understanding service tax concepts - june 2013

8/11/2019 Understanding Service Tax Concepts - June 2013

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Updated June 2013


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CA Madhukar N Hiregange

CA Rajesh Kumar T R

CA Sudhir VS

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PREFACE

Service tax is a subject which has been posing quite a few probles to assessees since its

introduction in the !ear 1""# through $hapter % of &inance 'ct 1""#( )ver *s(131+000 $roreshas been collected last !ear on this count( ,he service tax law li-e other tax laws prevalent in the

countr! is not siple+ not equitable+ not certain and tax adinistration not fair( )ver the !ears

there have been nuber of instances where assessees have had to face litigations with the

departent at various levels ainl! due to lac- of clarit! in the subject atter( .t has been

observed that though the ,ribunals and $ourt provide the clarit!+ the deands fro the revenue

for the past periods are raised( /ow with the Negative Listslated to augent revenues to at least

*s( 1+0+000 crores+ the earlier understanding of the provisions have substantiall! changed( ,he

professional advisor would also face difficulties while advising the clients in this area which is ina developing stage(

,hough an attept has been ade to reove confusion b! appropriate clarifications

education guide where ever applicable+ the assessees woes and the advisors probles are far

fro over( )ne of the ain reasons for this has been the fact that the subject has not !et

developed to the fullest extent and we continue to see changes ever! !ear b! wa! of aendents+

exeptions+ clarifications being given even after 1(4(2012( ,he coprehensive approach to cover

the taxes has not been correspondingl! found sealess cenvat credit with ost ajor restriction

still reaining( .nvariabl! it is seen that the changes have been priaril! been aied atincreasing the revenue to the governent even if it eans aring the tax adinistrators undul!(

.t is not uncoon to find entrepreneurs 5 business advisors5 chartered accountants new to

service tax who are doubtful5 unclear about the legal provisions pertaining to the sae( ,his brief

online boo- is aied at such $hartered 'ccountants in eplo!ent as well as practice 5 assessees

who are new to service tax practice and are interested in understanding the basic concepts of the

subject so that the! can ta-e steps to ensure effective copliance with the law( ,he attesting

auditor a! also li-e to have a handil! eas! to refer boo- for ensuring copliance under laws he

certifies when he signs off the financials for corporate( 6eeping this fact in ind and as well asthe constraints as to space+ this boo- deals with concepts of service tax to guide the assessee5

professional rather than an in7depth discussion of the legal provisions+ especiall! the taxable

services individuall!(

,his boo- has attained its present for partl! due to the efforts of the partners of 8iregange

9 'ssociates+ $hartered 'ccountants nael! 7 $' :adhu-ar / 8iregange+ $' *ajesh 6uar

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,*+ $' Sudhir % S and also the efforts of qualified staff who have contributed especiall! $'

*oopa /a!a-(( ;e ac-nowledge their efforts(

,he boo- contains an overview of service tax initiall! which would provide the reader with a

birds e!e view of service tax( ,he reader is advised to go through the sae before proceeding

onto the subsequent chapters( ,his boo- also contains soe of the iportant procedures whichwould be useful to the assessee in copl!ing with the legal provisions of service tax(

,he authors have tried their best to a-e this online boo- as coplete as possible but where

the readers have an! doubt regarding the subject atter are advised to refer a ore

coprehensive publication regarding the sae or see- expert opinion(

,he chapters in this boo- have been arranged in such a wa! as to give the reader a fairl! good

idea as to the provisions of law( ,he authors would also welcoe valuable suggestions fro the

readers+ which would help us in ensuring a better offering next tie around( &or an! coents or

feedbac- please write to hiregange


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Tabe !" C!ntents

#VERV$E% #F SERV$CE TA&(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10$onstitutional validit! and concepts((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10>ev! and collection((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((12$oncept of $lassification(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((13*egistration((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#$oncept of consideration and valuation((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#?a!ent of service tax(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1@?a!ent of .nterest((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A$B/%', $redit schee((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((14Bxport of Services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((14&iling of returns(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1'ssessent((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"?rovisions as to recover!(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"

?rovisions pertaining to penalt!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((20$ollecting aounts representing service tax(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21?rovisions pertaining to 'ppeals(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21

SERV$CE TA& ' LEV(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23>ev! and charge of service tax((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23;hat is ServiceC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23$lassification of Service((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2@

)ECLARE) SERV$CE((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((241( *enting of .ovable ?ropert!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((22( $onstruction of $oplex(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2"3( ,eporar! transfer or peritting the use or enjo!ent of an! intellectual propert!

right((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((31#( Developent etc of ., software((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((32@( /on $opete &ee((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((33A( ,ransfer of goods b! wa! of hiring+ leasing+ licensing or in an! such anner withouttransfer of right to use such goods(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((3#4( Deliver! of goods on hire7purchase or an! s!ste of pa!ent b! installents(((((((3@( Service portion in execution of ;or-s $ontracts((((((((((((((((((((((((((((((((((((((((((((((((((((((3A"( Suppl! of &ood or other articles of 8uan $onsuption((((((((((((((((((((((((((((((((((((((((3

NE*AT$VE L$ST((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((#21( Services provided b! Eovernent or >ocal authorit!F((((((((((((((((((((((((((((((((((((((((((((((#22( Services provided b! *eserve =an- of .ndia(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((##

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10( Bntr! to Bntertainent Bvents and access to 'useent &acilities(((((((((((((((((((((((@211(,ransission or Distribution of Blectricit!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@312( Specified services relating to Bducation((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@#13( Services b! wa! of *enting of residential dwelling for use as residence((((((((((((((((@A1#( &inancial Sector(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@4

1@( Service relating to ,ransportation of ?assengers(((((((((((((((((((((((((((((((((((((((((((((((((((((@1A( Service relating to ,ransportation of Eoods((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@14( &uneral+ =urial+ $reatoriu or :ortuar! services including transportation of thedeceased(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@"=rea- of $envat $hain(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A0

CLASS$F$CAT$#N #F SERV$CE((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A1*elevance of the concept of classification(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A1?ossible raifications where the assessee gets the classification wrong((((((((((((((((((((((A#?ointers for practice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A@

E&EMPT$#NS $NCL+)$N* ME*A E&EMPT$#N(((((((((((((((((((((((((((((((((((((((((((((((((A4:ega Bxeption /otification(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A4

Sall Service ?rovider Bxeption((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((4'bateents(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("0?ointers for practice((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("2)ther exeptions((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("3

PLACE #F PR#V$S$#N #F SERV$CE R+LES, -./-(((((((((((((((((((((((((((((((((((((((((((((("@*ule 1#F )rder of application of rules((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("A*ule 13F ?owers to notif! description of services or circustances for certain purposes((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("4*ule 12F ?lace of ?rovision of services provided on board a conve!ance(((((((((((((((((((("4*ule 10F ?lace of ?rovision of goods transportation services((((((((((((((((((((((((((((((((((((((("*ule "F ?lace of ?rovision of Specified services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("*ule F ?lace of ?rovision of services where provider and receiver are located intaxable territor!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((101*ule 47 ?art perforance of a service at different locations(((((((((((((((((((((((((((((((((((((((102*ule AF ?lace of ?rovision of Services relating to events((((((((((((((((((((((((((((((((((((((((((((102*ule @F ?lace of provision of services relating to iovable propert!((((((((((((((((((((((103*ule #F ?lace of provision of perforance based services((((((((((((((((((((((((((((((((((((((((((10#*ule 3F Eeneral *esiduar! rule((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10@$onclusionF((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10@

REVERSE CHAR*E 0 1#$NT CHAR*E MECHAN$SM(((((((((((((((((((((((((((((((((((((10A.ntroduction((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10A/o $harging section w(e(f(1(4(12 on reverse charge(((((((((((((((((((((((((((((((((((((((((((((((((((10A;hat is reverse chargeC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10A;hat is Joint $harge :echanisC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((104;hat is covered under *everse $hargeC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((104;hat is covered under Joint $hargeC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10")ther relevant aspects((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((110.portant point to be considered(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((111$onclusion(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((112

CENVAT CRE)$TS AN) PA(MENTS((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((113

