In Between Relief and Pain

Swati Jha, Associate Lawyer, Kaden Boriss

Many middle class and upper middle class people are flabbergasted as the Hon’ble Finance Minister has not shared their concern and proposed to raise the service tax once again. Once upon a time there lived a great atheist and philosopher named ‘Carvaka Muni’ who preached to eat, drink, be merry and enjoy for as long as one possesses his/her body. But he wasn’t aware that his teaching will make things difficult for his follower, initially service tax (hereinafter “Tax”), was levied only on 3 services namely telephone services, non-life insurance services and stock brokers service’s  but gradually the list has been increased to 119. Entry 97 of List-I of schedule VII extends the constitutional rights to the central government to levy Tax and the administrative control is vested with the Central Board of Excise & Customs (CBEC). On 1st February, 2017 the Hon’ble Minister submitted the budget for the financial year 2017 – 18 where he has exercised his power to amend the previous notifications and Tax. This budget was indeed different from the past budgets in a number of ways, firstly, it was delivered on 1st February instead of 28th February, secondly, there was no separate railway budget this year and thirdly, the house wasn’t adjourned as a mark of respect to the deceased Member of Parliament, Shri E Ahmad. Despite the demise the house choose to uphold the constitutional obligation and present the union budget.

This Article discusses highlights of the proposed amendments in the present Tax provisions and the changes brought out in Chapter V of the Finance Bill 2017 (hereinafter “Bill”).However, an attempt has been taken to logically reason out the measures taken under union budget 2017.

Changes in the Bill:[1] – once the Bill is enacted it will amend the Finance Act, 1994 (hereinafter ‘Act’) unless otherwise stated. Below in this article the changes have been divided into 6 (six) parts which are as follows:-

Negative list;

Omission of Definitions;

Legislative changes;

Insertion of new sections;

Amendments in Service tax Rules. 2006;and

Amendments  in the notifications

NEGATIVE LIST

Clause 121 of the Bill seeks to amend section 66D(f)of the Act “services, by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption” of the Act is proposed to be deleted. However, the notification no 7/2017- Service Tax[2] via entry 30 provides exemption to it.

OMISSION OF DEFINITION

Clause 123 of the Bill proposes to omit Section 96B of the Act- Vacancies, etc., not to invalidate proceedings – No proceeding before, or pronouncement of advance ruling by, the Authority under this Chapter shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority;

LEGISLATIVE CHANGES

Clause 122 of the Bill seeks to amend of section 96A (d) of the Act the definition of “Authority” has been substituted to mean the Authority for Advance Ruling as constituted under section 28E of the Customs Act, 1962.

Section 96B of the Act regarding vacancies invalidating the proceedings will be omitted.

Section 96C(3) of the Act is being amended so as to increase the application fee for seeking advance ruling from Rs 2,500/- (rupees two thousand five hundred) to Rs 10,000/-( rupees ten thousand) on the lines of the Central Excise Act.

Section 96D (6) of the Act is being amended increasing the time limit by which Authority shall pronounce its ruling to six months from three months (90 days) on the lines of the Central Excise Act.

INSERTION OF NEW SECTIONS

Clause 126 of the Bill proposes to insert a new section 96HA so as to provide for transferring the pending applications before the Authority for Advance Rulings (Central Excise, Customs and Service Tax) to the Authority constituted under section 245-O of the Income-tax Act from the stage at which such proceedings stood as on the date on which the Bill receives the assent of the President.

Clause 127 of the Bill proposes to insert a new Section 104 and 105

Section 104 (1) provides that notwithstanding anything contained in section 66, as it stood prior to the 01.07.2012 or in section 66B, no Tax, leviable on one time upfront amount (premium, salami, cost, price, development charge or by whatever name called) in respect of taxable service provided or agreed to be provided by a State Government industrial development Corporation or undertaking to industrial units by way of grant of long term lease of 30 years or more of industrial plots, shall be levied or collected during the period commencing from 01.06.2007 and ending with 21.09.2016 (both days inclusive).

Section 104(2) provides that refund shall be made of all such service tax which has been collected, but which would not have been so collected, had sub-section(1) been in force at all material times;

Section 104 (3) provides that notwithstanding anything contained in this Chapter, an application for claim of refund Tax shall be made within a period of six months from the date on which the Bill receives the assent of the President;

Section 105(1) provides that notwithstanding anything contained in section 66, as it stood prior to 01.07.2012 or in section 66B, no Tax shall be levied or collected in respect of taxable services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force, respectively under the Group Insurance Schemes of the Central Government, during the period commencing from 10.09.2004 and ending with 01.02.2016 (both days inclusive);

Section 105(2) provides that refund shall be made of all such service tax which has been collected but which would not have been so collected, had sub-section (1) been in force at all material times;

Section 105(3) provides that notwithstanding contained in this Chapter, an application for the claim of refund of Tax shall be made within a period of 6 months from the date on which the Bill receives the assent of the President.

AMENDMENTS IN SERVICE TAX RULES, 2006

Clause 128 of the Bill proposes to amend Rule 2A of the rules, 2006 this would come into effect from 01.07.2017 so that the value of service portion in execution of works contract involving transfer of goods and land or undivided share of land, as the case may be, shall not include value of property in such or undivided share of land.

 

AMENDMENTS IN NOTIFICATION NO. 25/2012- ST DATED 20.06.2017 WHICH DEALS IN MEGA EXEMPTION

Entry 9B[3] in item A omission of the word “residential”;

After entry 23 following entry shall be inserted:-

Entry 23A: Services provided to the Government by way of transport of passengers, with or without accompanied belongings, by air, embarking from or terminating at a Regional Connectivity Scheme Airport, against consideration in the form of Viability Gap Funding (VGF).

Provided that nothing contained in this entry shall apply on or after the expiry of a period of one year from the date of commencement of operations of the Regional Connectivity Scheme Airport as notified by the Ministry of Civil Aviation.

Entry 26D: Services of life insurance business provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds to members of the Army, Navy and Air Force, respectively, under the Group Insurance Schemes of the Central Government.

Entry No. 30: this notification seeks to substitute the exsisiting entry 30 and come  into effect when the Bill receives assent of the President. It is divided in two parts:-

Any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumptions; or

Any intermediate production process as job work not amounting to manufacture or production in relation to agriculture, printing or textile processing, cut and polished diamonds and gemstones and other precious gem stones under chapter 71 of Central Excise tariff Act, 1985, any goods excluding alcoholic liquor for human consumption, process of zinc plating, heat etc [4]

After the earthquake of demonetization, everybody expected tsunami but tsunami didn’t hit. One big relief from the budget is that it does not have any big bang negative surprises for anybody, which means there is certain readiness of doing things.


Photos: PixaBay

[1] http://indiabudget.nic.in/ub2017-18/memo/memo.pdf

[2]http://www.cbec.gov.in/resources//htdocs-servicetax/st-notifications/st-notifications-2017/st07-2017.pdf;jsessionid=5941EA9BF9A9747CDAB21B514150F3B0

[3] The exemption in respect of services provided by Indian Institutes of Management (IIMs) by way of two year full time residential Post Graduate Programmes (PGP) in Management for the Post Graduate Diploma in Management (PGDM), to which admissions are made on the basis of the Common Admission Test (CAT), conducted by IIMs, is being extended to include non-residential programmes.

[4] http://www.cbec.gov.in/resources//htdocs-servicetax/st-notifications/st-notifications-2017/st07-2017.pdf

[Refer clause iv (ii) for detail list]