Summary of Indirect Taxes Amendments by Budget 2015 with Effective Dates

(I) CENTRAL EXCISE

AMENDMENTS IN RATE OF EXCISE DUTY

1. Basic Excise Duty Rate – I Schedule of CETA, 1985

Basic Excise Duty rate for most of the goods under I Schedule of CETA, 1985 is increased from 12% to 12.5%.

Effective Date: 01st March 2015

2. EC and SHEC – Finance Act, 2004 & Finance Act, 2007 respectively

No EC and SHEC will be charged on excise duty, effectively making the excise duty rate as 12.5%.

Effective Date: 01st March 2015

AMENDMENTS IN CENTRAL EXCISE ACT, 1944

1. Factors of Production for Tobacco Related Products – Explanation 3 to Section 3A

This amendment will enable the Central Government to specify more than one factor relevant to the production of notified goods under Section 3A. Accordingly, Central  Government has issued NN 4/2015 & NN 5/2015 dated 1st March 2015 to specify more factors for Chewing Tobacco / Unmanufactured Tobacco and Pan Masala respectively. In those notifications, the factors which are relevant to the production of notified goods are

a. the number of packing machines in the factory of the manufacturer and

b. the maximum packing speed at which such packing machines can be operated for packing of notified goods of various retail sale prices.

Effective Date: 01st March 2015

2. Recovery of Excise Duty without Service of Notice – Section 11A(16)

Earlier, even for non-payment of duty self-assessed and declared in the Return, service of Show Cause Notice under Section 11 was required. Only after the Demand Order was passed by the adjudicating authority, the case would go to Recovery Cell [i.e. Section 11] if the assesse has not paid the amount mentioned in Demand Order and has not gone for Appeals. After the amendment, recovery of the excise duty amount self-assessed and declared in the Return but not paid shall be recovered as per the modes given under Section 11 [i.e. Case would be transferred Recovery Cell], without service of any notice under Section 11A.

Effective Date: 14th May 2015

3. “Relevant Date” for SCN – Explanation 1 to Section 11A

Earlier, in case of excise dues where return was filed but after due-date, it was not clear as to what would be the relevant date for SCN. After the amendment, it has been clarified that in case of excise dues, where the return was filed before or after the due-date, then the relevant date for SCN is date of filing of return. Also, in case of payment of interest only, the relevant date for SCN would be date of payment of duty to which the interest relates.

Effective Date: 14th May 2015

4. Changes in Penalty Provisions – Section 11A(5)/(6)/(7) and Section 11AC

A. Penalty in Bona-Fide Cases

Before Amendment

No Penalty

After Amendment

The benefit of reduced penalty [i.e. 25% of Basic Penalty i.e. 2.5% of Excise Duty] would be available in following cases:

a. If the penalty imposed by the Central Excise Officer by way of a demand order, then the benefit of reduce penalty shall be admissible if the excise duty, interest and reduced penalty is paid within 30 days of such order; and

b. If the excise duty amount gets increased in any appellate proceeding, then penalty amount shall also stand increased accordingly, then the benefit of reduced penalty will be only for increased amount of penalty (and not for penalty determined by CEO) if excise duty, interest and reduced penalty is paid within 30 days of such appellate order.

B. Penalty in Fraudulent Cases

Before Amendment

After Amendment

The benefit of reduced penalty [i.e. 25% of Excise Duty] would be available in following cases:

a. If the penalty imposed by the Central Excise Officer by way of a demand order, then the benefit of reduce penalty shall be admissible if the excise duty, interest and reduced penalty is paid within 30 days of such order; and

b. If the excise duty amount gets increased in any appellate proceeding, then penalty amount shall also stand increased accordingly, then the benefit of reduced penalty will be only for increased amount of penalty (and not for penalty determined by CEO) if excise duty, interest and reduced penalty is paid within 30 days of such appellate order.

Fraudulent cases where the details relating to such transactions are recorded in the specified record for the period beginning with 8th April, 2011 up to the date on which the Finance Bill, 2015 receives the assent of the President (i.e. 14th May 2015) (both days inclusive), the penalty shall be 50% of the Excise Duty.

This amendment has rationalized penalty provision. The penalty provision for all the fraud cases, whether the transactions are captured in records or not is the same. The benefit of the reduced penalty in cases where the transactions were captured in records and the payment is made before receipt of SCN has been removed.

Effective Date: 14th May 2015

5. Power of Central Government to make Rules – Section 37(4)/(5)

Section 37 empower Central Government to frame rules. It also provides for penalty of Rs.2,000 in some cases. Amount of such penalty is increased to Rs.5,000. Consequential amendment is also made in Rule 25(1) of CER, 2002.

