Service Tax Update

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Key changes in Service Tax Act
Service Tax Alert
l

2. 2
“This proposal was floated
by the government to
facilitate the roll out for the
national goods and services
tax, expected to be rolled
out from April, 2016”.
SERVICE TAX - UPDATE
EFFECTIVE RATE OF SERVICE TAX WOULD BE 14 % WITH EFFECT FROM 1STDAY OF
JUNE, 2015
Service Tax at the rate of 14% has been notified with effect from 1st June 2015. Post enactment of Finance Act 2015, industry was waiting
for the Finance Ministry to notify the date for enhancement of service tax. Central Board of Excise & Customs has by way of notification
changed the effective rate of service tax from 12.36% to 14% with effect from 1st
June, 2015. There are certain other proposals of Finance
Act, 2015 are made effective from 1st
June 2015.
Following is the update on effective rate of Service Tax.
A. Rate of Service Tax:
1. Rate of Service Tax with effect from 1st
June, 2015 would be 14% of the gross value of the service
consideration.
2. Education Cess and Secondary & Higher Education Cess would be abolished from 1st
Day of June
2015.
An analysis of the Service Tax Rate since July, 1994 is tabulated below:
2
“This proposal was floated
by the government to
facilitate the roll out for the
national goods and services
tax, expected to be rolled
out from April, 2016”.
SERVICE TAX - UPDATE
EFFECTIVE RATE OF SERVICE TAX WOULD BE 14 % WITH EFFECT FROM 1STDAY OF
JUNE, 2015
Service Tax at the rate of 14% has been notified with effect from 1st June 2015. Post enactment of Finance Act 2015, industry was waiting
for the Finance Ministry to notify the date for enhancement of service tax. Central Board of Excise & Customs has by way of notification
changed the effective rate of service tax from 12.36% to 14% with effect from 1st
June, 2015. There are certain other proposals of Finance
Act, 2015 are made effective from 1st
June 2015.
Following is the update on effective rate of Service Tax.
A. Rate of Service Tax:
1. Rate of Service Tax with effect from 1st
June, 2015 would be 14% of the gross value of the service
consideration.
2. Education Cess and Secondary & Higher Education Cess would be abolished from 1st
Day of June
2015.
An analysis of the Service Tax Rate since July, 1994 is tabulated below:
2
“This proposal was floated
by the government to
facilitate the roll out for the
national goods and services
tax, expected to be rolled
out from April, 2016”.
SERVICE TAX - UPDATE
EFFECTIVE RATE OF SERVICE TAX WOULD BE 14 % WITH EFFECT FROM 1STDAY OF
JUNE, 2015
Service Tax at the rate of 14% has been notified with effect from 1st June 2015. Post enactment of Finance Act 2015, industry was waiting
for the Finance Ministry to notify the date for enhancement of service tax. Central Board of Excise & Customs has by way of notification
changed the effective rate of service tax from 12.36% to 14% with effect from 1st
June, 2015. There are certain other proposals of Finance
Act, 2015 are made effective from 1st
June 2015.
Following is the update on effective rate of Service Tax.
A. Rate of Service Tax:
1. Rate of Service Tax with effect from 1st
June, 2015 would be 14% of the gross value of the service
consideration.
2. Education Cess and Secondary & Higher Education Cess would be abolished from 1st
Day of June
2015.
An analysis of the Service Tax Rate since July, 1994 is tabulated below:

3. 3
Point of Taxation:
Now after amended rate, the issue of applicability of effective rate shall arise [Rule 4 of the Point of Taxation Rule and Section 67A of the Finance
Act, 1994]. CBEC has clarified that to know whether a Service has been provided or agreed to be provided for a consideration and its point
of taxable, following three ingredients are important:
 Provision of Taxable Service
Applicability of Service Tax – Period Wise Effective Rate
Period Basic Rate of Service
Tax (in %)
Ed.
Cess
H&
Ed.
Cess
Effective Rate of Service Tax
01/07/1994 to 13/05/2003 5 0 0 5.00 %
14/05/2003 to 09/09/2004 8 0 0 8.00 %
10/09/2004 to 17/04/2006 10 2 0 12.00 %
18/04/2006 to 10/05/2007 12 2 0 12.24 %
11/05/2007 to 23/02/2009 12 2 1 12.36 %
24/02/2009 to 31/03/2012 10 2 1 10.30 %
01/04/2012 to 31.05.2015 12 2 1 12.36 %
With effect from 01.06. 2015 14 0 0 14.00 %
3
Point of Taxation:
Now after amended rate, the issue of applicability of effective rate shall arise [Rule 4 of the Point of Taxation Rule and Section 67A of the Finance
Act, 1994]. CBEC has clarified that to know whether a Service has been provided or agreed to be provided for a consideration and its point
of taxable, following three ingredients are important:
 Provision of Taxable Service
Applicability of Service Tax – Period Wise Effective Rate
Period Basic Rate of Service
Tax (in %)
Ed.
Cess
H&
Ed.
Cess
Effective Rate of Service Tax
01/07/1994 to 13/05/2003 5 0 0 5.00 %
14/05/2003 to 09/09/2004 8 0 0 8.00 %
10/09/2004 to 17/04/2006 10 2 0 12.00 %
18/04/2006 to 10/05/2007 12 2 0 12.24 %
11/05/2007 to 23/02/2009 12 2 1 12.36 %
24/02/2009 to 31/03/2012 10 2 1 10.30 %
01/04/2012 to 31.05.2015 12 2 1 12.36 %
With effect from 01.06. 2015 14 0 0 14.00 %
3
Point of Taxation:
Now after amended rate, the issue of applicability of effective rate shall arise [Rule 4 of the Point of Taxation Rule and Section 67A of the Finance
Act, 1994]. CBEC has clarified that to know whether a Service has been provided or agreed to be provided for a consideration and its point
of taxable, following three ingredients are important:
 Provision of Taxable Service
Applicability of Service Tax – Period Wise Effective Rate
Period Basic Rate of Service
Tax (in %)
Ed.
Cess
H&
Ed.
Cess
Effective Rate of Service Tax
01/07/1994 to 13/05/2003 5 0 0 5.00 %
14/05/2003 to 09/09/2004 8 0 0 8.00 %
10/09/2004 to 17/04/2006 10 2 0 12.00 %
18/04/2006 to 10/05/2007 12 2 0 12.24 %
11/05/2007 to 23/02/2009 12 2 1 12.36 %
24/02/2009 to 31/03/2012 10 2 1 10.30 %
01/04/2012 to 31.05.2015 12 2 1 12.36 %
With effect from 01.06. 2015 14 0 0 14.00 %

