The rate of Service Tax is being increased from 12.36% to 14%. The new Service Tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015. On 14th May 2015, the Finance Bill got the assent of President of India. The new service tax rate is around the corner, it may happen anytime now, so, gear up to embrace higher rate!
Enabling provision for levy of “Swachh Bharat Cess”: This cess shall be levied from such date as may be notified by the Central Government after the enactment of the Finance Bill, 2015. The details of coverage of this Cess would be notified in due course. This notification is also expected anytime soon.
Changes in the Finance Act, 1994 on enactment of the Finance Bill 2015 (means applicable from 14th May 2015)
- Insertion of new definition to specify the term “government” [section 65 B (26A)] Government means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder
- Insertion of a new Explanation in the definition of service [section 65 B(44)] An Explanation is being inserted in the definition of “service” to specifically state the intention of the legislature to levy Service Tax on activities undertaken by chit fund foremen in relation to chit, and lottery distributors and selling agents, in relation to lotteries [section 65 B (44)]. Further, an explanation is being added in entry (i) of section 66D to specifically state that these activities are not covered by the Negative List
- Insertion of an illustration in sub-section (1) of section 66F(1) to explain the scope of this subsection: As illustrated, reference to service provided by the Reserve Bank of India (RBI), in section 66D (b) does not include any agency service provided by other banks to RBI, as such agency services are input services used by RBI for provision of its main service. Accordingly, banks providing agency service to or in relation to services of RBI, are liable to pay Service tax on the agency services so provided by virtue of the existing section 66F (1)
- Amendment in the definition of the terms “consideration” in section 67: Definition of ‘consideration’ has been amended to include reimbursement of expenses in value of taxable service
- Amendments in sections 73, 76 and 78. Section 73 (1B) has been inserted to apply in cases where Service tax has been declared in Service tax returns but has not been paid. In such cases, recovery can be made under Section 87 of the Act without issuance of any show cause notice. Corresponding changes has been made in Service tax Rules 1994 by omission of Rule 6(6A). Section 73 (4A) which provided for reduced penalty to the extent of twenty five per cent in cases of fraud etc. before issuance of show cause notice has been omitted
- Insertion of transition provision by way of section 78B
- Omitting section 80: that provided for waiver of penalty in certain circumstances, is being omitted
- Amendments in section 86
- Amendments in the provisions relating to Settlement Commission
- Omitting of rule 6 (6A) of the Service Tax Rules