Effective Date: 14th May 2015

6. III Schedule to CEA, 1944

III Schedule to CEA, 1944 provide for goods in which case packing / repacking / labeling / re-labelling shall amount to manufacture and accordingly excise duty needs to be discharged on such activity. Scope of this Schedule is increased to include more goods under it.

Effective Date: 14th May 2015

AMENDMENTS IN CENTRAL EXCISE (REMOVAL OF GOODS AT CONCESSIONAL RATE OF DUTY FOR MANUFACTURE OF EG) RULES, 2001

Application by Manufacturer to obtain the benefit – Proviso to Rule 3(3)

An assessee having clean records can avail the benefit of these rules and remove the goods at concessional rate by submitting Letter of Undertaking instead of submitting Bond.

Effective Date: 01st March 2015

AMENDMENTS IN CENTRAL EXCISE RULES, 2002

1. Simplification in Registration Process – Rule 9

Registration process for Service Tax has been simplified and amended. In this regard Noti. No. 7/15 has been issued, prescribing documentation, time limits and procedure for registration. Following are the key instructions specified in the said order:

• Online registration is mandatory;
• Requirement of PAN No. is mandatory for registration;
• Registration Certificate downloaded from ACES web site would be accepted as proof of registration dispensing with the need of signed copy
• Applicant shall quote the email address and mobile number. Further, existing registrants who have not submitted this information are required to file an amendment application by 30-05-2015.
• Documentation required to be submitted along with registration certificate has also been specified, which are as follows:

Effective Date: 01st March 2015

2. Invoice can now be Authenticated Digitally and Records can be preserved in Electronic Form – Rule 11 (8)/(9) & Rule 10(4)/(5)

An invoice issued by the manufacturer under this act can now be authenticated by way of digital signatures. However, duplicate copy for transported needs to be self-attested by manufacturer. Further, option is given to preserve records as specified under these rules in electronic form and every page of the record so preserved shall be authenticated by means of a digital signature. The conditions and procedure in this regard shall be specified by the CBEC.

Effective Date: 01st March 2015

3. Invoice can contain the details of the Buyer as well as the Consignee – 2nd / 3rd / 4th Provisos to Rule 11(2)

Clarification provided for business procurement process of “Bill To – Ship To” is provided. In such cases, the invoice should contain the detains of the buyer (manufacturer / service provider / registered dealer / importer) as well as the details of the consignee (job worker / otherwise)

Effective Date: 01st March 2015

4. Recovery of Excise Duty without Service of Notice – Rule 8(4)

This amendment is more in form of clarification after the amendment of Rule 8(3A) by FA, 2014.

Effective Date: 01st March 2015

5. Late Fees for Late Filing of Return or Statement – Rule 12(6) / Rule 17(6)

Before the amendment, there was no separate penal clause for charging penalty for late filing of Excise Return / Statement. Under general clause, penalty for late filling of return was levied. The amendment provides for a specific penalty of Rs.100 / day subject to maximum of Rs.20,000/-.

Effective Date: 01st March 2015

6. CER, 2002 applicable to Registered Importer also – Rule 11(7), Rule 12 CCC, Rule 22(2)/(3) & Rule 25(1)

FA, 2014 made mandatory to Import Dealer to get registered under Excise, if he wish to pass-on the CCR like registration requirement for FSDSSD. However, many rules in CER, 2002 governing FSD/SSD were not made applicable for Importer Dealer. Now the same are also made applicable to Import Dealer as well.

Effective Date: 01st March 2015

7. Sale to 100% EOU is not Export – Explanation to Rule 18

After this amendment, litigation w.r.t rebate on supply of goods to 100% EOU will come to any end i.e. it will not be treated as export. Consequential amendment have been made in Rule 5 of CCR, 2004.

Effective Date: 01st March 2015

8. Increase in Penalty Amount – Rule 25(1)

Consequent to amendment in Section 37(4)/(5), penalty amount in Rule 25(1) is also increased from Rs.2,000 to Rs.5,000.

Effective Date: 14th May 2015

(II) SERVICE TAX

AMENDMENTS IN FINANCE ACT, 1994

1. Rate of Service Tax – Section 66-B

A. Basic Service Tax Rate under Charging Section – Section 66-B

Basic Service Tax rate mentioned in Section 66-B is changed 12% to 14%.

Effective Date: 01st June 2015

B. EC SHEC – Finance Act, 2004 & Finance Act, 2007 respectively

No EC and SHEC will be charged on service tax, effectively making the service tax rate as 14%.

Effective Date: 01st June 2015

C. Swachh Bharat Cess (SBC) – Section 117 of Finance Act, 2015

SBC will be charged along with basic service tax on the value of the services, effectively making the service tax rate as 16% (14% + 2%).

Effective Date: To be Notified

Comment: Cess is generally calculated on Tax. However, the amendment proposed levies the cess on Value of Service. Therefore, if the same would be implemented the total rate of service tax would be 16%. FM has kept the option of levying this even on selected services w.e.f. a date to be notified.

