IPCC Service Tax Amendments Applicable for Nov 2016 Exam ST.1 C A - I P C C SERVICE TAX AMENDMENTS FOR NOV 2016 EXAM A SERVICE TAX A.1 Charging Section A.1.1 Negative List [Sec 66D] (a) Services provided by GOVERNMENT (both Central and State) or a local authority (Amended by Finance Act, 2015 w.e.f. 01-Apr-2016) Exceptions: However, the following services provided by Govt. or a local authority are chargeable to service tax: (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) support services any service, other than services covered under clauses (i) to (iii) above, provided to business entities. Effect of Amendment: Not just the support services, but all services which are provided by the Government to any Business Entity, would be outside the scope of negative list. Support services means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves, but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis. A.2 Valuation A.2.1 Compounding schemes for determination of payment under the Service Tax Rules, 1994 (a) In case of insurer carrying on life insurance business [Rule 6(7A)] Where Investment amount in Gross premium has been intimated to the policy holder Where Investment amount in Gross premium has not been intimated to the policy holder In case of single premium annuity policies, if not already covered above All years First year Subsequent years 14% (12%) on Gross premium less amount allocated for investment, or savings on behalf of policy holder 3.5% (3%) of the gross amount of premium charged 1.75% (1.5%) of the gross amount of premium charged 1.4% of the single premium charged from the policy holder (Inserted w.e.f. 01-Apr-2016) This option not available if the entire premium paid by the policy holder is towards the risk cover in life insurance.
IPCC Service Tax Amendments Applicable for Nov 2016 Exam ST.2 A.3 Exemptions A.3.1 MEGA EXEMPTION NOTIFICATION No. 25/2012 dated 20-Jun-12 (as amended up to 01-Apr-16) ^Indicates clause amended / inserted by Notification No. 09/2016-ST dated 01-Mar-2016 effective from 01-Apr-2016 (except as otherwise provided) 6. Legal Services provided by- (a) an arbitral tribunal to - (i) any person other than a business entity; or (ii) a business entity with a turnover up to Rs. 10 lakh in the preceding financial year; ^(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to- (i) an advocate or partnership firm of advocates providing legal services; (ii) any person other than a business entity; or (iii) a business entity with a turnover up to Rs. 10 lakh in the preceding financial year; or ^(c) a senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. 1. Legal service means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority. 2. Arbitral tribunal means a sole arbitrator or a panel of arbitrators. 3. Senior advocate has the meaning assigned to it in section 16 of the Advocates Act, 1961. An advocate may, with his consent, be designated as senior advocate if the Supreme Court or a High Court is of opinion that by virtue of his ability standing at the Bar or special knowledge or experience in law he is deserving of such distinction. Effect of amendments: 1. Legal services provided by a senior advocate shall be exempt only if they are provided to any person not carrying out any activity relating to industry, commerce or any other business or profession. 2. The services provided by a person represented on an arbitral tribunal to an arbitral tribunal shall now be liable to tax. ^9B. Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme, - (a) two year full time residential Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management; (b) fellow programme in Management; (c) five year integrated programme in Management. (Applicable w.e.f. 01-Mar-2016) Note: It has been stated by the Ministry of Human Resource Development (MHRD) and also by associations like Association of Indian Universities, Inter University Board of India etc. that IIMs have been conducting Post Graduate Programmes in Management and Fellowship Programmes which are equivalent to MBA and Ph.D degrees, respectively. Hence, the exemption being given to the above programmes of IIMs is clarificatory in nature and in view of the same, liability to pay service tax in respect of the said programmes for the past period will also become infructuous. ^9C. services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme ^9D. services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training. ^# 16. Services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre, if the consideration charged for such performance is not more than one lakh one lakh and fifty thousand rupees. Provided that the exemption shall not apply to service provided by such artist as a brand ambassador;
