copyright 2016, lakshmikumaran & sridharan / confidential · cenvat credit service tax. cst...

Central Sales Tax (CST)

Customs

Central Excise

Cenvat Credit

Service Tax

CST AMENDMENT

CST AMENDMENT - Contd.


Allahabad High Court - Reliance Industries Limited {2012 (194) ECR 293(All)}

Gujarat High Court - B.G. Exploration {[2015] 84 VST (1)}

What about other goods which get co-mingled in the common carrier:

Crude Oil

ATF

Chemicals


Customs

EXEMPTION WITHDRAWN EXEMPTION GRANTED

1. Parts and Accessories of Mobile Phones

• Charger or Adapter• Battery• Wired Headsets• Speakers

BCD, CVD & SAD exemption removed

Full BCD and CVD Exemption:• Inputs or parts for use in manufacture of these specified

items• Inputs or sub-parts of above

IGCR to be followed

2. E-Readers

Specific BCD exemption withdrawn

Will exemption to “Electrical machines with translation ordictionary functions” under Notification No. 25/2005-Cusapply?

Full BCD Exemption:• Raw Materials or parts for use in manufacture of e-readers

IGCR to be followed

3. Populated PCBs of mobile phone or table computer

SAD exemption withdrawn

SAD – 2%

IGCR to be followed

4. Populated PCBs of personal computers (laptops/desktops)SAD exemption withdrawn

AMENDMENTS TO PROMOTE MAKE IN INDIA


New Exemptions Granted – Promote Make in India

Parts, Components and Accessories (including sub-parts) for use in manufacture of

Broadband Modem [8517 62 30]

Routers [8517 62 30]

Set top boxes for gaining access to internet [8517 69 60]

Digital Video Recorder (DVR)/ Network Video Recorder (NVR) [8521 90 90]

Reception apparatus for television but not designed to incorporate video display [8528 71 00]

CCTV Camera/ IP Camera [8525 80 20]

Lithium Batteries (other than batteries of mobile phones) [8507 60 00]

Full BCD and CVD Exemption Granted

IGCR Procedure to be followed


Exemptions made subject to IGCR Procedure

Product Exemption

LCD, LED or OLED panels for manufacture of television classifiable under 8529 BCD – Nil

Solar tempered glass or solar tempered (anti-reflective coated) glass for use in manufacture of solar cells/panels/modules classifiable under chapter 70

BCD - 5%

Phosphoric Acid [Chapter 28] for manufacture of fertilizers BCD – 5%CVD – Nil

Anhydrous ammonia (Chapter 28), for the manufacture of goods falling under Chapter 31, intended for use as fertilizers

CVD – Nil

Denatured ethyl alcohol (ethanol) for use in manufacture of excisable goods (2207 20 00) BCD – 2.5%

Machinery, electrical equipment, other instruments and their parts [Chapter 84, 85 & 90] for use in:• Fabrication of semiconductor wafer and Liquid Crystal Display (LCD)• Assembly, testing, marking and packaging of semi conductor chips[except populated Printed Circuit Boards]

BCD – NilSAD - Nil


New Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016

• Supersedes existing IGCR Rules, 1996• Applicable from 1st April, 2016• Key Changes

• Exemption based on self-declaration rather than permission from central excise authorities• No need for separate registration under these rules

• Manufacturer of non-excisable/ exempted final products –to obtain Central excise registration under rule 9 of Central Excise Rules

• Information regarding intention to avail benefit to both Excise and Customs authorities. • Excise to forward the same to Customs.• Customs to grant benefit on Bill of Entry on this basis itself.

• Continuity bond with surety/ security to be executed to Excise authorities.• Intimation regarding receipt of goods in factory and maintenance of account of receipt/

consumption and stock• Specific provision for disposal of unutilized or defective imported goods with 3 months from

import subject to payment of duty and interest


Telecom Equipment – Exemption Withdrawn

• Budget 2014 excluded certain telecommunication products from the purview of ITA Bound exemption (Notification No.24/2005-Cus.)

• However, mobile operators claimed alternate exemption in terms of Sl. No. 372 of Notification No. 12/2012-Cus.

• Anomaly now corrected by excluding the same set of telecommunication equipment from Notification No. 12/2012-Cus. as well

• Impact – The mobile operators exemption is no longer available for major 2G, 3G and 4G telecommunication equipment.

• Intended to promote the “Make in India” scheme?


AVIATION SECTOR – KEY CHANGES

Exemption extended on both parts of aircraft imported after repair and parts imported for repair by an MRO

agencies under the Standard Exchange Scheme.

