Union budget 14-15 service tax

Union Budget 2014-2015
Service tax amendments
By
Right advice at right time....

Synopsis…
• Rationalised tax base
– Scope, of exemption given to services provided to educational institutions,
restricted
– Exemption limited only to selling of space for advertisement in print media
– Recovery enabled from successor in case of change in ownership by way
of transfer, sale etc.
– Radio taxis covered under ST net with abatement benefit
– Technical testing & analysis services with respect to clinical trials made
taxable
– Deemed valuation for specified works contract increased fro, 60% to 70%
• Reliefs granted
– Exemption granted to operator of common bio-medical waste treatment
facility
– Exemption to Dharamshalas/Ashrams etc. provided tariff of 1 unit per day
is less than Rs. 1,000/-
– Exemption introduced for transportation by rail, vessel and road (GTA) of
Organic manure and Cotton
7/15/2014 GSC Intime Services Pvt. Ltd. 2

…Synopsis…
• Reliefs granted
– CENVAT Credit of input services received from tour operators available to
tour operators with the benefit of abatement
– CENVAT Credit of services covered under full RCM available on payment of
ST
– Advance ruling may be obtained by resident Pvt. Ltd. Cos.
– Procedural reliefs granted to SEZs
• Compliance enhancements
– Time limit introduced for availment of CENVAT Credit of inputs and input
services
– Information returns to be filed by specified persons
– Payment mandatory through internet banking
– Services provided by director to all body corporates now covered under
full RCM
– Introduction of full RCM on services of recovery agents

…Synopsis
• Clarificatory amendments
– Place of removal defined under CENVAT Credit Rules, 2004
• Streamlining procedural aspects
– Interest for late payment of ST increased maximum upto 30%
– Restriction on transfer of CENVAT Credit by LTUs
– Mandatory pre-deposits of 7.5% or 10% based on the level of litigation
– No waiver from penalties in case of assessees having mala fide
intentions even if true and complete records available
• Other Amendments…

Selling of space for Advertisement…
Background • Advertisement in print media was specifically excluded from
service tax net and print media was also defined prior to
negative list of services
• With effect from 1st July, 2012, negative list of services (Section
66D (g)) excludes services of selling of space or time slots for
advertisements other than advertisements broadcast by radio or
television from Service tax net
Current
Scenario
• Selling of space for advertisements in radio or television is
taxable
• Selling of space for advertisements in print media is covered in
the scope of negative list of services. However, print media is not
defined in Finance Act, 1994
Changes in Law
& its effective
date
• It is proposed to substitute Section 66D (g) to limit exclusion
only to selling of space for advertisements in print media…

…Selling of space for Advertisement…
Changes in Law
& its effective
date
• …Print media is proposed to be defined under Section 66D (39a)
as was defined prior to introduction of negative list of services as
under:
“print media” means —
(i) ‘‘book’’ as defined in sub-section (1) of section 1 of the Press and
Registration of Books Act, 1867, but does not include business
directories, yellow pages and trade catalogues which are primarily
meant for commercial purposes;
(ii) ‘‘newspaper’’ as defined in sub-section (1) of section 1 of the
Press and Registration of Books Act, 1867
• Section 1 (1) of the Press & Registration of Books Act, 1867:
o “Book" includes every volume, part of division of a volume, and
pamphlet, in any language, and every sheet of music, map, chart
of plan separately printed
o “Newspaper" means any printed periodical work containing
public news or comments on public new
• Changes to be effective from notified date after Finance Bill,
2014 receives assent of the President

…Selling of space for Advertisement
Impact • Selling of space other than print media such as advertisement
in internet websites, film screens in theatres, conveyances,
buildings, cell phones, ATMs, tickets, commercial publications,
aerial advertisement etc. are proposed to be covered under
Service tax net
• To remove ambiguity, print media is defined specifically

Penalties to be levied for all mala fide cases
Background Assessees, having mala fide intention to evade Service tax but who
have made true and complete details of transactions, are not penalised
if the assessee proves that there was reasonable cause for failure
Current
Scenario
• In case the assessee has intention to evade Service tax, penalty upto
100% of Service tax liability is leviable under Section 78. In case, true
and complete details of transactions are available in specified
records, penalty is reduced to 50% of Service tax liability
• Vide Section 80, in such mala fide cases where true and complete
details of transactions are available, if it is proved that there was
reasonable cause for failure, powers have been given to central
excise officers to waive penalties
Changes in
Law & its
effective
date
• It is proposed to amend Section 80 to remove the waiver of
penalties in mala fide cases even if true and complete records are
available
• Changes to be effective from the date Finance Bill, 2014 receives
assent of the President
Impact Assessees having mala fide intentions are proposed to be penalised
without giving benefit of waiver of penalties even if true and
complete records are available

Search & Seizure
Background Search & Seizure is not allowed to be undertaken by Central Excise
Officer below the rank of Superintendent of Central Excise
Current
Scenario
Joint Commissioner is vested with power to conduct search and seizure
and also to authorise any Superintendent of Central Excise to conduct
search and seizure vide Section 82 (1)
Changes in
Law & its
effective
date
• Section 82 (1) is substituted to align it with Central Excise Laws. Now,
Joint Commissioner or Additional Commissioner of Central Excise or
any other notified Central Excise Officer, who has reason to believe
that any documents, books or things, which would be useful or
relevant to Service tax proceedings, are secreted in any place, may
authorise in writing any Central Excise Officer for search & seizure or
may conduct search & seizure on his own
Impact It is proposed that now any Central Excise Officer may be authorised
for conducting search and seizure

