Service tax exemptions

The Service Tax department has vide its notification no. 9/2016 dated 1st March, 2016 extended further exemptions from the service tax as following. What they have done is amended a mega notification no. 25/2012 dated 20th June, 2012 and all amendments in the nature of exemption notifications are made to this notification. Defeats me why they keep on amending the notifications instead of having a separate chapter itself for exemptions in the Service Tax Act. Some bureacracies fail common sense. 

Anyways, the following services are exempt from service tax (it is a detailed list, which I have copied from the portal directly)

1. In the said notification,-

(a) in the first paragraph,- (i) in entry 6, for clause (b) and clause (c), the following clauses shall be substituted, namely,-

“(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to- (i) an advocate or partnership firm of advocates providing legal services; (ii) any person other than a business entity; or (iii) a business entity with a turnover up to rupees ten lakh in the preceding financial year; or

(c) a senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession;”;

(ii) after entry 9A, the following entry shall be inserted with effect from 1st March, 2016, namely,-

“9B. Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme, -

(a) two year full time residential Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management;

(b) fellow programme in Management;

(c) five year integrated programme in Management.”;

(iii) after entry 9B as so inserted, the following entries shall be inserted, namely:-

“9C. services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme;

9D. services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training.”;

(iv) after entry 12, with effect from the 1st March, 2016, the following entry shall be inserted, namely-

“12A. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of - (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or (c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause (44) of section 65 B of the said Act; under a contract which had been entered into prior to the 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date: provided that nothing contained in this entry shall apply on or after the 1st April, 2020;”;

(v) in entry 13, after item (b), the following items shall be inserted with effect from 1st March, 2016, namely – “(ba) a civil structure or any other original works pertaining to the „In-situ rehabilitation of existing slum dwellers using land as a resource through private participation‟under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers. (bb) a civil structure or any other original works pertaining to the „Beneficiaryled individual house construction / enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;”;

(vi) in entry 14, with effect from 1st March, 2016, A. for item (a), the following shall be substituted, namely:-

“(a) railways, excluding monorail and metro; Explanation.-The services by way of construction, erection, commissioning or installation of original works pertaining to monorail or metro, where contracts were entered into before 1st March, 2016, on which appropriate stamp duty, was paid, shall remain exempt.”. B.

after item (c), the following item shall be inserted, namely –

“(ca) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under: (i) the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; (ii) any housing scheme of a State Government.”.

(vii) after entry 14, with effect from the 1st March, 2016, the following entry shall be inserted, namely-

“14A. Services by way of construction, erection, commissioning, or installation of original works pertaining to an airport or port provided under a contract which had been entered into prior to 1 st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date: provided that Ministry of Civil Aviation or the Ministry of Shipping in the Government of India, as the case may be, certifies that the contract had been entered into before the 1st March, 2015: provided further that nothing contained in this entry shall apply on or after the 1st April, 2020;”;

(viii) in entry 16, for the words “one lakh rupees”, the words “one lakh and fifty thousand rupees” shall be substituted;

(ix) in entry 23,- (A) after clause (b), the following clause shall be inserted with effect from 1 st June 2016, namely,- “(bb) stage carriage other than air-conditioned stage carriage;”; (B) clause (c) shall be omitted;

(x) in entry 26, after clause (p), the following clause shall be inserted, namely,- “(q) Niramaya‟ Health Insurance Scheme implemented by Trust constituted under the provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).”;

(xi) after entry 26B, the following entry shall be inserted, namely,-

“26C. Services of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority of India (PFRDA) under the Pension Fund Regulatory And Development Authority Act, 2013 (23 of 2013);”;

(xii) after entry 48, the following entries shall be inserted, namely,-

“49. Services provided by Employees‟ Provident Fund Organisation (EPFO) to persons governed under the Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952);

50. Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999);

51. Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market;

52. Services provided by National Centre for Cold Chain Development under Ministry of Agriculture, Cooperation and Farmer‟s Welfare by way of cold chain knowledge dissemination;”;

(xiii) after entry 52 as so inserted, the following entries shall be inserted with effect from 1 st June 2016, namely:-

“53. Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India.”;

(b) in paragraph 2, - (i) after clause (b), the following clause shall be inserted with effect from such date on which the Finance Bill, 2016 receives assent of the President of India, namely: - „

(ba) “approved vocational education course” means, - (i) a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961); or (ii) a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship;‟;

(ii) for clause (oa), the following shall be substituted with effect from such date on which the Finance Bill, 2016, receives assent of the President of India, namely : - „

(oa) “educational institution” means an institution providing services by way of: (i) pre-school education and education up to higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force; (iii) education as a part of an approved vocational education course;”;

(iii) after clause (zd), the following clause shall be inserted, namely:- „(zdd) “senior advocate‟ has the meaning assigned to it in section 16 of the Advocates Act, 1961 (25 of 1961);‟

Save as otherwise provided in this notification, this notification shall come into force on the 1st of April, 2016.

