SUPPORT SERVICES OF BUSINESS OR COMMERCE
Statutory Definition of Service liable to tax
When the tax was levied: 1-5-2006.
What is liable to tax
1 Any service provided or to be provided; to any person, by any other person, in relation to support services of business or commerce [see 2], in any manner [Section 65(105)(zzzq)]
2 “Support services of business or commerce” means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
Explanation -For the purposes of this clause, the expression ‘infrastructural support services’ includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security[Section 65(104c)].
Coverage & Service liable to tax
What is covered
BPO type services
Infrastructure support
Business Centers.
Services provided by shipping companies to postal department of mail handling.
Service of distribution of electricity (issue is arguable).
What is not covered?
Legal services not taxable
Screening of movie by theatre owner is not a support service
Contract hatching of eggs not taxable.
Only support or assistance activity covered, independent activity on its own accord not taxable under this head.
Other issues
Accounting Code - Service Tax: 00440366.
Payment of interest, penalty, etc.: 00440367.
Rule for determining export or import of service: 3(iii)
________________________________________________________
CARGO HANDLING SERVICE
Statutory Definition of Service liable to tax
When the tax was levied: 16-8-2002.
What is liable to tax
1 Any service provided or to be provided to any person, by a cargo handling agency in relation to cargo handling services [see 2] [Section 65(105)(zr)]
2 ‘Cargo handling service’ means loading, unloading, packing or unpacking of cargo and includes,— (a) cargo handling services provided for freight in special containers or for noncontainerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight; and
(b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include, handling of export cargo or passenger baggage or mere transportation of goods [section 65(23)]
Coverage & Service liable to tax
What is covered
Cargo handling for freight, services in container freight terminal, CFS, packing with transportation
Movers and packers service.
What is not covered?
Handling of export cargo or passenger baggage
Mere handling of coal or iron ore in mines is not ‘cargo handling’ [May be taxable under mining service].
Stevedoring (loading and unloading) in port is cargo handling service and not port service. If it is for export goods, there is no service tax.
Material loading and unloading incidental to transport of goods is not‘cargo handling’.
Cargo handling in port is ‘cargo handling service’ and not ‘port service’
What is covered under different head?
Mere transportation is under Goods Transport Agency (GTA) service.
Supply of labour will be under manpower recruitment and supply service.
Storage of empty containers will be taxable under ‘Storage and Warehousing Service’.
Valuation
Tax not on transportation charges if charged on actual basis [strong prima facie view of Tribunal]
Exemptions
Cargo handling services relating to agricultural produce or goods intended to be stored in a cold storage are exempt - Notification No. 10/2002-ST dated 16-8-2002.
Other issues
Accounting Code - Service Tax: 00440189. Payment of interest, penalty, etc.: 00440190.
Rule for determining export or import of service: 3(ii)
________________________________________________
CLEARING AND FORWARDING AGENT
Statutory Definition of Service liable to tax
When the tax was levied : 16-7-1997.
What is liable to tax
1 Any service provided or to be provided to any person, by a clearing and forwarding agent (see 2) in relation to clearing and forwarding operations in any manner [Section 65(105)(j)].
2 “Clearing and forwarding agent” means any person who is engaged in providing any service, either directly or indirectly, connected with clearing and forwarding operations in any manner to any other person and includes a consignment agent [Section 65(25)].
Coverage & Service liable to tax
What is covered
Both clearing and forwarding operations required. Only clearing or only forwarding service is not sufficient.
Receiving goods, warehousing and dispatch, preparing invoices on behalf of Principal.
Services of coal merchants, who are acting as buyer’s agents
Providing marketing and product support services.
What is not covered?
Consignment Agent, who has right to sale goods on behalf of Principal, is not C&F Agent (even if definition of C&F Agent includes ‘consignment agent’) [He may get covered under BAS]
Simple buying and selling of goods.
What is covered under different head?
Service of ICD and CFS are taxable under ‘storage and warehousing’ services.
Simple storage service is taxable under ‘storage and warehousing’ services.
Mere procuring or booking orders for the Principal by an agent on commission basis would not be ‘Clearing and forwarding Agent service’. It will go under BAS.
Service of commission agent will be taxable under Business Auxiliary Service.
Valuation
Tax only on commission, not on reimbursable expenses like godown rent, loading/unloading, freight, telephone, rent, salary etc.
Other issues
Accounting Code - Service Tax: 00440045.
Payment of interest, penalty, etc. : 00440046.
Rule for determining export or import of service: 3(ii)
_____________________________________________________
CLEANING ACTIVITY
Statutory Definition of Service liable to tax
When the tax was levied: 16-6-2005.
What is liable to tax
1 Any service provided or to be provided to any person, by any other person, in relation to cleaning activity [see 2] [section 65(105)(zzzd)].
