11/02/2017
Highlights of Service Tax Changes proposed in Budget 2017
There are no big bang changes proposed in Indirect taxes in this Budget as GST is around the corner
1. The changes proposed in the Negative List in Section 66 D are as follows:
S. 66D(f) “services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption”. These services are proposed to be omitted from the negative list.
The service tax exemption on them is being continued by incorporating them in the mega exemption notification.
Consequently, the definition of ‘process amounting to manufacture’ is also proposed to be omitted from of the Finance Act and is being incorporated in the mega exemption notification
2. Authority of Advance ruling under Income tax to act as Authority under the Indirect Tax Laws:
Clause (d) of section 96A is being amended so as to substitute the definition of “Authority” to mean the Authority for Advance Ruling as constituted under section 28E of the Customs Act, 1962.
Section 28 (E) of the Customs Act, 1962, is also being amended so as to substitute the definition of “Authority” to mean the Authority for Advance Ruling as constituted under section 245-O of the Income-tax Act, 1961
3. Section 96C is being amended so as to increase the application fee for seeking advance ruling from Rs. 2000 to Rs. 10,000 on the lines of the Income Tax Act
4. Section 96D is being amended so as to extend the existing time limit of 90 days to 6 months by which time the Authority of Advance ruling shall pronounce its ruling, on the lines of the Income Tax Act.
5. Repeal of Research and Development Cess Act, 1986
(a) Research and Development Cess Act, 1986 is proposed to be repealed.
(b) Notification No. 14/2012-ST dated 17-03-2012 exempts the taxable service involving import of technology from so much of the service tax leviable thereon as is equivalent to the amount of cess payable on the said import of technology under the Research and Development Cess Act, 1986.
Consequently, with effect from the enactment of the Finance Bill, 2017, the exemption from service tax under notification No. 14/2012-ST would be not available to a taxable service involving import of technology on which Research and Development Cess is not payable. Full service tax would be applicable to such taxable service.
6. Rule 2 A of Service Tax (Determination of Value) Rules, 2006 is being amended with effect from 01.07.2010 so as to make it clear that value of service portion in ex*****on of works contract involving transfer of goods and land or undivided share of land, as the case may be, shall not include value of property in such land or undivided share of land
7. Mega Exemption Notification - Amended
(a) Services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government is being exempted from service tax. (New entry at S. No. 26D of notification No. 25/2012)
(b) The exemption vide S. No. 9B of notification No. 25/2012-ST dated 20.06.2012, is being amended so as to omit the word “residential” appearing in the notification. The exemption remains the same in all other respects. S. No. 9B of notification No. 25/2012- ST exempts services provided by Indian Institutes of Management (IIMs) by way of 2-year full time residential Post Graduate Programme (PGP) in Management for the Post Graduate Diploma in Management (PGDM), to which admissions are made on the basis of the Common Admission Test (CAT), conducted by IIM. (S. No. 9B of notification No. 25/2012)
(c) Under the Regional Connectivity Scheme (RCS), exemption from service tax is being provided in respect of the amount of viability gap funding (VGF) payable to the selected airline operator for the services of transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a Regional Connectivity Scheme (RCS) airport, for a period of 1-year from the date of commencement of operations of the Regional Connectivity Scheme (RCS) as notified by Ministry of Civil Aviation. (New entry at S. No. 23A of notification No. 25/2012)
8. Benefit of the exemption notification No. 41/2016-ST dated 22.09.2016 is being extended with effect from 1.6.2007, the date when the services of renting of immovable property became taxable.
Notification No. 41/2016-ST dated 22.09.2016, exempts one-time upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for grant of long-term lease of industrial plots (30 years or more) by State Government industrial development corporations/ undertakings to industrial units was exempted
9. Cenvat Credit Rules
(a) Rule 6 of CENVAT Credit Rules, 2004 (Explanation-I applicable to sub-rule 3 and 3A) is being amended so as to exclude banks and financial institutions including NBFCs engaged in providing services by way of extending deposits, loans or advances from its ambit.
It has been provided in the said explanation that value for the purpose of reversal of common input tax credit taken on inputs and input services used in providing taxable and exempted services, shall not include the value of service by way of extending deposits, loans or advances against consideration in the form of interest or discount (CENVAT Credit Rules, 2004 as amended by notification No. 04/2017-C.E.(NT), dated 02 Feb 2017)
(b) A new sub-rule 4 is being inserted in Rule 10 of CENVAT Credit Rules, so as to provide that transfer of CENVAT Credit by the jurisdictional Dy./Assistant Commissioner of Central Excise, shall be allowed within 3 months from the date of receipt of application from the manufacturer or service provider in this regard, subject to the fulfillment of the conditions prescribed under Rule 10 (3). (CENVAT Credit Rules, 2004 as amended by notification No. 04/2017-C.E.(NT), dated 2nd Feb, 2017)
