Service Tax changes under Budget 2017-18 for Banking and Other Financial Services

Rate of Service Tax to be paid for Banking & Other Financial Services under Indian Budget 2017-18

 

 

Service Tax changes under Budget 2017-18 for Banking and Other Financial ServicesIn continuation of demonetization in the country since November 2017 and implementation of GST before September 2017, Indian Budget 2017-18 is being announced on 1st February 2017.

As Service Tax is being transitioned to GST this year, major changes are expected in Indian Budget 2017-18.  The service tax rate changes for Banking & Other Financial Services under Indian Budget 2017-18 is being updated below soon after announcement of Budget on 1st February, 2017. The government notification extract also is being updated in pdf format once after release from the authorities.

 

Click here to read government notification on changes in Service Tax tariff rate under Indian Budget 2017-18 


Customs duty tariff rate changes as per Indian Budget 2017-18

Central Excise Duty changes as per Indian Budget 2017-18

Service Tax rate Changes under Indian Budget 2017-18

 

SERVICE TAX

 

 

S.

No.

Changes

Existing

Proposed

A.

Relief to the armed forces of the Union from service tax

 

1.

Services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government is being exempted from service tax from 10th September, 2004 (the date when the services of life insurance became taxable).

14%

Nil

B.

Dispute resolution, certainty of taxation  and avoidance of  litigation

 

1.

Notification No. 41/2016-ST dated 22.09.2016, which has exempted from service tax, one time upfront amount (called as premium, salami, cost, price, development charges or by whatever name) payable for grant of long-term lease of industrial plots (30 years or more) by State Government industrial development corporations/undertakings to industrial units, is proposed to be made effective from 1.6.2007 (the date when the services of renting of immovable property became taxable).

14%

Nil

 

2.

Rule 2A of the Service Tax (Determination of Value) Rules, 2006 is proposed to be amended from 01.07.2010 so as to make it clear that value of service portion in execution of works contract involving transfer of goods and land or undivided share of land, as the case may be, shall not include value of property in such land or undivided share of land.

4.2%

4.2%

C.

Promotion of Regional Connectivity  Scheme of Ministry of Civil Aviation

 

1.

Under the Regional Connectivity Scheme (RCS), exemption from service tax is being provided in respect of the amount of viability gap funding (VGF) payable to the airline operator for providing the services of transport of passengers by air, embarking from or terminating in a Regional Connectivity Scheme (RCS) airport, for a period of one year from the date of commencement of operations of the Regional Connectivity Scheme (RCS) airport as notified by Ministry of Civil Aviation.

14%

Nil

D.

Rationalization Measures

 

1.

The exemption in respect of services provided by Indian Institutes of Management (IIMs) by way of two year full time residential Post Graduate Programmes (PGP) in Management for the Post Graduate Diploma in Management (PGDM), to which admissions are made on the basis of the Common Admission Test (CAT), conducted by IIMs, is being extended to include non-residential programmes.

14%

Nil

 

2.

Explanation-I (e) to Rule 6 of CENVAT Credit Rules, 2004 is being amended so as to exclude banks and financial institutions including non-banking financial companies engaged in providing services by way of extending deposits, loans or advances from its ambit.

 

3.

The Negative List entry in respect  of “services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption”, in the Finance Act, 1994, is proposed to be omitted and instead placed in the exemption notification. Consequently, clause (40) of section 65B of the Finance Act, which defines ‘process amounting to manufacture’ is also proposed to be omitted and instead placed in the exemption notification.

Nil

Nil

AMENDMENT IN THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT, 1975

S.

No.

Amendment

A.

Amendments not affecting rates of duty

  1.  

The following amendments are being carried out to:

(i)          Delete tariff items 1302 32 10 and 1302 32 20 and entries relating thereto and create new tariff items 1106 10 10 and 1106 10 90, in relation to Guar meal and its products so as to harmonize the Customs Tariff with HS Nomenclature.

(ii)        Create new tariff item 1511 90 30 for Refined bleached deodorized palm stearin, so as to harmonize Customs Tariff in accordance with WCO classification decision.

(iii)      Substitute tariff items 3823 11 11 to 3823 11 90 and entries relating thereto with tariff item 3823 11 00.

(iv)      Substitute tariff items 3904 10 10 to 3904 22 90 with tariff items 3904 10 10 to 3904 22 00 in relation to the PVC Resin.

  1.  

Chapter Note (4) of Chapter 98 is being amended so as to remove the non-applicability of headings 9803 and 9804 to goods imported through courier service. Also, heading 9804 is being amended so as to extend the classification of personal imports by courier, sea, or land under this heading.

 

 

 

Banking & Other Financial Services fall under SAC 00440173

 

The Law about Service Tax for Banking & Other Financial Services explains:

"Taxable Service" means any service provided or to be provided to any person, by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern, in relation to banking and other financial services;

[Section 65 (105) (zm) of Finance Act, 1994 as amended]

 

"Authorised Dealer of Foreign Exchange" has the meaning assigned to "authorised person" in clause (c) of Section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);

[Section 65(8) of Finance Act, 1994 as amended]

"Banking" has the meanings assigned to it in clauses (b) of section 5 of the Banking Regulation Act, 1949 (10 of 1949),

[Section 65 (10) of Finance Act, 1994 as amended]

 

"Banking Company" shall have the meanings assigned to it in clauses (a) of section 45 A of the Reserve Bank of India Act, 1934 (2 of 1934);

[Section 65 (11) of Finance Act, 1994 as amended]

"Banking and Other Financial Services" means -

 

(a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or [commercial concern] *, namely: -

(i) financial leasing services including equipment leasing and hire-purchase;

Explanation. -For the purposes of this item, "financial leasing" means a lease transaction where-

(i) contract for lease is entered into between parties for leasing of a specific asset;

(ii) such contract is for use and occupation of the asset by the lessee;

(iii) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges; and

(iv) the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment;

(ii) Omitted

(iii) merchant banking services;

(iv) securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing;

(v) asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services,

(vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy;

(vii) provision and transfer of information and data processing; and

(viii) banker to an issue services; and

(ix) other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults, operation of bank accounts;";

(b) foreign exchange broking and purchase or sale of foreign currency including money changing provided by a foreign exchange broker or and authorised dealer in foreign exchange or an authorised money changer, other than those covered under sub-clause (a);

 

[Explanation. - For the purposes of this clause, it is hereby declared that "purchase or sale of foreign currency, including money changing" includes purchase or sale of foreign currency, whether or not the consideration for such purchase or sale, as the case may be, is specified separately;]

[Section 65 (12) of Finance Act, 1994 as amended]

"Body Corporate" has the meaning assigned to it in clause (7) of Section

2 of the Companies Act, 1956 (1 of 1956);

[Section 65 (14) of Finance Act, 1994 as amended]

"Financial Institution" has the meaning assigned to it in clause (c) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934);

[Section 65 (45) of Finance Act, 1994 as amended]

"Non-Banking Financial Company" has the meaning assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934);

 

 

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What is the service tax rate for Banking Services as per Budget?

                                                                                                                                    

ST tariff rate changes for Financial Services under SAC   00440173

 

Budget 2017-18, Service Tax to be paid for Banking & Other Financial Services

 

Banking & Other Financial Services, Service Tax tariff rate changes in Budget, SAC 00440173

 

How much Service Tax to be paid for Banking & Other Financial Services as per latest changes in Budget?


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