IPCC Service Tax Amendments Applicable for Nov 2016 Exam ST.3 Brand ambassador means a person engaged for promotion or marketing of a brand of goods, service, property or actionable claim, event or endorsement of name, including a trade name, logo or house mark of any person. All other activities by an artist in other art forms e.g. western music or dance, modern theatres, performance of actors in films or television serials shall be taxable. Activities of artists in still art forms e.g. painting, sculpture making etc. are also taxable. Effect of Amendment: The scope of the above exemption has been restricted w.e.f. 01-Apr-2015 by fixing a monetary limit of Rs. 1,00,000 in respect of a performance. This limit has been further enhanced to Rs. 1,50,000 w.e.f. 01-Apr-2016. 23. Transport of passengers, with or without accompanied belongings, by - (a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; *(b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or ^(c) ropeway, cable car or aerial tramway; 26. Services of general insurance business provided under following schemes - (a) Hut Insurance Scheme; (b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development Programme); (c) Scheme for Insurance of Tribals; (d) Janata Personal Accident Policy and Gramin Accident Policy; (e) Group Personal Accident Policy for Self-Employed Women; (f) Agricultural Pumpset and Failed Well Insurance; (g) premia collected on export credit insurance; (h) Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture; (i) Jan Arogya Bima Policy; (j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana); (k) Pilot Scheme on Seed Crop Insurance; (l) Central Sector Scheme on Cattle Insurance; (m) Universal Health Insurance Scheme; (n) Rashtriya Swasthya Bima Yojana; or (o) Coconut Palm Insurance Scheme; (p) Pradhan Mantri Suraksha Bima Yojna (Notification No. 12/2015 ST dated 30-Apr-2015) ^(q) Niramaya Health Insurance Scheme implemented by Trust constituted under the provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999). ^26C. Services of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority of India (PFRDA) under the Pension Fund Regulatory And Development Authority Act, 2013 (23 of 2013). 48. Services provided by Government or a local authority to a business entity with a turnover up to Rs. 10 lakh in the preceding financial year. (Inserted by Notification No. 7/2016-ST dated 18-Feb-16 w.e.f. 01-Apr-16) ^49. Services provided by Employees Provident Fund Organisation (EPFO) to persons governed under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952). ^50. Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999). ^51. Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market. ^52. Services provided by National Centre for Cold Chain Development under Ministry of Agriculture, Cooperation and Farmer s Welfare by way of cold chain knowledge dissemination.
IPCC Service Tax Amendments Applicable for Nov 2016 Exam ST.4 A.3.2 Information Technology Software Service (Notification No. 11/2016-ST dated 01-Mar-2016) The service tax is exempted on service in relation to Information Technology Software when such Information Technology Software is recorded on a media bearing retail sale price. Conditions: (i) the value of the package of such media has been determined as per retail sale price under provisions of section 4A of the Central Excise Act, for the levy of: Central Excise Duty if domestically produced Additional Duty of Customs u/s 3(1) of the Customs Tariff Act if imported (ii) the appropriate duties of excise or customs (including CVD) on such value have been paid. (iii) a declaration made by the service provider on the invoice relating to such service that no amount in excess of the retail sale price declared on such media has been recovered from the customer. A.3.3 Services provided by TBI or STEP [Notification No. 32/2012-ST dated 20-Jun-12] Services provided by the following are exempt: Technology Business Incubators (TBI) or Science and Technology Entrepreneurship Parks (STEP) or Bio-incubators recognized by the Biotechnology Industry Research Assistance Council (BIRAC), under Department of Biotechnology, Government of India. (w.e.f. 01-Apr-2016) A.4 Abatement for determining the taxable value [Notification No. 26/2012-ST dated 20-Jun-2012 as amended upto 01-Apr-2016] In case of specific services deductions are allowed from gross receipt received from customer to get the taxable service value. This deduction is called abatement in service tax. (Amendments by Notification No. 08/2016-ST dated 01-Mar-2016 w.e.f. 01-Apr-2016 have been marked in Italics) Sl. No. Description of taxable service 2 Transport of goods by rail (other than service specified at Sl. No. 2A below) Value of taxable service Conditions 30% CENVAT credit on inputs and capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. 2A Transport of goods in containers by rail by any person other than Indian Railways 3 Transport of passengers, with or without accompanied belongings by rail 7 Services of goods transport agency (GTA) in relation to transportation of goods other than used household goods 7A Services of goods transport agency in relation to transportation of used household goods. 8 Services provided by a foreman of chit fund in relation to chit 40% CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken. 30% CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken. 30% CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider. 40% CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider. 70% CENVAT credit on inputs, capital goods and input services used for providing the taxable service, has not been taken.
