Category: Service Tax

Finance Minister in Finance Act, 2012 has introduce the new concept of negative list in service tax and given the list of services which are exempted from service tax. Read How to Register Under Service Tax Online. So the Central Board of Excise and Customs (CBEC) has issued the Notification No. 25/2012 dated 20th June, 2012, giving detail list of services which will be exempted from payment of service tax w.e.f. 01-07-2012 (1st July 2012).

The following List of taxable services have been exempt from the whole of the service tax

1. Services provided to the united nations or a specified international organization;
2. Health care services by a clinical establishment, an authorized medical practitioner or Para-medics;
3. Services by a veterinary clinic in relation to health care of animals or birds;
4. Services by an entity registered under section 12AA of the income tax act, 1961 (43 of 1961) by way of charitable activities;
5. Services by a person by way of-
   1. Renting of precincts of a religious place meant for general public; or
   2. Conduct of any religious ceremony;
6. Services provided by-
   1. An arbitral tribunal to –
      1. Any person other than a business entity; or
      2. A business entity with a turnover up to rupees ten lakhs in the preceding financial year;
   2. An individual as an advocate or a partnership firm of advocates by way of legal services to,-
      1. An advocate or partnership firm of advocates providing legal services ;
      2. Any person other than a business entity; or
      3. A business entity with a turnover up to rupees ten lakhs in the preceding financial year; or
   3. A person represented on an arbitral tribunal to an arbitral tribunal;
7. Services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organisation approved to conduct clinical trials by the drug controller general of India;
8. Services by way of training or coaching in recreational activities relating to arts, culture or sports;
9. Services provided to or by an educational institution in respect of education exempted from service tax, by way of,-
   1. Auxiliary educational services; or
   2. Renting of immovable property;
10. Services provided to a recognised sports body by-
    1. An individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a recognized sports body;
    2. Another recognised sports body;
11. Services by way of sponsorship of sporting events organised,-
    1. By a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone;
    2. By association of Indian universities, inter-university sports board, school games federation of India, all India sports council for the deaf, Paralympic committee of India or special Olympics bharat;
    3. By central civil services cultural and sports board;
    4. As part of national games, by Indian Olympic association; or
    5. Under Panchayat Yuva Kreeda Aur Khel Abhiyaan (pykka) scheme;
12. Services provided to the government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –
    1. A civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
    2. A historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the ancient monuments and archaeological sites and remains act, 1958 (24 of 1958);
    3. A structure meant predominantly for use as (I) an educational, (ii) a clinical, or (iii) an art or cultural establishment;
    4. Canal, dam or other irrigation works;
    5. Pipeline, conduit or plant for (I) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or
    6. A residential complex predominantly meant for self-use or the use of their employees or other persons specified in the explanation 1 to clause 44 of section 65 b of the said act;
13. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-
    1. A road, bridge, tunnel, or terminal for road transportation for use by general public;
    2. A civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru national urban renewal mission or Rajiv Awaas Yojana;
    3. A building owned by an entity registered under section 12AA of the income tax act, 1961(43 of 1961) and meant predominantly for religious use by general public;
    4. A pollution control or effluent treatment plant, except located as a part of a factory; or
    5. A structure meant for funeral, burial or cremation of deceased;
14. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-
    1. An airport, port or railways, including monorail or metro;
    2. A single residential unit otherwise than as a part of a residential complex;
    3. Low- cost houses up to a carpet area of 60 square meters per house in a housing project approved by competent authority empowered under the ‘scheme of affordable housing in partnership’ framed by the ministry of housing and urban poverty alleviation, government of India;
    4. Post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or
    5. Mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;
15. Temporary transfer or permitting the use or enjoyment of a copyright covered under clauses (a) or (b) of sub-section (1) of section 13 of the Indian copyright act, 1957 (14 of 1957), relating to original literary, dramatic, musical, artistic works or cinematograph films;
16. Services by a performing artist in folk or classical art forms of (I) music, or (ii) dance, or (iii) theatre, excluding services provided by such artist as a brand ambassador;
17. Services by way of collecting or providing news by an independent journalist, press trust of India or united news of India;
18. Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below rupees one thousand per day or equivalent;
19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (I) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages;
20. Services by way of transportation by rail or a vessel from one place in India to another of the following goods –
    1. Petroleum and petroleum products falling under chapter heading 2710 and 2711 of the first schedule to the central excise tariff act, 1985 (5 of 1986);
    2. Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap
    3. Defence or military equipments;