2. Definition of Service – Explanation 2 to Section 65-B(44)

Explanation 2 to Section 65B (44) has been substituted to clarify that following activities would not be covered by the exclusion part of service under “Mere Transaction in Money and Actionable Claim” thus, they would be taxable service:

A. Service by Lottery Distributor or Selling Agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind

B. Service by Foreman of Chit Funds for conducting or organising a chit

A. Service by Lottery Distributor or Selling Agent – Taxable

Earlier also service by lottery distributor or selling agent was taxable. However, doubts were raised regarding its taxability as the transaction in lottery as such “transaction in actionable claim”, which is not taxable. Now all such doubts are put to rest. Transaction in lottery is not taxable as such. However, activity carried out by a lottery distributor or selling agent in relation to promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any manner would now be a taxable service.

Related Amendments

a. Explanation to Section 66D(i) [i.e. Negative List] has been inserted to clarify the taxability of services provided by lottery distributor or selling agent.

b. Definition of “lottery distributor or selling agent” has been inserted in Section 65-B (31A)

c. The definition of “Consideration” attached as an Explanation to Valuation provision [i.e. Section 67] has been amended to include amount retained by the distributor or selling agent of lottery from gross sale amount of lottery ticket in addition to the fee or commission or discount received [i.e. Margin].

B. Service by Foreman of Chit Funds – Taxable

Earlier, the entire chit fund installments were intended to be taxed. However, the decision on Hon’ble Delhi High Court in the case of Delhi Chit Fund Association case held that chit fund transaction is not a service and thus, not taxable. Even, service by foreman of chit funds was held to be not taxable. Now, the chit fund transaction which are mere transaction in money or actionable claim are not taxable. However, activity carried by a foreman of chit funds for conducting or organizing a chit in any manner is propose to tax would now be a taxable service.

Related Amendments

a. Definition of “foreman” has been inserted in Section 65-B (23A).

b. AN 26/2012, which provided for abatement in relation to the chit fund has been deleted, which implies that the entire commission received by foreman would be taxable. Also, he can avail credit under CCR, 2004.

3. Negative List – Section 66-D

A. Any Services provided by the Government / Local Authority to Business Entity – Section 66-D(a)(iv) – Taxable

The amendment has widened the scope of taxability by replacing “support services” by “any service”. Now, any service provided by the Government / Local Authority to a Business Entity would be taxable. It is important to note that the business entity receiving such service would be person liable to pay service tax under reverse charge if the business entity is located in taxable territory.

Effective Date: To be Notified

Related Amendments

a. Definition of “Government” has been inserted in Section 65-B(26A).

b. Definition of the “Support Service” has been omitted in Section 65-B(49).

B. Manufacture / Production of Alcoholic Liquor for Human Consumption – Section 66 D(f) – Taxable

The amendment has widened the scope of taxability. Services by way of carrying out any process amounting to manufacture or production alcoholic liquor for human consumption would be taxable.

Effective Date: 01st June 2015

Comment: Alcoholic liquor for human consumption is a State Subject covered under Entry 51 of List II of the Schedule VII of the Constitution. Hence, this amendment encroaches into the State Subject without the authority, which can be challenged.

Related Amendments

a. Definition of the word “process amounting to manufacture” has been amended in Section 65-B(40) to state remove manufacture of alcoholic liquors for human consumption.

b. MEN 25/2012 has been amended to remove the exemption of carrying out an intermediate production process as job work in relation to alcoholic liquor for human consumption.

C. Amusement Facilities and Entertainment Events – Section 66 D(j) – Taxable

The amendment has widened the scope of taxability. Now, admission to entertainment events or access to amusement facilities would be taxable.

Effective Date: 01st June 2015

Comment: Entertainment Events or Access to Amusement Facilities is a state subject covered under Entry 62 of List II of the Schedule VII of the Constitution. Hence, this amendment encroaches into the State Subject without the authority, which can be challenged.

Related Amendments

a. Definition of the “Amusement Facilities” and “Entertainment Events” has been omitted in Section 65-B(9) and Section 65-B(24).

b. Consequently, MEN 25/2012 has been amended to provide exemption for the following:

• Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo
• Services by way of right to admission to

i. exhibition of cinematographic film, circus, dance, or theatrical, performance including drama or ballet

ii. recognized sporting event

iii. award function, concert, pageant, musical performance or any sporting event other than a recognized sporting event, where the consideration for admission is not more than Rs.500 per person

4. Principles of Interpretation – Section 66F(1)

An illustration has been added after Section 66F (1) to illustrate that main service does not include ancillary service or sub-service.

