Service tax is levied on any act or activity performed by the assessee. And as far as my experience is concerned it is one of the most crucial and day to day activity which everyone performs. But everyone ignores this tax laws, simply because it is too much critical to understand and too much complex rules and tax parameters. But, as it is a day to day activity, so we must understand this tax laws. I am going to share my experience about this tax laws and hope that this will make you to understand about this tax laws and its applicability.
The journey of taxation of services began by selective taxation of just three services on July 1, 1994. The first year collection now appear a very modest at Rs. 407.
After appearing largely as just-another-tax for the first 8 years, with collections touching Rs. 3,302 crore in 2001-02, service tax took some giant leaps in the next 7 years, both on the back of wider coverage as well as increase in tax rate, reaching Rs. 60,941 crore in 2008-09. Next two years saw the growth somewhat moderating with collections reaching Rs. 70,896 crore in 2010-11.
The buoyancy began once again on the back of some policy initiatives and service Tax contributed Rs. 97,444 crore during 2011-12, an increase of nearly 37% over the previous year.
Budget 2012 has ushered a new system of taxation of services, popularly known as Negative List. The new changes are a paradigm shift from the existing system where only services of specified descriptions are subjected to tax. In the new system all services, except those specified in the negative list, will be subject to taxation. For those who like to use modern day terminology one could call it taxation of service version 2.0.
- Test 1
- Test 2
- Test 3
- Test 4
- Final Scenario
- Due date of Payment of service tax
- Filling Date
The Key Features of the New system of taxation are as follows:
- At the outset ‘service‘ has been defined in clause (44) of section 65B of the act.
- Section 66B specifies the charge of service tax which is essentially that 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.
- The negative list of services is contained in section 66D of the Act.
- Since provision of service in the taxable territory is an important ingredient of taxability, section 66C empowers the Central Government to make rules for determination of place of provision of service. Under these provisions the Place of Provision of Services Rules, 2012 have been made.
- To remove some ambiguities certain activities have been specifically defined by description as services and are referred as Declared services (listed in Section 66E)
- In addition to the services specified in the negative list, certain exemptions have been given. Most of the exemptions have been consolidated in a single mega exemption for ease of reference.
- Principles have been laid down in Section 66F of the Act for interpretation wherever services have to be treated differentially for any reason and also for determining the taxability of bundled services.
- The system of valuation of services for levy of service tax and of availment and utilization of Cenvat Credits essentially remains the same with only incidental changes required for the new system of taxation.
A Brief synopsis, how service will be taxable. If a particular service, didn’t clear the any of the four test then it will not be tested further, which means it will not be taxable. Each step must be checked with its tentative list given below: (It has been assumed that the service provider is a registered service provider)
Test :1 : Is it a service or not?
The first step which is to be tested is to determine whether the asked service is a taxable service or not. For this it is necessary to determine the definition of taxable service. For this Section 65B, defines service as:
- Any Activity
- Carried out by a person for another
- for consideration, and includes a declared service.
Activity word has not been defined in the Act. In terms of the common understanding of the word activity WOULD INCLUDE AN ACT DONE, A WORK DONE, A DEED DONE (which is enforceable), an operation carried out, execution of an act, provision of a facility etc. It is a term with very wide connotation.
Consideration means Something in return. It could be in two terms: Monetary consideration or Non-monetary consideration
Monetary consideration means any consideration received in the form of money.
Non-Monetary consideration means- consideration other than monetary consideration.
Test 2: Is the service covered under the Negative List (Section 66D)?
After a big revolution, it was decided that except some services all other services will be taxable and hence a negative list was prepared which is a exclusive list:
In terms of Section 66B of the Act, service tax will be leviable on all services provided in the taxable territory by a person to another for a consideration other than the services specified in the negative list. The services specified in the negative list therefore go out of the ambit of chargebility of service tax. The negative list of service is specified in the act itself in Section 66D. In all, there are 17 heads of services that have been specified in the negative list. The scope and ambit of these is explained in paras below.
The negative list shall comprise of the following services, namely:
1) Services provided by Government or Local authority
Most of the services provided by the Central or State 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.
“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 whatsover and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis,
“Local Authority” means a Panchayat, a Municipality, a Cantonment Board, a development board etc.
2) Services provided by Reserve Bank of India
All services provided by the Reserve Bank of India are in the negative list. Services provided to the Reserve Bank of India are not in the negative list and would be taxable unless otherwise covered in any other entry in the negative list.