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Bxepted Service eans(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((121Duties5taxes which can be considered for set off or availing credits(((((((((((((((((((((((((((122UtiliGation of the credits((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((122;hen inputs5capital goods are reoved outside the preises((((((((((((((((((((((((((((((((((((123;hen inputs5capital goods are written off full!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((12#*estriction in case of capital goods(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((12#$envat $redits *efund for exporter of service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((12A*ule A *eversal of $envat $redit(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((124Docuentation wor- to be done((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((130$oncept of input service distributor((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((132?a!ent of service tax(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((133

*ecover! of cenvat credit wrongl! ta-en or erroneousl! refunded(((((((((((((((((((((((((((((13#$onfiscation and penalt! in case of wrong availent of $envat $redits((((((((((((((((((((13#?ointers for ?ractice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((13@

VAL+AT$#N +N)ER SERV$CE TA&(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((134;hat is the ain basis for valuationC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((134$an the $entral Bxcise )fficer question the valuationC((((((((((((((((((((((((((((((((((((((((((((((13;hether the gross aount charged for the service would include charges reibursedb! the service receiverC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((13"'re there an! other specific inclusions and exclusions with regard to aount chargedfor specific servicesC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#1;here during the course of providing service+ there is transfer of propert! in goods+what would be the valueC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#2%alue of service portion in the execution of wor-s contract(((((((((((((((((((((((((((((((((((((((1#2Deterination of value of the service in relation to one! changing(((((((((((((((((((((((((1##?ointers for practice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#@

$MP#RT AN) E&P#RT #F SERV$CES(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#4.port of Services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#4?ointers for practice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#4

)EMAN), APPEALS, REC#VER( AN) PENALT$ES((((((((((((((((((((((((((((((((((((((((((1#"Deand 9 'djudicationF(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#"'ppeals((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1@#?enalties(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1@"

REF+N)S AN) RE2ATES((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A2.ntroductionF((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A2*efund under Section 11= of $entral Bxcise 'ct+ 1"##F(((((((((((((((((((((((((((((((((((((((((((((1A2*efund of $envat $redit under *ule @ of $$* 200#((((((((((((((((((((((((((((((((((((((((((((((((((1A3?rocedure for filing the refund clai(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A@?rocedure for refund of credits u5r @ of $$* 200# prior to the 01(0#(2012(((((((((((((((1AA*efund Under /otification /o #1520127S, dated 2"(0A(2012 w(e(f 1(4(2012((((((((((((1A?rocedure for claiing *ebate((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A

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8/280

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PR#CE)+RES %$TH RE*AR) T# RE*$STRAT$#N(((((((((((((((((((((((((((((((((((((((((10;hen does the service provider require registration under Service ,axC(((((((((((((((((((10

;hat is the procedure for registrationC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((108ow is centraliGed registration differentC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((128ow to a-e aendents with regard to changes in particularsC(((((((((((((((((((((((((((((12Service ,ax *egistration /uber((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((13?reise code((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((13

PR#CE)+RE %$TH RE*AR) T# $NV#$C$N*(((((((((((((((((((((((((((((((((((((((((((((((((((1#8ow to raise a proper invoiceC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#

REC#R) KEEP$N*(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1APA(MENT #F SERV$CE TA&((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"

Deterination of ?oint of ,axation(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"8ow to pa! service taxC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"2

SERV$CE TA& RET+RNS(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"#8ow to file the service tax returnC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"#;hat is the procedure to file the returns onlineC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"@

SERV$CE TA& A+)$TS 2( PR#FESS$#NALS((((((((((((((((((((((((((((((((((((((((((((((((((((((1"4;hat is required of the auditorC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"4?ointers for practice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((201

FRE3+ENT ERR#RS C#MM$TTE) $N SERV$CE TA&(((((((((((((((((((((((((((((((((((((204#THER M$SCELLANE#+S ASPECTS $N SERV$CE TA&(((((((((((((((((((((((((((((((((((20"

.nterest and penalt! calculations((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((20"?rovisions as to penalt!(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((210Searching of preises b! authoriGed officers((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((211)ther recover! provisions((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((211>iabilit! under 'ct to be &irst $harge(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((212)ffence and penalties(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((212'pplication of the provisions of the $entral Bxcise 'ct 1"##((((((((((((((((((((((((((((((((((((212

S#ME #F THE $MP#RTANT C#MM#N SERV$CES(((((((((((((((((((((((((((((((((((((((((((21#*enting of .ovable ?ropert! Services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21#:anageent+ :aintenance or *epair Services(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21A.nforation ,echnolog! Software Services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((214Eoods ,ransport 'genc! Services(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21";or-s contract service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((220Suppl! of tangible goods for use service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((22@$onstruction of coplexes((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((22"=usiness 'uxiliar! Service((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23#Support services of business or coerce((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23ASale of goods((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23".nterior decorator(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#0*enting of cabs((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#1,our operators service((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#2$oercial training or coaching((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2##


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#VERV$E% #F SERV$CE TA&

,ax on services has been in vogue in .ndia since 1""# when it was introduced for the first tie(

;hen it was introduced initiall!+ there were three services which were liable but over the !ears

various other services have been added to ta-e it to 11" in 2011( ,his !ear with the negative list

the nuber of services could be guesstiated to be in excess of 300H

)ne of the ain reasons for the services to be taxed is that the anufacturing sector can be taxed

onl! to a certain extent if we are to ensure the copetitiveness of our industr!+ since ours is no

longer a closed econo!I all activities are to bear the burden( Services presentl! foring ore

than @4 of the ED? are expected to reach 40 this decade+ which should also bear the burden

of tax( ,his tax would be subsued into the Eoods and Service ,ax which a!be in place in the

next few !ears(

,he lev! of service tax was initiall! under the residuar! powers conferred to the Union b! entr!"4 of >ist . to the Seventh Schedule to the $onstitution of .ndia( >ater entr! "2$ was introduced

specificall! to cover K,axes on Services+ though not put into effect till date( Unli-el! with ES,

in the horiGon(

Constitutional validity and concepts

Whether tax on services is constitutionally valid?

.n a nuber of cases+ the constitutional validit! of service tax has been questioned and thedecisions of the 8igh $ourts5 Supree $ourt have been in favour of revenue( .n Tamil Nadu

Kalyana Mandapam Assn Vs UOILL200#M L1A4M B>, 3M S $++ the lev! of service tax on andap

-eepers and outdoor caterers was upheld b! the Supree $ourt as a tax on services and not a tax

on sale of goods or hire purchase activities( ,he lev! of service tax on professional services of

$hartered 'ccountant+ $ost 'ccountant and 'rchitect was also upheld b! the Supree $ourt in

'll .ndia &ederation of ,ax ?ractitioners %s U). L2004 L04M S,* A2@7S$M(

.n GDA Security Private Ltd. Vs. UOIL200AL02MS,*@#2M it was held b! the :adras 8igh $ourt

that the tax on profession was levied in order to allow professionals to carr! on a particularprofession+ trade or calling or eplo!ent in a particular state( ,he aspect of providing a service

was held to be different and independent of the aspect of profession and the lev! of service tax on

securit! agenc! was upheld(

,his has been the case for the chartered accountants+ architects and advertisers also( ,he question

of constitutionalit! would favour the revenue( 's on date+ the validit! of service tax lev! on rental

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of iovable propert! is an issue to be decided b! the Supree $ourt though the Delhi 8igh

$ourt has aditted a writ petition in 8oe Solution *etail .ndia >td %s U). L200"7,.)>71"A7

DB>78$7S,M challenging the lev! of service tax on pure renting of iovable propert! without

there being a service associated with the renting(

,he Supree $ourt recentl! upheld the validit! of service tax on financial leasing servicesincluding equipent leasing and hire purchase in 'ssociation of >easing 9 &inancial Service

$opan! L20107,.)>747S$M and observed that service tax would be pa!able as there is a

rendition of service in financial transactions(

.n addition to the above+ the other relevant decisions are discussed below where the courts have

upheld the validit!F

i( 'ddition 'dvertising %s U). 1"" L"M B>, 1#F Service tax on advertising service is

constitutional and not violative of article 1# and 1"L1M of $onstitution of .ndia(

ii( .ndian .nstitute of 'rchitects %s U). 2002 L13"M B>, 2#@F Service tax is a tax levied onservices and it is not a tax on professionals( ?arliaent is copetent under entr! "4 to

lev! service tax on architects(

iii( Secretar!+ &ederation of =us )perators 2001 L13#M B>, A1F ,ax on service is distinct

fro tax on profession+ trade or calling and not falls under entr! A0 of list ..( Different

aspects are liable for tax(

iv( >% San-eshwar 200A L#M S,* 2@4F ,our operator not to be tered as transferor of right

to use vehicles as per article 3AAL2"'M of the $onstitution of .ndia( >ev! of service tax

neither tax on passenger nor goods(v( .nfotech Software Dealers 'ssociation L2010 L020M S,* 02" :adMF wherein an

iportant decision in the context of taxation of software has been delivered( ;hile

holding that software Lpac-aged or custoiGedM is goods+ the $ourt has also upheld the

validit! of lev! of service tax on ., software services(

What is the concept of service as understood here?

