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Finance Bill, 2017 Vis-a-vis Service Tax

Satyadev Purohit

The learned author attempts at making an overview of the proposals relating to Service Tax in the Budget 2017-18, presented in the Lok Sabha on 1st February, 2017.

1. Introduction

In the wake of proposed Goods and Services Tax regime, which is likely to come into force in the current financial year, the Budget 2017-18 had very less to do in respect of Central Excise, Customs and Service Tax provisions. The rate of service tax has been kept intact. The most of the amendments which are proposed to be made are in the nature of transitional provisions. The Negative list entry relating to services by way of carrying out any process amounting to manufacture or production of goods is proposed to be omitted from section 66D. However, this activity would be included in the exemption notification. Certain amendments are proposed in the provisions relating to Advance Ruling. These are being discussed in what follows.

2. Amendments in Negative List entry

(i) Present position

Presently, services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption, is included in the Negative List under clause (f) of section 66D of the Finance Act, 1994, hence the same is not chargeable to service tax.

Clause (40) of section 65B of the Act, defines the expression process amounting to manufacture or production of goods to mean a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 or any process amounting to manufacture of opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force.

Further, as per clause (c) of entry 30 of Notification No. 25/2012-ST, dt. 20-6-2012, carrying out an intermediate production process as job work in relation to the following is exempt from service tax, namely;

any goods excludng alcoholic liquors for human consumption on which appropriate duty is payable by the principal manufacturer.

As per clause (b) of para 2 of the definition clause, appropriate duty means duty payable on manufature or production under a Central Act or a State Act, but shall not include Nil rate of duty or duty wholly exempt.

(ii) Amendment proposed

Clause (f) of section 66D is proposed to be omitted by the Finance Bill, 2017. At the same time the activity which is proposed to be omitted from the negative list is proposed to be incorporated in the Notification No. 25/2012-ST by substituting entry 30 of the said Notification. Consequent to the above, as per clause (i) of substituted entry 30, the services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption, would continue to be out of the purview of service tax.

A new clause (ya) is proposed to be inserted under para of 2 of the Notification dated 20-6-2012, to define the expression process amounting to manufacture and production of goods as under:

process amounting to manufacture or production of goods means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944), or the Medicinal and Toilet Preparation (Excise Duties) Act, 1955 (16 of 1955) or any process amounting to manufacture of opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force

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