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Advertising Agency’s Services Tax on this service was introduced with effect from 1-11-1996.
As per section 65(2), “advertisement’’ includes any notice, circular, label, wrapper, document, hoarding or any other audio or visual representation made by means of light, sound, smoke or gas.
Airport Services Tax on this service was introduced with effect from 10-9-2004.
As per section 65(3c), ‘airport’ has the meaning assigned to it in section 2(b) of the Airports Authority of India Act, 1994. As per section 3(d), ‘airports authority’ means the Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 and also includes any person having the charge of management of an airport or a civil enclave . As per section 65(24a), ‘civil enclave’ has the meaning assigned to it in section 2(i) of the Airports Authority of India Act, 1994. Air Travel Agent’s Services Tax on this service was introduced with effect from 1-7-1997.
It has been clarified that only GSA/IATA agents who issue tickets directly and get commission from airlines are liable to pay service tax. Sub-agents or sub-sub-agents who are not getting commission from airlines as also not making out tickets directly from airlines are not required to collect service tax and get registration - CCE, New Delhi letter dated 27.8.97 - 97 ELT T7. Tax is payable only on commission and other charges but relating to booking of passage for air travel. For example, if he provides service for procurement of passport, that service cannot be covered under this head. Simple method for payment of service tax - As per rule 6(7) of Service Tax Rules, the air travel agent has option to pay service tax @ 0.50% of basic fare in case of domestic booking and @ 1.00% of the basic fare in case of international bookings, of passage for travel by air, during any calendar month, instead of paying service tax at the rate prescribed in section 66, which is presently 10.2% w.e.f. 10-9-2004. [The percentage was 0.4% and 0.80% respectively upto 17-9-2004]. In addition, education cess @ 2% will be payable. Once the option is exercised, the option shall apply uniformly in respect of all bookings of passage for air travel, and the option cannot be changed during financial year under any circumstances. For the purpose of this option, 'basic fare' means that part of air fare on which commission is normally paid by airline to the air travel agent. [Rule 6(7) of Service Tax Rules]. Architect’s Services Tax on this service was introduced with effect from 16-10-1998
As per section 65(6), “Architect’’ means any person whose name is, for the time being, entered in the register of architects maintained under section 23 of the Architects Act, 1972 and also includes any commercial concern engaged in any manner, whether directly or indirectly, in rendering services in the field of architecture. Service tax is payable on gross amount charged for service excluding (a) value of goods and materials sold to customer/client while providing service (such exclusion is permissible only if Cenvat Credit on such goods and material is not taken) and (b) expenses incurred on behalf of client and recovered from him. Authorised Service Station Services Tax on this service was introduced with effect from 16-7-2001. Tax on service in relation to service or repair of Light Motor Vehicle (LMV) has been made effective w.e.f. 1-7-2003. The scope of service tax was extended to reconditioning or restoration of motor car, LMV and two wheeled motor vehicle w.e.f. 16-6-2005. As per section 65(105)(zo), any service provided to a customer, by an authorised service station, in relation to any service, repair, reconditioning or restoration of motor cars, light motor vehicles or two wheeled motor vehicles, in any manner, is a taxable service [The words reconditioning, restoration and LMV have been inserted w.e.f. 16-6-2005]. Only services provided by “authorised service station” are liable to service tax. As per section 65(9), “authorised service station” means any service station, or centre, authorised by any motor vehicle manufacturer, to carry out any service, repair, reconditioning or restoration of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer [The words reconditioning or restoration have been inserted w.e.f. 16-6-2005]. Thus, repairs of ‘motor vehicle’ other than motor cars, LMV and two wheelers are neither covered under ‘Authorised Service Station Services’ nor covered under ‘Maintenance or Repair Services’. Banking and other financial services Tax on this service was introduced with effect from 16.7.2001. Tax on banking and other financial services provided by body corporate (other than banking company, financial institution or NBFC) was introduced w.e.f. 16-8-2002. Tax on foreign exchange brokers was made effective from 1-7-2003. Following changes have been made vide Finance (No. 2) Act, 2004 w.e.f. 10-9-2004 (a) Services provided by commercial concern (other than banking company, financial institution, body corporate and foreign exchange broker) have been covered (b) Other financial services like issue of pay order, DD, L/C etc. have also been covered. Thus, banking and financial services provided by cooperative banks, proprietary concerns, partnership firms, HUF business, AOP, Societies etc. will be taxable w.e.f. 10-9-2004. As per section 65(105)(zm), any service provided to a customer, by a banking company or a financial institution including NBFC, or any other body corporate or commercial concern, in relation to banking and other financial services is a ‘taxable service’.
Beauty Treatment Services Tax on this service was introduced with effect from 16-8-2002. Scope of service was widened w.e.f. 16-6-2005, to cover all services provided by beauty parlours, including those of hair cutting, hair dyeing and hair dressing.
Department has clarified that plastic surgery/cosmetics surgery to improve appearance is ‘medical service’ and is not a taxable service. Service tax is payable on gross amount charged for service excluding (a) value of goods and materials sold to customer/client while providing service (such exclusion is permissible only if Cenvat credit on such goods and material is not taken) and (b) expenses incurred on behalf of customer and recovered from him. Broadcasting services Tax on this service was introduced with effect from 16-7-2001.
Widening of coverage - Broadcasting services will now include charges recovered by broadcasting agencies from multi-system operator (MSO) and provision of direct to home (DTH) signals to the customers [Amendment to section 65(105)(zk) w.e.f. 16-6-2005]. Amended definition has been given above. A broadcasting agency or organisation will be liable to pay service tax. As per section 65(16), ‘broadcasting agency or organisation’ means any agency or organisation engaged in providing service in relation to broadcasting in any manner. In case of a broadcasting agency or organisation having its head office situated in any place outside India, it includes its branch office or subsidiary or representative in India or any agent appointed in India or any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for program or collecting the broadcasting charges or permitting the rights to receive any form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator including multi-system operator or any other person on behalf of the said agency or organisation. [The words in italics inserted w.e.f. 16-6-2005]. Business Auxiliary Service Tax on this service was introduced with effect from 1-7-2003. Exemption granted to Commission Agents was withdrawn on 9-7-2004. The scope was widened by Finance (No. 2) Act, 2004 w.e.f. 10-9-2004, to cover (a) procurement of inputs goods on behalf of client (b) production of goods on behalf of client and (c) provision of services on behalf of client. More auxiliary services were added in Budget 2004 (d) Additions in incidental services. The extended coverage has become effective from 10-9-2004. Scope was expanded to service of ‘production or processing of goods for or on behalf of the client’ w.e.f. 16-6-2005. Definition of ‘inputs’ and ‘commission agent’ have been inserted w.e.f. 16-6-2005. Coverage similar to ‘residual services’ – The definition and scope of service is so vast that this service can be categorized as ‘residuary service’, similar to ‘TI-68’ i.e. residuary category of goods which was earlier included in Central Excise. Any service provided to a client, by a commercial concern in relation to business auxiliary service is a ‘taxable service’ [section 65(105)(zzb)].
