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All services by government to businesses to attract Service tax
April, 15th 2016

The revenue department today said all services provided by government or a local authority to a business entity will attract service tax from April 2016.

However, services provided by government or a local authority to business entities up to a turnover of Rs 10 lakh in the preceding financial year will be exempted from the levy, a revenue department statement said.

"This (exemption) would relieve small businesses from compliance burden," the statement added.

Earlier, only support services provided by the government or local authority to business entities were taxable.

Services provided by government or a local authority to another government or a local authority are exempted, it said, adding the exemption will not apply on such services which were subjected to service tax prior to April 1, 2016, like the services of transport of goods or passengers by Indian Railways.

The statement further clarified, that services by way of grant of passport, visa, driving license, birth or death certificates will remain exempted.

Also, services provided by the government or a local authority where the gross amount charged for such service 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. 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 April 1, 2016," it said.

It has also been clarified that taxes, cesses or duties levied are not leviable to Service Tax. Similarly fines and penalties chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations will not attract Service Tax.

The revenue department has said that activity undertaken by Government or a local authority against a consideration will constitute a service and the amount charged for performing such activities will be liable to Service Tax.

Services provided by the Government or a local authority by way of registration required under law, testing, safety check or certification relating to protection or safety of workers, consumers will not attract service tax, the statement said.

Services by way of allocation of natural resources by Government or a local authority to an individual farmer for the purposes of agriculture too will be exempt from payment of service tax.

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