Adoption of Section 15A & 15B of CE Act– Information return
to be filed by specified persons…
Background Provision for submission of information return to CE authorities
Current
Scenario
In CE Act, except assessee no other person is statutorily required to
submit the return/details to Central Excise Department
Changes in Law
& its effective
date
A new Section 15A(1) has been inserted which requires any person
as listed below to furnish an information return:
a. an assessee; or
b. a local authority or other public body or association;
c. any authority of the State Government responsible for the
collection of value added tax or sales tax; or
d. an income tax authority appointed under the provisions of the
Income-tax Act, 1961; or
e. a banking company within the meaning of clause (a) of section
45A of the Reserve Bank of India Act, 1934; or

…Adoption of Section 15A & 15B of CE Act– Information
return to be filed by specified persons…
Changes in Law
& its effective
date
f. a State Electricity Board; or an electricity distribution or
transmission licensee under the Electricity Act, 2003, or any
other entity entrusted, as the case may be, with such functions
by the Central Government or the State Government; or
g. the Registrar or Sub-Registrar appointed under section 6 of the
Registration Act, 1908; or
h. a Registrar within the meaning of the Companies Act, 2013; or
i. the registering authority empowered to register motor vehicles
under Chapter IV of the Motor Vehicles Act, 1988; or
j. the Collector referred to in clause (c) of section 3 of the Right to
Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013; or
k. the recognised stock exchange referred to in clause (f) of
section 2 of the Securities Contracts (Regulation) Act, 1956; or
l. a depository referred to in clause (e) of sub-section (1) of
section 2 of the Depositories Act, 1996; or
m. an officer of the Reserve Bank of India, constituted under
section 3 of the Reserve Bank of India Act, 1934

…Adoption of Section 15A & 15B of CE Act– Information
return to be filed by specified persons
Changes in Law
& its effective
date
• The authorities will also be empowered to issue a notice for
delay in submission of information if the same is not submitted
in 90 days
• Section 15B prescribes penalty, which would be 100 rupees each
day
Impact This will pave way for exchange of information between relevant
authorities for detection of tax evasion, if any

Substitution of Section 35F– Mandatory pre-deposit for stay…
Background Section 35F of the CE Act which is also applicable to Service tax
provisions, provides for deposit of tax, interest and penalty pending
appeal
Current
Scenario
• The said section requires pre-deposit of tax along with interest
and penalty demanded for filing an appeal. And in certain cases,
if appellate authority is of opinion that such pre-deposit would
cause undue hardship to the applicant, may dispense with the
pre-deposit
Changes in Law
& its effective
date
• The existing section is proposed to be substituted with a new
provisions which provides for compulsory of deposit of 7.5% of
total duty demanded or penalty imposed or both in case of the
First Appeal. And a deposit of 10% in case of the Second Appeal
• Since Stay concept is proposed to be removed, consequentially,
Fees payable for Stay Application is also proposed to be removed
Date of Effect: From the date of enactment of Finance (No.2) Bill,
2014

…Substitution of Section 35F– Mandatory pre-deposit for stay
Impact • Substantial time of CESTAT may be saved in view of removal of
discretion of pre-deposit amount.
• However, honest assessees would face undue hardship due to
such mandatory requirement of pre-deposits

Recovery from successor
Current
Scenario
Section 87 provides for modes of recovery of Service tax dues by
Service tax authorities. However, there is no provision to recover
dues from successor
Changes in Law
& its effective
date
• It is proposed to introduce proviso to Section 87 (c) so that CE
Officer empowered by CBEC after receiving written approval
from Commissioner of CE may recover pending dues from sale of
all goods in custody or possession of successor
Impact In the case of acquisition, the acquirer will have to be more
cautious in respect of Service tax liability of the predecessor

Operator of common bio-medical Waste Treatment Facility
Background Medical services are already exempted from Service tax
Current
Scenario
Services provided by operator of common bio-medical waste
treatment facility are covered under Service tax net
Changes in Law
& its effective
date
• Now, services provided by operator of common bio-medical
waste treatment facility to clinical establishment by way of
treatment or disposal of bio-medical waste or the processes
incidental thereto are exempted from Service tax (Sr. No 2B of
Not. No. 25/2012-CE dated 20th June, 2012)
• “Biomedical waste is waste that is either liable to decay or
potentially infectious”
• Bio-medical waste generally generated at hospitals, clinics etc.
• Exemption is effective from 11th July, 2014
Impact Cost of medical services to come down to some extent

Technical testing & analysis services with respect to clinical
trials…
Background Technical testing and analysis services provided by Clinical Research
Organization approved to conduct clinical trials by the Drugs
Controller General of India, in relation to testing and analysis of
newly developed drugs, including vaccines and herbal remedies, on
human participants so as to ascertain the safety and efficacy of
such drugs on human participants, were exempt from Service tax
prior to negative list of services vide Notification No. 11/2007-ST
dated 1st March, 2007
Current
Scenario
Technical testing and analysis services with respect to such newly
developed drugs is covered under Mega Exemption at present (Sr.
No. 7 of Not. No. 25/2012-CE dated 20th June, 2012)
Changes in Law
& its effective
date
The said exemption is omitted with effect from 11th July, 2014