8% concessional rate of Excise Duty/ CVD on Aviation Turbine Fuel restricted to supply from Regional

Connectivity Scheme (RCS) airports to Scheduled Commuter Airlines (SCA)

For other rate of 14% applicable

Maximum period of stay of foreign aircrafts for MRO operations in India

Increased from 60 days to 6 months

Further extension as DGCA may deem fit

For Import of tools/ tool kits by MRO agencies:

• BCD, CVD and SAD exemption subject to certification by DGCA.• Procedure for exemption simplified based on records and subject to actual user condition.

Product Specific Amendments


Product Amendments

Wireless Microphones • Tariff Item 8525 50 50 stands deleted.• Now, all microphones including wireless microphones shall be

covered under Tariff Item 8518 10 00. • Inconsistency with HSN removed.

Smart Watches • Notified for RSP based assessment.• Abatement allowed 35%

Foreign Satellite Data on storage media BCD, CVD and SAD exempt on import by National Remote Sensing Centre (NRSC), Hyderabad.

Disposable sterilized dialyzer and micro barrier of

Artificial Kidney [Chapter 84 or 90]

BCD, CVD and SAD exempt.

Goods for construction of ships of Indian navy or

coast guard, Aircrafts, aircrafts parts, aircraft

engines, aircraft engine parts, Arms, ammunition

and military stores etc.

BCD and CVD exemption withdrawn

Polyester staple fibre manufactured from plastic

scrap or plastic waste

6% concessional rate of excise duty / CVD withdrawn from Notification No. 12/2012-CE.

“Clean Energy Cess” renamed as “Clean

Environment Cess” – Coal, Lignite & Peat

Rs.200 PMT increased to Rs.400 PMT

Other Key Amendments


EXPORT DUTY – WITHDRAWN/ REDUCED

Product Existing Rate New Rate

Iron Ore Fine (Fe Content below 58%) 10% Nil

Iron Ore Lumps (Fe Content below 58%) 30% Nil

Chromium ores and concentrates 30% Nil

Bauxite 20% 15%


LEGISLATIVE CHANGES


GENERAL AMENDMENTS

Amendment to Section 28, Customs Act

• Normal period of limitation for issuing a Show Cause Notice is increased from 1 year to 2 years

• ‘Short paid/non paid’ added in the Section to cover default in case of deferred payment of duty

under Section 47 of the Customs Act, 1962

Amendment to Section 25 – Power to grant exemption from duty

• No requirement to publish the Notification and offer the Gazette for sale – Param Industries –

SC – redundant

Amendment to Section 47, 51 and 156 – Deferred payment of Customs duty

• By notification, a certain class of importers may now be permitted to make deferred payment of

duty in a manner specified by way of rules.

• Central Government to make rules on due date and manner of making deferred payment

Section 53, Customs Act is amended where a proper officer may allow transit of certain goods andconveyance without payment of duty only subject to the conditions as may be prescribed by theBoard.

AMENDMENTS TO WAREHOUSING PROVISIONS

Introduction of a special warehouse licensed under Section 58A, where goods are kept under continued physical control of the department

Existing private bonded warehouse and public bonded warehouse have become record-based warehouses

Requirement of notifying warehousing stations dispensed with by deleting Section 2(45) and Section 9 and the words ‘warehousing station’ from Chapter Heading of Chapter III, thereby removing ‘warehousing station’ from the Customs Act


INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016

A common dispute resolution scheme for Customs, Central Excise and Service Tax.

Available as an option in respect of disputes (appeals) pending before

Commissioner (Appeals) only.

Benefit restricted to appeals pending as on 1st March, 2016.

Effect of order passed under the scheme• Appeal stands disposed off

• Complete immunity from all proceedings under the Act in respect of the dispute.

• The order will not be deemed to be an order on merits.



Steps to follow:

• The Assessee has to make a declaration upto 31st December, 2016 before the DesignatedAuthority. Designated Authority means an Officer not below the rank of Assistant Commissionerdesignated under the scheme.

• Declaration to be acknowledged by Designated Authority.

• Within 15 days of receipt of acknowledgement, Declarant has to deposit duty/Tax along withinterest and 25% of penalty imposed under the Order-In-Original.

• Intimate Designated Authority within 7 days of such payment.

• Order of discharge - Order to be passed by Designated Authority within 15 days of receipt ofsuch proof of payment.



Exclusions under the scheme:

• Orders in respect of search and seizure proceeding

• Orders in respect narcotic drugs or other prohibited goods.

