RENT-A-CAB SERVICES
Statutory Definition of Service liable to tax
When the tax was levied: 1-4-2000.
What is liable to tax
1 Any service provided or to be provided to any person, by a rent-a-cab scheme operator (see 2) in relation to the renting of a cab (see 3) [Section 65(105)(o)]
2 ‘Rent-a-cab scheme operator’ means any person engaged in the business of renting of cabs (see 3) [Section 65(91)]
3 "Cab" means—
(i) a motorcab (see 4) or
(ii) a maxicab (see 5) or
(iii) any motor vehicle (see 6)
constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward.
Provided that the maxicab referred to in sub-clause (ii) or motor vehicle referred to in sub-clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of cab [Section 65(20)]
4 ‘Motor cab’ means any motor vehicle constructed or adapted to carry not more than 6 passengers excluding driver, for hire or reward [Section 2(25) of Motor Vehicles Act, 1988]
5 “Maxi cab” has the meaning assigned to it in section 2(22) of the Motor Vehicles Act, 1988 (see 7) [Section 65(70)]
6 Motor Vehicle has the meaning assigned to it in section 2(28) of Motor Vehicles Act (see 8) [section 65(73)].
7 ‘Maxi cab’ means any motor vehicle constructed or adapted to carry more than 6 passengers, but not more than 12 passengers, excluding the driver, for hire or reward [Section 2(22) of Motor Vehicles Act, 1988](These vehicles are more popularly known as vans, sumo etc).
8 ‘Motor vehicle’ means any mechanically propelled vehicle adapted for use upon roads, whether the power or propulsion is transmitted thereto from internal or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle run on fixed rails or a vehicle of special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty five cubic centimeters [section 2(28) of Motor Vehicles Act].
Coverage & Service liable to tax
What is covered
If a driver is provided with cab, it is still rent-a-cab service
Service is taxable even if provided on sub-contract basis.
Providing buses, maxicab to companies for transport of their employees or children of employees is taxable.
What is not covered?
Renting of Maxicab or motor vehicle rented for use by an educational body (other than a commercial training or coaching centre) is not taxable [However, motor cab, even if rented to an educational body, is leviable to service tax].
Schools providing buses for transport of the students are not taxable, whether the buses are owned by the school or are hired from outside
Ambulances are not meant for carrying passengers for hire or reward. Hence, service tax liability does not arise.
Valuation
Service tax is payable only on 40% of the gross amount charged by the operator for providing taxable service, if the Rent-a-cab operator does not avail Cenvat credit.
Tax should not be payable on parking charges, toll fees etc. recovered from customer as this is not part of ‘rent-a-cab’ service.
Other issues
Accounting Code - Service Tax: 00440048.
Payment of interest, penalty, etc.: 00440049.
Rule for determining export or import of service: 3(ii)
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RENTING OF IMMOVABLE PROPERTY
Statutory Definition of Service liable to tax
When the tax was levied: 1-6-2007.
What is liable to tax
1 Any service provided or to be provided; to any person, by any other person in relation to renting of immovable property (see 2) for use in the course or furtherance of business or commerce [Section 65(105)(zzzz)]
Explanation 1.- For the purposes of this sub-clause, “immovable property” includes –
1. building and part of a building, and the land appurtenant thereto;
2. land incidental to the use of such building or part of a building;
3. the common or shared areas and facilities relating thereto; and
4. in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate,
but does not include-
1. vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;
2. vacant land, whether or not having facilities clearly incidental to the use of such vacant land;
3. land used for educational, sports, circus, entertainment and parking purposes; and
4. building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.
Explanation 2. - For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce [Section 65(105)(zzzz)]
2 “Renting of immovable property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include -
1. renting of immovable property by a religious body or to a religious body; or
2. renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching center (see 3);
Explanation 1 – For the purposes of this clause, “for use in the course or furtherance of business or commerce” includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings.
Explanation 2 – For the removal of doubts, it is hereby declared that for the purposes of this clause“renting of immovable property” includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property [Section 65(90a)]
3 ‘Commercial training or coaching centre’ means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force [section 65(27)].
Coverage & Service liable to tax
What is covered
Only renting for use in business or commerce covered and not renting for residential purposes.
Renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce taxable.
Use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings is covered.
Renting includes allowing use of space on non-exclusive basis.
Lease of factory by lessor to lessee is taxable.