2 “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[Section 65(24b)]
Coverage & Service liable to tax
What is covered
Cleaning services such as disinfecting, exterminating or sterilising of objects or premises provided to commercial or industrial building or premises.
What is not covered?
Cleaning of goods i.e. movable property.
Cleaning of residential buildings and premises.
Cleaning services in relation to agriculture, horticulture, animal husbandry or dairying
Other issues
Accounting Code - Service Tax: 00440318.
Payment of interest, penalty, etc.: 00440319.
Rule for determining export or import of service: 3(ii)
___________________________________________________
Club or association
Statutory Definition of Service liable to tax
When the tax was levied: 16-6-2005.
What is liable to tax
1 Any service provided or to be provided to its members, by any club or association [see 2] in relation to provision of services, facilities or advantages for a subscription or any other amount [section 65(105)(zzze)].
2 “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) anybody 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 [section 65(25a)].
Coverage & Service liable to tax
What is covered
Services, facilities or advantages to members of club or for a subscription or a charge.
Holiday resort provide facility of accommodation to its members on time sharing basis.
What is not covered?
Association engaged in public service and which are of a charitable, religious or political nature are not taxable.
‘Charitable purpose’ includes relief to poor, education, medical relief and the advancement of any other object of general public utility, but does not include a purpose which relates exclusively to religious teaching or worship.
Body established by or under law, trade union, promotion of agriculture, horticulture or animal husbandry, press or media are not taxable.
Trade or industrial associations should not be taxable.
Valuation
Service tax will be payable on life membership fees.
Amount charged for food or beverages is not taxable.
Exemptions
Services of housing societies or Resident Welfare Associations to their members are exempt if the monthly contribution is less than Rs 3,000 -Notification No. 8/2007-ST dated 01-03-2007.
Other issues
Accounting Code - Service Tax: 00440322.
Payment of interest, penalty, etc.: 00440323.
Rule for determining export or import of service : 3(ii)
__________________________________________________
COMMERCIAL TRAINING OR COACHING CENTRE
Statutory Definition of Service liable to tax
When the tax was levied: 1-7-2003.
What is liable to tax
1 Any service provided or to be provided to any person, by a commercial training or coaching center [see 2] in relation to commercial training or coaching [see 3] [Section 65(105)(zzc)]
2 ‘Commercial training or coaching centre’ means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force[section 65(27)].
3 ‘Commercial training or coaching’ means any training or coaching provided by a commercial training or coaching centre [section 65(26)].
Coverage & Service liable to tax
What is covered
Only private coaching or training services are covered.
Computer training or coaching Institutes are liable to service tax.
Coaching imparted to students of standards 1 to 9 taxable.
Postal or interactive online coaching is taxable.
What is not covered?
Training or coaching is taxable – not ‘education’ which is broader.
Teaching in Government recognised institutes will not be a taxable service.
A society registered under Societies Act is not liable as it is not‘commercial’ coaching institute and hence not taxable [Department has not accepted this view]
Pre-school coaching not taxable.
Training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law.
Services provided by recognised colleges for training of competitive examinations or entrance tests not taxable.
Home tuitions not taxable.
Training provided by employer free not taxable but if outside agency provides service, it will be taxable.
Continuous education programmes for professional development and/or creating awareness of latest developments but not to prepare the candidates or not to impart skills etc. is not commercial training. These are not taxable.
What is covered under different head?
Valuation
Service tax is not payable on value of material supplied [Department has not accepted this view]
Exemptions
Commercial training which forms essential part of course leading to recognised certificate/diploma exempt - Notification No. 10/2003-ST dated 20-6-2003.
Vocational and recreational training Institutes are exempt - Notification No. 24/2004-ST dated 10-9-2004.
Other issues
Accounting Code - Service Tax : 00440229. Payment of interest, penalty, etc. : 00440230.
Rule for determining export or import of service : 3(ii)
_________________________________________________
COMMERCIAL OR INDUSTRIAL CONSTRUCTION SERVICE
Statutory Definition of Service liable to tax
When the tax was levied
Tax on commercial or industrial construction service taxable w.e.f. 10-9-2004 and on residential complex w.e.f. 16-6-2005.
What is liable to tax
1 Any service provided or to be provided to any person, by any other person, in relation to commercial or industrial construction service [see 3] [Section 65(105)(zzq)]
2 Any service provided or to be provided to any person, by any other person, in relation to construction of complex [see 4 and 5] [section 65(105)(zzzh)]
3 “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 [Section 65(25b)].
4 ‘Construction of complex’ means— (a) construction of a new residential complex [see 5] 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 [Section 65(30a)]
5 “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 [Section 65(91a)].
Coverage & Service liable to tax
What is covered
Industrial and commercial construction and construction of residential complex having more than 12 residential units (flats/houses) is taxable.
Repairs, alteration, renovation of existing building is also subject to tax.