…Technical testing & analysis services with respect to clinical
trials
Impact •Technical testing and analysis services conducted on human
beings will be taxable
•These services are likely to be availed by drugs manufacturing
companies whon may be liable to pay Central Excise on their
production and therefore, may claim CENVAT credit

Educational Institutions…
Background • Education Sector is excluded from Service tax net either by way
of negative list of services or by way of exemptions
Current
Scenario
• Certain services provided by educational institutions such as pre-
school education; education upto higher secondary school;
certified courses; approved vocational courses etc. are covered
under negative list of services (Rule 66D (l))
• Renting and auxiliary educational Services provided to
educational institutions are exempted from Service tax (Sr. No. 9
of Not. No. 25/2012-ST dated 20th June, 2012)
• …

…Educational Institutions…
Current
Scenario
• …
• Auxiliary educational services are defined as under:
• “auxiliary educational services” means any services relating to
imparting any skill, knowledge, education or development of
course content or any other knowledge – enhancement activity,
whether for the students or the faculty, or any other services
which educational institutions ordinarily carry out themselves
but may obtain as outsourced services from any other person,
including services relating to admission to such institution,
conduct of examination, catering for the students under any
mid-day meals scheme sponsored by Government, or
transportation of students, faculty or staff of such institution”…

…Educational Institutions…
Changes in Law
& its effective
date
• Educational Institution is defined to mean Educational
Institutions covered under negative list of services
• Concept of auxiliary educational services removed and only
following services provided to educational institution are
exempted henceforth:
o Transportation of students, faculty and staff
o Catering, including any mid-day meals scheme sponsored by the
Government
o Security or cleaning or house-keeping services performed in
such educational institution
o Services relating to admission to, or conduct of examination by,
such institution
• Exemption given to renting of immovable property to an
Educational Institution is removed
• The amendment is effective from 11th July, 2014

…Educational Institutions
Impact • Scope of exemption to auxiliary educational services provided
to educational institution is narrowed down to specified
services and specified Institutions only. Therefore, Service tax
leviable on various activities such as development of course
content, training faculties, etc.
• Renting of immovable property to educational institution
would also be now leviable to Service tax

Dharmashalas, Ashrams, etc.
Background Renting of commercial places such as hotels, guest houses etc. upto
specified limit are exempted from Service tax
Current
Scenario
At present, services by way of renting of hotels, inns, guest houses,
clubs, campsites or other commercial places meant for residential
or lodging purposes having declared tariff of 1 unit below Rs.
1,000/- per day are exempted from Service tax
Changes in Law
& its effective
date
• Services by hotels, inns, guest houses, clubs and campsites
having tariff below Rs. 1,000/- per day, by whatever name called,
are exempted henceforth
Impact • There was confusion prevailing in industry that whether
Dharmashalas and Ashrams which are not commercial places
are covered under exemption
• Now, with prospective effect, Dharamshalas and Ashrams are
allowed to take exemption

Organic manure
Background Exemption was provided with respect to transportation of chemical
fertilizer by rail, vessel and road
Changes in Law
& its effective
date
• Now, transportation of organic manure is also exempted
Impact Organic manure is brought at par with chemical fertilizers and
accordingly, transportation services by rail, vessel and road will be
exempt henceforth

Cotton
Background Exemption was provided with respect to transportation of
agricultural produce by rail, vessel and road (GTA) and also with
respect to loading, unloading, packing, storage, warehousing etc. of
rice
Current
Scenario
• Transportation services by rail, vessels and road (GTA) with
respect to agricultural produce are exempted from Service tax
vide Sr. No. 20 & 21 of Not. No. 25/2012-ST dated 20th June, 2012
• Loading, unloading, packing, storage or warehousing of rice are
exempted with effect from 17th February, 2014 (Sr. No. 40 of Not.
No. 25/2012-ST dated 20th June, 2012)
Changes in
Law & its
effective date
• Now, transportation, loading, unloading, packing, storage or
warehousing of cotton is also exempted from Service tax levy
Impact Cotton is brought at par with agricultural produce and accordingly,
services of transportation by rail, vessel and road (GTA), loading,
unloading, packing, storage or warehousing of ginned as well as
baled cotton is exempted

Services to Government, Local Authority or Governmental
authority
Background Services provided to Government, Local Authority or Governmental
Authority are covered under negative list of services
Current
Scenario
• Any activity in relation to function ordinarily entrusted to a
municipality in relation to specified services provided to
Government, Local Authority or Governmental Authority are granted
exemption (Sr. No. 25 of Not. No. 25/2012-ST dated 20th June, 2012)
• Metered cabs as defined under Section 65B (32) means any contract
carriage with approved automatic device indicating fare
Changes in
Law & its
effective
date
• Specified services i.e. services of water supply, public health,
sanitation conservancy, solid waste management or slum
improvement and upgradation when provided to Government, Local
Authority or Governmental Authority are exempted henceforth
Impact Scope of exemption narrowed down and only specified services are
granted exemption as against exemption given to services not directly
connected with provision of such specified services

Micro-insurance products
Current
Scenario
LIC policies under JBY and AABY are exempted from Service tax with
effect from 24th December, 2012 vide Sr. No. 26A of Not. No.
25/2012-ST dated 20th June, 2012
Changes in Law
& its effective
date
• Exemption is extended to life micro-insurance products as
approved by Insurance Regulatory and Development Authority
(IRDA), having maximum amount of cover of Rs. 50,000/- with
effect from 11th July, 2014
• Life micro-insurance products are the products covered under
Regulation 2 (e) of the IRDA (Micro-insurance) Regulation, 2005
Impact Micro Insurance products will become affordable to the weaker
section of the Society

