Negative List & Mega Exemptions in Service Tax

Presented by

CA Virendra ParwalB.Com , FCA, LLB.

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Workshop on Service Tax at ICAI Jaipur Branch on 04th February 2015

What is the broad the scheme of new taxation? Section 65B(44)- Definition of Service.

Section 66B- Charge of service tax - Service tax shall be levied on all services provided or agreed to be provided in a taxable territory, other than services specified in the negative list.

Section 66D-The negative list of services .

Section 66C- Empowers the Central Government to make rules for determination of place of provision of service Provision of service.

Section 66E- Declared Services- To remove ambiguity

Mega Exemption Notification -In addition to the services specified in the negative list, certain exemptions have been given vide N. No.25/2012-ST

Section 66F- Principles for interpretation wherever services have to be treated differentially for any reason

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What is not in the ambit of Service Tax ?

Exemptions From Service Tax

Negative List (Sec 66D)

Mega Exemption Notification (25/2012)

Other General Exemptions & Abatements

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Section 66B: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. Section 66D:The services specified in the negative list therefore go out of the ambit of chargeability of service tax.

Negative List of Services

Tax Free

In all, there are 17 heads of services that have been specified in the negative list.

1. Services provided by Government or local authority Services provided by the Government or local authorities are in the negative list

except the following:

Services provided by the Department of Posts by way of speed post, express parcel post, life insurance and agency services carried out on payment of commission on non government business;

Services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport;

Transport of goods and/or passengers;

Support services, other than those covered by clauses (a) to (c) above, to business entities.

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What are Support Services ? Support services means

• infrastructural, operational, administrative, logistic,

• marketing

• or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever

and shall include

advertisement and promotion,

construction or works contract,

renting of immovable property,

security,

testing and analysis.

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Note: Services Provided by government in terms of their “Sovereign Rights to business entities are not support services – RTO, Factories inspector, Directorate of Boiler perform duties/functions which are statutory in nature

Let’s Think… Grant of Mining or Licensing Rights are Support Services ?

Warehousing facility provided by government are Support Services ?

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No, they are sovereign right to business rights provided by government hence are not under the ambit of service tax.

Yes, they are support services liable for service tax.

‘Government’ has not been defined in the Act. What is the meaning of Government? Definition of ‘Government’ as contained in the General Clauses Act, 1897

would be applicable as per which ‘Government’ includes both State Government and Central Government. Further as per the General Clause Act 1897, State includes Union Territory.

Corporations formed under Central or State Act or government companies registered under the Companies Act or autonomous institutions set up by a special Act are not covered under this entry.

‘Government’ would include various departments and offices of the Central or State Government or the U.T. Administrations which carry out their functions in the name and by order of the President of India or the Governor of a State.

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2. Services provided by Reserve Bank Of India

All services provided by RBI are part of negative list

However services provided to RBI are not in negative list hence are taxable unless covered in any other entry of negative list

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3. Services by a foreign diplomatic mission located in India

Note: This entry does not cover services, if any, provided by any office or establishment of an international organization.

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4. Services relating to agriculture or agriculture produce which pertains to below activities- Agricultural operations directly related to production of any agricultural

produce including cultivation, harvesting, threshing, plant protection or testing;

Supply of farm labor;

Processes carried out at the 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 makes it only marketable for the primary market;

Renting of agro machinery or vacant land with or without a structure incidental to its use;

Loading, unloading, packing, storage and warehousing of agricultural produce;

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Agricultural extension services; (Agricultural extension services have been defined as application of scientific

research and knowledge to agricultural practices through farmer education or training.)

Services provided by any Agricultural Produce Marketing Committee or Board or

services provided by commission agent for sale or purchase of agricultural produce;

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Definition Agriculture means the cultivation of plants and rearing of all life forms of animal, except the rearing of horses, for food, fiber, fuel raw material or other similar products. [Sec 65B(3)]

Agricultural produce means any produce of agriculture on which either no processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. [Sec 65B(5)]

Let’s Think… Leasing of vacant land with a green house or a storage

shed meant for agricultural produce Training provided to Farmers for organic farming Services by way of renting of shop in the mandi by

APMC for doing business of agriculture produce Potato chips or tomato ketchup qualify as agriculture

produce ? Is Hen Poultry covered under ‘agriculture’ ?

