Service Tax to Continue at
Old Rate of 12.36 percent Till Finance Bill is Passed
by Parliament and Converted to after Presidential Assent
[Service Tax Notification No. 183 dated 10th April 2015]
Subject:
Clarification on rate of service tax.
Doubts
have been expressed in various forums regarding the proposed increase in the rate
of service tax from 12.36% (including education cesses) to 14% on the
value of taxable service.
2. It may be noted that changes proposed in the
Budget have/are coming into effect on various dates as already indicated in JS
(TRU-II) D.O. letter dated 28th February, 2015. Certain
amendments made in the Finance Act, 1994, including the change in service tax
rate, will come into effect from a date to be notified by the Government after
the enactment of the Finance Bill, 2015.
3. In this regard your attention is invited to
clause 106 of the Finance Bill, 2015 and paragraph 3 of JS (TRU-II) D.O.
letter, which is reproduced below:-
“3. Service Tax Rate:
3.1 The rate of Service Tax is being increased
from 12% plus Education Cesses to 14%. The
‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be
subsumed in the revised rate of Service Tax. Thus, the effective
increase in Service Tax rate will be from the existing rate of 12.36%
(inclusive of cesses) to 14%, subsuming the cesses.
3.2 In this context, an amendment is being made in
section 66B of the Finance Act, 1994. Further, it has been provided vide
clauses 179 and 187 respectively of the Finance Bill, 2015 that sections 95 of
the Finance Act, 2004 and 140 of the Finance Act, 2007, levying Education Cess
and Secondary and Higher Education Cess on taxable services shall
cease to have effect from a date to be notified by the Government.
3.3 The new Service Tax rate shall come into
effect from a date to be notified by the Central Government after the enactment
of the Finance Bill, 2015.
3.4 Till the time the revised rate comes into effect, the ‘Education Cess’ and ‘Secondary
and Higher Education Cess’ will continue to be levied in Service Tax.”
4. The paragraph reproduced above is
self-explanatory and it is clear that the new Service Tax rate shall come into
effect from a date to be notified by the Central Government after the enactment
of the Finance Bill, 2015. The date will be notified in due course after the
enactment.
5. Similarly, certain doubts have been raised
with regard to abatement on value of services provided in relation to serving
of food or beverages by a restaurant, eating joint or a mess, having the
facility of air-conditioning or central air-heating in any part of the
establishment, at any time during the year. Valuation of services provided in
relation to serving of food or beverages by a restaurant, eating joint or a
mess is determined as provided in rule 2C of the Service Tax
(Determination of Value) Rules, 2006.
5.1 In the Union Budget, 2015, no change has been
made in these rules; therefore, any confusion is unwarranted. Further, as
explained above, the rate of service tax on the specified portion of the amount
charged for such supply which is 40% continues to be 12.36% (including cesses)
at present i.e. 4.944 %. The rate of Service tax, as discussed above, will
continue unchanged till a date which will be notified in due course.
6. Wide publicity may be given so that the assesses and public are aware of the above. All the
major Industry/Trade Associations may be informed accordingly.
F. No. B-1
/1/2015-TRU