Saturday, March 1, 2008

SERVICE TAX CHANGES IN BUDGET 2008


on Saturday, March 1, 2008

We try to cover major changes in service tax in Budget Presented on by Finance Minister on 29/2/2008.There is no change in service tax rate and it remains 12% plus education cess 2% and Higher Secondary Cess 1% .Important changes in service tax are given hereunder.

Service tax Good News

  1. The annual threshold limit of service tax exemption for small service providers has been increased from the present level of Rs.8 lakh to Rs.10 lakh with effect from 01.04.2008, provided that the aggregate value of taxable services rendered by such provider of taxable service from one or more premises, does not exceed Rs.10 lakh in the preceding financial year.(Notification No.08/2008-Service Tax).The above limit for service provider wise not for each service.Suppose If a person provide 2 or more services then the limit will be total for all the services provided by the persons.
  2. Consequent upon increase in threshold limit of exemption from Rs.8 lakh to Rs.10 lakh,with effect from 01.04.2008( notification No.26/2005-Service Tax dated 07.06.05 and notification No.27/2005-Service Tax dated 07.06.05 have been amended to raise the limit for obtaining service tax registration from Rs.7 lakh to Rs.9 lakh.)(Notification No.09/2008-Service Tax)(Notification No.10/2008-Service Tax) (Notification No.11/2008-Service Tax)
  3. Exemption from service tax is being provided with effect from 01.03.02008 to the taxable service provided
    • by a person, located outside India,
    • in relation to booking of an accommodation for a customer, located outside India,
    • in a hotel located in India.(Notification No.14/2008-Service Tax).
    • Earlier the tax was applicable for booking for booking for Indian Hotels done by agent outside India.but Tax from outside India entity are difficult to collect and only leads to litigations and dispute.This is a welcome steps.
  4. Exemption from service tax is being provided to the extent of 75% of the gross amount charged as freight for services provided by a goods transport agency (GTA) in relation to transport of goods by road in a goods carriage, unconditionally.(Notification No.13/2008-Service Tax)
      • Earlier the exemption was given conditionally with a condition that transport company has not taken cenvat credit ,moreover deptt has issued instructions to his staff to issue notice to service receiver who has taken the benefit of 75 % abatement on goods transport services while paying the service tax.As you aware of the clause that In case of Goods Transport services ,consignor ,consignee will pay service tax directly not goods transport agency ,if he falls in certain type of person category.
      • This abatement will apply from 01.03.2008
      • Goods Transport Agency Services excluded from the definition of “Output Services” to claim cenvat credit.means no output services credit will be available on goods transport agency now onwards.
OTHER CHANGES IN SERVICE TAX


New services Added :

  1. information technology software service,
  2. management of investment under Unit Linked Insurance Plan (ULIP)service,
  3. stock exchange service,
  4. recognised association or registered association commonly known as commodity exchange service,
  5. processing and clearinghouse service,
  6. supply of tangible goods for use service;
  7. internet telecommunication service.
Note :some of the services was included earlier in some other heads but now in depended heads have been given to them.scope of some services also extended.

A very good compilation of all the service tax amendments in budget has been created by CA Atul Kumar Gupta .you can download it from below link

Service Tax amendmend in budget (PDF)



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