Plant and Machinery permanently attached to earth is part of ‘immovable property’ but not machinery attached to earth only for beneficial use.
What is not covered?
Renting of vacant land, land used for educational, sports, circus, entertainment and parking purposes; and building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities are not taxable. However renting for commercial coaching classes is taxable.
Renting of immovable property by a religious body or to a religious body; or renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching center is excluded.
Renting of theatre by theatre owner to distributor of film is not taxable
Valuation
Deduction of property tax will be allowed from value in respect of property tax actually paid (and not on payable basis). Deduction will be on pro ratabasis. Service tax is payable only on rent actually received from service receiver.
Construction service is not input service?
As per para No. 096.01 / 04.01.08 of CBE&C circular dated 4-1-2008, Construction service is not ‘input service’ for service of ‘renting of immovable property and hence itsCenvat credit is not available [highly disputable issue. Validity seems doubtful].
Service tax on Renting of immovable property held invalid
Levy of service tax on renting of immovable property has been held inHome Solution Retail India Ltd. v. UOI (2009) 20 STT 129 (Del HC DB), with reason that there is no value addition. There is no decision about constitutional validity. It is easily possible for Government to get over the decision by making retrospective amendment. Hence, advisable to continue payment of taxes.
Whether separate exemption is available in case of renting of property jointly owned
The phrase used in the notification No. 6/2005-ST dated 1-3-2005 is'exempts taxable services of aggregate value not exceeding ten lakh rupees'. Thus, the exemption is 'qua service' and not 'qua service provider'. In this case, service is one and indivisible, though there may be more than one service providers. Hence, in my view, in such cases, separate exemption to each co-owner will not be available.
Other issues
Accounting Code - Service Tax: 00440406.
Payment of interest, penalty, etc.: 00440407.
Rule for determining export or import of service: 3(i)
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SALE OF ADVERTISING SPACE OR TIME
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 sale of space or time for advertisement, in any manner; but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation
Explanation 1.- For the purposes of this sub-clause, “sale of space or time for advertisement” includes, -
(i) providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet;
(ii) selling of time slots on radio or television by a person, other than a broadcasting agency or organisation, and
(iii) aerial advertising.
Explanation 2. — For the purposes of this sub-clause, "print media"means,—
(i) "newspaper" as defined in section 1(1) of the Press and Registrationof Books Act, 1867;
(ii) "book" as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867 (see 2), but does not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes [section 65(105)(zzzm)].
2 ‘Book’ includes every volume, part or division of a volume, and pamphlet, in any language, and every sheet of music, map, chart or plan separately printed. - - ‘newspaper’ means any printed periodical work containing public news or comment on public news. - - ‘Printing’ includes cyclostyling and printing by lithography [Section 1(1) of Press and Registration of Books Act, 1867]
Coverage & Service liable to tax
What is covered
Sale of space or time for advertisement.
Providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet.
Selling of time slots on radio or television by a person, other than a broadcasting agency or organisation
Aerial advertising
Sale of space in yellow pages, business directories
What is not covered?
Sale of space for advertisement in print media. "Print media"means "newspaper" and "book". However, service tax is payable on advertisements in business directories, yellow pages and trade catalogues.
Other issues
Accounting Code - Service Tax: 00440354.
Payment of interest, penalty, etc.: 00440355.
Rule for determining export or import of service: 3(iii)
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SECURITY AGENCY’S SERVICES
Statutory Definition of Service liable to tax
When the tax was levied: 16-10-1998.
What is liable to tax
1 Any service provided or to be provided to any person, by a security agency (see 2) in relation to the security of any property or person, by providing security personnel or otherwise and includes the provision of services of investigation, detection or verification of any fact or activity[Section 65(105)(w)]
2 “Security Agency” means any person 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 [Section 65(94)]
Coverage & Service liable to tax
What is covered
Security of any movable or immovable property or person.
Investigation, detection or verification of any fact or activity.
Safe deposit locker (can also come under Banking and Financial Services, if provided by Bank).
Security Services and other commercial services provided by police department taxable.
Services of Central Industrial Security Force, Police, CBI are also taxable, if charged and paid for.
Services provided by ex-service men or charitable organisations also taxable.
Valuation
Service tax is payable on gross amount including ESI, PF and wages of guards. The amount should be inclusive of service tax and then back calculations should be made.