'ssessees should note that in order to attract the lev! under service tax law+ there should first of

all be a service finding a ention in sec A@L10@M( ,he concept of NserviceO though has not beendefined for this purpose and one would have to refer the eanings given b! dictionar! to

understand the sae or even the word as understood coerciall! can also be considered( ,his

view has been followed in =ajaj 'uto >td %s $$B ?une 1""4 L"#M B>, @#@ L,riM(

Under the positive list based taxation+ the ter service was not defined( Under negative list based

taxation+ wef 1(4(2012+ there is a specific definition of ter service(

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,he concept has been explained in the chapter on lev!(

What would be the position under law, where service involves goods?

Service tax is a tax on service and not a tax on sale of goods( ,he various decisions given b! the

$ourts on the constitutional validit! of service tax have also clarified his aspect( .t hasaccordingl! been held that service tax and %', are utuall! exclusive and the definition of

service confirs this( ,here are notifications issued under service tax providing deduction 5

abateent in respect of the transfer of propert! in goods ade during the provision of services

and this deduction5abateent would be fro the gross value charged for the service( ,he

applicabilit! of these notifications would depend on the nature of the services involved and the

activities perfored( =efore opting for the benefit of these notifications+ the assessee should

ideall! perfor a cost7benefit anal!sis as there are associated conditions to be et to clai such

deduction(

Governing provisions

,he provisions pertaining to service tax are given in $hapter % and %' of &inance 'ct 1""# as

aended fro tie to tie( ,he $entral Eovernent has also been epowered to a-e rules to

carr! out the provisions of this $hapter+ through section "# of this chapter( ,his coes along with

the power to grant exeptions fro Service ,ax u5s "3( ,he Eovernent has consequentl!

notified various sets of rules+ the provisions of which have been explained as we proceed with

this boo-( ,he rules which a! be noted are as follows Service ,ax *ules 1""#I

$envat $redit *ules 200#I

Bxport of Service *ules 200@I

Service ,ax L*egistration of Special $ategor! of ?ersonsM *ules 200@I

Service ,ax LDeterination of %alueM *ules 200AI

?oint of ,axation *ules 2011

?lace of ?rovision of Services *ules ,axation of Services L?rovided fro outside .ndia and received in .ndiaM *ules

200AI;or-s $ontract L$oposition Schee for ?a!ent of Service ,axM *ules 2004I

Service ,ax L'dvance *ulingsM *ules 2003I

Service ,ax L?ublication of /aesM *ules 200I

Service ,ax L?rovisional attachent of propert!M *ules 200

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Levy and collection under earlier service tax law[upto !"!#$#%

,helev! of service tax extends to whole of .ndia except that it does not extend to a service

provider providing taxable services fro the state of Jau and 6ashir b! virtue of section A#

of $hapter % of &inance 'ct( Under negative list based taxation+ the service tax lev! is applicableon the services provided in taxable territor! of .ndia(

Under positive list based taxation+ the question of taxing a service would arise where the service

that is provided b! the service provider happens to be covered under the an! of the sub7clauses of

section A@L10@M ( )nce the relevant clause is identified+ the concept of Nservice providerO and

Nservice receiverO would also have to be satisfied in order to tax the concerned service( .n ost of

the categories+ the Nservice providerO and the Nservice receiverO can be any pers!n(

.n other words+ under erstwhile service tax law+ the lev! of service tax was on the provision of

specified taxable service at the rate of 12 wef 1(#(201210 wef 2(2(200"( &urther tounderstand the lev! and collection of the service tax upto 1(4(2012+ understanding the eaning

and scope of the ter taxable service would be iportant(

;here the criteria discussed above are satisfied+ the tax would be levied on the service provider

who would be liable to collect the service tax aount fro the service receiver and reit it to the

governent in the anner prescribed( 8owever in certain cases the statute requires the service

receiver to pa! the service tax to the governent( ,he charge of service tax would be at the rates

set out in section AA which was increased fro 10 to 12 wef 1(#(2012( ,he education and

secondar! higher education cess would be pa!able on this aount at 3 and the total service taxincluding cess is 12(3Afro 1(#(2012 to 30(A(2012(

Since the lev! of service tax is on the provision of service+ the services provided before the date

on which such services were brought under the tax net+ would not be subjected to service tax(

*eaders here a! note that even if the bills for the services provided are raised b! the service

provider after the date on which the service becae taxable+ there would be no liabilit! as the

services had been provided during the period when the service was not taxable at all( ,his has

been confired b! the 'hedabad 8igh $ourt in Schott Elass .ndia L?M >td %s $oissioner

$entral Bxcise and $ustos %adodara .. L200"7,.)>7278$7'8:7S,M

Concept of Classification under earlier service tax law [upto !"!#$#%

,he classification of the service is defined to ean identification of the appropriate sub7clause

under sec A@L10@M( ,he service provider should ensure that the service 5 activit! is classified

properl! as this would enable hi to ascertain his liabilit! properl!( $orrect classification is

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critical as the exeptions under service tax barring the general exeptions are based on specified

categories and if the classification is not proper+ the service provider a! either end up pa!ing

ore than what is required or even face a liabilit!(

.t is possible that the services provided a! fall under ore than one categor!( Siilarl! the

service provider a! be providing nuerous individual services or cobined services( &or thepurposes of classification+ the categor! which gives the ost specific description of the service

should be adopted( ;here coposite services Lcobination of different servicesM are provided+

the classification should be on the basis of the service which gives the their essential character(

;here the aforesaid two principles cannot be followed for classification+ the classification shall

be under the sub7clause which occurs first aong the sub7clauses which equall! erit

consideration as per section A@'( .n addition to this+ the non statutor! principles as to

consideration of trade parlance especiall! where certain NtersO are not defined under law would

also assue significance as indicated in "" General #Ne$ Del%i& Vs Gu'arat Perst!rp(lectr!nics Ltd 200@ L1AMB>,@32

&egistration

Bver! person liable to pa! service tax is required to register b! a-ing an application to the

Superintendent of $entral Bxcise in ters of section A"( ,he service provider before registering

shall ensure that the basic exeption liit for registration available to all service provider has

been crossed( ,he present notified liit at present is *s( 10 la-hs+ specified b! notification A5200@

S, dated 01(03(0@ as aended fro tie to tie( ,his notification superseded b! notificationno(33520127S,( =randed service providers i(e( providing services under brand nae or trade nae

of others would not be eligible for the exeption( 'n illustration could be the coercial

coaching franchisees( exaple tall! acadeies( ,he exeption fro registration would not

be available for a person who is liable to pa! service tax as receiver of services( :oreover+ the

aggregate value of taxable services provided in the preceding financial !ear should not exceed *s(

10 la-hs in order to avail the benefit of exeption(

.n ters of *ule # of Service ,ax *ules 1""#+ an application in &or S, 1 would have to be filedwithin thirt! da!s fro the date on which the taxable service is provided5tax is levied on such

service( Such for is now to be filed online through www(aces.)!v.inwherein the assessee would

have to first register hiself as a user and then fill the for S,71 Lthe procedure in this respect is

discussed in the chapter N?rocedures with regard to *egistrationOM,he service provider also has

