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Revision of Service Tax

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On 14.05.16, Finance Bill, 2016 has become the Finance Act, 2016 after receiving the assent from President of India. It has given way to following two important amendments in Service Tax apart from others:
1. Change in effective rate of Service Tax (effective from 01.06.2016)
Effective rate of service tax is being increased from 14.5% to 15% by levying Krishi Kalyan Cess @ 0.5% on value of taxable services. Service tax would be 15% wef 01-Jun-2016 as detailed below:
  • Service Tax: 14%
  • Swachh Bharat Cess: 0.5%
  • Krishi Kalyan Cess: 0.5%
Unlike Swachh Bharat Cess, cenvat credit of Krishi Kalyan Cess paid on input services will be available for adjustment.
2. Change in rate of interest on delayed payment of Service Tax (effective from 14.05.2016)

Prior to 14.05.2016, slab rates of interest (i.e. 18% for upto 6 months, 24% for the period from 6 months to 1 year and 30% for the period after 1 year) were provided for late payment of service tax. However, with effect from 14.05.2016, vide Notification No. 13/2016-Service Tax dated 01.03.2016, the new rates of interest shall be applicable:

S. No. Particulars Rate of Interest Period of Delay

1.

Service tax collected from customer / client 24% For the period from due date or 14.05.2016 (whichever is later) to actual date of payment.

 

Note: In case, due date was prior to 14.05.2016, rate of interest for delay from due date to 13.05.2016 shall be applicable as applicable for the period prior to 14.05.2016.

2.

Service tax is not collected or Reverse Charge Mechanism liability 15%