Other issues
Accounting Code - Service Tax: 00440108.
Payment of interest, penalty, etc.: 00440109.
Rule for determining export or import of service: 3(ii)
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SITE FORMATION AND CLEARANCE, EXCAVATION AND EARTHMOVING AND DEMOLITION
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 site formation and clearance, excavation and earthmoving and demolition (see 2) and such other similar activities [section 65(105)(zzza)]
2 “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 [Section 65(97a)]
Coverage & Service liable to tax
What is covered
Services in relation to site formation and clearance, excavation and earthmoving and demolition and such other similar activities.
Drilling, boring and core extraction services for construction, geophysical, geological or similar purposes
Soil stabilization.
Horizontal drilling for the passage of cables or drain pipes
Land reclamation work.
Contaminated top soil stripping work.
Demolition and wrecking of building, structure or road
What is not covered?
Services in relation to agriculture, irrigation, watershed development.
Drilling, digging, repairing, renovating or restoring of water sources or water bodies.
Exemptions
Services of the site formation and clearance, excavation and earthmoving and demolition and such other similar activities, provided to any person by any other person in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports or other ports, from the whole of service tax [Notification No. 17/2005-ST dated 7-6-2005].
Other issues
Accounting Code - Service Tax: 00440306.
Payment of interest, penalty, etc.: 00440307.
Rule for determining export or import of service: 3(i)
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SPONSORSHIP SERVICE
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 anybody corporate or firm, by any person receiving sponsorship (see 2), in relation to such sponsorship, in any manner, but does not include services in relation to sponsorship of sports events [Section 65(105)(zzzn)]
2 “Sponsorship” includes naming an event after the sponsor, displaying the sponsor’s company logo or trading name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition; but does not include any financial or other support in the form of donations or gifts, given by the donors subject to the condition that the service provider is under no obligation to provide anything in return to such donors [Section 65(99a)]
Coverage & Service liable to tax
What is covered
Naming an event after the sponsor, displaying the sponsor’s company logo or trading name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition.
Service tax is leviable only when the sponsor is anybody corporate or firm.
What is not covered?
Sponsorship of sports events is excluded
Any financial or other support in the form of donations or gifts, given by the donors is not taxable, if the service provider is under no obligation to provide anything in return to such donors.
Reverse charge - Person liable for payment of tax
In case of sponsorship service provided to a body corporate or firm located in India, the body corporate or firm receiving such sponsorship service will be liable to pay service tax [rule 2(1)(d)(vii)] (organizer of event not liable).
If the recipient of sponsorship service is located outside India, service taxis required to be paid by the service provider who is in India and not by the recipient.
Other issues
Accounting Code - Service Tax: 00440358.
Payment of interest, penalty, etc.: 00440359.
Rule for determining export or import of service: 3(iii)
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STOCK BROKER’S SERVICES
Statutory Definition of Service liable to tax
When the tax was levied: 1-7-1994. Service tax on sub-broker exempted w.e.f. 1-9- 2009.
What is liable to tax
1 Any service provided or to be provided to any person, by a stock-broker (see 2) in connection with the sale or purchase of securities (see 3) listed on recognised stock exchange (see 4) [Section 65(105)(a)]
2 “Stock-broker” means a person who has either made an application for registration or is registered as a stock-broker or sub-broker, as the case may be, in accordance with the rules and regulations made under the Securities and Exchange Board of India Act, 1992 [Section 65(101)] .
3 “Securities” has the meaning assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) [Section 65(93)]
4 “Recognised stock exchange” has the meaning assigned to it in section 2(f) of the Securities Contracts (Regulation) Act, 1956 [Section 65(90)]
Coverage & Service liable to tax
What is covered
Service by a stock-broker to any person in connection with the sale or purchase of securities listed on recognised stock exchange.
Jobbing and arbitrance is taxable.
Service provided by one broker to other taxable.
What is not covered?
No service tax if no brokerage collected from client.
Services of sub-broker are not liable under ‘stock broker’ service w.e.f. 1-9-2009. They have also been exempted under Business Auxiliary Service also vide Notification No. 31/2009-ST dated 1-9-2009. Thus, they are completely out of service tax net.
Valuation
The value of taxable services shall include 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.
No tax on turnover charges payable to stock exchange.
Transaction charges collected and paid over to stock exchange are not part of value of taxable service.
Handling charges for delivery of scrips are not part of value of taxable service.
