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What are the exempted items in Service Tax? What is negative list in Service Tax law? What is the revised rate of Service Tax as per Budget 2016 w.e.f June 1 2016.

Revised Rate of Service Tax as per Budget 2016 with effect from 1st June 2016

Budget 2016 has imposed cess called Krishi Kalyan Cess @ 0.5% on all taxable services. The effective Service tax rate is 15%. The rate of Service Tax was increased from 12% plus Education Cesses to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ should be subsumed in the revised rate of Service Tax. Thus, the effective increase in Service Tax rate was from the existing rate of 12.36% (inclusive of cesses) to 14%, subsuming the cesses. On November 15, 2015, the Government of India made an announcement that it has imposed Swachh Bharat Cess at the rate of 0.5% of the taxable service. This means the new service tax would be 14.5%. Swachh Bharat Cess is levied on the entire taxable amount of the service under a separate head in invoices. Now in Budget 2016 the service tax rate has been increased to 15%.

Exempted items under Service Tax Act and Negative List

Negative List - The changes proposed in Finance Bill 2015 in the Negative List in Section 66 D are as follows:

(i) The Negative List entry that covers “admission to entertainment event or access to amusement facility” is being omitted [section 66D (j)]. Consequently, the definitions of “amusement facility” [section 65 B (9)] and “entertainment event” [section 65B(24)] are also being omitted. The implication of these changes are as follows,-

 

 

(a) Service Tax shall be levied on the service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks and theme parks.

(b) Service tax to be levied on service by way of admission to entertainment event of concerts, pageants, musical performances concerts, award functions and sporting events other than the recognized sporting event, if the amount charged is more than Rs. 500 for right to admission to such an event. However, the existing exemption, by way of the Negative List entry, to service by way of admission to entertainment event, namely, exhibition of cinematographic film, circus, recognized sporting event, dance, theatrical performance including drama and ballet shall be continued, through the route of exemption. For this purpose a new entry is being inserted in notification No. 25/12-ST. The term recognized sporting event has been defined in the proposed amendment in the said notification.

(ii) The entry in the Negative List that covers service by way of any process amounting to manufacture or production of goods [section 66D (f)] is being pruned to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption. Consequently, Service Tax shall be levied on contract manufacturing/job work for production of potable liquor for a consideration. In this context, the definition of the term “ process amounting to manufacture or production of goods” [section 65 B (40)] is also being amended, along with the Negative List entry [section 66D (f)], with a consequential amendment in S. No. 30 of notification No. 25/12-ST, to exclude intermediate production of alcoholic liquor for human consumption from its ambit.

(iii) Presently, services provided by Government or a local authority, excluding certain services specified under clause (a) of section 66D, are covered by the Negative List. Service Tax applies on the “support service” provided by the Government or local authority to a business entity. An enabling provision is being made, by amending section 66D (a)(iv), to exclude all services provided by the Government or local authority to a business entity from the Negative List. Consequently, the definition of “support service” [section 65 B (49)] is being omitted. Accordingly, as and when this amendment is given effect to, all services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax .

 


The above changes in the Negative List shall come into effect from a date to be notified later, after the enactment of the Finance Bill, 2015

As per section 66B of the Finance Act, 1994, service tax should be levied on all services except the services which are specified in Section 66D of the said Act. Negative list of Service Tax for 2013-14 as per Section 66D revised as per latest budget is give below. There are currently 17 heads of Services which are given in the “negative list”. Every activity not covered under this list is chargeable to Service Tax. So the Negative List is Very Important.

 Prior to the amendment as per Finance Bill 2015 the Negative list of Service Tax is comprised of following 17 heads. They are:
1) Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere:
a) Services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government;
b)  services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
c)  transport of goods or passengers; or
d)  Support services, other than services covered under clauses (i) to (iii) above, provided to business entities.

2) Services by the Reserve bank of India;

3) Services by a foreign diplomatic mission located in India.

4) Services relating to agriculture or agricultural produce by way of -
a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;
b) supply of farm labour;
c)  processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but make it only marketable for the primary market;
d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
e)  loading, unloading, packing, storage or warehousing of agricultural produce;
f) agricultural extension services;
g) Services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.

5) Trading of goods.

6) Any process amounting to manufacture or production of goods.

7) Selling of space or time slots for advertisements other than advertisements broadcast by radio or television.

8) Service by way of access to a road or a bridge on payment of toll charges.

9) Betting, gambling or lottery.

10)  Admission to entertainment events or access to amusement facilities.

11) Transmission or distribution of electricity by an electricity transmission or distribution utility.

 

 

12)  Services by way of  -
a)  Pre-school education and education up to higher secondary school or equivalent;
b)  Education as a part of a curriculum for obtaining a qualification recognized by law;
c)  Education as a part of an approved vocational education course.
13)  Services by way of renting of residential dwelling for use as residence;

14)  Services by way of -
a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount;
b)  inter-se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers;

15)  Service of transportation of passengers, with or without accompanied belongings, by -
a) a stage carriage;
b) railways in a class other than - (A) first class; or (B) an air conditioned coach;
c) metro, monorail or tramway;
d) inland waterways;
e) public transport, other than predominantly for tourism purpose, in a vessel between
f) places located in India; and
g) metered cabs, radio taxis or auto rickshaws;

16)  Services by way of transportation of goods
a)  by road except the services of -
i)  a goods transportation agency; or
ii)  a courier agency;
b) by an aircraft or a vessel from a place outside India up to the customs station of clearance in India; or
c)  by inland waterways;

17) Funeral, burial, crematorium or mortuary services including transportation of the deceased.
 

 Extra services included in Negative list
 There are two more services included in the negative list:
a)  Vocational courses offered by institutes affiliated to the State Council of Vocational Training; and,
b) testing activities in relation to agriculture and agricultural produce.

 

What is Service Tax? Who is liable to pay service Tax? What are taxable services?

What is Cenavat Credit on input Services in Service Tax? How to claim Cenavat Credit in Service Tax Return?

What is limitation period for demanding Service Tax? Limitation in case of service tax demand

What are the declared Services as per Finance Act 1994 in case of Service Tax? List of declared services as per Service Tax Law

What are the exempted items in Service Tax? What is negative list in Service Tax law?

 

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