Effective Date: 14th May 2015

5. Definition of Consideration for Valuation – Explanation to Section 67

The definition of “Consideration” attached as an Explanation to Valuation provision [i.e. Section 67] has been amended to include two aspects:

a. amount of re-imbursement of expenses incurred in provision of output service. Thus, re-imbursement of expenses would be now taxable.

b. amount retained by the distributor or selling agent of lottery from gross sale amount of lottery ticket in addition to the fee or commission or discount received [i.e. Margin].

Effective Date: 14th May 2015

Comment: Earlier, amount of re-imbursement of expenses incurred in course of providing service was includible the value of taxable service in terms of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006. However, Hon’ble Delhi High Court in case of M/s. Intercontinental Consultants & Technocrats (P) Ltd. held that Rule 5(1) is ultra-vires Section 67 and thus such re-imbursement of expenses were not included in the value of taxable service in terms of Section 67 and thus, they were not taxable. This amendment has effectively overruled the judgment of Delhi High Court.

6. Recovery of Service Tax without Service of Notice – Section 73(1B)

Earlier, even for non-payment of tax self-assessed and declared in the Return, service of Show Cause Notice under Section 73(1) was required. Only after the Demand Order was passed by the adjudicating authority, the case would go to Recovery Cell [i.e. Section 87] if the assesse has non-paid the amount mentioned in Demand Order and has not gone for Appeals. After the amendment, recovery of the service tax amount self-assessed and declared in the Return but not paid shall be recovered as per the modes given under Section 87 [i.e. Case would be transferred Recovery Cell], without service of any notice under Section 73(1).

Effective Date: 14th May 2015

7. Changes in Penalty Provisions – Section 73(4A), Section 76, Section 78 and Section 80

A. Penalty in Bona-fide Cases

Before Amendment

After Amendment

The benefit of reduced penalty [i.e. 25% of Basic Penalty i.e. 2.5% of Service Tax] would be available in following cases:

a. If the penalty imposed by the Central Excise Officer by way of a demand order, then the benefit of reduce penalty shall be admissible if the service tax, interest and reduced penalty is paid within 30 days of such order; and

b. If the service tax amount gets increased in any appellate proceeding, then penalty amount shall also stand increased accordingly, then the benefit of reduced penalty will be only for increased amount of penalty (and not for penalty determined by CEO) if service tax, interest and reduced penalty is paid within 30 days of such appellate order.

Effective Date: 14th May 2015

B. Penalty in Fraud Cases – Section 78 and Section 73(4A)

Before Amendment

After Amendment

The benefit of reduced penalty [i.e. 25% of Service Tax] would be available in following cases:

a. If the penalty imposed by the Central Excise Officer by way of a demand order, then the benefit of reduce penalty shall be admissible if the service tax, interest and reduced penalty is paid within 30 days of such order; and

b. If the service tax amount gets increased in any appellate proceeding, then penalty amount shall also stand increased accordingly, then the benefit of reduced penalty will be only for increased amount of penalty (and not for penalty determined by CEO) if service tax, interest and reduced penalty is paid within 30 days of such appellate order.

Fraudulent cases where the details relating to such transactions are recorded in the specified record for the period beginning with 8th April, 2011 up to the date on which the Finance Bill, 2015 receives the assent of the President (i.e. 14th May 2015) (both days inclusive), the penalty shall be 50% of the Service Tax.

Effect of Amendment: This amendment has rationalized penalty provision. The penalty provision for all the fraud cases, whether the transactions are captured in records or not is the same. The benefit of the reduced penalty in cases where the transactions were captured in records and the payment is made before receipt of SCN has been removed. Also, the benefit of making the payment of penalty within 90 days of order for Small Service Provider has been removed.

Effective Date: 14th May 2015

C. Transitional provision for Section 76 and Section 78 – Section 78 B

A new Section 78B is being proposed for fixing the effective date for the new penal provision as under:

Effective Date: 14th May 2015

D. Waiver or Reduction of Penalty – Section 80

This deletion makes the penalties under all penal provisions – Section 76, Section 77 and Section 78 mandatory.

Effective Date: 14th May 2015

8. Rejection of Rebates Appeal jurisdiction changed to Central Government – Section 86(1)

Earlier, for the rejection of the rebate of service tax of the input service and rebate of duty paid on the inputs claimed in relation to exported output service, the appeal was put before the CESTAT. After the amendment, such matters involving rebate of tax or duty shall be dealt with Central Government in terms of Section 35EE of the Central Excise Act, 1944. Also, the cases filed before the CESTAT for the between 2012 and this enactment would be transferred from CESTAT to CG [i.e. Revision Authority].

Effective Date: 14th May 2015

9. Extended the scope of power to make rules by the Central Government – Section 94(2)(aa)

Now, the Central Government is also empowered to make rules where the amount shall not be treated as consideration.

