A Presentation on Service Tax Overview and Recent Developments
CA.SACHIN SINGH, IRS ASST. COMMISSIONER SERVICE TAX,SURAT-I Dr.
Sanjiv Agarwal 1
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Service Tax Overview & Recent Developments This
Presentation Covers What is Service ? Negative List and Exempted
Services. Deemed Service. 2
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Service Tax in India (The Past) Introduced in India in 1994 as
a simple, modest tax with just three services. Approach to Service
Tax Selective as against comprehensive one. Desirable from revenue,
equity and economic view point. Governed by Finance Act, 1994 and a
dozen of rules. Legislative dependence on over 25 other laws.
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Service Tax The Present Shift to Comprehensive Approach W.e.f.
1 st July, 2012 Finance Act, 2012 A land mark Act to shift from
selective positive approach to negative approach. It took 18 years
to shift from selective approach (positive) to comprehensive
approach (negative ) to tax services All services to be taxed other
than services specified in the negative list and exempted services
Section 66B. 4
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5 All Services (including declared Services (-) Specific
Exclusions (-) Negative List Services Exemptions Taxable Services
(-) Present Taxation of Services (=)
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New Provisions in Service Tax under Negative List Section 66
Bdeals with charge of service tax on or after Finance Act, 2012.
Section 66 Dcomprises of negative list of services. Section 66
Ecomprises of the services which constitute declared services.
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MAJOR CHANGES IN SERVICE TAX IN 2012-13 AT A GLANCE Definition
of service finds place in statutory provisions Place of provision
of service rules determine the location of service and become be
basis of taxation. Concept of taxable territory and non- taxable
territory introduced Classification of service criteria replaced by
new section 66F on interpretation principles of specified
description of services or bundled services. 7
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What is Service Service' has been defined in clause (44) of the
section 65B and means any activity For a consideration carried out
by a person for another and includes a declared service (66E)
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What is Service Activity In common understanding, activity
includes An act done A work done A deed done An operation carried
out Execution of an act Provision of a facility etc. Activity could
be active or passive and forbearance to act Agreeing to an
obligation to refrain from an act or to tolerate an act or a
situation - listed as a declared service u/s 66E 9
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What is Service Activity must be for a consideration (nexus /
reciprocity) Activity includes both activity as well as
non-activity Consideration includes both monetary and non monetary
consideration. Two persons are involved Service provider Service
receiver Only services provided by one person to another are
taxable ( Two separate regn doesnt mean two distinct person-
Mahindra logistics ltd-SC) Person natural as well as artificial
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What is Service Consideration Means everything received or
recoverable in return for a provision of service which includes -
Monetary payment Non-monetary payment Deferred consideration Under
Indian Contract Act, 1872, Consideration means - When, at the
desire of the promisor, the promisee or any other person has done
or abstained from doing, or does or abstains from doing, or
promises to do or to abstain from doing, something, such act or
abstinence or promise is called a consideration for the promise
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What is Service? Activity for a Consideration Activity should
be carried out by a person for a consideration Activity without
consideration like- Donation Gifts Free charities outside the ambit
of service. Charity for consideration would be service and taxable
unless otherwise exempted 12
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What is Service : Exclusions 'Service' does not include - any
activity that constitutes only a transfer in title of goods or
immovable property by way of sale, gift or in any other manner.
Sale of developed plots is a service (Narne Constructions Pvt. Ltd.
