Exempted Services Service Tax – Negative List based taxation Goa Chamber of Commerce and Industry July 7, 2012.

Exempted Services Service Tax – Negative List based taxation

Goa Chamber of Commerce and IndustryJuly 7, 2012

Services

Not to scale Illustrative only

Negative List vs. Exempted Services Negative List Services are the services which are out of

the ambit of chargeability of service tax

Exempt Services are services which are prima facie taxable, but exempt from payment of service tax, which may be general or subject to conditions

Notifications to be discussed

Notification No. 25 / 2012 – Service Tax dated 20.06.2012 Notification No. 12 / 2012 – Service Tax dated 17.03.2012



Notification No. 15 / 2012 – Service Tax dated 17.03.2012

WEF 01.07.2012

Notification No. 25 / 2012Exemptions

Classification of Exemptions

Service provider Service – AN

ACTIVITY

Recipient

Exemption based on nature of service

Exemption based on class of service provider

Exemption based on class of recipient of service

Based on Nature of Service Renting of religious places or for conduct of religious ceremony Legal services Training and coaching in recreational activities Sponsorship of tournaments or championships Erection, construction ….. of specified properties or original works Copyright services in specified circumstances Renting specified properties for residential or lodging purposes Transportation of goods by rail or vessel from one port to another in

India GTA services for specified goods Hiring of motor vehicle

Based on Nature of Service Transport of passengers in specified cases Parking of motor vehicles Distribution or marketing of mutual funds Distributor or marketing of sim cards or recharge coupon vouchers Selling or marketing of lottery tickets General insurance business under specified schemes Job work in specified cases Business exhibitions held outside India Making telephone calls from specified phones Slaughtering of bovine animals Business transfer Public conveniences

Based on Nature of Service Provider By a clinical establishment / para medics / auth medical practitioner By a Veterinary clinic By an entity registered under 12AA of Income Tax Act Clinical trials by CRO approved by DCG By individual player, refree, umpire, coach or manager By a recognized sports body By a performing artist in folk or classical forms By an independent journalist, PTI or UNI By a restaurant, eating joint or a mess By an incubatee By an unincorporated body or an entity registered as society By Public libraries By ESIC By Govt. Authority

Based on Nature of Recipient To UN or specified international organisations To Government or Local Authority / Govt. Authority To an educational institution To a GTA To a stock broker To member of commodity exchange To banking company or an insurance company To an entity registered under Section 12AA

UN or Specified International Organization

All taxable services provided by any person, to the United Nations or Specified International Organization is exempt from whole of service tax.

Hitherto, exempt vide Notification No. 16/2002 – Service Tax dated 2nd August, 2002.

Health care services Health Care Services provided by:

1. Clinical establishment2. Authorised medical practitioner3. Para-medics

is exempt from whole of service tax.

Hitherto, exempt vide Notifn No. 30/2011 – Taxable services under Section 65(105)(zzzzo)

Veterinary clinic

Services of veterinary clinic in relation to health care of animals or birds is fully exempt from service tax.

Charitable Institutions / Trust

All services by way of charitable activities provided by an entity registered u/s 12AA of the Income Tax Act, 1961 is fully exempt from service tax.

Renting of religious places

Service rendered by a person by way of:a) Renting of precincts of a religious place meant for

general public; ORb) Conduct of any religious ceremonyis fully exempt from service tax

Hitherto, exempt under the category of mandap keeper vide Notifn No. 14/2003

Legal services Services provided by:

An arbitral tribunal (Hitherto, exempt vide Notifn No. 45/2011) To any person other than a business entity To a business entity with turnover upto Rs. 10 lakhs

An individual as an ADVOCATE / PARTNERSHIP FIRM by way of legal services: To an advocate / partnership firm of advocates To any person other than a business entity To a business entity with turnover upto Rs. 10 lakhs

A person represented on an arbitral tribunal to the arbitral tribunal

is fully exempt from service tax.

Clinical Trials

Services provided by an approved CRO by way of: • technical testing

OR• analysis

of newly developed drugs, including vaccines and herbal remedies on human participants is fully exempt from service tax.

Hitherto, exempt vide Notifn No. 11/2007

Training or coaching Services by way of training or coaching in recreational activities

relating to arts, culture or sports is fully exempt

Hitherto – partly excluded and partly exempt – vide Notifn No. 24/2004 – Taxable under the category of ‘commercial training or coaching services’.

