Service tax abatements and composition schemes at a glance

November 21st, 2017

Service tax abatements and composition schemes at a glance w.e.f. 1-6-2016

V S Datey

Following is the summary of important abatements and composition schemes as amended upto 1-4-2016.

These apply mutadis mutandis to Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) also.

 

Taxable Service Partial abatement / Composition Scheme Conditions Relevant Notification/Rule
Accommodation booking service by tour operator 10% of amount charged
service tax – 1.4%, SBC – 0.05%, KKC – 0.05% on total value. Total 1.5%.(Abatement Scheme, though really it is composition scheme)
No Cenvat Credit. Invoice should be inclusive of cost of accommodation Sr. No. 11(ii) of Notification No. 26/2012-ST dated 20-6-2012.
Air Travel Agent Option to pay service tax at flat rate on ‘basic fare’ @ 0.6% in case of domestic booking and 1.2% in case of international booking – plus SBC and KKC
SBC and KKC each @ 3.5714% of service tax payable (Composition Scheme)
No restriction on availment of Cenvat credit Rule 6(7) of Service Tax Rules
Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises ( including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises  Tax on 70% of amount charged including fair value of goods and services supplied by service receiver (to service provider) under same or different contract
service tax – 9.80%, SBC – 0.35%, KKC – 0.35% on total value. Total – 10.50%(composition scheme)
Cenvat credit of input services and capital goods is available. Cenvat credit on food items (covered under Chapters 1 to 22 of CETA) not available. Cenvat credit of other inputs is available. Sr. No. 4 of Notification No. 26/2012-ST dated 20-6-2012
Chit related services Tax on 70% of amount charged w.e.f 1-4-2016
service tax – 9.80%, SBC – 0.35%, KKC – 0.35% on total value. Total – 10.50% [During 1-4-2015 to 1-4-2016, it was on 100% of value](Abatement scheme )
Cenvat Credit not allowed [As per Sr. No. 8 of Notification No. 26/2012-ST dated 20-6-2012, service tax was payable on 70% of value upto 1-4-2015, subject to non-availment of Cenvat credit].
Financial leasing and hire purchase Service Tax on lease management fee, processing fee, documentation charges and administrative fee plus 10% of interest – service tax 14% plus SBC and KKC @ 0.50% each
total 15% of value
No restriction on availment of Cenvat Credit Sr. No. 1 of Notification No. 26/2012-ST dated 20-6-2012
Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, if value of land is included in the amount charged from the service receiver Service tax on 30% of value w.e.f. 1-4-2016.

service tax – 4.20%, SBC – 0.15%, KKC – 0.15% on total value. Total – 4.50%.

Earlier, the provision was as follows – If construction contract is for residential complex (need not be works contract) includes value of land plus (a) the carpet area of residential unit is less than 2,000 Sq. Ft and (b) the amount charged for residential unit is less than Rs one crore (Abatement scheme under Sr No. 12(i) of Notification No. 26/2012-ST dated 20-6-2012 as amended on 1-3-2013)

If construction contract (need not be works contract) is for industrial or commercial construction and includes value of land, service tax payable on 30% of value.

(termed as Abatement Scheme – actually it is composition scheme)

Cenvat credit of input services and capital goods can be taken but not of input goods Sr No. 12 of Notification No. 26/2012-ST dated 20-6-2012 as amended w.e.f. 1-4-2016
Foreign Currency – sale and purchase At slab rates prescribed under rule 6(7B) on total gross amount of currency exchanged plus SBC and KKC
SBC and KKC each @ 3.5714% of service tax payable (Optional Composition Scheme)
No restriction on availment of Cenvat Credit Rule 6(7B) of Service Tax Rules
Foreign Currency – sale and purchase Value is difference between  buying or selling rate and RBI reference rate – service tax rate 14% plus SBC and KKC @ 0.50% each – total – 15% of value
(Normal Scheme of valuation)
No restriction on availment of Cenvat Credit Rule 2B of Service Tax (Determination of Value)  Rules
Life Insurance (i) 3.50% of net premium (excluding investment or savings part, if such amount is informed to policy holder)  – If not so informed, 3.5%% in first year and 1.75% in subsequent years

