20 20 What is Service Tax

8/6/2019 20 20 What is Service Tax

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Q: What is Service tax?

A:Service tax is an indirect tax levied under the Finance Act, 1994, as amended from time to time, on

services. At present, there are approximately 96 categories (including 15 new services introduced by

2006) of services taxable under the service tax net.

Q: What is the rate of service tax and are there different rates for different categories or a

rate across all categories?

A:Service tax is levied at a uniform rate of 12.24 percent (including education cess of 2 percent) fro

of enactment of Finance Bill, 2006Q: List of new services that have been brought under this tax net in Budget 2006-07?

A: The new services made taxable include services provided by share transfer agents and registrar t

recovery agents, maintenance and management of Automatic Teller Machines, sale of advertising spac

(except for print media), sponsorship of events by companies (except for sports), public relations man

services, ship management services, international air travel (excluding economy class), rail container h

services (excluding haulage charges), cruise ship travel, Internet telephony services, business support

auctioneers service (excluding auction of property under directions or orders of a court of law or aucthe government) and credit card, debit card and other payment card-related services.

Q: What is the value of service liable to service tax?

A: The value of service generally liable to service tax is the gross amount charged by the service pro

service rendered. Out of pocket expenses such as (travel, lodging, etc) paid on behalf of the client anrecovered on actual basis (supported by documentary evidence) have been clarified for certain servic

being liable to service tax.However, the Finance Act, 2006 substitutes a new section 67 in the place of the existing one for valu

the taxable service under different circumstances such as, consideration for service rendered was pamoney or partly for consideration other than money.

Further, pursuant to the Finance Act, 2006, 'Service Tax (Determination of Value) Rules, 2006' ('ValRules') have been introduced which specifies different principles for valuation depending upon the na

consideration. The Valuation Rules have also prescribed certain conditions which have to be fulfilled b

service provider to claim a deduction on account of expenditure/ cost incurred by him in provision of

As a result, various costs which are charged to the client as 'out of pocket' expenses (on which reimb

is claimed) would be subject to service tax if the specified conditions are not satisfied.

Q: Who is liable to deposit Service tax?

A: Generally, the liability to deposit service tax is on the service provider. However, in case service is

by a person based (ie having a business/ fixed establishment from where service is provided/ perman

address/ place of residence) outside India and such service provider does not have an office in India,person liable to deposit service tax is the service recipient based in India.

Further, with respect to 'goods transport agency services', if the consignee or consignor is a compan

corporation, body corporate, factory, etc the service tax is required to be paid by the person liable t

freight instead of the goods transport agency.

Q: Are export of services liable to service tax?

A: No, as per the Export of Services Rules, 2005 (effective from March 15, 2005), export of service

liable to service tax. Further, vide notification no. 11/ 2005 -ST, rebate of service tax paid on exportservices has been granted subject to certain conditions. Further, vide notification 12/ 2005 - ST, reb

excise duty on inputs and service tax paid on input services used in providing the exported service hagranted subject to certain conditions.

Q: Is service tax leviable on services received from outside India?

A: Prior to introduction of Finance Act, 2006, explanation to Section 65(105) of the Finance Act, 199

(inserted vide Finance Act, 2005) levied service tax on taxable services rendered by a service provid


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outside India (ie having a business/ fixed establishment from where service is provided/ permanent a

place of residence outside India) to a person based in India.

Under the Finance Act, 2006 a new Section 66A has been introduced. This Section provides for levy

tax on the services rendered by a service provider residing outside India to a person based in India.

such cases, it is deemed that the service recipient in India has himself provided the taxable service i

and, accordingly, service tax is payable by the service recipient.

In addition to Section 66A, Taxation of Services (Provided from Outside India and received in India)

2006 have been notified which lay down the criteria (similar to Export of Services Rules) based onservice would be treated as imports and thus be liable to service tax.

Q: Who is authorized to administer Service tax in the country?

A: The different jurisdictional Commissionerates of Central Excise and Director General of Service t

authorized to administer service tax in India.

Registration

Q: What is the procedure for obtaining a Service tax registration?

A: A prospective Service tax assessee seeking registration should file an application in Form ST-1 (inwith the jurisdictional Central Excise officer/ Service Tax officer within 30 days from the date on w

service becomes taxable or from the commencement of the provision of a taxable service, as may beThe application is required to be filed, generally, along with the following documents-

1. A copy of the PAN of the service provider;2. The memorandum and articles of association of the establishment providing the services;

3. An address proof of the establishment from which it functions; AND4. A power of attorney of the authorized signatory for the purposes of the said registration.

The requirement for filing the above stated documents (other than Form ST-1) is not prescribed in st

may vary from one jurisdiction to another.Department is required to issue the registration certificate to the assessee within 7 days of the recapplication. In case of failure to issue registration certificate within 7 days, the registration applied

deemed to have been granted and the assessee can carry on its activities. The registration certificata service tax registration number.

Q: Is separate registration certificate number required for, if the service provider is providing

one taxable service?

A: A single registration certificate number can be obtained for all services. However, the applicant shmention all taxable service categories on the registration application.

Q: In case of a registered service provider, providing a new taxable service, is he required to o

fresh registration?

A:Service tax registration needs to be obtained for each taxable service category. In case a service

already has a service tax registration certificate, the service provider would need to get the service

registration certificate amended for the addition of the new taxable service category in the certific

Q: Is there any prescribed period for intimation of change in information at the time of registr

A: The service provider is required to intimate any change in information submitted to the Central Ex

Officer at the time of registration within 30 days of the said change.

Q: If an assessee is providing services from more than one premise, does he have to obtain regi

for each premise?

A: To answer the above question, three situations are contemplated and discussed below:

1. Where the assessee is providing the service from more than one premises and has centralized


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system: When an assessee is providing taxable service from more than one premise or office ancentralized billing system in respect of such service rendered to clients in one or more such pr

offices, he may opt for registering such premises or offices from where such centralized billin

2. Where the assessee is providing the services from more than one premises and has centralized

accounting system: Where an assessee is providing services from more than one premise or offi

a centralized accounting system in one or more such premises or offices, he may opt for regist

such premises or offices from where centralized accounting is done.3. Where the assessee is providing service from more than one premises but does not have centra

billing system or centralized accounting system: Where an assessee is providing a taxable servi

more than one premise or office, but does not have any centralized billing system or centralize

accounting system, he would be required to obtain registration in respect of each of such premi

offices from where the services are rendered.

Q: What is the procedure for obtaining the service tax code ('STC') number?

A: An application in the prescribed format (in duplicate), as provided in Annexure II of CBEC Service

Circular No. 35/3/2001 dated 27 August 2001, along with a certified copy of the PAN card, has to besubmitted to the Superintendent of Central Excise.

Q: What are the consequences for failure to obtain registration?

A: There is no specific penalty for failure to obtain registration. However, as per residuary penalty cl

penalty for contravention where no specific penalty is provided), penalty which may extend to Rs 1000

leviable.

Payment of tax, filing of return and maintenance of records

Q: What is the basis for the deposit of service tax by an assessee and at what intervals? Is s

to be deposited by the assessee, even in cases where his client does not pay for the services re

only pays a part of the bill raised in this regard?A: The service tax is required to be paid only on the value of taxable services received for a particulor quarter, as the case may be, and not on the gross amount charged or billed to the client. Ordinarily

tax should be deposited on a monthly basis. However, individual proprietary firms or partnership firmrequired to deposit tax quarterly. In both the cases, whether monthly or quarterly, the tax is to be d

by the 5th of the month following the said month or the said quarter. However, tax for the month ofrequired to be deposited by March 31. Service tax is required to be deposited through TR 6 challans.

Please note that in all cases where the amount received is less than the gross amount charged/ billedclient, the service tax assessees are required to amend the bills, either by rectifying the existing bill

a revised bill and by properly endorsing such change in the billed amount.In case payments have been made in advance for services which have not been provided as yet, servic

required to be deposited on such advance amounts also.

Q: What is the consequence of delay of deposit of tax?

