Transformation of Finance Act, 2016 & its interface in service tax

Changes in Service Tax

The Finance Act,2016[1] has made significant changes in Service tax and such changes have mixed impact on the Taxpayers

  • Amendment Pertains to Point of Taxation Rules, 2011[2], (“POTR”) W.e.f, 1st Mar,2016

Sec.67A of the finance Act, 1994[3] – grants power to dept to amend POTR

  • Amendment in Sec.73, Period for recovery.w.e.f, May 14,2016

sec.73 – issuance of SCN extended from 18 months to 30 months.[4]

  • Refund of service tax. w.e.f, 1st July 2016

Refund of service tax on services used beyond the factory or any other place or premises of production or manufacture of the said goods, for export of the said goods.

w.e.f. 1st July 2012 Extending the scope in ST rebate benefit[5]

# Currently Available in the Act Amendment Impact / Comments
 

1

 

Sec.39 (2) (s) of MEN No. 25/2012-Service Tax[6] – No exemption for Construction, erection, etc., of canal, dam or irrigation works entitled by way of contract.

 

exemption for Construction,[7] erection, etc., of canal, dam or irrigation works entitled by way of contract – Valid from 1st July 2012[8].

 

Refund allowed – if refund application filed within 6 months from 14th May 2016,

 

 

With effect from 1st April, 2015

 

# Currently Available in the Act Amendment Impact / Comments
2 No exemption –  Construction, erection installation, etc.,- civil structure for educational,  cultural establishment and residential complex, etc., for self use or use of their employees.[9] The same is being restored for the services till 31.03.2020.[10]

Provided that which appropriate/applicable stamp duty paid before 1.03.2015[11].

 

Benefit to the tax payer

Application for refund should be filed within 6months from 14th May 2016,

3. No Exemption – construction, erection, etc. of airport and port[12].

 

The same  restored[13] during the period from 01.04.2015 till 31.03.2020.[14]

 

Benefit to the tax payer.

Application should be filed within 6months from 14th May 16,[15]

With effect from 1st April 2016, New services included under Service Tax as Declared services:-

# Currently Available in the Act Amendment Impact / Comments
4 Right to use the radio frequency, spectrum – considered as sale of Intangible goods. Right to use the radio frequency, spectrum – listed under declared services[16]. ST is applicable.

 

 

 With effect from 14th May 2016,

 

# Currently Available in the Act Amendment Impact / Comments
5 Approved Vocational education course exempted u/s 65B(I). Deleted from NL – amended MEN[17] No impact. exempted from ST.
6 Specified Education Services exempted u/s 66D(L) – Negative list Deleted from NL – amended MEN[18] No impact

 

With effect from May 14,2016, Change of Rate of Interest for delayed payment.

# Changes Impact
7 Rate of Interest for delayed payment

 

Situation – 1

ST collected by not remitted to Government – 24%

 

Situation – 2

Others such ST is not levied / collected, etc – 15%

 

Where the total taxable services in PY is less than 60lacs, then the rate of interest would be discounted by 3% in both situations

Benefit to tax payer.

 

Decrease of Interest.

 

Imposition of fine by counting of days removed

 

With effect from 14th May 2016, Clarification provided:-

 

# Currently Available in the Act Amendment Impact / Comments
8 Not clarified properly While penalty proceedings initiated u/s 76/78 of a company is dropped – automatically penalty proceedings against director stand closed. Clarification provided

 

Conflict of opinion shall be resolved.

9 50 Lacs for imprisonment Sec.89 – increased the monetary limit for imprisonment from 50Lacs to 2 Crores. Will fit for current money flow.
10 50 Lacs for imprisonment Sec.90(2)Sec.91 – delete the reference of Sec.89(1)(i)- restricted the  imprisonment – for who collected the Service tax but not deposited it with the exchequer.

Enhanced the limit from 50 Lacs to 2 crores

Will fit for current money flow.

 

With effect from 1st June 2016, Increase of Rate of Tax:-

 

# Currently Available in the Act Amendment Impact / Comments
12 14% charged as service tax and 0.5% charged as Swachh Bharat Cess. Hence 14.5%

 

Cannot claim CENVAT credit for Swachh Bharat Cess under CENVAT

Krish Kalyan Cess (“KKC”) Cess 0.5% will be charged on all Taxable Services; this is applicable even in the case RCM[19].

KKC is Cenvatable: but can be utilised only against KKC Liability[20]

Increase of 0.5% for “KKC”. From Now:-

Service Tax – 14%

SB Cess   — 0.5%

KK Cess   — 0.5%

________

Total        — 15%

 

With effect from 1st June 2016, Deletion in NL and consequent amendments to MEN[21]

# Currently Available in the Act Amendment Impact / Comments
13 Sec. 66D(p)(ii) of Negative List. exemption – transportation of goods by an aircraft or vessel.[22] exemption is only for services by aircraft.[23]

Deleted Sec. 66D(p)(ii) from Negative list[24].