Other issues
Accounting Code - Service Tax: 00440008.
Payment of interest, penalty, etc.: 00440009.
Rule for determining export or import of service: 3(ii)
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STORAGE AND WAREHOUSING OF GOODS SERVICES
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 storage or warehouse keeper in relation to storage and warehousing (see 2) of goods (see 3) [Section 65(105)(zza)] .
2 ‘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 [Section 65(102)]
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
Services in relation to storage and warehousing of goods, including liquids and gases.
Storage outside the port premises is taxable.
Storage of empty containers taxable.
What is not covered?
Service provided for storage of agricultural produce or any service provided by a cold storage excluded.
Cloakroom facilities provided at railway stations, bus stations etc. not taxable.
Storage of own goods (sugar) as per statutory requirement of keeping buffer stock is not rendering of service, even if Government is giving subsidy.
What is covered under different head?
Mere renting of premises is not ‘storage and warehousing’ service. It will be taxable under renting of immovable property service.
Other issues
Accounting Code - Service Tax: 00440193.
Payment of interest, penalty, etc.: 00440194.
Rule for determining export or import of service: 3(ii)
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SUPPLY OF TANGIBLE GOODS FOR USE SERVICES
Statutory Definition of Service liable to tax
When the tax was levied: 16-5-2008.
What is liable to tax
1 Any service provided or to be provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances [section 65(105)(zzzzj)].
Coverage & Service liable to tax
What is covered
Supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances
What is not covered?
If there is transfer of right of possession and effective control of machinery, equipment and appliances, Vat will apply and not service tax, as it is deemed sale of goods.
If contract is for doing some work, it is not contract for supply of tangible goods for use.
Exemptions
Hire of goods carriage to GTA for transport of goods by road is exempt, but conditions are very difficult to comply with, since the exemption is subject to condition that service provider providing services should mention the name and address of the goods transport agency and also the name and date of the consignment note, by whatever name called, issued in his behalf. It is possible that the service might be provided on continuous basis and linking each service to a particular consignment note of GTA may be very difficult, if not impossible - Notification No. 1/2009-ST dated 5-1-2009.
Other issues
Accounting Code - Service Tax: 00440445.
Payment of interest, penalty, etc.: 00440447.
Rule for determining export or import of service: 3(iii) (It will be export if tangible goods located outside India and import if tangible goods located in India).
Machinery, equipment, appliance, vehicles, aircrafts, vessels etc. supplied during course of providing taxable service of ‘supply of tangible goods for use’ is ‘input’ for providing the taxable service. Hence, excise duty/CVD paid on such machinery, equipment, appliance, vehicles, aircrafts, vessels etc. will be eligible for Cenvat credit. This clarification applies only in respect of service of ‘supply of tangible goods for use’
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TECHNICAL INSPECTION, CERTIFICATION, TECHNICAL TESTING AND ANALYSIS SERVICES
Statutory Definition of Service liable to tax
When the tax was levied: 1-7-2003.
What is liable to tax
1A Any service provided or to be provided to any person, by a technical inspection and certification agency (see 2), in relation to technical inspection and certification (see 3) [Section 65(105)(zzi)]
1B Any service provided or to be provided to any person, by a technical testing and analysis agency (see 4), in relation to technical testing and analysis (see 5) [Section 65(105)(zzh)]
2 ‘Technical inspection and certification agency’ means any agency or person engaged in providing service in relation to technical inspection and certification [section 65(109)].
3 ‘Technical inspection and certification’ means inspection or examination of goods or process or material or information technology software or any immovable property to certify that such goods or process or information technology software 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)]
4 Technical testing and analysis agency means any agency or person engaged in providing service in relation to technical testing and analysis[section 65(107)].
5 ‘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 information technology software or any immovable property, but does not include any testing or analysis service provided in relation to human beings or animals.
Explanation - For the removal of doubts, it is hereby declared that for
Coverage & Service liable to tax
What is covered
What is not covered?
Medical testing and diagnosis of human beings and animals has been excluded from service tax.
Service in relation to inspection and certification of pollution levels is excluded
Testing or analysis service provided in relation to human beings or animals is excluded
Testing and certification done under statutory provisions is not taxable.
What is covered under different head?
Collection centers may get covered under Business Auxiliary Service.