4. 4
 Raising of Invoice
 Receipt of Payment
Further, it has been clarified that Service provided or agreed to provide cannot be considered as taxable service if there is no consideration.
Consideration is known only if invoice is raised or payment is made.
As per Section 67A of the Finance Act, 1994, Services where there is no confusion in time of provision of service, receipt of payment and
raising on invoice, rate of service tax will be applicable at the time when taxable service has been provided or agreed to be provided.
However in case of complex situation, where it is not possible to determine the time, when the taxable service has been provided or agreed
to be provided, point of taxation would be determined as per Rule 4 f the Point of Taxation Rules, 2011.
CBEC has provided clarification on applicability of Rule 4 on effective Service Tax Rate through tabular form:
Sr.
No.
Service Provided Invoice W.r.t. Rate
Change
Payment w.r.t. rate
change
Point of Taxation Rule Rate of Service Tax
1. Before Rate Change After After 4(a)(i) 14 %
2 ---Do--- Before After 4(a)(ii) 12.36 %
3. --Do--- After Before 4(a) (iii) 12.36 %
4. After Rate Change Before After 4(b)(i) 14 %
5 ---Do--- Before Before 4(a) (ii) 12.36 %
6 --Do--- After Before 4(a) (iii) 14 %
B. Rate of Swachh Bharat Cess:
The applicability date for levy of Swachh Bharat Cess has not been notified; hence rate of 14% shall be further increased once applicability
date of Swachh Bharat Cess is notified.
4
 Raising of Invoice
 Receipt of Payment
Further, it has been clarified that Service provided or agreed to provide cannot be considered as taxable service if there is no consideration.
Consideration is known only if invoice is raised or payment is made.
As per Section 67A of the Finance Act, 1994, Services where there is no confusion in time of provision of service, receipt of payment and
raising on invoice, rate of service tax will be applicable at the time when taxable service has been provided or agreed to be provided.
However in case of complex situation, where it is not possible to determine the time, when the taxable service has been provided or agreed
to be provided, point of taxation would be determined as per Rule 4 f the Point of Taxation Rules, 2011.
CBEC has provided clarification on applicability of Rule 4 on effective Service Tax Rate through tabular form:
Sr.
No.
Service Provided Invoice W.r.t. Rate
Change
Payment w.r.t. rate
change
Point of Taxation Rule Rate of Service Tax
1. Before Rate Change After After 4(a)(i) 14 %
2 ---Do--- Before After 4(a)(ii) 12.36 %
3. --Do--- After Before 4(a) (iii) 12.36 %
4. After Rate Change Before After 4(b)(i) 14 %
5 ---Do--- Before Before 4(a) (ii) 12.36 %
6 --Do--- After Before 4(a) (iii) 14 %
B. Rate of Swachh Bharat Cess:
The applicability date for levy of Swachh Bharat Cess has not been notified; hence rate of 14% shall be further increased once applicability
date of Swachh Bharat Cess is notified.
4
 Raising of Invoice
 Receipt of Payment
Further, it has been clarified that Service provided or agreed to provide cannot be considered as taxable service if there is no consideration.
Consideration is known only if invoice is raised or payment is made.
As per Section 67A of the Finance Act, 1994, Services where there is no confusion in time of provision of service, receipt of payment and
raising on invoice, rate of service tax will be applicable at the time when taxable service has been provided or agreed to be provided.
However in case of complex situation, where it is not possible to determine the time, when the taxable service has been provided or agreed
to be provided, point of taxation would be determined as per Rule 4 f the Point of Taxation Rules, 2011.
CBEC has provided clarification on applicability of Rule 4 on effective Service Tax Rate through tabular form:
Sr.
No.
Service Provided Invoice W.r.t. Rate
Change
Payment w.r.t. rate
change
Point of Taxation Rule Rate of Service Tax
1. Before Rate Change After After 4(a)(i) 14 %
2 ---Do--- Before After 4(a)(ii) 12.36 %
3. --Do--- After Before 4(a) (iii) 12.36 %
4. After Rate Change Before After 4(b)(i) 14 %
5 ---Do--- Before Before 4(a) (ii) 12.36 %
6 --Do--- After Before 4(a) (iii) 14 %
B. Rate of Swachh Bharat Cess:
The applicability date for levy of Swachh Bharat Cess has not been notified; hence rate of 14% shall be further increased once applicability
date of Swachh Bharat Cess is notified.

5. 5
C. Other Rate:
In case of provision of taxable as well exempted services, Rule 6(3) of CENVAT Credit Rules (i.e. non-maintenance of separate books of
accounts) has been amended. With effect from 1st
June, 2015, reversal of CENVAT under the said sub-rule shall be 7% of exempted
services. Earlier, it was 6%.
=================================================================================
For any further clarification you may get in touch with your team at Taxpert Professionals
Visit us at:www.taxpertpro.com
Contact us at: info@taxpertpro.com || vinay@taxpertpro.com
Call us at :91 -22 25138323 ||| 09769134554
*****
5
C. Other Rate:
In case of provision of taxable as well exempted services, Rule 6(3) of CENVAT Credit Rules (i.e. non-maintenance of separate books of
accounts) has been amended. With effect from 1st
June, 2015, reversal of CENVAT under the said sub-rule shall be 7% of exempted
services. Earlier, it was 6%.
=================================================================================
For any further clarification you may get in touch with your team at Taxpert Professionals
Visit us at:www.taxpertpro.com
Contact us at: info@taxpertpro.com || vinay@taxpertpro.com
Call us at :91 -22 25138323 ||| 09769134554
*****
5
C. Other Rate:
In case of provision of taxable as well exempted services, Rule 6(3) of CENVAT Credit Rules (i.e. non-maintenance of separate books of
accounts) has been amended. With effect from 1st
June, 2015, reversal of CENVAT under the said sub-rule shall be 7% of exempted
services. Earlier, it was 6%.
=================================================================================
For any further clarification you may get in touch with your team at Taxpert Professionals
Visit us at:www.taxpertpro.com
Contact us at: info@taxpertpro.com || vinay@taxpertpro.com
Call us at :91 -22 25138323 ||| 09769134554
*****