Service tax Rate Increased @ 14% w.e.f 01.06.2015 & Notifcations

After the Hon’ble President has given assent to the Finance Bill, 2015 on Thursday, May 14, 2015, the Ministry of Finance, Department of Revenue vide Notification No. 14/2015-ST dated May 19, 2015 has notified increase in the rate of Service tax from 12.36% to flat 14% (Subsuming Education Cess and Secondary & Higher Secondary Education Cess) to be effective from June 1, 2015.

Swachh Bharat Cess @ 2% on value of taxable services and any Service provided by Government/ Local authority to Business entity to be notified at a later date

As per TRU Clarification vide D.O.F.No.334/5/2015-TRU dated May 19, 2015, the effective dates in respect of the following shall be notified at later date:

A: Swachh Bharat Cess – Enabling Provision

• An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess (“SB Cess”) on all or any taxable services at a rate of 2% on the value of all or any taxable services. The proceeds from this Cess would be utilized for Swachh Bharat initiatives. The Government will specify the categories of taxable services on which SB Cess would be leviable.
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B: Following change in relation to the Negative List – Section 66D of the Finance Act

Section 66D(a): Under clause (iv), the words ‘support services’ to be substituted by the words ‘any service’.

Accordingly, after such amendment, ‘Any services’ provided by the Government or local authority to a Business Entity would be exigible to Service tax, except for the services that are specifically exempted, or covered by any another entry in the Negative List.

Services provided by Government or Local Authority to Business Entity will continue to be taxed under Reverse charge mechanism except (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994.

Gist of changes vides other Service Tax Notifications dated May 19, 2015

A: Notification No. 13/2015-ST

Amend Notification No. 26/2012-ST dated June 20, 2012, thereby removing the entry relating to Chit in the definition part in view of withdrawal of abatement in relation to Chit Fund vide Notification No. 8/2015-ST dated March 1, 2015 (effective from April 1, 2015).

B: Notification No. 14/2015-ST

Increase in the rate of Service tax from 12.36% to flat 14% (Subsuming Education cess and Secondary & Higher Secondary Education cess) to be effective from June 1, 2015;

Following changes in relation to the Negative List – Section 66D of the Finance Act to be effective from June 1, 2015

• Section 66D(f): Services by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption brought under the Service tax net.
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• Section 66D(i): Explanation inserted whereby the expression “betting, gambling or lottery” shall not include the activity as specified in substituted explanation 2 to Clause (44) of Section 65B of the Finance Act.
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• Section 66D(j): Omitted, which covers ‘admission to entertainment event or access to amusement facilities’.
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Consequent to the above changes in the Negative List of services, definition of following terms to be omitted/ amended in Section 65B of the Finance Act w.e.f. June 1, 2015:

• Definitions of certain terms omitted [Section 65B(9): ‘amusement facility’, Section 65B(24): ‘entertainment event’]
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• Definitions of certain terms amended [Section 65B(40): ‘process amounting to manufacture or production of goods’ excluding alcoholic liquors for human consumption]
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C: Notification No. 15/2015-ST

• Effective from June 1, 2015, consequent to the upward revision in Service tax rate, the composition rate to be revised proportionately under Rule 6(7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994 on specified services, namely Air Travel Agent, Life Insurance service, Money changing service provided by banks or authorized dealers and Service provided by lottery distributor and selling agent.
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D: Notification No. 16/2015-ST

Following changes in Mega Exemption Notification No. No. 25/2012-ST dated June 20, 2012 made vide Notification No. 6/2015-ST dated March 1, 
2015 effective from June 1, 2015

Entry 30: Service tax would be levied on services by way of carrying out of intermediate production process of alcoholic liquor for human consumption on job work, consequent to imposition of Service tax on services by way of manufacture of alcoholic liquor for human consumption.

New Exemption:

Entry 47: Services by way of right to admission to:

• exhibition of cinematographic film, circus, dance, or theatrical performances including drama or ballet; recognized sporting events; award functions, concerts, pageants, musical performances or any sporting events other than recognized sporting event, where the consideration for such admission is upto Rs. 500 per person

E: Notification No. 17/2015-ST

Exempts taxable services provided under the Power System Development Fund Scheme of the Ministry of Power from the whole of the Service tax leviable thereon under Section 66B of the Finance Act till April 1, 2017 subject to the conditions specified therein.