IPCC Service Tax Amendments Applicable for Nov 2016 Exam ST.5 Sl. No. Description of taxable service Value of taxable service Conditions 9 New Para BA inserted in Explanation for Sr. No. 9: For the purposes of exemption at Serial number 9, the amount charged shall be the sum total of the amount charged for the service including the fair market value of all goods (including fuel) and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract. Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles. 10 Transport of goods in a vessel 30% CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken. 11 Services by a tour operator in relation to,- (i) a tour, only for the purpose of arranging or booking accommodation for any person 10% (i) CENVAT credit on inputs, capital goods and input services other than the input service of a tour operator, used for providing the taxable service, has not been taken. (ii) The invoice, bill or challan issued indicates that it is towards the charges for such accommodation. (iii) This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, includes only the service charges for arranging or booking accommodation for any person but does not include the cost of such accommodation. (ii) tours, other than (i) above 30% (i) CENVAT credit on inputs, capital goods and input services other than the input service of a tour operator, used for providing the taxable service, has not been taken. (ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour and the amount charged in the bill is the gross amount charged for such a tour. Effect of amendments w.e.f. 01-Apr-2016: CENVAT Credit on input services shall now be available to all the service providers engaged in: (i) transportation of goods by rail (ii) transportation of passengers by rail (iii) transportation of goods in a vessel Abatement on following services has been reduced from 70% to 60%: (i) transportation of goods by rail by person other than Indian Railways (ii) transportation of used household goods by road Services of foreman of chit fund have been made eligible for abatement of 70% value. In case of renting of motorcab service (Sl. No. 9), some cab operators used to charge separately for the fuel etc. so as to underrate the value of service. Thus, in order to safeguard the interest of revenue, the above explanation has been introduced. The abatement calculation on tour operator services has been rationalized.
IPCC Service Tax Amendments Applicable for Nov 2016 Exam ST.6 A.5 Point of Taxation A.5.1 Threshold Limit for Applicability of Rule 3 to Individuals / Partnership Firm / LLPs / OPC In case of individuals / firms / LLPs / One person Companies (OPC) w.e.f. 01-Apr-2016 whose aggregate value of taxable services provided from one or more premises is 50 lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or to be provided by him up to a total of Rs. 50 lakh in the current financial year as per the due dates w.r.t. the quarter, in which payment is received. Thus, these entities will have the option to pay tax on payment basis and not on billing basis. The facility will be available upto a turnover of Rs. 50 lakh in a financial year provided the taxable turnover did not exceed this limit in the previous financial year. Type of Assessee Individual/Firm/LLP/OPC Other Taxable Turnover in Previous Financial Year < 50,00,000 > 50,00,000 Any Amount Taxability in Current Year Upto 50,00,000 Beyond 50,00,000 Option to pay tax on Receipt Basis As per Rule 3 of POT Rules As per Rule 3 of POT Rules As per Rule 3 of POT Rules As per Rule 3 of POT Rules As per Rule 3 of POT Rules A.5.2 Payment of tax in cases of new services [Rule 5] When a service is taxed for the first time, as it was earlier covered under negative list or exemption notification, in such a situation, no tax shall be payable to the extent mentioned below: Case Treatment Invoice Raised and Payment received before such service become taxable No tax Payment received before such service become taxable but Invoice raised after such service become taxable but within 14 days of the date when the service is taxed for No tax the first time. Any other circumstances Taxable Hence if payment is received after service becomes taxable, even though the provision of service and billing was done earlier, the amount would be liable to service tax. The following explanations have been inserted w.e.f. 01-Mar-2016 by Notification No. 10/2016-ST dated 01-Mar-2016: Explanation 1.- This rule shall apply mutatis mutandis in case of new levy on services. Explanation 2.- New levy or tax shall be payable on all the cases other than specified above. Reason for amendment: With the introduction of Swachch Bharat Cess, there was confusion regarding applicability of service tax and rate of tax on provision of service. Therefore, in order to clear this confusion and to define point of taxation in case of new levy, amendment was made in Rule 5. Accordingly, the provisions of rule 5 shall apply in case of new levy on services.