What about?Computer training (Hitherto under Notifn No. 24/2004) Vocational training (Hitherto under Notifn No. 23/2010 and 24/2004) – Is under negative list under Section 66D(L)Pre school education – Under negative list Training for grant of certificate / diploma / degree – Under negative list Curriculum – No. 10/2003 – under Section 66D(L)

Educational Institutions Services provided TO / BY an educational institution

Auxiliary educational services Renting of immovable property

Recognised sports body Services provided to a recognised sports body by:

1. An individual player, referee, umpire, coach or team manager

2. Another recognised sports bodyis exempt from service tax


Sponsorship Services by way of sponsorship of SPORTING EVENTS

organised by the notified board / scheme / association is fully exempt from service tax

To Govt. / Local Auth / Govt. Auth Construction, erection, commissioning, installation, completion, fitting

out, repair, maintenance, renovation or alteration Civil structures for other than commerce, industry or profession Historical monuments, archaeological sites Structure meant for use as educational, clinical or an art or cultural

establishment Canal (Circular No. 116/10/2009 read with Notifn No. 41/2009), dam (Excluded)

or other irrigational works Pipeline, conduit or plant for water supply, water treatment &

sewage treatment. Residential complex for self use or use of employees (F No.

332/16/2010 – TRU dated 24.05.2010)

Construction…. Construction, erection, commissioning, installation, completion, fitting

out, repair, maintenance, renovation or alteration Road, bridge, tunnel, or terminal for road transportation for use by

general public; Civil works or any original works under JNNURM Building owned by an entity registered u/s 12 AA of the Income tax

Act, 1961 and meant predominantly for religious use by general public;

Pollution control or effluent treatment plant; or Structure for funeral, burial or cremation of deceased;

Hitherto, roads were exempt vide Notifn No. 24/2009 and site formation, clearing activities etc vide Notifn No. 17/2005

Erection or const - original works Erection or Construction

Airport, port or railways including monorail / metro Hitherto airport under WCT vide Notifn No. 10/2011 and ports

under WCT vide Notifn No. 11/2011 and construction activities under 38/2010 and 27/2007

Single residential unit as part of residential complex Low- cost houses Post- harvest storage infrastructure for agricultural

produce Mechanised food grain handling system, machinery or

equipment for units processing agricultural produce

Copyright Temporary transfer or permitting the use or

enjoyment of a copyright relating to:1. Original literary2. Dramatic3. Musical4. Artistic works5. Cinematograph films

is exempt from service tax

Performing artist Services by a performing artist in folk or classical art

forms of:1. Music; or2. Dance; or3. Theatre

is fully exempt from service tax

Exception to the above is the services provided by such artist as a brand ambassador (TAXABLE)

Collecting or providing news Services by way of collecting or providing news by:

1. An independent journalist2. Press Trust of India3. United News of India

is fully exempt from service tax.

Hitherto, exempt under the category of computer network services vide Notifn No. 13/2010

Renting of hotel, inn, etc. Services by way of renting of a hotel, inn, guest

house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accomodation below Rs. 1000/- per day or equivalent

Hitherto, exempt vide Notifn No. 31/2011 – Short term accommodation services

What if the renting is for more than 3 months?

Serving of food or beverages Services provided in relation to serving of food or

beverage by a restaurant, eating joint or a mess which has a licence to serve alcoholic beverages but which do not have the facility of air-conditioning or central air heating is exempt from service tax

Hitherto, excluded from the definition of ‘restaurant services’ under Section 65(105)(zzzzv)

Transportation of notified goods Services by way of transportation by rail or a vessel

from one place in India to another of the notified goods is exempt from service tax

Goods Transport Agency Services provided by a GTA by way of transportation

of fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage


Goods Transport Agency Services provided by a GTA by way of transportation

of goods where gross amount charged: on a consignment in a single goods carriage does

not exceed Rs. 1,500/- or for a single consignee in the goods carriage does

not exceed Rs. 750/-


Providing on hire Services by way of giving on hire:

• Motor vehicles meant to carry more than 12 passengers to a state transport undertaking; or

• A goods carriage to a goods transport agency;is exempt from service tax

Transport of passengers Transport of passengers with or without accompanied

belongings by: Air, embarking from or terminating in an airport

located in notified North eastern states; or A contract carriage for the transportation of

passengers excluding tourism, conducted tour, charter or hire

Ropeway, cable car or aerial tramway

Hitherto, exempt vide Notifn No. 27/2010 and 20/2009

Motor vehicle parking Services by way of vehicle parking to general public is

exempt from service tax.

