When the tax was levied

1-7-2003 and scope expanded later. 

What is liable to tax

18.1 Any service provided or to be provided to a franchisee, by the franchisor (see 18.2) in relation to franchise (see 18.3) [Section 65(105)zze)]

18.2 ‘Franchisor’ means any person who enters into franchise with a franchisee and includes any associate of franchisor or a person designated by franchisor to enter into franchise on his behalf and the term ‘franchisee’ shall be construed accordingly [section 65(48)].

18.3 “Franchise” means an agreement by which the franchisee is granted representational right to sell or manufacture goods (see 18.4) or to provide service or undertake any process identified with franchisor, whether or not a trademark, service mark, trade name or logo or any such symbol, as the case may be, is involved [Section 65(47)]

18.4  ‘Goods’ has the meaning assigned to it in section 2(7) of Sale of Goods Act. [section 65(50)].

What is covered

Some well known examples of franchise are - Coca-Cola, Pepsi, NIIT, Aptech, McDonald etc.

If vocational training is provided through franchisee, the service will be taxable under ‘franchisee service’.

License Production Agreements where principal allows production of goods bearing his brand name by another person would be covered.

If rights are granted for rendering services identified with the principal on his behalf, such services by the principal to the service recipient would be taxable.

If courier service is provided through franchise, the franchisee will not be eligible for exemption available to small service providers as he is providing service under brand name of other.

Other issues

Accounting Code - Service Tax : 00440237. Payment of interest, penalty, etc. : 00440238.

Rule for determining export or import of service : 3(iii)

When the tax was levied

16-5-2008.

What is liable to tax

19.1 Any service provided or to be provided  to any person, by any other person in relation to information technology software (see 19.2) for use in the course, or furtherance, of business or commerce, including,—

(i) development of information technology software,

(ii) study, analysis, design and programming of information technology software,

(iii) adaptation, upgradation, enhancement, implementation and other similar services related to information technology software,

(iv) providing advice, consultancy and assistance on matters related to information technology software, including conducting feasibility studies on implementation of a system, specifications for a database design, guidance and assistance during the start-up phase of a new system, specifications to secure a database, advice on proprietary information technology software

(v) providing the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in other information technology software products

(vi) providing the right to use information technology software supplied electronically [section 65(105)(zzzze)]

19.2 “Information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment  [section 65(53a)]

[The words ‘acquiring’ in sub-clauses (v) and (vi) above were replaced by the word ‘providing’ with retrospective effect from 16—5-2009. This is only a correction of drafting mistake].

What is covered

Almost all services in relation to IT software are covered in the definition.

What is covered under other heads?

Some services relating to software will get covered under other heads like commercial coaching, consulting engineer, technical inspection/certification, maintenance and repair, Management Consultancy, Internet Telecommunication, Business Auxiliary Service etc.

Whether service tax can be levied on IT software as such?

Software, branded as well as tailor made,  has been held as goods by Supreme Court. It is also specified as ‘goods’ in both Central Excise and Customs Tariff. Many States are imposing Vat on sale of branded as well as unbranded software.

The issue is whether ‘development of information technology software’ itself is a taxable service or ‘service in relation to development of information technology software’ is a taxable service.

Service tax if software downloaded from internet

If software is downloaded from internet from abroad, it will be ‘import of service’ and service tax will be payable by recipient under reverse charge method, except in cases where recipient is an individual and he can establish that the downloaded software is not for business and commerce - confirmed in para 4.1.5 of CBE&C TRU letter F. No.334/1/2008-TRU dated 29-2-2008.

Valuation

Service tax is payable on gross value of services.

If IT software is supplied, Even assuming that service tax is payable, deduction is available of value of goods. Hence, ‘value’ should be ‘Nil’.

Other issues

Accounting Code - Service Tax : 00440452. Payment of interest, penalty, etc. : 00440450.

Rule for determining export or import of service : 3(iii)

When the tax was levied

10-9-2004.

What is liable to tax

20.1 Any service provided or to be provided to any person, by the holder of intellectual property right (see 20.2), in relation to intellectual property service (see 20.3) [Section 65(105)(zzr)] .

20.2 “Intellectual property right” means any right to intangible property, namely, trademarks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright [Section 65(55a)]

20.3 ‘Intellectual property service’ means, - (a) transferring temporarily; or (b) permitting the use or enjoyment of, any intellectual property right [Section 65(55b)]

What is covered

Transferring temporarily; or permitting the use or enjoyment of, any intellectual property right.

