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Our Bureau

Mr Parthasarathi Shome (left), Advisor to Finance Minister, with Mr A.K. Singh, Chairman, CBEC, addressing a press conference in the Capital on Tuesday. - Ramesh Sharma

New Delhi , June 7

THE Finance Ministry on Tuesday announced a slew of service tax exemptions to provide an impetus to the infrastructure, construction, shipping and ports, and gems and jewellery sectors.

Briefing newspersons on the latest changes in the service tax regime, Dr Parthasarathy Shome, Advisor to the Finance Minister, said that the changes have been made to bring about equity in certain areas, align the service tax regime of the country with international practices and also provide a policy thrust to crucial areas like infrastructure.

He also announced that service tax would become applicable on nine new services from June 16. From the same date, the scope of 12 existing services will also be expanded for service tax purposes. Among others, the 12 services whose scope has been expanded include broadcasting services, beauty parlours, franchisee services, business auxiliary services and manpower recruitment services.

Elaborating on the exemptions, which would also come into effect from June 16, Dr Shome said that commercial or industrial construction services in relation to the construction of major and minor ports would be exempted from service tax.

Further, no service tax will be applicable on site formation and clearance, excavation and earth moving and demolition services provided in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams and ports.

In a move that could give fillip to the gems and jewellery sector, the Finance Ministry has said that production or processing of goods through job workers in the course of manufacture of cut and polished diamonds and gemstones, plain and studded jewellery of gold, and other precious metals would be exempt from service tax.

Acceding to the shipping industry's requests, the Finance Ministry has exempted from service tax certain specified services received from a non-resident in the course of sailing of an Indian ship or a chartered ship.

The exemption has been granted for services in relation to handling of ships in a port outside India, handling or storage of goods carried in a ship in a port outside India or any other services related to the handling or storage of goods carried in a ship.

"We have not accepted all the suggestions of the shipping industry on the issue of reverse charge. Some of them have been accepted. But certain conditions have to be met for availing the exemptions," Mr R. Sekar, Joint Secretary in the Finance Ministry, said.

Under the concept of reverse charge, taxable services received from abroad are taxed at the hands of the Indian recipient. This concept is being utilised to levy service tax on the import of services. The Finance Ministry has also now specified that any taxable service received and consumed outside India by an individual (not in the course of furtherance of commerce or industry or any other business) would be exempt from service tax. In such cases, the reverse charge will not be applicable.

On services provided under construction of residential complexes by a developer, the Finance Ministry has granted an abatement option for such services on the same lines as the one available for construction of commercial buildings.

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