3) Services by a Foreign Diplomatic Mission Located in India
Any service that is provided by a diplomatic mission of any country located in India is in the negative list. This entry does not cover services, if any, provided by any office or establishment of an international organization.
4) Services relating to agriculture
The services relating to agriculture that are specified in the negative list are as below:
- agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;
- supply of farm labour;
- 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;
- agricultural extension services;
- services provided by any Agricultural Produce Marketing Committee or Board or services provided by commission agent for sale or purchase of agricultural produce;
- Testing activities in relation to agriculture and agricultural produce
Further the activities like: breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry is also included in the definition of agriculture. The plantation crops like coffee, tea are also covered in agricultural produce.
5) Trading of Goods
Transfer of title of goods is one of the essential conditions for a transaction to come under the ambit of trading of goods. However, the services supporting or ancillary to the trading of goods would not come under the above item of Negative List.
6) Processes amounting to Manufacture or Production of Goods
The phrase processes amounting to manufacture or production of goods has been defined in section 65B of the Act as a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944) or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act.
This entry, therefore, covers manufacturing activity carried out on contract or job work basis provided duties of excise are leviable on such processes under the Central Excise Act, 1944 or any of the State Acts.
7) Selling of Space or Time Slots for Advertisements other than Advertisements Broadcast by Radio or Television
Sale of space for advertisement in print media, bill boards, public places, buildings, conveyances, cell phones, automated teller machines, internet, Aerial advertising are covered in negative list.
However, Sale of space or time for advertisement to be broadcast on radio or television and sale of time slot by a broadcasting organization are the taxable services.
8) Access to a Road or a Bridge on Payment of Toll Charges
The negative list entry covers access to a road or a bridge on payment of toll charges. The access to National highways or state highways, which are also roads, is hence covered in this entry.
9) Betting, Gambling or Lottery
Betting or gambling has been 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. The State Government levy a betting tax on such activities.
10) Entry to Entertainment Events and access to Amusement Facilities
Entertainment event has been defined in section 65B of the Act as 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 program.
‘Amusement facility’ has been defined in the Act 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.
11) Transmission or Distribution of Electricity
An ‘electricity transmission or distribution utility‘has also been defined in section 65B of the act to means the following:
- the Central Electricity Authority
- a State Electricity Board
- the Central Transmission Utility (CTU)
- a State Transmission Utility (STU) notified under the Electricity Act, 2003 (36 of 2003)
- a distribution or transmission licensee licensed under the said Act
- any other entity entrusted with such function by the Central or State Government
12) Specified services relating to Education
The following services relating to education 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 any law for the time being in force;
- education as a part of an approved vocational education course
Approved vocational education courses have been specified in section 65B of the Act. These are
- a course run by an industrial training institute or an industrial training centre 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.
- Vocational courses offered by institutes affiliated to the State Council of Vocational Training;
13) Services by way of Renting of residential dwelling for use as residence
‘Renting’ has been defined in section 65B as “allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property‘.
14) Financial Sector
The services of loans, advances or deposits are in the list 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. Some examples:
- 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 a credit limit facility 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.
The Invoice discounting is covered only to the extent consideration it is represented by way of discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration. Services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to general public are not covered in Negative List.
15) Service relating to Transportation of Passengers
The following services relating to transportation of passengers, with or without accompanied belongings, have been specified in the negative list. Services by:
- a stage carriage;
- railways in a class other than (i) first class; or (ii) an AC coach;
- metro, monorail or tramway;
- inland waterways;
- public transport, other than predominantly for tourism purpose, in a vessel between places located in India ; and
- metered cabs, radio taxis or auto rickshaws.
The various other equivalent modes of transport not specified herein could be cause of dispute as the above list is not complete within each segment.
16) Service relating to Transportation of Goods
The following services provided in relation to transportation of goods are specified in the negative list:-
- by road except the services of (i) a goods transportation agency; or (ii) a courier agency
- by aircraft or vessel from a place outside India up to the customs station of clearance in India; or
- By inland waterways. (Services provided as agents for inland waterways are not covered in the negative list.)
17) Funeral, Burial, Crematorium or Mortuary services including transportation of the deceased
This entry exempts services in relation to cremation, etc. of dead.
Two more services have been included in the negative list services in interim Budget 2014, as mentioned below:-
a) loading, unloading, packing, storage and warehousing of rice and
b) Services provided by cord blood banks
Test : 3 Place of Provision of Services:
Now the service is tested for, whether the service is placed or provided in the Indian territory or not. If it is performed outside the indian territory then it must be see that whether the service receiver is in indian territory or not. If it is in indian territory then it is taxable in india. And if the service is placed outside the indian territory then it that particular service will not be taxable in india.