Brand licensing by brand name owner.

What is not covered?

Copyright service is excluded.

Permanent transfer of Intellectual Property is not taxable.

Technical know-how (which is not patented) should not be taxable under this head.

Exemption

Cess is payable under section 3 of Research and Development Cess Act, 1986, on transfer of technology. If such cess is payable, the holder of intellectual property right will be granted exemption from service tax to the extent of cess paid. - Notification No. 17/2004-ST dated 10-9-2004. Thus, if value of service is Rs 100, tax payable is Rs 12 and cess paid is Rs 5, net service tax actually payable will be Rs 7.

Other issues

Accounting Code - Service Tax : 00440278. Payment of interest, penalty, etc. : 00440279.

Rule for determining export or import of service : 3(iii)

When the tax was levied

16-10-1998.

What is liable to tax

21.1 Any service provided or to be provided to any person, by an interior decorator (see 21.2) in relation to planning, design or beautification of spaces, whether manmade or otherwise, in any manner [Section 65(105)(q)]

21.2  “Interior Decorator” means any person engaged, whether directly or indirectly, in the business of providing by way of advice, consultancy, technical assistance or in any other manner, services relating to planning, design or beautification of spaces whether manmade or otherwise and includes a landscape designer [Section 65(59)]

What is covered

Planning, design or beautification of spaces

Advice, consultancy, technical assistance relating to planning, design or beautification of spaces

Landscape designing.

Vastu/Feng shui consultants

What is not covered?

No tax on manufacture of furniture, execution of civil work etc.

Valuation

No tax on material, furniture, and temporary structures.

Other issues

Accounting Code - Service Tax : 00440076. Payment of interest, penalty, etc. : 00440077.

Rule for determining export or import of service : 3(i)

When the tax was levied

1-9-2009.

What is liable to tax

21A.1 Any service provided or to be provided to a business entity, by any other business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner , is a ‘taxable service’: Provided that any service provided by way of appearance before any court, tribunal or authority shall not amount to taxable service. Explanation.—For the purposes of this sub-clause, “business entity” includes an association of persons, body of individuals, company or firm, but does not include an individual.

What is covered

Advice, consultancy or assistance in any branch of law, in any manner by law firms.

What is not covered?

Any service of appearance before any court of law or any statutory authority.

Service provided by or to individual.

Other issues

Rule for determining export or import of service : 3(iii)

When the tax was levied

1-7-2003 scope expanded later.

What is liable to tax

22.1 Any service provided or to be provided to any person, by any person in relation to management, maintenance or repair (see 22.2) [Section 65(105)(zzg)]

22.2  “Management, maintenance or repair” means any service provided by— (i) any person under a contract or an agreement; or (ii) a manufacturer or any person authorised by him, - - in relation to, —

(a) management of properties, whether immovable or not

(b) maintenance or repair of properties whether immovable or not; or

(c) maintenance or repair including reconditioning or restoration, or servicing of any goods (see 22.3) or equipment, excluding motor vehicle.

‘Explanation.– For the removal of doubts, it is hereby declared that for the purposes of this clause -  (a) “goods” includes computer software (b) ‘properties’ includes information technology software  [Section 65(64)].

22.3  ‘Goods’ has the meaning assigned to it in section 2(7) of Sale of Goods Act. [section 65(50)].

What is covered

Services provided during the warranty period by the dealer or any other authorized person is taxable.

Software maintenance is taxable.

AMC contracts taxable.

Service to customers on behalf of manufacturer during warranty taxable when charges paid by manufacturer of OE equipment.

What is not covered?

Services to motor vehicles not taxable under this head

This service cannot be got covered under ‘works contract service’.

Operation and Maintenance (O&M) contract is not taxable, as per Tribunal decisions.

Repairs of roads, airports taxable?

Road repairs are taxable as per Board circular. However, this has been specifically excluded from ‘construction services’. Hence. It is doubtful if these can be taxed under this head.

What is covered under different head?

Maintenance charges collected by housing society/Resident Welfare Association can get covered under club or association service, but exempt if chares upto Rs 3,000 per month.

Valuation

Service tax is not payable on value of material. However, in case of AMC contracts, it is difficult to find value of material. In Wipro GE Medical Systems v. CST (2009) 18 STT 508 (CESTAT), assessee had adopted 30% of total contract towards value of services. This was considered as reasonable [However, there is no statutory provision to support such valuation].