A: Any service provider not depositing tax within the time stipulated for the same, has to pay simple i

the rate of 13 percent per annum.

In addition, the assessee may required to pay penalty ranging between Rs 100/- and Rs 200/- for eve

delay up to a maximum penalty which is equivalent to the service tax which has not been deposited. Th

levy of penalty is at the discretion of the authorities.

However, as per the amendment introduced by the Finance Act, 2006, the assessee is required to pay

not less than Rs. 200/day of delay or 2% of the tax per month of delay, whichever is higher up to a m

penalty which is equivalent to the service tax which has not been deposited. The actual levy of penalt

discretion of the authorities.


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Q: At what intervals do service tax assesses have to file service tax returns? What are the do

that have to be filed along with service tax returns Statement?

A: The service tax assesses are required to file a half yearly return in Form ST 3 or ST-3A, in triplic

the Superintendent Central Excise dealing with service tax. The returns have to be filed within 25 da

the last day of the particular half-year. Thus, the returns for half year ending September 30, and M

have to be filed by October 25, and April 25, respectively. The returns should be accompanied by copi

TR 6 challans, evidencing payment of service tax.

Further, an assessee filing service tax returns for the first time should also furnish to the Departmeof all the accounts maintained by them relating to service tax.

Q: What are the consequences for failure to submit returns?

A: There is no specific penalty for failure to obtain registration. However, as per residuary penalty cl

penalty for contravention where no specific penalty is provided), penalty which may extend to an amou

exceeding Rs 1000/- may be leviable.

Q: What are the records required to be maintained by an assessee?

A: No specific records are required to be maintained by a service tax assessee. Records required tomaintained under any other law in force (sales tax, income tax etc) are acceptable for the purpose of

tax.

Service tax credit

Q: Is service tax credit available for services utilized by a service provider?

A: Yes, an output service provider is allowed to avail credit of the service tax/ excise duty paid on in

services/ input goods received and consumed, which are in relation to rendering of output services.

Q: What are the documents needed to avail service tax credit?

A:Service tax credit can be availed on the basis of the following documents:1. Credit of service tax paid on input services can be availed on the basis of invoice, bill or challan issu

input service provider which should contain the following details:

1. Date of invoice

2. Serial number of document3. Name, address and registration number of the input service provider

4. Name and address of the service recipient

5. Descripttion, classification and value of input service

6. Service tax paid/ payable.

2. Credit of service tax paid on input services received by an input service distributor can be availed

basis of invoice, bill or challan issued by an input service distributor which should contain the followin

1. Date of invoice

2. Serial number of the document

3. Name, address and registration number of the person providing input services and the serial nu

date of the invoice, bill or challan (as provided hereinabove)

4. Name and address of the input service distributor

5. Name and address of the recipient of the credit distributed

6. Amount of credit distributed.

3. Credit of excise duty paid on inputs/ capital goods can be availed of on the basis of an invoice issue

1. A manufacturer for clearance of inputs or capital goods; or


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2. An importer; or

3. A first stage dealer or second stage dealer; or

4. Supplementary invoice issued by a manufacturer or importer of inputs or capital goods; or Bill o5. Certificate issued by an appraiser of customs in respect of goods imported through a foreign p

Q: What records need to be maintained to avail service tax credit?

A: The manufacturer/ output service provider should maintain proper records for receipt, disposal, c

and inventory of input and capital goods. There is no specified format in which the records need to bemaintained. However, the manufacturer/ output service provider needs to maintain records containing

information regarding the value, tax/ duty paid, cenvat credit availed and credit utilized, person from

inputs/ capital goods/ services are procured.

Q:Whether a service tax credit return needs to be filed?

A: Yes, an output service provider is obliged to file a return, on half yearly- basis, in the prescribed f

indicating details of input service provider, input service tax credit available, credit utilized and the

available, if any, along with the return to be filed in Form ST-3. The returns for half year ending Sep

30, and March 31, have to be filed by October 25, and April 25, respectively.

General exemptionsQ: What are the general exemptions available from service tax across all taxable service categ

A: Exemptions from service tax available across all taxable service categories are:

1. All taxable services provided by any person to the United Nations or any International agency,

defined, shall be exempt from paying service tax related to those services. [Notification no. 16

dated August 2, 2002]2. All taxable services provided to a developer or units of SEZ for the development, operation an

maintenance of a SEZ or for setting up SEZ unit or for manufacture of goods buy the SEZ unit

exempted from service tax, subject to satisfaction of the prescribed procedural requirements.[Notification No.17/2002/ST dated November 21, 2002]

3. The value of goods and materials that are sold by the service provider to the recipient of servi

provided there is documentary proof specifically indicating the value of the goods and material[Notification no 12/2003/ST effective July 1, 2003]

4. All taxable services rendered by the RBI have been exempted from service tax w.e.f. March 1,

Information Technology related services

Q: What are the relevant taxable service categories for a person providing Information Technol

related services?A: Depending of the nature of IT services provided by a person, the following taxable service categobe relevant: -

Consulting engineer service means service provided by a professionally qualified engineer or any body

or any other firm who, either directly or indirectly, renders any advice, consultancy or technical assis

any manner to a client in one or more disciplines of engineering excluding services provided in relation

discipline of computer hardware engineering or computer software engineering.

Management consultant service means any service provided by any person, either directly or indirectl

connection with the management of any organization in any manner and includes any advice, consultanc

technical assistance, in relation to financial management, human resources management, marketing maproduction management, logistics management, procurement and management of information technolo

resources or other similar areas of management.

Commercial training or coaching service means any training or coaching provided by any institute or


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establishment providing commercial training or coaching for imparting skill or knowledge or lessons on

subject or field other than the sports, with or without issuance of a certificate and includes coaching

tutorial classes but does not include preschool coaching and training centre or any institute or establi

which issues any certificate or diploma or degree or any educational qualification recognized by law fo

being in force.

Internet cafe service means service provided in relation to access of internet by any commercial esta

providing facility for accessing internet.

Management, maintenance or repair service means any service provided by- any person under a contract or agreement or

a manufacturer or any person authorized by him, in relation to

i. management of properties, whether immoveable or not; or

ii. maintenance or repair including reconditioning or restoration or servicing of any of any goods, exclu

motor vehicle.

Any service in relation to maintenance or repair or servicing of software have been clarified as being l

service tax under this service category vide Circular No 81/2/2005 - ST dated 7 October 2005.Online information and data base access or retrieval service means any service provided by a commer

concern, for provision of data or information, retrievable or otherwise, to a customer, in electronic fothrough a computer network.

Erection, commissioning or installation service means any service provided by a commissioning and instagency in relation to erection, commissioning or installation of plant, machinery or equipment, structur

whether or not pre-fabricated, electrical and electronic devices, plumbing, drain laying, etc for transfluid, heating or air conditioning, thermal or sound insulation, fire proofing, lift and escalators, and si

services.Business auxiliary service means any service in relation to -

promotion or marketing or sale of goods produced or provided by or belonging to the client; or

promotion or marketing of service provided by the client; or

any customer care service provided on behalf of the client; or

procurement of goods or services, which are inputs for the client; or

production of goods on behalf of the client; or

provision of service on behalf of the client; or

any incidental or auxiliary support service such as billing, collection or recovery of cheques, acc

remittance, evaluation of prospective customer and public relation services, and includes servic

commission agent, but does not include any information technology service.

"Information technology service" has been defined to mean any service in relation to designing or dev

computer software, system networking, or any other service primarily in relation to operation of comp

systems.

Definition of business auxiliary services specifically excludes information technology service from th

of service tax. However, w.e.f 1 May 2006, the definition of information technology services was narr

exclude services in relation to maintaining of computer software, or computerized data processing fr

purview.

