Budget 2015 – increase in service tax rate to 14% notified w.e.f. 1-Jun-2015

May 22, 2015
1 min read

[By Shaleen Shah (Partner), VNCA]

In our Circulars on Budget 2015 as applicable to service tax, in the First Part, we had informed you the changes made effective immediately from 1-Mar-2015 and changes effective from 1-Apr-2015. In the Second Part we informed you the Budget amendments that became effective immediately on enactment of the Finance Bill, 2015 i.e. on 14-May-2015.

Now in a series of Notifications issued by the Finance Ministry, the remaining Budget amendments become effective from 1-Jun-2015.

Following changes are effective from 1-Jun-2015

1. The rate of service tax will be 14% without any cesses w.e.f. 1-Jun-2015.

2. Consequent to the change in service tax rate, the special rates for air travel agent, insurance service, money changing service, service provided by a lottery distributor & selling agent will also change proportionately.

3. Under Rule 6(3) of Cenvat Credit Rules, 2004, where a manufacturer or service provider utilizes Cenvat credit in manufacture/provision of exempted as well as of dutiable goods/services and doesn’t maintain separate account or does not opt for reversal of credit as per Rule 6(3A), he is liable to pay an amount equal to certain percentage of value of exempted goods/services. Earlier this rate was 6% for both exempted goods as well as exempted services. Now w.e.f. 1-Jun-2015, liability for exempted goods manufacturer will remain at 6% whereas, exempted service provider will have to pay at 7%.

4. Till now, access to amusement facilities wasn’t chargeable to service tax being covered under the negative list. Now, consideration charged for access to amusement facilities shall be subjected to service tax w.e.f. 1-Jun-2015. Access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks and theme parks shall now be taxable.

5. Hitherto, admission to any entertainment event was covered under the negative list and hence not taxable. Admission to entertainment event, namely, exhibition of cinematographic film, circus, Government recognized sporting event, dance, theatrical performance including drama and ballet was exempt and shall continue to be fully exempt. Other than the aforesaid entertainment events, w.e.f. 1-Jun-2015 service tax shall be levied on admission to entertainment event of concerts, pageants, musical performances, award functions and sporting events other than the recognized sporting event, if the amount charged is more than Rs.500 for right to admission to such an event.

6. Carrying out an intermediate production process as job work in relation to alcoholic liquor for human consumption shall now be subjected to service tax.

The following budget amendments are not yet effective and will come into effect from a date to be notified –

  • Service Tax on services provided by Government or a local authority to any business entity; and
  • Levy of Swachh Bharat Cess.
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