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an option of going in for centraliGed registration where the accounting and5or billing activities are

centraliGed(

' change in the inforation or an! additional inforation sought to be given shall be intiated in

writing to the jurisdictional 'ssistant $oissioner of $entral Bxcise or Deput! $oissioner

of $entral Bxcise( ,here is a penalt! of *s 10+00057 for dela! in registration(

Concept of consideration and valuation

'fter ascertaining the taxabilit!+ the valuation of taxable services becoes iportant for the

reason that the service tax liabilit! is deterined based on the value of taxable service( ,he value

is arrived norall! on gross basis and is on the aounts charged for the taxable services

provided( ,he non7taxable services or non7service activities would not for part of gross value

for service tax coputation( 's per section A4+ where the consideration is wholl! in one!+ the

gross aount charged for the service would be liable( Bven reiburseents of expenses shall beliable as per *ule @L1M of Service ,ax LDeterination of %alueM *ules 200A unless the sae is

incurred b! the service provider as a pure agent of the service receiver( ,he conditions to be

satisfied for this are explained in the chapter on valuation( ,he gross aount charged shall

include pa!ent b! cheque+ credit card+ deduction fro account and an! for of pa!ent b!

issue of credit notes or debit notes and boo- adjustent( )ne would have to refer the rules on

valuation to ascertain the value where the consideration is not wholl! or partl! in onetar! ters

or where the sae is not ascertainable(

'ay(ent of service tax

,he service provider providing taxable services shall be required to pa! service tax under section

AL1M( 8owever+ the service provider does not have to pa! service tax until the value of service is

collected+ fro the service receiver towards the taxable services provided b! virtue of *ule A of

Service ,ax *ules 1""#(

8owever with the introduction of ?oint of Service *ules+ effective fro 01(0#(2011+ the above

said discussion would not be of uch of iportance+ since it requires pa!ent of service tax at

earliest of the followinga( Date on which service is provided or to be provided

b( Date of invoice

c( Date of pa!ent

8owever in case of iport of service under section AA' point of taxation shall be date on which

invoice was received or pa!ent is ade which ever was earlier(

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i( 'pplicabilit! of rate of service taxF ,he service tax rate shall be the rate

prevailing on the date on which the service is deeed to be provided as per the

?oint of ,axation *ules+ 2011( Barlier the rate prevailing at the tie of raising the

invoice was considered for charging service tax+ irrespective of date of

realiGation(ii( 's per section A4'+ the rate of service tax is rate applicable when service

provided or agreed to be provided( .n Delhi $hartered 'ccountants Societ!

L*egdM vs U). and )rsL20137,.)>7178$7Del7S,M held that where services of

$hartered 'ccountants were actuall! rendered before 1(#(2012 and the invoices

also issued before that date+ but the pa!ent was received after that date+ the rate

of service tax would be 10 and not 12(

iii( ?a!ent of Service ,axF ,he service tax has to be paid to the credit of $entral

Eovernent within due dates iediatel! the following onth5quarter in whichthe services are deeed to be provided as per the ?oint of ,axation *ules+ 2011(

iv( 'djustent for non7provision of serviceF .n case of assessee who has issued an

invoice5 received pa!ent towards a service to be provided and has not provided

service Lin full or partM or where aount of invoice is renegotiated due to

deficient provision of service or an! ters of contract+ he is eligible to ta-e the

credit of excess S, paid b! hi if heF

i. *efunded the pa!ent along with the S, to the receiver of service or

ii( .ssued a credit note for the value of service not so provided to the personto who he has issued invoice(

Bnhanceent of the adjustent liitF .n case where the assessee has paid to the credit of $entral

Eovernent an! aount in excess of the aount required to be paid towards service tax liabilit!+

can be adjusted in the subsequent period without an! onetar! liit(

?a!ent u5s AL2M b! the service receiver under earlier service tax law

Eenerall! it is the service provider providing taxable services+ who is responsible for collection of

service tax fro his custoer5client(( =ut section AL2M epowers the governent to notif! the

services with regard to which the service receiver would be held liable to pa! service tax to thegovernent( ,he governent has consequentl! notified the following services in this regard

through notification 3A5200# S, dated 31(12(200# as aended fro tie to tie

Eoods ,ransport 'genc! service specified person pa!ing the freight

=usiness auxiliar! service of distribution of utual fund b! a utual fund distributor or

agent utual fund or asset anageent copan! receiving such service

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Sponsorship service provided to an! bod! corporate5fir in which case+ thebod!

corporate or fir receiving such sponsorship service would be liable

,axable services received b! an! person in .ndia fro abroad the recipient of such

service in .ndia(

.nsurance auxiliar! service b! an insurance agent person carr!ing the general insurance

business or life insurance business

.n the opinion of the authors+ where the service provider pa!s the service tax+ the service receiver

can still be called upon b! the departent to pa! service tax as a receiver of such services(

8owever+ if one were to go as per the clarification provided b! the departent through its aster

circular on procedural issues "45A52004 dated 23(0(04+ it had clarified that where service tax had

been paid b! the service provider the sae could be ta-en as credit( ,his would lend credibilit! to

the theor! that a transaction cannot be taxed twice which could be a possible defense(

'ay(ent of )nterest

Section4@ of $hapter % of &inance 'ct 1""# as aended fro tie to tie provides for pa!ent

of interest b! the assessee where there is short pa!ent or dela! in pa!ent of service tax( ,he

present notified rate is 1 p(a( siple interest and this should be paid along with the tax( ,he

interest shall be for the period of default( .nterest is andator! in nature as far as the service tax

is concerned( ,he calculation of interest under service tax law is different and considers the actual

dela! in ters of da!s i(e( the calculation is not siilar to the one followed under the .ncoe ,ax

law or the 67%', law(

C*+-. Credit sche(e

,he service provider providing taxable services is entitled to avail cenvat credit of the service tax

paid on input services in addition to the excise dut! paid on inputs and5or capital goods provided

the! are used for providing such taxable service( ,his credit can be used b! the service provider

to set off the liabilit! on his services( ,his would reduce the outflow in cash on account of service

tax and ore iportantl! avoids cascading effect of taxes(

Bg .f the liabilit! is *s( 1000057 and the accuulated credits is *s( #@0057+ the service provider

can set off his liabilit! with the accuulated credit and is required to pa! the balance of onl! *s(

@@0057 in cash(

,he credit of service tax on input services Leg( ,elephone service+ anageent consultanc!+

professional services+ securit! service etcM would be available on accrual basis 8owever+ the

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credit of excise dut! additional dut! of custosL$%DM either on inputs or capital goods is

available on receipt i(e( the pa!ent to the vendor or the anufacturer is not required( ,he

service provider would however have to be careful where the service provider provides both

taxable and exepted services in which case the service provider is required to follow rule A of

$envat $redit *ules 200# for the purpose of availent(( *eversal 5 restriction on availent a!have to be done in such cases(

*xport of /ervices upto !"!#$#

,he services has been structured b! brea-ing up the sae into three groups5sectors i.e.based on

the situation of iovable propert!+ based on the perforance of service and based on the

location of the recipient of service( &or each of the categor!+ the coon condition is the receipt

of consideration in $onvertible &oreign Bxchange( ?rior to 24(02(2010+ in addition to the said

condition+ there was one ore condition requiring the service provider to provide service fro.ndia and service receiver to use the sae outside .ndia(

,he service provider who exports his service in accordance with the Bxport of Service *ules

200@ would not have to pa! service tax on such exports( 8e would also have the option of going

in for the rebate of service tax paid on taxable service exported or service tax paid on input

services or excise dut! paid on inputs used in providing such taxable services exported in

accordance with *ule @ of Bxport of Service *ules 200@ and the notifications specified

thereunder( /otification 11 0r 12 of 200@ 'nother option would be that of refund in accordance

with *ule @ of $envat $redit *ules 200#(

0iling of returns

,he service provider is required to subit half7!earl! returns in &or S,73 or &or S,73' Lin

case of provisional assessentM as the case a! be with relevant copies of &or E'* 4+ in

triplicate b! the 2@thda! of the onth following the end of the relevant half7!ear in ters of *ule

4 of Service ,ax *ules 1""#( &ro 01(0#(2010 e7filing of return is andator! for the service

providers who have paid central excise dut! or service tax of *s( 10 la-hs or ore in the

preceding financial !ear+ whether b! cash or debit in $envat credit account or both vide circular/o( "1"50"520107$P dated 23(03(2010( &or S,73' is to be used where a deposit is to be ade

provisionall! Li(e( the assessee has opted for provisional assessentM( ,he returns are to be filed

for the half !ear ending 30thSepteber and for the half !ear ending on 31st:arch( ,his !ear the

tie for filing of the return has been extended to 1" thJanuar! 2013 due to the need for different

inforation consequent to negative list(

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;here the assessee a-es a ista-e in the return+ the revised return in &or S, 3 should be

subitted within ninet! da!s and not three onths fro the date of subission of the return

under *ule 4(

;here the filing of the return is dela!ed+ the service provider would have to pa! a su to thecredit of the central governent as follows under *ule 4$ of Service ,ax *ules 1""#

