Complete Service Tax

8/11/2019 Complete Service Tax

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SERVICE TAX(As amended by the Finance Act, 2012)


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2

APPLICABILITY/NON-APPLICABILITY OF NEGATIVE LIST AND RELATED TOPICS IN

SYLLABUS OF PART II: SERVICE TAX AND VAT OF PAPER 4: TAXATION (IPCC) FROM MAY

2013 EXAMINATION ONARDS

The Examination Committee at its 498th meeting held on September 23, 2012 has decided that the folloing

sections of the !inance "ct, 1994#r$les ill be co%ered $nder point no& 1 'Concepts and (eneral principles)and point no& 2 'Charge of ser%ice tax and taxable ser%ices) of s*llab$s of +art - Ser%ice tax . /"T in+aper 4- Taxation from a* 2013 examination onards-

'i) Section 4 Extent, commencement and application

'ii) Sections 5 nterpretations 6onl* rele%ant ones hich o$ld be re7$ired to explain the conceptsincl$ded

'iii) Section 5 Charge of ser%ice tax on and after !inance "ct, 2012

'i%) Section :egati%e list of ser%ices

'%) Section ! 5 +rinciples of interpretation of specified descriptions of ser%ices or b$ndled ser%ices&'%i) Section ;" ate of determination of rate of tax, %al$e of taxable ser%ice and rate of exchange

'%ii) +oint of Taxation


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3

INDEX

1 BASIC CONCEPTS OF SERVICE TAX 4-10

2 EXTENT. COMMENCEMENT AND APPLICATION SECTION /4 11-11

3 DEFINITION OF SERVICE SECTION /0B(44) 12-21

4 NEGATIVE LIST OF SERVICES SECTION //D 22-40

BUNDLED SERVICES SECTION //F 41-43

SMALL SERVICE PROVIDER EXEMPTION 43-43

POINT OF TAXATION 2-

VALUATION OF TAXABLE SERVICE -

PAYMENT OF SERVICE TAX -10

10 FILING OF RETURNS 110-11


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BASIC CONCEPTS OF SERVICE TAX

I+*'"6*"+

n an* ?elfare State, it is the prime responsibilit* of the (o%ernment to f$lfill the increasing de%elopmentalneeds of the co$ntr* and its people b* a* of p$blic expendit$re& ndia, being a de%eloping econom*, has

been stri%ing to f$lfill the obligations of a ?elfare State ith its limited reso$rces& The (o%ernment@sprimar* so$rces of re%en$e are direct and indirect taxes& Central excise d$t* on the goodsman$fact$red#prod$ced in ndia and c$stoms d$ties on imported goods constit$te the to maAor so$rces ofindirect taxes in ndia& >oe%er, re%en$e receipts from c$stoms . excise ha%e been declining d$e to ?orldTrade Commitments and rationali=ation of commodit* d$ties&

Bn the other hand, ser%ice sector has been groing phenomenall* all o%er the orld, tho$gh it ma* %ar* indegree and magnit$de among the %ario$s co$ntries& The groing importance of this sector can be ga$gedfrom the e%er increasing contrib$tion made b* the ser%ice sector to (+, thereb* p$shing bac thecontrib$tion of traditional contrib$tors lie agric$lt$re and man$fact$ring sectors& ndia is also not anexception to this changed phenomenon& n 2002, the ser%ice sector acco$nted for 49&2D of (+ hile

agric$lt$re acco$nted for 2D and ind$str* 2&8D of (+& Contin$ed groth in (+ accompanied b*higher rate of groth in ser%ice sector promises ne and ider a%en$es of taxation to the (o%ernment&

n the present da* context, ser%ices are so idespread and encompass almost all acti%ities liemanagement, baning, ins$rance, hospitalit*, administration, comm$nication, entertainment, tra%el,holesale distrib$tion, retailing, research and de%elopment acti%ities, other professional ser%ices, etc&Ser%ice sector is no occ$p*ing the center stage of the econom* so m$ch so that in the contemporar* orld,de%elopment of ser%ice sector has become s*non*mo$s ith the ad%ancement of the econom*& Economists

belie%e that ith the phenomenal de%elopment of the ser%ice sector, the excl$sion of the ser%ice sectorfrom indirect taxation leads not onl* to the loss of considerable potential re%en$e, b$t also creates distortionin the allocation of reso$rces& The distortion arises beca$se the cons$mer starts maing the choice beteenthe cons$mption of goods and ser%ices&

>ence, the (o%ernment@s arg$ment as that s$bstantial re%en$e sho$ld come from the ser%ice sector and thetax on goods 'excise d$t*) sho$ld be complemented ith the tax on ser%ices& The tax on ser%ices red$ces thedegree of intensit* of taxation on man$fact$ring and trade itho$t forcing the (o%ernment to compromiseon the re%en$e needs, it ill enable better pricing of its prod$cts b* the man$fact$ring sector in the globalmaret&?ith these obAecti%es in mind, ser%ice tax as introd$ced in ndia in 1994 and toda* it is en%isaged as thetax of the f$t$re&

G$+$55 "8 5$'#6$ *9 + I+

The imposition of ser%ice tax as in se7$el to the


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C"+5***"+; A*


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" conse7$ential amendment to "rticle 2;0 of the Constit$tion as also made to enable +arliament toform$late b* la, principles for determining the modalities of le%*ing the ser%ice tax b* the Central(o%ernment and collection of the proceeds thereof b* the Central (o%ernment and the State (o%ernment&

?ith this amendment in the Constit$tion, the Central (o%ernment has become competent to enact a separatelegislation on ser%ice tax&

:ote- "ltho$gh +arliament has passed the Constit$tional amendment maing entr* 92C to nion Hist, thispro%ision has not *et been made effecti%e b* the +arliament& Conse7$entl*, ser%ice tax is presentl* collected$nder the poers of Entr* 9; onl*&

S$'#6$ T9 L>

Ser%ice tax as introd$ced in the *ear 1994 b$t till date, there is no independent stat$te for le%*ing ser%icetax& >oe%er, folloing so$rces pro%ide stat$tor* pro%isions relating to ser%ice tax and can be broadl*gro$ped $nder the folloing categories-

() F++6$ A6*. 14: The stat$tor* pro%isions relating to le%* of ser%ice tax on ser%ices ere firstprom$lgated thro$gh Chapter / of the !inance "ct, 1994& Since then, Chapter / of the !inance "ct, 1994 isoring as the "ct for the ser%ice tax le%*& Hater, in the *ear 2003, the !inance "ct 2003 inserted Chapter/" to deal ith ad%ance r$lings& n the *ear 2004, the pro%isions relating to le%* of @ed$cation cess@ on theamo$nt of ser%ice tax ere made applicable thro$gh Chapter / of the !inance ':o&2) "ct, 2004&

(&) R;$5 "+ 5$'#6$ *9:Section 94 of Chapter / and section 9 1 of Chapter /" of the !inance "ct,1994 grants poer to the Central (o%ernment for maing r$les for effecti%e carr*ing o$t the pro%isions ofthese Chapters& sing these poers, the Central (o%ernment has iss$ed Ser%ices Tax


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orders ha%e been iss$ed b* the CEC, from time to time, to define A$risdiction of Central Excise Bfficers forthe p$rposes of ser%ice tax&

(8) T'$ N"*6$5 "+ 5$'#6$ *9- Trade :otices are iss$ed b* the Central Excise#Ser%ice TaxCommissionerates& These Commissionerates recei%e %ario$s instr$ctions from the inistr* of !inance orCentral oard of Excise . C$stoms for effecti%e implementation and administration of the %ario$s

pro%isions of ser%ice tax la& The same are circ$lated among the field officers and the instr$ctions hichpertain to trade are comm$nicated to them in the form of trade notices& Trade "ssociations are s$pplied iththe copies of these trade notices&

ndi%id$al assesses ma* also appl* for copies of trade notices& The trade notice disseminate the contents ofthe notifications and circ$lars#letters#orders, define their A$risdictionK identif* the bans in hich ser%ice taxcan be depositedK gi%e clarifications regarding ser%ice tax matters, etc&

The %ario$s components maing ser%ice tax la ha%e been represented in the folloing diagram-

SOURCES OF SERVICE TAX LA

S$;$6*#$ #5 6"%7'$


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There as also a near $nanimit* across a ide section of thiners that potential of ser%ice tax remained h$geand largel* $ntapped& +art of the problem identified as the lac of comprehensi%e taxation of ser%ices, notso m$ch in the lac of co%erage b$t more on acco$nt of lac of clarit* and significant gaps in existingdefinitions, exposing the tax collection process to a%oidable leaages and litigation&

$dget 2012 has $shered a ne s*stem of taxation of ser%icesK pop$larl* non as :egati%e Hist& The nechanges are a paradigm shift from the existing s*stem here onl* ser%ices of specified descriptions ares$bAected to tax& n the ne s*stem all ser%ices, except those specified in the negati%e list, ill be s$bAect totaxation&

A%+5*'*"+ "8 5$'#6$ *9

The epartment of


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The administrati%e machiner* of the ser%ice tax la can be $nderstood ith the help of the folloingdiagram-

ADMINISTRATION OF SERVICE TAX

MINISTRY OF FINANCE (1)

DEPARTMENT OF REVENUE (2)

CENTRAL BOARD OF EXCISE AND CUSTOMS (3)

CENTRAL EXCISE ZONES HEADED BY CHIEF COMMISSIONERS (4)

CENTRAL EXCISE COMMISIONERATES HEADED BY COMMISSIONERS (5)

SERVICE TAX COMMISSIONERATE (6)

ADDITIONAL COMMISSIONER ()

!OINT COMMISSIONER (")

ASSISTANT COMMISSIONER#DEPUTY COMMISSIONER ($)

SUPERINTENDENT (1%)

INSPECTOR (11)

R";$ "8 C


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here there is management b* exception i&e& generall* accept all the ret$rns as correct and pic and choosethose ret$rns hich need detailed scr$tin*& n this mechanism a chartered acco$ntant co$ld be of greatassistance& Ser%ice tax ret$rns and financial statements co$ld be certified b* the chartered acco$ntant fromthe perspecti%e of ser%ice tax similar to an a$dit $nder section 44" of the ncometax "ct&

($) O+$'"5 *5@ *" @$$7 76$ : The ser%ice tax lie excise is administered more b* a* of trade noticesiss$ed b* %ario$s Commissionerates& " chartered acco$ntant ill ha%e to eep himself abreast of the latestnotifications and trade notices in addition to the changes in la so as to meet the client expectations& Th$s,in order to render good %al$e added ser%ices in the area of ser%ice tax a chartered acco$ntant has an onero$stas to eep pace ith the latest in the legal front&


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E9*$+*. C"%%$+6$%$+* + A77;6*"+ !S$6*"+ 4,

I E9*$+* 6"%%$+6$%$+*: The !inance "ct, 1994 came into force from 1&;&1994& /ide section 4'1), thepro%isions of the "ct extends to the hole of the co$ntr* except the State of Gamm$ and Mashmir, and %idesection 4'3), the le%* applies to all *9&;$ 5$'#6$5 7'"#$&

P'"#5"+5 "8 *


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D$8+*"+ "8 S$'#6$ !S$6*"+ B(44),