Clauses (iv), (v) and (vi) were inserted and clause (vii) expanded, vide Finance (No. 2) Act, 2004 w.e.f. 10-9-2004, to cover (a) Procurement of inputs goods on behalf of client (b) production of goods on behalf of client and (c) provision of services on behalf of client (d) Incidental or auxiliary support services like issue of cheques, development of prospective customer or vendor, evaluation of vendor, management or supervision have been added to the definition. Extension of present coverage – Business Auxiliary Service will include production or processing of goods for or on behalf of the client. It is also clarified that ‘input’ means all goods or services intended for use by client. Definition of ‘commission agent’ has been given [Amendment to section 65(19) w.e.f. 16-6-2005]. Job work and Service Tax The wording of section 65(19)(v) as amended w.e.f. 16-6-2005 are - ‘any service in relation to production or processing of goods for, or on behalf of, the client’. Para 24.2 of MF(DR) circular No. B1/6/2005-TRU dated 27-7-2005 states as follows, “A point was raised whether ‘production of goods on behalf of the client’ covers situations where the service provider undertakes job work for the client. In view of the amendment, production or processing (not amounting to manufacture) done either for the client or on behalf of the client would be liable to service tax”. Earlier wording of section 65(19)(v) was ‘any service in relation to production of goods on behalf of client’. In the opinion of author, this did not cover simple ‘job work’, for reasons discussed later. Exclusions - The definition of Business Auxiliary Service specifically states that it does not cover any activity that amounts to ‘manufacture’ within the meaning of section 2(f) of Central Excise Act, 1944. There is no condition that excise duty should be paid or payable on such goods. As long as the process is ‘manufacture’, it is out of service tax net. Exemption if job work done where final product is dutiable. Luckily the rigours of possible duty liability on job work have been considerably reduced by exemption notification No. 8/2005-ST dated 1-3-2005. This notification exempts taxable service of production or processing of goods for, or on behalf of client, referred to in clause 65(19)(v) of Finance Act, 1994, from whole of service tax, if prescribed conditions are fulfilled. Basically, the notification exempts processing of goods where the goods after processing are returned back (‘returned’ itself means ‘sending back’!) to client (raw material supplier) for use in or in relation to manufacture of ‘other goods’ by the client. The ‘other goods’ should be such that appropriate duty should be payable on such goods. No service tax if job work results in ‘manufacture’. The exemption notification states that ‘production’ should not amount to ‘manufacture’ within meaning of section 2(f). This has raised fears in minds of job workers that if job work amounts to ‘manufacture’, service tax will be payable as exemption notification will not apply. This fear is incorrect as the definition of ‘Business Auxiliary Service’ itself says that it does not include any activity that amounts to ‘manufacture’ within the meaning of section 2(f) of Central Excise Act. Thus, if job work amounts to ‘manufacture’, it is out of purview of taxable service. Hence, question of giving ‘exemption’ does not arise. In short, if job work results in new and identifiable and marketable product, it is ‘manufacture’ and completely out of definition of ’Business Auxiliary Service’. It is ‘excluded service’, not ‘exempted service’. No tax will be payable. Commission Agent Explanation (a) to section 65(19) has been inserted w.e.f. 16-6-2005, which defines ‘commission agent’ as follows –
Definition of ‘Commission AGent’ has retrospective effect? – The explanation (a) to section 65(19) starts with words ‘for the removal of doubts, it is hereby declared’. Department may take a view that the explanation which defines ‘commission agent’ is only clarificatory and applies even to past transactions. We will have to see what view is taken by Tribunal and Courts, since mere calling it ‘explanation’ does not necessarily mean that it is only clarificatory. Exemptions from service tax on Business Auxiliary Services
Business Exhibition Services Tax on this service was introduced with effect from 10-9-2004.
Cable Services Tax on this service was introduced with effect from 16-8-2002. The services provided by multi-system operator have been covered vide Finance (No. 2) Act, 2004, w.e.f. 10-9-2004.
[reference to multi-system operator was inserted vide Finance (No. 2) Act, 2004].
Cargo Handling Agency Services Tax on this service was introduced with effect from 16-8-2002. As per section 65(105)(zr), any service provided to any person, by a cargo handling agency in relation to cargo handling services, is a ‘taxable service’.
Chartered Accountant/CS/ICWA Services Tax on this service was introduced with effect from 16-10-1998.
As per section 65(105)(s), any service provided to a client, by a Practising Chartered Accountant in his professional capacity in any manner, is a ‘taxable service’. As per section 65(105)(u), any service provided to a client, by a Practising Company Secretary in his professional capacity in any manner, is a ‘taxable service’. As per section 65(105)(t), any service provided to a client, by a Practising Cost Accountant in his professional capacity in any manner, is a ‘taxable service’. As per Notification No. 59/98-ST dated 16-10-1998, service tax is payable only on following services provided by PCA/PCS/PCWA –
If any service provided falls under any of aforesaid category, it will be taxable. Service provided other than those specified in notification 59/98-ST is exempt from service tax, unless that service falls under some another specified category. If a practising CA/CS/ICWA provides service which is taxable under other head which is taxable, he will be liable to service tax, e.g. if he provides services of man power recruitment, project consultancy, management consultancy, market research etc., these will be taxable [Explanation added w.e.f. 1-8-2002 to Notification No. 59/98-ST dated 16-10-1998. Earlier, all other services were exempt].
Cleaning activity This service has been newly covered under service tax by Finance Act, 2005. The service is taxable w.e.f. 16-6-2005.
As per section 65(24b), "Cleaning activity" means cleaning, including specialised cleaning services such as disinfecting, exterminating or sterilising of objects or premises, of — (i) commercial or industrial buildings and premises thereof; or (ii) factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises thereof, - - but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying. Cleaning of residential buildings and premises has been excluded from the provisions. Cleaning services such as disinfecting, exterminating or sterilising of objects or premises have been included. Since the words used are ‘such as’, these are only illustrations, and any ‘cleaning’ of commercial or industrial buildings will get covered. However, ‘cleaning’ of goods i.e. movable property will not be taxable under this head. Though the word ‘machinery’ is used, considering the other accompanying words, it can cover only huge machinery and not small machines. Clearing & Forwarding Agent’s Services Tax on this service was introduced with effect from 16th July, 1997.
Meaning of ‘clearing and forwarding operations’ is not defined in the Act. Hence, the words have to be understood in the sense in which these are commercially understood. Clearing & Forwarding Agent will be liable.
All C&F agents covered - The C&F agents appointed by manufacturer of goods (both excisable or non-excisable), producers and distributors of goods and agents appointed for agricultural and mineral goods are all covered under the net of service tax. - CBE&C Circular No. B 43/7/97-TRU dated 11-7-1997 - parallel CCE, Madurai-2 TN 87/97 dated 14.7.1997.
Club or association’s Services The service is taxable w.e.f. 16-6-2005.