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Animal also covers ‘bird’ – Davinder Singh v WTO (1982) 1 ITD 610 – Accordingly poultry would be agriculture produce.

5. Trading of goods (Neither Manufacture nor Service) Risk and Reward to be transferred Involves transfer of title in goods

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‘Trading of Goods’ per se is not taxable but services provided in relation to trading of goods shall be liable to Service Tax

Let’s Think… Would activities of a commission agent or a clearing

and forwarding agent who sells goods on behalf of another for a commission be included in trading of goods?

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No. The services provided by commission agent or a clearing and forwarding agent are not in the nature of trading of goods. These are auxiliary for trading of goods as title in the goods never passes on to such agents to come within the ambit of trading of goods.

Let’s Think… Would future contracts in commodities be covered

under trading of goods?

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Yes. Futures contracts would be covered under trading of goods as these are contracts which involve transfer of title in goods on a future date at a pre-determined price.

Let’s Think…

Would auxiliary services relating to future contracts or commodity futures be covered in the negative list entry relating to trading of goods?

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No. Such services provided by commodity exchanges clearing houses or agents would not be covered in the negative list entry relating to trading of goods.

6. Processes amounting to manufacture or production of goods

Process on which duties of excise are levible U/s 3 of Central Excise Act 1944.

Covers manufacturing activity carried out on contract or job work basis, not involving transfer of title in goods provided duties of excise are levible on such processes under CE Act 1944

If Central Excise Duty is levible on a process as the same amounts to manufacture then such process would be covered in negative list even if there is a central excise duty exemption from such process.

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7. Selling of space for advertisement in print media

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selling of space for advertisements in print media

Definition of Print Media:

Sec.65B(39a)

"print media" means,—

(i) "book" as defined in sub section (1) of section 1 of the Press and Registration of Books Act, 1867 (25 of 1867), but does not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes;

(ii) "newspaper" as defined in sub section (1) of section 1 of the Press and Registration of Books Act, 1867 (25 of 1867); ]

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Let’s Think…

Services provided by Advertisement Agencies:

a) Relating to preparation of advertisement

b) Composite service of providing space of advertisement with design and preparation of the advertisement

8. Access to a road or a bridge on payment of toll charges

It covers the access to national and state highways.

Let’s Think…. Are collection charges or service charges paid to any toll

collecting agency also covered?

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No. The negative list entry only covers access to a road or a bridge on payment of toll charges. Services of toll collection on behalf of an agency authorized to levy toll are in the nature of services used for providing the negative list services.

9. Betting, gambling or lottery

Defined in section 65B of the Act as ‘putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring’.

Does not include auxiliary services that are used for organization or promotion of betting or gambling events.

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10. Entry to Entertainment Events and Access to Amusement Facilities. Entertainment Event

An event or a performance which is intended to provide

recreation, pastime, fun or enjoyment,

such as exhibition of cinematographic films, circus, concerts, sporting events, fairs, pageants, award functions, dance performances, musical performances, theatrical performances

including cultural programs, drama, ballets or any such event or programme

Amusement Facility

A facility where fun or recreation is provided by means of

rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other place

but does not include a place within such facility where other services are provided.

Standalone ride set up in a mall qualify as an amusement facility is covered under this entry.

Video parlors exhibiting movies played on a DVD player and displayed through a TV screen is covered under this entry.

Membership of a club does not fall in the definition of an amusement facility.

Amusement facility has been defined as ‘a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other place but does not include a place within such facility where other services are provided’.

’

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Let’s Think…

If a cultural programme, drama or a ballet is held in an open garden and not in a theatre would it qualify as an entertainment event?

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Yes. The words used in the definition are ‘theatrical performances’ and not ‘performances in theatres’.