Exemption to Tour Operators
Background Services by tour operators are covered under Service tax net
Current
Scenario
Outbound and inbound tours are leviable to Service tax and
abatement schemes are available subject to specified conditions
including non-availment of CENVAT Credit
Changes in Law
& its effective
date
Services provided by tour operators to a foreign tourists in relation
to tours conducted wholly outside India are granted exemption
with effect from 11th July, 2014 (Sr. No. 42 of Not. No. 25/2012-ST
dated 20th June, 2012)
Impact Indian Tour Operators providing services to foreign tourists will
become more competitive in terms of cost

POT for services under RCM…
Background Point of taxation (POT) Rules define the taxable events/points of
taxation for various situations
Current
Scenario
• POT of services covered under RCM is payment date (Rule 7 of
POT Rules, 2011)
• However, if payment of such services are not made within 6
months from the date of invoice, POT to be determined as if the
said Rule does not exist
• Accordingly, POT is then shifted to date of invoice vide Rule 3 of
POT Rules, 2011
• Further, in such cases, if invoice is not raised within 30 days from
the date of completion of services, POT again preponed to the
date of completion of service

…POT for services under RCM
Changes in Law
& its effective
date
• In cases of services covered under RCM, if payment is not made
within 3 months then POT would be first day immediately
following 3 months from the date of invoice (Rule 7 of POT
Rules, 2011)
• Invoices issued prior to 1st October, 2014 to be governed by
present rules (Rule 10 of POT Rules, 2011)
Impact Confusion of trade is addressed and relief is granted to the
assessees i.e. no requirement to pay interest retrospectively if
payment is not made within time limit

Partial RCM-Rent-a-cab services…
Background Rent-a-cab services are covered under RCM with effect from 1st
July, 2012
Current
Scenario
• In case of rent-a-cab services taxed on abated value, SR to pay
Service tax on the full portion of taxable value i.e. 40%
• In case of rent-a-cab services taxed on full value, SP and SR are
required to pay ST of 60% and 40% respectively (Sr. No. 7 of Not.
No. 30/2012-ST dated 20th June, 2012)
Changes in Law
& its effective
date
• In case of rent-a-cab services leviable to Service tax on full value,
SP and SR are required to pay ST of 50% each
• Changes to be effective from 1st October, 2014
Impact • SR will have to ascertain if the SP is availing abatement, so as to
work out his portion of Liability under partial Reverse Charge

…Partial RCM-Rent-a-cab services
Example • If SP pays on abated value (40% value)
• If SP pays on non-abated value
Particulars Present W.e.f. 01/10/14
Consideration for rent-
a-cab services
Rs. 1,00,000/- Rs. 1,00,000/-
Service tax Rs. 12,360/- Rs. 12,360/-
ST to be paid by SP Rs. 7,416/- (60%) Rs. 6,180/- (50%)
ST to be paid by SR Rs. 4,944/- (40%) Rs. 6,180/- (50%)
Particulars Present W.e.f. 01/10/14
Consideration for rent-a-
cab services
Rs. 1,00,000/- Rs. 1,00,000/-
Service tax on abated
value to be paid by SR
Rs. 4,944/- Rs. 4,944/-

CENVAT Credit-Place of removal (POR)…
Background • Place of removal (POR) defined under CE Laws
• Reference to POR under CE Laws given in notification granting
rebate of ST paid on services used for export of goods
Current
Scenario
• “Place of removal” phrase used in CCR, 2004 at various places
• With respect to interpretation of definition of input services,
place of removal has been bone of contention

….CENVAT Credit-Place of removal (POR)
Changes in Law
& its effective
date
• Now, POR is defined under CCR, 2004 as under:
“place of removal” means –
o (i) a factory or any other place or premises of production or
manufacture of the excisable goods;
o (ii) a warehouse or any other place or premises wherein the
excisable goods have been permitted to be deposited without
payment of duty;
o (iii) a depot, premises of a consignment agent or any other
place or premises from where the excisable goods are to be sold
after their clearance from the factory;
o from where such goods are removed
• Changes to be effective from 11th July, 2014
Impact • Prospective amendment made to define POR, prior period to
face litigations in view of contradictory decisions delivered by
High Courts

CENVAT Credit-Time limit for availment
Background CENVAT Credit on eligible inputs, input services and capital goods is
available to a manufacturer or SP
Current
Scenario
• There was no time limit for availment of CENVAT Credit
• Bangalore tribunal in case of Coromandal Fertilizers Ltd. vs. CCE
(A), Visakhapatnam – IV 2009 (239) ELT 99 (Tri.-Bang.) held that
CENVAT Credit was allowed to be taken anytime after receipt of
inputs in factory
Changes in Law
& its effective
date
• Availment of CENVAT Credit on inputs (3rd Proviso to Rule 4(1))
and input services (6th Proviso to Rule 4(7)) restricted to be
taken within 6 months from the date of invoice
• Changes to be effective from 1st September, 2014
Impact • Reversing the ratio delivered by Bangalore Tribunal, time limit
introduced for availment of CENVAT Credit on inputs and input
services
• Applicable to both manufacturer as well as SP
• No outer time limit prescribed for Capital Goods still
• Assessees to avail past CENVAT Credits till 31st August, 2014