Business auxiliary service has been clarified to include the services of evaluation of prospective custo

processing of purchase orders, customer management, information and tracking of delivery schedules,

accounting and processing of transactions, operational assistance for marketing, formulation of custo

service and pricing policies, managing distribution & logistics. Further, it has been clarified that the s

provided in relation to getting a customer, verification of prospective customer, processing of purcha


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etc would also be covered under service tax, as the law specifically provides for inclusion of such serv

business auxiliary support services. Circular 59/8/2003 dated June 20, 2003]

Support services of business or commerce means services provided in relation to business or commerc

includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfill

services, information and tracking of delivery schedules, managing distribution and logistics, customer

relationship management services, accounting and processing of transactions, operational assistance f

marketing, formulation of customer service and pricing policies, infrastructural support services and

transaction processing.Infrastructural support services include providing office along with office utilities, lounge, and recep

competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry

security.

Automated teller machine operations, maintenance or management service means any service provided

relation to automated teller machines and includes site selection, contracting of location, acquisition,

installation, certification, connection, maintenance, transaction processing, cash forecasting, replenish

reconciliation and value-added services.Automated teller machine means an interactive automatic machine designed to dispense cash, accept

cash, transfer money between bank accounts and facilitate other financial transactions.Internet telephony means telecommunication service through internet and includes fax, audio confere

video conferencing.'Internet' means a global information system which is logically linked together by a globally unique ad

based on Internet Protocol or its subsequent enhancements or upgradations and is able to supportcommunications using the Transmission Control Protocol or Internet Protocol suite or its subsequent

enhancements or upgradations and all other Internet Protocol compatible protocols.Services in relation to sale of space or time means services provided, in relation to sale of space or ti

advertisement, in any manner but does not include sale of space for advertisement in print media andtime slots by a broadcasting agency or organisation.

Such services include:

1. providing space or time, as the case may be, for display, advertising, showcasing of any product

in video programmes, television programmes or motion pictures or music albums, or on billboard

places, buildings, conveyances, cell phones, automated teller machines, internet;

2. selling of time slots on radio or television by a person, other than a broadcasting agency or org

and

3. aerial advertising.

Q: What are the exemptions available with respect to IT related services?

A: The exemptions available with respect to IT related services are: -

Consulting engineer service- As per the definition of 'taxable service', services provided by a c

engineer in the discipline of computer hardware engineering or computer software engineering

taxable.

Business auxiliary service- The definition of business auxiliary services excludes information te

services, which is any service in relation to designing or developing of computer software, syste

networking, and any other services primarily related to operation of computers, are excluded fambit of business auxiliary service category. [Explanation to section 65 (19) of the Finance Act

Commissioning or installation service- The taxable service provided in relation to commissioning


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installation by a commissioning and installation agency, has been exempted from so much of thetax leviable as is in excess of the amount of service tax calculated on a value which is equivalen

thirty-three per cent of the gross amount charged from the customer under a contract for sup

plant, machinery or equipment and commissioning or installation of the said plant, machinery or

subject to the prescribed conditions..Explanation: - For the purposes of this notification, the g

amount charged shall include the value of the plant, machinery, equipment, parts and any other

sold by the commissioning and installation agency, during the course of providing commissioninginstallation service. [Notification no 1/2006/ST dated 1 March 2006]

Q: What is Service tax?

A:Service tax is an indirect tax levied under the Finance Act, 1994, as amended from time to

time, on specified services. At present, there are approximately 96 categories (including 15

new services introduced by Budget 2006) of services taxable under the service tax net.

Q: What is the rate of service tax and are there different rates for different

categories or a common rate across all categories?A:Service tax is levied at a uniform rate of 12.24 percent (including education cess of 2

percent) from the date of enactment of Finance Bill, 2006

Q: List of new services that have been brought under this tax net in Budget 2006-07?

A: The new services made taxable include services provided by share transfer agents and

registrar to issues, recovery agents, maintenance and management of Automatic Teller

Machines, sale of advertising space or time (except for print media), sponsorship of events bycompanies (except for sports), public relations management services, ship management

services, international air travel (excluding economy class), rail container handling services

(excluding haulage charges), cruise ship travel, Internet telephony services, business supportservices, auctioneers service (excluding auction of property under directions or orders of acourt of law or auction by the government) and credit card, debit card and other payment

card-related services.

Q: What is the value of service liable to service tax?

A: The value of service generally liable to service tax is the gross amount charged by theservice provider for service rendered. Out of pocket expenses such as (travel, lodging, etc)

paid on behalf of the client and recovered on actual basis (supported by documentaryevidence) have been clarified for certain services as not being liable to service tax.

However, the Finance Act, 2006 substitutes a new section 67 in the place of the existing onefor valuation of the taxable service under different circumstances such as, consideration for

service rendered was partly in money or partly for consideration other than money.

Further, pursuant to the Finance Act, 2006, 'Service Tax (Determination of Value) Rules,

2006' ('Valuation Rules') have been introduced which specifies different principles for

valuation depending upon the nature of consideration. The Valuation Rules have also prescribed

certain conditions which have to be fulfilled by a service provider to claim a deduction on

account of expenditure/ cost incurred by him in provision of a service.

As a result, various costs which are charged to the client as 'out of pocket' expenses (on

which reimbursement is claimed) would be subject to service tax if the specified conditionsare not satisfied.

Q: Who is liable to deposit Service tax?

A: Generally, the liability to deposit service tax is on the service provider. However, in case


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service is provided by a person based (ie having a business/ fixed establishment from where

service is provided/ permanent address/ place of residence) outside India and such service

provider does not have an office in India, then the person liable to deposit service tax is the

service recipient based in India.

Further, with respect to 'goods transport agency services', if the consignee or consignor is a

company, corporation, body corporate, factory, etc the service tax is required to be paid by

the person liable to pay freight instead of the goods transport agency.

Q: Are export of services liable to service tax?A: No, as per the Export of Services Rules, 2005 (effective from March 15, 2005), export of

services is not liable to service tax. Further, vide notification no. 11/ 2005 -ST, rebate of

service tax paid on exported services has been granted subject to certain conditions. Further,

vide notification 12/ 2005 - ST, rebate of excise duty on inputs and service tax paid on input

services used in providing the exported service has been granted subject to certain conditions.

Q: Is service tax leviable on services received from outside India?

A: Prior to introduction of Finance Act, 2006, explanation to Section 65(105) of the FinanceAct, 1994 (inserted vide Finance Act, 2005) levied service tax on taxable services rendered by

a service provider residing outside India (ie having a business/ fixed establishment fromwhere service is provided/ permanent address/ place of residence outside India) to a person

based in India.Under the Finance Act, 2006 a new Section 66A has been introduced. This Section provides

for levy of service tax on the services rendered by a service provider residing outside India toa person based in India. Further, in such cases, it is deemed that the service recipient in India

has himself provided the taxable service in India and, accordingly, service tax is payable bythe service recipient.

In addition to Section 66A, Taxation of Services (Provided from Outside India and received inIndia) Rules, 2006 have been notified which lay down the criteria (similar to Export of

Services Rules) based on which a service would be treated as imports and thus be liable to

service tax.

Q: Who is authorized to administer Service tax in the country?

A: The different jurisdictional Commissionerates of Central Excise and Director General of

Service tax are authorized to administer service tax in India.

Registration

Q: What is the procedure for obtaining a Service tax registration?

A: A prospective Service tax assessee seeking registration should file an application in FormST-1 (in duplicate) with the jurisdictional Central Excise officer/ Service Tax officer within

30 days from the date on which the service becomes taxable or from the commencement of

the provision of a taxable service, as may be applicable.

The application is required to be filed, generally, along with the following documents-

1. A copy of the PAN of the service provider;

2. The memorandum and articles of association of the establishment providing the

services;

3. An address proof of the establishment from which it functions; AND4. A power of attorney of the authorized signatory for the purposes of the said

registration.

The requirement for filing the above stated documents (other than Form ST-1) is not


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prescribed in statute and may vary from one jurisdiction to another.

Department is required to issue the registration certificate to the assessee within 7 days of

the receipt of the application. In case of failure to issue registration certificate within 7

days, the registration applied for is deemed to have been granted and the assessee can carry

on its activities. The registration certificate contains a service tax registration number.

Q: Is separate registration certificate number required for, if the service provider is

providing more than one taxable service?

