1.	Service Tax Rate: There is no change in the service tax rate.
2.	Secondary and Higher Education cess: Levy of additional cess @ 1% on the service tax payable on taxable services. The cess shall come into force from the date of enactment of the Finance Bill, 2007. The Secondary and Higher Education cess shall be in addition to the education cess of 2% already payable.
3.	Exemption to small service provider enhanced: W.e.f. 1-4-2007, service tax exemption for small service providers increased from the present level of Rs. 4 lakhs to Rs. 8 lakhs. Notification No.6/2005-Service Tax, dated 01.03.05 amended [Refer notification No. 4/2007-Service Tax, dated 01.03.07].
4.	Minimum turnover limit for compulsory limit enhanced: Consequent upon the increase in the threshold exemption limit from Rs. 4 lakh to Rs. 8 lakh, w.e.f. 1-4-2007, the limit for obtaining service tax registration has also been increased from Rs. 3 lakh to Rs.7 lakh. Notification Nos. 26/2005-Service Tax and No.27/2005-Service Tax (Registration of Special Category of Persons Rules), both dated 07.06.05 and ST-I Form have been amended [Refer Notification Nos. 5, 6 & 7/2007-Service Tax, dated 01.03.07].
5.	New Services: The following services are proposed to be specifically included and defined in the list of taxable services, namely: [Service tax on such services shall come into force from the date to be notified after the enactment of the Finance Bill, 2007].
	a)	Telecommunication service: Presently telecom related services are separately taxed under different taxable service such as telephone services, pager, leased circuit, etc. It is proposed to merge all such services into one category of taxable service i.e. 'telecommunication service'. Further, telecommunication services have been comprehensively defined under section 65 (109a) read with section 65(105)(zzzx) and its scope widened.
	b)	Mining service: Services in relation to mining of mineral, oil or gas. [Section 65(1 05)(zzzy)].
	c)	Renting of immovable property service: Renting of immovable property for use in the course or furtherance of business or commerce. [Section 65(105)(zzzz) read with section 65(90a)]
	d)	Service involved in the execution of a works contract: Services involved in the execution of a works contract. Only selective works contracts are covered, namely:- (i) works contract for carrying out erection, commissioning or installation; (ii) works contract for commercial or industrial construction; (iii) works contract for construction of complex; and (iv) works contract for turnkey projects including Engineering Procurement and Construction or Commissioning (EPC) projects. Works contract in respect of specified infrastructure projects namely roads, airports, railways, transport terminals, bridges, tunnels and dams are specifically excluded from the scope of the levy. It is also proposed to give an option to an assessee to opt for a composition scheme, whereby the assessee would be required to pay 2% of the total value of the works contract as service tax. Assessee opting for the composition scheme would not be entitled to avail CENVAT credit of capital goods, inputs and input services required for use in the works contract. Valuation of works contract and details of the composition scheme will be notified separately. [Section 65(105)(zzza)]
	e)	Development and supply of content service: Services provided by content developers in relation to development and supply of content for use by telecommunication service providers, advertising agencies and on-line information and database access or retrieval services such as internet or website service providers. [Section 65(105)(zzzzb) read with section 65(36c)]
	f)	Asset management including portfolio management and all forms of fund management service: Asset management including portfolio management and all forms of fund management provided by individual service providers; similar services provided by other than individual are already covered under banking and other financial services. [Section 65(105)(zzzzc)]
	g)	Design services: Design services, other than fashion designing service and interior decorator's service, like furniture design, aesthetic design, consumer or industrial products, logos, packaging, production of three dimensional models, etc. [Section 65(105)(zzzzd) read with section 65(36b)]
6.	Existing Services expanded: The following existing services are proposed to be amended, namely: [Service tax on such changes made in the existing services shall come into force from the date to be notified after the enactment of the Finance Bill, 2007].