Let’s Think… Would a standalone ride set up in a mall qualify as an

amusement facility?

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Yes. A standalone amusement ride in a mall is also a facility in which fun or recreation is provided by means of a ride. Access to such amusement ride on payment of charges would be covered in the negative list.

Let’s Think… Would entry to video parlors exhibiting movies played on

a DVD player and displayed through a TV screen be covered in the entry?

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Yes. Such exhibition is an exhibition of cinematographic film.

Let’s Think… Would membership of a club qualify as access to an

amusement facility?

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No. A club does not fall in the definition of an amusement facility.

11. Transmission or distribution of electricity by an electricity transmission or distribution utility

Electricity transmission or distribution utility includes:

The Central Electricity Authority,

A State Electricity Board,

The Central Transmission Utility (CTU),

A State Transmission Utility (STU) notified under the Electricity Act, 2003 or

A distribution or transmission licensee licensed under the said Act or any other entity entrusted with such function by the Central or State Government

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Let’s Think… If charges are collected by a developer or a housing society for distribution

of electricity within a residential complex then are such services covered under this entry?

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No. The developer or the housing society would be covered under this entry only if it is entrusted with such function by the Central or a State government or if it is, for such distribution, a distribution licensee licensed under the Electricity Act, 2003.

Let’s Think… If the services provided by way installation of gensets or similar

equipment by private contractors for distribution of electricity covered by this entry?

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No. the entry does not cover services provided by private contractors.

Moreover the services provided are not by way of transmission or distribution of electricity.

• Charges for installation of Electricity Meter

It has close nexus with transmission & distribution of electricity- Circular No.131/13/2010-ST dated 7-12-2010

12. Specified services relating to education The following services are specified in the negative list – Pre-school education and education up to higher secondary school or

equivalent Education as a part of a prescribed curriculum for obtaining a

qualification recognized by law for the time being in force; Education as a part of an approved vocational education course

Approved vocational education courses means:

a course run by an industrial training institute or an industrial training center affiliated to the National Council for Vocational Training offering courses in designated trades as notified under the Apprentices Act, 1961(52 of 1961)

a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Ministry of Labour and Employment, Government of India;

a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India.

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Let’s Think… Are services provided by boarding schools covered in this entry?

Are private tuitions covered here ?

Are placement services provided to educational institutions for security of job placements of students covered in this negative list entry ?

Online teaching is covered in negative list entry (l)?

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Bundled Services- Natural Bundling, Dominant nature test.In this case since dominant nature is determined by the service of education other dominant service of providing residential dwelling is also covered in a separate entry of the negative list, the entire bundle would be treated as a negative list service.

No, they are not covered in the negative list. Can avail the benefit of threshold exemption (for private tutors)

No, such services are not covered in negative list

If it is not part of course for curriculum, not covered in negative list

13. Services by way of renting of residential dwelling for use as residence

Scenario Taxable or non taxable

(i) Flat provided on rent by a director of a company to the company for the purpose of stay of its employees and guests?

(ii) if a house is given on rent and the same is used as a hotel or a lodge

(iii) rooms in a hotel or a lodge are let out whether or not for temporary stay

(iv) government department allots houses to its employees and charges a license fee

(v) furnished flats given on rent for temporary stay

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To employees for residence not taxable

Taxable

Taxable

Taxable as it is in the nature of lodge or guest house

Non taxable. Such service would be covered in the negative list entry relating to services provided by government

14. Financial sector

Services by way of— extending deposits, loans or advances in so far as the consideration is represented by

way of interest or discount;Illustrations of such services are -• Fixed deposits or saving deposits or any other such deposits in a bank for which

return is received by way of interest.• Providing a loan or over draft facility for in consideration for payment of interest.• Mortgages or loans with a collateral security to the extent that the consideration for

advancing such loans or advances are represented by way of interest.• Corporate deposits to the extent that the consideration for advancing such loans or

advances are represented by way of interest or discount.

Inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers;

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Let’s Think… Services provided by banks or authorized dealers of foreign exchange by

way of sale of foreign exchange to general public. Taxable or not ?

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This is not covered under negative list and hence is taxable.

Let’s Think If any service charges or administrative charges are recovered in addition

to interest on a loan, advance or a deposit would such charges be also a part of this negative list entry?

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No. The services of loans, advances or deposits are exempt in so far as the consideration is represented by way of interest or discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration.

15. Service relating to transportation of passengers Following services relating to transportation of passengers have been specified in the

negative list:i. Services by a stage carriageii. Services by railways in a class other than 1st class or an AC coachiii. Services by Metro, monorail or tramway;iv. Inland waterways;v. Services by public transport, other than predominantly for tourism

purpose, in a vessel of less than fifteen tonne net; andvi. Services by Metered cabs, radio taxis or auto rickshaws

Stage Carriage means a motor vehicle carrying or adapted to carry more than six persons excluding the driver which carries passengers for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey (Motor Vehicles Act, 1988)

Inland Water ways means national waterways as defined in section 2(h) of the Inland Waterways Authority of India Act, 1985 or other waterway on any inland water, as defined in section 2(b) of the Inland Vessels Act, 1917;

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16. Service relating to transportation of goods

Following services relating to transportation of goods have

been specified in the negative list of services:

i. By road except the services of a goods transportation agency (GTA) & a courier agency

ii. By aircraft or vessel from a place outside India to the first customs station of landing in India; or

iii. By inland waterways.

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Let’s Think

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Nature of service relating to transportation of goods Whether covered in the negative list entry?

By railways

By air within the country or abroad

By a vessel in the coastal waters

By a vessel on a national waterway

By Angadia’s

By Bullock Cart

By Individual Lorry owner

No

NoNo

Yes

YesYes

Yes

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

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Lets Think…..What about transportation of patient ?

Exempted Services Vide notification No 25/2012-ST,(as amended)

government has specified 42 clause in which services are exempt from service tax

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1. Services provided to the United Nations or a specified international organization

Specified international organizations 1. International Civil Aviation Organization 2. World Health Organization3. International Labor Organization4. Food and Agriculture Organization of the United Nations5. UN Educational, Scientific and Cultural Organization (UNESCO) 6. International Monetary Fund (IMF)7. International Bank for Reconstruction and Development8. Universal Postal Union9. International Telecommunication Union10.World Meteorological Organization11. Permanent Central Opium Board12. International Hydrographic Bureau13. Commissioner for Indus Waters, Government of Pakistan and his advisers and assistants14. Asian African Legal Consultative Committee15. Commonwealth Asia Pacific Youth Development Centre, Chandigarh16. Delegation of Commission of European Community17. Customs Co-operation Council18. Asia Pacific Telecommunity19. International Centre of Public Enterprises in Developing Countries, Ljubljana (Yugoslavia)20. International Centre for Genetic Engineering and Biotechnology21. Asian Development Bank22. South Asian Association for Regional Co-operation23. International Jute Organization, Dhaka, Bangladesh

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2. Health care services by a clinical establishment, an authorized medical practitioner or para-medics

“Clinical establishment" means a hospital, nursing home, clinic, sanatorium or an institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury,

deformity, abnormality or pregnancy in any recognized system of medicine, established and administered or maintained by any person or a place established as an

independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases,

As per section 2(h) of the Clinical Establishments Act, 2010, the following systems of medicine are recognized systems of medicine:

Allopathy Yoga Naturopathy Ayurveda Homeopathy Siddha Unani Any other system of medicine that may be recognized by central government

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“Authorized Medical Practitioner” means

any medical practitioner registered with any of the Councils of the recognized system of medicine and includes medical professional having the requisite qualification to practice in any recognized system of medicine as per any law for the time being in force,

“Paramedic” means

trained health care professionals, for example nursing staff, physiotherapists, technicians, lab assistants etc.

Lets Think……Whether Ambulance services provided by a private party is taxable?

