Service Tax on the services provided by Government

The word “Support Services” was substituted with all services vide The Finance Act 2015, which was  made effective from 01.06.2015. However, effective date of amendment of the section was notification w.e.f. 01.04.2016 thereby all services provided by the Government is subject to service tax on reverse charge basis.

In my article published in our Bulletin in the month of April 2012 provided the Frequently Asked Questions (FAQ), wherein I have  clarified what is Government ? and what are the services provided by the Government ? which is reproduced below…

All services other than following provided by the government are excluded from the definition of service.

  1. Services by the Department of posts by way of speed post, express parcel post, life Insurance and Agency services provided to a person other than Government.
  2. Services in relation to an aircraft or a vessel, inside or outside the precincts of a port oran airport.
  3. Transport of goods or passengers.
  4. Support services, other than services covered under clauses.   (i) to (iii) above, provided to business entities;

Some of the examples are: providing Birth / Death Certificate, Marriage Certificate, Completion Certificate, Passport, etc.,

Since all Services provided by Government are now excluded from the negative list by amending Sec 66D which has been made effective from 1st April 2016 and hence recipient of such services from the government have to discharge 100% service tax liability on Reverse Charge Mechanism.

Circular No. 192/02/2016-Service Tax

Input Tax Credit (ITC) Under GST

Input Tax Credit (ITC) is available for Goods & Services Tax (GST) paid or payable by a registered person on the purchases or expenses incurred for the business activities.

 Criteria To Claim Input Tax Credit (ITC)

  1. You must be a registered person, that’s taxable person.
  2. The goods or services must have been acquired in the course or furtherance of the business. ITC is claimable on acquisition of capital assets used in the business.
  3. Goods or services are acquired for making taxable supplies.
  4. You must hold a valid tax invoice.
  5. Tax invoices must be in the name of the registered person.
  6. No ITC shall be available on tax component of capital goods where depreciation is claimed on such tax component.

          ITC Credit adjustments

  •  ITC towards IGST shall be utilised towards IGST, CGST & SGST in that order
  •  ITC towards CGST shall be used for CGST first and balance towards IGST
  •  ITC towards SGST shall be utilised towards SGST and balance towards IGST
  •  ITC towards CGST shall not be utilised for payment of SGST