Earlier, $nder the selecti%e approach of taxation of ser%ices, the ord Iser%iceJ as nohere defined in the!inance "ct, 1994& n the negati%e list approach of taxation of ser%ices, the definition of ser%ice gains

paramo$nt importance& n order to determine hether a person is liable to pa* ser%ice tax, the first 7$estionhe needs to anser is hether the acti%it* $ndertaen b* him comes ithin the ambit of definition ofIser%iceJ& Conse7$entl*, section '44) defines the ord Iser%iceJ& !or ease of $nderstanding, thedefinition of ser%ice tax ma* be di%ided into three sections-

I M$++? "8 5$'#6$

Ser%ice means'i) an* acti%it* for consideration'ii) carried o$t b* a person for another and'iii) incl$des a declared ser%ice&

II E96;5"+5

>oe%er, a ser%ice 5


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'b) an establishment of a person in the taxable territor* and an* of his other establishment in a nontaxableterritor* shall be treated as establishments of distinct persons&

E97;+*"+ 4

" person carr*ing on a b$siness thro$gh a branch or agenc* or representational office in an* territor* shallbe treated as ha%ing an establishment in that territor*&Each of these sections has been disc$ssed #anal*sed in detail as follos-() M$++? "8 5$'#6$

Ser%ice means

I ANY ACTIVITY FOR CONSIDERATION

()


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'b) Sagar agrees not to open dr* clean shop in :areshPs neighborhood, and in ret$rn, :aresh agrees not toopen photograph* shop in SagarPs neighborhood&'c) +$shar agrees to design haratPs ho$se, and in ret$rn, harat agrees not to obAect to constr$ction of+$sharPs ho$se in his neighborhood&'d) "ash agrees to constr$ct 3 flats for hola on land oned b* hola, and in ret$rn, hola agrees to

pro%ide one flat to "ash itho$t an* monetar* consideration&

(6) A6*#*= 8"' 6"+5$'*"+

() I%7;6*"+5 "8 *


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To$rism information free of charge

"ccess to free T/ channels

"n artist performing on a street here passersb* ma* drop some coins in his bol ept either after

feeling reAoiced or o$t of compassion

Harge n$mber of go%ernmental acti%ities for citi=ens

() C"+5$'*"+ >*+? 7=%$+*5 6"+5***$ 6"+5$'*"+ 8"' 7'"#5"+ "8 5$'#6$H

S N" N*'$ "8 7=%$+*


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colorable de%ice herein the interest on thedeposit s$bstit$tes for the consideration forser%ice pro%ided or the interest earned has a

perceptible impact on the consideration chargedfor ser%ice then s$ch interest o$ld form part ofgross amo$nt recei%ed for the ser%ice& "lsosec$rit* deposit sho$ld not be in lie$ of ad%ance

pa*ment for the ser%ice&

;& Sec$rit* deposits forfeited for damages doneb* ser%ice recei%er in the co$rse of recei%inga ser%ice&

f the forfeited deposits relate to accidentaldamages d$e to $nforeseen actions not relatable to

pro%ision of ser%ice then s$ch forfeited depositso$ld not be a consideration in terms ofcla$se '%i) of s$br$le '2) of r$le of the/al$ation ence, ser%ices pro%ided b* a person to self are o$tside the ambit of taxableser%ice& !or instance, a ser%ice pro%ided b* one branch of a compan* to another or to its head office or %ice%ersa are not ser%ices pro%ided b* one person to another&

P$'5"+ incl$des,N'i) an indi%id$al,'ii) a >ind$ $ndi%ided famil*,'iii) a compan*,'i%) a societ*,'%) a limited liabilit* partnership,'%i) a firm,'%ii) an association of persons or bod* of indi%id$als, hether incorporated or not,'%iii) (o%ernment,'ix) a local a$thorit*, or'x) e%er* artificial A$ridical person, not falling ithin an* of the preceding s$bcla$ses!S$6*"+ B(3),&

E96$7*"+5

G$+$'; ';$ - Bnl* ser%ices pro%ided b* a person to another are taxable& Explanation 3car%es o$t toexceptions to the general r$le-

an establishment of a person located in taxable territor* and another establishment of s$ch person

located in nontaxable territor* are treated as establishments of distinct persons&

an $nincorporated association or bod* of persons and members thereof are also treated as distinct

persons&

>ence, s$ch persons shall be deemed to be separate persons and th$s, ser%ices pro%ided b* these personso$ld be taxable&


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!or example, ser%ices pro%ided b* a cl$b to its members and ser%ices pro%ided b* the branch office of am$ltinational compan* to the head7$arters of the m$ltinational compan* located o$tside ndia o$ld betaxable pro%ided other conditions relating to taxabilit* of ser%ice are satisfied&

III SERVICE INCLUDES DECLARED SERVICE

eclared ser%ice means an* acti%it* carried o$t b* a person for another person for consideration anddeclared as s$ch $nder section E !S$6*"+ B(22),& The pro%isions relating to declared ser%ice ha%e beenexplained in detail in +aper 8- ndirect Tax Has at the !inal le%el&

() E96;5"+5

E96;5"+5 8'"% $8+*"+ "8 5$'#6$

mmo%able propert* o%able propert* " ctionable claims ( oods

E mplo*ee

() C;5$ ()() "8 $96;5"+5

A6*#*= *" &$ *9&;$ 5*


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transfer of the right to $se an* goods for an* p$rpose 'hether or not for a specified period) for cash,

deferred pa*ment or other %al$able consideration

s$ppl* of goods b* an* $nincorporated association or bod* of persons to a member thereof for cash,

deferred pa*ment or other %al$able consideration

s$ppl*, b* a* of or as part of an* ser%ice or in an* other manner hatsoe%er, of goods, being food

or an* other article for h$man cons$mption or an* drin 'hether or not intoxicating), here s$chs$ppl* or ser%ice, is for cash, deferred pa*ment or other %al$able consideration&

(6) C;5$ ()() "8 $96;5"+5

T'+56*"+5 "+;= + %"+$= "' 6*"+&;$ 6;%5 " +"* 6"+5***$ 5$'#6$

Cla$se 'a)'iii) of excl$sions has to be read in conA$nction ith Explanation 2&Explanation 2 clarifies that for the p$rposes of this cla$se, transaction in mone* shall not incl$de an*acti%it* relating to the $se of mone* or its con%ersion b* cash or b* an* other mode, from one form,c$rrenc* or denomination, to another form, c$rrenc* or denomination for hich a separate consideration ischarged&

The implications of this explanation are that hile mere transactions in mone* are o$tside the ambit ofser%ice, an* acti%it* related to a transaction in mone* b* a* of its $se or con%ersion b* cash or b* an*other mode, from one form, c$rrenc* or denomination to another form, c$rrenc* or denomination o$ld not

be treated as a transaction in mone* if a separate consideration is charged for s$ch an acti%it*& ?hile thetransaction in mone*, perse, o$ld be o$tside the ambit of ser%ice the related acti%it*, for hich a separateconsideration is charged, o$ld not be treated as a transaction of mone* and o$ld be chargeable to ser%icetax if other elements of taxabilit* are present&

!or example, a foreign exchange dealer hile exchanging one c$rrenc* for another also charges acommission 'often inb$ilt in the difference beteen the p$rchase price and selling price of forex)& Theacti%it* of exchange of c$rrenc*, perse, o$ld be a transaction onl* in mone*, the related acti%it* of

pro%iding the ser%ices of con%ersion of forex, doc$mentation and other ser%ices for hich a commission ischarged separatel* or b$ilt in the margins o$ld be %er* m$ch a Oser%iceP&

oe%er, for a draftor a pa* order made b* ban the ser%ice pro%idedo$ld be onl* to the extent of commissioncharged for the ban draft or pa* order&The mone* recei%ed for the face %al$e of s$ch

instr$ment o$ld not be consideration for aser%ice since to the extent of face %al$e of theinstr$ment it is onl* a transaction in mone*&

3& "n in%estment n%estment of f$nds b* a person ith another for


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hich the ret$rn on s$ch in%estment is ret$rned orrepatriated to the in%estors itho$t retaining an*

portion of the ret$rn on s$ch in%estment of f$ndsis a transaction onl* in mone*& Th$s a partner

being admitted in a partnership against his shareill be a transaction in mone*& >oe%er, if acommission is charged or a portion of the ret$rn isretained as ser%ice charges, then s$ch commissionor portion of ret$rn is o$t of the p$r%ie oftransaction onl* in mone* and hence taxable&"lso, if a ser%ice is recei%ed in lie$ of anin%estment it o$ld cease to be a transaction onl*in mone* to the extent the in%estment representsthe consideration for the ser%ice recei%ed&

4& ebt collection ser%ices or credit controlser%ices

:o& S$ch ser%ices pro%ided for consideration aretaxable&

& Sale, p$rchase, ac7$isition or assignment of asec$red debt lie a mortgage Res& >oe%er, if a ser%ice fee or processing fee oran* other charge is collected in the co$rse oftransfer or assignment of a debt then the sameo$ld be chargeable to ser%ice tax&

M"+$= means legal tender, che7$e, promissor* note, bill of exchange, letter of credit, draft, pa* order,tra%eller che7$e, mone* order, postal or electronic remittance or an* s$ch similar instr$ment b$t shall notincl$de an* c$rrenc* that is held for its n$mismatic %al$e !S$6*"+ B(33),

A6*"+&;$ 6;% means a claim to an* debt, other than a debt sec$red b* mortgage of immo%able propert*or b* h*pothecation or pledge of mo%able propert*, or to an* beneficial interest in mo%able propert* not in

the possession, either act$al or constr$cti%e, of the claimant, hich the ci%il co$rts recogni=e as affordinggro$nds for relief, hether s$ch debt or beneficial interest be existent, accr$ing, conditional or contingent!S$6*"+ B(1),

ll$strations of actionable claims are nsec$red debts


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3& n case the cas$al orers are emplo*ed b*a contractor, lie a b$ilding contractor orsec$rit* agenc* ser %ices, ho deplo*s themfor exec$tion of a contract or for pro%ision ofsec$rit* ser%ices to a client&

Res& Ser%ices pro%ided b* the orer to thecontractors are in the co$rse of emplo*ment&>oe%er, ser%ices pro%ided b* the contractor tohis client b* deplo*ing s$ch orers o$ld not bea ser%ice pro%ided b* the orers to the client inthe co$rse of emplo*ment& The considerationrecei%ed b* the contractor o$ld therefore betaxable if other conditions of taxabilit* are

present&

() E97;+*"+5

E97;+*"+ 1 clarifies that Oser%iceP does not co%er f$nctions or d$ties performed b* embers of+arliament, State Hegislat$res, +ancha*at, $nicipalities or an* other local a$thorit*, an* person ho holdsan* post in p$rs$ance of the pro%isions of the Constit$tion or an* person as a Chairperson or a ember or airector in a bod* established b* the Central or State (o%ernments or local a$thorit* and ho is not deemedas an emplo*ee&

E97;+*"+ 2 3 ha%e alread* been disc$ssed at the rele%ant places&

E97;+*"+ 4 explains that a branch or an agenc* of a person thro$gh hich the person carries o$t b$sinessis also an establishment of s$ch person&

C


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E6*"+ C$55 + S$6"+'= + ?