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Exempt only if the renting provided by clinical establishment, medical practitioner or paramedics)

2A. Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation.

2B. Services provided by operators of the Common Bio-medical Waste Treatment Facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto.

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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’ (Define in next slide)

5. Services by a person by way of—

a) renting of precincts of a religious place meant for general public; or

b)conduct of any religious ceremony; Commercial shops in the premises of religious place given on rent. (So long as the religious place is meant for general public, renting of precincts would be exempt, even is such premises is given for commercial purposes).

5A. Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement;

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• charitable activities” means activities relating to - (i) public health by way of -

(a) care or counseling of (i) terminally ill persons or persons with severe physical or mental disability, (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

(b) public awareness of preventive health, family planning or prevention of HIV infection;

(ii) advancement of religion or spirituality;

(iii) advancement of educational programmes or skill development relating to,-

(a) abandoned, orphaned or homeless children;

(b) physically or mentally abused and traumatized persons;

(c) prisoners; or

(d) persons over the age of 65 years residing in a rural area;

(iv) preservation of environment including watershed, forests and wildlife; or

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6. Individual Advocates and Arbitral TribunalServices provided by-

(a) an arbitral tribunal to -

(i) any person other than a business entity; or

(ii) a business entity with a turnover up to rupees ten lakh in the preceding

financial year;

(b) an individual as an advocate or a partnership firm of advocates by way of legal services to,-

(i) an advocate or partnership firm of advocates providing legal services ;

(ii) any person other than a business entity; or

(iii) a business entity with a turnover up to rupees ten lakh in the preceding financial year; or

(c) a person represented on an arbitral tribunal to an arbitral tribunal;

“arbitral tribunal” has the meaning assigned to it in clause (d) of section 2 of the

Arbitration and Conciliation Act, 1996 (26 of 1996)48

Technical testing or analysis "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;“

Entry 7 omitted by Notification No. 6/2014-ST, dated 11-7-2014, w.e.f. 11-7-2014.

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8. Services by way of training or coaching in recreational activities relating to arts, culture or sports;

It extends to coaching or training relating to all forms of Dance Music Painting Sculpture Making Theatre Sports

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9. Services provided, -

(a) by an educational institution to its students, faculty and staff;

(b) to an educational institution, by way of,-

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Government;

(iii) security or cleaning or house-keeping services performed in such educational institution;

(iv) services relating to admission to, or conduct of examination by, such institution;”;

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Let’s Think…Taxable or Exempt ?

A school is engaged in providing education to its students up to Class XII. It has a big playground which is given on rent for marriages only if the booking is in name of any staff or faculty.

Charges collected for summer camp, hobby classes etc.

Extra classes for preparation of IIT exam

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Taxable

Taxable

Exempt

9A. Any services provided by, -

(i) the National Skill Development Corporation set up by the Government of India;

(ii) a Sector Skill Council approved by the National Skill Development Corporation;

(iii) an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;

(iv) a training partner approved by the National Skill Development Corporation or the Sector Skill Council

in relation to (a) the National Skill Development Programme implemented by the National Skill Development Corporation; or (b) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill Development Corporation.”

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10. Services provided to a recognized sports body by:- an individual as a player, referee, umpire, coach or manager for

participation in a tournament or championship organized by a recognized sports body;

another recognized sports body;“recognized sports body” means

(i) The Indian Olympic Association,

(ii) Sports Authority of India,

(iii) A national sports federation recognized by the Ministry of Sports and Youth Affairs of the Central Government, and its affiliate federations,

(iv) National sports promotion organizations recognized by the Ministry of Sports and Youth Affairs of the Central Government,

(v) The International Olympic Association or a federation recognized by the International Olympic Association or

(vi) A federation or a body which regulates a sport at international level,54

Let’s Think…. Services by individuals such as selectors, commentators, curators, technical

experts etc are exempt from Service Tax ?

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No, they are not exempt as no specific entry related to them in the exemption notification.