(ii) In case of single premium annuity policies other than above, service tax on 1.4% of single premium [clause (ii) inserted w.e.f. 1-4-2016]

plus SBC and KKC
SBC and KKC each @ 3.5714% of service tax payable

(Composition Scheme)

No restriction on availment of Cenvat Credit Rule 6(7A) of Service Tax Rules
Lottery ticket promotion At slab rates as specified in rule 6(7C)  plus SBC and KKC
SBC and KKC each @ 3.5714% of service tax payable(Composition Scheme)
No restriction on availment of Cenvat Credit Rule 6(7C) of Service Tax Rules
Outdoor caterer Tax on 60% amount excluding State Vat
service tax – 8.40%, SBC – 0.30%, KKC – 0.30% on total value. Total – 9.00%.(Composition Scheme) (Till 1-7-2012, it was 50%)
Cenvat credit of input services and capital goods is available. Cenvat credit on food items (covered under Chapters 1 to 22 of CETA) not available. Cenvat credit of other inputs is available. Rule 2C of Service Tax (Determination of Value) Rules
Renting of motor cab [The words were – ‘Renting of any motor vehicle designed to carry passengers’ upto 1-10-2014] Tax payable on 40% of amount charged

service tax – 5.60%, SBC – 0.20%, KKC – 0.20% on total value. Total – 6.00%. (Abatement Scheme)

Cenvat credit on inputs and capital goods not available. However, w.e.f. 1-10-2014, Cenvat credit on input service of motor cab is available. Cenvat credit of any other input service is not available [Upto 1-10-2014, Cenvat credit was not available at all]. Sr. No. 9 of Notification No. 26/2012-ST dated 20-6-2012 as amended w.e.f. 1-10-2014
Restaurant service Tax on 40% amount excluding State Vat
service tax – 5.60%, SBC – 0.20%, KKC – 0.20% on total value. Total – 6.00%.(Composition Scheme) (Till 1-7-2012, it was 30%)
Cenvat credit of input services and capital goods is available. Cenvat credit of excise duty on food items (covered under Chapters 1 to 22 of CETA) not available. Cenvat credit of other inputs is available. Rule 2C of Service Tax (Determination of Value) Rules
Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes Tax payable on 60% of amount charged
service tax – 8.40%, SBC – 0.30%, KKC – 0.30% on total value. Total – 9.00%.(Abatement Scheme) (Till 1-7-2012, the tax payable was on 50% amount).
Cenvat Credit of input services allowable but no Cenvat credit of inputs and capital goods Sr. No. 6 of Notification No. 26/2012-ST dated 20-6-2012
Tour operator – providing services solely of arranging or booking accommodation for any person in relation to a tour (If Bill includes cost of accommodation)

 

Tax is payable on 10% of  amount charged
service tax – 1.40%, SBC – 0.05%, KKC – 0.05% on total value. Total – 1.50%.(termed as Abatement Scheme – really it is a composition scheme)
Cenvat credit of input service of tour operator is allowed w.e.f. 1-10-2014 [till 1-10-2014, Cenvat credit was not available at all]

Bill to be inclusive of charges for such accommodation

Sr. No. 11(i) of Notification No. 26/2012-ST dated 20-6-2012 amended w.e.f. 1-4-2016.
Tour operator – [package tour or other tour]

 

Tax is payable on 30% of amount charged w.e.f. 1-4-2016
service tax – 4.20%, SBC – 0.15%, KKC – 0.15% on total value. Total – 4.50% [earlier i.e. upto 1-4-2016, it was 25% for package tours and 40% for other tours. Now it is uniform @ 30% w.e.f. 1-4-2016](Abatement Scheme)
Cenvat credit of input service of tour operator is allowed w.e.f. 1-10-2014 [till 1-10-2014, Cenvat credit was not available at all]

Bill to be inclusive of all charges for the tour

Sr. No. 11(ii) of Notification No. 26/2012-ST dated 20-6-2012 as amended
Transport of goods  by rail Tax payable on 30% of amount charged (w.e.f. 1-10-2012).

service tax – 4.20%, SBC – 0.15%, KKC – 0.15% on total value. Total – 4.50%.