Approved plan and municipal regulations to determine whether building is for commerce or industry.
Post construction stand alone services relating to completion or finishing are taxable.
Sub-contractors providing the construction services (to main contractor or to any other person) will be liable to service tax.
Repairs of roads is taxable? [The issue is arguable].
What is not covered?
Services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.
Construction of educational, religious, Government buildings etc. not taxable, as it is not commercial or industrial construction.
Residential 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 - “personal use” includes permitting the complex for use as residence by another person on rent or without consideration.
Construction by builder or developer for personal use of customer (even if it is in residential complex).
Construction of one house in residential complex is not taxable if direct contract given by individual for residential purposes to builder or developer.
Construction of single house or residential complex with 12 or less than 12 residential units is not taxable.
What is covered under different head?
If Vat/sales tax is payable on goods involved in the contract, the service will be classifiable under ‘works contract’ service tax.
Maintenance or management of immovable property has been made taxable under ‘Maintenance or Repair Services’.
Valuation
Value is the gross value of taxable services.
However, any person providing taxable service of commercial or industrial construction or construction of complex can opt to pay service tax on 33% of gross amount charged. This is at the option of service provider This relaxation is not available if only completion and finishing services are provided - Notification No. 1/2006-ST dated 1-3-2006. The partial exemption is available only if the gross amount charged includes value of goods and materials supplied or provided or used by provider of the commercial or industrial construction of service for providing such service (Explanation to Notification No. 1/2006-ST]. However, value of land is not required to be added as it is neither goods nor material.
This simple method is not available in case the service provider provides only completion and finishing services (as in such cases, material content will be much less).
Exemptions
Construction and works contract services relating to port or other port are exempt. However, services of completion and finishing, repair, alteration, renovation, restoration, maintenance or repair provided in relation to existing port or other port are not exempt - Notification No. 25/2007-ST dated 22-5-2007
Other issues
Commercial or Industrial Construction - Date of Introduction: 10-9-2004. Accounting Code - Service Tax : 00440290.
Payment of interest, penalty, etc.: 00440291.
Construction of Residential Complex - Date of Introduction: 16-6-2005Accounting Code - Service Tax : 00440334.
Payment of interest, penalty, etc.: 00440335.
Rule for determining export or import of service (for both types of services) : 3(i)
________________________________________________
CONSULTING ENGINEER
Statutory Definition of Service liable to tax
When the tax was levied: 7-7-1997.
What is liable to tax
1 Any service provided or to be provided; to any person, by a consulting engineer (see 2) in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering including the discipline of computer hardware engineering
Explanation.— For the purposes of this sub-clause, it is hereby declared that services provided by a consulting engineer in relation to advice, consultancy or technical assistance in the disciplines of both computer hardware engineering and computer software engineering shall also be classifiable under this sub-clause [Section 65(105)(g)].
2 “Consulting engineer” means any professionally qualified engineer or any body corporate or any other firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to any person in one or more disciplines of engineering [Section 65(31)]
Coverage & Service liable to tax
What is covered
Technical assistance, training, software support are all ‘taxable services’
Services of Valuation taxable.
Only services provided by qualified engineer taxable.
What is not covered?
Royalty payment for use of technology and know-how cannot be equated with any services provided by foreign collaborator. Hence, no service tax is payable on such royalty payment.
Transfer of technical know-how is not a consulting engineering service.
Contract should be predominantly consultancy contract. An indivisible contract cannot be vivisected.
Sale of drawings is sale of goods and not service.
Contract for execution of a project is not consulting engineering service.
Execution services are not covered under this head.
Design and development of moulds for manufacture of parts required by customer is not ‘service rendered by consulting engineer’.
Contract for Operations and Maintenance of plant is not Management Consultancy service or consulting engineering service.
Exemption
Cess is payable under section 3 of Research and Development Cess Act, 1986, on transfer of technology. If such cess is payable, the consulting engineer will be granted exemption from service tax to the extent of cess paid - Notification No. 18/2002-ST dated 16-12-2002. Thus, if value of service is Rs 100, tax payable is Rs 12 and cess paid is Rs 5, net service tax actually payable will be Rs 7.
Other issues
Accounting Code - Service Tax: 00440057.
Payment of interest, penalty, etc.: 00440058.
Rule for determining export or import of service: 3(iii)
_________________________________________________
COSMETIC SURGERY AND PLASTIC SURGERY
Statutory Definition of Service liable to tax
When the tax was levied: 1-9-2009.
