Finance Budget 2014 - Income Tax Provisions
Finance Budget 2014 Income Tax Provisions at a Glance
- The Government has proposed to levy service tax on radio- taxies / cabs whether or not air conditioned operative from notified date.
- Similarly, service tax extended to be levied on sale of space or time for advertisement on online and mobile advertising. Operative from notified date.
- Exemption extended to clinical research on human participants being withdrawn. Earlier it was exempt under entry no. 7 of Megha exemption notification no. 25/2012 dated: 26/06/12 operative from with immediate effects.
- Exemption extended to air conditioned contract carriages like buses is being withdrawn. Earlier it was exempt under entry no 23 (b) of Megha exemption notification no.25/2012 dated 26/6/2012.
- The service of Auxiliary educational service provided to or by educational institutions is separately exempt under the Megha notification, now stand withdrawn with immediate effect.
- Further as a rationalization measure the exemption hitherto available to service provided by way of renting of immoral property to education institutions by virtue of Megha exemption notification stands withdrawn with immediate effect.
- The exemption in respect of services provided to Government or local authority or Governmental authority in entry at Sr No 25 of Megha exemption notification has been made more specific. The exemption of the service in such category as consultancy, designing etc., not directly connected stands withdrawn with immediate effect.
- In case of service by a hotel, inn or guest house the word commercial have been withdrawn to give more clarity about taxation under this category. Therefore any dharmashalas or ashrams having a declared tariff of less than Rs. 1000/- per day or equivalent are also exempt.
However, is would be relevant to note that, the renting of vacant land or buildings for hotels would continue to be taxable irrespective of the hotel declared tariff.
- The Rule 2A of service tax ( determination of value) Rules 2006 should be modified in such a way to combine the works contract of maintenance or repairs and completion and finishing services to be merged in to one single category with % of service portion taxable at 70%. Notification no. 11/2014 dated 11/07/2014 w.e.f. 01/10/2014.
- It is proposed to levy interest for the delay in payment of service tax on variable rates of interest. Accordingly new Notification No.12/2014 dated 11/07/14 to supersede the earlier Notification No.26/2004 dated 10/09/2004 enacted from 1/10/2014 to charge interest as per delay in making payment of service tax as per chart given below-
Period of delay
Rate of simple Interest
Up to Six Months
More than 6 month and up to 1 year.
18% p.a. for first 6 months and 24% p.a. For delay beyond 6 months
More than 1 year.
18% p.a. for first 6 months delays 24 % p.a. For delay above 6 months up to one year, 30% p.a For delay above one year.
- E Payment of service tax by all eligible assesses have been made mandatory by Notification No 9/2014 dated 11/07/2014 w.e.f 1/10/2014. However, the relaxation on same can be provided by D.C. or A.C as the case may be and case to case.
- Service provided by recovery agents to Banks, Financial Institution, and MBFC is being brought under the reverse charge mechanism and accordingly the service receiver will be person liable to pay service tax. It is Operative from 1/10/2014 wide Notification No. 10/2014 dated 11/07/2014.
- Further the directors of a company or a body corporate to the said company or the body corporate has also been brought under the perview of reverse charge mechanism and 100% service tax will be paid by service receiver. It is also operative from 01/10/2014 vide notification no. 10/2014 dated 11/07/2014.
- Rule 7 of point of taxation rules is being amended to provide the point of taxation in respect of reverse charge mechanism will be earlier of the two.
- The date of payment or
- The First day that occurs immediately after a period of 3 months from the date of invoice.
This amendment will apply only to invoices issued after 1/10/2014.
- In renting of motor vehicle where the service provider, does not take abatement, the simplification of partial reverse charge will be as –
- Pre Budget period - 60% service Provider
40% service Receiver
- Post Budget Period – 50% each of both.
The above amendment will take place on and from 1/10/2014.
- A landmark amendment have been made effective from 1/09/2014 that a manufacture or a service provider shall take credit on inputs and input services within a period of six months from the date of issue of Invoice bill or Challan.
- It is pertinent to note that where in case of service tax paid under full reverse charge mechanism, the condition of payment of invoice value to the service provider for availed credit of input service is being withdrawn however, the position in case of partial reverse charge mechanism it is kept intact.
- It has been amended in the fiancé act that, recredit of Cenvat credit reversed on account of non-receipt of export proceeds within the specified period or extended period, to be allowed, if such proceeds are realized within one year from the stiputed period. This can be done by evidencing with the help of relevant documents.
- It is proposed to exempt with immediate effect, about the life micro insurance scheme for the poor approved by IRDA where sum assured is up to 50000/-
- It is proposed to exempt with immediate effect, about the transport of organic manure by vessel, rail or road ( by GTA) taxable portion in transport of goods by vessels is being reduced from 50% to 40% so as to chargeable rate present 6.18% to 4.944%.