• Order is in respect of offence punishable under the Indian Penal Code, Narcotic Drugs and

Psychotropic Substances Act, 1985 or the Prevention of Corruption Act, 1988.

• Any detention order passed under Conservation of Foreign Exchange and Prevention of

Smuggling Act, 1974.

• Prosecution instituted before the 1st June, 2016.

Change in Rate

Expansion of Levy

New Exemption : RMC

Rationalisation of Cess

Interest on Provisional Assessment

Ease of Doing Business

Cenvat Credit


Rate of excise duty

Sl.

No.

Product Earlier rate of duty New rate of duty

1 Polyester Staple fibre or Polyester filament yarn

manufactured from plastic waste and scrap (Ch. 54 or 55)

2% (without credit)

6% (with credit)

2% (without credit)

12.5% (with credit)

2 Sacks and bags (Tariff Item 3923 21 00 and Ch. 3923 29) 15% & 12.5% 15%

3 Waters, including mineral waters and aerated waters,

containing added sugar or other sweetening matter or

flavoured (Ch. 2202 10)

18% 21%

Effective from 01.03.2016

No change in Excise Duty Rate of 12.5%

Increase in Rate


Reduction in rate of excise duty


Sl. No. Product Earlier rate of duty New rate of duty

1 Solar Lamp (Tariff Item 9405 50 40) 12.5% Nil

2 Rubber sheets and resin rubber sheets for soles and heels

(Tariff item 4008 29 10)

12.5% 6%

3 Specified goods for use in manufacture of centrifugal pumps

under tariff item 8413 70 10 (Ch. 8413 91 or 8501 31 19)

12.5% 6%

4 Micronutrients (Ch. 28, 29 or 38) (falling under Sr. No. 1(f) of

Schedule 1 Part (A) of the Fertilizer Control Order

12.5% 6%

5 Mixture of Fertilizers (Ch. 31) [Co-operative Societies holding

certificate of manufacture for mixture of fertilizers under

Fertilizer Control Order]

12.5% NIL

Readymade Garments

Jewellery

Aluminium foils

Other items


Ready made garments


Branded Goods + RSP ≥

Rs. 1,000

2 % (Without CENVAT)

OR

12.5 % (With CENVAT)

Branded Goods +

RSP < Rs. 1,000

OR

Unbranded Goods (irrespective of

RSP)

Cotton Other than

Cotton

Nil (Without CENVAT)

OR

6 % (With CENVAT)

Nil (Without CENVAT)

OR

12.5 % (With CENVAT)


SSI – for March 2016 upto Rs. 12.5

Lakhs

Tariff value – 60% of RSP

Registration- Option available to brand

owner as well as job worker

Retail Tailors taxable?

Ready made garments…….contd.



Jewellery sector


other than plain silver jewellery increased to

Rs. 6 crores with an eligibility limit of Rs. 12

crores – for March 2016 Rs. 50 lakh

Centralised registration to

manufacturers of articles of jewellery

other than plain silver jewellery

Articles of silver jewellery, other than those studded with

diamonds, ruby, emerald or sapphire (“plain silver

jewellery”)

Nil (no change from present

position)

Articles of jewellery – of precious metals other than silver

jewellery not studded

1% without credit on inputs and

capital goods

OR

12.5% with credit


Alum iminium foils of thickness 0.2mm or less – included under Third

Schedule


packing or repacking of such goods in a unit container or labelling or re-labelling of containers

including the declaration or alteration of retail sale price on it or adoption of any other treatment

on the goods to render the product marketable to the consumer

S.R. Tissues

Pvt. Ltd. 2002

(139) E.L.T.

A81 (S.C)


Accessories of vehicles, fork lift trucks and other

self propelled machineries



Expansion of Levy : Other items


Description of goods Abatement

Smart watches 35

All goods of 3401 and 3402 (earlier only specified were

covered) Soaps and other active agents

30


Excise duty on Ready-mix Concrete

manufactured at site of construction (Ch.

3824): Nil

Existing entry:

“Concrete mix manufactured at the site of

construction for use in construction work at

such site”

Substituted entry:

“Concrete mix or Ready-mix Concrete

(RMC), manufactured at site of construction

for use in construction work at such site”

Ready-mix Concrete



Larson & Tubro Ltd.- 2015 (324) E.L.T. 646 (S.C.)

W.P.I.L. Ltd.- 2005 (181) E.L.T. 359 (S.C.): Amendment

clarificatory?

Ready-mix Concrete….contd.


