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15 May 2015

Finance Bill, 2015 receives President Assent

Finance Bill, 2015 has got President Assent on 14th May, 2015 and has become Finance Act, 2015. As you know, Finance Bill 2015 has proposed lot of changes in Service tax provisions, applicable with effect from various dates.

Now with the enactment of Finance Bill, 2015, following changes are applicable:

1)    Government defined in Service Tax Law:

“Government means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder” 

2)    Amendment in definition of ‘service’ i.e. Section 65B(44):

Following activities has been specifically excluded from the term ‘transaction in money’ or we can say following activities has been specifically included in definition of ‘service’:-

  1. a)Services by chit fund foreman by way of conducting a chit; and
  2. b)Services in relation to promotion, marketing, organizing, selling of lottery or facilitating in organizing a lottery of any kind

3)    Clarification on classification of input services used for providing output services:

Section 66F(1) provides that an input service shall be classified independent to the nature of main services, for the provision of which it is utilized. Finance Bill 2015 has clarified this through following illustration.

“As illustrated, reference to service provided by the Reserve Bank of India (RBI), in section 66D (b) does not include any agency service provided by other banks to RBI, as such agency services are input services used by RBI for provision of its main service. Accordingly, banks providing agency service to or in relation to services of RBI, are liable to pay Service tax on the agency services so provided by virtue of the existing section 66F (1).”   

4)    Definition of ‘consideration’ has been amended to include reimbursement of expenses in value of taxable service.

5)    Recovery and Penalty provisions revised:

  1. Section 73 (1B) has been inserted to apply in cases where Service tax has been declared in Service tax returns but has not been paid. In such cases, recovery can be made under Section 87 of the Act without issuance of any show cause notice. Corresponding changes has been made in Service tax Rules 1994 by omission of Rule 6(6A).
  2. Section 73 (4A) which provided for reduced penalty to the extent of twenty five per cent in cases of fraud etc. before issuance of show cause notice has been omitted.
  3. Revision of rates of penalty under Section 76 and Section 78.
  4. Section 80 relating to exemption from levy of penalty in certain cases has been omitted. Accordingly, penalty provisions has been made mandatory.
  5. Transition provision has been inserted for penalty

6)    Delegation of appellate powers:

Appellate powers under Section 86 of the Act, against the order of Commissioner (Appeals) in respect of rebate matters, have been entrusted to Central Government in terms of Section 35 EE of the Central Excise Act 1944.

Pending appeal before Tribunal in rebate matters, filed between 28th May 2012 and date of assent of President on Finance Bill 2015 shall be transferred to Central Government for disposal.

Here it is worthwhile to mention that following significant changes will become applicable from a date yet to be notified:

  1. a)Change in effective rate of Service Tax from 12.36% to 14%;
  2. b)Service Tax on amusement facilities and entertainment events;
  3. c)Service Tax on Liquor Job Work;
  4. d)Change in taxability of services provided by Government.