiated where the offence exceeds Rs. 2crore.

 

Review of Exemptions:

1. Exemption in respect of the following services is being withdrawn–

• Services provided by a senior advocate to an advocate or partnership firm of advocates, and
• A person represented on an arbitral tribunal to an arbitral tribunal;

 

Service tax in the above instances would be levied under forward charge. However, the existing dispensation regarding legal services provided by a firm of advocates or an advocate other than senior advocate is being continued.

It shall come into effect from the 1St day of April 2016.

 

2. Exemption under Sl. No. 23 (c) of the notification No.25/2012-ST on transport of passengers, with or without accompanied belongings, by ropeway, cable car or aerial tramway is being withdrawn.

It shall come into effect from the 1St day of April 2016.

 

3. Exemption to construction, erection, commissioning or installation of original works pertaining to monorail or metro (under S. No 14 of the notification No. 25/12-ST) is being withdrawn, in respect of contracts entered into on or after 1st March 2016. The other exemptions under S. No. 14 of notification No. 25/12-ST shall continue unchanged.

It shall come into effect from the 1St day of March 2016.

 

New Exemptions:

1. The services of life insurance business provided by way of annuity under the National Pension System (NPS) regulated by Pension Fund Regulatory and Development Authority (PFRDA) of India is being exempted from service tax. (New entry at S. No. 26C of notification No. 25/2012-ST refers)
2. Services provided by Securities and Exchange Board of India (SEBI) set up under SEBI Act, 1992, by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market are being exempted from service tax. (New entry at S. No. 51 of notification No. 25/2012-ST refers)
3. Services provided by Employees‟ Provident Fund Organisation (EPFO) to employees are being exempted from service tax. (New entry at S. No. 49 of notification No. 25/2012-ST refers) Page 11 of 38
4. Services provided by Biotechnology Industry Research Assistance Council (BIRAC) approved biotechnology incubators to the incubatees are being exempted from service tax. (Amendment in notification No. 32/2012-ST refers)
5. Services provided by National Centre for Cold Chain Development under Department of Agriculture, Cooperation and Farmer‟s Welfare, Government of India, by way of knowledge dissemination are being exempted from service tax. (New entry at S. No. 52 of notification No. 25/2012-ST refers)
6. Services of general insurance business provided under „Niramaya‟ Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability in collaboration with private/public insurance companies are being exempted from service tax. (New entry at S. No. 26(q) of notification No. 25/2012-ST refers)
7. The threshold exemption limit of consideration charged for services provided by a performing artist in folk or classical art forms of music, dance or theatre, is being increased from Rs 1 lakh to Rs 1.5 lakh per performance. ( Notification No.09/2016-ST, dated 1st March 2016 refers)
8. Services provided by way of skill/vocational training by Deen Dayal Upadhyay Grameen Kaushalya Yojana training partners are being exempted from service tax. (New entry at S. No. 9D of notification No. 25/2012-ST refers)
9. Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development & Entrepreneurship are being exempted from service tax.

The above changes in notification No. 25/12-ST shall into effect from the 1St day of April 2016.

10. Services by way of construction, erection, etc., of original works pertaining to low cost houses up to a carpet area of 60 sq.m per house in a housing project approved by the competent authority under the “Affordable housing in partnership” component of PMAY or any housing scheme of a State Government are being exempted from service tax. (new entry at S. No. 14 (ca) of notification No. 25/2012-ST refers)
11. Services provided by the Indian Institutes of Management (IIM) by way of 2 year full time Post Graduate Programme in Management (PGPM) (other than executive development programme), admissions to which are made through Common Admission Test conducted by IIMs, 5 year Integrated Programme in Management and Fellowship Programme in Management are being exempted from service tax.

 

The above two changes in notification No. 25/12-ST shall into effect from the 1St day of March 2016.

 

Rationalisation of abatements along with the conditions for availing such abatements

• Abatement at the existing rate of 70% will continue to be available on transport of passengers and goods by rail and on transport of goods by vessel, with the CENVAT credit of input services now to be allowed [presently, the credit of input services is not allowed with the abatement being claimed].
• A lower rate of abatement of 60% for transport of goods in containers by rail by any person other than Indian railway, with the CENVAT credit of input services being allowed.
• Uniform rate of abatement of 70% on services by way of construction of residential complex, building, civil structure, or a part thereof, irrespective of the carpet area of the units and amount charged for such units.
• Abatement on services by a tour operator in respect of a tour only for the purpose of arranging or booking accommodation for any person, retained at the existing rate of 90%. However, abatement in respect of any other tour is rationalised from 75% and 60% to 70%.
• A lower rate of abatement of 60% on shifting of used household goods by a Goods Transport Agency (GTA) without CENVAT credit on inputs, input services and capital goods.
• Abatement of 70% on services of a foreman to a chit fund restored, without CENVAT credit on inputs, input services and capital goods.

 

The proposed rationalization in abatements shall come into effect from the 1st day of April, 2016.

 

Reverse charge mechanism

1. Mutual fund agents/distributors to an asset management company under forward charge.
2. Service provided by Government or local authorities to business entities shall be on the service recipient.

 

Rationalisation

Interest rates on delayed payment of duty/tax across all indirect taxes is proposed to be made uniform at 15%, except in case of service tax collected but not deposited with the Central Government, in which case the rate of interest will be 24% from the date on which the service tax payment became due.

 

In case of assessees, whose value of taxable services in the preceding year/years covered by the notice is less than Rs. 60 Lakh, the rate of interest on delayed payment of service tax will be 12%.

 

Considering the above changes in procedural aspects it seems that the government has taken favourable steps for further simplifying the procedures under Service Tax more in line with the idea of increasing the Ease of Doing Business in India.

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