*s( @00 for a dela! of 1@ da!s fro the prescribed date

*s( 1000 where the dela! is between 1@ and 30 da!s fro the prescribed date

*s( 1000Q *s( 100 per da! of dela! where the dela! is be!ond 30 da!s fro the

prescribed date but not exceeding *s( 2000 in ters of Section 40(#N!$ t%e ma*imum

penalty is increased +r!m ,s - t! -&

*ule 4$ epowers the $entral Bxcise )fficer to reduce or waive the penalt! for dela!ed filing of

return+ where the gross aount of service tax pa!able is nil and there was sufficient cause for not

filing the return(

Section 41enables the =oard to notif! a schee for preparation and filing of service tax returns

through a class of persons -nown as Service ,ax *eturn ?reparer authoriGed for this purpose( ,he

assessee could thus utiliGe the services of S,*? where he has an! difficult! in filing the returns(

,he Eovernent has fraed the Service ,ax *eturn ?reparer Schee 200" notified through

/otification 45200" S, dated 03(02(0"+ a cop! of which can be obtained on the website

www(cbec(gov(in(

*ecentl! with an :)U with $=B$ and .$'.+ $hartered 'ccountant can register as a $ertified

&iling $enter and can offer the service of filing service tax and excise returns online through

'$BS website( visit icai(org

-ssess(ent

,he assessee is required to assess the tax pa!able b! hi and pa! the sae on onthl! or

quarterl! basis as applicable( .n other words+ what is envisaged here is self7assessent( *ule AL#M

of Service ,ax *ules 1""# enables the service provider to opt for pa!ent on provisional basis

where there is a difficult! in ascertaining the aount to be paid( &or this+ the service provider

shall a-e an application to '$$B5D$$B( ,he assessent would be finaliGed at a later date( ,he

departental authorities can call for further inforation as the! a! require fro tie to tie(

,he provisions of $entral Bxcise *ules would appl! here in relation to such provisional

assessent with the exception as to requireent of furnishing of bond(

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.s best judgent assessent possible under service taxC

Section 42 authoriGes the $entral Bxcise )fficer to a-e such assessent after allowing the

assessee to represent his case+ where the assessee has failed to a-e service tax returns or assess

the tax properl!( ,hus where the assessees fail to assess tax properl! or fail to furnish return itselfthe! could face the ris- of the departent calling for a best judgent assessent( 8owever these

assessents are expected to lead to substantial litigation(

'rovisions as to recovery

's per section 43 of $hapter % of &inance 'ct 1""# as aended+ where the service tax has not

been levied or paid or has been short7levied or short7paid or erroneousl! refunded+ the $entral

Bxcise )fficer handling service tax can serve a Show $ause /otice on the person chargeable with

service tax as to wh! he should not pa! the aount specified in the notice( ,he notice shall statethe aount involved(

,his can be done within one !ear fro the relevant date unless such short pa!ent5 non7

lev!5refund was b! reason of fraud or collusion or willful is7stateent or suppression of facts or

contravention of the provisions of $hapter % or rules ade there under with the intent to evade

pa!ent of service tax( .n such cases+ the tie liit would be five !ears(

,here is an option of copleting the proceedings b! pa!ent of the tax aount along with

interest u5s 4@ before issue of notice in cases pertaining to fraud+ collusion etc(+ b! pa!ing the said

tax and interest along with penalt! of 2@ of the service tax specified in the notice within 30da!s fro the date of counication of notice( In t%e /inance 0ill -11 t%e said 2ene+it $as

e*cluded $it% respect t! cl!sure !+ pr!ceedin)s a+ter payment !+ penalty under secti!n 34#1A&&

5!$ever revised 2ene+it %as 2een pr!p!sed 2y intr!ducin) secti!n 34#6A& 2y virtue !+ $%ic%

$%ere true and c!mplete rec!rds are availa2le in t%e speci+ied rec!rds and t%e assessee durin)

t%e c!urse !+ audit veri+icati!n !r investi)ati!n pays t%e ta* interest penalty. T%e e*tent !+

penalty in t%is re)ard is 17 P.M !+ t%e ta* am!unt +!r t%e durati!n !+ t%e de+ault upt! a

ma*imum !+ -87 !+ t%e ta* am!unt. It is imp!rtant t%at t%e am!unt !+ ta* is paid 2e+!re t%e issue

!+ n!tice and in+!rmati!n !+ t%e same is pr!vided t! t%e central e*cise !++icer !+ suc% payment in

$ritin).

It is +urt%er pr!vided t%at t%e central e*cise !++icer may determine t%e am!unt !+ service ta*

$%ic% is unpaid 2y t%e assessee and t%e central e*cise !++icer in t%is scenari! %as p!$ers t!

pr!ceed +!r rec!very 2y issuin) a s%!$ cause under secti!n 34#1&

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9Speci+ied rec!rds: means rec!rds includin) c!mputeri;ed data as are re


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*ule of Service ,ax *ules 1""# requires the appeal to be ade on &or S,7# in duplicate( '

cop! of the order sought to be appealed against is also to be filed with the appeal(

Section A allows the assessee or revenue to a-e an appeal to the 'ppellate ,ribunal against the

order passed b! either the $$B or $$B L'ppealsM( ,he appeal is to be filed within three onthsof the date on which the order sought to be appealed against is received b! the assessee and as per

*ule " of Service ,ax *ules 1""#+ would be filed on &or S,7@ and would be in quadruplicate(

Bven orders passed either under section 43 dealing with recover! or a revision order of the $$B

u5s # or order adjudging penalt! u5s 3' a! be appealed against(

's far as appeals to 8igh $ourt and Supree $ourt are concerned the provisions of sections 3@E

and 3@> of the $entral Bxcise 'ct 1"## would appl!( ,he appeal to 8igh $ourt can be ade

against the order of the 'ppellate ,ribunal once the 8igh $ourt is satisfied that the case involvesa substantial question of law( ,he appeal shall be within 10 da!s fro the date on which the

order appealed against is received b! the assessee( ,he fee shall be rupees two hundred(

,he appeal against the order of the 8igh $ourt shall be with the Supree $ourt once the 8igh

$ourt certifies the case to be one that is fit for appeal to Supree $ourt( ,his a! be done on its

own otion or on an application b! the assessee once its judgent is delivered( ,he decision of

the Supree $ourt shall be final and binding on the parties concerned( ,he practice of the

revenue departent to continue to raise protective deands or litigate a atter uch after itsjudicial confiration should be discouraged as it aounts to a harassent to the tax copliant

service providers5 receivers who contributes ore than 0 of the total collections of taxes

whether in direct or indirect taxes( .t would also ebrace the global best practice of trusting the

tax pa!er both in word and spirit reduces the cost of tax adinistration(

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SERV$CE TA& ' LEV(

Levy and charge of service tax

Barlier+ Service tax was applicable to defined service providers+ providing defined taxable

services+ to defined service receivers+ in .ndia( ,he tax was liable on the gross aounts charged

for such service less the deductions and exeptions set out therein( /ow+ the Service ,ax law hasundergone a sea change with the ter Kservice b! itself being defined and all the activities which

satisf! the definition criterion fall under the service tax net ( ' list of 14 activities called the

negative list is provided which are copletel! outside the service tax net ( :ost of the earlier

exeption notifications have been scrapped and a ega exeption notification consisting of 3"

ites is given( ,hus one has to chec- the negative list+ then the exeption notification and if an!

activit! is not specified therein+ it is a taxable service( ,he lev! now is still on the provision of

service+ but for cr!stalliGation we have to chec- the ?oint of ,axation *ules+ 2011(

What is /ervice?