v UOI 2013 (29)STR 3 (SC) a transfer, delivery or supply of goods
which is deemed to be a sale of goods within the meaning of clause
(29A) of article 366 of the Constitution a transaction only in
money or actionable claim a service provided by an employee to an
employer in the course of the employment. fees payable to a court
or a tribunal set up under a law for the time being in force
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What is Service Person-65B(37) " person" includes, an
individual, a Hindu undivided family, a company, a society, a
limited liability partnership, a firm, an association of persons or
body of individuals, whether incorporated or not, Government, a
local authority, or every artificial juridical person, not falling
within any of the above 14
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15 The New Taxability Concept Taxable 3. Exemptions (39) 1. Non
- Taxable territory (POPS) 2. Negative list (17) SERVICE FOR A
CONSIDERATION E - MAGIC TEST E: Employee M: Money A: Actionable
claim G: Goods I: Immovable property C: Court Fee 9 DECLARED
SERVICES
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16 Clause 44 of section 65B defines service it includes a
declared service. There are 9 categories of services or activities
as declared services implying that on all such nine declared
services, Service Tax shall be payable Does not include any such
transfer, delivery or supply of any goods which is deemed to be a
sale within the meaning of Article 366(29A) of the Constitution of
India. What is declared services is defined in section 65B(22) to
mean any activity carried out by a person for another person for a
consideration and declared as such under section 66E of the Act.
They are amply covered by the definition of service but have been
declared with a view to remove any ambiguity for the purpose of
uniform application of law all over the country
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17 Following constitute Declared Services (Section 66E) Renting
of immovable property; Construction of a complex, building, civil
structure or a part thereof, including a complex or building
intended for sale to a buyer, wholly or partly, except where the
entire consideration is received after issuance of certificate of
completion by a competent authority; Temporary transfer or
permitting the use or enjoyment of any intellectual property right;
Development, design, programming, customization, adaptation, up
gradation, enhancement, implementation of information technology
software;
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18 Agreeing to an obligation to refrain from an act, or to
tolerate an act or a situation, or to do an act; Transfer of goods
by way of hiring, leasing, licensing or any such manner without
transfer of right to use such goods; Activities in relation to
delivery of goods on hire purchase or any system of payment by
installments ; Service portion in execution of a works contract;
Service portion in an activity wherein goods, being food or any
other article of human consumption or any drink (whether or not
intoxicating) is supplied in any manner as part of the
activity.
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Declared Services Agreeing to an obligation to refrain from an
Act / to tolerate Act or situation / to do an Act [section 66E(e)]
Following activities if carried out by a person for another for
consideration would be treated as provision of service - Agreeing
to an obligation to refrain from an act. Agreeing to an obligation
to tolerate an act or a situation. Agreeing to an obligation to do
an act. 19
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Declared Services Obligations / Actions Examples of Taxable
Obligations / Actions Non-compete fees for agreeing not to compete
compensation on termination of business agreements advance
forfeited for cancellation of agreement to provide a service.
forfeiture of security deposit for damages done by service receiver
in course of receiving of services. cancellation charges being
charged by airlines, hotels etc. consideration for non-appearance
in a court of law or withdrawal of suit. demurrage charges or
detention charges 20
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21 WWorks Contract means a contract wherein transfer of
property in goods involved in the execution of such contract is
leviable to tax as sale of goods and such contract is for the
purpose of carrying out construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance,
renovation, alteration of any movable or immovable property or for
carrying out any other similar activity or a part thereof in
relation to such property.
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22 Alternative valuation model (Rule 2A of Valuation Rules)
Where works contract is for Value of the service portion shall be
(A) execution of original works forty percent of the total amount
charged for the works contract (B) maintenance or repair or
reconditioning or restoration or servicing of any goods seventy per
cent of the total amount charged including such gross amount (C) in
case of other works contracts, not included in serial nos. (A) and
(B) above, including contracts for maintenance, repair, completion
and finishing services such as glazing, plastering, floor and wall
tiling, installation of electrical fittings. sixty percent of the
total amount charged for the works contract
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Service liable to Service Tax All services are liable to
service tax except a) Activities specifically excluded in
definition of service. b) Services covered under the negative list
c) Services covered under Mega Exemption notification. d) Services
provided outside the taxable territory. e) Services received by a
unit located in SEZ (subject to conditions). Negative List of
Services There are 17 categories of services which are not
chargeable to service tax 1. Services provided by Government or
local authority. [Except (a) services by Dept of post by way of
speed post, express parcel post, life insurance, and agency
services, (b) services in relation to an aircraft or a vessel,
inside or outside the precincts of a port or an airport, (c)
transport of goods or passengers, (d) support services] 2. Services
provided by RBI - 23
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Service liable to Service Tax Negative List of Services Contd.
