Volume 3, Issue 12
13th July, 2010 |
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Amendments to Service Tax Law |
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The Finance Bill, 2010 had made
several amendments to Finance Act,
1994 (hereinafter referred to as
“Service Tax Act” or “Act”). With a
view to give effect to these
amendments, Notification No.
24/2010 dated 22nd June, 2010 has
been issued under the Act which
states that effective date of such
amendments shall be 1st July, 2010.
New services brought into
the tax net:
Eight new services which were
notified will be taxable w.e.f 1st July,
2010. The said services are as follows:
- Services of storing, keeping, or
maintenance of medical records of
employees of business entity
- Services provided by electricity
exchanges to any person in
relation to electricity contracts
- Services of promoting, marketing
or organizing games of chance,
including lottery conducted online
or otherwise (Earlier this service
was taxable by way of an
explanation to Business Auxiliary Service which is now withdrawn
and separate category is
introduced)
- Health services provided by
hospitals, nursing homes, or multi
specialty clinic
- Commercial use or exploitation of
any event
- Services of promoting of a “brand”
- Copyrights in respect of
cinematographic films and sound
recording
- Services provided to buyer by
builder of residential or
commercial complex for providing
preferential location or
development of complex
Accordingly, any person rendering or
proposing to render any of the
aforesaid services will be liable to
Service Tax and has to obtain
registration under the said category
within 30 days of rendering service or
if the services are already being
rendered then by 30th July, 2010. It
may be noted that advances received
prior to 1st July, 2010 will not be liable
to Service Tax.
Amendments in the Act, effective from
1st July, 2010.
- The definition of the term “business entity” is
introduced in the Act which states that “business
entity” does not include an individual. The word
“business entity” is used in the definition of
taxable service in relation to law. Accordingly, if
the service provider or a receiver is an individual
then the transaction will not be subject to
Service Tax.
- The definition of the term “passenger” has been
changed to include a person performing
domestic journey. Accordingly, a person
travelling locally will be termed as
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“passenger”
and the services provided to such person will
also be liable to Service Tax.
- The definition of term “port service” has been
substituted to mean any service rendered within
a port in any manner. Moreover, whether a
person is authorized or not, services rendered by
them will fall under port service and
classification rules shall not apply if services are
rendered wholly within a port. Accordingly, it
can be construed that if many services are
rendered which are consumed wholly within a
port, the services shall be classified under port
service. Similar changes have been made in the
definition of taxable service of other ports
(governed by Indian Ports Act, 1908) and
airports. However, exemption from Service Tax is
granted to certain services provided within ports
or airports.
- Any commercial training or coaching institute
which imparts coaching for consideration and
registered as trust or society or not, will be liable
to Service Tax retrospectively, i.e. w.e.f 1st July,
2003.
- Commercial or industrial construction complex intended for sale in whole or part, before, during
or after construction to aprospective buyer will
be taxable unless the entire consideration for
the property is paid after issuance of completion
certificate. Further, advances received prior to
1st July, 2010 will not be liable to Service Tax. For
advances received post 1st July, 2010 it is
advisable to receive after issuance of completion
certificate, in order to avoid Service Tax.
Completion certificate can be issued by
Government authorities, architect, chartered
engineer and licensed surveyor. Abatement is
granted by the Government, so the amount
which is taxable is only 25%. Accordingly,
builders/developers have to pay tax only on 25%
of gross amount charged for providing service.
Full exemption from Service Tax is granted on
construction of residential complex under
Jawaharlal Nehru National Urban Renewal
Mission and Rajiv Awaas Yojna.
- Sponsorship service provided to any person is
liable to Service Tax. Earlier, only body corporate
and firms were liable to Service Tax. However,
exemption is granted for sponsorship of certain
sports events.
- Domestic journey and economy class for
domestic and international journey will form
part of definition of aircraft operator.
Accordingly, service provided by aircraft
operator to any passenger in relation to
domestic journey and economy class for both
journeys is liable to Service Tax.
- Renting of immovable property, service in
relation to renting and vacant land leased for
construction of building to be used for
furtherance of business at later stage will form
part of taxable service in relation to renting of
immovable property. Accordingly, any service in
relation to renting is liable to Service Tax, which is given retrospective effect, i.e. w.e.f 1st June,
2007.
- Services in relation to information technology
software will be liable to Service Tax, even if
services are not used in course of furtherance of
business.
- Exemption from Service Tax is granted to aircraft
operator and to persons on board an aircraft in
relation to transport of passengers who arrive at
customs port from outside India for journey to
outside India and who do not pass through
immigration in India.
Partial exemption is granted to aircraft
operators. For domestic travel of any class,
amount taxable is 10% of gross value of the
ticket or Rs. 100 per journey whichever is less,
and for international journey of economy class,
the amount taxable is 10% of gross value of the
ticket or Rs. 500 whichever is less. This exemption is available only if CENVAT credit is
not taken on inputs.
Further, full exemption from Service Tax is
granted to aircraft operators in relation to air
travel for journey originating or terminating in an
airport located in Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram, Nagaland,
Tripura, and Baghdogra in West Bengal.
It has been further provided that ticket issued by
aircraft operator to passenger shall be construed
as invoice, bill or challan for Service Tax
purposes.
- Transport of goods in government railway were
exempt up to 31st March, 2010. This exemption
is now extended up to 31st December, 2010.
Accordingly, transport of goods in government
railway will become taxable w.e.f 1st January,
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