As per section 65(25a), "club or association" means any person or body of persons providing services, facilities or advantages, for a subscription or any other amount, to its members, but does not include— (i) any body established or constituted by or under any law for the time being in force; or (ii) any person or body of persons engaged in the activities of trade unions, promotion of agriculture, horticulture or animal husbandry; or (iii) any person or body of persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature; or (iv) any person or body of persons associated with press or media. Commercial or industrial construction service The title of service was ‘construction service’ and service was taxable w.e.f. 10-9-2004. Construction of new buildings or civil structure or part thereof and repair, alteration, or restoration of, or similar services in relation to, building or civil structure were taxable w.e.f. 10-9-2004. The scope of ‘construction service’ was widened and title of service was changed to ‘commercial or industrial construction service’ w.e.f. 16-6-2005. Commercial or industrial construction service will include (i) renovation of such building or civil structure (ii) post construction completion and finishing services for such building or civil structure; (iii) construction, repair, alteration, renovation or restoration of pipeline or conduits [section 65(25b) inserted w.e.f. 16-6-2005].
As per section 65(25b) (as inserted w.e.f. 16-6-2005), “commercial or industrial construction service” means— (a) construction of a new building or a civil structure or a part thereof; or (b) construction of pipeline or conduit; or (c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or (d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is— (i) used, or to be used, primarily for; or (ii) occupied, or to be occupied, primarily with; or (iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Note – The earlier definition in section 65(30a) (which was valid during the period 10-9-2005 to 16-6-2005) did not cover clauses (b) and (c) above. Present clause (d) was clause (b) in earlier definition. The earlier definition did not cover services relating to construction of pipeline or conduit. Earlier clause (b) [present clause (d)] did not cover ‘renovation’. Earlier, only construction of new buildings or civil structure or part thereof and repair, alteration, or restoration of, or similar services in relation to, building or civil structure were covered. Maintenance of all immovable property – Maintenance or management of immovable property has been made taxable under ‘Maintenance or Repair Services’ w.e.f. 16-6-2005. This covers all immovable property. Some civil constructions have been exempted from scope of ‘construction services’. However, its maintenance or management will get covered under ‘Maintenance or Repair Services’. Value of service Service tax is payable on gross amount charged for service provided or to be provided.
Commercial Training or Coaching Services Tax on this service was introduced with effect from 1-7-2003. As per section 65(105)(zzc), any service provided to any person, by a commercial training or coaching center in relation to commercial training or coaching, is a ‘taxable service’.
recognised institutes will not be a taxable service. Pre-school coaching has been specifically excluded from the definition.
No deduction for study material supplied by Institute – Service tax is not payable on that part of charges which represent cost of goods or material sold by service provider, as per notification No. 12/2003-ST dated 20-6-2003. - - However, in case of commercial training and coaching institutes, deduction will be available only to the sale value of standard text books, which are priced. Any study material or written text provided by the institute will be subjected to service tax, i.e. it will not be allowable as deduction – CBE&C circular No. 59/8/2003 dated 20-6-2003. Company Secretary’s Services Please see under ‘Chartered Accountant Services’. Computer Network Services Tax on this service was introduced with effect from 16-7-2001. The service is also termed as ‘on-line information and data base access or retrieval services’. As per section 65(105)(zh), any service provided to a customer, by a commercial concern, in relation to on-line information and database access or retrieval or both in electronic form through computer network, in any manner is a taxable service. As per section 65(75), “on-line information and database access or retrieval” means providing data or information, retrievable or otherwise, to a customer, in electronic form through a computer network. Construction of Residential Complex services This service has been newly covered under service tax by Finance Act, 2005. The service is taxable w.e.f. 16-6-2005.
As per section 65(30a) effective from 16-6-2005, ‘construction of complex’ means— (a) construction of a new residential complex or a part thereof; or (b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex. As per section 65(91a), "residential complex" means any complex comprising of— (i) a building or buildings, having more than twelve residential units; (ii) a common area; and (iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, - - located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. - - Explanation —For the removal of doubts, it is hereby declared that for the purposes of this clause,— (a) "personal use" includes permitting the complex for use as residence by another person on rent or without consideration (b) "residential unit" means a single house or a single apartment intended for use as a place of residence. The service is taxable only if it is provided by one person to another person. If the builder builds a residential complex on his own the service is not taxable, as one cannot provide service to oneself. If builder appoints a contractor to construct the flats, then services of contractor will be taxable [This view is supported by para 1 of circular No. 80/10/2004 in relation to commercial or industrial complex, as the principle is same]. Maintenance of all immovable property – Maintenance or management of immovable property has been made taxable under ‘Maintenance or Repair Services’ w.e.f. 16-6-2005. This covers all immovable property. Some civil constructions have been exempted from scope of ‘construction services’. However, its maintenance or management will get covered under ‘Maintenance or Repair Services’. Service tax is payable on gross amount charged for service provided or to be provided.
Consulting Engineer’s Services Tax on this service was introduced with effect from 7th July, 1997. Services in discipline of computer hardware engineering or software engineering have been specifically excluded by Finance (No. 2) Act, 2004, w.e.f. 10-9-2004.
[The words ‘but not in discipline of computer hardware engineering or software engineering’ have been inserted vide Finance (No. 2) Act, 2004]. Services provided by consulting engineer are taxable.
'Engineer' will include diploma as well as degree holder. Thus, mere provision of engineering services is not sufficient. The services are taxable only if these are provided by professionally qualified engineer. Convention Services Tax on this service was introduced with effect from 16-7-2001. As per section 65(105)(zc), any service provided to a client, by any commercial concern in relation to holding of convention, in any manner, is a taxable service. As per section 65(32), “convention” means a formal meeting or assembly which is not open to the general public, but does not include a meeting or assembly, the principal purpose of which is to provide any type of amusement, entertainment or recreation. Cost Accountant’s Services Please see under Chartered Accountant’s Services. Courier Services Tax on this service was introduced with effect from 1-11-1996.
The important elements of taxable service are – (a) Door-to-door transportation (b) Time sensitive and (c) documents, goods or articles.
Credit Rating Agency’s Services Tax on this service was introduced with effect from 16-10-1998. As per section 65(105)(x), any service provided to a client, by a credit rating agency in relation to credit rating of any financial obligation, instrument or security, is a ‘taxable service’.
Credit Rating Agency providing credit rating service to a client is liable. Custom House Agent’s services Tax on this service was introduced with effect from 15-6-1997.
Services of CHA in relation to entry/departure of conveyances of import/export of goods are taxable.
Dredging This service has been newly covered under service tax by Finance Act, 2005. The service is taxable w.e.f 16-6-2005.
