Service Tax Sways - 14% from Today Liquor - Delhi High Court declines Stay
SERVICE TAX is at 14% from today. With GST round the corner, the line between State Taxes and Central Taxes, is getting slowly blurred and maybe as a preparation, the Service Tax levies are stepping into the State zone - with an increase in tax rate - after all under the GST regime there will be a State Service Tax and a Central Service Tax.
Liquor is a good source of revenue for the State Governments, next only to VAT and the Centre has been having an eye on it notwithstanding constitutionally prescribed bar on intaxication.
The CBEC issued a draft circular proposing to tax the job work of bottling liquor. In the High Court held that bottling of liquor is liable to Service Tax. However in Board's letter CBEC Letter F.No . 249/1/2006- CX 4 dated 27th October 2008, it was clarified that there would be no service tax.
When the negative list concept came in 2012, any process amounting to manufacture or production of goods was included in the negative list in Section 66D(f) of the Finance Act 1994.
Any process amounting to manufacture or production of goods was defined as a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force.
So, it was clear that there would be no service tax on job work manufacture of alcohol.
In the 2015 Finance Act, alcoholic liquor for human consumption was taken out of the negative list and consequently this alcoholic liquors for human consumption was also removed from the definition of manufacture.
The crux of the story is that from today, Service Tax shall be levied on contract manufacturing/job work for production of potable liquor - which means almost the entire liquor industry will come under the Service Tax net and that booze is going to be slightly more expensive from today.
The Industry is obviously not happy and the Confederation of Indian Alcohol Beverages Companies took the matter to the Delhi High Court. The High Court was not impressed enough to grant stay of the levy. The case is posted for disposal on 10.09.2015. At least until then, happy intaxication.
The State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health - Article 47 of the Constitution.