Change in Rate of Service Tax w.e.f. 01.06.2015

  1. Vide Notification No 14/2015 dated 19.05.2015, Rate of service tax is going to change as 14% , against the Existing rate of 12.36% , with effect from 01.06.2015. The specific issues to be considered on change of rate may be understand as :-

a)Earlier rate of 12.36% was composed of 12% service tax, .24% of Education cess and .12% of Higher secondary Education Cess. With effect 01.06.2015, a consolidated rate of 14% is applicable as service tax, with no bifurcation for education / higher education cess etc.

b)As per the Rule 4 of Point of Taxation Rules, 2011,Whenever, there is change in rate of tax, the applicability of rate of tax depends upon on three factors, i.e.,

  1. Date on which Services got completed
  2. Date on which Invoice is issued by the Service Provider
  3. Date on which Payment is received by the Service Provider

c)To understand in layman language, we may interpret the rule for applicability of rate of tax as “Majority Rule”. To explain, we need to verify the dates of occurrence of three components , based on which rate of tax is to be determined. Rate of Tax applicable shall be 12.36% , if date of two components falls prior to 31.05.2015 and the rate of tax shall be 14% where the date of two components falls after 01.06.2015. To explain , it we may refer the table ,as under, explaining the rate of tax applicability under different circumstances.

Date of Completion of Service / Date of Invoice issued / Date of Receipt of Payment / Rate to be considered.
On or Before 31.05.2015 / On or after 01.06.2015 / On or after 01.06.2015 / 14%
On or Before 31.05.2015 / On or Before 31.05.2015 / On or after 01.06.2015 / 12.36%
On or Before 31.05.2015 / On or after 01.06.2015 / On or Before 31.05.2015 / 12.36%
On or after 01.06.2015 / On or Before 31.05.2015 / On or after 01.06.2015 / 14%
On or after 01.06.2015 / On or Before 31.05.2015 / On or Before 31.05.2015 / 12.36%
On or after 01.06.2015 / On or after 01.06.2015 / On or Before 31.05.2015 / 14%

d)Rule 7 of the Point of Taxation Rules, 2011, the point of taxation in respect of the persons required to pay tax as recipients of service under the rules made in this regard in respect of services notified under sub-section (2) of section 68 of the Act, shall be the date on which payment is made.

  1. Vide No Notification No.15/2015-ST dated 19.05.2015, services on which special rate of service tax are applicable has also been changed, as detailed hereunder :-

Air Travel Agent:

In the case of / Current Rate / New Rate
Domestic bookings of passage for travel by air / 0.6% of the basic fare / 0.7% of the basic fare
International bookings of passage for travel by air / 1.2% of the basic fare / 1.4% of the basic fare

Insurance Service:

Period / Current Rate / New Rate
First year / 3% of the gross amount of premium charged / 3.5% of the gross amount of premium charged
Subsequent Year / 1.5% of the gross amount of premium charged / 1.75% of the gross amount of premium charged

Money Changing:

For an amount / Current Rate / New Rate
Upto Rs.100,000 / 0.12% of the gross amount of currency exchanged or Rs.30 whichever is higher / 0.14% of the gross amount of currency exchanged or Rs.35 whichever is higher
Exceeding Rs.1,00,000 and upto Rs.10, 00, 000 / Rs.120 + 0.06% of the (gross amount of currency exchanged-Rs.1,00,000) / Rs.140 + 0.07% of the (gross amount of currency exchanged-Rs.1,00,000)
Exceeding Rs.10,00,000 / Rs.660 + 0.012% of the (gross amount of currency exchanged-Rs.10,00,000) or Rs.6,000/- whichever is lower / Rs.770 + 0.014% of the (gross amount of currency exchanged -Rs.10,00,000) or Rs.7,000/- whichever is lower

Service provided by lottery distributor and selling agent:

Particulars / Current Rate / New Rate
Where the guaranteed lottery prize payout is > 80% / Rs.7000/- on every Rs.10 Lakh (or part of Rs.10 Lakh) of aggregate face value of lottery tickets printed by the organising state for a draw. / Rs.8,200/- on every Rs.10 Lakh (or part of Rs.10 Lakh) of aggregate face value of lottery tickets printed by the organising state for a draw.
Where the guaranteed lottery prize payout is < 80% / Rs.11000/- on every Rs.10 Lakh (or part of Rs.10 Lakh) of aggregate face value of lottery tickets printed by the organising state for a draw. / Rs.12800/- on every Rs.10 Lakh (or part of Rs.10 Lakh) of aggregate face value of lottery tickets printed by the organising state for a draw.
  1. The Rate of Abetments allowed as pper Notification No 26/2012 ,as amended upto 01.06.2015 are as under :-