3. Services provided by a Foreign diplomatic mission located in
India 4. Services relating to agriculture 5. Trading of goods
(commission agent or clearing agent) 6. Any process amounting to
manufacture or production of goods. 7. Selling of space or time
slots for advertisement other than advertisements broadcast by
radio or television. 8. On payment of toll charges 9. Betting,
gambling or lottery 10. Admission to entertainment events or access
to amusement facilities. 11. Transmission or distribution of
electricity by an electricity transmission or distribution utility
12. A few of services relating to education. 13. Services by way of
renting of residential dwelling for use as residence - 24
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Service liable to Service Tax Negative List of Services Contd.
14. A few financial services like deposits, loans advance, foreign
currency sale or purchase by banks or authorised dealers etc) 15.
Service of transportation of passengers, with or without
accompanied belongings. 16. Services by way of transportation of
goods 17. Funeral services Exemptions from Service TaxMega
Notifications Notification No. 12/2012-S.T. 1. Services provided to
UNO 2. Health care services 3. Services by a veterinary clinic 4.
Services by charitable trust - 25
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Service liable to Service Tax Exemptions from Service TaxMega
Notifications Notification No. 12/2012-S.T. Contd 5. Religious
services 6. Legal or arbitral service 7. Technical testing of drugs
etc. 8. Coaching in recreational activities 9. Educational
institution 10. Services provided to a recognized sports body 11.
Sponsorship of sporting events 12. Construction service to
Government 13. Construction of road, bridge etc. 14. Other
construction service airport, single residential units, low-cost
houses up to a carpet area of 60 sqmt etc. 15. Copyright service -
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Service liable to Service Tax Exemptions from Service TaxMega
Notifications Notification No. 12/2012-S.T. Contd 17. Services in
folk or classical art forms 18. Services of collecting or providing
news 19. Services of renting of a hotel etc for residence 20.
Services of providing food or beverages 21. Services of
transportation by rail or a vessel of specified goods petroleum,
relief materials, defence equipment, postal mail, household
effects, newspaper/magazines, railway equipment, agricultural
produce, chemical fertilizers 22. Goods transport agency for fruits
etc. 23. Hiring motor vehicle for transport of more than 12
passengers 24. Transport of passengers 25. Vehicle parking to
general public - 27
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Service liable to Service Tax Exemptions from Service TaxMega
Notifications Notification No. 12/2012-S.T. Contd 26. Specific
services to government water supply, public health, sanitation,
solid waste management, slum improvement repair & maintenance
of vessel/aircraft 27. Specific general insurance service hut
insurance scheme, cattle insurance, insurance of tribal, Janata
Personal Accident Policy, Group Personal Accident Policy,
Agricultural Pumpset & Failed Well Insurance, Export credit
insurance, National Agricultural Insurance etc. 28. Services
provided by an incubate provided turnover is below 50 lakh &
within three years from date of the agreement. 29. Services by an
unimcorporated body to its members 30. Financial services
sub-broker to broker, mutual fund agent to MF, distributor to a
M.F. Selling agent of lottery to a distributor, selling agent or
distributor of a sim card etc. 31. Specific job work services
agriculture, printing, cutting & polishing of diamond etc. -
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Service liable to Service Tax Exemptions from Service TaxMega
Notifications Notification No. 12/2012-S.T. Contd 32. Business
exhibition service outside India 33. Specific telephone service
departmentally run public telephones, free calls at airport,
hospital where no bills are being issued. 34. Slaughtering service
35. Services provided from non-taxable territory 36. Public library
service 37. Services by Employees State Insurance Corporation 38.
Transfer of a going concern 39. Public conveniences 40.
Municipality services by government 41. Services provided outside
taxable territory. - 29