A: A single registration certificate number can be obtained for all services. However, theapplicant should mention all taxable service categories on the registration application.

Q: In case of a registered service provider, providing a new taxable service, is he

required to obtain a fresh registration?

A:Service tax registration needs to be obtained for each taxable service category. In case a

service provider already has a service tax registration certificate, the service provider would

need to get the service tax registration certificate amended for the addition of the new

taxable service category in the certificate.

Q: Is there any prescribed period for intimation of change in information at the time of

registration?

A: The service provider is required to intimate any change in information submitted to the

Central Excise Officer at the time of registration within 30 days of the said change.

Q: If an assessee is providing services from more than one premise, does he have to

obtain registration for each premise?

A: To answer the above question, three situations are contemplated and discussed below:

1. Where the assessee is providing the service from more than one premises and hascentralized billing system: When an assessee is providing taxable service from more

than one premise or office and has a centralized billing system in respect of suchservice rendered to clients in one or more such premises or offices, he may opt for

registering such premises or offices from where such centralized billing is done.2. Where the assessee is providing the services from more than one premises and has

centralized accounting system: Where an assessee is providing services from more than

one premise or office but has a centralized accounting system in one or more such

premises or offices, he may opt for registration of such premises or offices from where

centralized accounting is done.

3. Where the assessee is providing service from more than one premises but does not have

centralized billing system or centralized accounting system: Where an assessee is

providing a taxable service from more than one premise or office, but does not have any

centralized billing system or centralized accounting system, he would be required to

obtain registration in respect of each of such premises or offices from where the

services are rendered.

Q: What is the procedure for obtaining the service tax code ('STC') number?

A: An application in the prescribed format (in duplicate), as provided in Annexure II of CBEC

Service tax Circular No. 35/3/2001 dated 27 August 2001, along with a certified copy of the

PAN card, has to be submitted to the Superintendent of Central Excise.

Q: What are the consequences for failure to obtain registration?

A: There is no specific penalty for failure to obtain registration. However, as per residuary

penalty clause (ie penalty for contravention where no specific penalty is provided), penalty


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which may extend to Rs 1000/- may be leviable.

Payment of tax, filing of return and maintenance of records

Q: What is the basis for the deposit of service tax by an assessee and at what

intervals? Is service tax to be deposited by the assessee, even in cases where his client

does not pay for the services rendered or only pays a part of the bill raised in this

regard?

A: The service tax is required to be paid only on the value of taxable services received for a

particular month or quarter, as the case may be, and not on the gross amount charged or billedto the client. Ordinarily service tax should be deposited on a monthly basis. However,

individual proprietary firms or partnership firms are required to deposit tax quarterly. In

both the cases, whether monthly or quarterly, the tax is to be deposited by the 5th of the

month following the said month or the said quarter. However, tax for the month of March is

required to be deposited by March 31. Service tax is required to be deposited through TR 6

challans.

Please note that in all cases where the amount received is less than the gross amount charged/billed to the client, the service tax assessees are required to amend the bills, either by

rectifying the existing bill or issuing a revised bill and by properly endorsing such change inthe billed amount.

In case payments have been made in advance for services which have not been provided as yet,service tax is required to be deposited on such advance amounts also.

Q: What is the consequence of delay of deposit of tax?

A: Any service provider not depositing tax within the time stipulated for the same, has to pay

simple interest at the rate of 13 percent per annum.In addition, the assessee may required to pay penalty ranging between Rs 100/- and Rs 200/-

for every day of delay up to a maximum penalty which is equivalent to the service tax whichhas not been deposited. The actual levy of penalty is at the discretion of the authorities.

However, as per the amendment introduced by the Finance Act, 2006, the assessee is required

to pay penalty not less than Rs. 200/day of delay or 2% of the tax per month of delay,

whichever is higher up to a maximum penalty which is equivalent to the service tax which has

not been deposited. The actual levy of penalty is at the discretion of the authorities.

Q: At what intervals do service tax assesses have to file service tax returns? What are

the documents that have to be filed along with service tax returns Statement?

A: The service tax assesses are required to file a half yearly return in Form ST 3 or ST-3A, in

triplicate, to the Superintendent Central Excise dealing with service tax. The returns have tobe filed within 25 days from the last day of the particular half-year. Thus, the returns for

half year ending September 30, and March 31, have to be filed by October 25, and April 25,

respectively. The returns should be accompanied by copies of all TR 6 challans, evidencing

payment of service tax.

Further, an assessee filing service tax returns for the first time should also furnish to the

Department the list of all the accounts maintained by them relating to service tax.

Q: What are the consequences for failure to submit returns?

A: There is no specific penalty for failure to obtain registration. However, as per residuary

penalty clause (ie penalty for contravention where no specific penalty is provided), penaltywhich may extend to an amount not exceeding Rs 1000/- may be leviable.

Q: What are the records required to be maintained by an assessee?

A: No specific records are required to be maintained by a service tax assessee. Records

required to be maintained under any other law in force (sales tax, income tax etc) are


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acceptable for the purpose of service tax.

Service tax credit

Q: Is service tax credit available for services utilized by a service provider?

A: Yes, an output service provider is allowed to avail credit of the service tax/ excise duty

paid on input services/ input goods received and consumed, which are in relation to rendering

of output services.

Q: What are the documents needed to avail service tax credit?

A:Service tax credit can be availed on the basis of the following documents:1. Credit of service tax paid on input services can be availed on the basis of invoice, bill or

challan issued by an input service provider which should contain the following details:

1. Date of invoice

2. Serial number of document

3. Name, address and registration number of the input service provider

4. Name and address of the service recipient

5. Descripttion, classification and value of input service

6. Service tax paid/ payable.

2. Credit of service tax paid on input services received by an input service distributor can be

availed on the basis of invoice, bill or challan issued by an input service distributor which

should contain the following details:

1. Date of invoice

2. Serial number of the document

3. Name, address and registration number of the person providing input services and the

serial number and date of the invoice, bill or challan (as provided hereinabove)4. Name and address of the input service distributor

5. Name and address of the recipient of the credit distributed6. Amount of credit distributed.

3. Credit of excise duty paid on inputs/ capital goods can be availed of on the basis of aninvoice issued by:

1. A manufacturer for clearance of inputs or capital goods; or

2. An importer; or3. A first stage dealer or second stage dealer; or4. Supplementary invoice issued by a manufacturer or importer of inputs or capital goods;

or Bill of entry; or5. Certificate issued by an appraiser of customs in respect of goods imported through a

foreign post office.

Q: What records need to be maintained to avail service tax credit?

A: The manufacturer/ output service provider should maintain proper records for receipt,

disposal, consumption and inventory of input and capital goods. There is no specified format inwhich the records need to be maintained. However, the manufacturer/ output service providerneeds to maintain records containing information regarding the value, tax/ duty paid, cenvat

credit availed and credit utilized, person from whom inputs/ capital goods/ services areprocured.


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Q:Whether a service tax credit return needs to be filed?

A: Yes, an output service provider is obliged to file a return, on half yearly- basis, in the

prescribed form (III) indicating details of input service provider, input service tax credit

available, credit utilized and the balance available, if any, along with the return to be filed in

Form ST-3. The returns for half year ending September 30, and March 31, have to be filed by

October 25, and April 25, respectively.

General exemptions

Q: What are the general exemptions available from service tax across all taxable servicecategories?

A: Exemptions from service tax available across all taxable service categories are:

1. All taxable services provided by any person to the United Nations or any International

agency, as defined, shall be exempt from paying service tax related to those services.

[Notification no. 16/2002/ST dated August 2, 2002]

2. All taxable services provided to a developer or units of SEZ for the development,

operation and maintenance of a SEZ or for setting up SEZ unit or for manufacture of

goods buy the SEZ unit have been exempted from service tax, subject to satisfactionof the prescribed procedural requirements. [Notification No.17/2002/ST dated

November 21, 2002]

3. The value of goods and materials that are sold by the service provider to the recipientof service provided there is documentary proof specifically indicating the value of the

goods and materials. [Notification no 12/2003/ST effective July 1, 2003]4. All taxable services rendered by the RBI have been exempted from service tax w.e.f.