Exemptions
Testing and analysis of water quality by Government laboratories exempt, subject to prescribed conditions- Notification No. 6/2006-Service Tax dated 1.3.2006.
Exemption to clinical testing of newly developed drugs - Notification No. 11/2007-ST dated 1-3-2007.
Other issues
Accounting Code - Service Tax: 00440249.
Payment of interest, penalty, etc.: 00440250 (for both type of services)
Rule for determining export or import of service: 3(ii) (for both type of services)
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TELECOMMUNICATION SERVICES
Statutory Definition of Service liable to tax
When the tax was levied
1-7-1994 and scope expanded later.
Statutory Definition of Service liable to tax
When the tax was levied: 1-7-2003.
What is liable to tax
1A Any service provided or to be provided to any person, by a technical inspection and certification agency (see 2), in relation to technical inspection and certification (see 3) [Section 65(105)(zzi)]
1B Any service provided or to be provided to any person, by a technical testing and analysis agency (see 4), in relation to technical testing and analysis (see 5) [Section 65(105)(zzh)]
2 ‘Technical inspection and certification agency’ means any agency or person engaged in providing service in relation to technical inspection and certification [section 65(109)].
3 ‘Technical inspection and certification’ means inspection or examination of goods or process or material or information technology software or any immovable property to certify that such goods or process or information technology software 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)]
4 Technical testing and analysis agency means any agency or person engaged in providing service in relation to technical testing and analysis[section 65(107)].
5 ‘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 information technology software or any immovable property, but does not include any testing or analysis service provided in relation to human beings or animals.
Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause, “technical testing and analysis” includes testing and analysis undertaken for the purpose of clinical testing of drugs and formulations; but does not include testing or analysis for the purpose of determination of the nature of diseased condition, identification of a disease, prevention of any disease or disorder in human beings or animals - [section 65(106)].
What is liable to tax
1 Any service provided or to be provided; to any person, by the telegraph authority (see 2) in relation to telecommunication service (see 3) [Section 65(105)(zzzx)]
2 ‘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 [Section 65(111)].
3 “Telecommunication service" means service of any description provided by means of any transmission, emission or reception of signs, signals, writing, images and sounds or intelligence or information of any nature, by wire, radio, optical, visual or other electro-magnetic means or systems, including the related transfer or assignment of the right to use capacity for such transmission, emission or reception by a person who has been granted a licence under the first proviso to sub-section (1) of section 4of the Indian Telegraphs Act, 1885 and includes –
(i) voice mail, data services, audio tex services, video tex services, radio paging;
(ii) fixed telephone services including provision of access to and use of the public switched telephone network for the transmission and switching of voice, data and video, inbound and outbound telephone service to and from national and international destinations;
(iii) cellular mobile telephone services including provision of access to and use of switched or non-switched networks for the transmission of voice, data and video, inbound and outbound roaming service to and from national and international destinations;
(iv) carrier services including provision of wired or wireless facilities to originate, terminate or transit calls, charging for interconnection, settlement or termination of domestic or international calls, charging for jointly used facilities including pole attachments, charging for the exclusive use of circuits, a leased circuit or a dedicated link including a speech circuit, data circuit or a telegraph circuit;
(v) provision of call management services for a fee including call waiting, call forwarding, caller identification, three-way calling, call display, call return, call screen, call blocking, automatic call-back, call answer, voice mail, voice menus and video conferencing;
(vi) private network services including provision of wired or wireless telecommunication link between specified points for the exclusive use of the client;
(vii) data transmission services including provision of access to wired or wireless facilities and services specifically designed for efficient transmission of data; and
(viii) communication through facsimile, pager, telegraph and telex, but does not include service provided by-
(a) any person in relation to on-line information and database access or retrieval or both referred to in sub-clause (zh) of clause (105);
(b) a broadcasting agency or organisation in relation to broadcasting referred to in sub-clause (zk) of clause (105); and
(c) any person in relation to internet telephony referred to in sub-clause(zzzu) of clause (105) [section 65(109a)].
Coverage & Service liable to tax
What is covered
Comprehensive coverage of all telecom services as per definition (see left column).
Tax is payable on international in-bound roaming services provided in India.
Inter-connection services and rent and access charges to DOT taxable.
What is not covered?
Shop keeper selling SIM card is not liable as he is not ‘telegraph authority’.
What is covered under different head?
Service in relation to on-line information and database access or retrieval, a broadcasting agency or organisation in relation to broadcasting and internet telephony excluded (since covered under another head).
