corporate and professional update

CORPORATE AND PROFESSIONAL UPDATE

SERVICE TAX AMENDMENTS

Clarification about the Rate of Service Tax

The rate of Service Tax will continue at @12.36% until the new rate is notified. The increase in service tax rate from 12.36% to 14% is yet to be notified.

 Service Tax amendments are applicable from 01 April 2015.

 New Exemptions provided

  1. Services provided by way of transportation of a patient in an ambulance would now be exempt from Service Tax. The scope of this exemption is being widened to include all ambulance services in addition to health care services.
  2. Life insurance services provided under the Varishtha Pension Bima Yojna scheme would now be exempted.
  3. The scope of exemption on transportation of goods by road has been extended from the place of removal to an inland container depot, a container freight station, a port, airport or Land Customs Station is exempt from Service Tax vide notification No. 31/12-ST dated 20 June 2012.
  4. Service provided by a Common Effluent Treatment Plant operator for treatment of effluent would now be exempted.
  5. Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables would now be exempted.
  6. Service provided by way of admission to a museum, zoo, national park, wildlife sanctuary, and a tiger reserve would now be exempted.
  7. Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of its members would now be exempted.

Withdrawal of Exemptions

  1. The following services are provided to government, local authority, or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of:
  1. A civil structure meant for use other than for commerce, industry, etc.
  2. A structure meant predominantly for use as an educational, clinical, or art, or cultural establishment.
  • A residential complex predominantly meant for self-use or the use of its employees would be taxable.
  1. Services provided by way of construction, erection, commissioning or installation of original works pertaining to an airport or port would now be taxable.
  1. Exemption to services provided by a performing artist in folk or classical art form
  2. music, or
  3. Dance, or
  4. Theater,

Will be limited only to such cases where the amount charged is an option. 1, 00,000 for performance would be taxable. It is further clarified that the exemption shall not apply if services are provided by an artist as a brand ambassador;

  1. Goods Transport services by rail or water in respect of following products which were exempt earlier will now be taxable with regards to fruits, vegetables, and eggs. Hence, Goods transport services by rail or water will not be taxable in the case of Milk, Salt, and food grain including flours, pulses, and rice.
  2. Goods transportation by road in respect of following products which were exempt earlier will now be taxable with regards to tea, coffee, Jaggery, Sugar, Milk Products and edible oil Hence, GTA (road) will not be taxable in case of Milk, Salt and food grain including flours, pulses, and rice.
  3. The following services provided would be taxable:
  • distributor to a mutual fund or AMC,
  • a mutual fund agent to a mutual fund or assets management company,
  • Selling or marketing agent of lottery ticket to a distributor.
  • These services are now covered under a reverse charge basis.
  • Departmentally run public telephone, guaranteed public telephone operating only local calls; Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued would be taxable.

Changes in Abatement

  1. Currently, the Service Tax is payable on 70% of the fees, commission or any such amount in case of Chit Funds.  The abatement is being withdrawn from services provided in relation to the chit fund business.
  2. The service tax abatement is several transportation services that have been changed to bring them to the same rate of service tax and related conditions.  In the table below, we have summarized the old and new rates of service tax:
Services Old Rate and Conditions New Rate and Conditions
Goods Transport Agency 25% and no cenvat credit shall be allowed on inputs, capital goods, and input services 30% and no cenvat credit shall be allowed on inputs, capital goods, and input services
Rail Transportation of Goods 30% and no further conditions Same as above
Rail transport of Passengers 40% and no cenvat credit shall be allowed on inputs and capital goods Same as above
Transportation of goods by Vessel 50% and no cenvat credit shall be allowed on inputs, capital goods, and input services Same as above
  1. Currently, the Service Tax is payable on 40% of the value of air transport of passengers irrespective of the class.  The service tax would now be payable on 60% of the value in case of classes above economy class.

Reverse Charge Mechanism

  1. Manpower supply and security services, when provided by an individual, HUF, or partnership firm to a body corporate, are being brought to full reverse charge. Currently, the service receiver pays 75% of the service tax due, and the balance is paid by the service provider.
  2. The following services are brought under reverse charge mechanism:

            Mutual fund agents,

            Mutual fund distributors and

            Agents of lottery distributor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: singh@carajput.com or call at 9555555480

Rajput Jain & Associates

Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders. Rajput jain & Associates, a professional firm, offers its clients a full range of services, To serve better and to bring bucket of services under one roof, the firm has merged with it various Chartered Accountancy firms pioneer in diversified fields. We have associates all over India in big cities. All our offices are well equipped with latest technological support with updated reference materials. We have a large team of professionals other than our Core Team members to meet the requirements of our prospective clients including the existing ones. However, considering our commitment towards high quality services to our clients, our team keeps on growing with more and more associates having strong professional background with good exposure in the related areas of responsibility.

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