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N$?*#$ ;5* "8 5$'#6$5 !S$6*"+ D,

The charging sectionsection of the !inance "ct, 1994, inter alia, pro%ides that ser%ice tax shall bele%ied on all ser%ices, except the ser%ices specified in the negati%e list& "ccordingl*, section of the "cthas specified the list of ser%ices consisting of 1; heads of ser%ices hich is termed as @:egati%e Hist@& n acomprehensi%e tax regime, this @:egati%e Hist@ is of paramo$nt importance beca$se e%er* acti%it* notco%ered $nder this list is chargeable to ser%ice tax&

The negati%e list shall comprise of the folloing ser%ices, namel*-N

'a) ser%ices b* (o%ernment or a local a$thorit* excl$ding the folloing ser%ices to the extent the* are notco%ered elsehereN

'i) ser%ices b* the epartment of +osts b* a* of speed post, express parcel post, life ins$rance, andagenc* ser%ices pro%ided to a person other than (o%ernmentK

'ii) ser%ices in relation to an aircraft or a %essel, inside or o$tside the precincts of a port or an airportK

'iii) transport of goods or passengersK or

'i%) s$pport ser%ices, other than ser%ices co%ered $nder cla$ses 'i) to 'iii) abo%e, pro%ided to b$sinessentitiesK

'b) ser%ices b* the


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'g) selling of space or time slots for ad%ertisements other than ad%ertisements broadcast b* radio ortele%isionK

'h) ser%ice b* a* of access to a road or a bridge on pa*ment of toll chargesK

'i) betting, gambling or lotter*K

'A) admission to entertainment e%ents or access to am$sement facilitiesK

') transmission or distrib$tion of electricit* b* an electricit* transmission or distrib$tion $tilit*K

'l) ser%ices b* a* ofN

'i) preschool ed$cation and ed$cation $p to higher secondar* school or e7$i%alentK

'ii) ed$cation as a part of a c$rric$l$m for obtaining a 7$alification recognised b* an* la for the

time being in forceK

'iii) ed$cation as a part of an appro%ed %ocational ed$cation co$rseK

'm) ser%ices b* a* of renting of residential delling for $se as residenceK

'n) ser%ices b* a* ofN

'i) extending deposits, loans or ad%ances in so far as the consideration is represented b* a* ofinterest or disco$ntK

'ii) inter se sale or p$rchase of foreign c$rrenc* amongst bans or a$thorised dealers of foreignexchange or amongst bans and s$ch dealersK

'o) ser%ice of transportation of passengers, ith or itho$t accompanied belongings, b*N

'i) a stage carriageK

'ii) raila*s in a class other thanN

'") first classK or') an airconditioned coachK

'iii) metro, monorail or trama*K

'i%) inland atera*sK

'%) p$blic transport, other than predominantl* for to$rism p$rpose, in a %essel beteen places locatedin ndiaK and

'%i) metered cabs, radio taxis or a$to ricshasK

'p) ser%ices b* a* of transportation of goodsN

'i) b* road except the ser%ices ofN

'") a goods transportation agenc*K or


24/180

N$?*#$ L5* "8 S$'#6$5 24

') a co$rier agenc*K

'ii) b* an aircraft or a %essel from a place o$tside ndia $p to the c$stoms station of clearance inndiaK or

'iii) b* inland atera*sK

'7) f$neral, b$rial, crematori$m or mort$ar* ser%ices incl$ding transportation of the deceased&

ANALYSIS

"nal*sis of each of the entries of negati%e list in detail-

1 E+*'= (): S$'#6$5 &= G"#$'+%$+* "' L"6; A*oe%er, the folloing ser%ices, e%en if pro%ided b* the (o%ernment or local a$thorit*, are taxable-

'i) Ser%ices b* the epartment of +osts b* a* of speed post, express parcel post, life ins$rance, and agenc*ser%ices pro%ided to a person other than (o%ernmentK

'ii) Ser%ices in relation to an aircraft or a %essel, inside or o$tside the precincts of a port or an airportK

'iii) Transport of goods or passengersK or

'i%) S$pport ser%ices, other than ser%ices co%ered $nder cla$ses 'i) to 'iii) abo%e, pro%ided to b$sinessentities&


25/180

N$?*#$ L5* "8 S$'#6$5 2

R*"+;$ &$


26/180

N$?*#$ L5* "8 S$'#6$5 2

Express parcel post ser%ices 2,00,000

Comp$te the ser%ice tax liabilit* of Hahanp$r +ost Bffice for the 7$arter ending 31&03&2013&

:otes-1& +oint of taxation for all the aforesaid cases fall d$ring the 7$arter ending 31&03&2013&2& "ll the ser%ice charges stated abo%e are excl$si%e of ser%ice tax&3& Small Ser%ice +ro%idersP exemption need not be taen into acco$nt hile sol%ing the aforesaid 7$estion&

S";*"+:

Ser%ices pro%ided b* the (o%ernment or a local a$thorit* are not chargeable to ser%ice tax as the* areincl$ded in the negati%e list& >oe%er, folloing ser%ices pro%ided to a person other than (o%ernment, b*the epartment of +osts are excl$ded from the negati%e list-

'i) Speed post'ii) Express parcel post

'iii)


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N$?*#$ L5* "8 S$'#6$5 2

UU"erodrome means an* definite or limited gro$nd or ater area intended to be $sed, either holl* or inpart, for the landing or depart$re of aircraft, and incl$des all b$ildings, sheds, %essels, piers and otherstr$ct$res thereon or appertaining thereto&

3 "s per 5$6*"+ B(3), 7"'* co%ers to t*pes of ports-

() MJ"' 7"'*5 as defined $nder section 2'7) of the aAor +ort Tr$sts "ct, 193P"'* means an* maAor port to hich this "ct applies ithin s$ch limits as ma*, from time to time, be defined

b* the Central (o%ernment for the p$rposes of this "ct b* notification in the Bfficial (a=ette, and, $ntil anotification is so iss$ed, ithin s$ch limits as ma* ha%e been defined b* the Central (o%ernment $nder the

pro%isions of the ndian +orts "ct&

() O*eree are disc$ssing the complete taxabilit* of transport of passengers and goods& "s a res$lt of the combinedst$d* of the cla$se 'o), 'p) and this part of entr* 'a), the taxabilit* of transport of passengers and goods is$nder-

A T'+57"'* "8 755$+?$'5

Transport of passengers b* (o%ernment or local a$thorit* is generall* taxable& >oe%er, folloing ser%icesof transportation of passengers,'hether pro%ided b* (o%ernment or otherise) >*< "' >*


28/180

N$?*#$ L5* "8 S$'#6$5 2

(#) T'+57"'* "8 755$+?$'5 &= +;+ >*$'>=5

I+;+ >*$'>=5 means-

() N*"+; >*$'>=5 as defined in section 2'h) of the nland ?atera*s "$thorit* of ndia "ct, 198, or() O*= "+ += +;+ >*$' as defined in section 2'b) of the nland /essels "ct, 191;!S$6*"+ B(2),

"s per section 2'h) of the nland ?atera*s "$thorit* of ndia "ct, 198,

N*"+; >*$'>= means the inland atera* declared b* section 2 of the :ational ?atera* '"llahabad>aldia Stretch of the (angahagirathi>ooghl* oe%er, ser%ices pro%ided b* leis$re or charter %essels or a cr$ise ship, predominant p$rpose of hich isto$rism, o$ld not be co%ered in the negati%e list e%en if some of the passengers in s$ch %essels are notto$rists&

F"' +5*+6$, ser%ices b* a* of transportation of passengers on a %essel, from Molata to +ort lair'mainland 5 island) or +ort lair to oe%er, folloing ser%ices oftransportation of goods, 'hether pro%ided b* (o%ernment or otherise) '$ +"* *9&;$:-N

() S$'#6$5 &= >= "8 *'+57"'**"+ "8 ?""5 &= '" $96$7* *


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N$?*#$ L5* "8 S$'#6$5 2

(A) ?""5 *'+57"'**"+ ?$+6= "'

(B) 6"'$' ?$+6=

Transportation of goods b* road is not taxable& >oe%er, ser%ices of goods transportation agenc* andco$rier agenc* ser%ices are excl$ded from the negati%e list entr* relating to transportation of goods b* roadthereb* maing these to ser%ices taxable&

(A) G""5 *'+57"'**"+ ?$+6= 5$'#6$5

?hen the goods are transported b* road b* a goods transport agenc*, it is liable to tax&!$rther, the pro%isions relating to re%erse charge, i&e& ser%ice tax is liable to be paid b* the consigner orconsignee in specified cases, are applicable e%en after the introd$ction of negati%e list&

G""5 *'+57"'* ?$+6= means an* person ho pro%ides ser%ice in relation to transport of goods b* roadand iss$es consignment note, b* hate%er name called !S$6*"+ B(2),&

(B) C"'$' ?$+6=

Co$rier agenc* ser%ices are liable to ser%ice tax&

E97'$55 6'?" 5$'#6$: The nat$re of ser%ice pro%ided b* OExpress Cargo Ser%iceP falls ithin the scopeand definition of the co$rier agenc*& >ence, the said ser%ice is liable to ser%ice tax&

A+?: O"ngadiaP $ndertaes deli%er* of doc$ments, goods or articles recei%ed from a c$stomer toanother person for a consideration& Therefore, OangadiasP are co%ered ithin the definition of a Oco$rierP andser%ices pro%ided b* angadia are liable to ser%ice tax&

C"'$' ?$+6= means an* person engaged in the doortodoor transportation of time sensiti%e doc$ments,goods or articles $tilising the ser%ices of a person, either directl* or indirectl*, to carr* or accompan* s$ch

doc$ments, goods or articles !S$6*"+ B(20),&

() S$'#6$5 &= >= "8 *'+57"'**"+ "8 ?""5 &= + '6'8* "' #$55$; 8'"% 7;6$ "*5$ I+ 7

*" *


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N$?*#$ L5* "8 S$'#6$5 30

1 B5+$55 $+**= means an* person ordinaril* carr*ing o$t an* acti%it* relating to ind$str*, commerce oran* other b$siness or profession !S$6*"+ B(1),&

2 S77"'* 5$'#6$5 means infrastr$ct$ral, operational, administrati%e, logistic, mareting or an* others$pport of an* ind comprising f$nctions that entities carr* o$t in ordinar* co$rse of operations themsel%es,

b$t ma* obtain as ser%ices b* o$tso$rcing from others for an* reason hatsoe%er and shall incl$dead%ertisement and promotion, constr$ction or ors contract, renting of immo%able propert*, sec$rit*,testing and anal*sis !S$6*"+ B(4),&

2 E+*'= (&): S$'#6$5 7'"#$ &= R$5$'#$ B+@ "8 I+

"ll the ser%ices b* the


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N$?*#$ L5* "8 S$'#6$5 31

() P'"6$55$5 >'$oe%er an* ser%ice pro%ided b*s$ch bodies hich is not directl* related to agric$lt$re or agric$lt$ral prod$ce ill be liable to tax e&g&renting of shops or other propert*&

Ser%ice pro%ided b* commission agent for sale or p$rchase of agric$lt$ral prod$ce are also co%ered $nderthe negati%e list entr*&

E+*'= ($): T'+? "8 ?""5

The abo%e entr* refers to the acti%it* of trading of goods&

Th$s, the chec has to be tofold 5


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N$?*#$ L5* "8 S$'#6$5 32

'1) the acti%it* sho$ld be of trading and'2) trading, sho$ld be of goods&

") are not in the nat$reof trading of goods& These are a$xiliar* for trading of goods& n terms of the pro%ision of cla$se '1) ofsection ! 'disc$ssed later in this chapter in heading 13&) reference to a ser%ice does not incl$de referenceto a ser%ice $sed for pro%iding s$ch ser%ice& oreo%er the title in the goods ne%er passes on to s$ch agentsto come ithin the ambit of trading of goods&