- It is proposed to exempt with immediate effect, about loading, unloading, packing, storage or warehousing, transport by vessel, rail or road (GTA), of cotton, ginned or baled is being exempted.
- It is proposed to exempt with immediate effect, about services provided by common bio- medical waste treatment facility operators to clinical establishments are being exempted.
- It is proposed to exempt with immediate effect, about specialized financial services received by RBI from global financial institutions in the course of management of foreign exchange reserve e.g. external asset management, custodial services, securities lending services, etc. are being exempted.
- It is proposed to exempt with immediate effect, about services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India are being exempted.
- A clarificatory provision has been introduced regarding input service distributor; according to rule 7 of cenvat credit Rules. 2004 by amending Rule 7(d) to provide for distribution of common input service credit among all units in their turnover ratio of the relevant period. The circular No. 178/04/2014 – ST dated 10/07/204 and notification No. 05/2014 – CEC (NT) has been issued to that effect.
- It has been substituted in the service tax that, with immediate effect that, the condition for non-availment of credit is required to be satisfied by the service provider only in case of abatement in GTA services.
- An entry at sr no. 9 A have been introduced to provide the 40% taxable portion about newly inserted transportation of passenger by air conditioned contract carriage, with condition that cenvat credit of inputs or capital goods or inputs services has not to be taken.
- The condition against entry no.9 is amended w.e.f 1/10/2014 to allow the credit of input services to the renting of motor cab provided if received from similar line of business and restricted to 40 % of the value of services again with a precondition that the service tax is paid or payable on full value of services and no abatement is availed.
- It has been also amended that tour operator services provider are also eligible to avail cenvat credit on the input service received from similar business, which are used for providing taxable service. It will reduce the cascading of taxes. Effective from 01/10/2014.
- Like under central excise section 35 it has been made applicable to service tax also. It laid a pre-condition about appeals as follows –
- Mandatory payments of 7.5% as pre deposit of the dues including tax and penalty before filing of first stage appeal Commissioner Appeals and Tribunal.
- Mandatory payment of 10 % as pre deposit of the dues including tax and penalty before filing the second stage appeal at tribunal. The upper ceiling of payment is restricted to 10 crores.
- The explanation to section GTA of Finance Act is being amended to enable the Government to prescribe rules for determination of rate of exchange for calculation of taxable value in respect of certain services.
- The second proviso to rule 4(a) of place of provision of services rules is being amended w.e.f 01/10/14 to prescribe that it would suffice for the purpose of exclusion of repairs services from applicability of rule 4(a) that the goods imported for repair are exported after repairs without being put to any use other than that which is required for such repair.
- Services provided by ESIC during the period prior to 01/07/2012 are proposed to be exempt from service tax.
- The resident Pvt ltd co is being included or a class of persons eligible to make application for advance ruling in service tax. According to notification No 15/2014 dated 11/07/14 it is operative with immediate effect.
- On account of technical exemption, specialized financial services received by RBI from outside India, in the course of management of foreign exchange reserve e.g. external asset management, custodial services, securities lending services are being exempted. ( New entry at Sr No 41 of Megha notification No 25/2012).
- In case of Special Economic Zone (SEZ) for the simplification of procedure, with immediate effect the notification no. 7/2014 dated 11/07/2014 have been replaced to the earlier notification no. 12/2013.
- The followings sections of Central Excise provisions are made applicable to Service Tax as per amendment in section83. Those sections are 5A(2), 15A and 15B.
- Section 73 is being amended to prescribe time limits for completion of adjudication as already exists in Central Excise. This time limit would need to be followed, as far as possible.
- Section 80 is being amended to exclude the reference of first proviso to section 78. This amendment, in effect, removes the power to waive the 50% penalty imposable in cases where service tax has not been levied, not paid or short levied or short paid on account of suppression of facts or willful misstatement but details of transactions are available in the specified record.
- Section 82(1) is being amended, along the lines of section 12F(1) of the Central Excise Act, so that Joint Commissioner or Additional Commissioner or any other officer notified by the Board can authorize any Central Excise Officer to search and seize.
- Sub-section (6A) of section 86 is being amended to omit the words “for grant of stay or”.
- Section 87 is being amended to incorporate power to recover dues of a predecessor from the assets of a successor purchased from the predecessor as it is presently provided for in section 11 of the Central Excise Act, 1944.
- Section 94 is being amended to obtain rule making powers (a) to impose upon assesses, inter alia, the duty of furnishing information, keeping records and making returns and specify the manner in which they shall be verified; (b) for withdrawal of facilities or imposition of restrictions (including restrictions on utilization of CENVAT credit) on service provided or exporter, to check evasion of duty or misuse of CENVAT credit; and (c) to issue instructions in supplemental or incidental matters.
- Changes explained above are not intended to be exhaustive and the analysis of changes does not have legal validity; analysis of changes wherever provided is merely meant to highlight certain aspects of these changes. The text of the statutory provisions and the wordings of the notifications should be read carefully for interpreting the law.