CENVAT Credit-RCM & Partial RCM
Background CENVAT Credit available to SR only when value of services and ST is
paid
Current
Scenario
• At present, CENVAT Credit of ST paid under full and partial RCM
is available once SR makes payment of value of services and
Service tax (1st Proviso to Rule 4 (7)) to SP
• CENVAT Credit on input services is available on receipt of invoice
provided payment to SP is made within 3 months
• In case SR fails to make payment to SP within 3 months, CENVAT
Credit to be reversed
• CENVAT Credit may be availed once again on making payment to
SP
Changes in Law
& its effective
date
• In case of full RCM, the mechanism is liberalised to provide that
SR may avail CENVAT Credit on making ST payments
• In case of partial RCM, SR may avail CENVAT Credit once SR pays
value of input services alongwith ST

CENVAT Credit-Export viz-a-viz Exempted Services
Background CENVAT credit in respect of exempted services are not allowed to
be taken under CCR, 2004
Current
Scenario
• Normally, exports are not considered as exempt services for the
purpose of CENVAT credit reversal
• Therefore, there is no requirement to reverse proportionate
CENVAT Credit if services are exported vide Rule 6A of ST Rules,
1994 without payment of Service tax
• However, such services to be treated as exempted services if
payment is not received within 6 months or extended period
allowed by RBI, from the date of provision (Rule 6(8))
Changes in Law
& its effective
date
• Now, one proviso is added to Rule 6 (8) (b) to provide that if
payment is received after the specified or extended period
allowed by RBI, but within 1 year from specified or extended
period, CENVAT Credit reversed would be available as CENVAT
Credit once again on the basis of documentary evidence

Transfer of CENVAT Credit by LTUs
Background Large Tax Payer Units (LTUs) are provided various benefits under
Service tax and Central Excise Laws
Current
Scenario
One of the major benefits available to LTUs is that CENVAT Credit
available at one registered premises could be transferred for use to
another registered premises
Changes in Law
& its effective
date
The said benefit is taken away with effect from 11th July, 2014
Impact Henceforth, inter unit transfer of CENVAT credit by LTU is not
possible. Only benefit available to LTUs now is administrative
convenience

Input Service Distributor-Clarification…
Background Till 31st Match, 2012, Input Service Distributors (ISD) were allowed
distribution of CENVAT Credit in any proportion without any
restriction
Current
Scenario
• With effect from 1st April, 2012, the scope of ISDs is restricted
and CENVAT Credit is allowed to be distributed on pro rata basis
• The determination of turnover for calculation of pro rata CENVAT
Credit has undergone change from time to time. At present,
CENVAT Credit to be distributed as follows:
o Credit of ST, attributable to services used in all units exclusively
engaged in exempted goods or services, shall not be distributed
o Credit of ST, attributable to services used wholly by a units, shall
be distributed only to that unit and
o Common Credit of ST to be distributed on pro rata basis on the
basis of turnover of previous year of all operational units

…Input Service Distributor-Clarification
Clarification • Last amendment vide Not. No. 5/2014-ST dated 24th February,
2014 used the phrase “Credit of ST attributable to services used
by more than one unit shall be distributed pro rata on the basis
of turnover of such units…”
• One of the possible interpretations is- distribution of Credit
would be restricted only to the units where services are used
• It is now clarified that the amendment was to simplify the
method of distribution from calculation of turnover based on
previous month’s turnover to previous year’s turnover and the
scope of ISDs remained the same
Impact • It is not necessary that Credit needs to be distributed only to
units using common input services
• Illustration given in said Circular provides for distribution of
Credit even to a unit exclusively engaged in providing exempted
services

Exemption to SEZs…
Background SEZs are considered to be situated outside India and therefore,
services provided to SEZs are given incentives. However, in view of
ambiguity in exemption and frequent amendments, services
provided to SEZs bears the risk of litigations
Current
Scenario
Services received by a unit located in SEZ or developer of SEZ and
used for authorised operations are granted exemption from ST
In case, services are used exclusively for the authorised operations,
option to SP to not to pay ST ab initio (Not. No. 12/2013-ST dated
1st July, 2013)

…Exemption to SEZs…
Changes in Law
& its effective
date
• Following procedural amendments are made:
o Authorisation to be issued by AC/DC within 15 days from date of
submission of Form A-1
o Authorisation to be valid from the date of verification of Form A-
1 by Specified Officer of SEZ
o If Form A-1, verified by Specified Officer of SEZ, is not submitted
by SEZ Unit or Developer to AC/DC within 15 days, authorisation
to be valid from the date of submission to AC/DC
o Further, pending issuance of authorisation, SP may provide
services without payment of ST on the basis of Form A-1 and
Unit or Developer to provide copy of authorisation to SP within
3 months
o If copy of said Authorisation is not provided within 3 months
from the date of provision of services vide POT Rules, 2011, SP
to pay ST
• …

…Exemption to SEZs
Changes in Law
& its effective
date
• …
• Services to be treated as used exclusively for authorised
operations if services are received by SEZ Unit or Developer
under an invoice in the name of SEZ Unit or Developer and
services received only for furtherance of authorised operations
in SEZ
• ST Registration No. of SP not required to be mentioned on forms
if SEZ is liable to pay ST under full RCM
Impact Basically, to promote concept of SEZ, procedural benefits are
provided to SEZ Units or Developer