	a)	Sale of space or time for advertisement: Sale of space for advertisement in business directories, yellow pages and trade catalogues will also be leviable to service tax under this service. [Section 65(105)(zzzm]
	b)	Rent-a-cab service: Definition of "cab" has been amended so as to include motor vehicles capable of carrying more than twelve passengers for hire or reward. However, motor vehicle capable of carrying more than twelve passengers and maxicab, rented to an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, is specifically excluded from the scope of the term "cab". Motorcab, even if it is rented to an educational body is leviable to service tax. [Section 65(20)]. Ambulances are not meant for carrying passengers for hire or reward. Hence, the question of levy does not arise.
	c)	Mandap keeper service: Explanation has been added stating that social function includes marriage functions. [Section 65(66) and 65(67)]
	d)	Panda I or shamiana service: Explanation has been added stating that social function includes marriage functions. [Section 65(77a)]
	e)	Event management service: Definition of event management is amended so as to specifically include marriage event within the scope of this service. [Section 65(40)]
	f)	Manpower recruitment or supply service: Explanation is added to clarify that manpower recruitment or supply agency service includes services in relation to pre-recruitment screening, verifying the credentials of the candidate, authenticity of documents submitted by the candidates and verification of antecedents. [Section 65(105)(k)].
	g)	Banking and other financial service: As per the proposed amendment, cash management services will be leviable to service tax under this service. Cash management services includes services of collection of receivables, execution of payment, management of liquidity and providing customized Management Information System (MIS) reports, provided by banks to clients such as corporate clients. The term "financial leasing" is also explained. [Section 65(105)(zm) read with Section 65(12)]
	h)	Management consultant's service: This service renamed as management or business consultant's service and to explicitly include business consultancy in the definition itself [[Section 65(105)(r)] read with Section 65(65)].
	i)	Consulting engineer's service: Specific exclusion of computer hardware engineering consultancy is being omitted. Consequently, computer hardware engineering consultancy will be leviable to service tax under this service. [Section 65(105)(g)]
	j)	Management, maintenance or repair service: Section 65(64) is amended to clarify that "goods" for the purposes of this service includes computer software. Consequently, maintenance or repair of computer software will be leviable to service tax under this category. It may be noted that development of computer software is distinct from maintenance or repair of computer software and development of computer software continues to be not leviable to service tax.
7.	Other Changes in the Finance Act, 1994: [Such changes shall come into force from the date of the enactment of the Finance Bill, 2007.]
	a)	Penalty for delay in filing return: Section 70(1) is being amended. After the proposed amendment in section 70(1) comes into force, appropriate rules will be notified indicating the conditions and the amount to be paid for delayed filing of return.
	b)	Extending the applicability of Section Section 14AA and 38A of Central Excise Act, 1944: Section 14AA empowers the Commissioner of Central Excise to order for cost audit by a Cost Accountant to study the abnormal utilisation of CENVAT credit and Section 38A provides protection by way of savings for all pending actions under rules and notifications that are repealed, rescinded or amended.
	c)	Section 86 is being amended to empower the Central Board of Excise & Customs to constitute a committee of (i) two Chief Commissioners to review the adjudication order passed by a Commissioner of Central Excise (ii) two Commissioners to review the order passed by a Commissioner of Central Excise (Appeals).
	d)	Section 96A is being amended to insert an Explanation in clause (b) of section 96A relating to definition of 'applicant' so as to clarify that in the 'joint venture in India' at least one of the participants or partners or equity holders shall be a non-resident.

 

8.	Amendments in Service Tax Rules, 1994 [Refer Notification No. 1/2007-ST, dated 1-3-2007]:
	a)	Dispensing of submitting original registration certificate: W.e.f. 1-3-2007, as per the amended provisions (Rule 4), it is provided to dispense with the requirement of submission of original registration certificate to the department at the time of intimation of any changes. Now, the assessee is required to submit only a self-certified copy of the registration certificate. Rule 4, Form ST-1 and ST-2 are suitably amended for this purpose. The Department will issue the amended registration certificate after canceling the original registration certificate issued earlier.
	b)	Self adjustment of excess tax further extended: W.e.f. 1-3-2007, self-adjustment of excess service tax paid has been extended to all assessees subject to the following conditions:
		▪	Self-adjustment of excess credit is allowed on account of reasons other than interpretation of law, taxability, classification, valuation or applicability of any exemption notification.