Effective Date: 14th May 2015

AMENDMENTS IN SERVICE TAX RULES, 1994

1. Changes in Reverse Charge Mechanism – Rule 2(1)(d) read along with NN 30/2012

A. New Reverse Charge Entries

a. Service by Mutual Fund Agent or Distributor

Earlier, such taxable services were exempted as they were covered under MEN 25/2012. Thus, no question of any service tax on such services. After the amendment, such service are omitted from MEN 25/2012, thus making such taxable services, chargeable to service tax.  However, 100% service tax would be paid by service recipient as it is falling under reverse charge mechanism.

Effective Date: 01st April 2015

b. Service by a Selling or Marketing Agent of Lottery Tickets

Earlier, such taxable services were exempted as they were covered under MEN 25/2012. Thus, no question of any service tax on such services. After the amendment, such service are omitted from MEN 25/2012, thus making such taxable services, chargeable to service tax.  However, 100% service tax would be paid by service recipient as it is falling under reverse charge mechanism.

Effective Date: 01st April 2015

c. Service involving Aggregator

Earlier, such aggregators were paying service tax only on their commission received from the service providers. After the amendment, such aggregators have to pay service tax on the entire amount received from the service recipient (including their commission) on behalf of the service provider

Effective Date: 01st March 2015

B. Change from Joint Charge to Reverse Charge Entry

a. Supply of manpower and security agency services

Earlier, service recipient was required to pay 75% of service tax and service provider was required to pay 25% of service tax if the prescribed conditions mentioned were satisfied. Now, service recipient would be required to pay 100% of service tax if the prescribed conditions mentioned are satisfied.

Effective Date: 01st April 2015

2. Simplification in Registration Process – Rule 4

Registration process for Service Tax has been simplified and amended. In this regard Order No. 1/15 has been issued, prescribing documentation, time limits and procedure for registration. Following are the key instructions specified in the said order:

• Requirement of PAN No. is mandatory for registration;
• Registration for single premises shall be granted within two days of filing the application.
• Registration Certificate downloaded from ACES web site would be accepted as proof of registration dispensing with the need of signed copy
• Applicant shall quote the email address and mobile number. Further, existing registrants who have not submitted this information are required to file an amendment application by 30-4-2015.
• Documentation required to be submitted along with registration certificate has also been specified, which are as follows:

Effective Date: 01st March 2015

3. Invoice can now be Authenticated Digitally and Records can be preserved in Electronic Form – Rule 4C & Rule 5(4)/(5)

Any invoice, bill, challan or a consignment note issued under this act can now be authenticated by way of digital signatures. Further, option is given to preserve records as specified under these rules in electronic form and every page of the record so preserved shall be authenticated by means of a digital signature. The conditions and procedure in this regard shall be specified by the CBEC.

Effective Date: 01st March 2015

4. Recovery of service tax without Service of Notice – Rule 6(6A)

This a consequential amendment of amendment in Section 73(1B). As the core content of Rule 6(6A) is now incorporated in Section 73(1B), there is no need of Rule 6(6A) and thus, it is omitted.

Effective Date: 14th May 2015

5. Revision of Rate for Compounding Schemes

In respect of certain services like money changing service, service provided by air travel agent, insurance service and service provided by lottery distributor and selling agent, the service provider has been allowed to pay service tax at an alternative rate subject to the conditions as prescribed under the Service Tax Rules, 1994. Consequent to the upward revision in Service Tax rate, the said alternative rates has been revised proportionately as tabulated below:

A. Air Travel Agent

Effective Date: 01st June 2015

B. Insurer Carrying on Life Insurance Business

Effective Date: 01st June 2015

C. Sale / Purchase of Foreign Currency including Money Changing

Effective Date: 01st June 2015

D. Services of promotion, marketing or organising/assisting in organising lottery

Effective Date: 01st June 2015

AMENDMENTS IN NOTIFICATIONS

1. Withdrawal of Exemption benefit to Commission Agent – EN 42/2012

This exemption has become redundant in view of the amendments made in law in the previous budget (i.e. Budget 2014) in the definition of “intermediary” in the Place of Provision of Services Rules, 2012.

2. Enhancement of GTA Exemption with respect to Exports – EN 31/2012

Earlier, Goods Transport Agency service provided to an exporter in relation to transport of export goods by road was exempted by EN 31/2012 in case where such goods are transported from the Place of Removal to an Inland Container Depot, a Container Freight Station, a Port or Airport. Now the scope of this exemption is widened to transport of such goods from Place of Removal even to the Land Customs Station is exempted.

Effective Date: 01st April 2015

3. Mega Exemption Notification 25/2012

A. New Exemptions

a. Life Insurance Service

Life insurance service provided by way of Varishtha Pension Bima Yojana is now exempted.

Effective Date: 01st April 2015

b. Operation of Common Effluent Treatment Plant

Service provided by operator of Common Effluent Treatment Plant for treatment of effluent is now exempted.

