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Service Tax Update for Nov 2015 Exam

Update for Nov 2015 Exam

Clarification regarding levy of service tax on joint venture:-

CBEC has issued following clarification regarding levy of service tax on joint venture:

  • Services provided by the members of the Joint Venture (JV) to the JV and vice versa or between the members of the JV: In accordance with Explanation 3(a) of the definition of service under section 65B(44) of the Finance Act, 1994, JV (an unincorporated temporary association constituted for the limited purpose of carrying out a specified project) and the members of the JV are treated as distinct persons and therefore, taxable services provided for consideration, by the JV to its members or vice versa and between the members of the JV are taxable.
  • Cash calls (capital contributions) made by the members to the JV: If cash calls are merely a transaction in money, they are excluded from the definition of service provided in section 65B(44) of the Finance Act, 1994. Whether a ‘cash call’ is ‘merely…. a transaction in money’ [in terms of section 65B(44) of the Finance Act, 1994] and hence not in the nature of consideration for taxable service, would depend on the comprehensive examination of the Joint Venture Agreement, which may vary from case to case.  Detailed and close scrutiny of the terms of JV agreement may be required in each case, to determine the service tax treatment of cash calls.

Clarification regarding levy of service tax on activities involved in relation to inward remittances from abroad to beneficiaries in India through MTSOs

The remittances of money from overseas through the Money Transfer Service Operator (MTSO) route involves the following sequence of transactions:

Step 1: Remitter located outside India (say ‘A’) approaches a MTSO/bank (say B) located outside India for remitting the money to a beneficiary in India; ‘B’ charges a fee from ‘A’.

Step 2: ‘B’ avails the services of an Indian entity (agent) (say ‘C’) for delivery of money to the ultimate recipient of money in India (say ‘E’); ‘C’ is paid a commission/fee by ‘B’.

Step 3: ‘C’ may avail service of a sub-agent (D). ‘D’ charges fee/commission from ‘C’.

Step 4: ‘C’ or ‘D’, as the case may be, delivers the money to ‘E’ and may charge a fee from ‘E’.

Update for Nov 2015 Exam

Mega Exemption Notification amended

Mega Exemption Notification No. 25/2012 ST dated 20.06.2012 has been amended vide Notification No. 6/2015 ST dated 01.03.2015, unless specified otherwise.  The amendments are discussed in the following two broad categories:

(A) New exemptions

(B) Exemptions withdrawn/restricted

NEW EXEMPTIONS

(i) Ambulance services provided by all service providers (whether or not by clinical establishment or an authorised medical practitioner or paramedics) exempted

Earlier, entry 2 exempted any service provided by way of transportation of a patient to and from a clinical establishment from service tax only when the said service was provided by a clinical establishment or an authorised medical practitioner or paramedics.

The scope of this exemption has now been widened to extend the said exemption to ambulance services provided by all service providers.  Therefore, now the ambulance services provided by an entity which is not a clinical establishment or an authorised medical practitioner or paramedics would also be exempt from service tax.  The above amendment has been made by substituting entry 2 with a new entry.

[Effective from 01.04.2015]

(ii) General insurance provided under Pradhan Mantri Suraksha Bima Yojna exempted

Entry 26 exempts services of general insurance business provided under specified schemes.  A new clause (p) has been inserted vide Notification No. 12/2015 ST dated 30.04.2015 in the said entry to exempt services of general insurance business provided under Pradhan Mantri Suraksha Bima Yojna.

[Effective from 30.04.2015]

(iii) Life insurance provided under Varishtha Pension Bima Yojna, Pradhan Mantri Jeevan Jyoti Bima Yojna and Pradhan Mantri Jan Dhan Yojna exempted

Entry 26A exempts services of life insurance business provided under specified schemes.  Clauses (d), (e) and (f) have been inserted in the said entry to exempt services of life insurance business provided in respect of the following additional schemes:

Clause (d) Varishtha Pension Bima Yojna  – [Effective from 01.04.2015]

Clause (e) Pradhan Mantri Jeevan Jyoti Bima Yojna – [Effective from 30.04.2015 vide Notification No. 12/2015 ST dated 30.04.2015]

Clause (f) Pradhan Mantri Jan Dhan Yojna – [Effective from 30.04.2015 vide Notification No. 12/2015 ST dated 30.04.2015]

(iv) Collection of contribution under Atal Pension Yojna (APY) exempted

A new entry 26B has been inserted in the notification vide Notification No. 12/2015 ST dated 30.04.2015 to exempt the services by way of collection of contribution under Atal Pension Yojna.

[Effective from 30.04.2015]

(v) Treatment of effluent by Common Effluent Treatment Plant operator exempted

A new entry 43 has been inserted in the notification to exempt the services by operator of Common Effluent Treatment Plant by way of treatment of effluent.

[Effective from 01.04.2015]

(vi) Pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables exempted

A new entry 44 has been inserted in the notification to exempt the 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.

[Effective from 01.04.2015]

(vii) Admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo exempted

Services provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve have been exempted.  A new entry 45 has been inserted in the notification to give effect to this exemption.

