JULY 16, 2014

By Ashutosh Nath, CA and Pradeep Nainawati, CA

New Taxable Services

THE much awaited Union Budget 2014-15has provided a glimpse of newly formed government policies to revive the Indian economy. Some bold, some popular and some healthy proposals were put across by Hon'ble Minister on all fronts right from social to economic.

While the budget has brought some much needed cheer and boost for individual tax payers, for providers of certain services which were otherwise enjoying exemptions/covered under negative list, it's time to awake and analyze the implications. Service tax net has been broadened to include certain services which are discussed in the coming paragraphs. Post negative list regime,although not many services were left out of service tax net, the negative list has been further narrowed in the budget. Effectively, the recipient of services may have to deepen the hole in their pocket.

Advertisement

Currently, all services for selling of space or time slots for advertisements other than advertisements broadcast by radio or television are covered under Negative list vide Section 66D (g) of the Finance Act, 1994. The advertisements on following are proposed to be brought under taxable net by the Union Budget:

++ Internet website

++ Bill boards

++ Film screen in theatre

++ Building

++ Cell Phone

++ Automated Teller Machines

++ Conveyances

++ Aerial advertising

++ Out-of-home media

++ Tickets

Travelling

Travelling by radio taxi, which was earlier out of the tax purview vide Section 66D (O) (vi), is now proposed to be brought under the tax net. However, the services would be eligible for abatement under Notification 26/2012-ST dated 20 June 2012. Radio taxies are those cabs which have the facility of two way radio communications with central control office and have tracking facility using Global Positioning System (GPS) or General Packet Radio Service (GPRS).Examples of such type of taxies are Meru Cabs, Tab Cab etc.

Further, the service of passenger transportation by contract carriage which is used for purpose other than tourism, conducted tours, charter or hire were earlier exempted from levy of service tax. With effect of the amendment suggested in the budget, only non-air-conditioning contract carriage would enjoy the benefit of said exemption. Further, for air-conditioner contract carriage, all the services provided would be subject to service tax. The service tax will be charged on abated value i.e. 40% of total taxable value. This proposal has come into immediate effect.

Drug Testing and Analysis

The budget has proposed to withdraw exemption provided to services of technical testing or analysis of new drugs, vaccines and herbal remedies on human participant to conduct clinical trial. This exemption is withdrawn with immediate effect.

By virtue of the said amendment, the clinical trials conducted by the Clinical Research Organizations (‘CRO') would no more be exempted from service tax.

We wait to experience the positive impact of such broadening of service tax net.