Effective Date: 01st April 2015

c. Certain Post-Agricultural Processes

Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables is being exempted.

Effective Date: 01st April 2015

d. Admission to a Museum, National Park, etc.

Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo is now exempted.

It is consequential amendment to amendment in Section 66-D relating to access to amusement facilities and admission to entertainment events.

Effective Date: 01st April 2015

e. Services by way of Right to Admission to Specified Events

Services by way of right to admission to

i. exhibition of cinematographic film, circus, dance, or theatrical, performance including drama or ballet

ii. recognized sporting event

iii. award function, concert, pageant, musical performance or any sporting event other than a recognized sporting event, where the consideration for admission is not more than Rs.500 per person

is now exempted.

It is consequential amendment to amendment in Section 66-D relating to access to amusement facilities and admission to entertainment events.

Effective Date: 01st June 2015

f. Services of exhibition of movie by exhibitor to distributor is exempted

Service provided by way of exhibition of movie by an exhibitor to the distributor or an association of persons consisting of the exhibitor as one of its members is now exempted.

Effective Date: 01st April 2015

B. Exemptions Withdrawn

a. Certain Construction / Repair Services provided to Government / Local Authority / Governmental Authority

Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

1. a civil structure or  any other original works meant predominantly for  use other than for commerce, industry, or any other business or profession;
2. a structure meant predominantly for use  as (i) an educational, (ii) a clinical, or  (iii) an art or cultural establishment;
3. a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to Section 65 B(44) of the said Act;

is now taxable.

Effective Date: 01st April 2015

b. Construction Service of Airport or Port

Services by way of construction, erection, commissioning, or installation of original works pertaining to, an airport or port is now taxable.

Effective Date: 01st April 2015

c. Service by Mutual Fund Agent / Distributor / Selling or Marketing Agent of Lottery Tickets

Services by the following persons in respective capacities –

i. mutual fund agent to a mutual fund or asset management company;

ii. distributor to a mutual fund or asset management company;

iii. selling or marketing agent of lottery tickets to a distributer or a selling agent;

is now taxable.

Effective Date: 01st April 2015

d. Certain Public Telephone Services

Services by way of making telephone calls from –

i. departmentally run public telephone;

ii. guaranteed public telephone operating only for local calls; or

iii. free telephone at airport and hospital where no bills are being issued;

is now taxable.

Effective Date: 01st April 2015

C. Rationalization of Exemptions

a. Ambulance Services

Any service provided by way of transportation of a patient to and from a clinical establishment by a clinical establishment was already exempted from Service Tax. The scope of this exemption is being widened to include all ambulance services.

Effective Date: 01st April 2015

b. Service by an Artists by way of Performance in Folk or Classical Art Forms

Exemption to services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theatre, is now limited only to such cases where the amount charged the artist is upto Rs.1,00,000 for the performance.

Effective Date: 01st April 2015

c. Transportation of Foodstuff by Rail, Road or Vessel

Exemption to transportation of food stuff by rail, or vessels or road is now limited to the transportation of food grains, flour, pulses, rice, milk and salt. Therefore, transportation by rail, or vessels or road of tea, coffee, jaggery, sugar, milk products and edible oil is now taxable.

Effective Date: 01st April 2015

d. Intermediate Production Process as Job Work

MEN 25/2012 has been amended to remove the exemption of carrying out an intermediate production process as job work in relation to alcoholic liquor for human consumption.

Effective Date: 01st June 2015

4. Abatement Notification 26/2012

A. Abatement Withdrawn

a. Chit Fund

AN 26/2012, which provided for abatement in relation to the chit fund has been deleted, which implies that the entire commission received by foreman would be taxable. Also, he can avail credit under CCR, 2004.

Effective Date: 01st April 2015

B. Rationalization of Abatement

a. Transportation of Goods

A uniform abatement is now being prescribed for transport by Rail, Road and Vessel. Service Tax shall be payable on 30% of the value of such services subject to a uniform condition of non-availment of CCR on inputs, capital goods and input services.

Effective Date: 01st April 2015

b. Transportation of Passengers

At present, Service Tax is payable on 40% of the value of air transport of passenger for economy as well as higher classes, e.g. business class. The abatement for classes other than economy is being reduced and service tax would be payable on 60% of the value of such higher classes. Also, for transportation of passengers by rail, condition of non-availment of CCR on inputs, capital goods and input services has been inserted.

Effective Date: 01st April 2015

(III) CENTRAL EXCISE & SERVICE TAX

AMENDMENTS IN CENVAT CREDIT RULES, 2004

1. CCR, 2004 applicable to Registered Importer also – Rule 9(4), Rule 12 AAA, Rule 22(2)/(3) & Rule 25(1)

FA, 2014 made mandatory to Import Dealer to get registered under Excise, if he wish to pass-on the CCR like registration requirement for First Stage Dealer (FSD) / Second Stage Dealer (SSD). However there were many rules in CCR, 2004 governing FSD/SSD which were not made applicable for Import Dealer. However, now the same are also made applicable to Import Dealer as well.

