Admin[By Shaleen Shah (Partner), VNCA]
The Union Budget 2016 presented by Hon’ble Finance Minister, Shri Arun Jaitley was passed by both houses of the Parliament and received the Presidential assent and thus stands enacted on 14-May-2016.
Service Tax Changes proposed in the Union Budget-2016 are coming into effect on various dates, as indicated below:
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Changes effective immediately from 1-Mar-2016;
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Changes effective from 1-Apr-2016;
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Amendments effective from date of enactment of the Finance Bill, 2016 i.e. 14-May-2016;
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Amendments effective from 1-Jun-2016 after the enactment of the Finance Bill, 2016; and
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Levy of Krishi Kalyan Cess on all taxable services effective from 1st June 2016.
CHANGES EFFECTIVE FROM 1-MAR-2016
1) New Exemption is provided to educational programmes (except executive development programmes) provided by the Indian Institutes of Management (IIM).
2) Restoration of exemption – Exemption was withdrawn last year w.e.f. 1-Apr-2015 on services provided to the Government, a local authority or a governmental authority by way of construction, erection, repair, renovation, etc. of certain specified types of projects/works [Entry Nos.12 (a), (c) & (f) and No.14(a) of Mega Exemption Notification]. The exemption is restored subject to following conditions:
(a) the services are pertain to a contract which was entered into before 1-Mar-2015;
(b) stamp duty is paid on such contracts, wherever applicable; and
(c) exemption is restored upto 31-Mar-2020.
(Services provided during the interim period from 1-Apr-2015 to 29-Feb-2016 under such contracts is exempted vide new sections 102 & 103 being inserted in the Act which, shall be effective from date of enactment. It is also provided that in the interim period, where tax was paid but not collected by the service provider, refund application to be filed within 6 months from the date of enactment of Finance Bill, 2016.)
3) New Exemption is provided to services by way of construction, repair, renovation, etc. of original works pertaining to specified low cost housing projects covered under Housing For All (Urban) Mission / Pradhan Mantri Awas Yojana (PMAY) / low cost housing scheme of the State Government.
4) Amendments are made to make Central Excise duty/CVD and Service Tax on IT Software mutually exclusive. Excise duty/CVD is payable on Packaged Software. Such packaged software are now exempt from service tax subject to the following conditions:
(a) such software is recorded on a media which is notified under Chapter 85 of CETA;
(b) Retail Sale Price (RSP) is required to be declared on such package under Legal Metrology Act, 2009;
(c) appropriate Excise duty / CVD is assessed as per law and paid on it; and
(d) there is a declaration on the invoice that no amount in excess of declared RSP has been recovered from the customer.
In case of customised software recorded on a media and on which RSP is not required to be declared, the exemption from service tax will be to the extent of value of the media alongwith freight & insurance.
5) Exemption is withdrawn on construction, etc. of original works pertaining to monorail or metro on contracts entered into on or after 1-Mar-2016.
6) Method to determine the time limit of 1 year to file application for refund of CENVAT Credit in case of export of services, is now separately provided.
CHANGES EFFECTIVE FROM 1-APR-2016
1) The optional effective rate of tax on single premium annuity policies is reduced from 3.5% to 1.4%.
2) Exemption is withdrawn to services offered by Senior Advocates to an advocate or partnership firm of advocates providing legal service and representation on Arbitral Tribunals. Moreover, Service Tax on legal services by senior advocates to a business entity which was hitherto taxable under Reverse Charge Mechanism (RCM) will now have to be discharged by senior advocate under forward charge. As expected, the lawyers were up in arms, and the provisions were immediately challenged in different courts. Gujarat, Delhi & Allahabad High Courts have already granted stay on the amendments.
3) Service provided by a mutual fund agent/distributor, to a mutual fund or asset management company is removed from RCM and hence, now service tax would be payable by such mutual fund agents/distributors themselves under forward charge.
4) Exemption is withdrawn to transport of Passengers by way of Ropeway, Cable Car or Aerial Tramway.
5) Till 31-Mar-2016, only ‘support service’ provided by government or local authority to a business entity was liable to tax under reverse charge mechanism. Now, the phrase ‘support service’ is substituted by ‘any service’. A business entity having turnover upto Rs.10 Lacs in preceding financial year continues to be exempt. Certain services provided by Government or a local authority are exempted through the Mega Exemption Notification. CBEC has also issued a Circular No. 192/02/2016-ST dtd. 13-Apr-2016 clarifying various aspects pertaining to taxability of such services.
6) New exemption is granted to following services:
a) Life insurance service provided by way of annuity under national pension system regulated by PFRDA.
b) General insurance service provided under 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.
c) Services provided by EPFO to persons covered by Employees’ Provident Funds and Miscellaneous Provisions Act,1952.
d) Services provided by IRDA to insurer.
e) Services provided by SEBI by way of protecting the interests of the investors and to promote, develop and regulate securities market.
f) Services provided by National Centre for Cold Chain Development by way of cold chain knowledge dissemination.
g) Services provided by assessing bodies empanelled centrally by director general of training ministry of skill generation and entrepreneurship for the work of assessment under Skill Development Initiative.
h) Skill or vocational training provided by project implementation partners under Deen Dayal Upadhyay Grameen Kaushalya Yojana.
7) Exemption limit for services by a performing artist in folk or classical art forms of music, dance or theatre is enhanced from Rs.1 Lac to Rs.1.5 Lacs per performance.
8) Exemption is extended to bio-incubators recognized by the Biotechnology Industry Research Assistance Council.
9) Abatement on services of transport of goods by rail by Indian Railways continues @ 70% whereas for transport of goods in containers by rail by any person other than India Railways, the abatement is reduced to 60%.
10) The Abatement condition of non-availment of CENVAT Credit for transport of goods & passengers by rail is partially relaxed. Now CENVAT credit of input services shall be allowed even on abated value.
11) Till 31-Mar-2016, abatement of 70% was available to services of transport of goods by road (GTA). The said abatement is reduced to 60% in respect of services of transport of used household goods.
12) An abatement of 30% is provided to services provided by foreman of chit fund in relation to chit subject to condition of non-availment of CENVAT Credit.
13) Till 31-Mar-2016, abatement of 70% was available to services of transport of goods in a vessel subject to condition of non-availment of CENVAT Credit. Now CENVAT credit of input services shall be allowed even on abated value.
14) In relation to services by a tour operator, abatement of 90% in respect of services of arranging or booking accommodation is continued. However, the abatement in respect of other services is now unified at 70%. Consequently abatement of 70% will be available on services of “package tour
