Abatement Rates on Different Services were Notified by Notification 26/2012
It was later amended by
Notification 8/2014
and Notification 8/2015
Latest amended Abatement Chart is as follows
| Name of Service | Abatement notified | Rate Applicable (100%-Abatement) | Effective Rate of ST (14.5%* Rate Applicable) |
| Rail Transport (both goods and passengers) | 70% | 30% | 4.4% |
| Air transport (passenger) | |||
| Economy Class | 60% | 40% | 5.8% |
| Other than Economy Class | 40% | 60% | 8.7% |
| Goods transport by road | 70%* | 30% | 4.4% |
| Chit fund | No abatement* | 100% | 14.5% |
| Cab transport(rent a cab) | 60% | 40% | 5.8% |
| Goods transport by vessel | 70%* | 30% | 4.4% |
| Transport of passengers other than by | |||
| Radio taxi | 60% | 40% | 5.8% |
| Others (except Cab) | 60% | 40% | 5.8% |
| Tour Operator Service | |||
| Of package tour | 75% | 25% | 3.6% |
| Service of only booking or arranging accommodation only | 90% | 10% | 1.5% |
| Others | 60% | 40% | 5.8% |
*Amendments applicable from 1.4.2015 vide Notification 8/2015
| Particulars |
Old (tIll 31.3.15) |
New (From 1.4.15 onwards) |
| Transport of Goods by Road | 75% | 70% |
| Transport of Goods by Vessel | 60% | 70% |
| Transport of Passengers by air | ||
| Economy Class | 60% | 60% |
| Other than Economy Class | 60% | 40% |
| Chit FUND | 70% | No Abatement |
These abatements are subject to certain conditions as mentioned below
Other Services mentioned in Notification
(Not Covered in CA IPCC Study Module
| Name of Service | Abatement notified | Applicable rate | Effecive rate |
| Financial Leasing Services | 90% | 10% | 1.5% |
|
Bundled Service Supply of Food/Drinks with Rent (like Hotel/Banquet hall/Pandal) |
30% | 70% | 10.2% |
| Renting of Hotel/Guest house/Lodge | 60% | 40% | 5.8% |
| Construction of Building/Complex etc | 75% | 25% | 3.6% |
Exam Questions
Question 7
Mr. Sinha has travelled by air from Delhi to Mumbai in economy class. The Airlines has
charged ` 1,372 as service tax from Mr. Sinha. The Airlines does not avail CENVAT credit on
inputs and capital goods used for providing the taxable service.
Compute the value of taxable service provided by the airlines.
View answer
Notification No. 26/2012 ST dated 20.06.2012 provides that transport of passengers by air in
economy class, with or without accompanied belongings is eligible for 60% abatement of the
value of taxable service if CENVAT credit on inputs and capital goods, used for providing the
taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
In other words, service tax is payable on 40% of the value of taxable service in this case, thus
making the effective rate of service tax as 5.6% [40 x 14%].
Since in the given case, the Airlines complies with the requisite condition for availing
abatement, effective rate of service tax charged by it would be 5.6%. Thus, value of taxable
service rendered by the Airlines is Rs. 24,500 [Rs. 1,372 /5.6 x 100].
Question 9
Mr. Kapur has taken a package tour for Australia from Great Tours, a tour operator. Great
Tours has raised a bill of ` 2,50,000 for the said package tour. The bill indicates that it is
inclusive of service charges of Great Tours for arranging the said tour.
Mr. Kapur intends to visit New Zealand after vacationing in Australia. However, he wants to
explore New Zealand without any fixed itinerary and thus has asked Great Tours to arrange
only for his accommodation in New Zealand. Great Tours has raised a bill of ` 1,00,000 for
the said accommodation. The bill indicates that it includes the cost of such accommodation as
well as the service charges of Great Tours for arranging the said accommodation.
Great Tours does not avail CENVAT credit on inputs, capital goods and input services used
for providing taxable service. Compute the total amount of service tax charged by Great Tours
from Mr. Kapur.
View answer
Notification No. 26/2012 ST dated 20.06.2012 provides that services by a tour operator in
relation to a package tour is eligible for 75% abatement of the value of taxable service if -
(i) CENVAT credit on inputs, capital goods and input services (other than the input service
of a tour operator), used for providing the taxable service, has not been taken under the
provisions of the CENVAT Credit Rules, 2004.
(ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour.
In other words, service tax is leviable on 25% of the value of taxable service in this case, thus
making the effective rate of service tax as 3.5% [25 x 14%].
Since in the given case, Great Tours provides a package tour and complies with the requisite
conditions for availing abatement, effective rate of service tax charged by it would be 3.5%.
Thus, service tax charged by Great Tours from Mr. Kapur on package tour to Australia is
Rs. 8,750 [Rs. 2,50,000 x 3.5%].
Further, the above-mentioned notification also provides that if the tour operator is providing
services solely of arranging or booking accommodation for any person in relation to a tour, the
eligible abatement is 90% of the value of taxable service if the following conditions are
fulfilled:
(i) CENVAT credit on inputs, capital goods and input services (other than the input service
of a tour operator), used for providing the taxable service, has not been taken under the
provisions of the CENVAT Credit Rules, 2004.
(ii) The invoice, bill or challan issued indicates that it is towards the charges for such
accommodation.
Furthermore, this abatement is not available if the invoice, bill or challan issued by the tour
operator, in relation to a tour, only includes the service charges for arranging or booking
accommodation for any person and does not include the cost of such accommodation.
In other words, service tax is leviable on 10% of the value of taxable service in this case, thus
making the effective rate of service tax as 1.4% [10 x 14%].
Since in case of New Zealand tour, Great Tours has only booked the accommodation (not
provided any other service) and also the requisite conditions for availing the abatement are
fulfilled, effective rate of service tax charged by it would be 1.4%. Thus, service tax charged
by Great Tours from Mr. Kapur for booking accommodation in respect of New Zealand tour is
Rs. 1,400 [Rs. 1,00,000 x 1.4%].
Therefore, total amount of service tax charged by Great Tours from Mr. Kapur is ` 10,150.
Question 12
Examine the validity of following statements with reference to service tax law:
(ii) The transport of goods in a vessel attracts service tax at 40% of the gross amount
charged.
(iii) Both service providers and service receivers need to satisfy the condition of nonavailment
of CENVAT credit for claiming abatement of 70% of gross amount charged in
case of GTA service.
View answer
(ii) The said statement is not valid. Abatement Notification No. 26/2012 ST dated
20.06.2012 provides an abatement of 70% in respect of transport of goods in a vessel.
Thus, transport of goods in a vessel would attract service tax at 30% of the value of
taxable service provided CENVAT on inputs, capital goods and input service has not
been taken.
(iii) The said statement is not valid. Abatement Notification No. 26/2012 ST dated
20.06.2012 provides that the condition for non-availment of CENVAT credit is required to
be satisfied by the service providers only.