11. Services by way of sponsorship of tournaments or championships organized:-

by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state, zone or country;

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, Special Olympics Bharat;

by Central Civil Services Cultural and Sports Board; as part of national games, by Indian Olympic Association; or under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA)

Scheme;

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12. Services provided to the Government or local authority by way of erection, construction, maintenance, repair, alteration, renovation or restoration of:–

a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under Ancient Monuments and Archaeological Sites and Remains Act, 1958

a structure meant predominantly for use as an educational or a clinical or an art/cultural establishment;

canal, dam or other irrigation works;

pipeline, conduit or plant for Drinking water supply, Water treatment Sewerage treatment or disposal; or

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 Finance Act (e.g. MP, MLA etc)

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“Original works” means -

1. all new constructions; or

2. all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable,

Let’s Think… I am providing service of construction of hospitals and educational institutes.

Am I required to pay service tax?

If you are constructing such structures for the government or local authority, you are not required to pay service tax. If you are constructing for others, you are required to pay tax.

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13. Services provided by way of erection, construction, maintenance, repair, alteration, renovation or restoration of:-

road, bridge, tunnel, or terminal for road transportation for use by general public;

building owned by an entity registered under section 12 AA of the Income tax Act, 1961 and meant predominantly for religious use by general public;

pollution control or effluent treatment plant, except located as a part of a factory; or

a structure meant for funeral, burial or cremation of deceased;

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Let’s Think…

Contractor provided services of construction of road like construction of roads in a factory, residential colony etc. Whether such activities are exempt or taxable ?

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Construction of roads for use by general public is exempt from service tax. Construction of roads which are not for general public use e.g. construction of roads in a factory, residential complex etc would be taxable.

‘General Public’ (Aaam Adami) means body of people at large sufficiently defined by some common quality of public or in personnel nature.

14. Services by way of erection or construction of original works pertaining to :-

airport, port or railways including monorail or metro; single residential unit otherwise as a part of a residential complex;

“single residential unit" means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family;”"residential complex" means any complex comprising of a building or buildings, having more than one single residential unit

low- cost houses up to a carpet area of 60 sq. mtr. 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;

post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or

mechanized food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;

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Lets Think….. Construction of two floor house. Whether single

residential unit or residential complex? A Ltd constructed 6 villas in a township. It has separate

entrance and separate registry of villas has taken place when sold to buyers. The consideration was received by seller before construction of villas. The villas have a common park and recreation room. Is service tax applicable on the same?

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15. Services provided by way of temporary transfer or permitting the use or enjoyment of a copyright,-

(a) covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical or artistic works; or

(b) of cinematograph films for exhibition in a cinema hall or cinema theatre;”;

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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;

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Let’s Think… Activities by an artist in art forms e.g western music or dance, modern

theatres, performance of actors in films or television serials would be taxable or exempt ?

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Such activities are taxable as they are not part of any classical or folk art.

17. Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India;

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18. Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent;”;

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"Declared Tariff" includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air-conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit

Lets Think…. Declared Tariff is Rs.1100/- per day but discount @ 20% is

allowed based on tourist season Tariff is for separate for different type of room Renting out of entire hotel for a lump sum amount

19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year;”

19A. Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year;

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Lets Think….. Two restaurants in a complex, one is AC other is non-AC. Separately

demarcated and named but food is sourced from a common kitchen.

Goods sold on MRP across the counter in AC restaurant

Room service of food and beverages is covered by restaurant

Home delivery of food is liable for service tax?

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Only the service provided in AC is liable to service-tax – Circular no. 173/8/2013-ST dated 7-10-2013

Not liable for service tax - Circular no. 173/8/2013-ST dated 7-10-2013

(No- Circular no. 139/8/2011-TRU- dated 10-5-2011)

It is incidental to the contract of sale of goods- IRCTC v. Govt of NCT of Delhi (2011)Service tax is not payable on VAT – Circular no. 139/8/2011- TRU dated 10-5-2011

20. Services by way of transportation by rail or a vessel from one port in India to another of the following goods:-

relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;

defence or military equipment;

newspaper or magazines registered with Registrar of Newspapers;

railway equipment or materials;

agricultural produce;

foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages; or

chemical fertilizer, organic manure and oilcakes

Cotton, ginned or baled.