As per section 65(36a) "dredging" includes removal of material including, silt, sediments, rocks, sand, refuse, debris, plant or animal matter in any excavating, cleaning, deepening, widening or lengthening, either permanently or temporarily, of any river, port, harbour, backwater or estuary. Activity of dredging consists of the excavation of material from sea, river or lake bed and putting the excavated material elsewhere for disposal. Dry Cleaning Services Tax on this service was introduced with effect from 16-8-2002. As per section 65(105)(zt), any service provided to a customer, by a dry cleaner in relation to dry cleaning, is a ‘taxable service’.
Dry cleaning includes tagging and inspection, pre-treatment, dry cleaning and post sorting. No tax is payable on wet cleaning, i.e. cleaning with water and water soluble detergents. Service tax is also not payable on job of dyeing, darning etc. – CBE&C circular No. B.11/1/2002-TRU dated 1-8-2002. [Of course, tagging, inspection and sorting is done in wet cleaning also, but it does not mean that service tax is payable on those activities]. Erection, Commissioning and Installation Service Tax on this service was introduced with effect from 1-7-2003. Initially, the ‘erection’ services were not included. These were later covered vide Finance (No. 2) Act, 2004, with effect from 10-9-2004. Scope of taxable services has been widened w.e.f. 16-6-2005 to include specified installation services provided by wiremen and plumbers. As per section 65(105)(zzd), any service provided to a customer, by a commissioning and installation agency in relation to erection, commissioning or installation, is a ‘taxable service’. As per section 65(39a) (as amended w.e.f. 16-6-2005), "erection, commissioning or installation" means any service provided by a commissioning and installation agency, in relation to,— (i) erection, commissioning or installation of plant, machinery or equipment; or (ii) installation of— (a) electrical and electronic devices, including wirings or fittings therefor; or (b) plumbing, drain laying or other installations for transport of fluids; or (c) heating, ventilation or air-conditioning including related pipe work, ductwork and sheet metal work; or (d) thermal insulation, sound insulation, fire proofing or water proofing; or (e) lift and escalator, fire escape staircases or travelators; or (f) such other similar services [services mentioned in clause (ii) have been newly added w.e.f. 16-6-2005]. ERECTION OF CIVIL STRUCTURE NOT COVERED – Though the word ‘erection’ is a general word, it is used in association with commissioning and installation. Hence, ‘erection’ cannot cover ‘erection of civil structure’. Service tax is payable on gross amount charged for service excluding (a) value of goods and materials sold to customer/client while providing service (such exclusion is permissible only if Cenvat credit on such goods and material is not taken) and (b) expenses incurred on behalf of customer and recovered from him. Service tax in case of composite contract In case of composite contract, if service provider is unable to give break up, value of erection, commissioning or installation may, at the option of assessee, be taken as 33% of gross amount of contract and service tax will be payable accordingly. The gross amount charged will include value of plant, machinery, equipment, parts and other material sold by the commissioning and installation agency during the course of providing commissioning or installation service. However, the service provider will not be given further deduction is respect of material used – Notification No. 19/2003-ST dated 21-8-2003. Payment of service tax on basis of 33% of gross amount is optional to assessee. Thus, service provider can give break up of material cost and commissioning/installation charges. In such case, he will be liable to pay service tax only on the charges relating to commissioning and installation, plus profit attributable to that activity. He should be entitled to reasonable profit on both the activities and profit should be apportioned on a reasonable and fair basis. It will be highly unfair to apportion entire profit to commissioning/installation alone. Event Management Services Tax on this service was introduced with effect from 16-8-2002.
As per section 65(40) ‘event management’ means any service provided in relation to planning, promotion, organising or presentation of any arts, entertainment, business, sports or any other event and includes any consultation provided in this regard. Service tax is payable by ‘event manager’. As per section 65(41), ‘event manager’ means any person who is engaged in providing any service in relation to event management in any manner. Fashion Designing Services Tax on this service was introduced with effect from 16-8-2002. As per section 65(105)(zv), any service provided to any person, by a fashion designer in relation to fashion designing, is a ‘taxable service’.
Tax is payable by fashion designer. As per section 65(44), ‘fashion designer’ means any person engaged in providing services in relation to fashion designing. Forward Contract service Tax on this service was introduced with effect from 10-9-2004.
As per section 65(46a), ‘forward contract’ has the meaning assigned to it in section 2(c) of the Forward Contracts (Regulation) Act, 1952. As per section 65(89a), ‘recognised association’ has the meaning assigned to it in clause (j) of section 2 of the Forward Contracts (Regulation) Act, 1952. As per section 65(89b), ‘registered association’ has the meaning assigned to it in clause (jj) of section 2 of the Forward Contracts (Regulation) Act, 1952.
Franchise Services Tax on this service was introduced with effect from 1-7-2003.Scope of service is considerably widened w.e.f. 16-6-2005, to cover all agreements by which, the franchisor grants representational rights to franchisee to sell or manufacture goods or provide services identified with the franchisor.
As per section 65(47) (as amended w.e.f. 16-6-2005), "franchise" means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. Some well known examples of franchise are – Coca-Cola, Pepsi, NIIT, Aptech, McDonald etc. Tax is payable by franchisor. ‘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)]. General Insurance Services Tax on this service was introduced with effect from 1-7-1994.
Any service in relation to ‘general insurance business’ is taxable. As per section 65(49), “general insurance business’’ has the meaning assigned to it in section 3(g) of the General Insurance Business (Nationalisation) Act, 1972. As per section 65(58), “insurer’’ means any person carrying on the general insurance business in India. As per section 65(80), “policy-holder’’ has the meaning assigned to it in section 2(2) of the Insurance Act, 1938.
Goods Transport Agency Services – See under ‘Transport of Goods by Road Services’. Health and Fitness Services Tax on this service was introduced with effect from 16-8-2002. As per section 65(105)(zw), any service provided to any person, by a health club and fitness centre in relation to health and fitness services, is a ‘taxable service’.
Health club and fitness centre is liable to pay service tax. As per section 65(52), ‘health club and fitness centre’ means any establishment, including a hotel or resort, providing health and fitness service. Insurance Auxiliary services Tax on this service was introduced with effect from 16.7.2001. As per section 65(105)(zy), any service provided to a policy holder or insurer by an actuary, or intermediary or insurance intermediary or insurance agent, in relation to insurance auxiliary services concerning life insurance business, a taxable service. As per section 65(105)(zl), any service provided to a policy holder or insurer by an actuary, or intermediary or insurance intermediary or insurance agent, in relation to insurance auxiliary services concerning general insurance business, is a taxable service.
