New Service Tax Rate effective from 01-06-2016

After enactment of the Finance Act 2016 (No. 28 of 2016) the effective rate of Service Tax w.e.f. 01-06-2016 is increased from 14.50% to 15% (14% ST+ 0.50% Swachh Bharat Cess + 0.50% Krishi Kalyan Cess) by way of introducing Krishi Kalyan Cess @ 0.50% on value of taxable services. Accordingly, the rate of ST shall be 15% w.e.f. 01-06-2016 from existing effective rate of 14.50%.

Read also: Changes in Service Tax by Union Budget 2016-17 (Finance Act 2016)

The above changes shall have impact on the levy of existing (14.50%) and revised ST rate (15%) on the continuing works as well as on works completed but not billed. The summarized illustrative position of applicable rate of Service Tax under various scenarios as determined by Rule 5 of the Point of Taxation Rule, 2011 (New Levy) and Section 67A of the Finance Act, 1994 is as under:-

(Effective date is 01-06-2016)

S. No. Rendering Service Invoice Issued Payment Received Rate %
1. Before Before After 15.oo
2. Before After After 15.00
3. Before After (up to 14-6-16) Before 14.50
4. After After 14-06-16 Before 14.50
5. After Before After 15.00
6. After Before Before 14.50

 

Due to change in rate of Service Tax the taxable value of service under works contract service would be change as below:

Particulars Earlier Rate New Rate
Original Works 14% X 40% = 5.60% 15% X 40% = 6.00%
Others 14% X 70% = 9.80% 15% X 70% = 10.50%

 

Under reverse charge the new rates for various services taken would be as below:

 

Category of Service Earlier Rate New Rate
Liability of Service Provider Liability of Service Recipient Liability of Service Provider Liability of Service Recipient
Renting of Motor Vehicle-Abatement Taken-No Abatement Taken

Nil

7.25%

 5.60%

7.25%

 Nil

7.50%

6.00%

7.50%
Works Contract

  • -Original Works
  • -Other Works
  

  • 2.90%
  • 5.08%
  

  • 2.90%
  • 5.08%
  

  • 3.00%
  • 5.25%
  

  • 3.00%
  • 5.25%
Manpower Supply or Security Services Nil 14.50% Nil 15%

 

Important Change in Point of Taxation due to introduce Krishi Kalyan Cess

  • For Service Provider: KKC not payable if the payment has been received before 1st June, 2016 and invoice has been issued either prior to 1-6-2016 or within fourteen days i.e. upto 14-06-2016.
  • For Service Recipient u/s 68(2):

a) Service Received from Government or Local Authority: Tax is payable on earlier of

– Payment became due

– Payment received

Thus KKC is not payable where either Invoice has been issued or payment received before 01-06-2016.

b) Service Received from other than Government or Local Authority: Where the invoice is issued prior to 1-6-2016 but payment received lateron then then POT will be date of issue of invoice. Thus KKC is not payable if service has been provided and the invoice issued before 01-06-2016 and merely payment received after 1-6-2016.