Condition for Abatement in respect of GTA
Background • Notification No. 26/12 provides for abatement to certain
specified services
• Abatement granted to GTA services is 75%
Current
Scenario
• Abatement given to GTA Services is available on the condition
that Cenvat Credit of inputs, input services and capital goods, for
providing the taxable service is not taken
• Further, GTA services are covered by full RCM. Therefore, there
was confusion as to whom the condition of non availment of
CENVAT Credit is applicable –whether to SP or to SR
• Delhi Tribunal in case of Venkateshwara Distributors (P) Ltd. vs.
CCE, Delhi (2013 (31) STR 469) held that the condition is with
respect to SP
Changes in Law
& its effective
date
To remove the anomalies in Service tax Laws, the condition for
taking abatement is modified to specify that CENVAT Credit should
not be availed “by SP” with effect from 11th July, 2014
Impact As per TRU Circular, the amendment is to clarify that the condition
needs to be satisfied by SP and SR will not be required to establish
satisfaction of the condition of non-availment of CENVAT Credit

Exemption-Contract Carriage
Background Various exemptions and abatements are provided to transportation
industry
Current
Scenario
• Transport of passengers by a contract carriage for the
transportation of passengers, excluding tourism, conducted tour,
charter or hire is exempted vide Not. No. 25/2012-ST dated 20th
June, 2012
• Hiring of motor vehicles designed to carry passengers are granted
abatement of 60% subject to non-availment of CENVAT Credit
Changes in Law • Air conditioned contract carriages other than radio taxis are now
leviable to Service tax w.e.f. 11th July, 2014
• Transport of passengers by a contract carriage other than motor
cab are eligible for abatement of 60% subject to non-availment of
complete CENVAT Credit w.e.f. 11th July, 2014

Abatement-Motor Vehicles for transport of passengers…
Background Notification No. 26/12 provides for abatement for certain specified
services. Abatement for renting of any motor vehicle designed to
carry passengers is 60%
Current
Scenario
• The said abatement of 60% is available provided Cenvat Credit of
inputs, input services and capital goods is not taken
Changes in Law •Now, the said abatement is divided in 2 parts:
a) Motor cabs to continue to get abatement of 60% with the
benefit of availment of CENVAT Credit in specified proportion of
input services of person providing renting of motor cab services
(Change effective from 1st October, 2014)
b) Transport of passengers by a contract carriage other than motor
cab are also granted abatement of 60% subject to non-availment
of complete CENVAT Credit (effective w.e.f. 11th July, 2014)

…Abatement-Motor Vehicles for transport of passengers
Impact •In case of abated rent-a-cab output service, CENVAT Credit of input
services of rent-a-cab services is available now
•Abatement is available to air-conditioned contract carriages
including motor vehicles designed to carry passengers other than
motor cab subject to non-availment of CENVAT Credit of inputs,
input services as well as capital goods

ST introduced on Radio Taxis with abatement…
Background Service tax on transport of passengers by specified mode of
transport is covered under negative list of services
Current
Scenario
• Negative list of services (Section 66D (o) (vi)) excludes services
of transportation of passengers, with or without accompanied
belongings by metered cabs, radio taxis or auto rickshaws from
Service tax net
• Metered cabs as defined under Section 65B (32) means any
contract carriage with approved automatic device indicating fare
Changes in Law
& its effective
date
• Section 66D (o) (vi) and Section 65B (32) are proposed to be
amended to remove radio taxies from negative list of services
• Changes to be effective from notified date after enactment of
Finance Bill, 2014
• Consequently, an abatement of 60% is proposed to be provided
to radio taxis vide Notification No. 26/2012-ST dated 20th June,
2012 to be effective from the date radio taxis would get covered
under ST net with the condition of non-availment of CENVAT
Credit

…ST introduced on Radio Taxis with abatement
Changes in Law
& its effective
date
• Radio Taxis are defined under Not. No. 25/2012-ST dated 20th
June, 2012 as under:
• “radio taxi” means a taxi including a radio cab, by whatever
name called, which is in two-way radio communication with a
central control office and is enabled for tracking using Global
Positioning System (GPS) or General Packet Radio Service (GPRS)
Impact • Services of transportation of passengers by radio taxis are
proposed to be covered under Service tax net with an
abatement of 60% subject to non-availment of CENVAT Credit
• Radio taxis defined for the 1st time under ST Laws removing
ambiguity prevailing under ST Laws till now

Abatement-Transport of goods in a vessel
Background Notification No. 26/12 provides for abatement for certain specified
services
Current
Scenario
Transporter of goods in a vessel has option to avail abatement of
50% as of now
Changes in Law
& its effective
date
Now, the rate of abatement would be increased to 60% with effect
from 1st October, 2014
Impact Service tax will be payable only on 40% of the invoice value i.e.
the effective rate of Service tax decreased from 6.18% to 4.944%

Cenvat Credit of tour operator service
Background Notification 26/12 provides for abatement for certain specified
services. Abatement options available to a Tour operator are 25%,
10% and 40% subject to certain conditions
Current
Scenario
One of the condition for claiming the abatement was that Cenvat
Credit on capital goods and input services has not been taken
Changes in Law
& its effective
date
Now, w.e.f. 1st October, 2014, the words ‘other than tour operator
service’ have been inserted making the condition as ‘Cenvat Credit
on capital goods and input services other than tour operator
service has not been taken’
Impact Now, tour operators are allowed to avail CENVAT Credit in respect
of other tour operators’ services while availing the benefit of
abatement

