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Service Tax Changes

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Service Tax changes applicable from 1.4.2015

Please ensure that Rate of Service tax has not changed – it will remain to be 12.36% and NOT 14%, until notification issued.

A) Exemptions withdrawn

1. Goods Transport services

(a) by rail or water in respect of following products which were exempt earlier will now be taxable: Fruits, Vegetables & Eggs

Hence, Goods transport services by rail or water will not be taxable in case of Milk, Salt and foodgrain including flours, pulses and rice.

(b) by road in respect of following products which were exempt earlier will now be taxable: Tea, coffee, Jaggery, Sugar, Milk Products and edible oil

Hence, GTA (road) will not be taxable in case of Milk, Salt and foodgrain including flours, pulses and rice ONLY – rest all will be taxable.

2.  Services provided by a mutual fund agent to a mutual fund or assets management company, distributor to a mutual fund or AMC, selling or marketing agent of lottery ticket to a distributor. Service Tax on these services shall be levied on reverse charge basis.

3. Following services provided to government, local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of:

i. a civil structure meant for use other than for commerce, industry, etc.
ii. a structure meant predominantly for use as an educational, clinical, or an art or cultural establishment.
iii. a residential complex predominantly meant for self-use or the use of their employees.

4. Exemption to services provided by way of construction, erection, commissioning or installation of original works pertaining to an airport or port

5. Exemption to services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theater, will be limited only to such cases where amount charged is upto Rs. 1,00,000 for a performance. It is further clarified that the exemption shall not apply if services provided by artist as a brand ambassador;

6. Departmentally run public telephone, Guaranteed public telephone operating only local calls; Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued.

B) New Exemptions introduced

1. Goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is exempt from Service Tax vide notification No. 31/12-ST dated 20.6.2012. Scope of this exemption is being widened to exempt such services when provided for transport of export goods by road from the place of removal to a land customs station (LCS).

2. Any service provided by way of transportation of a patient to and from a clinical establishment by a clinical establishment is exempt from Service Tax. The scope of this exemption is being widened to include all ambulance services. 
Life insurance service provided by way of Varishtha Pension Bima Yojna is being exempted.

3. Service provided by a Common Effluent Treatment Plant operator for treatment of effluent is being exempted.

4. Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables is being exempted.

5. Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve is being exempted. These services when provided by the Government or local authority are already covered by the Negative List.

6. Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of it’s members is being exempted.

C) Reverse Charge Mechanism

1. Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism;

2. Services provided by mutual fund agents, mutual fund distributors and agents of lottery distributor are being brought under reverse charge consequent to withdrawal of the exemption on such services.

D) Rationalisation of Abatement

1. Transport for Goods

At present, service tax is payable on 30% of the value of rail transport for goods and passengers, 25% of the value of goods transport by road provided by a goods transport agency and 40% for goods transport by vessels. The conditions also vary.

A uniform abatement is now being prescribed for transport by rail, road and vessel. Service Tax shall be payable on 30% of the value of such services subject to a uniform condition of non-availment of CENVAT Credit on inputs, capital goods and input services.

2. Air Transport of Passangers

At present, Service Tax is payable on 40% of the value of air transport of passenger for economy as well as higher classes, e.g. business class. The abatement for classes other than economy is being reduced and service tax would be payable on 60% of the value of such higher classes. 

3. Abatement is being withdrawn from services provided in relation to chit fund business consequently Service Tax shall be paid on full consideration received by way of fee, commission or any such amount.

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