As per section 65(58), ‘insurer’ means any person carrying on the general insurance business or life insurance business in India. As per section 65(54), “Insurance Agent” has the meaning assigned to it in section 2(10) of the Insurance Act, 1938. As per section 65(80), “policy-holder’’ has the meaning assigned to it in section 2(2) of the Insurance Act, 1938. Following persons are liable to pay service tax. Actuary or intermediary liable to pay tax - Tax is payable by an actuary, or intermediary or insurance intermediary or insurance agent. As per section 65(56) “intermediary or insurance intermediary” has the meaning assigned to it in section 2(1)(f) of the Insurance Regulatory and Development Authority Act, 1999. As per section 65(1) “actuary” has the meaning assigned to it in section 2(1) of the Insurance Act, 1938. The intermediaries like loss assessors, insurance surveyors, insurance consultants will be liable to service tax. However, exception has been made in case of insurance agents. Tax payable by insurance company on behalf of insurance agent – In respect of services provided by an insurance agent, any person carrying on the general insurance business in India or life insurance business in India is the ‘person liable for paying the service tax’. [section 68(2) of Finance Act, 1994 read with rule 2(1)(d)(iii) of Service Tax Rules, 1994]. [Thus, the insurance company is liable to pay service tax and not the insurance agent]. The service tax is payable on commission payable to the insurance agent In respect of other service providers i.e. insurance surveyors and loss assessors, actuaries and insurance consultants, service is provided mainly to insurance company and service tax is payable by the service provider himself. – CBE&C letter No. B.II/I/2000-TRU dated 9-7-2001. [Thus, exception is only in case of insurance agent, where service tax is payable by the insurance company and not the insurance agent]. Intellectual Property Services Tax on this service was introduced with effect from 10-9-2004. As per section 65(105)(zzr), any service provided to any person, by the holder of intellectual property right, in relation to intellectual property service is ‘taxable service’. As per section 65(55b) (amended w.e.f. 16-6-2005, ‘intellectual property service’ means, - (a) transferring temporarily; or (b) permitting the use or enjoyment of, any intellectual property right. [The words ‘whether permanently or otherwise’ were replaced by ‘temporarily’ w.e.f. 16-6-2005]. Section 65(55b) has been amended w.e.f. 16-6-2005 to make it clear that only temporary transfer of any intellectual property right (IPR) will be subject to service tax. Permanent transfer will not be taxable. Even otherwise, CBE&C, vide earlier circular dated 10-9-2004 had clarified that permanent transfer of IPR will not be taxable under service tax provisions. Meaning of intellectual property right and intellectual property services - As per section 65(55a), “intellectual property right” means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright. Holder of intellectual property right (excluding copyright holder) is liable to pay service tax. Interior Decorator’s Services Tax on this service was introduced with effect from 16-10-1998.
Interior decorator is liable to pay service tax. As per section 65(59), “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 man-made or otherwise and includes a landscape designer. Internet Café Services Tax on this service was introduced with effect from 1-7-2003.
Service provided by internet café is taxable. Internet café means a commercial establishment providing facility for accessing internet [section 65(57)]. Life Insurance Business Services Tax on this service was introduced with effect from 16-8-2002. The service was exempt vide Notification No. 9/2002-ST dated 1-8-2002. The exemption has been withdrawn w.e.f. 10-9-2004.
As per section 65(61), ‘life insurance business’ has the meaning assigned to it in section 2(11) of Insurance Act, 1938. As per this definition, ‘life insurance business’ means business effecting contracts of insurance of human life. It includes disability and double or triple indemnity accident benefit, granting of annuities, superannuation allowances etc. As per section 65(80), “policy-holder’’ has the meaning assigned to it in section 2(2) of the Insurance Act, 1938. The insurer (i.e. insurance company) is liable to pay service tax. As per section 65(58), ‘insurer’ means any person carrying on the general insurance business or life insurance business in India.
Showing risk portion separately is quite cumbersome. Hence, as per rule 6(7A), the insurance company will have to actually pay tax at flat rate of 1% of the gross premium without showing any break-up. If policy is purely risk coverage, then service tax will be 10% of premium. Mailing list compilation and mailing Service This service has been newly covered under service tax by Finance Act, 2005. The service is taxable w.e.f. 16-6-2005.
As per section 65(63a) "mailing list compilation and mailing" means any service in relation to— (i) compiling and providing list of name, address and any other information from any source; or (ii) sending document, information, goods or any other material in a packet, by whatever name called, by addressing, stuffing, sealing, metering or mailing; - -; for, or on behalf of, the client. Maintenance or Repair ServicesTax on this service was introduced with effect from 1-7-2003. Scope has been considerably widened w.e.f. 16-6-2005.
As per section 65(64) (as amended w.e.f. 16-6-2005), "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) maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle; or (b) maintenance or management of immovable property. Maintenance or Management of immovable property - Maintenance or management of immovable property is taxable. What is meant by ‘management’ of immovable property is not clear. Only time will tell what is likely to get covered. However, considering other words used in the definition, only ‘management’ which is akin or similar to ‘maintenance’ should get covered. This is on the principles of ‘Noscitur a sociis’, i.e. a word is known by its associate words. Service provided to a customer by any person in relation to maintenance or repair is taxable. Service tax is payable only on service portion and not on the cost of parts or other material sold to customer during the course of providing maintenance or repair service. [exclusion 1 clause (vi) to section 67]. Management Consultant’s Services Tax on this service was introduced with effect from 16-10-1998.
As per section 65(65), “management consultant” means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualising, devising, development, modification, rectification or upgradation of any working system of any organisation. Mandap Keeper’s Services Tax on this service was introduced with effect from 1-7-1997.
As per section 65(66), “mandap’’ means any immovable property as defined in section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixtures, light fittings and floor coverings therein let out for consideration for organising any official, social or business function. Section 3 of Transfer of Property Act, 1882, really does not define ‘Immovable Property’. The section only states that ‘immovable property’ does not include timber, growing crops or grass. As per section 65(24), “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. Any ‘Hall’ or ‘permanent structure can be ‘Mandap’ - It may be noted that the ‘mandap’ should be a permanent structure (though in common parlance, generally, ‘mandap’ is presumed to be a temporary structure). Thus, a permanent building like marriage hall, meeting hall, theatre or even hotels used for holding social, business or official functions will be a ‘mandap’. Mandap keeper providing taxable services is liable to pay service tax. As per section 65(67), “mandap keeper’’ means a person who allows temporary occupation of a mandap for consideration for organising any official, social or business function. If a mandap keeper or hotel provides catering services of full meals, tax will be payable only on 60% of the gross amount charged to client. Manpower Recruitment or Supply Agency’s services Tax on this service was introduced with effect from 7-7-1997. The words ‘or supply’ have been inserted by Finance Act, 2005 w.e.f. 16-6-2005.
As per section 65(68) (amended w.e.f. 16-6-2005), "manpower recruitment or supply agency" means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to a client. Thus, labour contractors will get covered under the amended definition w.e.f. 16-6-2005. Service tax is payable on gross amount charged for service excluding expenses incurred on behalf of client and recovered from him. Market Research Agency’s Services Tax on this service was introduced with effect from 16-10-1998.
Tax is payable by ‘market research agency’. As per section 65(69), “Market Research Agency’’ means any commercial concern engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customised and syndicated research services. Membership of club or Association services See under ‘Club and Association’s Services’. Opinion poll services Tax on this service was introduced with effect from 10-9-2004.