What is liable to tax
1 Any service provided or to be provided to any person, by any other person, in relation to cosmetic surgery or plastic surgery is a taxable service, but does not include any surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma [section 65(105)(zzzzk)]
Coverage & Service liable to tax
What is covered
Cosmetic surgery and plastic surgery undertaken to preserve or enhance physical appearance or beauty
Abdominoplasty (tummy tuck); bletharoplasty (eyelid surgery); mammoplasty; buttock augmentation and lift; rhinoplasty (reshaping of nose); otoplasty (ear surgery); Rhytidectomy (face lift); liposuction (removal of fat from the body); brow lift; cheek augmentation; facial implants; lip augmentation; forehead lift; cosmetic dental surgery; orthodontics; aesthetic dentistry; laser skin surfacing etc.
What is not covered?
Normal medical services
Reconstructive surgery undertaken to restore one’s appearance, anatomy or bodily functions affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma etc. These processes could be undertaken to correct impairment caused by burns, fractures or congenital abnormalities like cleft lip etc.
Other issues
Rule for determining export or import of service : 3(iii)
_______________________________________________
COURIER AGENCY
Statutory Definition of Service liable to tax
When the tax was levied: 1-11-1996.
What is liable to tax
1 Any service provided or to be provided to any person, by a courier agency (see 2) in relation to door-to-door transportation of time sensitive documents, goods (see 3) or articles [Section 65(105)(f)]
2 “Courier agency” means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles [Section 65(33)]
3 ‘Goods’ has the meaning assigned to it in section 2(7) of Sale of Goods Act [section 65(50)].
Coverage & Service liable to tax
What is covered
Door-to-door transportation of time sensitive documents, goods or articles.
‘Angadias’ who provide courier services are liable to pay service tax
Co-loaders i.e. persons providing services to courier liable (earlier circular withdrawn).
Transporters who are rendering “Express Cargo Service” for door delivery will be held as taxable since they deliver goods on ‘time sensitive’ basis on door to door basis.
What is not covered?
Basic postal services not taxable. However, courier services (Speed Post), insurance services (Postal Life Insurance), agency or intermediary services on commission basis which are also provided by other commercial organizations, are taxable - Ref Code 999.02/23.8.07 of CBE&C Circular No. 96/7/2007-ST dated 23-8-2007.
What is covered under different head?
Money transfer through courier will get covered under Banking and other Financial Services.
Franchisee not eligible for small service provider’s exemption
If courier service is provided through franchise, the franchisee may not be eligible for exemption available to small service providers as he is providing service under brand name of other.
Export and import of service
It is ‘export of service’, but not exempt as payment is received in Indian Rupees.
It is also ‘import of service’ since partly performed in India.
Other issues
Accounting Code - Service Tax : 00440014. Payment of interest, penalty, etc. : 00440018.
Rule for determining export or import of service : 3(ii)
____________________________________________
CUSTOM HOUSE AGENT
Statutory Definition of Service liable to tax
When the tax was levied: 15-6-1997.
What is liable to tax
1 Any service provided or to be provided to any person, by a custom house agent (see 2) in relation to the entry or departure of conveyances or the import or export of goods [section 65(105)(h)]
2 “Custom house agent” means a person licensed, temporarily or otherwise, under the regulations made under section 146(2) of the Customs Act, 1962 [Section 65(35)].
Coverage & Service liable to tax
What is covered
Only services in relation to ‘entry or departure of conveyances or the import or export of goods’ will be taxable.
What is not covered?
Expenses incurred on behalf of client.
Valuation
Activity of CHA relates to entry or departure of conveyances or import or export of goods any customs station. It cannot extend beyond it. Charges collected for freight, cartage, MSIL/JWG charges, examination charges, DO fees, Bill of Lading fee, CFS charges, storage and handling etc. do not pertain to CHA service. In case of charges collected by CHA for activities not related to CHA, he is not liable to pay service tax. Even if he earns profit on these activities, it is not includible in value of CHA services.
Payments made by CHA on behalf of client such as statutory levies (cess, customs duties, port dues etc.) and various reimbursable expenses are not to be included for computing service tax.
Other issues
Accounting Code - Service Tax : 00440026. Payment of interest, penalty, etc. : 00440027.
Rule for determining export or import of service : 3(ii)
Disclaimer: In this note, we have attempted to summarise some of the significant aspects to be kept in mind by readers to ensure compliance of tax laws and regulations. Readers should ensure to verify specific provisions as applicable to each case before taking any business decisions. It would be pertinent to note that some changes are being made to the tax laws and rules and regulations on a continuous basis by way of notifications, clarifications etc issued by the department based on their practical experience in implementing the legislation.
It may be noted that nothing contained in this note should be regarded as our opinion. Professional advice should be sought for applicability of legal provisions based on specific facts. Though reasonable efforts have been taken to avoid errors or omissions in this note we are not responsible for any liability arising to readers directly or indirectly due to any mis-statements or error contained in this note. It must be noted that the views expressed in the note are based on our understanding of the law and regulations as published by the Government authorities and we may or may not agree or subscribe to such views.
No comments:
Post a Comment