So, there are 14 rules, which are required to be observed while levying tax on a particular service:
- Short title, extent and commencement. – (1) These rules may be called the Place of Provision of Services Rules, 2012.
- Definitions.- In these rules, unless the context otherwise requires,-
- “Act” means the Finance Act, 1994 (32 of 1994)
- “account” means an account bearing interest to the depositor, and includes a non-resident external account and a non-resident ordinary account;
- “banking company” has the meaning assigned to it in clause (a) of section 45A of the Reserve Bank of India Act, 1934 (2 of 1934);
- “continuous journey” means a journey for which a single or more than one ticket or invoice is issued at the same time, either by one service provider or through one agent acting on behalf of more than one service provider, and which involves no stopover between any of the legs of the journey for which one or more separate tickets or invoices are issued;
- “financial institution” has the meaning assigned to it in clause (c) of section 45-I of the Reserve Bank of India Act,1934 (2 of 1934);
- “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the ‘main’ service) between two or more persons, but does not include a person who provides the main service on his account.;
- “leg of journey” means a part of the journey that begins where passengers embark or disembark the conveyance, or where it is stopped to allow for its servicing or refueling, and ends where it is next stopped for any of those purposes;
- “location of the service provider” means-
– where the service provider has obtained a single registration, whether centralized or otherwise, the premises for which such registration has been obtained;
– where the service provider is not covered under sub-clause (a)
(i) the location of his business establishment; or
(ii) where the services are provided from a place other than the business establishment, that is to say, a fixed establishment elsewhere, the location of such establishment; or
(iii) where services are provided from more than one establishment, whether business or fixed, the establishment most directly concerned with the provision of the service; and
(iv) in the absence of such places, the usual place of residence of the service provider.
- “location of the service receiver” means:-
– where the recipient of service has obtained a single registration, whether centralized or otherwise, the premises for which such registration has been obtained;
– where the recipient of service is not covered under sub-clause (a):
(i) the location of his business establishment; or
(ii) where services are used at a place other than the business establishment, that is to say, a fixed establishment elsewhere, the location of such establishment; or
(iii) where services are used at more than one establishment, whether business or fixed, the establishment most directly concerned with the use of the service; and
(iv) in the absence of such places, the usual place of residence of the recipient of service.
Explanation:-. For the purposes of clauses (h) and (i), “usual place of residence” in case of a body corporate means the place where it is incorporated or otherwise legally constituted.
Explanation 2:-. For the purpose of clause (i), in the case of telecommunication service, the usual place of residence shall be the billing address.
- “means of transport” means any conveyance designed to transport goods or persons from one place to another;
- “non-banking financial company” means-
(i) a financial institution which is a company; or
(ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or
(iii) such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette specify;
- “online information and database access or retrieval services” means providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;
- “person liable to pay tax” shall mean the person liable to pay service tax under section 68 of the Act or under sub-clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994;
- “provided” includes the expression “to be provided”;
- “received” includes the expression “to be received”;
- “registration” means the registration under rule 4 of the Service Tax Rules, 1994;
- “telecommunication service” means service of any description (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electro-magnetic means but shall not include broadcasting services.
- words and expressions used in these rules and not defined, but defined in the Act, shall have the meanings respectively assigned to them in the Act.
- Place of provision generally.- The place of provision of a service shall be the location of the recipient of service:
Provided that in case the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service.
- Place of provision of performance based services.- The place of provision of following services shall be the location where the services are actually performed, namely:-
- services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service:
– Provided that when such services are provided from a remote location by way of electronic means the place of provision shall be the location where goods are situated at the time of provision of service:
– Provided further that this sub-rule shall not apply in the case of a service provided in respect of goods that are temporarily imported into India for repairs, re-conditioning or re-engineering for re-export, subject to conditions as may be specified in this regard.
- services provided to an individual, represented either as the recipient of service or a person acting on behalf of the recipient, which require the physical presence of the receiver or the person acting on behalf of the receiver, with the provider for the provision of the service.
- Place of provision of services relating to immovable property.- The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located.
- Place of provision of services relating to events.- The place of provision of services provided by way of admission to, or organization of, a cultural, artistic, sporting, scientific, educational, or entertainment event, or a celebration, conference, fair, exhibition, or similar events, and of services ancillary to such admission, shall be the place where the event is actually held.