As per section 65(75a), ‘Opinion poll’ means any service designed to secure information on public opinion regarding social, economic, political or other issues. Opinion Poll Agency is liable to pay service tax. As per section 65(75b), “opinion poll agency” means any person engaged in providing any service in relation to opinion poll. On-line information and database access or retrieval services See under ‘Computer Network Services’. Other port services These services are discussed under ‘Port Services’. Outdoor Caterer’s Services Service-tax was earlier imposed on outdoor caterer (w.e.f. 1st August 1997) but was withdrawn on 2nd June 1998. The service tax is now reimposed on outdoor caterer services vide Finance (No. 2) Act, 2004, with effect from 10-9-2004. The scope has been widened w.e.f. 16-6-2005 to include catering from a place or premises provided, by way of tenancy or otherwise, by the person receiving such services . As per section 65(105)(zzt), any service provided to a client, by an outdoor caterer is a ‘taxable service’. As per section 65(76a) as amended w.e.f. 16-6-2005, “outdoor caterer” means a caterer 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. [The words in italics have been inserted w.e.f. 16-6-2005]. Expansion of definition – The words ‘but including a place provided by way of tenancy or otherwise by the person receiving such services’ have been inserted w.e.f. 16-6-2005. Service tax is payable by a caterer. As per section 65(24), “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.
Packaging Activity services This service has been newly covered under service tax by Finance Act, 2005. The service has become taxable w.e.f. 16-6-2005.
As per section 65(76b), "packaging activity" means packaging of goods including pouch filling, bottling, labelling or imprinting of the package, but does not include any packaging activity that amounts to 'manufacture' within the meaning of clause (f) of section 2 of the Central Excise Act, 1944. The intention seems to be to cover specialised packaging services like packing for transport etc. If packaging results in manufacture of new Article, excise duty will become payable. Pandal or Shamiana Contractor’s service The service tax on pandal or shamiana services was imposed from 1st August 1997 but was withdrawn on 2nd June 1998. The service tax has been reimposed in the Finance Act, 2004 with effect from 10-9-2004.
Service tax is payable on gross amount charged for service excluding (a) value of goods and materials sold to customer/client while providing service (such exclusion is permissible only if Cenvat credit on such goods and material is not taken) and (b) expenses incurred on behalf of client and recovered from him.
Photography Services Tax on this service was introduced with effect from 16-7-2001.
As per section 65(78), “photography” includes still photography, motion picture photography, laser photography, aerial photography or fluorescent photography. A photography studio or agency is liable to pay service tax.
Service tax is payable on gross amount charged for service excluding expenses incurred on behalf of customer and recovered from him. As per clause (ii) of Explanation 1 to section 67, value of taxable service does not include the cost of unexposed photography film, unrecorded magnetic tape or such other storage devices if any, sold to the client during the course of providing the service. Port Services Tax on major ports was introduced with effect from 16-7-2001 The tax was extended to minor ports with effective from 1-7-2003.
As per section 65(82), “port service” means any service rendered by a port or other port or any person authorised by such port or other port, in any manner, in relation to a vessel or goods. As per section 65 (118), “vessel” has the meaning assigned to it in section 2(z) of the Major Port Trusts Act, 1963. As per that section, ‘vessel’ includes anything made for the conveyance, mainly by water, of human beings or of goods and a caisson. Thus, it includes all types of transport conveyances by water like ships, barges, boats, tankers, etc. Practising CA/ICWA/CS See under Chartered Accountant’s Services. Programme Production Services Tax on this service was introduced with effect from 10-9-2004.
As per section 65(86a), “programme” means any audio or visual matter, live or recorded, which is intended to be disseminated by transmission of electro-magnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations. Rail Travel Agent’s Services Tax on this service was introduced with effect from 16-8-2002.
As per section 65(87), ‘rail travel agent’ means any person engaged in providing any service connected with booking of passage for travel by rail (Thus, he need not be authorised agent of Railways). Person need not be authorised agent. Service tax is payable even if the booking agent is not registered with railways. Service tax is payable both on booking of tickets and cancellation charges. – CBE&C circular No. B.11/1/2002-TRU dated 1-8-2002.
Real Estate Agent’s Services Tax on this service was introduced with effect from 16th October, 1998.
As per section 65(88), ‘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. As per section 65(89), ‘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. Tax is payable by real estate agent as well as real estate consultant. Rent-a-cab services Tax on this service was payable w.e.f. 16th July, 1997. Tax on this service was exempted w.e.f. 28-2-1999 upto 31.3.2000, but exemption has not been continued. Thus, service tax is payable by rent-a-cab scheme operator w.e.f. 1-4-2000.
As per section 65(91), rent-a-cab scheme operator means any person engaged in the business of renting of cabs. Tax is payable by rent-a-cab scheme operator. Service tax is payable only on 40% of the gross amount charged by the operator for providing taxable service. The exemption is available only if - (a) Rent-a-cab operator does not avail Cenvat of duty paid on inputs and capital goods (He can avail Cenvat of input services) and (b) He does not avail benefit of notification No. 12/2003-ST dated 20-6-2003 – Notification No. 9/2004-ST dated 9-7-2004. As per notification No. 12/2003-ST, no service tax is payable on value of goods and materials sold by service provider to recipient of service. Thus, if a rent-a-cab operator avails exemption under 9/04-ST, he cannot avail deduction on account of goods and material supplied. Scientific or technical consultancy services Tax on this service was introduced with effect from 16-7-2001.
As per section 65(92), “scientific or technical consultancy” means any advice, consultancy, or scientific or technical assistance, rendered in any manner, either directly or indirectly, by a scientist or a technocrat, or any science or technology institution or organisation, to a client, in one or more disciplines of science or technology.
Security Agency’s Services Tax on this service was introduced with effect from 16th October, 1998.
As per section 65(94), “Security Agency’’ means any commercial concern engaged in the business of rendering services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity, whether of a personal nature or otherwise, including the services of providing security personnel. A security agency is liable to pay service tax. Site formation and clearance, excavation and earthmoving and demolition This service has been newly covered under service tax by Finance Act, 2005. The service has become taxable w.e.f. 16-6-2005.
As per section 65(97a), "site formation and clearance, excavation and earth moving and demolition" includes, — (i) drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or (ii) soil stabilization; or (iii) horizontal drilling for the passage of cables or drain pipes; or (iv) land reclamation work; or (v) contaminated top soil stripping work; or (vi) demolition and wrecking of building, structure or road, - - but does not include such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies. Sound Recording services Tax on this service was introduced with effect from 16-7-2001. Scope was widened w.e.f. 16-6-2005. As per section 65(105)(zj), any service provided to a client, by a sound recording studio or agency in relation to any kind of sound recording is a taxable service. As per section 65(98) (as amended w.e.f. 16-6-2005), "sound recording" means recording of sound on any media or device including magnetic storage device, and includes services relating to recording of sound in any manner such as sound cataloguing, storing of sound and sound mixing or re-mixing or any audio post-production activity. As per section 65(63), “magnetic storage device” includes wax blanks, discs or blanks, strips or films for the purpose of original sound recording. As per section 65(99), “sound recording studio or agency” means any commercial concern engaged in the business of rendering any service relating to sound recording. Steamer Agent’s Services Tax on this service was introduced with effect from 15th June, 1997.