Effective Date: 01st March 2015

2. Increase in Time Limit for Availment of CCR on Inputs & Input Services – 3rd Proviso to Rule 4(1) & 6th Proviso to Rule 4(7)

Till September 1, 2014, there was no time limit prescribed under the CCR, 2004 for availment of CCR. However, effective from September 1, 2014, the said liberty in respect of availment of CCR on Inputs / Input Services was withdrawn by amending Rule 4(1) [for Inputs] and Rule 4(7) [for Input services] of the CCR, 2004 in order to fix a time limit of 6 months from the date of issue of any of the documents specified in Rule 9(1) thereof, for availment of the CCR.

Considering the hue and cry created in the Industry, the Union Budget, 2015 has enhanced the stated time limit (effective from March 1, 2015) for availing CCR on Inputs and Input services to 1 year (as against 6 months earlier) from the date of issue of any of the documents specified in Rule 9(1) of the CCR, 2004.

Effective Date: 01st March 2015

3. Conditions for Availment of CCR on Inputs & Capital Goods – Rule 4(1) & Rule 4(2)(a)

The following changes have been made by the amendment:

a. Hitherto, CCR on Inputs was available only on receipt of Inputs in the factory of the manufacturer or in the premises of the provider of output service. After the amendment, CCR of Inputs can be taken immediately on receipt of Inputs in the premises of the job worker, in case where the Inputs are sent directly to the job worker’s premises on the direction of the manufacturer or the provider of output service.

b. Hitherto, CCR on Capital Goods was available only on receipt of Capital Goods in the factory of the manufacturer or in the premises of the provider of output service or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory. After the amendment, CCR on Capital Goods can be taken immediately on receipt of the Capital Goods in the premises of the job worker, in case where the Capital Goods are sent directly to the job worker’s premises on the direction of the manufacturer or the provider of output service.

Therefore, now the manufacturer or the output service provider would be able to dispatch the Inputs / Capital goods directly to the job workers’ premises and avail CCR, thereby removing the blockage in CCR when Inputs / Capital goods are directly sent to job worker’s premises.

Effective Date: 01st March 2015

4. Conditions for Availment of CCR on Input Services – 1st 3 Provisos of Rule 4(7)

Hitherto, CCR of service tax paid by service recipient under partial reverse charge can be availed by the service recipient only on the payment of service tax to the CG and payment of service charges to the service provider. After the amendment, CCR of service tax paid by the service recipient under partial reverse charge can be availed immediately by the service recipient after payment of service tax to CG, irrespective whether payment for value of service to service provider is made or not.

Effective Date: 01st April 2015

5. Goods sent to Job Worker – Rule 4(5)(a)

The following changes have been made by the amendment:

a. Inputs and Capital Goods can be sent to job worker’s premises directly without worrying for CCR eligibility.

b. Inputs and Capital Goods can be sent from one job worker’s premises to another job worker’s premises without worrying for CCR eligibility.

c. The time limit for having the Capital Goods in job worker’s premises without reversal of CCR has been increased from 180 days to 2 Years.

Effective Date: 01st March 2015

6. Sale to 100% EOU is not Export – Clause (1A) to Explanation 1 to Rule 5

After this amendment, litigation w.r.t rebate on supply of goods to 100% EOU will come to any end i.e. it will not be treated as export. Consequential amendment have been made in Rule 18 of CER, 2002.

Effective Date: 01st March 2015

7. Non-Excisable Goods to be treated as Exempted Goods – Explanation 1 & Explanation 2 to Rule 6(1)

After this amendment, litigation w.r.t. whether non-excisable goods are to be treated as exempted goods or not will come to any end i.e. they would be treated as exempted goods. This would increase the scope of Rule 6 drastically.

Effective Date: 01st March 2015

8. Recover of CCR wrongly taken or erroneously refunded – Rule 14

The following changes have been made by the amendment:

a. Wrongly availed CCR will also be recovered by CG

b. Mechanism is provided for determining when is utilised wrongly CCR. Confusion was there as to whether FIFO / LIFO method is to be followed in this regards. Now it has been clarified that all credits taken during a month shall be deemed to have been taken on the last day of the month and the utilisation thereof shall be deemed to have occurred in the following manner, namely:

i. the opening balance of the month has been utilised first;

ii. credit admissible taken during the month has been utilised next;

iii. credit  inadmissible  taken  during  the  month  has been utilised thereafter

Effective Date: 01st March 2015

9. Confiscation & Penalty – Rule 15

The amendment has linked penalty provision relating to booking and utilization of CCR wrongly in bonafide cases and fraudulent cases with CEA, 1944 for a manufacturer and FA, 1994 for a service provider.