' new Section AA= has been introduced in this &inance 'ct and KService has been defined in

clause L##M of the new section A@=( ,he definition of service has be divided into three parts i(e(

Keans part+ Kinclusive part and Kexclusion part(

Means 5art !" the de"initi!n

RServiceR eans an! activit! carried out b! a person for another for consideration( ,he definition

of service has the following essential requireentsFa( .t has to be an! activit!+b( Such activit! has to be carried out b! a person+

c( Such person has to carr! out the sae for another person+d( ,he activit! has to be for a consideration

$n6usive 5art !" the de"initi!n

.nclusive part of the definition has ipact of enlarging the scope of the definition( .t gives wider

eaning to words or phrases in the statute( ;hen it is used in words or phrases+ it ust be

construed as coprehending not onl! such things as the! signif! according to their nature and

ipact+ but also those things which interpretation clause declares the! shall include( ,he

definition of service also includes the declared service in the inclusive part( ,his is done to avoid

abiguit! in so far as the activities entioned under declared services which could lead to

continued litigation( 8owever the contradiction between the definition part and the inclusion part

as well as the possible variance with the $entres powers laid down under the $onstitution of

.ndia are li-el! to see disputes continuing(

S5e6i"i6 e76usi!ns "r!m the de"initi!n !" servi6e

,he definition of Kservice as provided in Section A@= L##M specificall! excludes certain activities

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which would not be considered as service( ,hat is to sa! that these activities when

perfored5executed shall be out of scope of the service tax lev!(LaM an activit! which constitutes erel!+

LiM a transfer of title in goods or iovable propert!+ b! wa! of sale+ gift or in an!

other annerI or

LiiM a transaction in one! or actionable claiILbM a provision of service b! an eplo!ee to the eplo!er in the course of or in relation to

his eplo!entILcM fees ta-en in an! $ourt or tribunal established under an! law for the tie being in force(

,here are three explanations inserted after the eans+ inclusive and exclusive libs of the

definition of service( ,he! are as followsFBxplanation 1 stipulates that the definition sha n!t a558 t!

L'M the functions perfored b! the :ebers of ?arliaent+ :ebers of State >egislative+

:ebers of ?ancha!ats+ :ebers of :unicipalities and :ebers of other local

authorities who receive an! consideration in perforing the functions of that office assuch eberI or

L=M the duties perfored b! an! person who holds an! post in pursuance of the provisions of

the $onstitution in that capacit!I orL$M the duties perfored b! an! person as a $hairperson or a :eber or a Director in a bod!

established b! the $entral Eovernent or State Eovernents or local authorit! and who

is not deeed as an eplo!ee before the coenceent of this section(Bxplanation 2 provides that

transaction in one! shall not include an! activit! relating to the use of one! or its

conversion b! cash or b! an! other ode+ fro one for+ currenc! or denoination toanother for+ currenc! or denoination for which a separate consideration is charged(

Bxplanation 3 is an exception to the part that there have to be 2 distinct persons for provision of

service(LaM an unincorporated association or a bod! of persons+ as the case a! be+ and a eber

thereof shall be treated as distinct personsILbM an establishent of a person in the taxable territor! and an! of his other establishent in

a non7taxable territor! shall be treated as establishents of distinct persons(

Bxplanation # stipulates that

' person carr!ing on a business through a branch or agenc! or representational office in an!territor! shall be treated as having an establishent in that territor!(

Classification of /ervice

Barlier+ the classification of the service provided should have been with reference to the specific

coverage within the 11" alternatives( .t was possible that the services provided b! one service

provider a! appear to fall under ore than one categor! of specified services( .t was possible

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that one service provider a!be providing nuerous individual services or cobined services(

8e was required to register under all of the(

;here the entr! was not clear or ore than one classification appeared to be correct+ then

reference was to be ade to Section A@' for the rules of interpretation(

,hus+ a lot of confusion prevailed here and also litigation(/ow+ Section A@' has been replaced with Section AA&(

Section AA& has laid down the principles of classification of services(

$lause 1F Unless otherwise specified+ reference to a service Lherein referred to as ain

serviceM shall not include reference to a service which is used for providing ain service(

$lause 2F ;here a service is capable of differential treatent for an! purpose based on its

description+ the ost specific description shall be preferred over a ore general

description(

$lause 3F Subject to the provisions of sub7section L2M+ the taxabilit! of a bundled service

shall be deterined in the following anner+ nael!F

LaM if various eleents of such service are naturall! bundled in the ordinar! course

of business+ it shall be treated as provision of the single service which gives such

bundle its essential characterI

LbM if various eleents of such service are not naturall! bundled in the ordinar!course of business+ it shall be treated as provision of the single service which

results in highest liabilit! of service tax(

Bxplanation( &or the purposes of sub7section L3M+ the expression Rbundled serviceR

eans a bundle of provision of various services wherein an eleent of provision of one

service is cobined with an eleent or eleents of provision of an! other service or

servicesO(

E7em5ti!ns

Barlier+ there were an! notifications general exeptions as well as exeptions relating to

specific categor! of services( /ow all the exeptions have been cobined into a ega

notification /o( 2@52012( ,he exeption notification is to be exained carefull! as non7

following of the substantive conditions could lead to a denial of the benefit(

#ther Maj!r Change9

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,he &inance 'ct has introduced joint charge along with reverse charge echanis for dual

responsibilit! to pa! service tax( ,his is to ensure ore chaos along with enhancing the treasur!T

?lace of ?rovision *ules+ 2012 have been introduced replacing the erstwhile Bxport of Services

*ules+ 200@ and the ,axation of ServicesL?rovided fro )utside .ndia and *eceived in .ndiaM

,ules+ 200A( ,hese rules have been put in place for the purpose of the deterination of the place

of provision of services(

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)ECLARE) SERV$CE

Declared Services

Declared Services are defined under Section A@= L22M of the &inance 'ct+ 1""# to ean an!activit! carried out b! a person for another person for consideration and declared as such under

Section AAB of the &inance 'ct+ 1""#( .t eans for a service to coe under the categor! of

declared services+ it has to satisf! two basic conditions conjunctivel!

it ust be an activit! b! one person to another for consideration it ust be specifiedLi(e( declaredM under section AAB

Need "!r )e6ared Servi6e9

,he definition of service in the first instant is ver! wide to cover an! transaction done for a

consideration( 8owever+ there exist few activities which would overlap with the other levies of

state with a arginal difference+ thereb! questioning the constitutional validit! of the lev! under

service tax( .n soe cases there a! be a doubt whether that activit! could possibl! called a

service at all( ,o rest the doubt about the validit! of a transaction to be considered as service+ the

authorities have intended to declare such activities to be a service( ,o give an instance+ the first

declared service Nrenting of iovable propert! serviceO was challenged as to whether it was a

NserviceO as well as the copetence of the Union to lev! the tax on a propert!+ which is a subject

to state governance( Siilarl! ost of the declared services were challenged( &or all events and

purposes these transactions shall be deeed to be service(

The "!!:ing nine a6tivities have been s5e6i"ied in se6ti!n ;;E9

a. renting of iovable propert!I

b. construction of a coplex+ building+ civil structure or a part thereof+ including a coplex

or building intended for sale to a bu!er+ wholl! or partl!+ except where the entire

consideration is received after issuance of certificate of copletion b! a copetent

authorit!Ic. teporar! transfer or peritting the use or enjo!ent of an! intellectual propert! rightI

d. developent+ design+ prograing+ custoiGation+ adaptation+ up gradation+enhanceent+ ipleentation of inforation technolog! softwareI

e. agreeing to the obligation to refrain fro an act+ or to tolerate an act or a situation+ or to

do an actIf. transfer of goods b! wa! of hiring+ leasing+ licensing or an! such anner without transfer

of right to use such goodsI

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g. activities in relation to deliver! of goods on hire purchase or an! s!ste of pa!ent b!

installentsIh. service portion in execution of a wor-s contractIi. service portion in an activit! wherein goods+ being food or an! other article of huan

consuption or an! drin- Lwhether or not intoxicatingM is supplied in an! anner as part

of the activit!(

Bach individual declared service is explained belowF7

! &enting of )((ovable 'roperty

*enting of .ovable propert! has been taxed under the earlier tax regie vide Section

A@ L10@M LGGGGM( *enting of iovable propert! has been brought into tax net vide

/otification /o( 23520047S, dated 01(0A(2004( *enting eans facilit! allowing+ peritting or granting access+ entr!+ occupation+ use( Such facilit! has to be in an iovable propert!+ either wholl! or partl! Such facilit! a! be provided with or without the transfer of possession or control ,he sae specificall! includes letting+ leasing+ licensing or other siilar arrangeents in

respect( *enting in negative listLS(AADM and BxeptionL2@520127S,M

Renting under Negative ist9

Services provided b! wa! of renting or leasing of following are covered b! the negative list

'gro :achiner!