Only service provided by telegraph authority taxable, not by agents etc.
Telecommunication service is taxable only when provided by‘Telegraph Authority’ i.e. who has been granted license under Indian Telegraphs Act. Thus, agents selling seem cards etc. are not liable under this head.
Liability in case of ‘roaming facility’ on cellular phone is on Home Operator.
Valuation
Value for purpose of service tax in case of service tax on SIM card is net price at which card sold to dealer and not MRP.
Tax not payable on initial deposit, but payable if initial deposit adjustments made from deposits.
Service tax is payable on reconnection charges.
Service tax is payable on net amount after discount.
No service tax on surcharge collected on account of delayed payment.
In case of PCO, service tax is payable on net amount received
by telegraph authority from PCO, i.e. discounted price.
Exemption
Notification No. 3/1994-ST dated 30-6-1994 exempts following telecom services
(a) Departmentally run public telephones for local calls(b) Guaranteed public telephone operating only for local calls
(c) Free telephones at airports and hospitals where no bills are being
issued.
Sale of SIM card
There are contrary decisions. In my view, when a customer purchases SIM card, he actually purchases talk time. The intrinsic value of SIM carD (as material content) is negligible. Predominantly it is telecom service.
In Bharat Sanchar Nigam Ltd. v. UOI (2006) 3 SCC 1 = 152 Taxman 135 = 3 STT 245 = 282 ITR 273 = 3 VST 95 = 145 STC 91 = AIR 2006 SC 1383 (SC 3 member bench), it has been held that what a SIM card represents is ultimately a question of fact. If the SIM card is not sold by the assessee to the subscribers but is merely part of the services rendered by service providers, then a SIM card cannot be charged separately to sales tax. If the parties intended that the SIM card would be a separate object of sale, it would be open to the sales tax authorities to levy sales tax thereon. If the sale of SIM card is merely incidental to the service being provided and only facilitates the identification of subscriber, their credit and other details, it would not be assessable to sales tax. In any event, cost of service cannot be included in the value of SIM card by relying on ‘aspects’doctrine.
Is tax payable on free telephone service provided to employees, dealers etc.?
In my view, it can still be argued that service tax is not payable on free services (at least for past period), for the following reasons - (a) As per rule 6(1), service tax is payable only where payment is received towards value of taxable services. In this case, no ‘payment’ is received
(b) Even if tax is paid, Cenvat credit can be availed, since obviously, it is an input service of the service provider. Hence, payment of tax will be a revenue neutral exercise.
In respect of future, the service provider may pay service tax by TR-6/GAR-7 challan and avail Cenvat credit of service tax so paid, to avoid petty disputes.
Other issues
Accounting Code - Service Tax: 00440398.
Payment of interest, penalty, etc.: 00440399.
Rule for determining export or import of service: 3(iii)
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TOUR OPERATOR’S SERVICES
Statutory Definition of Service liable to tax
When the tax was levied: 1-4-2000 and scope expanded later.
What is liable to tax
1 Any service provided or to be provided to any person, by a tour operator (see 2) in relation to a tour (see 3) [section 65(105)(n)].
2 ‘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 (see 4) or a contract carriage (see 6) by whatever name called, covered by a permit, other than a stage carriage permit, granted under the Motor Vehicles Act, 1988 or the rules made thereunder
Explanation — For the purposes of this clause, the expression “tour” does not include a journey organised or arranged for use by an educational body, other than a commercial training or coaching centre, imparting skill or knowledge or lessons on any subject or field [Section 65(115)]
3 ‘Tour’ means a journey from one place to another irrespective of the distance between such places [section 65(113)].
4 “Tourist vehicle” has the meaning assigned to it in section 2(43) of the Motor Vehicles Act, 1988 (see 5) [Section 65(114)]
5 A tourist vehicle means a contract carriage constructed or adapted and equipped and maintained in accordance with such specifications as may be prescribed [Section 2(43) of Motor Vehicles Act]
6 ‘Contract carriage’ means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether express or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorised by him in this behalf on a fixed or an agreed rate or sum—
(a) on a time basis, whether or not with reference to any route or distance; or
(b) from one point to another;- - and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, - - and includes—
(i) a maxi-cab; and
(ii) a motor-cab notwithstanding that separate fares are charged for its passengers [Section 2(7) of the Motor Vehicles Act].