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21. Services provided by a goods transport agency by way of transportation of:-

Agriculture produce; goods where gross amount charged on a consignment

transported in a single goods carriage does not exceed Rs. 1500/-; or;

goods, where gross amount charged for transportation of all such goods for a single consignee in the goods carriage does not exceed Rs. 750/-;

Contd..

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Contd.. foodstuff including flours, tea, coffee, jaggery, sugar, milk

products, salt and edible oil, excluding alcoholic beverages; chemical fertilizer, organic manure and oilcakes; newspaper or magazines registered with the Registrar of

Newspapers; relief materials meant for victims of natural or man-made

disasters, calamities, accidents or mishap; or defence or military equipment cotton, ginned or baled.

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Food Stuff includes rice: Circular no.177/3/2014-ST 17-2-2014

22. Services by way of giving on hire:-

to a state transport undertaking, a motor vehicle meant to carry more than 12 passengers; or

to a goods transport agency, a means of transportation of goods;

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23. Transport of passengers, with or without accompanied belongings, by:

air, embarking or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Baghdogra located in West Bengal; or

non-air conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire;

ropeway, cable car or aerial tramway;

24. Vehicle Parking (Exemption Omitted w.e.f 01-4-2013)

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25. Services provided to the Government or a local authority by way of:-

water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation

repair of a vessel;

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26. Services of general insurance business provided under following schemes:-

Hut Insurance Scheme;

Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development Programme);

Scheme for Insurance of Tribals;

Janata Personal Accident Policy and Gramin Accident Policy;

Group Personal Accident Policy for Self-Employed Women;

Agricultural Pumpset and Failed Well Insurance;

Premia collected on export credit insurance;

Weather Based Crop Insurance Scheme or the Modified National

Central Sector Scheme on Cattle Insurance;

Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture;

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Jan Arogya Bima Policy;

National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);

Pilot Scheme on Seed Crop Insurance;

Universal Health Insurance Scheme;

Rashtriya Swasthya Bima Yojana; or

Coconut Palm Insurance Scheme;

26A. Services of life insurance business provided under following schemes—

a) Janashree Bima Yojana (JBY);

b) Aam Aadmi Bima Yojana (AABY);

c) life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having maximum amount of cover of fifty thousand rupees.

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27. Services provided by an incubatee up to a total business turnover of Rs. 50 lac in a financial year subject to the following conditions, namely :-

the total business turnover had not exceeded Rs. 50 lac during the preceding financial year; and

a period of 3 years has not lapsed from the date of entering into an agreement as an incubatee

“incubatee” means an entrepreneur located within the premises of a Technology Business Incubator (TBI) or Science and Technology Entrepreneurship Park (STEP) recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology, Government of India and who has entered into an agreement with the TBI or the STEP to enable himself to develop and produce hi-tech and innovative products,

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28. Service by an unincorporated body or an entity registered as a society to own members by way of reimbursement of charges or share of contribution :-

as a trade union;for the provision of exempt services by the entity to third

persons; orup to an amount of Rs. 5,000/- 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;

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Let’s Think… The members contribute an amount to RWA for holding camps to provide

health care services to poor men and women. Whether RWA is required to pay tax on contribution received from members?

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No. You are not required to pay service tax on the contribution received as you are providing exempt health care services to third persons. If contribution is for the taxable services to be provided to third persons, you are required to pay service tax.

29. Services by the following persons in respective capacities:-

(a)sub-broker or an authorised person to a stock broker;

(b) authorised person to a member of a commodity exchange;

(c) mutual fund agent to a mutual fund or asset management company;

(d) distributor to a mutual fund or asset management company;

(e) selling or marketing agent of lottery tickets to a distributer or a selling agent;

(f) selling agent or a distributer of SIM cards or recharge coupon vouchers;

(g) business facilitator or a business correspondent to a banking company or an insurance company, in a rural area; or

“business facilitator or business correspondent” means an intermediary appointed under business facilitator model or business correspondent model by a banking company or an insurance company under the guidelines issued by Reserve Bank of India,

(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;

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Lets Think…..