Effective Date: 14th May 2015

10. Utilization of CCR of EC and SHEC against BED – 3rd, 4th and 5th Provisos to Rule 3(7)(b)

After this amendment, CCR EC and SHEC on the Inputs, Capital Goods and Input Services can be used against BED on FP in the following cases only:

a. In case where Inputs are received on or after 1st of March 2015 with EC and SHEC being levied on them

b. In case where Capital Goods purchased in FY 2014-15, 50% of CCR of EC & SHEC CCR which can be availed only in FY 2015-16

c. In case where Input Services are procured on or after 1st of March 2015 with EC and SHEC being levied on them

Effective Date: 30th April 2015

(IV) CUSTOMS

AMENDMENTS IN CUSTOMS ACT, 1962

1. Penalty Provisions – Proviso to Section 28(2) & Section 28(5)

Following changes are made by the amendment:

a. No penalty in bonafide cases, if the assessee pays the duty along with interest within 30 days of the notice.

b. Penalty in bonafide cases is reduced from 25% to 15% if the assessee pays the duty along with interest and 15% penalty within 30 days of the notice.

It is also clarified if the SCN is issued before 14th May 2015 and no order is passed, the benefit of no penalty and reduced penalty as discussed above will be applicable if the duty, interest and penalty (if any) is paid within 30 days of 14th May 2015.

Effective Date: 14th May 2015

2. Penalty in case of Improper Importation of Goods & Improper Export of Goods – Section 112(b)(ii) & Section 114(ii)

a. Improper Import: Section 112 is being amended to provide that any person who acquires possession of or is in any way concerned with or in any other manner deals with any dutiable goods, other than prohibited goods, which he knows or has reasons to believe are liable to confiscation under Section 111, shall, subject to the provisions of section 114A, be liable to a penalty not exceeding 10% of the duty sought to be evaded of Rs.5000, whichever is greater. Earlier the penalty was equal to duty sought to be evaded on such goods or Rs.5,000, whichever was greater.

b. Improper Export: Section 114 is being amended to provide that any person who does or omits to do any act with any dutiable goods, other than prohibited goods, which he knows or has reasons to believe are liable to confiscation under Section 113, shall, subject to the provisions of section 114A, be liable to a penalty not exceeding 10% of the duty sought to be evaded of Rs.5000, whichever is greater. Earlier the penalty was equal to duty sought to be evaded on such goods or Rs.5,000, whichever was greater.

It is also being provided that in cases of short levy or non-levy or short payment or non-payment and erroneous refund of duty for reasons of fraud, collusion, etc., if the duty as determined under Section 28(8) and the interest under Section 28AA is paid within 30 days from the date of communication of the order of the PO, the amount of penalty liable to paid by such person under this section shall be 25% of the penalty so determined.

Effective Date: 14th May 2015

(V) COMMON TOPICS

AMENDMENTS IN SETTLEMENT COMMISSION

1. Definition of Case – Proviso to Section 31(c) of CEA, 1944 and Proviso to Section 127A(b) of CA, 1962

After the amendment, when any proceeding is referred back, whether in appeal or revision or otherwise, by any Court, Appellate Tribunal or any other authority to the adjudicating authority for a fresh adjudication or decision, then such case shall not be entitled for settlement.

Effective Date: 14th May 2015

2. Omission of Redundant Provisions

Central Excise Act, 1944: Proviso to Section 32(3), Section 32E(1A), Section 32H and Explanation to Section 32K(1) have been omitted. Unwanted wordings in Section 32F(6) and Section 32O(1)(i)/(ii) have been omitted.

Customs Act, 1962: Section 127B(1A), Section 127C(6), Section 127E and Explanation to Section 127H(1) have been omitted. Unwanted wordings in Section 127L(1)(i)/(ii) have been omitted.

3. Member to act as Chairman –Section 32B of CEA, 1944

Now the Member of Settlement Commission is now allowed to act as Chairman in event of vacancy in the office of Chairman due to any reasons.

Effective Date: 14th May 2015

AMENDMENTS IN ADVANCE RULING

1. Advance Ruling benefit is extended to Resident Firms

Earlier the benefit of advance ruling was available only for Non-Residents, Public Sector Undertakings, Resident Public Limited Company and Resident Private Limited Company. Now the benefit of advance ruling is extended to “Resident Firm” which includes LLP, Sole Proprietorship and One Person Company.

Effective Date: 01st March 2015

YOUR VIEWS & COMMENTS ARE MOST WELCOME EVEN IF CONTRARY.

Author: Vishal Jain A, B.Com., ACA, ACS
E-mail: ca_va_jain@yahoo.com