(&) F"'>' 6"+*'6*5 + 6"%%"*$5

!orard contracts o$ld be co%ered $nder trading of goods as these are contracts hich in%ol%e transfer oftitle in goods on a f$t$re date at a predetermined price&

(6) C"%%"*= 8*'$5Commodit* f$t$res o$ld be co%ered $nder trading of goods& n commodit* f$t$res act$al deli%er* of goodsdoes not normall* tae place and the p$rchaser $nder a f$t$res contract normall* offset all obligations orcloses o$t b* selling an e7$al 7$antit* of goods of the same description $nder another contract for deli%er*on the same date& These are in the nat$re of deri%ati%es&

() A9;'= 5$'#6$5 '$;*+? *" 8*'$ 6"+*'6*5 "' 6"%%"*= 8*'$5

S$ch ser%ices pro%ided b* commodit* exchanges clearing ho$ses or agents o$ld not be co%ered in thenegati%e list entr* relating to trading of goods&

:ote- t is rele%ant to note here that in common parlance hene%er the term @trading@ is $sed, it is considered

as @trading in goods@& The term @trading of ser%ice@ seems to be little $ncommon to $se b$t these ind ofacti%ities commonl* taes place here a person proc$res ser%ices from one person and pro%ides to another,

practicall* s$ch transactions most of the times get recognised as commission agent@s ser%ices tho$gh ma*not be strictl* commission based&

G""5 means e%er* ind of mo%able propert* other than actionable claim and mone*K and incl$dessec$rities, groing crops, grass, and things attached to or forming part of the land hich are agreed to bese%ered before sale or $nder the contract of sale !S$6*"+ B(2),&

S$6'*$5 incl$de N'i) shares, scrips, stocs, bonds, debent$res, debent$re stoc or other maretable sec$rities of a lie nat$re in

or of an* incorporated compan* or other bod* corporateK'ia) deri%ati%eK'ib) nits or an* other instr$ment iss$ed b* an* collecti%e in%estment scheme to the in%estors in s$chschemesK'ii) (o%ernment sec$ritiesK'iia) s$ch other instr$ments as ma* be declared b* the central (o%ernment to be Sec$ritiesK and'iii) rights or interest in sec$rities !S$6*"+ B(43),&

E+*'= (8): P'"6$55$5 %"+*+? *" %+86*'$ "' 7'"6*"+ "8 ?""5

"n* process amo$nting to man$fact$re or prod$ction of goods shall not be taxable&

P"+*5 *" &$ +"*$

This entr* co%ers %+86*'+? 6*#*= 6''$ "* "+ 6"+*'6* "' J"& >"'@ &55 , hich does

not in%ol%e transfer of title in goods, 7'"#$ d$ties of excise are le%iable on s$ch processes $nderthe Central Excise "ct, 1944 or an* of the State "cts&


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N$?*#$ L5* "8 S$'#6$5 33

n other ords, if Central Excise d$t* is le%iable on a partic$lar process, as the same amo$nts to

man$fact$re, then s$ch process o$ld be co%ered in the negati%e list e%en if there is a central excised$t* exemption for s$ch process&

>oe%er if central excise d$t* is rongl* paid on a certain process hich does not amo$nt to

man$fact$re, ith or itho$t an intended benefit, it ill not sa%e the process on this gro$nd&

P'"6$55 %"+*+? *" %+86*'$ "' 7'"6*"+ "8 ?""5 means a process on hich d$ties of excise arele%iable $nder section 3 of the Central Excise "ct, 1944 or an* process amo$nting to man$fact$re ofalcoholic li7$ors for h$man cons$mption, opi$m, ndian hemp and other narcotic dr$gs and narcotics onhich d$ties of excise are le%iable $nder an* State "ct for the time being in force !S$6*"+ B(40),&

E+*'= (?): S$;;+? "8 576$ "' *%$ 5;"*5 8"' #$'*5$%$+*5 "**< $5?++? + 7'$7'*"+ "8

*


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N$?*#$ L5* "8 S$'#6$5 34

f s$ch ser%ices are not b$ndled in the ordinar* co$rse of b$siness then the b$ndle of ser%ices ill be treatedas consisting entirel* of s$ch ser%ice hich attracts the highest liabilit* of ser%ice tax&

3 C+#55+? #$'*5$%$+* 8"' 7&;5


35/180

N$?*#$ L5* "8 S$'#6$5 3

" standalone am$sement ride in a mall is also a facilit* in hich f$n or recreation is pro%ided b* means of aride& "ccess to s$ch am$sement ride on pa*ment of charges o$ld be co%ered in the negati%e list&

3 E+*'= *" #$" 7';"'5 $9


36/180

N$?*#$ L5* "8 S$'#6$5 3

2& P'#*$ **"+5 are :BT co%ered in this entr*& >ence, the* are liable to pa* ser%ice tax if their aggregate%al$es of taxable ser%ices exceed the threshold exemption&

3& B"'+? 56


37/180

N$?*#$ L5* "8 S$'#6$5 3

'iii) a co$rse r$n b* an instit$te affiliated to the :ational Sill e%elopment Corporation set $p b* the(o%ernment of ndia !S$6*"+ B(11),&

P"+*5 *" &$ +"*$

1 Ed$cational instit$tes s$ch as Ts, s charge a fee from prospecti%e emplo*ers lie corporate ho$ses#:Cs, ho come to the instit$tes for recr$iting candidates thro$gh camp$s inter%ies& Ser%ice tax is liableon ser%ices pro%ided b* s$ch instit$tions in relation to camp$s recr$itment as s$ch ser%ices are not co%eredin the negati%e list&

2 Ser%ices of cond$cting admission tests for admission to colleges are exempt in case the ed$cationalinstit$tions are pro%iding 7$alification recogni=ed b* la for the time being in force&

13 E+*'= (%): S$'#6$5 &= >= "8 '$+*+? "8 '$5$+*; >$;;+? 8"' 5$ 5 '$5$+6$

The abo%e entr* co%ers ser%ices

b* a* of renting of a residential delling

for $se as residence

1 R$+*+? means alloing, permitting or granting access, entr*, occ$pation, $se or an* s$ch facilit*, holl*or partl*, in an immo%able propert*, ith or itho$t the transfer of possession or control of the saidimmo%able propert* and incl$des letting, leasing, licensing or other similar arrangements in respect ofimmo%able propert* !S$6*"+ B(41),&

2 R$5$+*; >$;;+?: The phrase Oresidential dellingP has not been defined in the "ct& t has therefore tobe interpreted in terms of the normal trade parlance as per hich it is an* residential accommodation, b$tdoes not incl$de hotel, motel, inn, g$est ho$se, camp5site, lodge, ho$se boat, or lie places meant fortemporar* sta*&

R$+*+? "8 '$5$+*; >$;;+? >


38/180


39/180

N$?*#$ L5* "8 S$'#6$5 3

4& transactions are entered into b* bans ininstr$ments lie repos and re%erse reposU

the* are more appropriatel* excl$ded from thedefinition of ser%ice itself being the sale and

p$rchase of sec$rities, hich are goods&

& there is a s$bscription to or trading inCommercial +aper 'C+) or Certificates ofeposit 'C)UU

since these are instr$ments for lending or borroingmone* herein consideration is represented b* a*of a disco$nt, iss$e or s$bscription to C+s or Cs,the* o$ld be co%ered in the negati%e list entr*relating to Oser%ices b* a* of extending deposits,loans or ad%ances in so far as consideration isrepresented b* a* of interest or disco$ntP& t ma*also be borne in mind that promissor* note isincl$ded in the definition of mone* in the "ct asgi%en in cla$se '33) of section &

R$7"5 + '$#$'5$ '$7"5 are financial instr$ments of short term call mone* maret that are normall* $sedb* bans to borro from or lend mone* to


40/180

N$?*#$ L5* "8 S$'#6$5 40

Ed$cation cess 2D 6`4,92,0002D 9,840Secondar* and higher ed$cation cess 1D 6`4,92,0001D 4,920Ser%ice tax liabilit* ,0,;0

N"*$5:

1& !olloing ser%ices pro%ided in consideration of pa*ment of interest are incl$ded in the negati%e list andhence are not taxable-

B%erdraft facilit*&

Hoans ith a collateral sec$rit*&

Corporate deposits&

2& "dministrati%e charges or amo$nts collected o%er and abo%e the interest or disco$nt amo$nts o$ld notbe part of the negati%e list and th$s o$ld represent taxable consideration&

3& Sale of foreign exchange beteen bans or b* bans to a$thori=ed dealers of foreign exchange is incl$dedin the negati%e list& >oe%er, sale of foreign exchange to general p$blic is not so co%ered and hence taxable&

4& Since Cs are in the nat$re of promissor* notes, transactions in Cs shall be considered as transaction inmone*& >oe%er, a related acti%it*, for hich a separate consideration is charged o$ld not be treated as atransaction of mone* and o$ld be taxable& >ence, ser%ice charges relating to iss$ance of Cs shall bechargeable to ser%ice tax&

1 E+*'= (): F+$';. &';. 6'$%*"'% "' %"'*'= 5$'#6$5

!$neral, b$rial, crematori$m or mort$ar* ser%ices incl$ding transportation of the deceased are incl$ded in

this entr* and hence are not liable to ser%ice tax&


41/180

N$?*#$ L5* "8 S$'#6$5 41


42/180

B+;$ S$'#6$5 42

P'+67;$5 "8 +*$'7'$**"+ "8 57$68$ $56'7*"+5 "8 5$'#6$5 "' &+;$ 5$'#6$5 !S$6*"+ F,

nless otherise specified, reference to a ser%ice 'herein referred to as main ser%ice) shall not incl$dereference to a ser%ice hich is $sed for pro%iding main ser%ice !S&-5$6*"+ (1),&

?here a ser%ice is capable of differential treatment for an* p$rpose based on its description, the mostspecific description shall be preferred o%er a more general description !S&-5$6*"+ (2),&

S$bAect to the pro%isions of s$bsection '2), the taxabilit* of a b$ndled ser%ice shall be determined in thefolloing manner, namel* -N

'a) if %ario$s elements of s$ch ser%ice are nat$rall* b$ndled in the ordinar* co$rse of b$siness, it shall betreated as pro%ision of the single ser%ice hich gi%es s$ch b$ndle its essential characterK

'b) if %ario$s elements of s$ch ser%ice are not nat$rall* b$ndled in the ordinar* co$rse of b$siness, it shallbe treated as pro%ision of the single ser%ice hich res$lts in highest liabilit* of ser%ice tax !S&-5$6*"+ (3),&

ANALYSIS"ltho$gh the negati%e list approach largel* ob%iates the need for descriptions of ser%ices, s$ch descriptionscontin$e to exist in 5

:egati%e list of ser%ices&

eclared list of ser%ices&

Exemption notifications&

+lace of +ro%ision of Ser%ice


43/180

B+;$ S$'#6$5 43

I;;5*'*"+5

1& " hotel pro%ides a 4 da*s3 nights pacage ith the facilit* of breafast& This is a nat$ral b$ndling ofser%ices in the ordinar* co$rse of b$siness& The ser%ice of hotel accommodation gi%es the b$ndle theessential character and o$ld, therefore, be treated as ser%ice of pro%iding hotel accommodation&

2& " star hotel is booed for a conference of 100 delegates on a l$mp s$m pacage ith the folloingfacilities-

