Our Honourable Finance Minister of India, Shri Arun Jateiy ji presented the Finance Bill 2016 in the parliament today.
A total no. of 67 changes including introduction of Annual Return under Service Tax & CENVAT Credit Rules have been introduced in this Finance Bill 2016 & Notifications issued thereafter with respect to Indirect Taxes,
We have covered 24 major changes in form of a short video clipping on Finance Bill 2016 by CA Atul Kumar Gupta.
The Finance Bill, 2016 presented by the Finance Minister, Mr. Arun Jaitely on 29th February, 2016 has brought with it a whole new set of changes in the indirect taxes. The basic purview taken by the government behind rationalizing the transformations is to bring the current taxing provisions in line with the proposed plan of Goods and Service Tax.
Below is gist of major proposed and fallout amendments in the Service Tax:
1. Changes applicable w.e.f. 1st March, 2016
- Restoration of Exemption on service provided to the Government, a Local Authority or a government Authority be way of construction of i) civil work or any other original work for use other than commerce, industry or any business or profession, ii) structure meant for use as (a) educational, b) clinical, c) art or cultural establishment, iii) residential complex for self-use or employees or specified person in explanation 1 of clause 44 of Section 65B of the Act.
- Restoration of exemption from service tax on service by way of construction, erection of original works pertaining to an airport, port.
- Withdrawal of exemption on service to monorail or metro in respect of contract before entered into an before 01.03.2016.
- Exemption to service by way of construction, in respect of
i) Housing under housing for all mission/pradhan mantra awas yojana:
ii) Low cost houses up to a carpet area of 60 square meters in a housing project under an housing scheme of the state government:
- Exemption to specified service provided by the Indian Institute of Management.
- Notification to ensure that Information Technology Software is subjected to either central excise duty or service tax.
- Insertion of explanation in Rule 5 of Point of Taxation of Rules, 2011.
- CENVAT Credit is being allowed to service provider providing services by way of transportation of goods by a vessel from India to abroad.
- Notification No. 27/2012 CE(NT) dated is amended to specify relevant date for refund.
- Service provided by container train operators.
2. Changes applicable w.e.f. 1st April, 2016
- Exemption on services by senior advocate to other advocate or to a law firm is being withdrawn. Levy under forward charge.
- Exemption on service of person represented on arbitral tribunal to an arbitral tribunal is being withdrawn.
- Exemption from service of transport of passengers by ropeway, cable car or aerial tramway is being withdrawn.
- Rationalization of abatement rate and conditions;
· Tour operator services solely of arranging or booking accommodation for any person in relation to a tour-90%, abatement can’t be claimed where the invoice does not include the cost of such transportation.
· Tour Operator other than specified above rationalized from 75%/60% to 70%
· Service provided by foreman to a chit fund-30%
· Condition for abatement on value of renting of motor can service, that the cost of fuel should be included in the consideration.
· Uniform abatement rate for construction of complex, building, civil structure or part thereof.
· CENVAT Credit of input services is available where abatement availed on transport of passengers by rail.
· Abatement on transport of goods by rail reduced from 70% to 60%, credit of input services is being prescribed for transport of goods in containers by rail by any person other Indian Railway.
· CENVAT Credit of input service is available where abatement is availed on transport of goods by vessel.
· Abatement on transport of goods by road reduced from 75% to 70%.
- The benefit of quarterly payment of service tax being extended to OPC and HUF and payment on receipt basis
- Rule 2(1)(d)(i) (D)(II) of Service Tax Rules, 1994,modifies as an individual advocate other than senior advocate.
- Invoice issued by service provider for removal of inputs and capital goods shall be valid documents.
- To give option to banking company, a financial institution including non-banking financial company for CENVAT Credit reversal under sub-rule(1),(2) and (3) of the Rule 6 along with 6(3B) of the CENVAT Credit Rules, 2004.
- Reversal of CENVAT Credit of inputs/inputs services which have been commonly in a taxable output service as well as an activity which is not a service.
- Rule 14(2) of CENVAT Credit Rules,2004 which specifies the FIFO method for utilization of credit is being omitted.
- In sub-rule (1) of Rule 6 of CENVAT Credit Rules, 2004 explanation 3 is inserted which defines that exempted service includes an activity which is not a service.
3. Changes in the Finance Act, 1994 that get incorporated on enactment of the Finance Bill, 2016
- Right to use the radio frequency spectrum and subsequent transfers in section 66E as a declared service.
- Section 67A is proposed to amended to obtain specific rule making power in respect of Point of Taxation Rules, 2011.
- Section 73 proposed to be amended to increase time limit from 18 months to thirty months.
- Section 75 proposed to be amended so that a higher rate of interest would apply to a person who has collected the amount of service tax from the service recipient but not deposited the same with the Central Government.
- Service Tax exemption to canal, dam or other irrigation works exempted from the 1st July 2012 to 29.01.2014.
- Approved vocational educational course is to be incorporated in the general exemption no. 25/2012.
- Rationalization of rate of interest in case where is service tax is collected and not credited in Govt. account and others.
With effect from 1st day of June, 2016 after enactment of the Finance Bill, 2016 in respect of each provision
- Krishi Kalyan Cess.
- Negative List entry that covers “service of transportation of passengers, with or without accompanied belongings, by a stage carriage” is to be omitted.
- Negative List that covers services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance is to be omitted.
- Exemption to transportation of passengers by a stage carriage other than air conditioned stage carriage is to be exempted.
- Services by an aircraft will continue to be outside service tax net by way of exemption through notification.