Service tax changes applicable from 1st April 2016 due to budget 2016 are summarized in this article.The article provides knowledge about change in exemptions, abatement, reverse charge mechanism and service tax rules from 1/4/2016.

25 Service tax changes applicable from 1st April 2016:

Change in Exemptions from 1st april, 2016:

  1. Exemption to senior advocate in respect of service to advocate or to partnership of advocates and a person represented on an arbitral tribunal to an arbitral tribunal is being withdrawn from 1st April, 2016. Service tax should be charged in bill under forward charges and paid to government.
  2. Exemption to transportation of passenger services , with or without accompanied belongings by ropeway, cable car or aerial transway – s.no. 23(c) has been withdrawn from 1st april, 2016. So these services are taxable.
  3. Exemption has been extended to life insurance service by way of annuity under national pension system regulated by PFRDA. This exemption is effective from 1/4/2016.
  4. Exemption has been extended for services provided by EPFO.
  5. Exemption has been extended for services provided by SEBI.
  6. Services provided by Biotechnology Industry research assistance council – BIRAC approved incubators to incubatees are being exempted.
  7. Services by National Centre for Cold Chain Development are being exempted.
  8. Services of IRDA are being exempted.
  9. For performing artist in folk or classical art forms of music, dance or theater , threshold exemption limit is being increased from Rs. 1 Lakh to Rs. 1.5 Lakh per performance.
  10. Skill vocational training service provided by Deen Dayal Upadyay Grameen Kaushalya Yojana taining partners are being exempted.
  11. Services of assessing bodies empanelled by DGT or Ministry of skill development and Entrepreneurship are being exempted.

Change in Abatement rate from 1/4/2016:

  1. While claiming abatement 90% in relation to Services of solely booking accommodation  of tours, it is made necessary to include accommodation cost in invoice along with service charges.
  2. Now there is single abatement rate of 70%  for tour operator other than mentioned above. To know more about tour operator service, read this article here.
  3. Services provided by foreman to chit fund are proposed to be taxed with 30% abatement availability.
  4. To avail abatement on renting of motor car services, cost of fuel should be included in the consideration charged.
  5. For composition scheme of residential construction activity,condition of  abatement as per carpet area is being removed and single abatement of 70% is now being prescribed subject to fulfillment of existing conditions.
  6. From 1/4/2016, service tax is leviable on 30% on amount charged for service of transport of passengers by rail , without availability of cenvat credit of inputs and capital goods. ( Cenvat credit of input services are now available).
  7. Transport service of goods in containers by rail by any other person other than Indian Railway is taxable under service tax with reduced abatement rate of 60%. So there are two categories of abatement for transport of goods in rails. For Indian railways, it is 70% ( 30% value is taxable) and for others , it is 60% (40% value is taxable). Credit of input services are available to both of them while claiming abatement.
  8. For transport of goods by vessel, 70% abatement is available with cenvat credit of input services.
  9. For GTA, abatement on transport of used household goods is being rationalized with 60% abatement rate without availment of cenvat credit of inputs, input services and capital goods. For other goods, 70% abatement is available.

Changes in Reverse charge mechanism after budget 2016 from 1/4/16:

  1. Services of mutual fund agents/ distributor to a mutual fund or assets management company are being put under forward charge.
  2. The liability to pay service tax on any service provided by government or a local authority to Business Entities shall be on service recipient under reverse charge basis (RCM).

Changes in service tax rules from 1st April, 2016:

  1. One person company ( OPC) whose aggregate value of services provided is up to Rs. 50 Lakhs can get benefit of quarterly payment of service ax and payment of service tax on receipt basis. So relaxation to individuals and partnership firms are available to OPC too.
  2. The service tax rate under composition scheme for single premium annuity policies is being rationalized at the rate of 1.4% of the total premium charged.
  3. Service tax above certain threshold will also be required to file an annual return.

I hope this article has updated you about service tax changes from 1st April 2016. If I forget to mention any point, please remind me through comments and don’t forget to share this article on Facebook  to spread knowledge.