March 1, 2006.

Information Technology related servicesQ: What are the relevant taxable service categories for a person providing Information

Technology ('IT') related services?

A: Depending of the nature of IT services provided by a person, the following taxable servicecategories may be relevant: -

Consulting engineer service means service provided by a professionally qualified engineer orany body corporate or any other firm who, either directly or indirectly, renders any advice,

consultancy or technical assistance in any manner to a client in one or more disciplines ofengineering excluding services provided in relation to the discipline of computer hardware

engineering or computer software engineering.Management consultant service means any service provided by any person, either directly or

indirectly, in connection with the management of any organization in any manner and includes

any advice, consultancy or technical assistance, in relation to financial management, human

resources management, marketing management, production management, logistics management,

procurement and management of information technology resources or other similar areas of

management.

Commercial training or coaching service means any training or coaching provided by any

institute or establishment providing commercial training or coaching for imparting skill or

knowledge or lessons on any subject or field other than the sports, with or without issuance of

a certificate and includes coaching or tutorial classes but does not include preschool coaching

and training centre or any institute or establishment which issues any certificate or diploma or

degree or any educational qualification recognized by law for the time being in force.


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Internet cafe service means service provided in relation to access of internet by any

commercial establishment providing facility for accessing internet.

Management, maintenance or repair service means any service provided by-

any person under a contract or agreement or

a manufacturer or any person authorized by him, in relation to

i. management of properties, whether immoveable or not; or

ii. maintenance or repair including reconditioning or restoration or servicing of any of any

goods, excluding motor vehicle.Any service in relation to maintenance or repair or servicing of software have been clarified as

being liable to service tax under this service category vide Circular No 81/2/2005 - ST dated

7 October 2005.

Online information and data base access or retrieval service means any service provided by a

commercial concern, for provision of data or information, retrievable or otherwise, to a

customer, in electronic form through a computer network.

Erection, commissioning or installation service means any service provided by a commissioningand installation agency in relation to erection, commissioning or installation of plant, machinery

or equipment, structures, whether or not pre-fabricated, electrical and electronic devices,plumbing, drain laying, etc for transport of fluid, heating or air conditioning, thermal or sound

insulation, fire proofing, lift and escalators, and similar services.Business auxiliary service means any service in relation to -

promotion or marketing or sale of goods produced or provided by or belonging to theclient; or

promotion or marketing of service provided by the client; or

any customer care service provided on behalf of the client; or

procurement of goods or services, which are inputs for the client; or

production of goods on behalf of the client; or

provision of service on behalf of the client; or

any incidental or auxiliary support service such as billing, collection or recovery of

cheques, accounts and remittance, evaluation of prospective customer and public

relation services, and includes services as a commission agent, but does not include any

information technology service.

"Information technology service" has been defined to mean any service in relation to designing

or developing of computer software, system networking, or any other service primarily inrelation to operation of computer systems.

Definition of business auxiliary services specifically excludes information technology service

from the purview of service tax. However, w.e.f 1 May 2006, the definition of information

technology services was narrowed to exclude services in relation to maintaining of computer

software, or computerized data processing from its purview.

Business auxiliary service has been clarified to include the services of evaluation of

prospective customers, processing of purchase orders, customer management, information and

tracking of delivery schedules, accounting and processing of transactions, operational

assistance for marketing, formulation of customer service and pricing policies, managing

distribution & logistics. Further, it has been clarified that the services provided in relation to

getting a customer, verification of prospective customer, processing of purchase order etc

would also be covered under service tax, as the law specifically provides for inclusion of such


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services as business auxiliary support services. Circular 59/8/2003 dated June 20, 2003]

Support services of business or commerce means services provided in relation to business or

commerce and includes evaluation of prospective customers, telemarketing, processing of

purchase orders and fulfillment services, information and tracking of delivery schedules,

managing distribution and logistics, customer relationship management services, accounting and

processing of transactions, operational assistance for marketing, formulation of customer

service and pricing policies, infrastructural support services and other transaction processing.

Infrastructural support services include providing office along with office utilities, lounge, andreception with competent personnel to handle messages, secretarial services, internet and

telecom facilities, pantry and security.

Automated teller machine operations, maintenance or management service means any service

provided in relation to automated teller machines and includes site selection, contracting of

location, acquisition, financing, installation, certification, connection, maintenance, transaction

processing, cash forecasting, replenishment, reconciliation and value-added services.

Automated teller machine means an interactive automatic machine designed to dispense cash,accept deposit of cash, transfer money between bank accounts and facilitate other financial

transactions.Internet telephony means telecommunication service through internet and includes fax, audio

conferencing and video conferencing.'Internet' means a global information system which is logically linked together by a globally

unique address, based on Internet Protocol or its subsequent enhancements or upgradationsand is able to support communications using the Transmission Control Protocol or Internet

Protocol suite or its subsequent enhancements or upgradations and all other Internet Protocolcompatible protocols.

Services in relation to sale of space or time means services provided, in relation to sale ofspace or time for advertisement, in any manner but does not include sale of space for

advertisement in print media and sale of time slots by a broadcasting agency or organisation.

Such services include:

1. providing space or time, as the case may be, for display, advertising, showcasing of any

product or service in video programmes, television programmes or motion pictures or

music albums, or on billboards, public places, buildings, conveyances, cell phones,

automated teller machines, internet;

2. selling of time slots on radio or television by a person, other than a broadcasting agency

or organisation; and

3. aerial advertising.

Q: What are the exemptions available with respect to IT related services?

A: The exemptions available with respect to IT related services are: -

Consulting engineer service- As per the definition of 'taxable service', services

provided by a consulting engineer in the discipline of computer hardware engineering or

computer software engineering are not taxable.

Business auxiliary service- The definition of business auxiliary services excludesinformation technology services, which is any service in relation to designing or

developing of computer software, system networking, and any other services primarily

related to operation of computers, are excluded from the ambit of business auxiliary


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service category. [Explanation to section 65 (19) of the Finance Act, 1994]

Commissioning or installation service- The taxable service provided in relation to

commissioning or installation by a commissioning and installation agency, has been

exempted from so much of the service tax leviable as is in excess of the amount of

service tax calculated on a value which is equivalent to thirty-three per cent of the

gross amount charged from the customer under a contract for supplying a plant,

machinery or equipment and commissioning or installation of the said plant, machinery orequipment, subject to the prescribed conditions..Explanation: - For the purposes of this

notification, the gross amount charged shall include the value of the plant, machinery,

equipment, parts and any other material sold by the commissioning and installation

agency, during the course of providing commissioning or installation service.

[Notification no 1/2006/ST dated 1 March 2006]

Best Answer - Chosen by VotersWest Bengal has created its respective professional tax slab structure to keep the residents informed about the

exact deductions from their incomes. The professional tax slab in West Bengal has been categorized as per the

following criteria:

Income Monthly Professional Tax

Less than 1,500 Nil

Between Rs. 1501- Rs. 2001 Rs. 18

Between Rs. 2001 - Rs. 3001 Rs. 25

Between Rs. 3001- 5001 Rs 30

Rs. 5001 Rs. 40Between Rs. 6001 -7001 Rs.45

Rs.7001 Rs.50

Rs.8001 Rs.90

Rs.9001 Rs.110

Rs.15001 Rs.130

Rs. 25001 Rs.150

Beyond Rs.40001 Rs.200

Source(s):

http://business.mapsofindia.com/india-ta

2 years ago

TAXABLE SERVICES

Name of service1. Advertising services2. Air Travel Agent Services

3. Architect Services4. Authorised service station5. Banking and Other Financial Services6. Beauty Parlour Services7. Broadcasting Service8. Business Auxiliary Services, namely Business Promotion and Support Services including CustomerCare Services (Excluding any information Technology Services)
http://business.mapsofindia.com/india-tax/structure/slabs.htmlhttp://business.mapsofindia.com/india-tax/structure/slabs.html


