Other changes concerning Service Tax

Important amongst these are:

Definition of process amounting to manufacture or production of goods in Section

65B(40) being amended to include processes on which duties of excise are leviable under
the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955).

A separate section is enacted in place of an explanation contained in Removal of

Difficulty Order 2/2012 by way of Section 66BA.

The word seed is omitted from the expression seed testing found in Section 66D(d)
(i).

In Section 73, a new Sub-section (2A), similar to Sub-section (9) of Section 11A of
Central Excise Act, 1944, is being inserted to harmonize the Central Excise and
Service Tax law. As a result, if a Show Cause Notice issued under proviso to Sub-section
(1) of Section 73 is not found sustainable by an Appellate Authority or Tribunal or Court,
the same will be deemed to be a notice issued for a period of 18 months.

Section 78A is introduced to make provision for imposition of penalty on director,

manager, secretary or other officer of the company, who is in any manner knowingly
concerned with specified contraventions.

Maximum penalty under Section 77(1)(e) for failure to get registration can be only
Rs.10,000/-.

In case of Assessee Appeal also, Appellate Tribunal can admit an Appeal or permit
the filing of memorandum of cross objections after the expiry of the relevant period.

Section 90 is introduced to specify and differentiate cognizable offences from noncognizable and bailable offences.

New Section 91 is introduced to provide for power to arrest; Commissioner of Central

Excise is empowered to authorize any officer of Central Excise not below the rank of
Superintendent of Central Excise, to arrest a person for specified offences particularly
non-payment of collected Service Tax.

Retrospective amendment
Retrospective exemption is being extended to the Indian Railways on the Service Tax leviable on
various taxable services provided by them during the period prior to the 1st day of July, 2012 to

the extent Show Cause Notices have been issued upto the 28th day of February, 2013. Section 99
is being added for this purpose, in Chapter V of the Finance Act, 1994.

Rationalization of exemptions
The following exemptions are being rationalized except the change relating to restaurants
mentioned earlier:
(i) Rationalization of exemption limit prescribed for charitable organizations, providing
service towards any other object of general public utility. So far, the limit was Rs.25 lakh
p.a. Now, they will be covered by the threshold exemption.
(ii) Rationalization of exemption to transport of goods by road and rail/vessel.
Amnesty scheme for Service Tax
To encourage voluntary compliance and broaden the tax base, it is proposed to provide one time
amnesty by way of
(i)
(ii)

waiver of interest and penalty; and

immunity from prosecution, to the stop filers, non-filers or non-registrants or service
providers (who have not disclosed true liability in the returns filed by them during the
period from October, 2007 to December, 2012), who pay the tax dues.

COMPARISON OF CHANGES UNDER SERVICE TAX ACT

Section

New Provision

"Service" means any activity carried

out by a person for another for
consideration, and includes a declared
service, but shall not include
(a) an activity which constitutes
merely, (i) a transfer of title in goods
Section 65Bor immovable property, by way of sale,
Definitions
gift or in any other manner; or (ii) a
transaction in money or actionable
claim; (b) a provision of service by an
employee to the employer in the course
of or in relation to his employment; (c)
fees taken in any
There shall be levied a tax (hereinafter
referred to as the service tax) at the rate
of twelve per cent. on the value of all
services, other than those services
Section 66B specified in the negative list, provided or
Charging
agreed to be provided in the taxable
Section
territory by one person to another and
collected in such manner as may be
prescribed. "taxable territory" means
the territory to which the provisions of
this Chapter apply;
Definition

Rule 2 of Partnership firm includes Limited

Service
Tax Liability Partnership (LLP)
Rules
Issuance
of Within 30 days from the date of
bills
or provision of taxable service. Within 45
invoices
days in case of persons providing
Rule 4A of banking and other financial services
Service
Tax from the date of provision of taxable
Rules.
service.
Payment
of It is clarified that Service provider who
Tax in relation export the services pursuant to Export of
to Export of Service Rules and receives the

Old Provision

The word Service is not defined

There shall be levied a tax

(hereinafter referred to as the
service tax) at the rate of twelve per
cent. of the value of taxable
services referred to in subclauses [ ]
of clause (105) of section 65 and
collected in such manner as may be
prescribed.

Limited Liability Partnership (LLP)

was not recognized.

Within 14 days from the date of

provision of taxable service.

Proviso was not in existence.

consideration within the period specified

Service Rule
by RBI i.e. one year or extended time
6 of Service
limit, service provider is not liable to
Tax Rules
pay tax.

