The ministry of finance (MoF) has granted business entities exemption from service tax on certain services provided by the government and local authorities. These include various registration services and the ones where the gross amount payable by a business entity does not exceed Rs 5,000. If such a service is received on a continued basis (like payments made monthly), the annual payment must not exceed Rs 5,000 to avail service tax exemption.
The Finance Bill, 2016 had broadened the scope of service tax. From April 1, 2016, a business entity having a turnover of Rs 10 lakh or more had to pay service tax at 15% for services (unless specifically exempt) provided by the government or local authorities.
The MoF received representations from business entities and industry associations, and it issued a number of clarifications on April 13 via internal memos and public notifications.
The list of services exempt from the levy include grant of a passport, visa, driving licence, and birth or death certificate to an individual who may be carrying on a profession or a business. While the service tax levy doesn’t apply when services are availed by individuals from government or local bodies (such as the passport office), the clarification has been issued to remove any doubts.
Major respite has also been offered to telecom companies (telcos), which do not have to pay service tax on instalments due after April 1 for spectrum assigned or auctioned to them prior to this date. Nor do telcos have to pay service tax on payments to the government, such as spectrum user charges and licence fee, pertaining to the previous fiscal 2015-16.
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