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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.
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