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Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
Circular No. 183/02/2015-ST
Dated 10th April, 2015
Subject: Clarification on rate of service tax – regarding.
Doubts have been expressed in various forums regarding the proposed increase
in the rate of service tax from 12.36% (including education cesses) to 14% on
the value of taxable service.
2.It may be noted that changes proposed in the Budget have/are coming into
effect on various dates as already indicated in JS (TRU-II) D.O. letter dated
28th February, 2015. Certain amendments made in the Finance Act, 1994, including
the change in service tax rate, will come into effect from a date to be notified
by the Government after the enactment of the Finance Bill, 2015.
3. In this regard your attention is invited to clause 106 of the Finance
Bill, 2015 and paragraph 3 of JS (TRU-II) D.O. letter, which is reproduced
below:-
“3. Service Tax Rate:
3.1 The rate of Service Tax is being increased from 12% plus Education Cesses
to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be
subsumed in the revised rate of Service Tax. Thus, the effective increase in
Service Tax rate will be from the existing rate of 12.36% (inclusive of cesses)
to 14%, subsuming the cesses.
3.2 In this context, an amendment is being made in section 66B of the Finance
Act, 1994. Further, it has been provided vide clauses 179 and 187 respectively
of the Finance Bill, 2015 that sections 95 of the Finance Act, 2004 and 140 of
the Finance Act, 2007, levying Education Cess and Secondary and Higher Education
Cess on taxable services shall cease to have effect from a date to be notified
by the Government.
3.3 The new Service Tax rate shall come into effect from a date to be notified
by the Central Government after the enactment of the Finance Bill, 2015.
3.4 Till the time the revised rate comes into effect, the ‘Education Cess’ and
‘Secondary and Higher Education Cess’ will continue to be levied in Service
Tax.”
4. The paragraph reproduced above is self-explanatory and it is clear that the
new Service Tax rate shall come into effect from a date to be notified by the
Central Government after the enactment of the Finance Bill, 2015. The date will
be notified in due course after the enactment.
5. Similarly, certain doubts have been raised with regard to abatement on value
of services provided in relation to serving of food or beverages by a
restaurant, eating joint or a mess, having the facility of air-conditioning or
central air-heating in any part of the establishment, at any time during the
year. Valuation of services provided in relation to serving of food or beverages
by a restaurant, eating joint or a mess is determined as provided in rule 2C of
the Service Tax (Determination of Value) Rules, 2006.
5.1 In the Union Budget, 2015, no change has been made in these rules;
therefore, any confusion is unwarranted. Further, as explained above, the rate
of service tax on the specified portion of the amount charged for such supply
which is 40% continues to be 12.36% (including cesses) at present i.e. 4.944 %.
The rate of Service tax, as discussed above, will continue unchanged till a date
which will be notified in due course.
6. Wide publicity may be given so that the assesses and public are aware of the
above. All the major Industry/Trade Associations may be informed accordingly.
F. No. B-1 /1/2015-TRU
Yours sincerely,
(Dr. Abhishek Chandra Gupta)
Technical Officer, TRU
Tel: 011-23095547
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