Full RCM-Director of ‘body corporate’
Background Notification no. 30/2012 and Rule 2 of Service tax Rules, 1994; prescribe
cases where the persons other than SP can be made liable to pay Service
tax-popularly known as – Reverse Charge
Current
Scenario
Notification No. 45/2012 amended ST Rules, 1994 where service tax on
services provided by the directors to a company was covered under full
reverse charge
Changes in
Law & its
effective
date
•ST Rules, 1994 and Not. No. 30/2012-ST dated 20th June, 2012 are
amended and now, services provided by Director to any company or body
corporate are covered under full RCM
•This change will be effective from 11th July, 2014
Impact • Now, the tax base has been increased to include body corporate under
reverse charge mechanism along with company
• Body Corporate may also cover establishments incorporated under
some other Legislations like Reserve Bank of India, Life Insurance
Corporation of India and other Public Sector Units

Full RCM-Recovery Agents
Current
Scenario
Recovery agents engaged by financial or non-financial institutions
were liable to discharge Service tax to Government
Changes in Law
& its effective
date
• Now, ST Rules, 1994 and Not. No. 30-2012-ST dated 20th June,
2012 have been amended to include recovery agents under RCM
•Accordingly, now, banking company, financial institution or a non-
banking financial company will be liable to discharge ST liability
under RCM for receipt of services by recovery agents
•Liability of these institutions will be effective from 11th July, 2014
Impact Now, banking companies, financial institutions or non-banking
financial companies will be liable to pay 100% Service tax as a
recipient of service provided by recovery agents

Payment of Service Tax only through Internet Banking
Background According to Rule 6 (2) if Service tax paid, including payment
through Cenvat Credit by the assessee during the preceding year, is
more than 10 lakhs then he should pay service tax only through
internet banking
Current
Scenario
Notification 16/2013 lowered the limit of 10 lakhs to 1 lakh. Hence,
if service tax payment, including payment through Cenvat Credit, is
more than 1 lakh then, assessee has to make payment through
internet banking only
Changes in Law
& its effective
date
• Now, the above sub-rule (2) has been amended to provide that
every assessee must pay his liability of ST only through internet
banking
• If the assessee wants to discharge ST in any other mode, he may
apply to AC/DC who may for the reasons to be recorded in writing,
allow the assessee to do so
• The above change will be effective from 1st October, 2014
Impact Even though there is a negligible liability of Service tax, assessee
will have to opt for internet banking which would be cause
inconvenience to small assessees

Valuation for Works Contract
Background •Rule 2A(ii) provides for deemed valuation based on some percentages
Impact All works other than original works will be valued @ 70% under deemed
valuation method
VALUATION
Type of Works Current Scenario New Provisions
(A) Original Works 40% of total
amount charged
40% of total amount
charged
(B) maintenance or repair or
reconditioning or restoration or
servicing of any goods
70% of total
amount charged
70% of total amount
charged(C) Not covered above, including
maintenance, repair, completion
and finishing services such as
glazing, plastering, floor and wall
tiling, installation of electrical
fittings of an immovable property
60% of total
amount charged

INTEREST on delayed payment of Service Tax...
Background According to Section 75 Every person who is liable to pay tax, who
fails to credit the tax or any part thereof to the account of the
Central Government within the period prescribed, shall pay simple
interest at such rate not below ten per cent and not exceeding
thirty-six per cent per annum.
Current
Scenario
• Notification 14/2011 amended Principal Notification 26/2004 by
changing the rate of interest from 13% per annum to 18% per
annum
• However, proviso under section 75 lays down that if value of
taxable services provided in the preceding year is not exceeding 60
lakhs, interest rate will reduce by 3%
Changes in Law
& its effective
date
• Principal Notification 26/2004 has been amended to introduce
new rates for interest
• New interest rates will be effective from 1st October, 2014
• 3% concession for small service providers continues

…Interest Rates
Period of Delay Rate of simple Interest
Upto 6 months 18%
More than 6 months
and up to 1 year
18 % for the first 6 months of delay and 24 % for the delay
beyond 6 months
More than 1 year 18 % for the first 6 months of delay; 24% for the period
beyond 6 months up to 1 year and 30% for any delay beyond 1
year

Intermediary to include agents dealing in goods
Current
Scenario
• According to Rule 2(f) of POPS, 2012, “intermediary” means a
broker, an agent or any other person, by whatever name called,
who arranges or facilitates a provision of a service (hereinafter
called the ‘main’ service) between two or more persons, but
does not include a person who provides the main service on his
account
• Intermediaries of services are covered by Rule 9 of POPS, 2012
and accordingly, POPS would be the location of SP in such cases
Changes in Law
& Effective date
Now,
―intermediary means a broker, an agent or any other person, by
whatever name called, who arranges or facilitates a provision of a
service (hereinafter called the main‘ service) or a supply of goods,
between two or more persons, but does not include a person who
provides the main service or supplies the goods on his account
Impact • Now, in case of intermediaries of goods, POPS would be
location of SP as against location of SR till now
• Accordingly, commission agents, engaged in export of goods for
overseas SR would get covered under ST net