No exemption if the leasing of space is given to an entity for providing such parking facility.

To Govt. / Local Auth / Govt. Auth Activity in relation to function entrusted to

municipality In relation to water supply, public health, sanitation

conservancy, solid waste management or slum improvement and upgradation

Repair of a ship, boat or vessel; Effluents and sewerage treatment; Waste collection or disposal; Storage, treatment or testing of water for drinking purposes; or Transport of water by pipeline or conduit for drinking purposes;

General insurance business Services of general insurance business provided

under the notified schemes is exempt from service tax.

Incubatee Services Services provided by an incubatee up to a total

turnover of Rs. 50 Lakh in a financial year subject to the prescribed conditions is exempt from service tax.

Hitherto, exempt vide Notifn No. 10/2007 for TBI, STEP and NSTEDB

Unincorporated body Service by an unincorporated body or non-profit orgn To its own members By way of reimbursement of charges or share of

contribution For the following:

As a trade union Carrying out any activity which is exempt from payment of

service tax Upto Rs. 5,000 per month per member in a housing society

or a residential complex

Service provider based Services by following persons in respective capacities :1. a sub-broker or an authorised person to a stock

broker; (hitherto, exempt vide No. 31/2009) 2. an authorised person to a member of a commodity

exchange; 3. a mutual fund agent to mutual fund or asset

management company;

4. a selling or marketing agent of lottery tickets to a distributer or a selling agent; (Hitherto, exempt vide No. 50/2010)

5. a selling agent or a distributer of SIM cards or recharge coupon vouchers; or

6. a business facilitator or a business correspondent to a banking company or an insurance company in a rural area;

7. Sub contractor providing services by way of works contract to another contractor providing works contract services which are exempt;

Service provider based

Intermediate production Carrying out an intermediate production process as

job work in relation to notified goods / processes is exempt from service tax.


Business exhibition Services by an organiser to any person in respect of a

business exhibition held outside India is exempt from service tax.


Telephone calls Services by way of making telephone calls from:

• departmentally run public telephone; • guaranteed public telephones operating only for

local calls; or • free telephone at airport and hospitals where

no bills are being issuedis exempt from service tax

Hitherto, exempt vide No. 3/1994

Slaughtering of bovine animals Services by way of slaughtering of bovine animals is

exempt from service tax

By persons located in NTT Services provided by a service provider located in a

non- taxable territory to:• the Government, Local Authority or

Governmental Authority • An individual in relation to any purpose other

than industry, business or commerce; or• an entity registered under section 12AA of the

Income tax Act, 1961 for the purposes of providing charitable activities; or

• A person located in non-taxable territory

Public libraries By public libraries By way of lending books, publications or any other

knowledge enhancing content or material

ESIC By ESIC To persons governed under the ESI Act

Business transfer By way of transfer of a going concern, as a whole

or an independent part thereof

Public conveniences By way of public conveniences Such as facilities of bathroom, washrooms,

lavatories, urinal or toilets

By Govt. Authority By way of an activity in relation to function

entrusted to a municipality under Article 243 of the Constitution

Notification No. 14 / 2012Partial Exemptions

R&D Cess Exemption to the extent R&D Cess paid on

transactions involving import of technology Subject to the condition that R&D Cess is paid

within 6 months from the date of invoice OR within 6 months from the date of credit in the books (associated enterprise)

Are all existing exemptions continued under the new scheme?

Other existing exemptions !!! Service provided to SEZ developers / units in SEZ vide

Notifn No. 40/2012 Notifn No. 17/2011 read with Notifn No. 52/2011

Distribution of electricity Notifn No. 32/2010 and Notifn No. 11/2010 Under negative list under Section 66D(K)

Manufacturers of alcoholic beverages / medicinal preparations with alcohol Notifn No. 39/2009 / Notifn No. 32/2009 Under negative list under Section 66D(F)

Other existing exemptions !!! Transportation of Coastal goods

Notifn No. 30/2009 Under negative list under Section 66D(P)

SSI Scheme vide Notifn No. 33/2012 Notifn No. 6/2005

All services provided by RBI Notifn No. 22/2006 Under negative list under Section 66D(B)

Other existing exemptions !!! To the extent of air freight included in the value of goods

reckoned for customs Notifn No. 9/2011

Packaged / Canned software when ED paid / when licensed for single use Notifn No. 53/2010 / Notifn No. 2/2010