Sub contractor provide input service to main contractor in relation to

construction of road for general public use.

Sub contractor supplying labour to main contractor who is providing

construction service of hospital to Govt.

M/s A Ltd is engaged in construction of Income Tax Deptt at Jaipur. It

subcontracts the labour contract to M/s X Ltd. Is service tax applicable on

any of them? Will your answer change if it sub-contracts the whole work

with material to M/s X Ltd.

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30. Carrying out an intermediate production process as job work in relation to:-

• agriculture, printing or textile processing;

• cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 of the CETA,1985;

• any goods on which appropriate duty is payable by the principal manufacturer; or

• 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 upto an aggregate value of taxable service of the specified processes of 150 lac rupees in a financial year subject to the condition that such aggregate value had not exceeded 150 lac rupees during the preceding financial year;

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Lets Think…. Embroidery work done on job basis – whether

taxable?

Packing and bottling of liquor

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(Treated as ‘manufacture’ in Maa Sharda Wine Traders v UOI (2009) 22 STT 105 (MP HC FB)

31.Services by an organizer to any person in respect of a business exhibition held outside India;

32. Services by way of making telephone calls from:- departmentally run public telephones; guaranteed public telephones operating only for

local calls; or free telephone at airport and hospitals where no

bills are being issued;

33. Services by way of slaughtering of animals;

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34. Services received from a service provider located in a non- taxable territory by:-

the Government, a local authority or an individual in relation to any purpose other than industry, business or commerce; or

an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities.

a person located in a non-taxable territory;

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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;

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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.

40. Services by way of loading, unloading, packing, storage or warehousing of rice, cotton, ginned or baled;

41. Services received by the Reserve Bank of India, from outside India in relation to management of foreign exchange reserves;

42. Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India.”.

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Summary

Sector Negative List Mega ExemptionGovernment (a) 5A, 12, 25, 36, 39

Construction Sector 12, 13, 14, 29(h) & 38

Manufacturing /Job Work (f) 30

Education (L) 4, 8, 9, 9A & 35

Tour/ Travel/ Transportation (O) & (P) 20, 21, 22, 23, 40 & 42

Charitable & Religious 4, 5, 13

Renting (m) 5, 18 & 22

Public Welfare (h), (j), (q) 2, 7, 16, 19, 24, 28, 32 & 38

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Small Scale Exemption:- (Notification No 33/2012-ST)

Exemption to small scale service providers when value of Taxable services in the preceding financial year had not exceeded ten lakh rupees — Notification No. 6/2005-S.T. superseded.

Provided that nothing contained in this notification shall apply to,-

(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or

(ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994.

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Small Scale Exemption:- (Notification No 33/2012-ST)

Explanation. - For the purposes of this notification,-

(A) “brand name” or “trade name” means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person;

(B) “aggregate value” means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviable thereon under section 66B of the said Finance Act under any other notification.”

4. This notification has come into force on the 1st day of July, 2012.91

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Case Study 1. A building co-owned by two or more people and given on rent with

individual share of rent less than 10 lacs per annum. Whether it is considered as AOP or BOI.

2. In case of a works contract service, Service tax is payable on 40% of gross amount charged. Assume total value of works contract is 20 lacs. The taxable value would be Rs. 8 lacs. Whether he is entitled to the exemption of SSP.

3. In case of construction of residential complex service tax is payable in 25% of the gross amount charged. Whether full value of service needs to be considered or the abated value for the purpose of SSP exemption.

4. An authorised service station of Maruti provides servicing to the vehicle. Whether his services is covered under the brand name and consequently not be entitled to exemption of Rs.10 lacs.

Final Words…

Thank You

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