Exemption provided to goods temporarily imported in India
for Exports
Background Rule 4 of Place of Provision of Service, 2012 (POPS, 2012) provides the place
for provision of performance based service
Current
Scenario
• According to clause (a), if goods are required to be made physically
available, POPS shall be place of actual performance
• However, service provided in respect of goods that are temporarily
imported into India for repairs, reconditioning or reengineering for re-export
were excluded from Rule 4 (a)
Changes in
Law & its
effective
date
Now, the above Rule has been substituted as ‘Provided further that this
clause shall not apply in the case of a service provided in respect of goods
that are temporarily imported into India for repairs and are exported after
the repairs without being put to any use in the taxable territory, other than
that which is required for such repair‘
Impact •Earlier, goods imported for repairs, reconditioning or reengineering were
kept out of the Service Tax net. Now, goods imported only for repairs will
be excluded from Rule 4 (a)
•Accordingly, the mischief of the rule is put to rest and only when goods
are imported for repairs without being put to use in India except as is
required for such repairs would be excluded from operations of Rule 4 (a)

Changes in POPS for Temporary hiring of aircrafts and vessels
except yachts
Background POPS of temporary hiring of goods from non-taxable territory is kept
out of the Service tax preview
Current
Scenario
• Clause (d) of Rule 9 of POPS, 2012 specifies that place of provision
in respect of ‘Hiring of means of transport upto a period of 1 month’
is the location of service provider
Changes in Law
& its effective
date
• Now, ‘aircrafts and vessels’ would be excluded from the above
clause
•Yachts would still be covered by operations of Rule 9 of POPS, 2012
• The above change will come into effect from 1st October, 2014
Impact •Aircrafts & Vessels to be governed by general Rule i.e. Rule 3 of
POPS, 012. Accordingly, POPS would be location of SR making
import of such services taxable
•POPS for hiring of Yachts would be still location of SP irrespective
of period of such hiring

Application for Advance Ruling can be made by Resident
Private Limited Company
Background According to Section 96C, an application for advance Ruling can be sought
with respect of classification of service, valuation of service, etc.
Current
Scenario
• Clause (b) of Section 96A defines applicant who can make application
under section 96C(1)
• Applicant defined was including persons setting up joint venture in India,
a wholly owned subsidiary Indian company, of which the holding company
is a foreign company, resident public limited company (Notification
4/2013), etc.
Changes in
Law & its
effective
date
•Now, resident private limited company is also eligible to apply for advance
rulings
•Resident Pvt. Ltd. Co. is defined as provided under Income Tax Act, 1961.
Section 6 (3) of Income tax Act, 1961 is reproduced hereunder:
“A company is said to be resident in India in any previous year, if—
(i) it is an Indian company ; or
(ii)during that year, the control and management of its affairs is situated
wholly in India”
Impact It is a welcome provision that now even a Resident Private Limited
Company can make an application for obtaining Advance Ruling

Miscellaneous amendments…
• In view of request from trade and industry, Section 67A is proposed
to be amended to delink “rate of exchange” from Customs Laws
with effect from notified date after Finance Bill, 2014 receives
• With a view to streamline adjudication proceedings, new Section 73
(4A) has been inserted to provide time limits to conclude
adjudication proceedings (already provided under CE Laws),
wherever it is possible to do so. Changes to be effective from the
date of enactment of Finance Bill, 2014
• For appeal to Appellate Tribunal, CBEC may constitute committee by
issuance of notification in official gazette as provided under Section
86 (1A) (i). It is proposed to constitute such committee by way of
order. Changes to be effective from the date of enactment of
Finance Bill, 2014

…Miscellaneous amendments
• Services provided by ESIC prior to 1st July, 2012 is proposed to
be excluded from Service tax net by inserting Section 100
under Finance Act, 1994. Amendment to be effective from the
date of enactment of Finance Bill, 2014
• Import of services by RBI in relation to management of foreign
exchange reserves are exempted with effect from 11th July,
2014 (Sr. No. 41 of Not. No. 25/2012-ST dated 20th June, 2012)
• If any explanation is introduced within 1 year, the same is
proposed to be effective from the date of issuance of such
notification. Section 5A (2A) of CE Act made applicable to
Service tax

Abbreviations used…
AC/DC Assistant Commissioner/Deputy
Commissioner of CE/ST
CCR CENVAT Credit Rules, 2004
CE Central Excise
CESTAT Central Excise & Service Tax Appellate
Tribunal
ESIC Employees’ State Insurance Corporation
GTA Goods Transport Agency
ISD Input Service Distributor
LTU Large tax Payer Unit

…Abbreviations used
POR Place of Removal
POT Point of Taxation
RBI Reserve Bank of India
RCM Reverse Charge Mechanism
SEZ Special Economic Zone
SP Service Provider
SR Service Receiver
ST Service tax

Disclaimer
The presentation is meant for understanding of certain important concepts pertaining to the
topic. Before using the same for any statutory interpretations, raising demands or taking any
business decisions, prior written consent of the author is mandatory.
The presentation highlights general understanding of indirect tax amendments through Union
Budget 2014-2015. The same can not be construed to be the opinion of the Author.
In any case, the author or GSC Intime Services Pvt. Ltd. are not responsible for the usage of the
presentation material without any written consent of the Author.
The views presented in the Presentation are personal views of the Author and may not be
accepted by the Tax or Judicial Authorities.
The Presentation endeavors to explain the situation of the Law as on or before the date of the
presentation. The Author does not undertake any responsibility to update the same in the future.
© Author

Ca. Jayesh Gogri
Director
2/22 Nityanand Nagar, Sahar Road, Andheri (East),
Mumbai-400 069.
6-A, Ranjit Studio Compound, DSP Road, Dadar (East),
Mumbai-400 014.
+91 22 2684 0208
+91 9821 012 151
+91 9870 712 151
info@gscintime.com
jayeshgogri@gscintime.com
Right advice at right time…

Union budget 14-15 service tax

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