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9. Cable Operator Services10. Cargo Handling Services11. Certification Service12. Chartered Accountant Services13. Clearing & Forwarding Agent services14. Commercial Vocational Institutes, coaching centres and private Tutorials15. Commissioning and Installation Services16. Company Secretary Services17. Consultant Engineer services18. Convention Service19. Cost Accountant Services20. Couriers services21. Credit Rating Agency Services22. Custom House Agent services23. Dry Cleaning Services24. Event Management Services25. Fascimile Service26. Fashion Designing Services27. Franchisee Services28. General Insurance Services29. Health Clubs and Fitness Centers Services30. Insurance Auxiliary Services31. Interior Decorators/Designers Services

32. Internet Cafe33. Leased Circuits Service34. Life Insurance Service including Insurance auxiliary Services relating to Life Insurance35. Maintenance and Repair Services36. Man Power Recruitment services37. Management Consultant Services38. Mandap Keeper Services39. Market Research Agency Services40. Online Information and Database access and / or Retrieval Service41. Photography Service42. Port Services43. Radio Paging Services44. Rail Travel Agent services

45. Real Estate Agents46. Rent-a-Cab Scheme Operator Services47. Scientific & Technical Consultancy Service48. Security / Detective Agency Services49. Sound Recording Service50. Steamer Agent Services51. Stock Broker Services52. Storage and Warehousing Services53. Telegraph Service54. Telephone Services55. Telex Service56. Tour Operator services57. Under Writing Services

58. Video Tape Production Service Circular No. 59/8/200320th June, 2003

F. No. B3/7/2003-TRUGovernment of IndiaMinistry of Finance

Department of RevenueTax Research Unit

Subject:Imposition of Service Tax on new services consequent to enactment of Finance Bill, 2003-reg.1.APPOINTMENT OF EFFECTIVE DATE FOR THE NEW SERVICESIt may be recalled that the Finance Act, 2003 has made provisions to levy service tax, from a date to be notified later on,on the following new services,-

o Commercial training & coaching center

o Technical testing & analysis; technical inspection and certificationo Maintenance and repair serviceo Commissioning and installationo Business auxiliary serviceso Internet cafo Franchise service


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Further, it was also provided in the Finance Act to extend the scope of services already covered under the tax net in caseof,-

o port services (which were earlier limited to major ports) to cover all ports under the service tax net;o authorised automobile service was brought under the tax net with effect from 16.7.2001. However,

it was restricted only to motorcars and two wheeled motor vehicles. Buses, trucks, maxi cabs etc were notcovered. Provision have been made to widen the scope of authorized automobile service to cover all suchvehicles;o foreign exchange broking service provided by any body corporate or non-banking financial

company was covered under the tax net in the category of banking and other financial service with effectfrom 16.7.2001. Provisions have been made to extend the scope of the tax to include the service provided

by all foreign exchange brokers (including moneychangers and forex dealers).As per the provisions of the Finance Act, the above levies or extensions of levies are to come into effect from a date to beappointed by the Central government. In this regard, vide notification No.7/2003-Service Tax, date 20th June 2003,the government has appointed 1st July, 2003, as the date from which the levy of Service tax on the above serviceswould come into effect.2. EXEMPTIONS AND CLARIFICATIONS2.1 BUSINESS AUXILIARY SERVICE:2.1.1 Call centers and medical transcription centers:Business auxiliary services provided by call centers (i.e. commercial concern which provides assistance, help orinformation, through telephone, on behalf of another person) and medical transcription centers (i.e. commercial concernwhich transcribes medical history, treatment, medical observations and the like) have been fully exempted from levy ofservice tax w.e.f. 1st July, 2003, vide notification No. 8/2003-Service Tax, dated 20th June, 2003.2.1.2 Commission agent:

As per the definition of business auxiliary services, services as commission agent are considered business auxiliaryservices. However services of commission agents have been exempted from service tax w.e.f. 1st July, 2003 videnotification No.13/2003-Service Tax dated 20th June 2003. Commission agent has been defined in the notification, as aperson who causes sale or purchase of goods, on behalf of another person for a consideration, which is based on thequantum of such sale or purchase. It may be noticed that the exemption under this notification is for a commission agentwhile the services of a consignment agent remain taxable under the category of Clearing and Forwarding services. It maybe appreciated that the nature of service provided by a Consignment agent is different than that provided by a commissionagent. A consignment agents job is to receive the goods from the principal and dispatch them on the directions of theprincipal, whereas a commission agents job is to cause sale/purchase on behalf of another person. Thus, the essentialdifference is that a commission agent sells or purchases on behalf of the principal while consignment agent receives anddispatches the goods on behalf of a principal. It is possible that a person may be a consignment agent as well as acommission agent. Such a person would already be covered in the category of Clearing and Forwarding agent and wouldbe liable to pay service tax in that category. In other words, the present exemption is available only to such commission

agent who is not a consignment agent.2.1.3 Certain doubts have been raised in case of business auxiliary services. In this regard the following is clarified,-

While it is not possible to give an exhaustive list of business auxiliary services, the following are illustrations ofservices that are covered under this category viz. evaluation of prospective customers, processing of purchase orders,customer management, information and tracking of delivery schedules, accounting and processing of transactions,operational assistance for marketing, formulation of customer service and pricing policies, managing distribution &logistics. The services provided in relation to getting a customer, verification of prospective customer, processing ofpurchase order etc would also be covered under service tax, as the law specifically provides for inclusion of such servicesas business auxiliary support services. As regards the question whether insurance agents, C&F agents working on commission basis fall under the definitionof business auxiliary service, it is clarified that they do not, as they are specifically covered within the definition of otherspecified taxable services, namely the Insurance service and C&F Service respectively. Under Section 65A of Finance Act1994, it has also been provided that in case of overlap, a service would be classified under the head, (a) which provides

most specific description, (b) in case of a composite service having combination of different taxable services, the servicewhich give them their essential character and (c) in case the test of (a) and (b) does not resolve, the service which comesearlier in the clauses of Section 65, i.e. the service that was subjected to service tax earlier. Since Insurance services andC&F Services are more specific description and were also subjected to service tax prior to imposition of tax on businessauxiliary service, the insurance agents, C&F agents working on commission basis would fall under those respectivecategories. From this, it follows that a particular service can be taxed only under one head of service. As per the definition of business auxiliary services, information technology service is outside the purview of businessauxiliary service. In the explanation appended to the definition in the Act itself, it has been clarified that informationtechnology service means any service in relation to designing, developing or maintaining of computer software orcomputerized data processing or system networking or any other service primarily in relation to operation of computersystems. In this regard, it is clarified that only if the output service provided by a service provider is in the nature of theabove operations, such exclusion would operate. The mere fact that a personal computer or a laptop has been used forproviding the service does not, ipso facto, make the service an information technology service. Similarly, the fact that any

of the IT services mentioned in the explanation has been used by the service provider as an input service does notautomatically make the output service an IT service. Therefore, in such cases, individual service has to be examined withreference to the explanation provided to the definition of business auxiliary service and only such output services whichqualify to be IT services in terms of the said explanation shall remain excluded from taxable service under the headingbusiness auxiliary service.2.2 VOCATIONAL TRAINING AND COACHING CENTERS:


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2.2.1 Commercial coaching and training services provided by institutes that prepare applicants for Board examinationsand competitive exams like entrance examinations for Indian Institute of Technology-Joint Entrance Examinations/PreMedical Tests, Civil Services exams etc. are chargeable to service tax. However, services in relation to commercialcoaching and training, provided by, -

a. vocational training institute;

b. computer training institute; and

c. recreational training institute;have been exempted from service tax w.e.f. 1st July, 2003vide Notification No.9/2003-Servtice Tax dated 20th June 2003.Therefore, vocational coaching and training services provided by typing and shorthand institutes, TV/ vehicle repairtraining institutes, tailoring institutes, industrial training institutes, foreign language institutes, computer-training centers,

hobby classes, institutes teaching martial arts, painting, dancing etc would not be chargeable to service tax. Thisexemption would remain in force upto 29th February 2004.2.2.2 Institutes like the Institute of Chartered Accountants of India some time hire the services of other institutes to impartsome part of training (like language or computer training) to the students undertaking courses for obtaining recognizeddegrees/diplomas (like Chartered Accountancy) from their institute. Whereas institutes the Institute of CharteredAccountants of India will not be chargeable to service tax because they confer qualifications recognized by law, theinstitutes or centers providing such part of training may be otherwise under service tax net. Vide notification No. 10/2003-Service Tax dated 20th June, 2003, exemption has been provided w.e.f. 1st July, 2003 to such services rendered bycommercial training or coaching centers from service tax which form an essential part of the course or curriculum leadingto issuance of recognized certificate, diploma, degree or any other educational qualification. The exemption is subject tothe condition that the receiver of such service (for example, student) makes payment for the entire course or curriculum tothe institute or establishment issuing such certificate, diploma etc. and not to the commercial coaching or training center.2.2.3 Certain doubts have been raised in case of commercial coaching and training. In this regard, the following is

clarified,- Whether service tax is leviable on postal coaching: It is clarified that service tax is leviable on anycoaching or training provided by an institution on commercial basis. Therefore, the coaching provided bypostal means would also be covered under the service tax and the charges, including the postal chargescollected for rendering this service would be subjected to service tax. Whether service tax is leviable on institutes providing commercial coaching in addition to recognizeddegree courses: Some institutes like colleges, apart from imparting education for obtaining recognizeddegrees/diploma/certificates, also impart training for competitive examinations, various entrance tests etc.It is clarified that by definition, such institutes or establishments, which issue a certificate, diploma ordegree recognized by law, are outside the purview of "commercial training or coaching institute". Thus,even if such institutes or establishments provide training for competitive examinations etc., such servicesrendered would be outside the scope of service tax. Whether individuals going to houses to impart tuition/coaching would be chargeable to service tax: Itis clarified that service tax is on institutions/establishments. Therefore, only those service providers arecovered under the service tax who have some establishment for providing commercial coaching ortraining i.e. institutional coaching or training. Thus, individuals providing services at the premises of aservice receiver would not be covered under service tax. However, if coaching or training center providescommercial coaching by sending individuals to the premises of service receivers, such services would bechargeable to tax, as in this case, the individuals are rendering services on behalf of an institution. Whether free summer training/ in house training provided by employers to their employees arecovered under service tax net: It is clarified that in case employers provide any free training themselves,no service tax is chargeable. However if an employer hires an outside commercial coaching or trainingcenter for imparting some training to its employees, then the payment made by the said employer to suchcoaching center will be chargeable to service tax.

2.3 MAINTENANCE AND REPAIR SERVICES:

2.3.1 Maintenance contracts entered into before 1

st

July 2003:There are cases where maintenance contracts are entered into for a period of more than one year. Vide notificationNo.11/2003- Service Tax, dated 20th June 2003 for maintenance contracts entered into prior to 1st July, 2003, exemptionhas been provided to that part of the value of the service for which bill/invoices have been raised and the amount hasactually been received prior to the 1st July, 2003. For such contracts, all subsequent payments or payments made againstinvoice issued subsequent to the 1st July 2003 will be chargeable to service tax. Similar will be situation for paymentsmade for continuing services.2.3.2 Certain doubts have been raised in case of maintenance and repair services as to whether service tax onmaintenance and repair would be charged in cases where during the guarantee period, the services are provided to thebuyer of the goods while the payments for the same are received from the supplier of the goods. In this regard it isclarified that irrespective of the fact that the receiver of the service is different from the person making payments for suchservices, the service tax is leviable on the services provided towards maintenance and repair. Therefore, for the servicesprovided during the warranty period by the dealer or any other authorized person, service tax would also be leviable on

any amount received by such dealer or such other authorized person from manufacturer of such goods.2.4 FRANCHISE SERVICE:Franchise service is a service provided by franchisor to a franchisee. Section 65 of the Finance Act 1994, (sub section 47)defines franchise as a specific type of agreement. This agreement has various ingredients, which have been specified inthe said definition. For removal of doubt it is clarified that unless all the ingredients mentioned at (i) to (iv) of the said subsection are satisfied, the agreement can not be called as franchise agreement. These ingredients are,-

(i) the franchisee is granted representational right to sell or manufacture goods or to provide service or


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undertake any process identified with franchisor, whether or not a trade mark, service mark, trade nameor logo or any such symbol, as the case may be, is involved;(ii) the franchisor provides concepts of business operation to franchisee, including know how, method ofoperation, managerial expertise, marketing techniques or training and standards of quality control exceptpassing on the ownership of all know how to franchisee;(iii) the franchisee is required to pay to the franchisor, directly or indirectly, a fee; and(iv) the franchisee is under an obligation not to engage in selling or providing similar goods or services orprocess, identified with any other person.

For example, the mere fact that a principal manufacturer has allowed production of goods bearing his brand name byanother person under License Production Agreement`, does not make the agreement a Franchise Agreement. Afranchise agreement also includes the franchisee being obliged to follow the concept of business operation, managerialexpertise, market techniques etc. of the franchisor and is under an obligation not to engage in selling, producing orproviding similar goods or services, identified with any other person. Therefore, in the absence of such ingredients, a merelicensed production cannot be called as a franchise agreement and accordingly the license fees paid for such licenseproduction cannot be charged to service tax.2.5 TECHNICAL INSPECTION AND CERTIFICATION SERVICES:A doubt has been raised whether certification given in respect of immovable property should fall under the purview oftechnical inspection and certification services`. In this regard it may be recalled that earlier, CBEC vide its order No.1/1/2002, dated 26.02.2003, issued under Section 37B (of the Central excise Act as made applicable to service tax) hadclarified that certification given under authority of any code or statute can not be considered as a consulting engineerservice. However, the new service included in 2003 budget, namely technical inspection and certification services` wouldcover certification of all types including that of immovable property. Therefore, it is clarified that such services becometaxable from the notified date.

2.6 COMMISSIONING AND INSTALLATION SERVICES:Certain doubts have been raised in case of commercial coaching and training . In this regard, the following is clarified,-

In case of commissioning and installation it has been pointed out that in case of turnkey project, the contract may beindivisible and no separate value could be assigned to commissioning or installation of goods. Doubts have also beenraised as to what would be the value of taxable service. It is submitted that it has been provided in law that service tax isleviable on erection and commissioning charges only and not on the material and goods supplied. However, it is upto theservice provider to show the break-up of commissioning or installation charges. In case service provider showsconsolidated charges, service tax would be leviable on such consolidated amount. A doubt has been raised as to whether charges for erection of plant are covered under the service tax or onlycommissioning and installation charges. It is clarified that the law specifically provides for taxation of commissioning andinstallation of plant, machinery or equipment. Thus all activities other than the commissioning and installation of theplant/machinery/equipment per se, will not be chargeable to service tax.2.7 MANDAP KEEPER SERVICE:

Religious places like parish hall, temples etc provide services as mandap keeper for hosting of social and religiousfunctions. Though such services are liable to service tax under the mandap keeper services, vide notification No.14/2003-Service Tax, 20th June, 2003services provided by the religious centers as mandap keeper in their precincts have beenexempted from service tax.2.8 CREDIT OF SERVICE TAX PAID ON TELEPHONES:In regard to credit of service tax on telephone connection, queries have been raised as to whether service tax credit wouldbe admissible on telephone sets installed only in the business premises. The answer is in the affirmative, and credit will beallowed only on telephone sets installed in the business premises. Mobile phones are not covered.2.9 MISCELLANEOUS ISSUES:2.9.1 In case of authorized service stations, maintenance or repair services, commissioning and installation services andphotography services it has been provided in the law that the cost of goods and material shall not form part of the value tobe subjected to service tax, if evidence (like sale invoice/bill) shows that these goods were sold. Such dispensation has,however, not been provided for other services like commercial coaching and training centers, telecom services. In this

regard, a general exemption under Notification No. 12/2003-service Tax, dated 20th

June, 2003 has been issuedexempting that part of the value of all taxable services from service tax, which represents the cost of goods or materialsold by the service provider to the receiver of such services during the course of provision of the taxable services. Thisexemption would be available only in cases where the sale of such goods is evidenced and the sale value is quantifiedand shown separately in the invoice. It is also clarified that in case of commercial training and coaching institutes, theexclusion shall apply only to the sale value of standard textbooks, which are priced. Any study material or written textprovided by such institute as a part of service which does not satisfy the above criteria will be subjected to service tax.2.9.2 In case of a non-resident service provider who does not have any office in India, the service receiver in India is liableto pay service tax. A doubt has been raised as to how such receiver would avail the service tax credit. As per the existinglaw, in such cases service receiver is required to take registration, to pay service tax and to comply with other proceduralformalities. As there is no bar under service tax law on the service tax payer to take the same amount back as credit, theservice receiver after having paid the service tax on behalf of the non-resident service provider, can take credit of thesame on the basis of document/ bill/invoice under which he paid the service tax.