Specified services when wholly provided within the Port / Airport Notifn No. 41/2010 and Notifn No. 31/2010

Air transport of passengers embarking in India for domestic / international journeys Notifn No. 26/2010 (based on the value of tickets)

Other existing exemptions !!! Air transport services provided to passengers in transit

through India Notifn No. 25/2010

ECIS for food grain handling, cold storage, agriculture…. Notifn No. 12/2010

TTA services for seed testing – by Central / State seed testing Labs Notifn No. 10/2010

Transportation of specified goods by Rail Notifn No. 8/2010

Other existing exemptions !!! Inter-bank transactions of purchase and sale of foreign

currency, provided to a Scheduled bank, by any other Scheduled bank Notifn No. 19/2009

Services provided for personal use of diplomatic agents or career consular officers Notifn No. 34/2007

Right to exhibit a cinematograph film Notifn No. 12/2007

Other existing exemptions !!! Transport of export goods by aircraft

Notifn No. 29/2005 Collection of duties and taxes by the Banks

Notifn No. 13/2004 Specified services provided to GTAs

C&F, MPS, Cargo handling, S & W, BAS, Packaging, SSBC and supply of tangible goods

Notifn No. 1/2009

Notification No. 26 / 2012Partial Exemptions

Sl. No

Description of taxable service Taxable Portion (in %)

Proposed Existing

1 Financial leasing services including hire purchase

10 10

2 Transport of goods by rail 30 30

3 Transport of passengers, with or without accompanied belongings by rail

30 N.A

4 Supply of food or drink, in any premises, including renting (hotel, convention centre, club, pandal, shamiana or any place specially arranged for organizing a function)

70 30

5 Transport of passengers by air, with or without accompanied belongings

40 NA

Partial Exemption

Sl. No

Description of taxable service Taxable Portion (in %)Proposed Existing

6 Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes.

60 50

7 Transport of goods by road by Goods Transport Agency (GTA)

25 25

8 Services provided in relation to chit 70 709 Renting of any motor vehicle designed to

carry passengers 40 40

10 Transport of goods in a vessel from one port in India to another

50 75

11 By aircraft operators for scheduled / unsch air transport of passengers embarking in India

NA 40

Partial Exemption

Sl. No

Description of taxable service Taxable Portion (in %)Proposed Existing

12 Service provided / to be provided by a tour operator in relation to a package tour.

25 25

13 Service provided / to be provided by a tour operator limited to providing services solely of arranging or booking accommodation.

10 10

14 Other tour operator service not covered above

40 40

15 Construction of complex, civil structure – including the value of land

25 25

Partial Exemption

Notification No. 30 / 2012Persons liable to pay tax

Is this an exemption for the service provider?

Onus to discharge

Service provider

Service – AN ACTIVITY

Prima facie, liability to discharge is that of the

service provider

In specified cases, the liability to discharge

service is tax is vested with the recipient of

services

Proposal to divide the responsibility between the provider and recipient of services

Sl. No. Description of a service % of tax payable byProvider Recipient

1 Insurance agent Nil 1002 Transport of goods by road by a GTA Nil 1003 Sponsorship Nil 1004 Arbitral tribunal Nil 1005 Individual advocate Nil 1006 Support service by Government or local

authority excluding renting, and negative list services

Nil 100

7 Services provided by any person who is located in NTT and received by any person located in the taxable territory

Nil 100

Onus to discharge

Sl. No. Description of a service % of tax payable byProvider Recipient

8 Renting or hiring any motor vehicle designed to carry passenger on abated value

Nil 100

9 Renting or hiring any motor vehicle designed to carry passenger on non abated value

60 40

10 Supply of manpower for any purpose 25 7511 Works contract 50 50

Onus to discharge

Questions ? Is this joint and several? Is this optional? What if the other person has paid? What if the provider is not registered? What is the recipient is not registered? What is the provider has not charged? What if the valuation adopted by the provider is

incorrect?

Badrinath NRPartner, Singhvi, Dev & Unni

[email protected] + 91 80 2226 1371

Thank you

mailto:[email protected]

Exempted Services Service Tax – Negative List based taxation Goa Chamber of Commerce and Industry July 7, 2012.

Documents

service slide

service tax exempt services

payment of service tax

legal services services

coaching services

taxable services

nature of service provider

nature of service exemption