This is to inform you that the Government of India has issued several notifications yesterday regarding applicability of amendments in service tax law. Important changes are as under:
The amended service tax rate of 14% will be effective from 1st June 2015;
- There is no requirement to charge 2% Education Cess & 1% Secondary & Higher Education Cess on 14% w.e.f. 1st June 2015;
- Currently as per Rule 6(3) of Cenvat Credit Rules, 2004, where a service provider is providing both taxable service and exempted service (including trading of goods), then in that case, such person can take 100% CENVAT credit on input services and required to reverse 6% credit on the value of exempted services. Now, due to increase in the rate of service tax, such person will be required to reverse 7% of credit on the value of exempted services w.e.f. 1st June 2015. However, it may be noted that where a manufacturer is manufacturing dutiable as well as exempted goods, then in that case reversal of credit on exempted goods would continue to be 6% only.
The following chart would help to understand the chargeability of service tax:
|Sr. No.||Services Provided||Invoice Raised||Payment Received||Applicable Rate of Service Tax|
|1||Before 1st June||Before 1st June||After 1st June||12.36%|
|2||Before 1st June||After 1st June||After 1st June||14%|
|3||Before 1st June||After 1st June||Before 1st June||12.36%|
|4||After 1st June||After 1st June||Before 1st June||14%|
|5||After 1st June||Before 1st June||Before 1st June||12.36%|
|6||After 1st June||Before 1st June||After 1st June||14%|
It may be noted that the Swachh Bharat Cess @ 2% or less is not yet effective from 1st June 2015. The effective date of applicability of Swachh Bharat Cess will be informed by the Government very soon.
It may also be noted that there is no clarification issued regarding inclusion of CENVAT credit of 2% & 1% on input services in the basic service tax credit effective from 1st June 2015. So we need to wait to receive such related notification or circular. I will update you once such notification or circular is issued. Till then do not include CENVAT credit of 2% and 1% Cess of input service in basic credit for payment of basic service tax.