Union Budget - Major Highlights

1)The ceiling of tax rebate under Section 87A of IT Act has been proposed to be raised to Rs. 5,000 from Rs. 2,000 for individuals with income less than Rs. 5 lakhs.

2)The limit of deduction of house rent paid under section 80GG has also been raised to Rs. 60,000 from the existing Rs. 24,000 per annum to give relief to employees who live in rented houses.

3) Under the presumptive taxation scheme under Section 44AD of the Income tax Act, the limit of turnover or gross receipts has been raised to two crore rupees from the exiting one crore rupees to benefit about 33 lakh small business people. It frees a large number of such assesses in the MSME category from the burden of maintaining detailed books of account and getting audit done.

4) The presumptive taxation scheme is to be now extended to professionals with gross receipts up to Rs. 50 lakh with the presumption of profit being 50% of the gross receipts.

5) Withdrawal up to 40% of the corpus at the time of retirement tax exempt in the case of National Pension Scheme(NPS). In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made after 1.4.2016. Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases.

6) The monetary limit for contribution of employer in recognized Provident and Superannuation Fund of Rs. 1.5 lakh per annum for taking tax benefit. 

7) Annuity services provided by the National Pension Scheme (NPS) and Services provided by EPFO to employees will be exempt from service tax. Also service tax on Single premium Annuity (Insurance) Policies will be reduced from 3.5% to 1.4% of the premium paid in certain cases.

8) 100% deduction for profits to an undertaking from a housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019, and is completed within three years of the approval. Minimum Alternate Tax will however apply to these undertakings.

9) Distribution made out of income of SPV to the REITs and INVITs having specified shareholding will not be subjected to Dividend Distribution Tax.

10) For the ‘first – home buyers’, there will be a deduction for additional interest of Rs. 50,000 per annum for loans up to Rs. 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed Rs. 50 lakh.

11) Exemption from service tax on construction of affordable houses up to 60 sq. metres under any scheme of the Central or State Government including PPP Schemes. Alongside, extension of excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work at such site to Ready Mix Concrete.

12) A Bill shall be introduced in the current Budget session of the Parliament in order to amend the Companies Act 2013. This will remove the difficulties and impediments to ease of doing business. The Bill would also improve the enabling environment for start-ups. The registration of companies will also be done in one day.

13) In order to reduce multiplicity of taxes, associated cascading and to reduce cost of collection, abolition of 13 cesses, levied by various Ministries in which revenue collection is less than Rs.50 crore in a year, is proposed.

14) Measures to rationalize TDS provisions for Income Tax have been proposed to improve cash flow position of small tax payers who get their funds blocked due to current TDS provisions. Also, Non-residents without PAN are currently subjected to a higher rate of TDS, however with amendment to relevant provision will allow that on furnishing of alternative documents, such higher rate will not apply. The facility for revision of return hitherto available to service tax assesses only will be extended to Central Excise assesses also.

15) Additional options for reversal of input tax credits with respect to non-taxable services provided by banking companies and financial institutions, including NBFCs, by way of extending deposits, loans and advances are proposed in Budget 2016-17.

16) Government of India has taken steps to reduce the cargo release time and transaction costs of EXIM trade. Shri Jaitley also proposed to amend the Customs Act so as to provide for deferred payment of customs duties for importers and exporters with proven track record.

17) Indian Customs Single Window Project would be implemented at major ports and airports starting from beginning of next financial year. Also, customs baggage for international passengers are simplified as filing of baggage declaration will be required only for those passengers who carry dutiable goods. 

18) General Insurance Companies will be listed in stock exchanges for improving transparency, accountability and efficiency. Comprehensive Central legislation to deal with Illicit Deposit Taking schemes will be enacted.

19) To provide better access to financial services, especially in rural areas, the government will undertake a massive nationwide rollout of ATMs and Micro ATMs in Post Offices over the next three years.

20) SARFAESI Act is to be amended to strengthen Asset Reconstruction Companies. This will help in dealing with stressed assets of Banks.

21) 100% deduction of profits for 3 out of 5 years for start-ups, during April, 2016 to March 2019, with certain riders. Similarly to promote innovation, a special patent regime with 10% rate of tax on income from worldwide exploitation of patents developed and registered in India was proposed.

22) Non-banking financial companies shall be eligible for deduction to the extent of 5 % of its income in respect of provision for bad and doubtful debts.

23) The corporate income tax rate for the next financial year of relatively small enterprises i.e companies with turnover not exceeding Rs. 5 crores (in the financial year ending March 2015) is proposed to be lowered to 29 % plus surcharge and cess.

24) The new manufacturing companies which are incorporated on or after 1.3.2016 are proposed to be given an option to be taxed at 25% plus surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.