- Place of provision of services provided at more than one location.-Where any service referred to in rules 4, 5, or 6 is provided at more than one location, including a location in the taxable territory, its place of provision shall be the location in the taxable territory where the greatest proportion of the service is provided.
- Place of provision of services where provider and recipient are located in taxable territory.- Place of provision of a service, where the location of the provider of service as well as that of the recipient of service is in the taxable territory, shall be the location of the recipient of service.
- Place of provision of specified services.- The place of provision of following services shall be the location of the service provider:-
- Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders;
- Online information and database access or retrieval services;
- Intermediary services;
- Service consisting of hiring of means of transport, upto a period of one month.
- Place of provision of goods transportation services.- The place of provision of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of the goods:
Provided that the place of provision of services of goods transportation agency shall be the location of the person liable to pay tax.
- Place of provision of passenger transportation service.- The place of provision in respect of a passenger transportation service shall be the place where the passenger embarks on the conveyance for a continuous journey.
- Place of provision of services provided on board a conveyance.- Place of provision of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.
Powers to notify description of services or circumstances for certain purposes.- In order to prevent double taxation or non-taxation of the provision of a service, or for the uniform application of rules, the Central Government shall have the power to notify any description of service or circumstances in which the place of provision shall be the place of effective use and enjoyment of a service.
- Order of application of rules.- Notwithstanding anything stated in any rule, where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration.
Test : 4 Whether it is 100% Exempted Services covered under notification no. 25/2012?
Now, at this stage the service needs to be tested whether it is covered under the Exemption/Notification no. 25/2012 issued by the central government or not. If it is covered then the service will not be taxable. So, there is a tentative list of 39 services which are covered under this list, as follows:
- Services provided to the United Nations or a specified international organization;
- Health care services by a clinical establishment, an authorised medical practitioner orpara-medics;
- Services by a veterinary clinic in relation to health care of animals or birds;
- Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) by way of charitable activities;
- 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;
6. Services 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;
- 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;
- Services by way of training or coaching in recreational activities relating to arts, culture or sports;
- Services provided to or by an educational institution in respect of education exempted from service tax, by way of,-
(a) auxiliary educational services; or
(b) renting of immovable property;
- Services provided to a recognised sports body by-
(a) an individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a recognized sports body;
(b) another recognised sports body;
- Services by way of sponsorship of sporting events organised,-
(a) by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone;
(b) by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;
(c) by Central Civil Services Cultural and Sports Board;
(d) as part of national games, by Indian Olympic Association; or
(e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;
- Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or
(f) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;
- Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-
(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;
(b) a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;
(c) a building owned by an entity registered under section 12 AA of the Income tax Act, 1961(43 of 1961) and meant predominantly for religious use by general public;
(d) a 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;
- Services by way of construction, erection, commissioning, or installation of original works pertaining to,-
(a) an airport, port or railways, including monorail or metro;
(b) a single residential unit otherwise than as a part of a residential complex;
(c) low- cost houses up to a carpet area of 60 square metres 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;
(d) post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or
(e) mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;
- Temporary transfer or permitting the use or enjoyment of a copyright covered under clauses (a) or (b) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical, artistic works or cinematograph films;
- 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;
- Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India;
- Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below rupees one thousand per day or equivalent;
- Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages;
- Services by way of transportation by rail or a vessel from one place in India to another of the following goods –
(a) petroleum and petroleum products falling under Chapter heading 2710 and 2711 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(b) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;
(c) defence or military equipments;
(d) postal mail or mail bags;
(e) household effects;
(f) newspaper or magazines registered with the Registrar of Newspapers;
(g) railway equipments or materials;
(h) agricultural produce;
(i) foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages; or
(j) chemical fertilizer and oilcakes;
- Services provided by a goods transport agency by way of transportation of –
(a) fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage;
(b) goods where gross amount charged for the transportation of goods on a consignment transported in a single goods carriage does not exceed one thousand five hundred rupees; or
(c) goods, where gross amount charged for transportation of all such goods for a single consignee in the goods carriage does not exceed rupees seven hundred fifty;
- Services by way of giving on hire –
(a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or
(b) to a goods transport agency, a means of transportation of goods;
- Transport of passengers, with or without accompanied belongings, by –