		▪	Excess amount paid and proposed to be adjusted should not exceed Rs. 50,000 for the relevant month or quarter.
		▪	Adjustment can be made only in the succeeding month or quarter.
		▪	The details of self-adjustment should be intimated to the Superintendent of Central Excise within a period of 15 days from the date of adjustment. However, assessees who have centralised registration can adjust the excess service tax paid on their own without any monetary limit provided the excess amount paid is on account of delayed receipt of details of payments from branch offices. It may be noted that Rule 6(3), which also contains provisions related to self-adjustment of excess tax paid has not been omitted.
	c)	W.e.f. 1-3-2007, Rule 7B is inserted to allow an assessee to rectify mistakes and file revised return within 60 days from the date of filing of the original return.
	d)	Rule 2(1)(d)(vii) is amended so that service tax is required to be paid under reverse charge method in relation to sponsorship service only if the recipient of service is located in India. In other words, if the recipient of sponsorship service is located outside India, in such cases, service tax is required to be paid by the service provider and not by the recipient. This change will come into effect from 151 April 2007.
9.	Amendments in the Export of Services Rules, 2005: With effect from 1st March, 2007, Rule 3 (2) is amended and the words 'delivered outside India and used outside India' has been substituted with the words 'provided from India and used outside India' and also clarify that that both rules 3(1) and 3(2) are to be satisfied for provision of service to be treated as export of services. [Refer Notification No. 2/2007-ST, dated 1-3-2007]
10.	Amendments in the Cenvat Credit Rules, 2004: [Refer Notification No. 10/2007-CE, dated 1-3-2007] [Such changes shall come into force w.e.f. 1-3-2007 except point (a) which shall be changed w.e.f. 1-4-2007].
	a)	Optional Scheme to General Insurance Service Provider: W.e.f. 1-4-2007, Rule 6(3) is amended to provide an option to general insurance service providers providing taxable as well as exempted insurance schemes and do not maintain separate input / input services credit accounts to utilise CENVAT credit proportionate to the inputs and input services used in providing taxable services. The scheme is optional. It may be noted that the scheme is applicable only to general insurance services referred to in section 65(105)(d).
	b)	Rectification of Mistakes: The Rule 9 is amended to insert sub-rule (11) to allow an assessee to rectify mistakes and file revised return within 60 days from the date of filing of original return.
	c)	Necessary amendments have been made in the Cenvat Credit Rules, 2004 to allow credit of Secondary and Higher Education Cess paid on inputs and capital goods, which can be utilized for payment of Education Cess only.
	d)	Sub-rule (2) of rule 9 has been amended to provide that the CENVAT credit can be taken if all the particulars as prescribed under the rules are available on the invoice or other duty-paying document. Further, in case any of the required particulars (other than specified particulars) are not available on the document, the Assistant/Deputy Commissioner may allow the credit subject to his satisfaction that (i) goods/services covered by said document had been received by the asseessee, and (ii) the receipt of said goods/services has been accounted for in the books of accounts of the receiver. Consequential amendments have also been made in rules 15(1) and 15(3), which provide for penal action.
	e)	Sub-rule (3) of rule 9 has been deleted, which had provisions related to ensuring of payments of duty. It may be noted that in this regard, earlier Board had issued Draft Circular dated 23-5-2006, which has now been converted into law. It is a welcome step to avoid litigation.
	f)	New sub-rules (3) & (4) have been inserted in rule 11 to provide that when a person opts for exemption from whole of duty (in case of conditional notification) or where a product becomes exempted absolutely, in such cases, the CENVAT credit taken on inputs lying in stock, or in process or contained in the final product lying in stock should be reversed. Similar provision has been made in respect of cases wherein taxable service becomes exempted. However, no reversal of credit of input services is required to be made in such cases.