“A clarificatory notification would take effect

retrospectively. Such a notification merely clarifies the

position and makes explicit what was implicit.

Clarificatory notifications have been issued to end the

dispute between the parties.”


Rationalization of cess

Cess withdrawn or reducedi. Cess under The Mica Mines Labour Welfare Fund Act, 1946

ii. Cess under The Salt Cess Act, 1953

iii. Passenger Welfare Cess under The Merchant Shipping Act,

1958

iv. Cess under The Textiles Committee Act, 1963

v. Cess under The Limestone and Dolomite Mines Labour

Welfare Fund Act, 1972

vi. Cess under The Tobacco Cess Act, 1975

vii. Cess under The Iron Ore, Manganese Ore Mines and Chrome

Ore Mines Labour Welfare Cess Act, 1976

viii. Cess under The Cine-workers Welfare Cess Act, 1981

Oil Industries Development Cess reduced from 4500 PMT to 20% ad

valorem

Cess introduced or increased

• Infrastructure Cess introduced (1.3.2016)

• Clean Environment Cess increased from Rs 300 to Rs. 400 per tonne(1.3.2016)


Automobile industry – Infrastructure cess



Automobile industry – infrastructure cess


Description of motor vehicle falling under

8703

Rate of

Cess

Petrol/ LPG/CNG driven motor vehicles of length

not exceeding 4m and engine capacity not

exceeding 1200cc

1%

Diesel driven motor vehicles of length not

exceeding 4m and engine capacity not

exceeding 1500cc

2.5%

All categories of motor vehicles of 8703 other

than the ones mentioned above and exempted

under Notification No. 1/2016-CE

4%

Exemption- ambulances, Electrically operated,

three wheeled, Hybrid Vehicles, taxi, Cars for

physically handicapped persons


Automobile industry – infrastructure cess



Interest on amount paid under provisional assessment

Interest payable for the period starting with

the first day after the due date till the date of

actual payment, whether such amount is paid

before or after the issue of order for final

assessment.

Bombay High Court - Commissioner of Central

Excise & Customs, Mumbai Vs. CEAT Limited

has been overcome




Reduction in number of statutory returns

• No requirement of filing

• Annual Financial Information Statement

• Annual Installed Capacity Statement.

Assesse required to file Annual Return under provisions of Excise

Rules and Credit Rules

Facility of revision of return

• Revision of ER-1 Return and Annual Return filed within the due date-

by the end of calendar month in which original return is filed.

• Facility available to EOU also

Rationalization of rate of interest

• Different rates of interest prescribed under Excise Act, 1944 and

other rules rationalized. Interest is now payable at the rate of 15% pa



Distribution of credit on inputs by warehouse of manufacturer

• Manufacturer having one or more factories allowed to take credit on inputs received under an invoice issued

by a warehouse of the manufacturer which receives the inputs

• Rules applicable to First Stage Dealer/Second Stage Dealer to apply mutatis mutandis to a warehouse of

manufacturer

Chartered Engineer (CE) Certificate for claiming rebate on inputs

• Assessee claiming rebate on inputs to file Chartered Engineer Certificate for correctness of ratio of output

and input where SION is notified. AC/DC may grant permission for manufacture of export goods on basis of

such certificate. In case of doubt, AC/DC may visit the factory

• Earlier, AC/DC had to verify the correctness of ratio of output and input by calling samples or by visiting the

factory.


• Earlier RGCR Rules, 2001 rescinded. New Rules effective

from 01.04.2016.

• The new Rules are intended to simplify the procedures,

including allowing duty exemptions to

importer/manufacturer based on self-declaration instead

of obtaining permissions from the Central Excise

authorities.

• Rules now provide that the demand of duty will be raised

on the supplier manufacturer if the recipient manufacturer

is found to be non-existent. This provision has been

inserted for the first time in the proposed Rules



Definitions

NCCD and Infrastructure Cess

Rule 4(5)(b) and Rule 4 (6)

Rule 6 and Rule 7

Rule 14 of Interest on credit


• Capital goods definition amended to include

• Wagons falling under 860692

• Office equipment and Appliances

• Specific mention for capital goods used outside factory for

pumping of water

• Earlier only for generation of electricity

Definition Amended

Effective 1.4.2016


• Inputs

• Capital goods having value upto

Rs. 10,000/ piece

• Specific mention for pumping of

water

Definition Amended

Effective 1.4.2016



• No credit other than NCCD be utilized

for payment NCCD for all product

• Earlier restriction was limited to

mobile phones only

• Dharmapal Satyapal 323 ELT 55

(Gau.)