Other issues

Accounting Code - Service Tax : 00440245. Payment of interest, penalty, etc. : 00440246.

Rule for determining export or import of service : 3(ii)

When the tax was levied

16-10-1998, scope elaborated later.

What is liable to tax

23.1 Any service provided or to be provided to any person, by a management or business consultant in connection with the management of any organisation or business in any manner [Section 65(105)(r)]

23.2 “Management or business consultant” means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation or business in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management [Section 65(65)]

What is covered

Service in connection with the management of any organisation or business.

ERP software consultancy taxable.

No qualification is required..

What is not covered?

Executory services would not fall under ‘consultancy services’.

Services of supervision and implementation is not a consulting service.

Operation and Maintenance (O&M) contract is not Management Consultancy service.

Maintenance of labour records by industrial law practitioners.

What is covered under different head?

Services rendered in relation to merger and acquisition will be taxed under Banking and other Financial services.

Other issues

Accounting Code - Service Tax : 00440116. Payment of interest, penalty, etc. : 00440117.

Rule for determining export or import of service : 3(iii)

When the tax was levied

1-7-1997.

What is liable to tax

24.1 Any service provided or to be provided to any person, by a mandap keeper (see 24.2) in relation to the use of a mandap (see 24.3) in any manner including the facilities provided or to be provided to such person in relation to such use and also the services, if any, provided or to be provided as a caterer (see 24.4)  [Section 65(105)(m)]

24.2 “Mandap keeper” means a person who allows temporary occupation of a mandap for consideration for organising any official, social or business function. Explanation.–For the purposes of this clause, social function includes marriage [Section 65(67)]

24.3 “Mandap” means any immovable property as defined in section 3 of the Transfer of Property Act, 1882 (see 24.5) and includes any furniture, fixtures, light fittings and floor coverings therein let out for consideration for organising any official, social or business function. Explanation.– For the purposes of this clause, social function includes marriage [Section 65(66)]

24.4 “Caterer” means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion [Section 65(24)]

24.5 ‘Immovable property’ does not include timber, growing crops or grass. [Section 3 of Transfer of Property Act]

What is covered

Social function includes marriage and taxable

Service provided as a caterer are included

Services of hotel or restaurant will be taxable if it provides ‘mandap’ services.

What is not covered?

Political meetings, film shooting is not social function and not taxable.

Drama and music performances whether covered – there are contrary views.

What is covered under different head?

If it is temporary structure, service will be taxed under Pandal or Shamiana Contractor’s Service.

Renting of art gallery will get covered under Business Exhibition Service.

Valuation

If the mandap keeper provides catering services also and if his bill indicates that his bill is inclusive of charges for catering services, he has to pay service tax only on 60% of his gross charges to client, if he does not avail Cenvat credit. Catering service means supply of substantial meal - Notification No. 1/2006-ST dated 1-3-2006.

High tea or unlimited breakfast is ‘substantial meal’.

No tax on general donations received.

Exemption

Use of precincts of a religious place as mandap is exempted from service tax - notification No. 14/2003-ST dated 20-6-2003.

Other issues

Accounting Code - Service Tax : 00440035. Payment of interest, penalty, etc. : 00440036.

Rule for determining export or import of service : 3(ii)

When the tax was levied

7-7-1997.

What is liable to tax

25.1 Any service provided or to be provided to any person, by a manpower recruitment or supply agency (see 25.2) in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner - Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the candidate [Section 65(105)(k)]

25.2  “Manpower recruitment or supply agency” means any person  engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person [Section 65(58)]

What is covered

Academic/educational institutes providing recruitment services are taxable.

Services of labour contractors are taxable.

Service of providing employees of Agency to business or industrial organizations for a specific period is taxable.

Pre-recruitment services also covered.

What is not covered?

No service tax if employees hired directly without intermediary

Execution of work on contract basis is not manpower supply service.

Mere charge on man-hour basis does not mean it is manpower supply service.

Valuation

Service tax is to be charged on the full amount of consideration for the supply of manpower, whether full-time or part-time. The value includes recovery of staff costs from the recipient e.g. salary and other contributions. For example, if labour charges are Rs. 1,00,000, provident fund, ESIC etc. towards the labour is Rs. 10,000 and service charges for procuring labour are (say) Rs. 12,000, service tax should be payable only on Rs. 1,22,000 (Issue is arguable).

No tax on reimbursement of expenses incurred on behalf of Principal.

Other issues

Accounting Code - Service Tax : 00440060. Payment of interest, penalty, etc. : 00440060.