"ccommodation for the delegates

reafast for the delegates,

Tea and coffee d$ring conference

"ccess to fitness room for the delegates

"%ailabilit* of conference room

$siness centre

"s is e%ident a bo$7$et of ser%ices is being pro%ided, man* of them chargeable to different effecti%e rates oftax& :one of the indi%id$al constit$ents are able to pro%ide the essential character of the ser%ice& >oe%er, ifthe ser%ice is described as con%ention ser%ice it is able to capt$re the entire essence of the pacage& Th$s theser%ice ma* be A$dged as con%ention ser%ice and chargeable to f$ll rate&

>oe%er, it ill be f$ll* A$stifiable for the hotel to charge indi%id$all* for the ser%ices as long as there is noattempt to offload the %al$e of one ser%ice on to another ser%ice that is chargeable at a concessional rate&

() S$'#6$5 >


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B+;$ S$'#6$5 44

the ser%ices is the main ser%ice and the other ser%ices combined ith s$ch ser%ice are in the nat$re ofincidental or ancillar* ser%ices hich help in better enAo*ment of a main ser%ice& !or exampleser%ice of sta* in a hotel is often combined ith a ser%ice or la$ndering of 34 items of clothing freeof cost per da*& S$ch ser%ice is an ancillar* ser%ice to the pro%ision of hotel accommodation and theres$ltant pacage o$ld be treated as ser%ices nat$rall* b$ndled in the ordinar* co$rse of b$siness&

Bther ill$strati%e indicators, not determinati%e b$t indicati%e of b$ndling of ser%ices in ordinar*

co$rse of b$siness are 5

There is a single price or the c$stomer pa*s the same amo$nt, no matter ho m$ch of the

pacage the* act$all* recei%e or $se& The elements are normall* ad%ertised as a pacage&

The different elements are not a%ailable separatel*&

The different elements are integral to one o%erall s$ppl* 5 if one or more is remo%ed, the

nat$re of the s$ppl* o$ld be affected&

:o straight Aacet form$la can be laid don to determine hether a ser%ice is nat$rall* b$ndled in the

ordinar* co$rse of b$siness& Each case has to be indi%id$all* examined in the bacdrop of se%eral factorssome of hich are o$tlined abo%e&

B+;$ 5$'#6$ means a b$ndle of pro%ision of %ario$s ser%ices herein an element of pro%ision of oneser%ice is combined ith an element or elements of pro%ision of an* other ser%ice or ser%ices&

E9%7;$ "8 &+;$ 5$'#6$: "ir transport ser%ices pro%ided b* airlines herein an element oftransportation of passenger b* air is combined ith an element of pro%ision of catering ser%ice on board&Each ser%ice in%ol%es differential treatment as a manner of determination of %al$e of to ser%ices for the

p$rpose of charging ser%ice tax is different&

D*$ "8 $*$'%+*"+ "8 '*$ "8 *9. #;$ "8 *9&;$ 5$'#6$ + '*$ "8 $96oe%er, s$ch exemption is not a%ailable to thetaxable ser%ices pro%ided b* a person $nder a brand name or trade name, hether registered or not, ofanother person and to s$ch %al$e of taxable ser%ices in respect of hich ser%ice tax is pa*able on re%ersecharge mechanism b* a person 'disc$ssed in detail in +aper8 ndirect Tax Has at !inal He%el)&!N"*86*"+ N" 33/2012 Q ST *$ 2002012


45/180

B+;$ S$'#6$5 4


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4

PRACTICE MANUAL

$5*"+ 1

riefl* anser the folloing-

'a) Explain as to ho and hen the amendments made in !inance ill, in respect of ser%ice tax matterscome into forceQ

'b) s ser%ice tax pa*able in respect of ser%ices pro%ided in the ndian territorial atersQA+5>$'

'a) "mendments made b* the !inance ill, in respect of ser%ice tax matters, come into force from the date ofenactment of the !inance ill i&e&, the date on hich the !inance ill recei%es the assent of the +resident ofndia& >oe%er, here%er it is specificall* pro%ided so in the !inance ill, certain amendments becomeeffecti%e from a date to be notified after the enactment of the !inance ill&

'b) Res, ser%ices pro%ided ithin ndian territorial aters are liable to ser%ice tax, as the le%* of ser%ice taxextends to the hole of ndia except Gamm$ and Mashmir and ndia incl$des ndian territorial aters&ndian territorial aters extend $pto 12 na$tical miles from the ndian land mass&

$5*"+ 2

?hat are the so$rces of ser%ice tax laQA+5>$'

There is no independent stat$te on ser%ice tax as *et& >oe%er, the so$rces of ser%ice tax la are-

'i) !inance "ct, 1994'ii)


47/180

4

$5*"+ 4

State ith reasons in brief hether the folloing statement is correct or incorrect ith reference tothe pro%isions of ser%ice tax-

Ser%ice tax pro%isions are not applicable in Gamm$ and Mashmir beca$se State (o%ernment conc$rrenceas not obtained in respect of !inance "ct, 1994&A+5>$'

The statement is correct& "s per "rticle 3;0 of the Constit$tion, an* "ct of +arliament applies to Gamm$ andMashmir onl* ith the conc$rrence of the State (o%ernment& Since, no s$ch conc$rrence has been obtainedin respect of !inance "ct, 1994, ser%ice tax pro%isions are not applicable in Gamm$ and Mashmir&

$5*"+

riefl* explain abo$t the charge of ser%ice tax&A+5>$'

Section is the charging section of the "ct, hich pro%ides that there shall be le%ied a tax at the rate of12D on the %al$e of all ser%ices, other than those ser%ices specified in the negati%e list, pro%ided or agreed

to be pro%ided in the taxable territor* b* one person to another and collected in s$ch manner as ma* beprescribed& The effecti%e rate of ser%ice tax is 12DK pl$s ed$cation cess of 2D and secondar* and highered$cation cess of 1D&

$5*"+

efine the folloing terms in terms of !inance "ct, 1994

'i) "d%ertisement'ii) $siness Entit*'iii) (oods'i%) (oods Transport "genc*

'%) +rocess amo$nting to man$fact$re'%i) $'

Section has been inserted b* !inance "ct, 2012 ith effect from 01&0;&2012& Section has stat$tor*defined certain terms& Th$s, stat$tor* definitions of all the abo%e terms as per section are gi%en in thefolloing table-

S N" T$'% R$;$#+* D$8+*"+ R$;$#+*

S$6*"+

'i) "d%ertisement I"d%ertisementJ means an* form of presentation for promotion of, or bringing aareness abo$t an* e%ent,idea, immo%able propert*, person, ser%ice, goods oractionable claim thro$gh nespaper, tele%ision, radio oran* other means b$t does not incl$de an* presentationmade in person&

'2)

'ii) $siness Entit* I$siness Entit*J means an* person ordinaril* carr*ingo$t an* acti%it* relating to ind$str*, commerce or an*other b$siness or profession&

'1;)

'iii) (oods I(oodsJ means e%er* ind of mo%able propert* other than

actionable claim and mone*K and incl$des sec$rities,groing crops, grass and things attached to or forming

part of the land hich are agreed to be se%ered before saleor $nder the contract of sale&

'2)


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4

'i%) (oods Transport"genc*

I(oods Transport "genc*J means an* person hopro%ides ser%ice in relation to transport of goods b* roadand iss$e consignment note, b* hate%er name called&

'2)

'%) +rocessamo$nting to

man$fact$re

F+rocess amo$nting to man$fact$re or prod$ction ofgoodsF means a process on hich d$ties of excise are

le%iable $nder section 3 of the Central Excise "ct, 1944 '1of 1944) or an* process amo$nting to man$fact$re ofalcoholic li7$ors for h$man cons$mption, opi$m, ndianhemp and other narcotic dr$gs and narcotics on hichd$ties of excise are le%iable $nder an* State "ct for thetime being in force&

'40)

'%i) oe%er, since ser%ice tax is a destination based cons$mption tax, ser%ice pro%ided in


49/180

4

A+5>$'

"ccording to Section '34) of !inance "ct, 1994 Inegati%e listJ means the ser%ices hich ha%e beenlisted in section & !olloing Se%enteen ser%ices ha%e been listed in Section &

S N" D$56'7*"+

1& Ser%ices b* (o%ernment or a local a$thorit* excl$ding the folloing ser%ices to the extentthe* are not co%ered elsehereN

'i) ser%ices b* the epartment of +osts b* a* of speed post, express parcel post, lifeins$rance and agenc* ser%ices pro%ided to a person other than (o%ernmentK

'ii) ser%ices in relation to an aircraft or a %essel, inside or o$tside the precincts of a port or anairportK

'iii) transport of goods or passengersK or 'i%) s$pport ser%ices, other than ser%ices co%ered $nder cla$ses 'i) to 'iii) abo%e, pro%ided to

b$siness entitiesK2& ser%ices b* the


50/180

0

for the time being in forceK

'iii) ed$cation as a part of an appro%ed %ocational ed$cation co$rseK

13& ser%ices b* a* of renting of residential delling for $se as residenceK

14& ser%ices b* a* ofN 'i) extending deposits, loans or ad%ances in so far as the consideration is represented

b* a* of interest or disco$ntK

'ii) inter se sale or p$rchase of foreign c$rrenc* amongst bans or a$thorised dealers offoreign exchange or amongst bans and s$ch dealersK

1& ser%ice of transportation of passengers, ith or itho$t accompanied belongings, b*N

'i) a stage carriageK

'ii) raila*s in a class other thanN '") first classK or

') an airconditioned coachK

'iii) metro, monorail or trama*K

'i%) inland atera*sK

'%) p$blic transport, other than predominantl* for to$rism p$rpose, in a %essel beteenplaces located in ndia and

'%i) metered cabs, radio taxis or a$to ricshas&

1& ser%ices b* a* of transportation of goodsN'i) * road except the ser%ices of

'") a goods transportation agenc*K or ') a co$rier agenc*K

'ii) b* an aircraft or a %essel from a place o$tside ndia $pto the c$stoms station of clearancein ndiaK or

'iii) b* inland atera*sK

1;& !$neral, b$rial, crematori$m or mort$ar* ser%ices incl$ding transportation of the deceased&

(N"*$: "* "8 *


51/180

1

')


52/180

2

'a) a person from Gamm$ pro%ides ser%ice at :e elhi'b) a person ha%ing office at Srinagar pro%ides ser%ice at :e elhi'c) a person from :e elhi pro%ides ser%ice at Gamm$'d) all of the abo%e

8& ?hich committee recommended the introd$ction of ser%ice taxQ

9& ?hich ere the first three ser%ices to be bro$ght $nder the ser%ice tax netQ

10& ?hat is the extent and application of the pro%isions of !inance "ct, 1994 relating to ser%ice taxQ

11& ?rite a note on administration of ser%ice tax&

12& ?hat do *o$ mean b* selecti%e and comprehensi%e co%erage of ser%ices for the p$rpose of ser%ice taxQ?hich s*stem is being adopted in ndiaQ

13& ?rite briefl* abo$t the role of a chartered acco$ntant in the field of ser%ice tax cons$ltanc*&

14& ?hat is ed$cation cessQ ?h* is it being le%iedQ ?hat is the so$rce of le%* of ed$cation cessQ

1& oes ser%ice tax la pro%ide for an* exemption to small ser%ice pro%idersQ f *es, then hat is the7$ant$m of s$ch exemptionQ

