Finance Act, 2015 has proposed to cover all services provided by Government or local authority to business entities under service tax net however effective date of this amendment was awaited since long. Now, Central Government vide Notification No. 06/2016 ST dated 18th February 2016 appointed the 1st April 2016 as the date on which the aforesaid provisions will come into effect. Simultaneously, scope of mega exemption has been extended to cover services provided by Government or a local authority to a business entity with a turnover up to rupees ten lakh in the preceding financial year (Notification No. 07/2016-ST).
Further, by virtue of notification no. 30/2012 ST dated 20.06.2012 read with Rule 2(1)(d) of Service Tax Rules, 1994, in case of service provided or agreed to be provided by Government or Local Authority to a business entity, the recipient of service is liable for payment of service tax under reverse charge mechanism however date of this amendment is still awaited.
Therefore, w.e.f. 1st April 2016, service tax will be applicable on following services provided by Government or Local Authority:
| S. No. | Nature of Service | Taxability | Who is liable to pay |
| 1. | Services by Department of Post provided to Government | Non-taxable | NA |
| 2. | Services by department of Post provided to person other than Government | Taxable# | Service Provider i.e. department of post |
| 3. | services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport | Taxable# | Service Provider |
| 4. | Transport of goods or passengers | Taxable# | Service Provider |
| 5. | Renting of immovable property service to business entity | Taxable# | Service Provider |
| 6. | Renting of immovable property to person other than Business Entity | Non-taxable | NA |
| 7. | Other services provided to business entity | Taxable# | Service Receiver* |
| 8. | Other services provided to person other than business entity | Non-taxable |
* Notification for reverse charge is yet to come.
# exemption is available if services are provided to business entity having turnover in preceding F.Y. is up to Rs. 10 lakh.
Here it is worthwhile to mention that any services provided by government will remain exempt if the same is covered under any separate clause of negative list of service or mega exemption notification.