Rule for determining export or import of service : 3(iii)

When the tax was levied

10-9-2004.

What is liable to tax

26.1 Any service provided or to be provided to any person, by an outdoor caterer [Section 65(105)(zzt)]

26.2  “Outdoor caterer” means a caterer (see 26.3) engaged in providing services in connection with catering at a place other than his own, but including a place provided by way of tenancy or otherwise by the person receiving such services [Section 65(76a)]

26.3 “Caterer” means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion [Section 65(24)]

What is covered

Catering at a place other than his own, but including a place provided by the person receiving such services

Supply of food to airlines for in-flight service to passengers is taxable.

Canteen service taxable if service provided to employer but not when service directly provided to employees.

Catering services provided on railway taxable.

What is not covered?

Home delivery of food not taxable

Valuation

Outdoor caterer can opt to pay service tax on 50% of his Bill amount if the Bill or challan issued indicates that it is inclusive of charges for supply of substantial meal, and he does not take Cenvat credit.

In LSG Sky Chefs v. CST (2009) 19 STT 440 (CESTAT), assessee, who was providing catering services to airlines, paid service tax on amounts collected towards handling, transportation and loading charges but not on cost of food as it paid sales tax/Vat on cost of food. It was held that service tax cannot be imposed on value of goods  – same view in The Grand Ashok v. CST (2009) 19 STT 435 (CESTAT).

Other issues

Accounting Code - Service Tax : 00440051. Payment of interest, penalty, etc. : 00440052.

Rule for determining export or import of service : 3(ii)

When the tax was levied

10-9-2004.

What is liable to tax

27.1 Any service provided or to be provided to any person, by a pandal or shamiana contractor in relation to a pandal or shami­ana (see 27.2) in any manner and also includes the services, if any, provided or to be provided as caterer (see 27.3) [Section 65(105)(zzw)]

27.2 ‘Pandal or shamiana’ means a place spe­cially prepared or arranged for organizing an official, social or business function. Explanation.–For the purposes of this clause, social function includes marriage [Section 65(77a)] .

27.3 “Caterer” means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion [Section 65(24)]

What is covered

‘Pandal or shamiana’ is temporary structure prepared or arranged for organizing an official, social or business function.

Social function includes marriage

Supply of furniture, fix­tures, lights and lighting fittings, floor coverings and other articles for use in pandal or shamiana taxable even if the contractor himself does not supply ‘pandal or shamiana’.

What is not covered?

No tax on religious functions.

What is covered under different head?

If it is permanent structure, service will be taxed under ‘mandap’ service.

Valuation

If a pandal or shamiana contractor provides catering services of full meals, tax will be payable only on 70% of the gross amount charged to client, if he does not avail any Cenvat credit - Notification No. 1/2006-ST dated 1-3-2006.

Other issues

Accounting Code - Service Tax : 00440054. Payment of interest, penalty, etc. : 00440055.

Rule for determining export or import of service : 3(ii)

When the tax was levied

16-7-2001.

What is liable to tax

28.1 Any service provided or to be provided to any person, by a photography studio or agency (see 28.2) in relation to photography (see 28.3), in any manner [Section 65(105)(zb)]

28.2 “Photography studio or agency” means any professional photographer or any person  engaged in the business of rendering service relating to photography [Section 65(79)]

28.3 “Photography” includes still photography, motion picture photography, laser photography, aerial photography or fluorescent photography [Section 65(78)]

What is covered

“Photography” includes still photography, motion picture photography, laser photography, aerial photography or fluorescent photography

What is not covered?

Preparing voter’s identity card for Election Commission is not ‘business activity’ and hence not taxable

X-ray or CT scan will not be covered.

What is covered under different head?

Collection centre not taxable under photography services. They may get covered under Business Auxiliary Service.

Valuation

In Shilpa Colour Lab v. CCE (2007) 8 STT 102 = 8 VST 554  (CESTAT), Sudha Digital Images v. CCE (2008) 17 STT 288 (CESTAT), Sood Studios v. CCE (2009) 19 STT 453 (CESTAT) etc., it has been held that deduction of value of material used while providing photography service will be available [There are contrary views also].

Other issues

Accounting Code - Service Tax : 00440127. Payment of interest, penalty, etc. : 00440130.

Rule for determining export or import of service : 3(ii)

When the tax was levied

16-10-1998.

