Budget 2015 – Service Tax Amendments effective from 1-Apr-2015

[By Shaleen Shah (Partner), VNCA]

Several amendments pertaining to Service Tax were proposed in the Finance Bill, 2015 presented by Hon’ble Finance Minister Shri Arun Jaitley. It may be noted that changes being made in the Budget are coming into effect on various dates.

Few changes were made effective immediately from 1-Mar-2015; few changes are effective from 1-Apr-2015; certain amendments will get incorporated in the Finance Act,1994 immediately on enactment of the Finance Bill, 2015; and certain amendments including the change in service tax rate from 12.36% to 14% will come into effect from a date to be notified by the Government in this regard after the enactment of the Finance Bill, 2015. Levy of Swachh Bharat Cess on all or any of taxable services that will come into effect from a date to be notified.

Following changes were made effective immediately from 1-Mar-2015

1. The Budget has recognised the concept of ‘aggregator model’. The aggregator or marketplace model is new in India and until now there has been a lack of clarity about what tax rules must apply. Service provided under the aggregator model, will now be taxable under service tax. The term aggregator is now clearly defined under the Service Tax Rules. An ‘aggregator’ means a person, who owns and manages a Web-based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator. For example a cab aggregator like Ola, Uber, TaxiForSure and Meru Cabs don’t own cars or even employ drivers; they simply connect users with drivers, using technology. Other examples of aggregator model are travel portals, food portals, shopping portals, etc.

In respect of any services provided under the aggregator model, the aggregator or any of his representatives located in India is liable for service tax. If the aggregator does not have any presence or representative in India, any agent appointed by the aggregator is liable to pay tax on behalf of the aggregator. Further, in respect of any service provided by a person involving an aggregator in any manner, the liability to pay service tax is of the aggregator or his agent under reverse charge (100%) mechanism.

2. The procedure, documentation required & time limit for service tax registration are prescribed vide Order No.1/2015-ST.

3. A provision for issuing digitally signed invoices is introduced along with the option of maintaining of records in electronic form and their authentication by means of digital signatures. The conditions and procedure in this regard shall be specified by the CBEC.

4. The facility of Advance Ruling is being extended to all resident firms by specifying such firms under section 96A (b)(iii) of the Finance Act, 1994. The term ‘firm’ is defined for the said purpose.

5. A time limit of six months from the date of issue of any invoice/stipulated documents was introduced w.e.f. 1-9-2014 for availing CENVAT Credit. This time limit is now increased to one year.

6. Other amendments are made in the provisions relating to CENVAT Credit on inputs & capital goods sent to jobworker directly or otherwise.

7. Notification No. 42/12-ST dated 29.6.2012 regarding exemption to the service provided by a commission agent located outside India to an exporter located in India is rescinded. This exemption had become redundant in view of the amendments made in law in the previous budget in the definition of “intermediary