Coverage & Service liable to tax
What is covered
‘Tour’ means a journey from one place to another irrespective of the distance between such places.
Planning, scheduling, organising or arranging tours.
Tours in a tourist vehicle or a contract carriage but not on a stage carriage permit
What is not covered?
Tour services by vehicle with stage carriage permit.
Journey organised or arranged for use by an educational body, other than a commercial training or coaching centre.
Buses/vehicles provided for transport of employees will be taxable under ‘rent-a-cab’ service.
Call taxi service where charge is on basis of distance is not taxable.
Plying taxi from airport to destination on pre-paid basis, is not tour operator service.
What is covered under different head?
Person booking tickets for buses is not tour operator (However, he may be liable under BAS).
Any journey between two places is not ‘tour’
As per Compact Oxford Reference Dictionary, ‘tour’ means
1. a journey for pleasure in which several different places are visited.
2. a short trip to view or inspect something. ‘Tour operator’ means a travel agent specialising in package holidays.
In Usha Breco Ltd. v. CCE (2007) 8 STT 191 (CESTAT), it has been held that statutory definition of ‘tour’ does not confer an entirely artificial meaning on the commonly understood word of ‘tour’. The word ‘irrespective of distance’ in the definition of tour only means there could be no argument that tour should be to a distant place. It does not give such artificial meaning to the word ‘tour’ as to make any movement in a tourist bus a ‘tour’.
Exemptions
In case of package tour, service tax is payable on 25% of gross amount charged, if no Cenvat credit is availed - Notification No. 1/2006-ST dated 1-3-2006.
Tax only on 10% amount when operator only provides booking services -Notification No. 1/2006-ST dated 1-3-2006.
Tax payable 40% in case of tours other than package tours, if no Cenvat credit is availed - Notification No. 1/2006-ST dated 1-3-2006.
Tour operator having contract carriage permit for inter-state or intra-state transportation of passengers are exempted w.e.f. 7-7-2009. The exemption will not be available if he uses the contract carriage for tourism, conducted tours, charter or hire service – Notification No. 20/2009-ST dated 7-7-2009.
Other issues
Accounting Code - Service Tax: 00440063.
Payment of interest, penalty, etc.: 00440064.
Rule for determining export or import of service: 3(ii)
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TRANSPORT OF GOODS IN CONTAINERS BY RAIL SERVICE
Statutory Definition of Service liable to tax
When the tax was levied: 1-5-2006 on transport in containers and on all rail transport w.e.f. 1-9-2009. However, transport of goods by rail other than containers has been fully exempted.
What is liable to tax
Any service provided or to be provided; to any person, by any other person, in relation to transport of goods by rail, in any manner, is a ‘taxable service’ [section 65(105)(zzzp)].
Coverage & Service liable to tax
Transport of goods by rail except by containers is exempt - There has been some flip flap in respect of service tax on transport of goods by rail.Service tax was imposed on transport of goods by rail. The tax was to be effective from 1-9-2009 and in fact, Notification Nos. 28/2009-ST and 29/2009-ST dated 31-8-2009 were issued granting full exemption to certain goods.
However, it seems Government had sudden change of heart and revisedNotification Nos. 33/2009-ST and 34/2009-ST both dated 1-9-2009have been issued, within 24 hours of the earlier notifications!.
Now, transport of all goods by rail (other than transport of goods in containers by rail by any person other than Government Railway) has been completely exempted vide Notification No. 33/2009-ST dated 1-9-2009.
Thus, the position as existing prior to Budget 2009 has been restored i.e. only transport of goods in container by rail by any person other thanGovernment Railway, will be liable to service tax on 30% of the gross value charged [Notification No. 1/2006-ST dated 1-3-2006, as amended vide Notification No. 34/2009-ST dated 1-9-2009].
Other issues
Accounting Code - Service Tax: 00440262.
Payment of interest, penalty, etc.: 00440263.
Rule for determining export or import of service: 3(ii)
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TRANSPORT OF GOODS BY ROAD SERVICE
Statutory Definition of Service liable to tax
When the tax was levied: 1-1-2005.
