Changes in Service Tax Rules & Negative List w.e.f. 01.10.2014

Service tax Notification no. 18/2014-ST & 19/2014- ST dated 25th Aug'14 Effective date of amendment-1st Oct'14 

SERVICES PROVIDED BY RADIO TAXIS:

Earlier, radio taxis were excluded from the purview of service tax by virtue of section 66D(o)(vi) of Finance Act,1994;

However, in the Finance (No.2) Act, 2014, enacted on 6th August, 2014, the said section was amended & the "radio taxis" got deleted, resulting in levy of service tax thereupon. However, effective date wasn't notified. Now, the same has been notified as 1st October,2014;

At the same time, abatement of 60% shall be allowed in such cases, as provided in entry no. 9/9A of N/N 26/2012-ST, amended by N/N 08/2014- ST, subject to the condition that no CENVAT is claimed.

Hence, effective rate of service tax shall be 4.944%.

SERVICES PROVIDED BY RADIO TAXIS:

As per the erstwhile provisions contained in section 66D(g) of Finance Act,1994, sale of space for advertisement, other than radio & television, used to remain excluded from the levy of service tax.

In the Finance (no. 2) Act, 2014, all advertisements, other than in print media, were made subject to service tax, though effective date of applicability of amended provisions, was not defined.

Now, the same has been notified as 1st October, 2014.

DETERMINATION OF RATE OF EXCHANGE:

From 28-May-2012, section 67A was inserted to determine the rate of exchange to be opted for the purpose of determination of value of the taxable service & such rate was construed to be the rates notified by CBEC from time to time, in accordance with section 14 of Customs Act,1962.

This had led to various practical difficulties in the industry, since they had to separately maintain a track record as per CBEC rates for the purpose of valuing import or export of service, while in financial statements the rates were considered on a different basis(e.g. RBI rates, Bank TT buying/selling rate, etc.)

Now, w.e.f. 1st October,2014,rule 11 has been inserted in Service Tax Rules,1994 to consider the rate of exchange as per GAAP on the date when Point of taxation arises in terms of the point of Taxation Rules, 2011.

Point this amendment, an ambiguity may arise as to whether the same rates may also be used for valuing export of Services, or department may take the other view?