A+5>$'5

1'a)K 2'b)K 3'c)K 4'd)K 'b)K 'c)K 'c)K Tax


53/180

3

REGISTRATION

R$?5*'*"+ S$6*"+ /R;$ 4(1) "8 STR. 14

" ser%ice pro%ider can charge ser%ice tax onl* if he is registered ith the Ser%ice Tax epartment&

E%er* ser%ice pro%ider in hose case, gross receipt has exceeded `9,00,000 shall appl* for registration tothe Ser%ice Tax epartment in !orm :o ST1 ithin 30 da*s from the date of crossing the limit of`9,00,000, hoe%er, he ill charge ser%ice tax after crossing the limit of `10,00,000& >e ill also s$bmit acop* of +ermanent "cco$nt :$mber and proof of residence& epartment shall grant him a registrationcertificate in !orm :o ST2 ithin ; da*s from the date of receipt of application otherise the ser%ice

pro%ider shall be deemed to be registered&

The ser%ice pro%ider shall be gi%en a


54/180

P"+* "8 T9*"+ 4

%OINT OF TAXATION

&' Introduction+oint of taxation means the point in time hen a ser%ice shall be deemed to ha%e been pro%ided& The point

of taxation enables $s to determine the rate of tax, %al$e of taxable ser%ice, rate of exchange and d$e date forpa*ment of ser%ice tax& !or determination of point of taxation of a ser%ice, +oint of Taxation


55/180

P"+* "8 T9*"+

P"+* "8 *9*"+ + 65$ "8 #+6$ '$6$#$ &= 5$'#6$ 7'"#$'

!or the p$rpose of this r$le, here%er an* ad%ance b* hate%er name non, is recei%ed b* the ser%icepro%ider toards the pro%ision of taxable ser%ice, the point of taxation shall be *


56/180

P"+* "8 T9*"+

/ September , 2012 Bctober 8, 2012 "mo$nt recei%edpartl* on September 3,2012 and remaining onSeptember 20, 2012

September 3, 2012 andSeptember , 2012 forrespecti%e amo$nts&

D$*$'%+*"+ "8 *$ "8 6"%7;$*"+ "8 5$'#6$

() D*$ "8 6"%7;$*"+ "8 5$'#6$ + 65$5 "*"; &$ *


57/180

P"+* "8 T9*"+

I+ 65$ *9&;$

5$'#6$ * ;$#=. *%$-7$'" #;&;$ 8"' *


58/180

P"+* "8 T9*"+

D$*$'%+*"+ "8 7"+* "8 *9*"+ + 65$ "8 55"6*$ $+*$'7'5$5 !R;$ ,

n case of 55"6*$ $+*$'7'5$5.here the person pro%iding the ser%ice is located o$tside ndia, thepoint of taxation shall be-

() *


59/180

P"+* "8 T9*"+

hiche%er is earlier&

D$*$'%+*"+ "8 7"+* "8 *9*"+ + "*;; 77;= *"

ho sitch o%er to the ne r$les on 01&04&2011 'a) all in%oices iss$ed before 01&04&2011'b) ser%ices for hich pro%ision has been completed

before 01&04&2011&

ho lie to shift to the ne r$les on 01&0;&2011 'a) in%oices iss$ed before 01&0;&2011'b) ser%ices for hich pro%ision has been completed

before 01&0;&2011&

t ma* be noted that the pa*ments recei%ed before the ne r$les come into force do not re7$ire an*

transitional pro%isions as the* are alread* re7$ired to pa* tax on pa*ment basis&

I%7"'*+* $8+*"+5

1 D$8+*"+5 +$' ';$ 2

n these r$les, $nless the context otherise re7$ires,

() A6*means the !inance "ct, 1994&

(&)C"+*+"5 577;= "8 5$'#6$ %$+5

'i) an* ser%ice hich is pro%ided, or agreed to be pro%ided contin$o$sl* "' "+ '$6''$+* &55. +$' 6"+*'6*. 8"' 7$'" $96$$+? *


60/180

P"+* "8 T9*"+ 0

() >$$+ *$$+ 56< $+*'= + &""@5 "8 66"+*5 + *5 6'$* + **< $88$6* 8'"% 01042012.

() I+ 65$ >5$. *"; &$ 77;6&;$


61/180

P"+* "8 T9*"+ 1

() I+ 65$ >


62/180

P"+* "8 T9*"+ 2

PRACTICE MANUAL

$5*"+ 1

:ihil Htd& pro%ides anagement Cons$ltanc* Ser%ices to its client "ggaral +roperties Htd& for agreedconsideration of `1,0,000& "ggaral +roperties Htd& maes the pa*ment on 2th"pril, 2012& >oe%er, the

date of completion of ser%ice is 1th "pril, 2012& The rele%ant in%oice for `1,0,000 is raised b* :ihil Htd&as per folloing table-

C"SE 30th"pril, 2012C"SE 1tha*, 2012C"SE 20th"pril, 2012

etermine +oint of Taxation in each of the abo%e three cases&A+5>$'

"s per


63/180

P"+* "8 T9*"+ 3

(&) +" *9 5


64/180

P"+* "8 T9*"+ 4

B;+6$ 7"'*"+

P'*6;'5 $"mo$nt billed for taxable ser%ices X `1,40,00"d%ance recei%ed toards taxable ser%ices X 40,000"mo$nt billed b$t not recei%ed toards taxable ser%ices X `'1,40,000 5 40,000)

X 1,00,000Ser%ice tax 12D X 1,00,000 x 12D

X 12,000Ed$cation cess 2D X 240Secondar* and higher ed$cation cess 1D X 120Total ser%ice tax liabilit* X 12,30

n this case, the d$e date for pa*ment of ser%ice tax ill be th arch, 2013&

$5*"+ 4

etermine the +oint of Taxation in each of folloing independent cases in accordance ith P"+* "8T9*"+ R;$5. 2011:

S N" D*$ "8 6"%7;$*"+ "8 5$'#6$ T%$ !*$, "8 +#"6$ D*$ "+ >


65/180

P"+* "8 T9*"+

N"*$ + '$57$6* "8 '$6$7* "8 #+6$: "ccording to Explanation appended to this


66/180

P"+* "8 T9*"+

after completion ofser%ice& Th$s&+ointof Taxation is ateof completion ofser%ice&

;& 10&04& 2012 1&0&2012 +art pa*menton 0&04&2012and remainingon 14&0&2012

0&04&2012and10&04&2012 for$'

"ccording to s$bstit$ted


67/180

P"+* "8 T9*"+

D*$ "8 I55+6$

"8 I+#"6$

D*$ "8 '$6$7*

"8 7=%$+*

P"5*"+ "8 T9&;*=

2&0&2012 for`1,00,000

2&0&2012 for`1,00,000

N"*-T9&;$ to the extent of iss$e of in%oice and receipt ofpa*ment against s$ch in%oice before s$ch ser%ice becomes taxablei&e& entire amo$nt of `1,00,000 in this case&

2&0&2012 for`1,00,000

2&0&2012 for `0,000

N"*-*9&;$ to the extent of `0,000 beca$se against the in%oice of`1,00,000 onl* part pa*ment to the extent of `0,000 has beenrecei%ed before s$ch ser%ice becomes taxable for the first time& nother ords, `40,000 recei%ed after s$ch ser%ice become taxable6i&e& after 01&0;&2012 ill be s$bAect to ser%ice tax&

2&0&2012 for`0,000

2&0&2012 for `1,00,000

N"*-*9&;$ to the extent of `0,000 beca$se of


68/180

P"+* "8 T9*"+

R$;$#+* Y$' R$;$#+* O*7*

(+ T"++$5,

C"+5$'*"+ 8"'

5+? *$'

t is pertinent to clarif* here that in the present 7$estion, Mirti Htd& is the ser%ice pro%ider and "C Htd& isthe ser%ice recipient& Since hole amo$nt of the consideration for the pro%ision of patent is not ascertainableat the time hen ser%ice as performed and s$bse7$entl* the $se of these ser%ices b* a person other thanthe pro%ider gi%es right to an* pa*ment of consideration, both the conditions specified in


69/180

V;*"+ "8 T9&;$ S$'#6$

VALUATION OF TAXABLE SERVICE

L$'++? "&J$6*#$5

"fter reading this chapter *o$ ill be able to $nderstand the-

Y pro%isions relating to %al$ation of taxable ser%ices for charging ser%ice tax&Y concept of gross amo$nt charged and consideration for taxable ser%ices&

1 V;*"+ "8 *9&;$ 5$'#6$5 8"' 6


70/180

V;*"+ "8 T9&;$ S$'#6$ 0

2 S$'#6$ T9 (D$*$'%+*"+ "8 V;$) R;$5. 200

Notification No.12/2006-ST, dated 19.04.2006 has notified the Ser%ice Tax 'etermination of /al$e)


71/180

V;*"+ "8 T9&;$ S$'#6$ 1

'ii) ?hat o$ld be the %al$e of taxable ser%ice if S Z 9,000 are con%erted into M W 4,00& oe%er, s$ch %al$e shall, in no case be less than the costof pro%ision of s$ch taxable ser%ice&


72/180

V;*"+ "8 T9&;$ S$'#6$ 2

24 R$J$6*"+ "8 #;$ &= C$+*'; E965$ O886$' + *5 $*$'%+*"+ *$'

The pro%isions contained in r$le 3 shall not restrict or p$t to 7$estion s$ch poer of the Central ExciseBfficer&

(3) I55$ "8 5"; ;5" 8"'%

7'* "8 #;$ "8 *9&;$ 5$'#6$

t is clarified that the %al$e of the taxable ser%ice is the total amo$nt of consideration consisting of allcomponents of the taxable ser%ice and it is immaterial that the details of indi%id$al components of the totalconsideration is indicated separatel* in the in%oice&

I;;5*'*"+ 1 n the co$rse of pro%iding a taxable ser%ice, a ser%ice pro%ider inc$rs costs s$ch as tra%ellingexpenses, postage, telephone, etc&, and ma* indicate these items separatel* on the in%oice iss$ed to therecipient of ser%ice& n s$ch a case, the ser%ice pro%ider is not acting as an agent of the recipient of ser%ice


73/180

V;*"+ "8 T9&;$ S$'#6$ 3

b$t proc$res s$ch inp$ts or inp$t ser%ice on his on acco$nt for pro%iding the taxable ser%ice& S$chexpenses do not become reimb$rsable expendit$re merel* beca$se the* are indicated separatel* in thein%oice iss$ed b* the ser%ice pro%ider to the recipient of ser%ice&

I;;5*'*"+ 2 " contracts ith , an architect for b$ilding a ho$se& $ring the co$rse of pro%iding thetaxable ser%ice, inc$rs expenses s$ch as telephone charges, air tra%el ticets, hotel accommodation, etc&, toenable him to effecti%el* perform the pro%ision of ser%ices to "& n s$ch a case, in hate%er form reco%erss$ch expendit$re from ", hether as a separatel* itemised expense or as part of an incl$si%e o%erall fee,ser%ice tax is pa*able on the total amo$nt charged b* & /al$e of the taxable ser%ice for charging ser%ice taxis hat " pa*s to &

