a. Service Tax on Chit Fund
In the case of Delhi Chit Fund Association - 2013-TIOL-331-HC-DEL-ST the Hon'ble High Court held that in a chit business, the subscription is tendered in any one of the forms of 'money' as defined in section 65B(33). It would, therefore, be a transaction in money. So considered, the transaction would fall within the exclusionary part of the definition of the word 'service' as being merely a transaction in money and thus, not liable to service tax. Even the SLP against the High Court order was dismissed by Supreme Court in UoI v Delhi Chit Fund Association - 2014-TIOL-23-SC-ST.
Now, Explanation 2 to section 65B (44) has been amended to, inter-alia, include any activity carried out, for a consideration by a foreman of chit fund for conducting or organising a chit in any manner. This, abatement appears to be introduced to overcome the decision of in the case of Delhi Chit Fund (supra).
b. Service tax on 'reimbursement' of expenses
In the case of Intercontinental Consultants And Technocrats Pvt Ltd - 2012-TIOL-966-HC-DEL-ST wherein the Delhi High Court held inclusion of reimbursable costs as ultra vires Section 66 and 67 of the Act. Now, in to overcome aforesaid judgment, by way of Explanation to Section 67 it is clarified that 'consideration' includes 'any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service'. as may be prescribed now been specifically provided in the section that reimbursement of expenses, incurred for providing taxable service by service provider, will chargeable to service tax
It is pertinent to note that 'Pure agent' reimbursement (subject to fulfillment of prescribed conditions under per Rule 5(2) of STR) will continue to be excluded from value of taxable service.
c. Definition of 'Government' introduced
The term Government was not defined in the Finance Act, 1994 and it led to interpretational issues. Thus, now, to address this anomaly the term 'Government' is defined under section 65B (26A).
d. Recovery of service tax without issue of Show Cause Notice
A new sub clause (1A) has been inserted under Section 73 which provides for recovery of the Service Tax amount self-assessed and declared in the return but not paid, without issuance of show cause notice.
e. Rationalisation of penalty under section 76Penalties in cases where fraud or collusion or willful misstatement etc is not involved would be as under-
i. Penalty not to exceed 10% of service tax amount involved in such casesii. No penalty is to be paid if Service Tax and interest is paid within 30 days of issuance of notice under section 73 (1) i.e. within 30 days of issuance of show cause noticeiii. A reduced penalty equal to 25% of the penalty imposed by the Central Excise officer by way of an order is to be paid if the Service Tax, interest and reduced penalty is paid within 30 days of such order
iv. If the Service Tax amount gets reduced in any appellate proceeding, benefit 25% of penalty imposed shall be admissible if service tax, interest and reduced penalty is paid within 30 days of such appellate order
f. Rationalisation of penalty under section 78Penalties in cases where fraud or collusion or willful misstatement etc is involved would be as under-
i. Penalty shall be 100% of service tax amount involved in such cases ii. A reduced penalty equal to 15% of the Service Tax amount is to be paid if Service Tax, interest and reduced penalty is paid within 30 days of service of notice in this regard iii. A reduced penalty equal to 25% of the service tax amount, determined, is to be paid if the service tax, interest and reduced penalty is paid within 30 days of such order
iv. If the Service Tax amount gets reduced in any appellant proceeding and benefit of 25% penalty shall be admissible if Service Tax, interest and reduced penalty is paid within 30 days of such appellate order
g. Transitional provisions section 78B
Section 78B provides that amended provisions of section 76 and section 78 shall apply to cases where either no notice is served, or notice is served under subsection (1) of section 73 or proviso thereto but no order has been issued under sub-section (2) of section 73, before the date of enactment of the Finance Bill, 2015
In respect of cases covered by section 73(4A) (i.e. issue being identified during the course of any audit, investigation or verification), if no notice is served, or notice is served under sub-section (1) of section 73 or proviso thereto but no order has been issued under sub-section (2) of section 73, before the date of enactment of the Finance Bill, 2015, penalty shall not exceed 50% of the Service Tax amount.
h. Waiver of penalty omitted
Section 80 provides for waiver of penalty if the assessee proves that there was reasonable cause for the said failure. Now, this provision is proposed to be omitted.
i. Services provided by Government to business entity
Earlier, 'support services' by Government or a local authority provided to business entities were liable to service tax (in the hands of recipient of service). The term 'support service' was defined.
Now, the term "support service" [section 65 B (49)] is being omitted. Thus, in-effect all services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax.
j. Illustration inserted in section 66F
Section 66F (1) prescribes that unless other wise specified, reference to a service shall not include reference to any input service used for providing such services. Anillustration is being incorporated in this section to clarify the scope of this provision. This being a clarificatory change may have retrospective effect.
a. Rate of service tax to be 14%
At present, service tax is charged at the rate of 12.36%. However, in order to prepare service consumers for GST, rate is being proposed to be increased to 14% and the cesses are proposed to be subsumed.
b. Introduction of Swachh Bharat Cess
An enabling provision is being incorporated in the Finance Bill, 2015 to empower the Central Government to impose a Swachh Bharat Cess. This cess will be levied on the value of all or any of the taxable services at a rate of 2%. This will further hike up the rate of service tax upto 16%.
c. Admission to entertainment event or access to amusement facility will be liable to tax
At present, services by way of admission to entertainment event or access to amusement facility are not liable to tax as these services are covered under Negative List [section 66D (j)].
Now, these services are proposed to be omitted from section 66D and covered under Not. No. 25/2012-ST. However, few services such as service by way of admission to entertainment event of concerts, pageants, musical performances concerts, award functions and sporting events other than the recognized sporting event, if the amount charged is more than Rs. 500 would be liable to service tax. Services by way of admission, irrespective of amount being charged, to entertainment event, namely, exhibition of cinematographic film, circus, recognized sporting event, dance, theatrical performance including drama and ballet, shall be continued, through the route of exemption (refer Sr. No. 47 to Not. No. 25/2012-ST).
[Refer Not. No. 6/2015-ST]d. Process amounting to manufacture of alcoholic liquor liable to service tax
The entry in the Negative List that covers service by way of any process amounting to manufacture or production of goods [section 66 D (f)] is being pruned to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption. Consequently, Service Tax shall belevied on contract manufacturing / job work for production of potable liquor for a consideration.
Further, Sr. No. 30 of Not. No. 25/2012-ST is amended to exclude intermediate production of alcoholic liquor for human consumption from its ambit.
e. Amendments in alternative rates of service tax
In respect of services like money changing service, service provided by air travel agent, insurance service and service provided by lottery distributor and selling agent, the service provider has been allowed to pay service tax at an alternative rate (as prescribed under rule 6 (7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994).
Consequent to the upward revision in Service Tax rate, the said alternative rates shall is also being revised proportionately. Amendments to this effect have been proposed in the Service Tax Rules (vide Not. No. 5/2015-ST).
