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Swacch Bharat Cess – Service Tax wef 15 November 2015

Swacch Bharat Cess of 0.5% wef 15th November 2015

The Swacch Bharat Cess was announced in the Budget 2015. However it was not made effective / applicable at that time.

The Budget 2015 (Finance Act, 2015) provided for the levy and collection of the Swacch Bharat Cess at a rate not exceeding 2%. The government has now notified that the Swacch Bharat Cess will be levied at a rate of 0.5% and will be effective from 15 November 2015.

Notification No. 21/2015 has been issued notifying 15th November 2015 as the date from which the Swacch Bharat Cess would be applicable.

Notification No. 22/2015 has been issued which specifies that an exemption has been granted in excess of the Swacch Bharat Cess calculated at 0.5% of the value of taxable services. Effectively, the rate of cess will be 0.5%.

Thus, the Rate of Service Tax increases to 14.5% with effect from 15th November 2015.

Below are some additional points to help you understand the implications better:

  • For services covered by abatement, for example, Goods and Transport Agency (GTA) service where at present the tax is payable at 4.2% (30% of 14%), the new rate of service tax will be 4.35% (30% of 14.5%, and not 4.2%+0.5% = 4.70%). Similarly, for other services covered by abatement, the effective service tax rate will be 14.5% x effective abatement rate under the latest notification/s.
  • In case of works contract, Service Tax is to be applied on the value at the rate of 14.5%. Thus, the effective rate of tax in case of original works will be 5.8% (14.5% * 40%) and in case of other than original works it will be 10.15% (14.5%*70%). Similar, would be for restaurant and outdoor catering services.
  • Swacch Bharat Cess has to be collected and paid separately from service tax and is not subsumed in existing service tax rate. The Swacch Bharat Cess should be be charged separately on the invoice, accounted separately in the books of account and paid separately under separate accounting code (which is soon expected to be notified).
  • If the services provided are covered by mega exemption notification i.e. 25/2012-ST. one does not need to charge only the Swacch Bharat Cess. Similar the Swacch Bharat Cess will not be applicable to the services covered by the negative list.
  • If the service have been provided prior to 15th November 2015 but invoiced on / after 15th November, and no advance has been received, we believe that teh Swacch Bharat Cess should be levied as required under the Point of Taxation Rules.
  • In case of reverse charge services where services have been received prior to 15th November 2015 but the consideration paid post after 15th November 2015, teh Swacch Bharat Cess will have to be paid.
  • We believe that since there has been no amendment to the Cenvat Credit Rules, 2004 regarding availment and utilisation of the Swacch Bharat Cess, credit of this cess is unlikely to be admissible. However, we also do believe that a suitable amendment would be made to the Cenvat Credit Rules, 2004 in due course.
  • Do remember that the Swacch Bharat Cess applicable only to services (and thus Service Tax). It does not apply to excise or customs duties. Thus, manufacturing entities should not charge any extra cess.

Service Tax Changes from 1 June 2015

The new service tax rate of 14% is applicable from 1st June 2015 (per Notification No. 14/2015-ST dated 19th May 2015).

  • Ensure that all your bills and invoices from that date on has the higher rate of service tax.
  • Also ensure that you DO NOT charge the Education and Higher Education Cess (2% and 1%) as the new service tax rate is inclusive of these.
  • You do not need to show the Cess in your bills / invoices after 1st June 2015.

Changes (in Rules 6 of Service Tax Rules, 1994) for change in abatement rates of Service Tax for: Air Travel Agent, Life Insurance Business, Foreign Exchange Brokers and Distributor & Selling Agent of Lottery will also be applicable from 1st June 2015 (Notification No. 15/2015-ST dated 19th May 2015).

  • In addition following changes are also applicable from 1st June 2015:
  • Service Tax on amusement facilities and Entertainment Events. Exemption will be available for following services where tickets are priced at Rs.500 or less per person.
  • Service Tax on Liquor Job Work

Date of applicability of following provisions is yet to be notified:

  • Expansion of scope of services provided by Government and Local Authority; and
  • Applicability of ‘Swachh Bharat Cess’

Do refer to our earlier note on Service Tax Changes from 1st April 2015 either in our earlier newsletter or on our blog.

Service Tax Changes from 1st April 2015

The recent Union Budget on 28th February 2015 brought with it some changes to Service Tax. While some of the changes are indeed applicable from 1st April 2015, others are not. We are detailing below each of these for your ready reference.

Increase in Rate from 12.36% to 14.00%

  • NOT effective from 1st April 2015.
  • It shall be effective from the date it is notified in the gazette (we shall keep you informed)
  • Till then charge 12.36% as earlier

Swach Bharat Cess of 2%

  • NOT effective from 1st April 2015.
  • It shall be effective from the date it is notified in the gazette (we shall keep you informed)

Changes in the Reverse Charge Mechanism

All these are effective from 1st April 2015 and base your bills, calculation and payments accordingly

  • Goods Transport – Abatement Rate changed to 30% from 25%. In a nutshell, pay service tax at 3.708% instead of the earlier 3.09%.
  • Manpower Supply / Security Services – 100% to be paid by service receiver (earlier 75% was paid by service receiver and 25% by service provider). Thus, service receiver will now have to pay service tax at full 12.36%.

