India: Union Budget 2015-16: Indirect Tax Highlights

Last Updated: 15 October 2015
Article by Bhasin Sethi & Associates

Key Takeaways:


Change in Service Tax rate

  • Service Tax rate increased from 12.36% (including education cess and secondary and higher education cess) to 14% (with effect from a date to be notified after the enactment of the Finance Bill, 2015).
  • Till the time the revised rate come into force, the levy of 'Education Cess' & 'Secondary & Higher Education Cess' shall continue.

Imposition of Swachh Bharat Cess

  • Imposes Swachh Bharat Cess on all or any of the taxable services @ 2% w.e.f. from a date to be notified by the Central Govt. in this regard. It will not have any immediate effect.

Review of the Negative List (Effective from a date to be notified)

  • Service tax levy extended to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks, etc.
  • Service Tax imposed on admission for entertainment events such as concerts, non-recognized sporting events, pageants, music concerts, award functions, if admission fee more than INR 500.
  • Irrespective of admission fee, no tax on exhibition of cinematographic film, circus, recognized sporting events, dance, theatrical performances including drama and ballets.
  • Service Tax extended on contract manufacturing / job work for production of potable liquor.
  • Service Tax imposed on support service by Govt. or local authority to a business entity, unless specifically specified.

Withdrawal of exemptions from April 1, 2015

  • Exemption only on specified services of construction, erection and commissioning provided to Govt. and shall be limited to historical monument, archaeological site, canal, dam, pipeline and conduit or plant for (i) Water supply (ii) Water treatment or (iii) Sewerage treatment or disposal.
  • Exemption withdrawn Construction, erection, commissioning or installation of original works pertaining to an airport or port.
  • Exemption withdrawn on services by a performing artist in folk or classical art form, if amount charged is more than INR 1,00,000.
  • Exemption to transportation of food stuff by rail, or vessels or road limited to food grains.
  • Exemption withdrawn for services by mutual fund agent to a mutual fund or assets management company, distributor to a mutual fund or AMC.
  • Exemption withdrawn on departmentally run public telephone, guaranteed public telephone operating only local calls, telephone calls from free telephone at airport and hospital.

New exemptions from April 1, 2015

  • Exemption on pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables.
  • Exemption on service by Common Effluent Treatment Plant operator for treatment of effluent.
  • Exemption on service by way of exhibition of movie by the exhibitor to the specified class of people.
  • Exemption for transportation of a patient to and from a clinical establishment by a clinical establishment, including by an ambulance.
  • Exemption for admission to a museum, zoo, national park, wild life sanctuary, and a tiger reserve.
  • Exemption for goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, port, etc.

Other Amendments to Finance Act, 1994 (Effective from a date to be notified)

  • Service Tax levy on chit fund foreman by way of conducting a chit and by distributors or selling agents of lottery.
  • For valuation of taxable service in case of chit fund and lottery distribution, consideration of service to include reimbursable expenditure or cost incurred and charged by the service provider and amount retained by the distributor or selling agent of lottery from gross sale amount of lottery ticket.
  • Penalty imposed not to be more than 10%, if no fraud or collusion, et al.
  • No penalty if service tax and interest paid within 30 days of issuance of SCN.
  • Penalty imposable is 100%, of the service tax amount involve or if fraud or collusion, et al.

Rationalization of Abatements from April 1, 2015

  • Uniform abatement for transport by rail, road and vessel, Service Tax payable on 30% of value of services.
  • Service Tax payable on 60% of the value of air transport of passenger for higher classes.
  • Exemption withdrawn on chit fund service.

Reverse Charge Mechanism from April 1, 2015

  • Full reverse charge on manpower supply and security services provided by an individual, HUF, or partnership firm to a body corporate.
  • Reverse charge mechanism on services by mutual fund agents, mutual fund distributors and agents of lottery distributor.
  • Credit allowed on service tax paid under partial reverse charge by the service receiver without linking it to the payment to the service provider.


  • Imposes service Tax on service by aggregator, if brand name of aggregator used (effective March 1, 2015).
  • Exemption withdrawn on service by commission agent located outside India to an exporter located in India.

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