• KamakHaya Cosmetics 232 ELT

33 (Gau.)

• Prag Bosini 295 ELT 682 (Gau.)

-

No Longer

ApplicableEffective 1.3.2016



• Infrastructure Cess

• To be Paid in Cash

• No credit of Cess

• No specific mention under Rule 3(1)

• Can manufacturer of automobile take

credit of cess under Rule 16?

Effective 1.3.2016


Rule 4(5)(b) And Rule 4 (6)

• Rule 4(5)(b) substituted

• To allow tools in addition to jigs, fixtures, moulds and dies sent to

contract manufacturer or job-worker

• Such goods can be directly sent without receiving in the factory

• Rule 4(6) permission can be granted for three years in place of one

Effective 1.4.2016


Rule 6 amended

• New Rule 6(1) to Rule 6(4) substituted

• Options of Separate book of accounts

removed

• Two Options available

• 6% / 7% on value of exempted goods

and exempted service respectively

• Proportionate credit reversal

Effective 1.4.2016


Rule 6 amended

• 6%/7% payable upto maximum of total credit available in the account at the

end of period to which payment relates.

• Total credit available means what?

(iv) The maximum limit prescribed in the first option would ensure that the amount

to be paid does not exceed the total credit taken. The purpose of the rule is to

deny credit of such part of the total credit taken, as is attributable to the exempted

goods or exempted services and under no circumstances this part can be greater

than the whole credit. (TRU-2)

Effective 1.4.2016


Rule 6 amended

• Proportionate Credit Reversal

• Applicable to Common inputs and input services only and not to exclusively

used for dutiable goods or taxable service

• Thyssenkrupp Industries (I) Pvt. Ltd. 310 ELT 317- taken care of

• No final products manufactured or no output service provided in preceding

financial year, provisional credit admissible upto 50% only

Effective 1.4.2016


Rule 6 amended

• No option exercised and Intimation for proportionate credit reversal not

filed, option for proportionate credit can be exercised on payment of

interest

• Transition provision provided till 30th June, 2016 for financial year 2015-

2016.

Effective 1.4.2016


Rule 6 amended

• Exempted goods to include non excisable

goods (Same as earlier provision)

• Exempted service to include activity not a

service under Section 65B(44)

• Value to be invoice/ agreement/ contract value

and where value is not available, value to be

determined by using reasonable means

consistent with principle of valuation contained

in Finance Act and rules made thereunder

Effective 1.4.2016


Rule 6 amended

• Service under Section 65B(44) defined as under :-“service” means any activity carried out by a person for another for consideration, and includes a

declared service, but shall not include—

(a) an activity which constitutes merely,—

(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other

manner; or

(ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the

meaning of clause (29A) of article 366 of the Constitution; or

(iii) a transaction in money or actionable claim;

(b) a provision of service by an employee to the employer in the course of or in relation to his

employment;

(c) fees taken in any Court or tribunal established under any law for the time being in force.

Effective 1.4.2016


Rule 6 (4) amended

• No credit on Capital Goods used exclusive in manufacture of exempted

goods or provision of exempted service for a period of 2 years from date of

commencement of commercial productions/ date of installation or

provision of exempted service

• Spenta International 216 ELT 133 Tri-LB

• Gujarat Propack 313 ELT 152 (Guj)

• Kailash Auto 280 ELT 49 (Kar.)

• Hindustan Coca Cola 313 ELT 152

Effective 1.4.2016


Rule 7 amended

• Credit can be distributed to outsourced manufacturing unit

• Outsourced manufacturing unit means job-worker paying duty under 10A of

valuation rules or contract manufacturer paying under Section 4A

• Credit common to more than one unit to be distributed to respective unit

• Credit common to all units to be distributed to all the units

• Credit on services with ISD upto 31.3.2016 not to be distributed to

outsourced manufacturing unit

Effective 1.4.2016


Rule 7 amended

• Outsourced manufacturer to maintain separate account for ISD credit

received and can be utilized for payment of duty on goods manufactured

for ISD

• Provision of Rule 6 to apply to manufacturing units or provider of output

service and not at ISD

• Can ISD take credit post 1.4.2016 and distribute to outsourced units

even in respect of services received prior to 1.4.2016?

