Flash on Service Tax
The Central Government has notified July 1, 2010 as the date on which the provisions of Finance Act, 2010 relating to introduction of new taxable services as also amendments to existing taxable services would come into force. The highlights of the important changes are as follows :
Eight new services which have been made effective :
Services of permitting commercial use or exploitation of any event organized by a person or organization
Services provided in relation to two types of copyright namely, cinematographic films and sound recording not covered under the existing taxable service ‘Intellectual Property Right (IPR)’. However, copyright on original literary, dramatic, musical and artistic work would continue to remain outside the scope of service tax
Services provided in relation to health check up undertaken by hospitals or medical establishments for the employees of business entities and health check up or treatment covered under health insurance schemes provided the payment is made directly by the business entity or the insurance company to the hospital or medical establishment
Services provided in relation to maintenance of medical records of employees of a business entity
Service provided by Electricity Exchanges
Services provided by a builder to the buyers pertaining to charges on preferential location or external or internal development of complexes excluding services provided in relation to vehicle-parking space
Service provided for promotion or marketing of a ‘brand’ of goods, services, events etc. of a business entity
Service envisaging promotion, marketing or organizing of games of chance, including lottery
Nine existing services which have been amended:
Air Passenger Transport Service – the definition of taxable service will include domestic journeys, and international journeys in any class
Information Technology Software Service – the definition of taxable service has been expanded to levy service tax on right to use software for all purposes
Commercial Training or Coaching Service – in the definition of taxable service, an Explanation has been added to clarify the term ‘commercial’ to mean any training or coaching, which is provided for a consideration, whether or not for profit w.e.f. 1st July 2003
Sponsorship Service – in the definition of taxable service, the exclusion relating to sponsorship services pertaining to sports has been removed
Construction of complex service – definition of taxable service has been modified to impose tax on consideration received before the completion of construction activity by the builder/promoter/developer from the prospective buyer
Renting of immovable property service – definition of taxable service has been amended to levy service tax on renting activity itself w.e.f. 1st June 2007 and to levy service tax on rent of vacant land provided such land is used for furtherance of business or commerce
Airport Services, Port services and Other port services – definition of taxable service has been amended to include all services provided entirely within the airport/port premises and to remove the pre-condition of obtaining an authorization from the airport/port authority
Auctioneer Service - in the definition of taxable service, an Explanation has been added to clarify the term ‘auction by government’ to mean an auction involving sale of government property and not when the government acts as an auctioneer for sale of the private property
Management of Investment under ULIP Service - definition of taxable service has been amended to provide that the value of the taxable service shall be higher of the fund management amount charged by the insurer or the maximum amount of fund management charges fixed by the Insurance Regulatory and Development Authority (IRDA)
Amendments in other provisions of service tax law have also been made. In this regard, the Central Government has issued Notification Nos 24/2010 to 35/2010 – Service Tax. The highlights of the such amendments are as follows:
Exemptions- effective from 1st July 2010
Air Travel Services as referred in Section 65(105)(zzzo) with respect to International in-transit passengers and person on board the aircraft engaged by aircraft operator have been exempted from the service tax.
Maximum limit of Service tax that can be charged from the passenger, has been specified in relation to Air Travel Services -
Air Travel Services originating in or terminating in an Airport located in specified North-East States have been exempted from service tax.
Services of construction of complex provided to specified projects viz. Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana have been exempted from service tax.
Sponsorship services provided for five specified categories of sports are exempted from service tax.
Specified eight Services if rendered within a port or airport have been exempted from service tax.
Exemptions- effective from date to be notified
Taxable service provided by an authorized distributor under Electricity Act, 2003 for the distribution of electricity has been exempted from service tax.
Abatements- effective from 1st July 2010
Service tax payable on 25% of the value of taxable services pertaining to Commercial or Industrial Construction and Construction of Complex provided value of land and the material used is included in the gross value of taxable services.