As per section 65(100), “steamer agent’’ means any person who undertakes, either directly or indirectly, - (i) to perform any service in connection with the ship’s husbandry or dispatch including the rendering of administrative work related thereto; or (ii) to book, advertise or canvass for cargo for or on behalf of a shipping line; or (iii) to provide container feeder services for or on behalf of a shipping line. Steamer Agent is liable to pay service tax. Stock broker’s Services Tax on services of stock brokers was introduced with effect from 1st July, 1994. Services provided by sub-broker have been made taxable w.e.f. 10-9-2004.
[The words ‘to an investor’ were replaced by words ‘to any person’ by Finance (No. 2) Act, 2004. Thus, service provided by stock broker to sub-broker or any other person will now be taxable].
As per section 65(90), “recognised stock exchange’’ has the meaning assigned to it in section 2(f) of the Securities Contracts (Regulation) Act, 1956. As per section 65(93), “securities’’ has the meaning assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956). As per explanation 1 clause (a) to section 67, the value of taxable services shall include the aggregate of the commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any sub-broker. Storage and warehousing of goods Services Tax on this service was introduced with effect from 16-8-2002.
As per section 65(102), ‘storage and warehousing’ includes storage and warehousing services for goods, including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage. A storage or warehouse keeper is liable to pay service tax. Survey and exploration of mineral, oil and gas services Tax on this service was introduced with effect from 10-9-2004.
As per section 65(104a), “survey and exploration of mineral” means geological, geophysical or other prospecting, surface or sub-surface surveying or map making service, in relation to location or exploration of deposits of mineral, oil or gas. Survey and map-making This service has been newly covered under service tax by Finance Act, 2005. The service has become effective from 16-6-2005.
As per section 65(104b), "survey and map-making" means geological, geophysical or any other prospecting, surface, sub-surface or aerial surveying or map-making of any kind, but does not include survey and exploration of mineral. Technical inspection and certification Services Tax on this service was introduced with effect from 1-7-2003.
‘Technical inspection and certification’ means inspection or examination of goods or process or material or any immovable property to certify that such goods or process or material or immovable property qualifies or maintains the specified standards, including functionality or utility or quality or safety or any other characteristic or parameters, but does not include any service in relation to inspection and certification of pollution levels [section 65(108)]. Thus, pollution testing has been excluded from service tax. Technical inspection and certification agency is liable to pay service tax. ‘Technical inspection and certification agency’ means any agency or person engaged in providing service in relation to technical inspection and certification [section 65(109)]. Technical testing and analysis Services Tax on this service was introduced with effect from 1-7-2003.
‘Technical testing and analysis’ means any service in relation to physical, chemical, biological or any other scientific testing or analysis of goods or material or any immovable property, but does not include any testing or analysis service provided in relation to human beings or animals [section 65(106)]. - - Thus, medical testing and diagnosis has been excluded from service tax. Technical testing and analysis agency is liable to pay service tax.
Telephone, pager, fax, telex, telegraph or leased circuit The services are taxable from following dates – (a) Telephone service is taxable w.e.f. 1-7-1994. (b) Pager service is taxable w.e.f. 1.11.1996. (c) Telex, telegraph, fax or leased circuit services are taxable w.e.f. 16.7.2001. Any service provided to a subscriber, by the telegraph authority in relation to following is a taxable service - Ø Telephone connection [section 65(105)(b)]. Ø Pager [section 65(105)(c)]. Ø Leased Circuit [section 65(105)(zd)] Ø Communication through telegraph [section 65(105)(ze)] Ø Communication through telex [section 65(105)(zf)] Ø Facsimile (FAX) Communication [section 65(105)(zg)] ‘Telegraph Authority’ has the meaning assigned to it in clause (6) of section 3 of the Indian Telegraph Act, 1885 and includes a person who has been granted a licence under the first proviso to section 4(1) of that Act. ‘Telegraph Authority’ is liable to pay service tax. As per section 65(11), ‘telegraph authority’ has the meaning assigned to it in section 3(6) of Indian Telegraphs Act, 1885 and includes a person who has been granted a licence under the first proviso to section 4(1) of that Act. Rule 2(d) of Service Tax Rules provides that Director General of Post & Telegraphs, Chairman-cum MD of MTNL and any person who has been granted license under section 4(1) of Indian Telegraphs Act will be liable to pay service tax. Tour operator's Services Tax on these services was brought w.e.f. 1.9.97, but was later exempted upto 31.3.2000, vide notification dated 18-7-1998. The exemption was not continued and hence tax on these services became payable w.e.f. 1.4.2000. The scope has been considerably widened by Finance (No. 2) Act, 2004 to cover all package tours provided by any tour operator (so far, only tours operated in tourist vehicle covered by a permit were taxable). This has become effective from 10-9-2004.
‘Tour’ means a journey from one place to another irrespective of the distance between such places [section 65(113)]. As per section 65(115) [as amended by Finance Act, 2004], ‘tour operator’ means any person engaged in the business of planning, scheduling, organising or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 or the rules made thereunder.
Tax only on 10% amount when operator only provides booking services - Where tour operator provides services only for booking or arranging accommodation, abatement of 90% from gross amount is provided, if the Bill includes cost of such accommodation, i.e. tax is only on 10% of gross amount. The exemption is available only if - (a) Tour operator does not avail Cenvat of duty paid on inputs and capital goods (He can avail Cenvat of input services) and (b) He does not avail benefit of notification No. 12/2003-ST dated 20-6-2003 and (c) The Bill/challan is inclusive of cost of accommodation – - Notification No. 40/97-ST dated 22-8-1997. Transport of Goods by Air Service Tax on this service was introduced with effect from 10-9-2004.
Services provided by an aircraft operator (i.e. commercial concern like an airlines) in relation to transport of goods by an aircraft falls under this category. Thus, in addition to the actual air-freight charges, all charges collected towards storing, handling, loading/unloading (done in relation to air transportation of cargo) by an airlines are also chargeable to this levy – MF(DR) circular No. B2/8/2004-TRU dated 10-9-2004. As per section 65(3b), ‘Aircraft operator’ means any commercial concern which provides the service of transport of goods by aircraft. Transport of Goods by Road Service As per section 65(105)(zzp) of Finance Act, 1994, any service provided to a customer, by a goods transport agency, in relation to transport of goods by road in a goods carriage is a ‘taxable service’.