Effective 1.4.2016


Rule 14 : Interest

• Rule 14 (2) of Credit Rule Deleted

“The existing sub- rule (2) of rule 14 prescribes a procedure based on FIFO

method for determining whether a particular credit has been utilized. The said

sub-rule is being omitted. Now, whether a particular credit has been utilised or

not shall be ascertained by examining whether during the period under

consideration, the minimum balance of credit in the account of the

assessee was equal to or more than the disputed amount of credit”. TRU

Circular

Effective 1.4.2016

Change in Rate

Rationalization of abatement

Negative List

Declared Services

Exemptions

Other legislative changes

Cenvat Credit – Relevant changes


Change in the rate of service tax

• Krishi Kalyan Cess

• Abatements rationalized

Tax Rates


Krishi Kalyan Cess

• Rate - 0.5% on the value of taxable services

• Levied over and above the service tax making effective rate

to 15%. (Service tax @ 14% + Swachh Bharat Cess @ 0.5%+

Krishi Kalyan Cess @0.5%)

• Set-off against input cess paid

• Provisions of Chapter V of Finance Act, 1994 to apply


Krishi Kalyan Cess

Issues:

• Treatment in specified cases:

• Special Economic Zone (SEZ),

• Rebate in case of exports

• Applicability – Point of Taxation?

• Service provided earlier

• Clarifications/Notification of Swachh Bharat Cess – Applicable?


Exemptions: Legal Services

Levy of service tax on legal services?


Exemptions: Legal Services ..

Senior Advocate

• Legal service provided to:

• An advocate or partnership firm of advocates

• Any person other than a business entity

• Business entity with a turnover up to rupees ten lakh in the

preceding financial year

Exemption Withdrawn

• Legal services provided by a senior advocate to a person other

than a person ordinarily carrying out any activity relating to

industry, commerce or any other business or profession

Exemption Introduced



Exemptions: Legal Services ..

• Services provided by a person represented on an arbitral

tribunal to an arbitral tribunal

(Exemption withdrawn)


Copyright 2016, Lakshmikumaran & Sridharan / Confidential Effective from 01.03.2016

Exemptions: Construction Sector

Low Cost Houses: Exemption

Extended

Exemption provided for

low cost houses up to a

carpet area of 60 square

meters per house in a

housing project

The ‘Affordable

Housing in partnership’

component of the

housing for All (Urban)

Mission/Pradhan

Mantri Awas Yojna

Any housing scheme of

a State Government

Approved under


Exemption : Software

Position prior to 1st March, 2016

(A) RSP affixation required

Excise duty/CVD leviable

Service tax exemption not available

(B) RSP affixation not required

Excise duty/CVD exempted

Service tax exemption not available

Position with effect from 1st March,

2016

(A) RSP affixation required

Excise duty/CVD leviable

Service tax exemption available

(B) RSP affixation not required

Excise duty/CVD leviable on value

of medium (including value of

freight and insurance)on which

software is loaded

Service tax leviable on the value of

software


Software : Issues

Packaged/canned software –

Goods or services?

Requirement for exemption from service tax?

Taxability of software loaded on media with multi-user

licenses?


Exemption to services to Govt/Governmental

authority/local authority

Exemption restored for the following services provided under contract entered

prior to 1.03.2015 on which stamp duty has been paid: Other original works meant predominantly for use other than for commerce, industry, or any

other business or profession

a structure meant predominantly for use as an educational, a clinical or an art or cultural

establishment

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

Above exemption is restored till 31.03.2020



Exemption to services to Govt/Governmental

authority/local authority

• Proposal to provide exemption during the period between 01.04.2015 and

29.02.2016

(Section 102 of the Finance Bill, 2016)

• Refund of service tax paid in respect of the services provided during the above

period shall be available.

• Application of refund shall be made with six months from the date on which the

Finance Bill, 2016 receives the assent of the President

• Issues:

• Procedure for claiming refund?

• Unjust enrichment?

• Meaning of appropriate stamp duty?


Exemption to ports/airports

• Exemption to services by way of construction, erection, commissioning or installation

of original works pertaining to an airport or port is now being restored till 1.04.2020.

• Conditions:

• Applicable for the contract entered prior to 01.03.2015

• Appropriate stamp duty to be paid, and

• Certificate required from Ministry of Civil Aviation or the Ministry of Shipping

certifying that the contract had been entered into before 01.03.2015.

• Proposal to provide exemption for the period between 01.04.2015 and 29.02.2016

(Section 103 of the Finance Bill, 2016)

• Refund of service tax paid in respect of the services provided during the above period

shall be available.