25) Service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development and Entrepreneurship are also proposed to be exempted.

26) The determination of residency of foreign company on the basis of Place of Effective Management (POEM) is deferred by one year.

27) To get more investment in Asset Reconstruction Companies (ARCs), which play a very important role in resolution of bad debts, a complete pass through income-tax to securitization trusts including trusts of ARCs has been proposed. The income will be taxed in the hands of the investors instead of the trust.    

28) The Finance Minister also enunciated a plan for phasing-out various exemptions as the corporate tax is proposed to be reduced from 30% to 25 % over a period. Such graduated plan includes 

1. a) The accelerated depreciation provided under IT Act will be limited to maximum 40 % from 1.4.2017.
2. b) The benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020
3. c) The benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.
4. d) The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020.  

Source PIB

Extension of e-tourist visas to 37 more countries

The e-Tourist Visa (e-TV) facility will be extended to 37 more countries from tomorrow. The total count of countries under the scheme will become 150. 

The new 37 countries included in e-Tourist Visa scheme are Albania, Austria, Bosnia & Herzegovina, Botswana, Brunei, Bulgaria, Cape Verde, Comoros, Cote d'lvoire, Croatia, Czech Republic, Denmark, Eritrea, Gabon, Gambia, Ghana, Greece, Guinea, Iceland, Lesotho, Liberia, Madagascar, Malawi, Moldova, Namibia, Romania, San Marino, Senegal, Serbia, Slovakia, South Africa, Swaziland, Switzerland, Tajikistan, Trinidad & Tobago, Zambia and Zimbabwe. 

Government of India had launched the e-TV facility on November 27, 2014. Till now the scheme has been extended to 113 countries at sixteen Indian airports designated for providing e-Tourist visa service.

PIB release dated 25th February, 2016

KYC norms for bank account opening for mentally challenged persons

RBI had vide its notification no. RBI/2013-14/444 DBOD.No.Leg.BC.84/09.07.005/2013-14 dated 13th January, 2014 laid down guidelines for opening/ operating bank accounts for mentally challenged persons i.e. persons suffering from autism, cerebral palsy, mental retardation and any other form of mental disability. According to the said guidelines, 

1. The Mental Health Act, 1987 provides for a law relating to the treatment and care of mentally ill persons and to make better provision with respect to their property and affairs. According to the said Act, “mentally ill person” means a person who is in need of treatment by reason of any mental disorder other than mental retardation. Sections 53 and 54 of this Act provide for the appointment of guardians for mentally ill persons and in certain cases, managers in respect of their property. The prescribed appointing authorities are the district courts and collectors of districts under the Mental Health Act, 1987.
2. The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 provides for a law relating to certain specified disabilities. Clause (j) of Section 2 of that Act defines a “person with disability” to mean a person suffering from any of the conditions relating to autism, cerebral palsy, mental retardation or a combination of any two or more of such conditions and includes a person suffering from severe multiple disabilities. This Act empowers a Local Level Committee to appoint a guardian, to a person with disabilities, who shall have the care of the person and property of the disabled person.
3. Banks are advised to take note of the legal position stated above and may rely on and be guided by the orders/certificates issued by the competent authority, under the respective Acts, appointing guardians/managers for the purposes of opening/operating bank accounts. In case of doubt, care may be taken to obtain proper legal advice.

Subsequently it has been brought to the notice of the RBI that the banks have been insisting upon the guardianship certificate from all mentally ill persons, Therefore RBI has clarified vide its notification no. RBI/2015-16/321 DBR.No.Leg.BC.78/09.07.005/2015-16 dated 11th February, 2016 that "paragraph 2(iii) of the aforesaid circular is not intended to mandate banks to insist on  appointment of a guardian as a matter of routine from every person “who is in need of treatment by reason of any mental disorder”. It would be necessary for banks to seek appointment of a guardian only in such cases where they are convinced on their own or based on documentary evidence available, that the concerned person is mentally ill and is not able to enter into a valid and legally binding contract."

Banks therefore have to exercise their judgment and call for documents only if they feel or have documentary evidence that the person is incapable of operating the bank account and needs guardian to take care of him. 

Startup Regulatory Relaxations - Issue of shares

RBI has vide its notification dated 11/2/2016 made a couple of clarifications w.r.t. issue of shares in case of start ups. One of the points is issue of shares without cash payment through sweat equity or issue of shares in lieu of payments due which are permissible transactions under FEMA. 