%acant land with or without a structure of incidental to its useE7em5ti!ns

*enting of precincts of a religious place eant for general public L/otification 2@520127

S,M *enting of a hotel+ inn+ guest house+ club+ capsite or other coercial places eant for

residential or lodging purposes+ having declared tariff of a unit of accoodation below

rupees one thousand per da! or equivalent L/otification 2@520127S,M Services b! wa! of vehicle par-ing to general public excluding leasing of space to an

entit! for providing such par-ing facilit!( L/otification 2@520127S,M( ,his has been

oitted b! &inance 'ct 2013 wef 1(#(2013( ,hus+ par-ing charges collected at cinea theatres+ alls etc+ is exepted fro service

tax as it fallsunder services b! wa! of otor vehicle par-ing to general public(

'fter aendent+ these would be liable to service tax(

C!vers

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,his lib of the definition assues iportance since it pla!s a significant role in deterining the

taxabilit! of the activit!( ,he entire activit! of the builder5developer5prooter shall be deeed to

be service onl! if an! aount has been received prior to issuance of copletion certificate b! a

copetent authorit!( .f the entire aount is received post issuance of copletion certificate+ the

activit! shall be a ere transfer of title in iovable propert! and thereb! not falling in thedefinition of service(

C!m5etent auth!rit89,his has been defined b! wa! of Bxplanation to ean the Eovernent or

an! authorit! authoriGed to issue copletion certificate under an! law for the tie being in force

and in case of non requireent of such certificate fro such authorit!+ fro an! of the following+

nael!FL'M architect registered with the $ouncil of 'rchitecture constituted under the 'rchitects

'ct+ 1"42I or

L=M $hartered engineer registered with the .nstitution of Bngineers L.ndiaMI orL$M >icensed surve!or of the respective local bod! of the cit! or town or village or

developent or planning authorit!I

Reated entries given in N!ti"i6ati!n N! -


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AA B(

1! .e(porary transfer or per(itting the use or en2oy(ent of any intellectual property right

.?* covers the followingF

,here should be an intellectual propert! right Such right is being teporaril! transferred to the service receiver or .t is peritting the use or enjo!ent of such right

,he phrase .ntellectual propert! right has not been defined under the &inance 'ct( ,his has to be

understood as per noral parlance as per intellectual propert! rights includes the followingF ?atents $op!rights ,radear-s Designs 'n! other siilar right in an intangible propert!(

Ta7abe A6tivit89

,here shall be a charge of service tax when a person assigns or agrees to assign right to use of

intangible propert! to another person for consideration+ where the assignent is not of peranent

transfer(

Tem5!rar8 Trans"er9

,ransfer+ whether peranent or teporar! shall depend upon the tie period for which the right

in the propert! subsists( F!r e7am5e+ as per Section 2A of .ndian $op!right 'ct+ 1"@4+ the right

in the cineatographic fil shall be subsist for the period of A0 !ears fro the beginning of thecalendar !ear next following the !ear in which the fil is published( ,herefore+ if the transfer of

the propert! in the right is for period exceeding A0 !ears+ the intention can be safel! concluded to

be a peranent transfer and if it is for a period less than A0 !ears+ it shall be a teporar! transfer

and subjected to service tax(

E7em5ti!n

,eporar! transfer or peritting the use or enjo!ent of a cop!right covered under clause LaM or

LbM of sub7section L1M of section 13 of the .ndian $op!right 'ct+ 1"@4+ relating to original literar!+

draatic+ usical+ artistic wor-s is exept L/ot( 2@52012M( =! &inance 'ct 2013+ there is anexeption to teporar! transfer or peritting the use or enjo!ent of a cop!right of

cineatograph fils for exhibition in a cinea hall or cinea theatreI

0ood for thought

1. Mr= M h!ds the $PR !" a 5r!du6t and the same is tem5!ra8 trans"erred t! Mr= S, i"

Mr= S a!:s Ms= M t! use the same, is it iabe "!r servi6e ta7

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,he taxable service required the service provided b! the holder of .?* and not the owner of

the .?*( 's long as :r( S holds the .?* at the tie of letting it for use b! :s( :+ he would be

liable for service tax(

-= %hether granting !" the !!m right is ta7abe

>oo right is also an intangible propert! and hence allowing the sae to be used is alsotaxable irrespective of it being recogniGed or not recogniGed under the law(

3! 4evelop(ent etc of ). software

.t covers the followingF

,he activit! perfored has to be onl! developent+ design+ prograing+ custoiGation+

adaptation+ upgradation+ enhanceent or ipleentation Such activit!has to pertain to .nforation ,echnolog! Software(

,he phrase K.nforation ,echnolog! Software has been specificall! defined in the &inance 'ct

vide Section A@=L2M to ean an! representation of instructions+ data+ sound or iage+ includingsource code and object code+ recorded in a achine readable for+ and capable of being

anipulated or providing interactivit! to a user+ b! eans of a coputer or an autoatic data

processing achine or an! other device or equipent(

0ood for thought

/= %!ud 5r!viding advi6e, 6!nsutan68 and assistan6e !n matters reating t! $n"!rmati!n

Te6hn!!g8 S!"t:are be 6hargeabe t! servi6e ta7

,hese services a! not be covered under the declared list entr! relating to .nforation

,echnolog! Software( 8owever+ such activities when carried out b! a person for another for

consideration would fall within the definition of service and hence chargeable to service tax if

other requireents of taxabilit! are satisfied(

2. %hether the 6anned !r !"" the she" s!"t:are are 6!vered

,he taxable service here is in relation to developent of the software for other person( .n the

case of canned software the developent is underta-en for oneself and after copletion the

sale is affected( .n such case there is no separate service receiver therefore the lev! fails(

8owever the sae is covered under the anufacture and are governed under central excise

provisions(

= %hether re5airs and maintenan6e !" s!"t:are is 6!vered

Bven though not specificall! covered b! the entr!+ it would be taxable since it is an activit!

done b! person to another person for a consideration(

D= %hether the s!"t:are i6enses are 6!vered

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.f the software wor-s on the license basis+ then it shall be transfer of right to use goods and

the sae is taxable under another declared service entr! nael! Ntransfer of goods b! wa! of

hiring+ leasing+ licensing or in an! such anner without transfer of right to use such goodsO

5! +on Co(pete 0ee

.t covers

'greeing to the obligation to refrain fro an act+ 'greeing to tolerate an act or a situation 'greeingto do an act

-greeing to the obligation to refrain fro( an act6 ;here a person underta-es an obligation not

to do an act on the request of the other person+ it eans that the first person has agreed to refrain

fro doing that act( .t is iportant that the first person should underta-e the obligation in return

of the request or proise b! another(&or exapleF

i. .n a erger and acquisition deal+ prooter of selling copan! agrees not to do siilar

business for an agreed period( $onsideration paid for such non copete fees would

attract service tax(

-greeing to tolerate an act or a situation6 ;here a person has to tolerate a particular situation or

act and consideration is received for such situation+ it would also be liable to service tax( &or

exaple+ a person gives personal guarantee to a ban- against loan advanced to a borrower(

Euarantor underta-es to honour outstanding dues(

-greeing to the obligation to do an act6;here a person underta-es an obligation to do an act in

return of provision of services+ consideration received for agreeing to the obligation would be

covered in declared service( &or exaple is given in ,*U letter that if ' agrees to construct 3

flats for = on land owned b! = and in return = agrees to provide one flat to ' without an!

onetar! consideration+ then the act of = for underta-ing the obligation to provide constructed

flat would be liable to service tax(

7! .ransfer of goods by way of hiring, leasing, licensing or in any such (anner without

transfer of right to use such goods

,his is covered under deeed sale as per 'rticle 3AAL2"'M of the $onstitution( ,he following are

the essentials to be satisfied for falling under the service categor!F ,here has to be goods Lwhether tangible or intangibleM Such goods would be transferred fro one person to another Such transfer is b! wa! of hiring or+ leasing or licensing or in an! such anner

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Such transfer would be without transfer of right to use such goods

Situati!ns t! de6ide :hether the a6tivit8 6!mes under trans"er !" right t! use g!!ds !r n!t

,ransfer of goods b! wa! of hiring+ leasing+ licensing or an! such anner without

transfer of right to use such goods is declared service under section AA&( ' car is given on hire b! a person to a copan! along with a driver on pa!ent of

charges on per onth5 ileage basis *ight to use is not transferred as the car owner

retains the perissions and licenses relating to the cab( ,herefore possession and

effective control reains with the owner( ,he service is therefore covered in the declared

list entr!( 8iring of ban- loc-ers ,he transaction does not involve the right to use goods as

possession of the loc-ers is not transferred to the hirer even though the contents of the

loc-er would be in the possession of the hirer( LState =an- of .ndia and )thers vs State of'ndhra ?radesh 1" L40M S,$ 021@M

8iring out of vehicles where it is the responsibilit! of the owner to abide b! all the laws

relating to otor vehicles /o transfer of right to use goods as effective control and

possession is not transferred L'llahabad 8igh $ourt judgeent in 'huja Eoods 'genc!