Exemption withdrawn

• Transport of passenger by ropeways, cable car or aerial tramway

• Monorail and metro

• Original works pertaining to monorail or metro withdrawn with effect from

1.03.2016

• Exemption continues for contracts entered prior to 1.03.2016




New Exemptions –Others

• Services by way of construction, erection, commissioning, installation,

completion, fitting out, repair, maintenance, renovation, or alteration of:

• a civil structure or any other original works pertaining to the In-situ

rehabilitation of existing slum dwellers using land as a resource through

private participation under the Housing for All (Urban) Mission/Pradhan

Mantri Awas Yojana, only for existing slum dwellers

• a civil structure or any other original works pertaining to the Beneficiary-led

individual house construction / enhancement under the Housing for

All(Urban) Mission/Pradhan Mantri Awas Yojana



New Exemptions – Others…

• Exemptions provided in respect of services provided by Employees’ Provident

Fund Organization to persons governed under the Employees’ Provident Fund

and Miscellaneous Provisions Act, 1952

• Exemption provided to services provided by Securities and Exchange Board of

India by way of protecting the interests of investors in securities and to promote

the development of and to regulate the securities market

• Services provided by National Centre for Cold Chain Development under

Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain

knowledge dissemination



Rationalization of Abatement

Abatement Reduced

SERVICE PRESENT

ABATEMENT

PROPOSED

ABATEMENT

CONDITION

Transportation of goods in containers

by rail by any person other than

Indian Railways

70% 60% Cenvat credit on inputs and

capital goods not available

Credit on input services

available

Services of goods transport agency in

relation to transportation of used

household goods

70% 60% Cenvat credit on inputs,

capital goods and input

service not available

Services

(ii) a tour, if the tour operator is

providing services solely of arranging

or booking accommodation for any

person in relation to a tour

Tours other than (i) above

90%

75%/60%

90%

70%

Conditions continue as

provided earlier



Abatement Reduced

SERVICE PRESENT

ABATEMENT

PROPOSED

ABATEMENT

CONDITION

Construction service 70%/75% 70% Conditions continue as provided

earlier




Abatement Introduced

SERVICE ABATEMENT PROPOSED

IMPLICATIONS

EFFECTIVE DATE

Services provided by a

foreman of chit fund in

relation to chit

30% Condition : No credit

on inputs, capital

goods and input

services.

01.04.2016

Transport of passengers with or

without accompanied

belongings by stage carriage

60%

Condition : No credit

on inputs, capital

goods and input

services.

01.06.2016



Credit on

input services

made

available

Transport of goods by rail

by Indian Railways

Transport of goods in a vessel Transport of passengers, with

or without accompanied

belongings by rail



Negative List: Pruned

Entries Omitted Present Status

Services by way of pre-school education and

higher secondary school, education to obtain

a qualification and approved vocational

education courses

Service of transportation of passengers with

or without accompanied belongings by “a

stage carrier”

Services by way of transportation of goods by

an aircraft or vessel from a place outside

India up to the customs station of clearance

Exemption available (S. No. 9)

Definition of “educational institution

provided

Exemption introduced for non-air

conditioned stage carriage (S. No. 23(bb))

Exemption introduced for transportation of

goods by an aircraft (S. No. 53)


Declared Service : Right to use the spectrum

• Assignment by the Government of the right to use the radio-frequency spectrum and

subsequent transfers thereof to be declared as a service.

Assignment of right to use-

Whether TRUG?

Effective Date:

1st April, 2016

Date of enactment of

Finance Bill

Currently taxable?


Rebate for services used for export

Rebate claim:

• Refund of service tax on services used beyond the factory for export of goods

for the period from 1.7.2012 to 2.3.2016 (both days inclusive).

• Application for claim of rebate of service tax to be made within one month

from the date of commencement of Finance Act, 2016

Issues

Manner in which such claim for rebate to be filled?

Authority before whom the rebate claim to be filed?

Rebate – Where credit availed earlier?


Other legislative changes : Increase in limitation

period

Service Tax

The time period for assessment in normal periods in section 73 proposed to be

increased to 30 months from 18 months

Issues:

Revised time limit applicable for pending matters?

Uttam Steels 2015 (319) ELT 598 (SC)

Excise Duty

The limitation period for demand of duty increased from one year to 2 years, in cases

not involving fraud or collusion or any willful mis-statement or suppression of facts

etc


Increase in limitation period

Introduced in

Finance Act, 1994

as 6 months in S.

73 (value of

taxable services

escaping

assessment)

Amended to one

year vide Finance

Act, 2002

Amended to 18

months vide

Finance Act, 2012

Proposed to be

amended to 30

months vide

Finance Bill, 2016


Proviso to section 75 substituted Where assesse collects service tax but does not deposit the amount with the Central

Government then rate of interest on delayed payment may be specified by way of notification.

