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Exemptions Withdrawn

The following services will now be liable for Service Tax as the exemptions provided till now have been withdrawn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

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