No Exemption for vessel.
14 Stage Carriage was listed in NL under Sec.66D (o) (i). Stage carriage notified under MEN – –Taxable only AC Stage Carriage – ST leviable  40% of gross charges after 60% abatement[25] Stage carriage became taxable Service.

 

 

With effect from 1st June 2016, valid till 31st Dec 2016

 

Indirect Tax Dispute Resolution Scheme, 2016 (the IDT DRS Scheme, 2016”).

 

# Particulars Impact
 

15

 

This is dispute resolution scheme applicable for all disputes pertaining to Customs, Central Excise and Service Tax matter which are pending before the Commissioner (Appeals) as on 1st March 2016.[26]

 

Process:– The Party have to pay duty/tax-liability along with interest and equivalent to 25% of Penalty, as imposed in the impugned order

 

Designated authority shall pass an order within 7days from the receipt of acknowledge of payment.

 

 

 

Simplifying the process and disposing the pending cases.

 

 

[1]      F. No. 334/8/2016-TRU dated February29th, 2016 retrieved on (19.5.2016) from http://www.cbec.gov.in/resources//htdocs-cbec/ub1617/do-ltr-jstru2-revision2.pdf

[2]      [18/2011-Service Tax dated 01.03.2011 as amended] retrieved on (19.5.2016) from http://www.cbec.gov.in/htdocs-ser vice tax / pt-of taxtn2011&gws_rd=cr&ei=rqs9V_jgAYbamAXy8ig

[3]      Notification No. 10/2016-ST dated 01-03-2016

[4]       Retrieved on (19.5.2016) from https://www.taxmann.com/Budget-2016-17/budget/t179/union-budget-       2016-an-analysis-by-s-b-gabhawalla-co.aspx

[5]     Effective from July 1, 2012

[6]     Notification No. 25/2012-Service Tax-retrieved on (20.05.2016) from http://www.cbec.gov.in/htdocs- servicetax/st-notifications/st-notifications-2012/st25-2012

[7]     Sec.39 (2) (s) of MEN No. 25/2012-Service amended with MEN No.9/2016.

[8]     Notification No.41/2012 – ST, dated the 29th June, 2012 was amended vide notification No.1/2016 – ST  dated 3rd February, 2016 – Retrospective effect.

[9]       the explanation 1 of clause 44 of Sec.65B withdrawn with effect from 1.4.2015#

[10]     Retrieved on (21.03.2016) from http://taxguru.in/income-tax/amendment-service-tax-exemptions-wef-  01 032016.html#sthash.Zi1l8kWE.dpuf

[11]     Notification No. 25/2012-ST as amended by notification No. 09/2016-ST dated 1st March, 2016 http://taxguru.in/income-tax/amendment-service-tax-exemptions wef01032016.html#sthash.Zi1l8kWE. dpuf

[12]     Notification No. 9/2015 – Service Tax New Delhi, the 1st March, 2015

[13]       Refund of ST shall be paid for the services done during the period from 1st Apr 2015 to 29thFeb 2016

[14]      Notification No. 25/2012-ST as amended by notification No. 09/2016- ST dated 1st March, 2016 – retrieved on (21.05.2016) from http://taxguru.in/income-tax/amendment-service-tax-exemptions-wef-

[15]      A New Entry vide Sr. No. 14A has been inserted after Sr. No. 14 in the Notification No. 25/2012-ST –  retrieved on (21.05.2016) from http://taxguru.in/income-tax/amendment-service-tax-exemptions-wef-

01032016.html#sthash.Zi1l8kWE.dpuf

[16]        Sec.66E subclause (i) and (j) inserted to include under declared services

[17]      Mega Exemption Notification 25/2012-ST dated June 20/2015.

[18]    Notification No.9/2016-ST dated March 1,2016

[19]       F. No. 334/8/2016-TRU dated February29th, 2016  “Chapter VI of the Bill (clause 158) proposes to levy KrishiKalyan Cess, on any or all the taxable services at the rate of 0.5% of the value of taxable services with effect from 1st June, 2016.”

[20]       F. No. 334/8/2016-TRU dated February29th, 2016 “Credit of KrishiKalyan 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”.

[21]       Notification No.9/2016 Service Tax 1st Mar 2016

[22]         ibid

[23]        Notification No. 25/2012-ST, as amended by notification No. 09/2016-ST, dated 1st March, 2016 refers

[24]        Section 66D (p)(ii)] is proposed to be omitted with effect from 1.06.2016. Clause 146 of Finance Bill

2016

[25]        Notification No.8/2016 ST 1st Mar 2016

[26]      F. No. 334/8/2016-TRUdated February29th, 2016


AUTHOR

G. Dinesh Kumar,

Associate @ SAPAA.


Disclaimer ;  The views and opinions expressed in this article are those of the authors. All data and information provided on this site is for informational purposes only. sapaa.in makes no representations as to accuracy, completeness, correctness or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.


 

Disclaimer:  The views and opinions expressed in this article are those of the authors. All data and information provided on this site is for informational purposes only. sapaa.in makes no representations as to accuracy, completeness, correctness or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.