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Budget Highlights
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Retrospective exemptions from levy of Service Tax by Union Budget,2018

February 1, 2018 9538 Views
Mohammad Salim
FCA, LL.B, B.Com(H)

A. Introduction:

As expected the Hon'ble Finance Minister in his Speech while presenting the Union Budget 2018-19 said that "on the Indirect Taxes side, this is the first budget after the roll out of Goods and Services Tax. Excise duties to a large extent and service tax have been subsumed in GST, along with corresponding duties on imports. Hence, my budget proposals are mainly on the customs side."

However certain amendments have been made in erstwhile Service Tax Law by means by insertion of three retrospective exemptions, which have been briefly discussed in this article.

B. Retrospective exemptions from Service Tax

Three services have been proposed to be exempted from service tax vide clause 103, 104 and 105 of Finance Bill,2018, which are tabulated below: -

Clause No. of Finance Bill,2018

Description of service

Period of proposed exemption

Remarks

103

Services provided or agreed to be provided by the Naval Group Insurance Fund by way of life insurance to personnel of Coast Guard, under the Group Insurance Schemes of the Central Government

10-09-2004 to 30-06-2017

These services were taxable and not exempt under service tax law as well as GST law. However recently these services were exempted from levy of GST retrospectively from 01-07-2017 vide Notification No 02/2018- Central Tax (Rate) dated 25-01-2018.

Similar exemption has been proposed to be extended to such services under service tax law as well from the period 10-09-2004 (date from when the services of life insurance became taxable) to 30-06-2017 (date immediately preceding the date of applicability of GST).

104

Services provided or agreed to be provided by the Goods and Services Tax Network (GSTN) to the Central Government or State Governments or Union territories administration.

28-03-2013 to 30-06-2017

GSTN is a not for profit company under section 8, non-Government, private limited company. It was incorporated on March 28, 2013.It may be noted here that the service provided by GSTN is already exempted from GST Law but such exemption was not there under service tax law and thus in Finance Bill,2018 it has been proposed to exempt such services from levy of service tax from 28-03-2013 (date of incorporation of GSTN) to 30-06-2017.

105

Consideration paid to the Government in the form of Government's share of profit petroleum in respect of services provided or agreed to be provided by the Government by way of grant of license or lease to explore or mine petroleum crude or natural gas or both.

01-04-2016 to 30-06-2017

These services were taxable and not exempt under service tax law as well as GST law. However recently these services were exempted from GST retrospectively from 01-07-2017 vide Notification No 05/2018- Central Tax (Rate) dated 25-01-2018 and notifications issued under other GST Acts. Similar exemption has been proposed to be extended to such services under service tax law as well from the period 01-04-2016 to 30-06-2017.

C. Refund of Service Tax paid on services now exempted

Clause 103, 104 and 105 of Finance Bill, 2018 provides that refund shall be made of all such service tax which has been collected in respect of above services provided during the period of proposed exemption, considering that such services were not taxable earlier. However, it is important to note here that in order to obtain refund an application for claim of refund of service tax shall be made within a period of six months from the date on which Finance Bill, 2018 receives the assent of the President.

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