I;;5*'*"+ 3 - Compan* [ pro%ides a ser%ice of rentacab b* pro%iding cha$ffe$r dri%en cars for o%erseas%isitors& The cha$ffe$r is gi%en a l$mp s$m amo$nt to co%er his food and o%ernight accommodation and an*other incidental expenses s$ch as paring fees b* the Compan* [ d$ring the to$r& "t the end of the to$r, thecha$ffe$r ret$rns the balance of the amo$nt ith a statement of his expenses and the rele%ant bills& Compan*[ charges these amo$nts from the recipients of ser%ice& The cost inc$rred b* the

cha$ffe$r and billed to the recipient of ser%ice constit$tes part of gross amo$nt charged for the pro%ision ofser%ices b* the Compan* [&

(2) A%"+*5 7 *" *


74/180

V;*"+ "8 T9&;$ S$'#6$ 4

M$++? "8 7'$ ?$+*

P'$ ?$+* means a person ho5

'a) enters into a contract$al agreement ith the recipient of ser%ice to act as his p$re agent to inc$rexpendit$re or costs in the co$rse of pro%iding taxable ser%iceK

'b) neither intends to hold nor holds an* title to the goods or ser%ices so proc$red or pro%ided as p$re agentof the recipient of ser%iceK

'c) does not $se s$ch goods or ser%ices so proc$redK and

'd) recei%es onl* the act$al amo$nt inc$rred to proc$re s$ch goods or ser%ices&

I;;5*'*"+ 5 [ contracts ith R, a real estate agent to sell his ho$se and there$pon R gi%es an

ad%ertisement in tele%ision& R billed [ incl$ding charges for Tele%ision ad%ertisement and paid ser%ice taxon the total consideration billed& n s$ch a case, consideration for the ser%ice pro%ided is hat [ pa*s to R& Rdoes not act as an agent on behalf of [ hen obtaining the tele%ision ad%ertisement e%en if the cost oftele%ision ad%ertisement is mentioned separatel* in the in%oice iss$ed b* [& "d%ertising ser%ice is an inp$tser%ice for the estate agent in order to enable or facilitate him to perform his ser%ices as an estate agent&

"bo%e ill$stration pro%ides the distinction beteen pa*ment made as Ip$re agentJ and pa*ment made asIprincipalJ&

(3) C;'86*"+

I55$ C;'86*"+

The principal Aob of a c$stom ho$se agent 'C>") isto get the import#export consignments clearedthro$gh c$stoms&>oe%er, at times the* also pro%ide ser%ices for

pacing, $npacing, loading, $nloading, bringing orremo%ing the goods to or from the c$stoms area,%esselsor aircrafts for their c$stomers 'i&e& importersor exporters)& C>"s initiall* pa* the ser%ice chargesto these agencies and later reco%er these chargesfrom the c$stomer along ith their on chargesC>"s& Similar arrangement can occ$r for pa*ment

of stat$tor* le%ies lie c$stom d$ties, port charges,cesses etc& le%iable on the said goods& ?hether thecharges hich are said to be paid b* the C>"s andlater reco%ered from the c$stomers 'i&e& reimb$rsablecharges) sho$ld be added to the %al$e for chargingser%ice tax from C>"sQ

t is clarified that the aforesaid reimb$rsable chargeso$ld be excl$ded from the %al$e of taxable ser%iceif all the folloing conditions are satisfied, 'a) The acti%it*#ser%ice for hich a charge is madesho$ld be in addition to pro%ision of C>" ser%ice&'b) There sho$ld be arrangement beteen thec$stomer . the C>" hich a$thori=es or allos theC>" to- 'i) arrange for s$ch acti%ities#ser%ices for the

c$stomerK and 'ii) mae pa*ments to other ser%ice pro%iders on

his behalfK'c) The C>" does not $se the acti%ities#ser%ices forhis on benefit or for the benefit of his otherc$stomersK'd) The C>" reco%ers the reimb$rsements onOact$alP basis i&e& itho$t an* mar$p or margin&'e) C>" sho$ld pro%ide e%idence to pro%e nex$s

beteen s$ch other than C>" ser%ices pro%ided andthe reimb$rsable amo$nts&Similar o$ld be the case for stat$tor* le%ies,charges b* carriers and c$stodians, ins$ranceagencies and the lie&'f) Each charge for separate acti%ities#ser%ices is to

be co%ered either b* a separate in%oice or b* aseparate entr* in a common in%oice&


75/180

V;*"+ "8 T9&;$ S$'#6$

"n* other miscellaneo$s#o$t of pocet expensescharged b* the C>" o$ld not be excl$ded&

[Circular No. 119/13/2009-S.T. dated 21-12-2009]

2 S$'#6$ 57$686 +6;5"+/$96;5"+ "8 6$'*+ *$%5 8'"% *


76/180

V;*"+ "8 T9&;$ S$'#6$

'%) the taxes le%ied b* an* (o%ernment 'incl$ding foreign (o%ernments, here a passenger disembars) onan* passenger tra%elling b* air, if shon separatel* on the ticet, or the in%oice for s$ch ticet, iss$ed to the

passenger&

vi" accidental da#a$es due to un&oreseen actions not relatable to the 'rovision o& service.

vii" subsidies and $rants disbursed b% the )overn#ent( not directl% a&&ectin$ the value o& service.


77/180

V;*"+ "8 T9&;$ S$'#6$

PRACTICE MANUAL

$5*"+ 1

?ill the pa*ment to a hotelier of `10,000 on behalf of an architect, the ser%ice pro%ider b* a ser%icerecei%er be incl$ded in the %al$e of taxable ser%icesQ

A+5>$'Ser%ice tax chargeable on an* taxable ser%ice is on the basis of gross amo$nt charged b* ser%ice pro%ider fors$ch ser%ice pro%ided or to be pro%ided b* him& t is not necessar* that the ser%ice recei%er sho$ld pa* theconsideration onl* to the ser%ice pro%iderK an* mone* paid to the third part* is also incl$dible& >ence, thehotel bill met b* the client o$ld be incl$dible in the %al$e of taxable ser%ices&

$5*"+ 2

"nser the folloing 7$estions-

'a) Can it be said that if the taxable ser%ice is not capable of ascertainment, the same cannot form part of%al$e of taxable ser%icesQ

'b) >o is the %al$e of taxable ser%ices determined hen the consideration against taxable ser%ices isrecei%ed in other than monetar* termsQ

A+5>$'

() :o, it cannot be said so& The pro%isions of section ; states clearl* that if the consideration for ataxable ser%ice is not ascertainable, the %al$e of s$ch ser%ice shall be the amo$nt as ma* bedetermined in the manner prescribed $nder the Ser%ice Tax 'etermination of /al$e) ence, s& +ri*a is liable to pa* ser%ice tax&

>oe%er, sometimes it ma* happen that the assessee is not able to charge ser%ice tax beca$se of the nat$reof ser%ice or he fails to reco%er the ser%ice tax from the client # c$stomer as he is not aare that his ser%icesare taxable& >ence, in these cases, the amo$nt reco%ered from the client in lie$ of ha%ing rendered theser%ice ill be taen to be incl$si%e of ser%ice tax and accordingl* tax pa*able ill be calc$lated b* maing

bac calc$lations&

The rates of ser%ice tax pa*able are-

asic rate 12D


78/180

V;*"+ "8 T9&;$ S$'#6$

Ed$cation cess '2D of 12D) 0&24D

Secondar* and higher ed$cation cess '1D of 12D) 0&12D

Effecti%e rate of ser%ice tax 12&3D

"s per


79/180

V;*"+ "8 T9&;$ S$'#6$

1& one* means legal tender, che7$e, promissor* note, bill of exchange, letter of credit, draft, pa* order,tra%eler che7$e, mone* order, postal or electronic remittance or an* s$ch similar instr$ment b$t shall notincl$de an* c$rrenc* that is held for its n$mismatic %al$e

2& (ross amo$nt charged incl$des pa*ment b* che7$e, credit card, ded$ction from acco$nt and an* form ofpa*ment b* iss$e of credit notes or debit notes and boo adA$stment

3& t has been ass$med that the assessee is not an SS+&

$5*"+

State ith reason in brief hether the folloing statement is tr$e or false ith reference to the pro%isions ofser%ice tax-

r& Salim, an architect has recei%ed the fees of ` 4,48,00 after the ded$ction of incometax of `1,00&Ser%ice tax ill be pa*able on `4,48,00&A+5>$'

F;5$ :"s the charge of the ser%ice tax is on the total %al$e of ser%ices pro%ided, the gross receipts are to beconsidered for tax calc$lation& >ence, ser%ice tax ill be pa*able on the gross fee of ` lah&

$5*"+

+areesh . Co&, is a partnership firm engaged in the b$siness of recr$itment and s$ppl* of labo$rers& Thefirm, hich had rendered taxable ser%ices to the t$ne of `20&2 lacs in the financial *ear 201112, f$rnishesthe folloing details pertaining to the half *ear ended on 30&9&2012-

'`)'i) "mo$nts collected from companies for prerecr$itment screening 2,0,000'ii) "mo$nts collected from companies for recr$itment of

+ermanent staff 3,00,000Temporar* staff 4,00,000

'iii) "d%ances recei%ed from prospecti%e emplo*ers for cond$cting camp$s inter%iesin colleges

1,00,000

?here%er applicable, ser%ice tax has been charged separatel* and recei%ed from clients& Comp$te the %al$eof taxable ser%ices rendered and the ser%ice tax pa*able b* the assessee for the rele%ant half *ear&A+5>$'

C"%7**"+ "8 #;$ "8 *9&;$ 5$'#6$5 + 5$'#6$ *9 7=&;$ &= M/5 P'$$5< C":-

P'*6;'5 A%"+* "8

*9&;$ 5$'#6$5

($)

A%"+* "8

5$'#6$ *9

($)"mo$nts collected from companies for prerecr$itment screening 2,0,000 30,900"mo$nts collected from companies for recr$itment of permanent staff 3,00,000 3;,080"mo$nts collected from companies for recr$itment of temporar* staff 4,00,000 49,440"d%ances recei%ed from prospecti%e emplo*ers for cond$cting camp$sinter%ie in colleges ':ote1) 89,000 11,000T"*; 10,39,000 1,28,420

N"*$5:

1& "mo$nts recei%ed as ad%ance are also liable to ser%ice tax& Ser%ice tax on ad%ance has been calc$lated onthe pres$mption that the same is incl$si%e of ser%ice tax

3&112

3&12000,00,1&


80/180

V;*"+ "8 T9&;$ S$'#6$ 0

2& Since the %al$e of taxable ser%ices rendered in the preceding *ear is more than `10 lah 'i&e& `20&2 lah),the assessee is not a small ser%ice pro%ider& >ence, it is not eligible for the exemption a%ailable to the smallser%ice pro%ider&

$5*"+

$ring the *ear ended 31&3&2012, Mohli . Co& , r$nning a coaching centre, has collected a s$m of `10&2lacs as ser%ice tax, `;0,000 as met thro$gh Cen%at credit and the balance as paid b* che7$es on %ario$sdates& The details pertaining to the 7$arter ended 30&&2012 are as $nder-

P'*6;'5 A%"+*

($)/al$e of free coaching rendered 20,000Coaching fees collected from st$dents 'Ser%ice tax collected separatel*) 14,0,000"d%ance recei%ed from a college for coaching their st$dents, on 30&&2012&>oe%er, no coaching as cond$cted and the mone* as ret$rned on 12&4&2013

3,00,000

etermine the Ser%ice Tax Hiabilit* for the 7$arter and indicate the date b* hich the ser%ice tax has to beremitted b* the assessee&A+5>$'