    4. Postal mail or mail bags;
    5. household effects;
    6. Newspaper or magazines registered with the registrar of newspaper
    7. Railway equipments or materials;
    8. Agricultural produce;
    9. Foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages; or
    10. Chemical fertilizer and oilcakes;
21. Services provided by a goods transport agency by way of transportation of –
    1. Fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage;
    2. Goods where gross amount charged for the transportation of goods on a consignment transported in a single goods carriage does not exceed one thousand five hundred rupees; or
    3. Goods, where gross amount charged for transportation of all such goods for a single consignee in the goods carriage does not exceed rupees seven hundred fifty;
22. Services by way of giving on hire –
    1. To a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or
    2. To a goods transport agency, a means of transportation of goods;
23. Transport of passengers, with or without accompanied belongings, by –
    1. Air, embarking from or terminating in an airport located in the state of raunchily Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in west Bengal;
    2. A contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire; or
    3. Ropeway, cable car or aerial tramway;
24. Services by way of vehicle parking to general public excluding leasing of space to an entity for providing such parking facility;
25. Services provided to government, a local authority or a governmental authority by way of –
    1. Carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation; or
    2. Repair or maintenance of a vessel or an aircraft;
26. Services of general insurance business provided under following schemes –
    1. Hut insurance scheme;
    2. Cattle insurance under Swarnajaynti gram Swarozgar Yojna (earlier known as integrated rural development programme);
    3. Scheme for insurance of Tribals;
    4. Janata personal accident policy and Gramin accident policy;
    5. Group personal accident policy for self-employed women;
    6. Agricultural Pumpset and failed well insurance;
    7. Premia collected on export credit insurance;
    8. Weather based crop insurance scheme or the modified national agricultural insurance scheme, approved by the government of India and implemented by the ministry of agriculture;
    9. Jan Arogya Bima policy;
    10. National agricultural insurance scheme (Rashtriya Krishi Bima Yojana);
    11. Pilot scheme on seed crop insurance;
    12. Central sector scheme on cattle insurance;
    13. universal health insurance scheme;
    14. Rashtriya Swasthya Bima Yojana; or
    15. Coconut palm insurance scheme;
27. Services provided by an incubatee up to a total turnover of fifty lakhs rupees in a financial year subject to the following conditions, namely:-
    1. The total turnover had not exceeded fifty lakhs rupees during the preceding financial year; and
    2. A period of three years has not been elapsed from the date of entering into an agreement as an incubatee;
28. Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –
    1. As a trade union;
    2. For the provision of carrying out any activity which is exempt from the levy of service tax; or
    3. Up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex;
29. Services by the following persons in respective capacities –
    1. Sub-broker or an authorized person to a stock broker;
    2. Authorized person to a member of a commodity exchange;
    3. Mutual fund agent to a mutual fund or asset management company;
    4. Distributor to a mutual fund or asset management company;
    5. Selling or marketing agent of lottery tickets to a distributer or a selling agent;
    6. Selling agent or a distributer of sim cards or recharge coupon vouchers;
    7. Business facilitator or a business correspondent to a banking company or an insurance company, in a rural area; or
    8. Sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;
30. Carrying out an intermediate production process as job work in relation to-
    1. Agriculture, printing or textile processing;
    2. Cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, falling under chapter 71 of the central excise tariff act ,1985 (5 of 1986);
    3. Any goods on which appropriate duty is payable by the principal manufacturer; or
    4. Processes of electroplating, zinc plating, anodizing, heat treatment, powder coating, painting including spray painting or auto black, during the course of manufacture of parts of cycles or sewing machines up to an aggregate value of taxable service of the specified processes of one hundred and fifty lakhs rupees in a financial year subject to the condition that such aggregate value had not exceeded one hundred and fifty lakhs rupees during the preceding financial year;
31. Services by an organiser to any person in respect of a business exhibition held outside India;
32. Services by way of making telephone calls from –
    1. Departmentally run public telephone;
    2. Guaranteed public telephone operating only for local calls; or
    3. Free telephone at airport and hospital where no bills are being issued;
33. Services by way of slaughtering of bovine animals;
34. Services received from a provider of service located in a non- taxable territory by-
    1. Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;
    2. An entity registered under section 12aa of the income tax act, 1961 (43 of 1961) for the purposes of providing charitable activities; or
    3. A person located in a non-taxable territory;
35. Services of public libraries by way of lending of books, publications or any other knowledge- enhancing content or material;
36. Services by employees’ state insurance corporation to persons governed under the employees’ insurance act, 1948 (34 of 1948);
37. Services by way of transfer of a going concern, as a whole or an independent part thereof;
38. Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets;
39. Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 w of the constitution.