(a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogralocated in West Bengal;
(b) a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire; or
(c) ropeway, cable car or aerial tramway;
- Services by way of vehicle parking to general public excluding leasing of space to an entity for providing such parking facility;
- Services provided to Government, a local authority or a governmental authority by way of –
(a) carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation; or
(b) repair or maintenance of a vessel or an aircraft;
- Services of general insurance business provided under following schemes –
(a) Hut Insurance Scheme;
(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development Programme);
(c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pumpset and Failed Well Insurance;
(g) premia collected on export credit insurance;
(h) Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
(j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);
(k) Pilot Scheme on Seed Crop Insurance;
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana; or
(o) Coconut Palm Insurance Scheme;
- Services provided by an incubatee up to a total turnover of fifty lakh rupees in a financial year subject to the following conditions, namely:-
(a) the total turnover had not exceeded fifty lakh rupees during the preceding financial year; and
(b) a period of three years has not been elapsed from the date of entering into an agreement as an incubatee;
- Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –
(a) as a trade union;
(b) for the provision of carrying out any activity which is exempt from the levy of service tax; or
(c) up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex;
- 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
(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;
- Carrying out an intermediate production process as job work in relation to –
(a) agriculture, printing or textile processing;
(b) cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 of the Central Excise Tariff Act ,1985 (5 of 1986);
(c) any goods on which appropriate duty is payable by the principal manufacturer; or
(d) 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 one hundred and fifty lakh rupees in a financial year subject to the condition that such aggregate value had not exceeded one hundred and fifty lakh rupees during the preceding financial year;
- Services by an organiser to any person in respect of a business exhibition held outside India;
- Services by way of making telephone calls from –
(a) departmentally run public telephone;
(b) guaranteed public telephone operating only for local calls; or
(c) free telephone at airport and hospital where no bills are being issued;
- Services by way of slaughtering of bovine animals;
- Services received from a provider of service located in a non- taxable territory by –
(a) Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;
(b) an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or
(c) a person located in a non-taxable territory;
- Services of public libraries by way of lending of books, publications or any other knowledge- enhancing content or material;
- Services by Employees’ State Insurance Corporation to persons governed under the Employees’ Insurance Act, 1948 (34 of 1948);
- Services by way of transfer of a going concern, as a whole or an independent part thereof;
- Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets;
- 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.
If a particular service had cleared all the test i.e. not felled in any of the list mentioned above then that service will be taxable. But, it is also required to observe whether it is partially taxed or fully. For this, one must check, whether the service fells in the below list or not. If it fells in the below table the the it is partially taxed and the rate beside that service will applicable and rest part will be exempted. Point of Taxation Rule is also to be taken into consideration.
Notification No. 26/2012 dated 20.06.2012 provides the following percentage of abatements which are available in respect of following taxable services subject to the conditions given in the following Table.
|Sl.No.||Description of taxable service||Percent-age||Conditions|
|1||Services in relation to financial leasing including hire purchase||10||Nil.|
|2||Transport of goods by rail||30||Nil.|
|3||Transport of passengers, with or without accompanied belongings by rail||30||Nil.|
|4||Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises ( including hotel, convention center, club, pandal, shamianaor any other place, specially arranged for organizing a function) together with renting of such premises||70||(i) CENVAT credit on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.|
|5||Transport of passengers by air, with or without accompanied belongings||40||CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.|
|6||Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes.||60||Same as above.|
|7||Services of goods transport agency in relation to transportation of goods.||25||CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.|
|8||Services provided in relation to chit||70||Same as above.|
|9||Renting of any motor vehicle designed to carry passengers||40||Same as above.|
|10||Transport of goods in a vessel||50||Same as above.|
|11||Services by a tour operator in relation to,-(i) a package tour||25||(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.(ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour.|
|(ii) a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour||10||(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.(ii) The invoice, bill or challan issued indicates that it is towards the charges for such accommodation.(iii) This exemption shall not apply in such cases where the invoice, bill orchallan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.|
|(iii) any services other than specified at (i) and (ii) above.||40||(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.(ii)The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.|
|12.||Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority||25||(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004.(ii)The value of land is included in the amount charged from the service receiver.|
A. For the purposes of exemption at Serial number 1 –
(i) the amount charged shall be an amount, forming or representing as interest, i.e. the difference between the installments paid towards repayment of the lease amount and the principal amount contained in such installments;
(ii) the exemption shall not apply to an amount, other than an amount forming or representing as interest, charged by the service provider such as lease management fee, processing fee, documentation charges and administrative fee, which shall be added to the amount calculated in terms of (i) above.
