India: major new changes to service tax system

New changes to India's service tax system: here are all the details that Italian exporting companies will also have to consider starting June 1, 2015.

The Indian government has recently announced some important changes in relation to Taxation on Services: many of them came into effect as of June 1, 2015, while others may be considered effective only in the following months. These measures also affect all Italian companies operating directly in the Subcontinent.

Following are the main provisions envisaged by New Delhi that came into effect as early as June 1, 2015:

• the Service Tax rate is increased to 14%, from 12.36% previously;
• the Primary education cess and the secondary and higher secondary cess no longer exist;
• in general, services provided in connection with entertainment events/activities or access to entertainment facilities are now subject to taxation, except for some that will continue to be exempt;
• services related to entertainment events/activities such as concerts, shows, musical performances, prize-giving and sporting events (other than recognized sporting events) are subject to taxation, if the ticket cost is more than Rs. 500 (7 Euro) for admission fees for that event/activity;
• Services related to labor/labor contracts regarding the production of alcoholic beverages are taxed;
• the “alternate rates” for payment of currency exchange tax, for services provided by air travel agencies, for insurance services, and for services provided by lottery distributors and sales agents were correspondingly adjusted, proportionally;
• The rate for the payment of the Service Tax under reverse charge is increased to 7% (from 6% previously), in all cases where the producer of dutiable goods/services provides tax-free services.

All companies on service taxation in India who would like further information or clarification on this issue are invited to contact us via email at the following address [email protected] or at our telephone number 059.9770184.

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