%s( State of U?M 8iring of audio visual equipent where ris- is of the owner 7 /o transfer of right to use

goods as effective control and possession is not transferred(

0ood for thought

1. $n 6ase the Ma6hiner8 is 5r!vided t! 6ust!mer a!ng :ith !5erat!r, :hether su6h

transa6ti!n is iabe "!r servi6e ta7

>%en t%e mac%ine is !perated 2y t%e pers!n !+ service pr!vider t%e c!ntr!l and pr!cessi!n is

n!t trans+erred t%en t%e ri)%t t! use t! pr!perty lies $it% t%e service pr!vider and %ence suc%

transacti!n is n!t !ne !+ sale. T%e ta*a2le service includes supply !+ mac%inery and t%ere+!re

t%e same is ta*a2le.

-= %here the ma6hiner8 is 5r!vided a!ng :ith the !5erat!r :!ud it be iabe

?es as t%e c!ntr!l and p!ssessi!n !+ t%e mac%inery is n!t trans+erred t! t%e cust!mer t%e

activity is a service and n!t a trans+er !+ )!!ds.

"! 4elivery of goods on hire8purchase or any syste( of pay(ent by install(ents

,his is covered under deeed sale as per 'rticle 3AAL2"'M of the $onstitution( Section 2 of the

8ire ?urchase 'ct+ 1"42 defines a Khire purchase agreeent as an agreeent under which goods

are let out on hire and under which the hirer has the option to purchase the in accordance with

the ters of the agreeent and included an agreeent under which

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i( ?ossession of goods is delivered b! the owner thereof to a person on condition that

such person pa!s the agreed aount in periodical installents+ andii( ,he propert! in the goods is to pass to such person on the pa!ent of the last of such

installents+ andiii( Such person has a right to terinate the agreeent at an! tie before the propert! so

passesI

6e! ingredients of the deeed sale categor! of Kdeliver! of goods on hire7purchase or an! s!ste

of pa!ent b! installents+ therefore are

,ransfer of control and possession Land not just of custod!M

,he hirer has the option or obligation to purchase the goods in accordance with the ters of the

agreeent(

0ood for thought

/= %hat is the di""eren6e bet:een a n!rma hiring agreement and a hire'5ur6hase

agreement

.n a ere hiring agreeent the hirer has no option to purchase the goods hired and the ris-s

and rewards incidental to ownership of goods reain with the owner and are not transferred

to the hirer( .n a hire7purchase agreeent the hirer has an option or an obligation to purchase

goods(

-= $" deiver8 !" g!!ds !n hire 5ur6hase !r an8 s8stem !" 5a8ment !n instament is deemed

t! be sae !" g!!ds :hat are the a6tivities in reati!n t! su6h deiver8 :hi6h are 6!vered

in the de6ared servi6e

.t has been held b! Supree court in the case of 'ssociation )f >easing 9 &inancial Service

$opanies Vs Union )f .ndia 2010 L20M S(,(*( #14 LS($(M that in equipent leasing5hire7

purchase agreeents there are two different and distinct transactions+ viG(+ the financing

transaction and the equipent leasing5hire7purchase transaction and that the financing

transaction+ consideration for which was represented b! wa! of interest or other charges li-e

lease anageent fee+ processing fee+ docuentation charges and adinistrative fees+ which

is chargeable to service tax( ,herefore+ such financial services that accopan! a hire7

purchase agreeent fall in the abit of this entr! of declared services(

9! /ervice portion in execution of Wor:s Contracts

,his is covered under deeed sale as per 'rticle 3AAL2"'M of the $onstitution( ' contract to be

covered under the definition of the wor-s contract under service tax+ the following conditions

would be the essential criteria

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,here would be a contract for provision of service During the provision of such service+ there is involveent of transfer of propert! in

goods which are leviable to %', and ,he scope of the contract has to be essentiall! be for construction+ erection+

coissioning+ installation+ copletion+ fitting out+ repairs+ aintenance+ renovation+alteration or an! other siilar activit! ofI

Such activit! has to be either on ovable or iovable propert!

Vauati!n in %!rks C!ntra6t Servi6e

=roadl!+ there are two ethods for valuation of serviceiM %alue of service V Eross aount value of propert! in goodsiiM .f not LiM value of service shall be

&or execution of original wor-s VW #0 of total aount shall be value &or aintenance or repair or reconditioning or restoration or servicing of an!

goods VW 40 of total aount shall be value &or other wor-s contracts VW A0 of total aount shall be value

,he ;or-s $ontract $oposition schee has been scrapped(

.n the above cases+ $B/%', credit cannot be availed of excise dut! paid on goods+ the propert!

of which is transferred to custoer( ,hus+ $B/%', credit cannot be availed on excise dut! paid

on building aterial li-e ceent+ steel+ tiles+ fittings+ etc(

0ood for thought

/= %!ud ab!ur 6!ntra6ts in reati!n t! a buiding !r stru6ture treated as a :!rks

6!ntra6t

/o( >abour $ontracts do not fall in the definition of wor-s contract( .t is necessar! that the

contractor brings in aterials used for the wor-s and there should be transfer of propert! in

goods involved in the execution of such contract which is leviable to tax as sale of goods(

?ure labour contracts are therefore not wor-s contracts and would be leviable to service tax

li-e an! other service and on full value(

-= %!ud 6!ntra6ts "!r ere6ti!n 6!mmissi!ning !r instaati!n !" 5ant, ma6hiner8,

eBui5ment !r stru6tures, :hether 5re"abri6ated !r !ther:ise be treated as a :!rks

6!ntra6t

Such contracts would be treated as wor-s contracts if ,ransfer of propert! in goods is involved in such a contractI

;! /upply of 0ood or other articles of


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,here is an activit! 'ctivit! involves an eleent of service Such activit! is in relation to goods ,he goods being food or an! other article for huan consuption or 'n! drin- whether intoxicating or not and

,his is supplied in an! anner as a part of such activit!(

.t is to be noted that the activit! of suppl!ing food or drin- has the case a! be+ would also

necessaril! have the service eleent has a part and parcel of such activit!( ;here onl! goods are

sold during the activit! of selling of food and no service eleent is involved+ it would not be

covered b! the declared service( ,herefore activities where ere food is supplied but no service is

offered has a part of suppl!ing of food+ it would not be liable to service tax(&or BxapleF ?ic- up or free hoe deliver! ade for which no separate charges are levied fro

the custoer(

Vauati!n

%aluation is broadl! classified in to two categor!I

#5ti!n /9 ,he value of service shall be deterined as per *ule 2$ of the Service ,ax

LDeterination of %alueM *ules+ 200A which provides as underF

S=

N!=

)es6ri5ti!n Per6entage !" t!ta am!unt

!n :hi6h servi6e ta7 eviabe

1( Service involved in the suppl! of food or an! other

article of huan consuption or an! drin- at a

restaurant

#0

2( Service involved in the suppl! of food or an! other

article of huan consuption or an! drin- as outdoor

catering service

A0

So where service provider is a restaurant+ the value for the purpose of charging of service tax

would be #0 of the gross aount charged( .n case of outdoor caterer+ chargeable value will be

A0 of the gross consideration(

Meanin) !+ !utd!!r caterer@ )utdoor caterer is not defined under the 'ct( 8owever+ as ordinaril!understood+ it eans a person providing food

understanding service tax concepts - june 2013

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