Sl.
No. / Description of taxable
service / Percent-
age / Conditions
(1) / (2) / (3) / (4)
1 / Services in relation to financial leasing including hire purchase / 10 / Nil.
2 / Transport of goods by rail / 30 / "CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.";
3 / Transport of passengers, withor without accompanied belongings by rail / 30 / “Same as above”
4 / Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises ( including hotel, convention center, club,pandal,shamianaor any other place, specially arranged for organizing a function) together with renting of such premises / 70 / (i) CENVAT credit on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
5 / Transport of passengers by air, with or without accompanied belongings in
(i)economy class
(ii)other than economy class / 40
60 / CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.”;
6 / Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes. / 60 / Same as above.
7 / Services of goods transport agency in relation to transportation of goods. / 30 / CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider under the provisions of the CENVAT Credit Rules, 2004.
8 / Omitted
9 / Renting of Motor cab / 40 / (i)CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004;
(ii) CENVAT credit on input service of renting of motorcab has been taken under the provisions of the CENVAT Credit Rules, 2004, in the following manner:
(a) Full CENVAT credit of such input service received from a person who is paying service tax on forty percent of the value; or
(b) Up to forty percent CENVAT credit of such input service received from a person who is paying service tax on full value; (iii) CENVAT credit on input services other than those specified in (ii) above, has not been taken under the provisions of the CENVAT Credit Rules, 2004.”
9A / Transport of passengers, with or without accompanied belongings, by a contract carriage other than motorcab / 40 / CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.”;
10 / Transport of goods in a vessel / 30 / Same as above.
11 / Servicesby a tour operator in relation to,-
(i)a package tour / 25 / (i) CENVAT credit on inputs, capital goods and “input services other than the input service of a tour Operator, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour.
(ii)a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour / 10 / (i) CENVAT credit on inputs, capital goods and input services other than the input service of a tour Operator, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii) The invoice, bill orchallanissued indicates that it is towards the charges for such accommodation.
(iii) This exemption shall not apply in such cases where the invoice, bill orchallanissued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.
(iii)anyservices other than specified at (i) and (ii) above. / 40 / (i) CENVAT credit on inputs, capital goods and input services other than the input service of a tour Operator, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii)The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.
12. / Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, except where entire consideration is received after issuance of completion certificate by the competent authority,-
(a) for a residential unit satisfying both the following conditions, namely:–
(i) the carpet area of the unit is less than 2000 square feet; and
(ii) the amount charged for the unit is less than rupees one crore;
(b) for other than the (a) above. / 25
30 / (i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004;
(ii) The value of land is included in the amount charged from the service receiver.”
  1. The extent of service tax payable by the person whoprovides the service and the person who receives the service for the taxable services specified in 68(2), as per the Notification No 30/2012,as amended till date shall be as specified in the following Table, namely:-

Sl.No. / Description of a service / Percentage ofservice tax payable by the person providing service / “Percentage of service tax payable by any person liable for paying service tax other than the service provider”;
(1) / (2) / (3) / (4)
1 / in respect ofservicesprovided or agreed to be providedby an insurance agent to any person carrying on insurance business / Nil / 100%
1A / in respect of services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company / Nil / 100%
1B / in respect of services provided or agreed to be provided by a mutual fund agent or distributor, to a mutual fund or asset management company / Nil / 100%
1C / in respect of service provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent / Nil / 100%
2 / in respectofservicesprovided or agreed to be providedby a goods transport agency in respect oftransportationof goods by road / Nil / 100%
3 / in respectofservicesprovided or agreed to be providedby way of sponsorship / Nil / 100%
4 / in respectofservicesprovided or agreed to be providedby an arbitral tribunal / Nil / 100%
5 / in respectofservicesprovided or agreed to be providedby individual advocate or a firm of advocates by way of legal services / Nil / 100%
5A / “in respect of services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate”; / Nil / 100%
6 / in respectofservicesprovided or agreed to be providedby Government or local authority by way of support services excluding,-(1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994 / Nil / 100%
7 / (a)inrespectofservicesprovided or agreed to be providedby way of renting of amotor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business
(b)inrespectofservicesprovided or agreed to be providedby way of renting of amotor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business / Nil
50% / 100 %
50%
8. / in respectofservicesprovided or agreed to be providedby way of supply of manpower for any purpose or security services / Nil / 100%
9. / in respectofservicesprovided or agreed to be provided in service portion in executionof works contract / 50% / 50%
10 / in respectofany taxable servicesprovided or agreed to be providedby any person who is located in a non-taxable territory and received by any person located in the taxable territory / Nil / 100%
11 / in respect of any service provided or agreed to be provided by a person involving an aggregator in any manner / Nil / 100%

CA Gurjit Singh Anand

FCA, ACS,ACMA

Partner : G S S V & Associates

Chartered Accountants

4B/20, Tilak Nagar, New Delhi-110018

Phone : 98102-33029