Thursday, April 9, 2015

Clarifications on Service Tax Applicability in 2015

New Service Tax rates have been proposed in the Finance Bill, 2015. These rates shall come into effect only after the Finance Bill becomes the Finance Act 2015 and the effective date is notified. It is, therefore, to be noted that there is no change in the rate of Service Tax w.e.f. 1st April, 2015.

Rate Applicable in Case of Transaction falling in the Transitional Phase 

However, there may be some confusion about the applicable rates in case the date of delivery of service, date of invoice and date of payment happen to occur at a time when some of these dates may fall before the effective date of change of rate and some others may fall after. The manner of determining the rate applicable on such transactions is as under.

In the following examples, "cut-off date" means the date from which the Service Tax rate will be notified as changed.

1. In case the service is provided before the cut-off date.

Applicable Rate
Both Date of Invoice and Date of Payment are after the cut-off date.
New Rate (14%)
Invoice issued before cut-off date and payment received after cut-off date.
Old Rate (12.36%)
Invoice issued after cut-off date but payment received before cut-off date.
Old Rate (12.36%)

2. In case the service is provided after the cut-off date.

Applicable Rate
Both Date of Invoice and Date of payment are before cut-off date.
Old Rate (12.36%)
Date of Invoice is before cut-off date but Date of Payment is after cut-off date.
New Rate (14%)
Date of Invoice is after cut-off date but payment received before cut-off date.
New Rate (14%)

Exemptions Withdrawn w.e.f. 1st April 2015

Services provided to:

1. Govt, local authority or Govt authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of:
  • a civil structure meant for use other than for commerce, industry.
  • a structure meant predominantly for use as an educational, clinical, or an art or cultural 
  • a residential complex predominantly meant for self-use or the use of their employees.

2. Services provided by way of construction, erection, commissioning or installation of original works pertaining to an airport or port.

3. Services provided by a performing artist in folk or classical art form of music, dance or theater,  where amount charged is more than Rs. 1,00,000 for a performance.

4. Transportation of food stuff by rail, or vessels or road will be limited to food grains including rice and pulses, flour, milk and salt.

5. Services provided by a mutual fund agent or distributor to a mutual fund or assets management company.

6. Services of selling or marketing agent of lottery ticket to a distributor.

7. Telecommunication services by
  • Departmentally run public telephone;
  • Guaranteed public telephone operating only local calls;
  • Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued.

New Exemptions w.e.f. 1st April, 2015

  1. All ambulance services.  
  2. Life insurance service provided by way of Varishtha Pension Bima Yojna 
  3. Goods transport agency service provided for transport of export goods by road from the place of removal to a land customs station.  
  4. Service provided by or for
  • a Common Effluent Treatment Plant operator for treatment of effluent. 
  • pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables.  
  • admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve.  
  • exhibition of movie by the exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of its members.  


Up to 31.03.2015
W.e.f. 01.04.2015
Services of goods transport agency in relation to transport of goods
Taxable Percentage
Effective Rate

Services provided in relation to Chit Funds
Taxable Percentage
Effective Rate

Services in relation to transport of goods in a vessel
Taxable Percentage
Effective Rate

Transport of Passengers by Air other than in Economy Class
Taxable Percentage
Effective Rate

Contributed by
Ms. Tanya Gagneja
Article Assistant
Sandeep Ahuja & Co.