For these two changes (above) ensure that, for the services availed in 2014-15, the service provider’s invoice is dated 31 March 2015.

  • For the following services the existing rates will continue. The new rates will be effective only after the date is notified.
  1. Air Travel Agent
  2. Life Insurance
  3. Money Changing Service
  4. Lottery

Exemptions Withdrawn

The following services will now be liable for Service Tax as the exemptions provided till now have been withdrawn

  • Services provided to the Government / local authority / governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of (a) civil structure for use other than for commerce, industry, etc., (b) structure for use as educational / clinical / art or cultural establishment, and (c) residential complex for self-use / use of employees

Thus exemption for historical monuments, etc., canals, dams, etc. and water supply, water treatment and sewage disposal continues

  • Construction, erection, commissioning or installation of original works pertaining to an airport or port
  • Transportation of food stuff by rail / vessels / road. Thus, services by way of transportation of foodstuff except milk, salt and food grain (including flour, pulses and rice) would be liable to service tax.
  • Services provided by mutual fund agent to a mutual fund / asset management company and selling / marketing agent of lottery ticket to a distributor. These will be now chargeable to service tax under the Reverse Charge Mechanism, i.e. the Mutual Fund / AMC will have to pay the service tax.

New Exemptions

The following services will NOT be liable to service tax:

  • Transportation of a patient to / from a clinical establishment by a clinical establishment by all ambulance services
  • Service provided by a Common Effluent Treatment Plant operator for treatment of effluent
  • Services of pre-conditioning / pre-cooling / ripening / waxing / retail packing / labeling of fruits & vegetables
  • Admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve
    Goods transport agency service for transport of export goods by road from the place of removal to a land customs station (LCS). Note that transport of export goods by road from place of removal to an inland container depot / container freight station / port / airport is already exempt.

Changes to Claiming CENVAT Credit

One can now claim credit (set-off) of service tax paid under reverse charge by service receiver after making the payment of service tax and even if value of service is not paid.
Earlier, the set-off could be claimed only if the provider of service was paid his/her dues.

Your feedback would be of immense help in improving our blog and newsletter. Is this too short/long? Too verbose? Just email us, we would love to hear from you.

No TDS on Service Tax Component

Clarification in the Latest Circular from CBDT

The latest circular from CBDT (Central Board of Direct Taxes) clarifies, based on a High Court decision, that service need not be deducted on the Service Tax component.

Thus, your cllients should now pay you higher to that extent. Correspondlngly, you need to deduct lower TDS to a similar extent.

An example:

  Earlier NOW
Head % Rs Rs
Amount Billed 10,000 10,000
Service Tax 12.36% 1,236 1,236
Gross Amount 11,236 11,236
T.D.S. 10.00% 1,124 1,000
Net Amount Receivable / Pauable 10,112 10,236

Ensure you follow this and also make sure your clients pay you accordingly. The link to the circular is here.

Note that, for now, this is applicable only if Service Tax is charged seprately for professional / techincal services.

Service Tax VCES Forms

Service Tax Voluntary Compliance Scheme – Forms Notified

The Service Tax authorities have notified the forms and details for the Service Tax Voluntary Compliance Encouragement Scheme.

The key details to be provided are, other than Name, Address, ST No., etc. are:

  • Amount of Service Tax unpaid as on 31st December 2012
  1. Higher Education Cess
  2. Education Cess
  3. Service Tax
  • The above calculation is to be done using the same method as used for the relevant period service tax returns.

Do have these details ready to ensure we can start filing at the earliest. The relevant forms in soft copy will be sent later.

ST Due Date for H2FY13 extended

ST Due Date for Oct-12 to Mar-13 extended

The due date for filing the service tax returns for the second half of Financial Year 2013 (October 2012 to March 2013) has been extended to 31st August 2013. The form required to be filed for this return will be available around 31st July 2013, as per the latest ST Notification.

The said notification is available here: http://www.servicetax.gov.in/notifications/notfns-2013/stodr-03-2013.htm

Do revert to me if you need any further clarifications.

ST Return Due Date Postponed

Service Tax Return Due Jul-12 to Sept-12 extended to 30th April 2013

Service Tax Return (ST 3) for the period 1st July – 30th September, 2012 is now available in a modified format for e-filing in ACES.CBEC has extended the last date of e-filing of the new Service Tax Return (ST-3) for the period July-September 2012, from 15th April to 30th April 2013.

