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Government services to business entities taxable: Finance ministry | Canindia News

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Government services to business entities taxable: Finance ministry

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CanIndia New Wire Service 0 comments

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New Delhi, April 14 (IANS) The government on Thursday said that any service provided by it or local authority to a business entity has been made taxable from April 1, 2016.

According to the Ministry of Finance, prior to April 1, 2016, only support services provided by the government or local authority to business entities were taxable.

The ministry said it has issued a detailed circular on service tax charges on Wednesday to clarify doubts raised by industry organisations and to mitigate the small tax assessees from compliance burden.

“It may be recalled that services provided by government or a local authority to business entities up to a turnover of Rs.10 lakh in the preceding financial year have been exempted,” the ministry said in a statement.

“This would relieve small businesses from compliance burden.”

Besides, services by way of grant of passport, visa, driving license, birth or death certificates have been exempted.

“Services provided by government or a local authority to another government or a local authority have been exempted,” the statement said.

“However, this exemption is not applicable to services provided by government or a local authority which were subjected to service tax prior to 1st April 2016 (for instance, the services of transport of goods or passengers by Indian Railways).”

The ministry elaborated that services provided by the government, where the gross amount charged for such services does not exceed Rs.5,000, have been exempted.

“In case of continuous service, the exemption shall be applicable where the gross amount charged for such service does not exceed Rs.5,000 in a financial year,” the statement pointed out.

“Needless to say that this exemption is not applicable to the services provided by government or a local authority which were subjected to service tax prior to 1st April 2016.”

The ministry stated that taxes, cesses or duties are not taxable under service tax.

“It has been clarified that fines and penalty chargeable by government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to service tax,” the statement said.

The ministry cited that any activity undertaken by the government against a consideration constitutes a service and the amount charged for performing such activities is liable to service tax.

“It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not,” the statement explained.

“As long as the payment is made (or fee charged) for getting a service in return, it has to be regarded as a consideration for that service and taxable irrespective of by what name such payment is called.”

The ministry reiterated that service tax is being levied on any payment, in lieu of any permission or license granted by the government.

“However, services provided by the government or a local authority by way of registration required under the law have been exempted,” the statement informed.

“Services provided by way of testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under the law, have been exempted.”

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