Service tax - Budget 11

► No change in the effective service tax rate of 10.3%.

► Service tax extended to services by air conditioned
restaurants having liquor license and to short term
accommodation in hotels.

► Scope of seven existing service categories expanded,
including life insurance service, legal service, health
service and commercial training and coaching service.

► Interest for delayed payment of service tax increased to
18% a year and penalty provisions amended.

► Restrictions on Cenvat credit on input services prescribed
in the case of works contractors (availing composition
scheme).

► Outright service tax exemption for input services “wholly
consumed” in a SEZ, linked with Export Rules.

► Point of Taxation Rules, 2011 introduced, deeming the
time of provision of service to be the date of provision of
service or date of invoice or date of payment, whichever
is earlier.

► Performance based criteria for determining export of
“credit rating agency services”, “market research agency
services”, “technical testing and analysis services” and
“transport of goods by air/ road/ rail services” changed
to “location of recipient of service”.

► Definition of “input service” for Cenvat credit purposes
substituted. Services provided for construction of
building or civil structure, outdoor catering, life/ health
insurance services not to be considered as input service.

► “Exempted services” to include trading. For the purposes
of availment of pro rata Cenvat credit, value of trading
will be the difference between sale price and purchase
price of the goods traded.

► Banking companies or financial institutions obligated to
pay an amount equal to 50% of Cenvat credit availed. For services related to life insurance or management of ULIP,such amount to be equal to 20% of credit availed.

► Provision relating to availability of full Cenvat credit on
specified services under Rule 6(5) of Cenvat Credit Rules
deleted.