What is liable to tax

29.1A Any service provided or to be provided to any person, by a Practising Chartered Accountant (see 29.2) in his professional capacity in any manner [Section 65(105)(s)]

29.1B Any service provided or to be provided to any person, by a Practising Cost Accountant (see 29.3) in his professional capacity in any manner   [Section 65(105)(t)]

29.1C Any service provided or to be provided to any person, by a Practising Company Secretary (see 29.4) in his professional capacity in any manner [Section 65(105)(u)]

29.2  “Practising Chartered Accountant” means a person who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provisions of the Chartered Accountants Act, 1949 and includes any concern engaged in rendering services in the field of chartered accountancy [Section 65(83)]

29.3  “Practising Cost Accountant” means a person who is a member of the Institute of Cost and Works Accountants of India and is holding a certificate of practice granted under the provisions of the Cost and Works Accountants Act, 1959 and includes any concern engaged in rendering services in the field of cost accountancy [Section 65(84)]

29.4  “Practising Company Secretary” means a person who is a member of the Institute of Company Secretaries of India and is holding a certificate of practice granted under the provisions of the Company Secretaries Act, 1980 and includes any concern engaged in rendering services in the field of company secretaryship [Section 65(85)]

What is covered

Service by a Practising Chartered Accountant/Cost Accountant/Company Secretary in his professional capacity.

Verification of books, accounting procedure and recording, certification, management consultancy, acting as liquidator, trustee all taxable.

What is not covered?

Authorship, directorship, teaching, preparation of electricity bills etc are not taxable as not provided under professional capacity.

What is covered under different head?

Services of electricity billing and related services to electricity distribution company not taxable as not in professional capacity (This may get covered under BAS, but borderline case).

Valuation

Tax is payable on reimbursement of expenses incurred while providing professional service.

Exemptions

Services provided by practising CA/CWA/CS in his professional capacity to a client, relating to representing before any statutory authority in the course of proceedings initiated under any law for the time being in force, by way of issue of notice, are exempt from service tax. (Notification No. 25/2006-ST dated 13-7-2006).

Other issues

Accounting Code - Service Tax : 00440092, 096 and 100 Payment of interest, penalty, etc. : 00440093, 097 and 101 (CA, CWA and CS respectively)

Rule for determining export or import of service : 3(ii)

When the tax was levied

16-10-1998.

What is liable to tax

30.1 Any service provided or to be provided to any person, by a real estate agent (see 30.2) in relation to real estate  [Section 65(105)(v)]

30.2  ‘Real Estate Agent’ means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant (see 30.3) [Section 65(88)]

30.3 ‘Real Estate Consultant’ means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate [Section 65(89)]

What is covered

Service in relation to sale, purchase, leasing or renting, of real estate. Services of Real estate consultant.

Advice, consultancy or technical assistance relating to real estate.

Other issues

Accounting Code - Service Tax : 00440104. Payment of interest, penalty, etc. : 00440105.

Rule for determining export or import of service : 3(i)

When the tax was levied

1-4-2000.

What is liable to tax

31.1 Any service provided or to be provided to any person, by a rent-a-cab scheme operator (see 31.2) in relation to the renting of a cab (see 31.3) [Section 65(105)(o)]

31.2  ‘Rent-a-cab scheme operator’ means any person engaged in the business of renting of cabs (see 31.3) [Section 65(91)]

31.3 "Cab" means— (i) a motorcab (see 31.4)  or (ii) a maxicab (see 31.5)  or (iii) any motor vehicle (see 31.6) constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward.

Provided that the maxicab referred to in sub-clause (ii) or motor vehicle referred to in sub-clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of cab [Section 65(20)]

31.4 ‘Motor cab’ means any motor vehicle constructed or adapted to carry not more than 6 passengers excluding driver, for hire or reward [Section 2(25) of Motor Vehicles Act, 1988]

31.5 “Maxi cab” has the meaning assigned to it in section 2(22) of the Motor Vehicles Act, 1988 (see 31.7) [Section 65(70)]

31.6 Motor Vehicle has the meaning assigned to it in section 2(28) of Motor Vehicles Act (see 31.8) [section 65(73)].

31.7 ‘Maxi cab’ means any motor vehicle constructed or adapted to carry more than 6 passengers, but not more than 12 passengers, excluding the driver, for hire or reward [Section 2(22) of Motor Vehicles Act, 1988] (These vehicles are more popularly known as vans, sumo etc).

