SKP Tax Alert
21 May 2015 | Volume 8 Issue 5
Changes in Service Tax in India from 1 June 2015

The Finance Bill, 2015 which amended direct and indirect tax provisions, was announced by India's Finance Minister, Arun Jaitley, on 28 February 2015 and enacted on 14 May 2015. Amendments under service tax (which is an indirect tax), are effective either from the date of enactment or a date to be notified subsequently through Notifications.

On 19 May 2015, a series of Notifications were issued, including clarifications, stating the provisions that would be effective from 1 June 2015 and those that would be effective later.

Key service tax provisions that will be effective from 1 June 2015 are as follows:
  • Service tax rate increased to 14% from 12.36%. Primary education cess and secondary and higher secondary cess would cease to exist.
  • Services provided by way of admission to entertainment events or access to amusement facilities would be taxable, except services provided by admission to specified entertainment events which would be exempted.
  • Services by way of admission to entertainment events such as concerts, pageants, musical performance concerts, award functions and sporting events other than recognised sporting events would be taxable, if the amount charged is more than INR 500 for rights to admission to such an event.
  • Services by way of carrying out contract manufacturing/job work for production or manufacture of alcoholic liquor for human consumption would be taxable.
  • As a result of the upward revision in the service tax rate, the alternate rates for payment of tax on money-changing services, services provided by air travel agents, insurance services and services provided by lottery distributors and selling agents are revised proportionately.
  • Rate of service tax payment/reversal increased to 7% from 6% on the value of exempted services, in cases where the manufacturer of dutiable goods/service provider of taxable services is providing exempt services.
However, there are other changes that will not be effective from 1 June 2015 and would be effective once notified later:
  • All services provided by government or local authorities to a business entity except the services specifically exempted.
  • Swachh Bharat cess at 2% of the value of the service on all or any taxable services.
SKP's comments
Considering the increased service tax rate will be effective from 1 June 2015, it is imperative that a business evaluates its ongoing contracts with its customers and suppliers to ensure that the appropriate rate of service tax is charged based on the provisions of the Point of Taxation Rules, 2011. Also, the industry is awaiting immediate clarifications on whether the cess balance that is unutilised as on 31 May 2015 would be available as credit against service tax or should be written off. 

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This SKP Tax Alert contains general information existing at the time of its preparation only. It is intended as a news update and is not intended to be comprehensive nor to provide specific accounting, business, financial, investment, legal, tax or other professional advice or opinion or services. This tax alert is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business. Before making any decision or taking any action that may affect you or your business, you should consult a qualified professional adviser and also refer to the source pronouncement/documents on which this tax alert is based. It is also expressly clarified that this tax alert is not a solicitation or an invitation of any sort whatsoever or a source of advertising from SKP Group or any of its entities to create any adviser-client relationship.

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