IPCC Service Tax Amendments Applicable for Nov 2016 Exam ST.7 A.6 Payment of Service Tax A.6.1 Due date of payment of service tax [Rule 6(1) of Service Tax Rules, 1994] a) In case of One Person Companies (OPC) [whose aggregate value of taxable services provided in the previous financial year is Rs. 50 lakh or less] or individuals, proprietary concern, partnership firms (including LLP) or HUF the periodicity of payment is quarterly: (Amended w.e.f. 01-Apr-2016) Quarter in which service is deemed to be provided as per Point of Taxation Rules, 2011 1 st April to 30 th June 5 th July* Due date of payment 1 st July to 30 th September 5 th October* 1 st October to 31 th December 5 th January* 1 st January to 31 st March 31 st March b) In case of other persons (Companies, Trusts etc.) the periodicity of payment is monthly: Month in which service is deemed to be provided as per Point of Taxation Rules, 2011 Each month except March March Due date of payment 5 th of the following month* 31 st March *Note: In case of electronic payment, tax can be deposited by the 6 th instead of 5 th. A.6.2 Service tax liability under Reverse Charge Mechanism [Sec 68(2)] (Notification No. 30/2012 ST dated 20-Jun-2012 as amended upto Notification No. 18/2016-ST dated 1-Mar-2016 applicable w.e.f. 01-Apr-2016) Sr. No. Description of a service % of service tax payable by the person providing service % of service tax payable by the person receiving the service any person liable for paying service tax other than the service provider (1) (2) (3) (4) *1B. Services by a mutual fund agent or distributor, to Nil 100% a mutual fund or asset management company (w.e.f. 1.4.2015) *1C. Services by a selling or marketing agent of lottery Nil 100% tickets in relation to lottery in any manner to a lottery distributor or selling agent of the State Government under the provisions of the Lottery (Regulations) Act, 1998 5. Legal Services by a firm of advocates or an individual advocate other than a senior advocate to any business entity located in the taxable territory Nil 100% Hence, in case of legal services provided by senior advocates, forward charge would be applicable. 6. Services by Government or Local Authority to any business entity located in the taxable territory by way of support services (Refer Note C) (Amendment applicable w.e.f. 01-Apr-2016) Nil 100%
IPCC Service Tax Amendments Applicable for Nov 2016 Exam ST.8 A.7 Records and Returns A.7.1 New Annual Return w.e.f. 01-Apr-2016 Every assessee shall be required to submit an annual return for the FY to which it relates. This will be in addition to the half yearly return in Form ST-3 or ST-3A. The form and manner of the return will be notified by the CBEC. The due date of filing the return would be 30 th November of the succeeding FY. Central Government has the power to exempt an assessee or class of assessee from the requirement of submitting the annual return. If thereturn is filed within the due date, then the assessee may submit a revised return within 1 month from the date of submission of the said annual return. In case of delay in filing the return, the assessee shall pay a late fee of Rs. 100 per day of delay, subject to maximum of Rs. 20,000. A.8 Miscellaneous Clarifications A.8.1 Incentives received by Air Travel Agents from CCRS It is clarified that incentives received by the Air Travel Agents (ATA) from the Companies providing Computer Reservation System (CCRS) are for using the software and platform provided by the CCRS like Galileo, Amadeus, etc. The CCRS are providing certain incentives either for achieving the targeted booking of air tickets or for loyalty for booking of air tickets using their software system. Thus, Service tax is leviable on the service provided to CCRS by the ATA for promoting the service provided by CCRS to Airlines. A.8.2 Service provided by ILMs The Institutes of Language Management ( ILMs ) provides services to the educational institutions, which helps such educational institutions in providing services specified in the Negative List of services. It is clarified that services provided by the ILMs are not eligible for exemption under Section 66D(l) of the Finance Act or under Sl. No. 9 of the Notification No. 25/2012-ST dated 20.06.2012, as they are not providing preschool education or education up to higher secondary school (or equivalent) or education for obtaining a qualification recognized by law. It is the schools/colleges/institutions (in which the students take admissions) which provide such education.