Following definitions have been also been inserted in the notification pursuant to the said exemption:

  1. National park has the meaning assigned to it in the clause (21) of the section 2 of The Wild Life (Protection) Act, 1972 [Clause (xaa)].
  2. Wildlife sanctuary means sanctuary as defined in the clause (26) of the section 2 of The Wild Life (Protection) Act, 1972 [Clause (zk)].
  3. Zoo has the meaning assigned to it in the clause (39) of the section 2 of the Wild Life (Protection) Act, 1972 [Clause (zl)].

Section 2(39) of the Wild Life (Protection) Act, 1972 provides that “Zoo” means an establishment, whether stationary or mobile, where captive animals are kept for exhibition to the public but does not include a circus and an establishment of a licenced dealer in captive animals.

  1. Tiger reserve has the meaning assigned to it in clause (e) of section 38K of the Wild Life (Protection) Act, 1972 [Clause (zi)].

[Effective from 01.04.2015]

(viii) Exhibition of movie by exhibitor to distributor/ association of persons consisting of such exhibitor as one of its members 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 has been exempted.  A new entry 46 has been inserted in the notification to give effect to this exemption.  [Effective from 01.04.2015]

(ix) Service provided with respect to Kailash Mansarovar and Haj pilgrimage exempted

Services provided by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement, have been exempted from service tax vide Notification No. 17/2014 ST dated 20.08.2014.

Specified organisation means:

(a) Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking; or

(b) Haj Committee of India and State Haj Committees constituted under the Haj Committee Act, 2002, for making arrangements for the pilgrimage of Muslims of India for Haj.

Thus, the religious pilgrimage organized by the Haj Committee and Kumaon Mandal Vikas Nigam Ltd. are not liable to service tax.

[Effective from 20.08.2014]

Service Tax Update for Nov 2015 Exam

EXEMPTIONS WITHDRAWN/RESTRICTED

(i) Scope of exemption available on specified services of construction, repair, maintenance etc. (when provided to the Government/ local authority/ Governmental authority) restricted

Earlier, entry 12 of the notification exempted six specified services of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration when provided to the Government, a local authority, or a Governmental authority.

The said entry has been amended to withdraw the above exemption in respect of the following construction, erection etc:

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b) a structure meant predominantly for use as

(i) an educational,

(ii) a clinical, or

(iii) an art or cultural establishment;

(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause (44) of section 65B of the said Act.

Therefore, now the exemption under entry 12 is available only in respect of the following three types of construction, erection etc:

(a) a historical monument, archaeological site or remains of national importance, archeological, excavation or antiquity or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958;

(b) canal, dam or other irrigation work; and

(c) pipeline, conduit or plant for (i)  water supply (ii)  water treatment, or (iii)  sewerage treatment or disposal.

[Effective from 01.04.2015]

(ii) Exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port withdrawn

Earlier, services by way of construction, erection, commissioning or installation of original works pertaining to an airport, port or railways, including monorail or metro were exempt from service tax under entry 14(a) of the notification.

Entry 14(a) has now been amended to withdraw such exemption in respect of an airport or port.  Thus, service tax will be payable on construction, erection, commissioning or installation of original works pertaining to an airport or port. The other exemptions covered under entry 14 of the notification are, however, not changed.

[Effective from 01.04.2015]

(iii) Service tax payable on a performance in folk or classical art forms of music/ dance/ theatre if the consideration therefor exceeds  1,00,000

Earlier, services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre, excluding services provided by such artist as a brand ambassador was exempt from service tax under entry 16 of the notification.

The scope of the said exemption has now been restricted by fixing a monetary limit of ` 1,00,000 in respect of a performance.  Thus, now exemption to services provided by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre, will be limited only to such cases where amount charged is upto ` 1,00,000 for a performance.  However, services provided by an artist as brand ambassador will continue to remain taxable.

[Effective from 01.04.2015]

(iv) Exemption to transportation of food stuff by rail or vessels or road limited to milk, salt and food grain including flours, pulses and rice

Earlier, transportation of foodstuff – including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages – by rail/ vessel and by goods carriage was exempt from service tax under entry 20(i) and entry 21(d) of the notification respectively.

Entry 20(i) and entry 21(d) have been amended to restrict such exemption to transportation of only milk, salt and food grain including flours, pulses and rice by rail/ vessel and by goods carriage.  Transportation of agricultural produce by rail or a vessel and by goods carriage is separately exempt vide entry 20(h) and entry 21(a) respectively, and this exemption would continue.

[Effective from 01.04.2015]

(v) Exemption to services by (i) mutual fund agent/distributor to a mutual fund or asset management company and (ii) selling/ marketing agent of lottery tickets to a distributor/selling agent, withdrawn

Earlier, services by the following persons in their respective capacities were exempt from service tax under entry 29 of the notification:-

(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 distributor or a selling agent.

The said exemption has now been withdrawn by omitting clause (c), (d) and (e) of  entry 29 from the notification.  Thus, service tax will be payable on these services.

[Effective from 01.04.2015]

(vi) Exemption withdrawn for services by way of making telephone calls from departmentally run public telephone etc.

Exemption has been withdrawn in respect of services by way of making telephone calls from-

(a) departmentally run public telephone;

(b) guaranteed public telephone operating only for local calls; or

(c) free telephone at airport and hospital where no bills has been issued.

Entry 32 of the notification has been omitted to give effect to this amendment.

[Effective from 01.04.2015]

Update for Nov 2015 Exam

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