The basic scheme is that the goods transport agency (GTA) will be preparing the consignment note and invoice containing details as required. Service tax payable will also be shown on the invoice/bill/challan prepared by goods transport agency. However, payment of service tax will be made by the consignor or consignee who is actually paying the freight, if the consignor/consignee paying freight is a company, body corporate, cooperative society, registered society, factory, partnership or dealer registered under Central Excise. Even in other cases, i.e. where freight is paid by individual, HUF or unregistered partnership firm, the service tax is payable by individual/HUF/unregistered partnership firm, if the consignor/consignee is factory, body corporate, society etc. [This may not be the intention, but this is as per clear provisions of rule 2(1)(d)(v) of Service Tax Rules]. Exemption has been given to small consignments where freight is upto Rs 750 per consignee per carriage or Rs 1,500 per goods carriage. Similarly, transport of fruits, vegetables, eggs or milk by road has been fully exempted from service tax. Though general rate of service tax is 10% plus 2% education cess, actual service tax payable is 25% of normal service tax, i.e. 2.5% plus 2% education cess (total 2.55%) of gross amount charged from customer for providing taxable service. There is no general service tax on all goods transport. Service tax is payable only when service is provided by ‘goods transport agency’, as defined in the Act. Finance Minister Shri P Chidambaram, in his budget speech on 8-7-2004 (para 149 of speech), had stated as follows, ‘58 services have been brought under the net so far. I propose to add some more this year. These are business exhibition services, airport services, services provided by transport booking agents, transport of goods by air, survey and exploration services, opinion poll services, - - - - -. I may clarify that there is no intention to levy service tax on truck owners or truck operators’. Thus, intention of Government is to tax only services provided by transport booking agents. This aspect should be kept in mind while interpreting various provisions in the Act and Rules. Meaning of ‘goods transport agency’ As per section 65(50b), ‘goods transport agency’ means any commercial concern which provides service in relation to transport of goods by road and issues consignment note, by whatever name called. Thus, essential requirement are – (a) Service must be in relation to transport of goods by road and (b) Service should be provided by ‘commercial concern’ and (c) The service provider must have issued consignment note by whatever name called. Person liable to pay service tax
In brief, if the goods are booked on ‘freight to pay’ basis, the consignee will be liable if he falls under any one of aforesaid categories. If goods are booked ‘freight paid’ basis, consignor will be liable, if he falls under one of aforesaid categories. Body corporate – As per section 65(14), ‘body corporate’ has the meaning assigned to it in section 2(7) of the Companies Act, 1956.
It is necessary to show education cess separately in invoice/challan. In the TR-6 challan also, the education cess is required to be shown separately under different account head.
Department, vide MF(DR) circular No. B1/6/2005-TRU dated 27-7-2005 para 31.1 has clarified as follows – ‘An abatement of 75% in taxable service of goods transport by road is available on the condition that the goods transport agency has not availed credit on inputs and capital goods used for providing taxable service and has also not availed benefit of notification No. 12/2003-Service Tax dated 20.6.2003 (vide Notification No. 32/2004-Service Tax, dated 3.12.2004). It has been requested that in cases where liability for tax payment is on the consignor or consignee, the procedure as to how it should be confirmed by such consignor or consignee that the goods transport agency has not availed credit or benefit of notification No. 12/2003-Service Tax may be prescribed. In such cases it is clarified that a declaration by the goods transport agency in the consignment note issued, to the effect that neither credit on inputs or capital goods used for provision of service has been taken nor the benefit of notification No. 12/2003-Service Tax has been taken by them may suffice for the purpose of availment of abatement by the person liable to pay service tax’. This circular can be taken only as directory and law does not say so. In fact, as per law, service tax payable should be shown separately in the invoice issued by Goods Transport Agency. It should be sufficient if such a declaration is separately obtained. Often, when transporter is located at far off places, obtaining such declaration will be impossible. It does not mean that the law abiding service recipient should suffer for law breaking and negligent service provider. Since the words used are ‘may’, it is not mandatory requirement, i.e. other evidence should suffice, as follows – (a) If the goods transport agency charges only 25% service tax in his invoice/challan, it can be taken as his declaration that he is fulfilling the conditions of exemption. (b) If there is no declaration on consignment note, a letter may be taken from Goods Transport Agency, wherever possible, that he is fulfilling the conditions of exemption. (c) In many cases, getting such declaration either on consignment note or a separate letter is not possible, particularly when transporter is in one city and consignee is at a far of place. In such cases, assessee may face notices and demands. Really, rule requires GTA to show service tax in his invoice. Why consignor/consignee should suffer because GTA does not follow rules? Assessment of tax is responsibility of GTA. It cannot be thrust on service receiver under guise of ‘reverse charge’. Transport of goods other than water, through pipeline or other conduit This service has been newly covered under service tax by Finance Act, 2005. The service is taxable w.e.f. 16-6-2005.
If a service provider supplies goods through pipeline (e.g. cooking gas or fuel), there is no separate charge for transport of goods through pipeline. The main contract is for supply of goods and supply through pipeline is only incidental to main contract. Such service cannot be a ‘taxable service’, as an indivisible contract cannot be vivisected. Travel Agent’s Services Services provided by air travel agents and rail travel agents were already taxable. Tax on other travel agents has been introduced with effect from 10-9-2004.
As per section 65(115a), ‘travel agent’ means any person engaged in providing any service connected with booking of passage for travel but does not include air travel agent and rail travel agent. Taxability is the service of booking of passage for travel. The booking of passengers for travel is only taxable and booking of any other item like cargo, animals are not taxable under this category. These services will cover large number of persons who are involved in booking of tickets for various tours conducted by tour operator, booking of bus tickets plying on daily basis between two given destinations, booking of car etc. When our service can be treated as ‘export of service’ for exemption of service tax ? In case of travel agent’s services, the service will be ‘export of service’ only if - (a) the service is at least partly performed outside India (b) The service is delivered outside India and used in business or for any other purpose outside India and (c) Payment for such service is received in convertible i.e. free foreign exchange. A travel agent will be liable to service tax.
Underwriter’s Services Tax on this service was introduced with effect from 16-10-1998.
As per section 65(117), “Underwriting’’ has the meaning assigned to it in rule 2(g) of SEBI (Underwriters) Rules, 1993.
The underwriter has to be registered with SEBI. He has to execute an agreement with the client. The underwriting commission varies between 0.5% to 2.5%, depending on category of underwriter. Underwriter is liable to pay service tax. As per section 65(116), “Underwriter’’ has the meaning assigned to it in rule 2(f) of SEBI (Underwriters) Rules, 1993. As per those rules, ‘underwriter’ means a person who engages in the business of underwriting of a issue of securities of a body corporate. Video production agency services Tax on this service was introduced with effect from 16-7-2001.The scope was expanded w.e.f. 16-6-2005 to include recording of any programme, event or function on any media and includes post production services.
As per section 65(120) (as amended w.e.f. 16-6-2005), "video-tape production" means the process of any recording of any programme, event or function on a magnetic tape or on any other media or device and includes services relating thereto such as editing, cutting, colouring, dubbing, title printing, imparting special effects, processing, adding, modifying or deleting sound, transferring from one media or device to another, or undertaking any video post-production activity, in any manner. Service is taxable only if it is provided to a client. Tax is payable by video production agency.
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