The due date for filing the second quarterly return has been extended from 25th March 2013 to 15th April 2013 (Notification yet to be issued). CBEC has extended the filing date as currently they are working on XML Scheme or Excel Utility.

The due date for filing the return has been extended from 25th October 2012 to 25th November 2012 under order no. 3/2012 dated 15 October 2012.

The taxability of services or the charge of service tax has been specified in section 66B of the Act. To be a taxable a service should be –

• provided or agreed to be provided by a person to another
  
• in the taxable territory
  
• And should not be specified in the negative list.
  

Agreed to be provided

Services which have only been agreed to be provided but are yet to be provided are taxable.

• Receipt of advances for services agreed to be provided become taxable before the actual provision of service
  
• Advances that are retained by the service provider in the event of cancellation of contract of service by the service receiver become taxable as these represent consideration for a service that was agreed to be provided.
  

Determination of point of taxation

The point of taxation is determined in terms of the Point of Taxation Rules, 2011. As per these Rules point of taxation is –

• the time when the invoice for the service provided or agreed to be provided is issued;
  
• If invoice is not issued within prescribed time period (30 days except for specified financial sector where it is 45 days) of completion of provision of service then the date of completion of service;
  
• The date of receipt of payment where payment is received before issuance of invoice or completion of service.
  

Taxable territory

Taxable territory has been defined in section 65B of the Act as the territory to which the Act applies i.e. the whole of territory of India other than the State of Jammu and Kashmir.

Service should not be specified in the negative list

As per section 66B, to be taxable a service should not be specified in the negative list. The negative list of services has been specified in section 66D of the Act.

In terms of Section 66B of the Act, service tax will be leviable on all services provided in the taxable territory by a person to another for a consideration other than the services specified in the negative list. The services specified in the negative list therefore go out of the ambit of chargeability of service tax. In all, there are seventeen heads of services that have been specified in the negative list. The scope and ambit of these is explained in below:

1. Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere:
   
   1. services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government;
      
   2. services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
      
   3. transport of goods or passengers; or
      
   4. Support services, other than services covered under clauses (i) to (iii) above, provided to business entities.
      
2. Services by the Reserve bank of India
   
3. Services by a foreign diplomatic mission located in India.
   
4. Services relating to agriculture or agricultural produce by way of –
   
   1. agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;
      
   2. supply of farm labour;
      
   3. processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but make it only marketable for the primary market;
      
   4. renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
      
   5. loading, unloading, packing, storage or warehousing of agricultural produce;
      
   6. agricultural extension services;
      
   7. Services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.
      
5. Trading of goods.
   
6. Any process amounting to manufacture or production of goods.
   
7. Selling of space or time slots for advertisements other than advertisements broadcast by radio or television.
   
8. Service by way of access to a road or a bridge on payment of toll charges.
   
9. Betting, gambling or lottery.
   
10. Admission to entertainment events or access to amusement facilities.
    
11. Transmission or distribution of electricity by an electricity transmission or distribution utility.
    
12. Services by way of –
    
    1. pre-school education and education up to higher secondary school or equivalent;
       
    2. education as a part of a curriculum for obtaining a qualification recognized by law;
       
    3. Education as a part of an approved vocational education course.
       
    4. Services by way of renting of residential dwelling for use as residence;
       
13. Services by way of –
    
    1. extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount;
       
    2. inter-se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers;
       
14. Service of transportation of passengers, with or without accompanied belongings, by –
    
    1. a stage carriage;
       
    2. railways in a class other than –
       

• first class; or
  
• an air conditioned coach;
  

1. metro, monorail or tramway;
   
2. inland waterways;
   
3. public transport, other than predominantly for tourism purpose, in a vessel between
   
4. places located in India; and
   
5. metered cabs, radio taxis or auto rickshaws;
   

1. Services by way of transportation of goods –
   
   1. by road except the services of –
      

• a goods transportation agency; or
  
• a courier agency;
  

1. by an aircraft or a vessel from a place outside India up to the customs station of clearance in India; or
   
2. by inland waterways;
   

Funeral, burial, crematorium or mortuary services including transportation of the deceased

‘Service’ has been defined in clause (44) of the new section 65B and means –

• any activity

• for consideration

• carried out by a person for another

• And includes a declared service.

The said definition further provides that ‘Service’ does not include –

1. any activity that constitutes only a transfer in title of
   
   1. goods or
      
   2. immovable property by way of sale, gift or in any other manner
      
2. a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of article 366 of the Constitution
   
3. a transaction only in money or auction able claim
   
4. A service provided by an employee to an employer in the course of the employment.
   
5. fees payable to a court or a tribunal set up under a law for the time being in force
   

Activity

The word activity would include an act done, a work done, a deed done, an operation carried out, execution of an act, provision of a facility etc.

Consideration

As per section 67 of the Act “consideration” includes any amount that is payable for the taxable services provided or to be provided.

In simple terms, ‘consideration’ means everything received or recoverable in return of a provision of service which includes monetary payment and any consideration of non- monetary nature.

By a person for another

This phrase signifies that services provided by a person to self are outside the ambit of taxable service.

Exception

An establishment of a person located in taxable territory and another establishment of such person located in non-taxable territory are treated as establishments of distinct persons.

An unincorporated association or body of persons and members thereof are also treated as distinct persons.