2.9.3 Though the new rate of service tax of 8% came into force from 14 th May, 2003 on existing 51 services, and wouldcome into effect from 1st July, 2003 in case of new services and extensions of services, in certain cases service providershave reportedly collected service tax @ 8% on such services, even prior to these specified dates. In such cases, unlessthe amount is refunded back to service receiver, the service provider is required to deposit amount equal to such dutycollected in excess of that is leviable, as per the provisions of the service tax law.3. The contents of this circular may be given wide publicity so that no difficulty is faced by the trade as well as thedepartmental officers in their observance and implementation. Apart from issuance of trade notice, wide publicity in the


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form of press releases and advertisement may also be given. Meetings/Seminars/ Consultations with the trade may beconducted to clarify the new provisions and clarifications relating thereto. Any difficulty faced by the trade in observance,by the officers in implementation or other issues pertaining to the new levies may be brought to the notice of theundersigned. However, references for clarifications pertaining to existing services may be made to Member (Service Tax)or to CX-4 Section.

TAXABLE SERVICES

Name of service1. Advertising services

2. Air Travel Agent Services3. Architect Services4. Authorised service station5. Banking and Other Financial Services6. Beauty Parlour Services7. Broadcasting Service8. Business Auxiliary Services, namely Business Promotion and Support Services including CustomerCare Services (Excluding any information Technology Services)9. Cable Operator Services10. Cargo Handling Services11. Certification Service12. Chartered Accountant Services13. Clearing & Forwarding Agent services

14. Commercial Vocational Institutes, coaching centres and private Tutorials15. Commissioning and Installation Services16. Company Secretary Services17. Consultant Engineer services18. Convention Service19. Cost Accountant Services20. Couriers services21. Credit Rating Agency Services22. Custom House Agent services23. Dry Cleaning Services24. Event Management Services25. Fascimile Service26. Fashion Designing Services

27. Franchisee Services28. General Insurance Services29. Health Clubs and Fitness Centers Services30. Insurance Auxiliary Services31. Interior Decorators/Designers Services32. Internet Cafe33. Leased Circuits Service34. Life Insurance Service including Insurance auxiliary Services relating to Life Insurance35. Maintenance and Repair Services36. Man Power Recruitment services37. Management Consultant Services38. Mandap Keeper Services39. Market Research Agency Services

40. Online Information and Database access and / or Retrieval Service41. Photography Service42. Port Services43. Radio Paging Services44. Rail Travel Agent services45. Real Estate Agents46. Rent-a-Cab Scheme Operator Services47. Scientific & Technical Consultancy Service48. Security / Detective Agency Services49. Sound Recording Service50. Steamer Agent Services51. Stock Broker Services52. Storage and Warehousing Services53. Telegraph Service54. Telephone Services55. Telex Service56. Tour Operator services57. Under Writing Services58. Video Tape Production Service


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Circular No. 59/8/200320th June, 2003

F. No. B3/7/2003-TRUGovernment of IndiaMinistry of Finance

Department of RevenueTax Research Unit

Subject:Imposition of Service Tax on new services consequent to enactment of Finance Bill, 2003-reg.1.APPOINTMENT OF EFFECTIVE DATE FOR THE NEW SERVICESIt may be recalled that the Finance Act, 2003 has made provisions to levy service tax, from a date to be notified later on,on the following new services,-

o Commercial training & coaching centero Technical testing & analysis; technical inspection and certificationo Maintenance and repair serviceo Commissioning and installationo Business auxiliary serviceso Internet cafo Franchise service

Further, it was also provided in the Finance Act to extend the scope of services already covered under the tax net in caseof,-

o port services (which were earlier limited to major ports) to cover all ports under the service tax net;o authorised automobile service was brought under the tax net with effect from 16.7.2001. However,

it was restricted only to motorcars and two wheeled motor vehicles. Buses, trucks, maxi cabs etc were not

covered. Provision have been made to widen the scope of authorized automobile service to cover all suchvehicles;o foreign exchange broking service provided by any body corporate or non-banking financial

company was covered under the tax net in the category of banking and other financial service with effectfrom 16.7.2001. Provisions have been made to extend the scope of the tax to include the service providedby all foreign exchange brokers (including moneychangers and forex dealers).

As per the provisions of the Finance Act, the above levies or extensions of levies are to come into effect from a date to beappointed by the Central government. In this regard, vide notification No.7/2003-Service Tax, date 20th June 2003,the government has appointed 1st July, 2003, as the date from which the levy of Service tax on the above serviceswould come into effect.2. EXEMPTIONS AND CLARIFICATIONS2.1 BUSINESS AUXILIARY SERVICE:2.1.1 Call centers and medical transcription centers:Business auxiliary services provided by call centers (i.e. commercial concern which provides assistance, help orinformation, through telephone, on behalf of another person) and medical transcription centers (i.e. commercial concernwhich transcribes medical history, treatment, medical observations and the like) have been fully exempted from levy ofservice tax w.e.f. 1st July, 2003, vide notification No. 8/2003-Service Tax, dated 20th June, 2003.2.1.2 Commission agent:As per the definition of business auxiliary services, services as commission agent are considered business auxiliaryservices. However services of commission agents have been exempted from service tax w.e.f. 1st July, 2003 videnotification No.13/2003-Service Tax dated 20th June 2003. Commission agent has been defined in the notification, as aperson who causes sale or purchase of goods, on behalf of another person for a consideration, which is based on thequantum of such sale or purchase. It may be noticed that the exemption under this notification is for a commission agentwhile the services of a consignment agent remain taxable under the category of Clearing and Forwarding services. It maybe appreciated that the nature of service provided by a Consignment agent is different than that provided by a commissionagent. A consignment agents job is to receive the goods from the principal and dispatch them on the directions of theprincipal, whereas a commission agents job is to cause sale/purchase on behalf of another person. Thus, the essentialdifference is that a commission agent sells or purchases on behalf of the principal while consignment agent receives anddispatches the goods on behalf of a principal. It is possible that a person may be a consignment agent as well as acommission agent. Such a person would already be covered in the category of Clearing and Forwarding agent and wouldbe liable to pay service tax in that category. In other words, the present exemption is available only to such commissionagent who is not a consignment agent.2.1.3 Certain doubts have been raised in case of business auxiliary services. In this regard the following is clarified,-

While it is not possible to give an exhaustive list of business auxiliary services, the following are illustrations ofservices that are covered under this category viz. evaluation of prospective customers, processing of purchase orders,customer management, information and tracking of delivery schedules, accounting and processing of transactions,operational assistance for marketing, formulation of customer service and pricing policies, managing distribution &logistics. The services provided in relation to getting a customer, verification of prospective customer, processing of

purchase order etc would also be covered under service tax, as the law specifically provides for inclusion of such servicesas business auxiliary support services. As regards the question whether insurance agents, C&F agents working on commission basis fall under the definitionof business auxiliary service, it is clarified that they do not, as they are specifically covered within the definition of otherspecified taxable services, namely the Insurance service and C&F Service respectively. Under Section 65A of Finance Act1994, it has also been provided that in case of overlap, a service

20 20 What is Service Tax

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