In case of transport in containers by rail or any person other than Indian Railways, service tax is payable on 40% of value w.e.f. 1-4-2016’

 

(Abatement Scheme)

Cenvat credit of input services available w.e.f. 1-4-2016. During 1-4-2015 to 1-4-2016, no Cenvat credit was available. Till 1-4-2015, there was no restriction on availment of Cenvat Credit] Sr. No. 2 of Notification No. 26/2012-ST dated 20-6-2012 and Sr No. 2A as inserted w.e.f. 1-4-2016
Transport of goods  by road by Goods Transport Agency (GTA) Tax payable on 30% of amount charged, except on transport of used household goods by GTA service tax – 4.20%, SBC – 0.15%, KKC – 0.15% on total value. Total – 4.50%

[Till 1-4-2015, service tax was payable on 25% of value]

In case of service of transport of used household goods by road by GTA, service tax is on 40% w.e.f. 1-4-2016, (Abatement Scheme)

No Cenvat Credit available to service provider (It has been clarified vide MF(DR) letter dated 10-7-2014 that service receiver is not required to establish that service receiver has not availed Cenvat credit) Sr. No. 7 and 7A of Notification No. 26/2012-ST dated 20-6-2012
Transport of goods  in a vessel from one port in India to another or from out of India to India Tax payable on 30% of amount charged w.e.f. 1-4-2015
service tax – 4.20%, SBC – 0.15%, KKC – 0.15% on total value. Total – 4.50% (During 1-10-2014 to 1-4-2015, service tax was payable on 40% of value. Till 1-10-2014, service tax was payable on 50% of value) (Abatement Scheme)
Cenvat Credit of input services available w.e.f. 1-4-2016. Till 1-4-2016, no Cenvat credit was allowable. Sr. No. 10 of Notification No. 26/2012-ST dated 20-6-2012
Transport of passengers, with or without accompanied belongings, by (a) a contract carriage other than motor cab (b) a radio taxi [The words ‘radio taxi have been added w.e.f. 1-10-2014] (c) Stage Carriage [clause (c) inserted w.e.f. 1-6-2016] Tax payable on 40% of amount charged.

service tax – 5.60%, SBC – 0.20%, KKC – 0.20% on total value. Total – 6.00%

If fuel or other goods are supplied by recipient of service, its fair market value will be includible in the value – Explanation BA added w.e.f. 1-4-2016.

No Cenvat Credit available Sr No. 9A of Notification No. 26/2012-St inserted w.e.f. 1-4-2016
Transport of passengers by air Tax payable on 40% of amount charged for economy class – service tax – 5.60%, SBC – 0.20%, KKC – 0.20% on total value. Total – 6.00%

and on 60% on executive or business class w.e.f. 1-4-2015 – service tax – 8.40%, SBC – 0.30%, KKC – 0.30% on total value. Total – 9.00%.

[Till 1-4-2015, serviced tax was payable on 40% of value even in respect of business class or executive class] (Abatement Scheme)

Cenvat Credit of input services allowable but no Cenvat credit of inputs and capital goods Sr. No. 5 of Notification No. 26/2012-ST dated 20-6-2012
Transport of passengers  by rail Tax payable on 30% of amount charged (w.e.f. 1-10-2012)
service tax – 4.20%, SBC – 0.15%, KKC – 0.15% on total value. Total – 4.50%(Abatement Scheme)
Cenvat credit on input services allowed w.e.f. 1-4-2016.

[During 1-4-2015 to 1-4-2016, no Cenvat credit was available. Till 1-4-2015, there was no restriction on availment of Cenvat Credit]

Sr. No. 3 of Notification No. 26/2012-ST dated 20-6-2012
Works Contract Service Tax on value of service calculated as per rule 2A(i) plus SBC and KKC
SBC and KKC each @ 3.5714% of service tax payable or(A) Tax on 40% of gross amount charged as specified in rule 2A(ii) if full construction, erection, commissioning – service tax – 5.60%, SBC – 0.20%, KKC – 0.20% on total value. Total – 6.00%(B) 70% for finishing, repairs etc. service tax – 9.80%, SBC – 0.35%, KKC – 0.35% on total value. Total – 10.50%(Composition Scheme)

 

Cenvat credit of input services and capital goods is available. Cenvat credit of excise duty on goods, the property of which is transferred is not available. Cenvat credit of other inputs (like consumables) is available Rule 2A of Service Tax (Determination of Value) Rules

 

 

 

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