Individuals and Partnership Firms

whose aggregate value of taxable
services provided from one or more
Payment
of
premises is Rs. 50 Lacs or less in the
tax on receipt
previous financial year, SP have option
basis
to pay tax on taxable services up to a
total of Rs. 50 Lacs in current financial
year, on receipt basis

Definition
Continuous
Services
Rule 2 (C )
Point
Taxation
Rules

of

of
of

Point
of
taxation
applicable to
persons
required
to
pay
service
tax on reverse
charge basis
as
provided
u/s. 68(2)

Continuous supply of service means

any service which is provided, or to be
provided or to be provided continuously
or on a recurrent basis, under a contract,
for a period exceeding three months
with obligation for payment periodically
or from time to time or where the
Central Government, by a notification in
the
Official
Gazette,
prescribes
provision of a particular service to be a
continuous supply of service, whether or
not subject to any condition.
Such persons can pay service tax when
the payment of consideration is made to
the service provider. However, if the
payment is not made within 6 months
from the date of invoice, the Point of
Taxation shall be regarded to have
occurred on the date of invoice.

Only the following eight specified

categories, the service provider
providing service as individual,
HUF or in partnership were allowed
to pay service tax on receipt basis :
i)
Chartered Accountant
ii)
Cost Accountant
iii)
iii) Company Secretary
iv) Technical Consultancy
v)
Interior
Decorator
vi)
Consulting Engineer vii) Architect
viii) Legal Services, the provider of
service was allowed to pay service
tax on receipt basis
Continuous supply of service
means any service which is
provided, or to be provided
continuously, under a contract, for a
period exceeding three months, or
where the Central Government, by
a notification in the Official
Gazette, prescribes provision of a
particular service to be a continuous
supply of service, whether or not
subject to any condition.
No such provision exist

Rule 7
Point
Taxation
Rules

of
of

Meaning
of
aggregate
value
in
threshold
limit
exemption

Definition of
Capital Goods
Rule 2(a) of
Cenvat Credit
Rules, 2004

Definition of
Input Services
Rule 2(l) of
Cenvat Credit
Rules, 2004

Determination

aggregate value means the sum total

of value of taxable services charged in
the first consecutive invoices issued
during a financial year. With
introduction of Point of Taxation Rules,
the exemption limit is based on the total
value of taxable services charged instead
of receipts
Motor Vehicles are now covered within
the definition of Capital Goods except
followings (i) Motor Vehicle for
transport of ten or more persons
including driver; (ii) Motor Cars and
Vehicles designed for transport of
persons including station wagons and
racing cars; (iii) Motor Vehicle for
transport of goods; (iv) Motor cycles
including mopeds and cycles fitted with
an auxiliary motor, with or without side
cars; (v) And chasis of (i) to(iv)
However, service provided by (a)
Courier agency; (b) Tour Operator; (c)
Rentacab operator; (d) Cargo handling
agency; (e) Goods Transport Agency; (f)
Outdoor caterer; (g) Pandal Shamiana
Contractor Would be eligible to consider
above motor vehicle as a Capital goods.
Motor Vehicle used under the Service
category of Supply of tangible goods,
Insurer providing general insurance and
authorized service stations are excluded
from the definition of Input Services
subject
to
certain
conditions.
Accordingly, Rentacab operator and
Transfer agent can avail the Cenvat
when they use Motor Vehicle.
If assessee is not able to determine the

aggregate value not exceeding ten

lakh rupees means the sum total of
first consecutive payments received
during a financial year.

Motor Vehicles of any kind were

not covered within the definition of
Capital Goods.

Motor Vehicle is used by - (a)

Insurer
providing
general
insurance; (b) Rentacab operator;
(c) Transfer agents were excluded
from the definition of Input
Services. However, if it is used
forthe provision of taxable service,
it would be considered as Input
Service.
Gross amount charged for the

of Value of
Works
Contract

Rule 2A of
Service
tax
Determination
of Value Rules

value of WC as per the existing scheme

of taxation, in such a situation, one more
simplified method of calculation of
service tax liability is proposed as
under: a. Value for execution of Original
works i.e. all new Construction and all
types of addition and alteration to
abandoned or damaged structures on
land that are required to make them
workable, service tax payable would be
40% of the total amount charged for the
WC. If Gross amount charged includes
value of land, service tax payable would
be 25% of the total amount charged. b.
Value for execution of works contracts,
other than contracts for execution of
original works, including contracts for
completion and finishing services such
as glazing, plastering, floor and wall
tiling, installation of electrical fittings,
service tax payable would be 60% of the
total amount charged for the works
contract. Total Amount means sum total
of value of all goods and services
including free supply but excluding the
VAT paid on goods. If Value of free
supply cannot be ascertained then it
shall be determined on Fair Market
Value that has closely available
resemblance. No CENVAT Credit of
Excise duty paid on goods whose
property is transferred. However,
assessee is eligible for Cenvat on
Capital Goods and Input Services.

Works Contract (WC) less the value

of transfer of property in goods
involved in execution of the said
WC. Gross amount should not
include VAT or Sales Tax paid on
actual value of transfer of property
in goods.