01 March 2011

Ankur Doshi: Service Tax Changes in the Budget

Service Tax provisions of Budget 2011

Section

Sub Clause

Details

Category

65

9

Definition of Authorised Service Station omitted

Omission

25a

Definition of Clinical Establishment introduced which cover all types of hospitals with the facility of more than 25 beds and Central Air Conditioning either in whole or part of its premises offering services in any system of medicines with the exception of Government and Local Authority controlled Hospitals.

Newly Introduced

27

Definition of Commercial training or coaching centre amended to include Pre School coaching & Training centre or any educational institute granting degree, diploma or certificate recognized by law. So whether all the school and colleges are included is a question ????

Scope Expanded

104 (c)

Definition of Support Service of business or commerce amended to include administration assistance in any manner instead of only marketing.

Scope Expanded

105 (zo)

Vis-à-vis omission of definition of Authorised Service Station the taxable service definition is also amended to include any person providing service for repair, decoration, etc. of any motor vehicle except 3 wheel scooter auto rickshaw & goods carriage motor vehicle.

Scope Expanded

105 (zx)

Amends the definition of taxable service of Life Insurance Business to include all type of charges i.e. whole premium instead of only risk premium.

Scope Expanded

105 (zzze)

Amends the definition of taxable service of club & association to include services provided to non members also. Earlier these services were exempt.

Scope Expanded

105 (zzzzm)

Amends the definition of taxable service in relation to Legal Consultancy Services to include service provided by a Business entity to any person and representational services provided by any person to business entity i.e. appearing before any authorities or court. So legal consultancy services provided by an individual to an individual or business entity is still out of purview while the representational services have been made taxable.

Scope Expanded

105 (zzzzo)

Amends the definition of taxable service in relation to Health Check-up and Treatment services to include Clinical Establishment, the definition of which is provided supra and also to include visiting doctors in such establishment.

Scope Expanded

105 (zzzzv)

Service provided to any person by a restaurant having Air Conditioning in any part and holding license to serve Alcoholic Beverages

Newly Introduced

105 (zzzzw)

Service provided by any type of hotel for accommodation for continuous period of less than 3 months.

Newly Introduced

70

Penalty for late filing of Return increased from ` 2,000 to ` 20,000

Increase in Penalty

73

1 (A)

Omitted, which provided the concessional penalty of 25% of Service Tax and consequential amendment to sub section (2) is made.

Omission

4 (A)

New clause is inserted which deals with penal provision with certain provisos.

Newly Introduced

73B

Certain relaxations in interest rate to certain persons

Relaxation

75

Certain relaxations in interest rate to certain persons

Relaxation

76

Penalty for failure to pay service tax has been reduced. ` 100 per day or 1% p.m. subject to maximum 50% of service tax payable which was earlier ` 200 per day or 2% p.m. subject to maximum of service tax payable.

Relaxation

77

Penalty for any other contravention of rules where there is no penalty specified has been increased from ` 5,000 to ` 10,000.

Increase in Penalty

78

Section substituted with new provisions. Penalty has been reduced from maximum 200% to 100% with certain provisos.

Relaxation

89

Besides other provisions under the section there is one harsh provision introduced. If any person collects service tax and does not pay the same within a period of 6 months when it becomes due he shall be sent to imprisonment for a period of 1 year.

Very harsh provisions.

Certain other machiney provisions have also been inserted or amended. The above provisions shall come into effect from the date of assent of Hon'ble President to the Finance Bill.

Certain Notification have already been issued with various effective dates. Some of the notifications are as under :-

Notification No.

Details

Effective Date

1/2011

It provides that in relation to Works Contract Composition Scheme Cenvat Credit of tax paid on taxable service in respect of Commercial or Industrial Construction, Construction of Complexes and Erection, Commissioning or Installation service is allowed upto 40% of tax paid under Regular payment Scheme.

01-03-2011

2/2011

Amendment to Service Tax (Determination of Value) Rules, 2006

01-04-2011

3/2011

Amendment to Service Tax Rules

01-04-2011

4/2011

Increase in Air Fare

01-04-2011

5/2011

Exempts organizer of a Business Exhibition

01-03-2011

6/2011

Exempts certain projects under construction of complexes

01-03-2011

7/2011

Exempts certain General Insurance policies

01-03-2011

8/2011

Exempts certain transport of goods by Air, Rail or Road

01-04-2011

9/2011

Exempts certain value of transport of goods by Air

01-04-2011

10/2011

Exempts works contract services provided within Airport

01-03-2011

11/2011

Exempts works contract services provided within Port

01-03-2011

12/2011

Amendment to Export of Services Rules

01-04-2011

13/2011

Amendment to Taxation of Services (Provided from Outside India and Received in India) Rules

01-04-2011

14 & 15/2011

Rate of Interest increased from 13% to 18%

01-04-2011

16/2011

Grants abatement to transport of Coastal goods, Goods through National Waterway or Inland Water

01-03-2011

17/2011

Certain exemptions to units located in SEZ and refund provisions.

01-03-2011

18/2011

Introduction of Point of Taxation Rules

01-04-2011

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