Notification No. 13/2016 provides:

Interest payable on delayed payment

S. No. Situation Rate of

interest

1 Collection of amount as service tax but failing to pay

the amount to Central Government

24%

2 Any situation other than above 15%

Effective from date of assent of Finance Bill, 2016

Issues: Situations where S. No. 2 will be attracted?

Case where amount is charged as cum-tax?


Interest payable on delayed payment- history

1.5% simple

interest per

month vide

Finance Act,

1994

Amended to

15% per annum

vide Finance

Act, 2001

Section 75

amended and

interest payable

reduced to 13%

vide Notification

No. 26/2014-ST

Amended vide

Notification No.

12/2014:

Up to 6 months:

18%

6 months to 12

months: 24%

Beyond 12

months: 30%

Amended vide

Notification No.

13/2016:

Amount collected

but not paid: 24%

Any other case:

15%


Provisions relating to arrest

Section 89

Offences and penalties

• Monetary limit for prosecution of In sub-section (1), the word “rupees fifty

lakhs” is proposed to be substituted with “rupees two hundred lakhs”

(i) “in case of offence specified in clauses (a), (b) or (c) where the amount

exceeds fifty lakh rupees, with an imprisonment for a term which may

extend to three years”

(ii) in case of offence specified in clause (d) where the amount exceeds

fifty lakh rupees, with imprisonment for a term which may extend to

seven year”Effective from date of enactment of Bill



Section 90

Cognizance of offences

• Sub-section (2) which provides that offences apart from those under section

89(1)(ii) are non-cognizable and bailable to be omitted

Section 91

Power to arrest

• In sub-section (1), “clause (i) or” to be omitted

• Sub-section (3) pertaining to power of Assistant/Deputy Commissioner in

case of a non-cognizable and bailable offence to be omitted

Effective from date of enactment of Bill



Impact of the amendments Power to arrest will be extended only where the amount is in excess of Rs. 2 crore instead of Rs. 50

lakhs

Such power of arrest limited to cases where the assesse collects any amount but fails to pay the

amount to the Central Government beyond a period of 6 months and will not cover offences

under S. 89(1)(a)(b) and (c)

Issues Whether power of arrest for offences under S. 89(1)(a)(b) and (c) will directly be covered by the

CrPC?



Reverse Charge: Government Services

Section 66D excludes any service by

Government/local authority to a business

entity

• Made effective from 1.4.2016

• Scope/Coverage:

• Licenses?

• Statutory fees?

• Permissions?


Section 67A & Point of Taxation

Section 67A : Determination of rate of tax • Sub-section (2) inserted to provide specific rule making powers in respect of rate of tax

in accordance with Point of Taxation Rules, 2011

Point of Taxation (POT)• Explanation to Rule 5 inserted to provide:

• POT in case of new levy on service.

Issues:

• Whether Krishi Kalyan Cess, Swachh Bharat Cess, etc are new levy?




Cenvat credit rules relating to service tax

Amendments relating to transportation of goods by a vessel for export Rule 2(e) amended to exclude transportation of goods by a vessel from customs station in India to

outside India from definition of exempted service


Sub-rules (1), (2), (3) and (4) of rule 6 inapplicable to transportation of goods by a vessel from

customs station in India to outside India by way of rule 6(7).


Amendments relating to assignment of right to use natural resources Sixth proviso to rule 4(7) added to provide formula for availment of Cenvat credit of service tax

paid on consideration paid for assignment of right to use natural resources:

Cenvat credit to be availed in FY= ST on charges payable for assignment of right to use/No.

of years of assignment



Cenvat credit rules relating to service tax

Amendments relating to assignment of right to use natural resources

(cont.) Seventh proviso to rule 4(7): in case of further assignment of right to use spectrum against

consideration, amount of balance of Cenvat credit as does not exceed service tax payable on

consideration charged shall be allowed in the same financial year.


Eighth proviso to rule 4(7): in case of annual or monthly user charges for assignment of right to

use natural resources, the Cenvat credit shall be allowed in the same financial year in which they

are paid.


Impact:

• The amendments in rule 2(e) and 6(7) will ensure continuity of the Cenvat credit chain with respect

to service of transportation of goods by sea by a vessel by way of export of goods even though

such services are not subject to the levy of service tax.

• Cenvat credit of service tax paid on charges paid for the assignment of right to use natural

resource shall be spread over the period of usage of such right.

Questions ?

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