31.8 ‘Motor vehicle’ means any mechanically propelled vehicle adapted for use upon roads, whether the power or propulsion is transmitted thereto from internal or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle run on fixed rails or a vehicle of special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty five cubic centimeters [section 2(28) pf Motor Vehicles Act].

What is covered

If a driver is provided with cab, it is still rent-a-cab service

Service is taxable even if provided on sub-contract basis.

Providing buses, maxicab to companies for transport of their employees or children of employees is taxable.

What is not covered?

Renting of Maxicab or motor vehicle rented for use by an educational body (other than a commercial training or coaching centre) is not  taxable [However, motor cab, even if rented to an educational body, is leviable to service tax].

Schools providing buses for transport of the students are not taxable, whether the buses are owned by the school or are hired from outside

Ambulances are not meant for carrying passengers for hire or reward. Hence, service tax liability does not arise.

Valuation

Service tax is payable only on 40% of the gross amount charged by the operator for providing taxable service, if the Rent-a-cab operator does not avail Cenvat credit.

Tax should not be payable on parking charges, toll fees etc. recovered from customer as this is not part of ‘rent-a-cab’ service.

Other issues

Accounting Code - Service Tax : 00440048. Payment of interest, penalty, etc. : 00440049.

Rule for determining export or import of service : 3(ii)

When the tax was levied

1-6-2007.

What is liable to tax

32.1 Any service provided or to be provided; to any person, by any other person in relation to renting of immovable property (see 32.2) for use in the course or furtherance of business or commerce  [Section 65(105)(zzzz)]

Explanation 1.- For the purposes of this sub-clause, “immovable property” includes -

1. building and part of a building, and the land appurtenant thereto;

2. land incidental to the use of such building or part of a building;

3. the common or shared areas and facilities relating thereto; and

4. in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate,

but does not include-

1. vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;

2. vacant land, whether or not having facilities clearly incidental to the use of such vacant land;

3. land used for educational, sports, circus, entertainment and parking purposes; and

4. building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.

Explanation 2. - For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce [Section 65(105)(zzzz)]

32.2 “Renting of immovable property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include -

1. renting of immovable property by a religious body or to a religious body; or

2. renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching center (see 32.3);

Explanation 1 – For the purposes of this clause, “for use in the course or furtherance of business or commerce” includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings.

Explanation 2 – For the removal of doubts, it is hereby declared that for the purposes of this clause “renting of immovable property” includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property [Section 65(90a)]

32.3 ‘Commercial training or coaching centre’ means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force  [section 65(27)].

What is covered

Only renting for use in business or commerce covered and not renting for residential purposes.

Renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce taxable.

Use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings is covered.

Renting includes allowing use of space on non-exclusive basis.

Lease of factory by lessor to lessee is taxable.

Plant and Machinery permanently attached to earth is part of ‘immovable property’ but not machinery attached to earth only for beneficial use.

What is not covered?

Renting of vacant land, land used for educational, sports, circus, entertainment and parking purposes; and building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities are not taxable. However renting for commercial coaching classes is taxable.

Renting of immovable property by a religious body or to a religious body; or renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching center is excluded.

Renting of theatre by theatre owner to distributor of film is not taxable

Valuation

Deduction of property tax will be allowed from value in respect of property tax actually paid (and not on payable basis). Deduction will be on pro rata basis. Service tax is payable only on rent actually received from service receiver.

Construction service is not input service?

As per para No. 096.01 / 04.01.08 of CBE&C circular dated 4-1-2008, Construction service is not ‘input service’ for service of ‘renting of immovable property and hence its Cenvat credit is not available [highly disputable issue. Validity seems doubtful].

Service tax on Renting of immovable property held invalid

Levy of service tax on renting of immovable property has been held in Home Solution Retail India Ltd. v. UOI (2009) 20 STT 129 (Del HC DB), with reason that there is no value addition. There is no decision about constitutional validity. It is easily possible for Government to get over the decision by making retrospective amendment. Hence, advisable to continue payment of taxes.

Whether separate exemption is available in case of renting of property jointly owned

The phrase used in the notification No. 6/2005-ST dated 1-3-2005 is 'exempts taxable services of aggregate value not exceeding ten lakh rupees'. Thus, the exemption is 'qua service' and not 'qua service provider'. In this case, service is one and indivisible, though there may be more than one service providers. Hence, in my view, in such cases, separate exemption to each co-owner will not be available.

Other issues

Accounting Code - Service Tax : 00440406. Payment of interest, penalty, etc. : 00440407.

Rule for determining export or import of service : 3(i)