What is liable to tax
1 Any service provided or to be provided to any person, by a goods transport agency (see 2), in relation to transport of goods (see 3) by road in a goods carriage (see 4) [Section 65(105)(zzp)]
2 ‘Goods transport agency’ means any person who (earlier the words were ‘commercial concern which’ upto Finance Act, 2006 i.e. upto 1-5-2006) provides service in relation to transport of goods by road and issues consignment note, by whatever name called [Section 65(50b)]
3 ‘Goods’ has the meaning assigned to it in section 2(7) of Sale of Goods Act. [section 65(50)].
4 ‘Goods carriage’ has the meaning assigned to it section 2(14) of the Motor Vehicles Act, 1988 [Section 65(50a)]
Coverage & Service liable to tax
What is covered
Service by a goods transport agency, in relation to transport of goods by road in a goods carriage.
Service tax is not on all goods transport. Tax is payable only when consignment note (Lorry Receipt) is issued.
Valuation
GTA service will be liable to service tax @ 25% of normal service tax –Notification No. 13/2008-ST dated 1-3-2008. Tax should be paid byGAR-7 challan and not by utilization of Cenvat credit (Then, he can availCenvat credit of tax so paid by him as it is his input service).
Tax payable on transport charges and not demurrage charges or octroi, entry tax paid by GTA and recovered from customer.
Exemptions
Transport of fruits, vegetables, eggs or milk by road is exempt
If total amount charged for all consignments carried in a goods carriage does not exceed Rs. 1,500, it is exempt.
If gross Amount charged on individual consignment transported in a goods carriage does not exceed Rs. 750. it is exempt
Reverse charge - Person liable for payment of service tax
Consignor or consignee who is paying freight will be liable to pay service tax in most of the cases, except when both consignor and consignee are individuals.
Goods Transport Agency (GTA) should issue invoice showing service tax but is not required to pay service tax.
Exemption as small service provider not available
Exemption as available as small service provider is not available whenservice tax is payable by consignor/consignee.
Certain services provided to GTA exempted
Certain taxable services provided to a goods transport agency (GTA)have been exempted vide notification No.1/2009–ST dated 5-1-2009. In most of the cases, the exemption will not be available.
Other issues
Accounting Code - Service Tax: 00440262.
Payment of interest, penalty, etc.: 00440263.
Rule for determining export or import of service: 3(ii)
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WORKS CONTRACT SERVICE
Statutory Definition of Service liable to tax
When the tax was levied: 1-6-2007.
What is liable to tax
1 Any service provided or to be provided; to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams
Explanation - For the purposes of this sub-clause, “works contract”means a contract wherein, –
(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and
(ii) such contract is for the purposes of carrying out,-
(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or
(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or
(c) construction of a new residential complex [see 2] or a part thereof; or
(d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or
(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects; [section 65(105)(zzzza)]
2 ‘Construction of complex’ means—
(a) construction of a new residential complex [see 3] 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)]
3 “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
Only specified contracts covered if Vat/sales tax paid on works contract.
Builder/developer not liable but contractor doing work for builder/developer is liable (issue is arguable).
Petty contractor can claim exemption as small service provider.
What is not covered?
Works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams, are excluded.
Only specified works contracts are covered. Other works contract (e.g. maintenance, job work, processing etc.) are not covered under this head.
Contract for sale of flat is not construction contract.
A builder entering into contract for sale of flat or a developer entering into contract for construction of an individual flat for personal residential use of client are not liable to pay service tax.
Activity done for self is not works contract
Valuation
Broadly, two options are available to service provider –
(a) Calculate value of service as per rule 2A of Service Tax (Determination of Value) Rules, 2006 (in short ‘Valuation Rules) and pay service tax at normal rate on such ‘value’. In such case, assessee can avail Cenvat credit of input services, inputs and capital goods
(b) Pay service tax under ‘composition scheme’ at 4.12% of ‘gross amount charged for works contract’ (inclusive of education cess and SAHeducation cess), under ‘Works Contract (Composition Scheme for Payment of Service tax) Rules, 2007’. As per rule 3(2) of Composition Scheme, the assessee cannot avail Cenvat credit of inputs. Thus, the assessee can avail Cenvat credit of input services and capital goods.
In both the cases, Vat/sales tax will not be included in the ‘value’ for purpose of calculating service tax.
Exemptions
Construction and works contract services relating to ports exempt, but no exemption to finishing or repairing services - Notification No. 25/2007-ST dated 22-5-2007.
Other issues
Accounting Code - Service Tax : 00440410. Payment of interest, penalty, etc. : 00440411.
Rule for determining export or import of service : 3(i)
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.
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