Today we discuss on important amendment made in service tax in budget 2016 that are useful for a common man. what are the various changes made in service tax and effective from which date. how it will impact the person like addition of krishi kalyan cess , change in interest rate etc.
Union Budget 2016 on Service tax
- No change in the Rate of Service Tax and Swachh Bharat Cess.
- No change in the Threshold Exemption limit.
- Additional cess called Krishi Kalyan Cess @ 0.5% on value of services to be levied w.e.f. 1st June,2016. Effective rate of Service Tax now 15%.
- Interest rates for delayed payment of service tax rationalized and reduced.
- Monetary limit for Arrest and Prosecution increased to Rs.2 Crores.
- Annual Return to be filed by certain Service Tax Assessee in addition to two Half Yearly returns, resulting into total three returns to be filed.
- CENVAT Credit Rules rationalized in case of provider of taxable and exempted services.
- One Person Company and HUF can pay service tax on quarterly basis.
- Introduction of “ Indirect Tax Dispute Resolution Scheme”
- Some Legal Service provided by Senior Advocate removed from RCM.
- Service provided by Mutual Fund Agents/Distributor are now taxable under Forward Charge.
Introduction of New Levy “Krishi Kalyan Cess”
Applicable date of c – 1st June, 2016)
- A new levy called “Krishi Kalyan Cess (KKC)” is proposed to be imposed from 1st June, 2016 on all or any of the taxable services @ 0.5% of total taxable value (and not the service tax) to be payable in addition to Service tax and SBC, resulting into the Total rate of 15% on the Value of Taxable services as mentioned below.
|Type of service Tax||Rate upto
31st May 2016
1St June 2016
|Basic Service Tax||14.00%||14.00%|
|Swachh Bharat Cess||0.50%||0.50%|
|Krishi Kalyan Cess||–||0.50%|
This is very important whether 15.00%
This is very important whether Krishi kalyan cess is cenvatable or not, If cenvatable we can take credit for non cenvatable no need to take credit. In Swachh bharat cess no cenvat can be taken.
FM in budget speech indicated that KKC is Cenvatable.
Refund of CENVAT Credit
Notification No. 27/2012 – C.E. (N.T.) is being amended so as to provide that time limit for filing application for refund of Cenvat Credit under Rule 5 of the Cenvat Credit Rules, 2004, in case of export of services, shall be 1 year from the date of –
(a) receipt of payment in convertible foreign exchange, where provision of service has been completed prior to receipt of such payment; or
(b) the date of issue of invoice, where payment for the service has been received in advance prior to the date of issue of the invoice.
Legal Services and Arbitration :
Legal services provided by Senior Advocate are being made liable to Service Tax on forward charge and remove from reverse charge So now only Legal services by a firm of advocates or an individual advocate other than senior advocate will be covered under Reverse Charge Mechanism.
The services provided by “Performing Artist”
The threshold exemption limit of consideration charged for services provided by a performing artist in folk or classical art forms of music, dance or theatre, is being increased from Rs 1 lakh to Rs 1.5 lakh per performance.
Changes in Tour Operator Services
In cases where the Tour Operator is providing services solely of arranging or booking accommodation for any person in relation to a tour, abatement of 90% is available with specified conditions.
However, this abatement of 90% cannot be claimed where tour operators has send invoice only for his services and not included the accommodation charges made to hotels.There is no change in the rate of abatement or the condition required to be fulfilled for claiming the said abatement.
- Abatement rates in respect of services by a Tour Operator in relation to a tour other than mentioned above, is being rationalized from 75% and 60% to 70%. Consequently, the definition of “package tour” as provided in the relevant notification is being omitted.
- At present, there is abatement of 60% on the gross value of Renting Of Motor-Cab Services, provided no cenvat credit has been taken. It is being made clear now that cost of fuel etc should be included in the consideration charged for providing renting of motor-cab services for availing the abatement.
- At present, two rates of abatement have been prescribed for services of construction of complex, building, civil structure, or a part thereof,-
- 75% of the amount charged in case of a residential unit having carpet area of less than 2000 square feet and costing less than Rs 1 crore, and
- 70% of the amount charged in case of other than (a) above, both subject to fulfillment of certain conditions prescribed therein.
A uniform abatement at the rate of 70% is now being prescribed for services of construction of complex, building, civil structure, or a part thereof, subject to fulfillment of the existing conditions.
In a nutshell, abatement on low end residential complex is reduced from 75% to 70% and common middle class shall have to shell out more to purchase a under construction flat.
Furnishing of “Annual Return” in Service tax
W.e.f. Financial year 2016-17 a new concept of furnishing of “Annual Return” is proposed to be introduced in service tax where specified assessee (to be notified by central government) shall submit an annual return for every financial year in such a form as specified by the central government. Such annual return shall be required to be filed in addition to the existing system of Half Yearly returns.
Key features of the proposed Annual return are as under;
- Annual Return to be filed by all specified assessee in addition to existing returns.
- Due date of filing annual Return will be 30th November of succeeding financial year.
- Late fees of Rs. 100/- per day upto maximum of Rs. 20,000/- for delayed filing of Annual Return.
- No revision of Belated Annual Return (i.e. annual return filed on or before due date can only be revised) once within one month from the date of submission of said annual returns.
Change in Interest Rate for Delayed Payments
Interest rates on delayed payment of duty/tax across all indirect taxes is proposed to be made uniform at 15%, except in case of service tax collected but not deposited with the Central Government, in which case the rate of interest will be 24% from the date on which the service tax payment became due.
In case of assessees, whose value of taxable services in the preceding year/years covered by the notice is less than Rs. 60 Lakh, the rate of interest on delayed payment of service tax will be 12%.(Notification Nos.13 and 14/2016-ST dated 1st March,2016 refer)
|Rationalization of Interest on Delayed Payment|
|if Turnover less than 60 lakh in preceding FY||if Turnover less than 60 lakh in preceding FY|
|Up to 6 Months||18%||15%||– if Service Tax collected but not deposited: 24%||– if Service Tax collected but not deposited: 21%|
|6 Months to 1 Year||24%||21%|
|More Than 1 year||30%||27%||– Any other case :15%||– Any other case :12%|