B. For the purposes of exemption at Serial number 4 –
The amount charged shall be the sum total of the gross amount charged and the fair market value of all goods and services supplied in or in relation to the supply of food or any other article of human consumption or any drink (whether or not intoxicating) and whether or not supplied under the same contract or any other contract, after deducting-
(i) the amount charged for such goods or services supplied to the service provider, if any; and
(ii) the value added tax or sales tax, if any, levied thereon:
Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.
C. For the purposes of exemption at Serial number 12 –
The amount charged shall be the sum total of the amount charged for the service including the fair market value of all goods and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract, after deducting-
(i) the amount charged for such goods or services supplied to the service provider, if any; and
(ii) the value added tax or sales tax, if any, levied thereon:
Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.
- For the purposes of this notification, unless the context otherwise requires,-
a. “chit” means a transaction whether called chit, chit fund, chitty, kuri, or by whatever name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to a prize amount,
b. “package tour” means a tour wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided by the tour operator as part of the package tour to the person undertaking the tour,
c. “tour operator” means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours,
3. This notification shall come into force on the 1st day of July, 2012.
Now, finally if it is taken into consideration that if a particular service has cleared all the 4 test mentioned above and also not fell in the abatement list, then that service will be taxable @12% + 3% cess. But, the provision of reverse charge will analyzed for paying the tax.
Due date of tax:
As per Rule 6 of the Service Tax Rules 1994, the due date for payment of service tax is separate for Individual/ Partnership Firms and others.
- For individual/ Partnership Firms:
The due date for payment of service tax in case of individual/partnership firm is 5th of the following quarter in which the payment is received. However, in case the Service Tax provider opts for online payments, he is given a grace period of 1 day and thus the Due Date for payment of Service Tax if the payment is made online is 6th of the following Quarter.
- For others:
For all service Tax Payers (except Individual and Partnership Firms), the Due Date for payment of Service Tax is 5th of the following Month in which the Service Tax is collected. However, if the payment is made online- the due date for payment of service tax becomes 6th of the following month.
Exception:- Service Tax collected for the month/ quarter ending March shall be payable by 31st March of the said calendar year.
The payment Schedule has been summarized below for your ready reference:
|Individual/ Parnership||Quarterly||5th of the following quarter||6th of the following quarter|
|Others||Montlhy||5th of the following month||6th of the following month|
Late Payment of Service Tax:
Simple interest is levied on Late payment of Service Tax and the Interest rates with effect from 1st April 2011 vide Notification No. 14/2011- Service Tax dated 1st March 2011 is as follows:
|Gross Turnover||Interest on Late Payment|
|More than Rs. 60 Lakhs||18%|
|Less than Rs. 60 Lakhs||15%|
Increase in interest w.e.f. 1st October 2014 :
|Extent of day||Simple Interest p.a. on Late payment of service tax|
|Upto 6 months||18%|
|From 6 months upto 1 year||24%|
|More than 1 year||30%|
- If one had paid any excess payment intentionally or un-intentionally, the amount paid in excess may be adjusted against the service tax liability for the coming period or may claim Refund of service tax in case of self- adjustment is not possible.
- If any person liable to pay service tax has collected an amount in excess of the amount due from the service reciepent, the whole of such amount collected in excess shall be payable to the central Govt.
If the payment is deposited by way of a cheque, the date of payment of service tax shall be the date of the cheque rather than the date of clearing of cheque (subject to clearing of the cheque)
Return of Service Tax:
Every Assessee who has registered for Service Tax and has been assigned a Service Tax Registration no. is required to file a Service Tax Return on a half yearly basis, irrespective of whether the assesse has provided taxable service in the period or not, he is required to file his Service Tax Return on a half yearly basis before the due dates as mentioned below:
|Period||Service Tax Return Due Date|
|Oct 20XX- Mar 20XX||25th April 20XX|
|April 20XX – Sept. 20XX||25th Oct 20XX|
Late fee for Delay in filing service Tax return:
If the service Return is not filed before the due date of filing of service tax Return, Late Fee shall be liable to be paid as follows:
|Delay in Filing of Return after Due Date||Late Fees|
|First 15 days||Rs. 500|
|15-30 days||Rs. 1000|
|More than 30 days||Rs. 1000 + Rs. 100 per day beyond 30 days|
|The Maximum Late Fee payable is Rs. 20,000|
To observe, whether the service is taxable or not, the above test is required to be done and if it clears all the test then while calculating tax abatement is taken into consideration and should be paid before 5th or 6th of the month and return should be filed within 25th of the month on half yearly basis.
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