Accordingly, the following is clarified:

a. Issue of shares without cash payment through sweat equity: Reserve Bank of India vide Notification No. FEMA.344/2015 RB dated June 11, 2015 has permitted Indian companies to issue sweat equity, subject to conditions, inter-alia, that the scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 in respect of listed companies or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013 in respect of other companies.

b. Issue of shares against legitimate payment owed: Reserve Bank of India vide Notification No. FEMA.315/2014-RB dated July 10, 2014, has permitted Indian companies to issue equity shares against any other funds payable by the investee company (e.g. payments for use or acquisition of intellectual property rights, for import of goods, payment of dividends, interest payments, consultancy fees, etc.), remittance of which does not require prior permission of the Government of India or Reserve Bank of India under FEMA, 1999 subject to conditions relating to adherence to FDI policy including sectoral caps, pricing guidelines, etc. and applicable tax laws (cf. paragraph 3 of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2015).

Relaxations for start ups - acceptance of payments

RBI has vide its notification dated 11th February, 2016 made some clarifications regarding start ups, especially w.r.t to acceptance of payments by them from their overseas subsidiares.

In this connection, it is clarified as under:

1. A start-up in India with an overseas subsidiary is permitted to open foreign currency account abroad to pool the foreign exchange earnings out of the exports/sales made by the concerned start-up;
2. The overseas subsidiary of the start-up is also permitted to pool its receivables arising from the transactions with the residents in India as well as the transactions with the non-residents abroad into the said foreign currency account opened abroad in the name of the start-up;
3. The balances in the said foreign currency account as due to the Indian start-up should be repatriated to India within a period as applicable to realisation of export proceeds (currently nine months);
4. A start-up is also permitted to avail of the facility for realising the receivables of its overseas subsidiary or making the above repatriation through Online Payment Gateway Service Providers (OPGSPs) for value not exceeding USD 10,000 (US Dollar ten thousand) or up to such limit as may be permitted by the Reserve Bank of India from time to time under this facility; and
5. To facilitate the above arrangement, an appropriate contractual arrangement between the start-up, its overseas subsidiary and the customers concerned should be in place.

Realisation, Repatriation & Surrender of FEX regulations

RBI has recently updated its Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2015 vide its notification dated 4th February, 2016, 

The salient features of the regulations are:

A. Duty of persons to realise foreign exchange due:-

A person resident in India to whom any amount of foreign exchange is due or has accrued shall, save as otherwise provided under the provisions of the Act, or the rules and regulations made thereunder, or with the general or special permission of the Reserve Bank, take all reasonable steps to realise and repatriate to India such foreign exchange, and shall in no case do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing -

1. that the receipt by him of the whole or part of that foreign exchange is delayed; or
2. that the foreign exchange ceases in whole or in part to be receivable by him.

B. Manner of Repatriation :-

(1) On realisation of foreign exchange due, a person shall repatriate the same to India, namely bring into, or receive in, India and -

1. sell it to an authorised person in India in exchange for rupees; or
2. retain or hold it in account with an authorised dealer in India to the extent specified by the Reserve Bank; or
3. use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the Reserve Bank.

(2) A person shall be deemed to have repatriated the realised foreign exchange to India when he receives in India payment in rupees from the account of a bank or an exchange house situated in any country outside India, maintained with an authorised dealer.

C. Period for surrender of realised foreign exchange:-

A person not being an individual resident in India shall sell the realised foreign exchange to an authorised person, within the period specified below :-

1. foreign exchange due or accrued as remuneration for services rendered, whether in or outside India, or in settlement of any lawful obligation, or an income on assets held outside India, or as inheritance, settlement or gift, within seven days from the date of its receipt;
2. in all other cases within a period of ninety days from the date of its receipt.

D. Period for surrender in certain cases:-

(1) Any person not being an individual resident in India who has acquired or purchased foreign exchange for any purpose mentioned in the declaration made by him to an authorised person under sub-section (5) of Section 10 of the Act does not use it for such purpose or for any other purpose for which purchase or acquisition of foreign exchange is permissible under the provisions of the Act or the rules or regulations or direction or order made thereunder, shall surrender such foreign exchange or the unused portion thereof to an authorised person within a period of sixty days from the date of its acquisition or purchase by him.

(2) Notwithstanding anything contained in sub-regulation (1), where the foreign exchange acquired or purchased by any person not being an individual resident in India from an authorised person is for the purpose of foreign travel, then, the unspent balance of such foreign exchange shall, save as otherwise provided in the regulations made under the Act, be surrendered to an authorised person -

1. within ninety days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of currency notes and coins; and
2. within one hundred eighty days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of travellers cheques.

E. Period for surrender of received/realised/unspent/unused foreign exchange by Resident individuals.-

A person being an individual resident in India shall surrender the received/ realised/ unspent/ unused foreign exchange whether in the form of currency notes, coins and travellers cheques, etc. to an authorised person within a period of 180 days from the date of such receipt/ realisation/ purchase/ acquisition or date of his return to India, as the case may be.

F. Exemption:-

Nothing in these regulations shall apply to foreign exchange in the form of currency of Nepal or Bhutan.