C"%7**"+ "8 S$'#6$ T9 L&;*= "8 "o ill a taxable ser%ice be %al$ed hen the consideration thereof is not holl* or partl* in terms ofmone*QA+5>$'

"s per section ; '2) of the !inance "ct, 1994, if the consideration for a taxable ser%ice is not holl* or

partl* in terms of mone*, then the %al$e of s$ch ser%ice shall be s$ch amo$nt in mone*, ith the addition ofser%ice tax charged, is e7$i%alent to the consideration&


81/180

V;*"+ "8 T9&;$ S$'#6$ 1

n other ords, here the ser%ice rendered is for a consideration not holl* or partl* consisting of mone*the %al$e of the taxable ser%ice is e7$i%alent to the total %al$e of the consideration& >oe%er, the total ofs$ch mone* and nonmone* %al$es of the consideration has to be treated as incl$si%e of the ser%ice tax

pa*able thereon&

$5*"+

"C +artnership firm, is engaged in pro%iding a taxable ser%ice& !or the 7$arter ended on 31 starch 2013,its gross receipts ere `18,00,000 ':o amo$nt as recei%ed in preceding 7$arters)& The brea$p of thesereceipts are as follos-

M"+*< + >


82/180

V;*"+ "8 T9&;$ S$'#6$ 2

$5*"+ 10

r& $'


83/180

V;*"+ "8 T9&;$ S$'#6$ 3

N"*$5:-

1& Ser%ices b* a* of renting of residential delling for $se as residence are incl$ded in the negati%elist of ser%ices& >ence, the* are not s$bAect to ser%ice tax&

2& Ser%ice tax is chargeable on the %al$e of ser%ice& Th$s, ser%ice tax is not pa*able in case of freeser%ices as there is no consideration in s$ch case&

3& "d%ance recei%ed for the ser%ices to be rendered in G$l*, 2013 is liable for ser%ice tax& The amo$ntof ser%ice tax incl$ded in the amo$nt ref$nded in the next financial *ear i&e& G$ne 2013 o$ld beadA$sted against ser%ice tax liabilit* of s$bse7$ent periods& 6t is ass$med that `3,0,000 ref$nded inG$ne, 2013 after the termination of agreement incl$des the amo$nt of ser%ice tax pa*able thereon&

4& Since, ser%ices pro%ided b* ence,


84/180

V;*"+ "8 T9&;$ S$'#6$ 4

3& Ser%ices relating to renting of agro machiner* for agric$lt$ral p$rpose is incl$ded in the negati%e listof ser%ice& >ence, it is not taxable&

4& +oint of taxation in respect of the ser%ices rendered in G$l*, 2012 is G$l* 29, 2012& >ence, receipts of`0,000 is not chargeable to ser%ice tax in Bctober, 2012 6


85/180

V;*"+ "8 T9&;$ S$'#6$

'ii) Ser%ices rendered to associated enterprise are liable to ser%ice tax& :o special treatment fromexigibilit* to ser%ice tax or exemption has been pro%ided for ser%ices rendered to an associatedenterprise&

$5*"+ 1

Chandra Himited started pro%iding taxable ser%ices& The ser%ices became taxable from 01&10&2012&

Chandra Himited for the month of arch, 2013, recei%ed folloing receipts 'incl$si%e of ser%ice tax)

S N" P'*6;'5 A%"+* ($)1& "mo$nt recei%ed in respect of ser%ices rendered in G$l* and "$g$st, 2012& 10,30,000

2& Ser%ices rendered to its a$ditors against a$dit fee +a*able& ,1,000

3& "d%ance recei%ed for ser%ices to be rendered in a*, 2013& ,18,000

4& aret /al$e of Ser%ices pro%ided to office staff and their relati%es free of cost 20,000

B$t of ad%ance recei%ed, 0D as ret$rned on 1042013 to the part*, as the* ha%e closed their operationsfrom 31032013&

Comp$te the taxable ser%ices and ser%ice tax pa*able for arch, 2013 b* Chandra Himited&A+5>$'

C"%7**"+ "8 %"+* "8 5$'#6$ *9 6";;$6*$ &= C


86/180

V;*"+ "8 T9&;$ S$'#6$

riefl* explain the IExemption a%ailable to small scale ser%ice pro%idersJ in reference to ser%ice tax-A+5>$'

Central (o%ernment has exempted the taxable ser%ices of aggregate %al$e not exceeding `10 lah in an*financial *ear from the hole of the ser%ice tax le%iable thereon $nder section of the !inance "ct, 1994in case the aggregate %al$e of taxable ser%ices rendered b* the ser%ice pro%ider from one or more premises,does not exceed `10 lah in the preceding financial *ear&

$5*"+ 1

"C . Co& recei%ed the folloing amo$nts d$ring the half *ear ended 31&03&2013-

P'*6;'5 A%"+*(`)'i) !or ser%ices performed prior to the date of le%* of ser%ice tax 3,0,000'ii) "d%ance amo$nt recei%ed in arch, 2013 ':o ser%ice as rendered and the amo$nt asref$nded to the client in G$l* 2013)

;,000

'iii) !or free ser%ices rendered to c$stomers, amo$nt reimb$rsed b* the man$fact$rer of s$chprod$ct& 'for the period after the imposition of ser%ice tax)

0,000

'i%) "mo$nts reali=ed and on hich ser%ice tax is pa*able 'excl$ding the items 'i) to 'ii)abo%e) 14,2,00

Calc$late the Ser%ice Tax Hiabilit* d$l* considering the threshold limit&A+5>$'

C"%7**"+ "8 S$'#6$ T9 L&;*= "8 ABC C":-

P'*6;'5 A%"+*(`)"mo$nt recei%ed for the ser%ices rendered prior to le%* of ser%ice tax is taxable as the amo$ntrecei%ed after the ser%ice become taxable '$'


87/180

V;*"+ "8 T9&;$ S$'#6$

?here the


88/180

P=%$+* "8 S$'#6$ T9

PAYMENT OF SERVICE TAX

PAYMENT OF SERVICE TAX

L$'++? "&J$6*#$5

"fter reading this $nit, *o$ ill be able to-

Y identif* persons liable to pa* ser%ice tax&Y get an insight of the basic principles $nderl*ing the proced$res relating to pa*ment of ser%ice tax&Y no the time period for pa*ing ser%ice tax&Y comprehend the manner of pa*ment of ser%ice tax&

11 P$'5"+ ;&;$ *" 7= 5$'#6$ *9 !S$6*"+ (1),

(enerall*, the ser%ice pro%ider rendering taxable ser%ices is liable to pa* ser%ice tax to the Central(o%ernment at reg$lar inter%als of time& >oe%er, in certain cases, (o%ernment finds it con%enient tocollect ser%ice tax from the ser%ice recei%er& t is termed as re%erse charge mechanism& The said mechanismhas been disc$ssed in detail in +aper 8- ndirect Tax Has at !inal le%el&

Section 8 of the !inance "ct, 1994 is the principal section hich fixes responsibilit* to pa* ser%ice tax& Thepoers to decide time and manner of pa*ment of ser%ice tax ha%e been granted to the Central (o%ernment%ide r$le of the Ser%ice Tax


89/180

P=%$+* "8 S$'#6$ T9

() P=%$+* &"*< "+ '$6$7* + 66'; &55

"s per r$le '1) of the Ser%ice Tax ence, ser%ice tax is pa*able on both receipt and accr$al basis&

(&) S$'#6$ *9 +"* 7=&;$ "+ 8'$$ 5$'#6$5

Section ;'1)'iii) and Ser%ice Tax 'etermination of /al$e) oe%er, these pro%isions appl* onl* hen there is consideration&f there is no consideration i&e&, in case of free ser%ice, section ; and Ser%ice Tax 'etermination of /al$e)oe%er, this principle applies onl* hen there isreall* a Ofree ser%iceP and not hen its cost is reco%ered thro$gh other means&

(6) S$'#6$ *9 ;&;$ *" &$ 7 $#$+ 8 +"* 6";;$6*$ 8'"% *oe%er, sometimes it ma* happen that the assessee is not able to charge ser%ice tax beca$se of the nat$reof ser%ice or he fails to reco%er the ser%ice tax from the client#c$stomer as he is not aare that his ser%icesare taxable& >ence, in these cases the amo$nt reco%ered from the client in lie$ of ha%ing rendered the ser%iceill be taen to be incl$si%e of ser%ice tax and accordingl* tax pa*able ill be calc$lated b* maing baccalc$lations&

!or example, if bill amo$nt is `,000 and ser%ice tax is not shon separatel* in in%oice, then ser%ice taxpa*able shall be comp$ted as follos-

000#112&3 x 12&3 X `0

t ma* be noted that ser%ice tax pa*able is not `18 comp$ted b* appl*ing 12&3D to `000&


90/180

P=%$+* "8 S$'#6$ T9 0

The %al$e of the taxable ser%ice in this case is `440&

The example gi%en abo%e can be sol%ed b* $sing the folloing form$lae-

/al$e of taxable ser%ice X 6(ross amo$nt charged#'100 ] rate of tax) x 100

Ser%ice tax X 6(ross amo$nt charged#'100 ] rate of tax) x rate of tax

() S$'#6$ *9 7=&;$ "+ #+6$ '$6$#$

"s per explanation to r$le 3 of the +oint of Taxation *< *


91/180

P=%$+* "8 S$'#6$ T9 1

'b) "n* person has collected the ser%ice tax hich is not re7$ired to be collected !S&5$6*"+(1) + (2),

() N"*6$ *" &$ 5$'#$ + 65$ *"; &$ 6


92/180

P=%$+* "8 S$'#6$ T9 2

n other cases, the interest shall be pa*able on the hole amo$nt, incl$ding the amo$nt alread* paid&

(#) Cence, a concessional rate of interest of 1D per ann$m is a%ailable to the tax pa*ers hose t$rno%erd$ring an* of the *ears co%ered in the notice iss$ed $nder section ;3"'3) or the preceding financial*ear is $pto `0 lah&

() D$ *$ 8"' 7=%$+* "8 5$'#6$ *9+ro%isions of r$le '1) inter alia pro%ides as follos-D$ *$ 8"' 7=%$+* "8 5$'#6$ *9 "+ *


93/180

P=%$+* "8 S$'#6$ T9 3

1& f the ser%ice tax is paid electronicall* thro$ghinternet baning

th da* of the folloing 7$arter in hich thepa*ment is recei%ed

2& n an* other case thda* of the folloing 7$arter in hich thepa*ment is recei%ed

3& n the case pa*ment is recei%ed in the 7$arterending in arch

31stda* of arch

Note artnershi' &ir# includes li#ited liabilit% 'artnershi' [ule 2cd" o& the Service Ta! ules( 199].

(J) M++$' "8 7=%$+*

A C"+#$+*"+; %"$ "8 7=%$+*: n case, the assessee is not re7$ired to mae the epa*ment of theser%ice tax and he pa*s ser%ice tax b* ("


94/180

P=%$+* "8 S$'#6$ T9 4

The Taxpa*ers acnoledgement is the e%idence of pa*ment& The Challan dentification :$mber 'C:)appearing on this acnoledgement ill ha%e to be 7$oted in the ret$rn&

The bans ill be gi%ing the tax pa*er a comp$ter generated acnoledgement#receipt ith the %ario$sdetails incl$ding the C:&

P=%$+* + 65$ "8 %;*7;$ 5$'#6$ 7'"#$': " m$ltiple ser%ice pro%ider 'a ser%ice pro%ider renderingmore than one

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