Service Tax Notifications dated 19 April 2006

The effective service tax rate of 12.24% is applicable from 18th April 2006, since that is the day on which the Finance Bill 2006 was assented to by the Hon. President.

A gist of the slew of service tax notifications issued today (though these are dated 19th April 2006) is here. All these notifications are effective from 19th April, 2006.

  1. The rate of interest for delayed service tax payment is 13% p.a. [Notification No. 8/2006]
  2. Service tax to be payable, even if any taxable service is provided from any other country, but is received in India [Notification No. 9/2006]. The clause, prior to this amendment, did not specify the place of providing or receiving the taxable service. It refered to the person providing the service.
  3. Notification No. 10/2006 amends the definition of ‘Person Liable for Paying Service Tax’ in the Service Tax Rules. The receipient of a taxable service which is received in India from any person from any other country, irrespective of from where the service is provided. The earlier definition made the receipent liable to pay service tax only if the provider was a non-resident or from outside India and did not have any office in India. This notification also removes the valuation methods for computing the service tax payable by clearing and forwarding agents and insurance agents.
  4. A new set of Rules (yes, yet another set of rules) called the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 are notified vide Notification No. 11/2006. Under these rules, input, input service, output service are defined to have the same meaning as in the CENVAT Credit Rules, 2004. The list of taxable services provided from outside India and received in India is mentioned therein; and includes some services in relation to immovable property situated in India, and some other services. There are a few exceptions also specified. These rules require the receipent of the services to register and pay service tax. It is clarified that the taxable services provided from outside India and received in India shall not be treated as output services for availing credit of excise duty / service tax paid on any input / input service. Note that where a service is provided partly outside India and partly in India, will be treated as a service provided in india.
  5. And yet more more set of rules … this time they are to be known as Service Tax (Determination of Value) Rules, 2006. These rules specify the method to value taxable services where the consideration is not wholly / partly received in money, i.e. by valuing the service at an equivalent gross amount charged by the service provided for similar services in the ordinary course of business; failing which the service provider is to determine the equivalent money value of such consideration which cannot be less than the cost of provision of the service. These rules also specify that the authority and powers of the Central Excise Officer to reject the valuation, and the procedure for the same. These rules, along with illustrations and examples, clarifies the inclusion and exclusion of certain costs from the value of service provided. [Notification No. 12/2006].
  6. Notification No. 13/2006 amends the Export of Service Rules, 2005. This amendment specifies the what is export of taxable service and clarifies that any service that is partly performed outside India will be deemed to be performed outside India. The provision of any service shall be treated as export of service when the service is delivered outside India and used outside India; and the payment is received by the service provider in convertible foreign exchange.
  7. And finally, Notification No. 14/2006 rescinds two earlier notifications; namely, notification no 22/2005 [service provided to an individual by a service provider, where the services are received and consumed outside India, not in the course business] and notification no 25/2005 [specified services provided by a non-resident person outside India and consumed outside India, in the course of sailing of a ship].

Related Links: Service Tax Website, Notifications Issued in 2006, CENVAT Credit Rules 2004

Online Applications to DGFT

The Directorate General of Foreign Trade (DGFT) has vide Policy Circular No. 48 (RE-2005)/2004-2009 dated 10th Febraury 2006 has made the system for remitting licence fee through Electronic Fund Transfer (EFT) optional till 31st March 2006.

Exporter can remit the licence fees either through EFT payment gateway on the DGFT Website (http://www.dgft.gov.in ) or submit the licence fees through a Treasure Challan / Demand Draft.

It is also clarified that mandatory electronic submission with digital signatures is being continued for the following categories of applications: Advance Licence (excluding Para 4.7 and DFRC applications), Advance Licence for Annual Requirement, EPCG Licence and DEPB Licence (for EDI shipping bills). Applications with digital signatures and EFT payment will be eligible for a 50% fee concession, while applications with only digital signatures will be eligible for a 25% fee concession (and licence fees being paid through Treasury Challan / Demand Draft).

The earlier system of filing ECOM applications on the DGFT website for manual shipping bills from notified EDI ports is re-introduced. Hence, no manual DEPB applications will be allowed. Similarly, for DEPB claims based on manual DEPB shipping bills from non-EDI ports, only ECOM applications on DGFT website will be allowed; and no manual DEPB appplications will be allowed. Thus, an exporter will have to submit an ECOM application on the DGFT website with a digital signature and has the option to pay the licence fee either through EFT or Treasury Challan / Demand Draft. (More details of the documents and procedures is specified in the notification).

This is effective from 1st April, 2006. Trade and industry has been requested to have all necessary formalities for operationalising this completed before that.

Quick Links:
Policy Circular No. 48(RE-2005)/2004-2009, Policy Circular No. 44 (RE-2005)/2004-2009, Policy Circular No.   28  (RE-2005)/2004-2009, Policy Circular No.   21  (RE-2005)/2004-2009.