Service Tax Projec1

8/6/2019 Service Tax Projec1

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Q.1 Brief note about the following 5 services:-

*H.L.INSTITUTE OF COMMERCE

Service Tax ProjectSY B.Com1

Yash Dhariwal- Roll No. 72

Trimester 2



I. Commercial Training or Coaching services

II. Mandap Keeper’s Services

III. Information Technology Software Service

IV. Club or Association Services

V. Legal Consultancy Service

Ans. Scope, valuation and related exemptions of followingservices:-

1. Commercial Training or Coaching services:-

Effective Date: - 1st July 2003

Definition:-

“Commercial training or Coaching” means any training orcoaching provided by a commercial training or coaching centre

[section 65(26)].

“Commercial training or Coaching centre” means anyinstitute or establishment providing commercial training orcoaching for imparting skill or knowledge or lessons on anysubject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does notinclude preschool coaching and training centre or any institute or

establishment which issues any certificate or diploma or degreeor any educational qualification recognized by law for the timebeing in force [section 65(27)].

Scope of taxable service shall include any service provided orto be provided to any person, by a commercial training or

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coaching centre in relation to commercial training or coaching[section 65(105)(zzc)].

Scope of coverage service: - From above mentioned definition,the scope of coverage of the service provider can be analyzed asunder:-

I. It must be any institute or establishment: - Therequirement of a place of business is important for the taxincidence to occur. Accordingly it has been clarified thattuition teachers who conduct home tuitions of theresidence of the students would not be liable for servicetax.

II. It should provide commercial training or coaching.

III. The training or coaching must be for imparting skill orknowledge or lessons on any subject.

IV. It includes coaching or tutorial classes.

V. It does not preschool coaching or training centre.

VI. It does not include any institute or establishment whichissues any certificate or diploma or degree pr anyqualification recognized by law for the time being in force.

Specific Exemption:-

1. Exemption to Vocational/Recreational TrainingInstitute [Notification No. 24/2004-ST, dated 10-9-2004](Asamended by Notification Nos. 19/2005-ST, dated 7-6-2005, w.e.f.16-6-2005 & 3/2010-ST, dated 27-2-2010)

Government, being satisfied that it is necessary in the publicinterest so to do, hereby exempts the taxable services provided inrelation to commercial training or coaching, by, -

(a) a vocational training institute;

(b) a recreational training institute; or

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(c) a computer training institute

to any person, from the whole of the service tax leviable thereonunder section 66 of the said Act.

Explanation: - For the purposes of this notification,-

(i) "vocational training institute" means a commercial training orcoaching centre which provides vocational training or coachingthat impart skills to enable the trainee to seek employment orundertake self-employment, directly after such training orcoaching;

(ii) "recreational training institute" means a commercial trainingor coaching centre which provides training or coaching relating torecreational activities such as dance, singing, martial arts orhobbies.

(iii) “Computer training institute” means a commercial training orcoaching centre which provides coaching or training relating tocomputer software or hardware.

2. Exemption to outsourced educational services[Notification No. 10/2003-ST, dated 20-6-2003]

In exercise of the powers conferred by section 93 of the FinanceAct, 1994 (32 of 1994), the Central Government, being satisfiedthat it is necessary in the public interest so to do, hereby exemptsthe taxable services provided by a commercial training orcoaching centre, in relation to commercial training or coaching,which form an essential part of a course or curriculum of anyother institute or establishment, leading to issuance of anycertificate or diploma or degree or educational qualification

recognized by law for the time being in force, to any person, fromthe whole of the service tax leviable thereon under sub-section(2) of section 66 of the said Act:

Provided that this exemption shall not be applicable if the chargesfor such services are paid by the person undergoing such course

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or curriculum directly to the commercial training or coachingcentre.

This notification shall come into force on the 1st day of July, 2003.

3. If employer provides free training to their employees, it isnot taxable. However, if it hires some outside commercialcoaching or training centre for imparting training toemployees, then the payment made by employer to suchcoaching centre will be chargeable to service tax.

2. Mandap Keeper’s Services:-

Effective Date: - 1st July 1997

Definition:-

“Mandap keeper” means any person who allows temporaryoccupation of a Mandap for consideration for organizing any official,social or business function. Here, social function includes marriage[section 65(67)].

“Mandap” means any immovable property as defined in section 3of the Transfer of Property Act, 1882 and includes any furniture,fixtures, light fittings and floor coverings therein let out for

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consideration for organizing any official, social or business function.Here, social function including marriage [section 65(66)].

“Immovable property” does not include standing timber, growingcrops or grass-(section 3 of the Transfer of Property Act, 1882).

“Caterer” means any person who supplies, either directly orindirectly, any food, edible preparations, alcoholic or non-alcoholicbeverages or crockery and similar articles or accoutrements for anypurpose or occasion [section 65(24)].

Scope of taxable service shall include any service provided or tobe provided to any person, by a Mandap keeper in relation to theuse of a Mandap in any manner including the facilities provided or tobe provided to such person in relation to use and also the service, if any, provided or to be provided as a caterer [section 65(105) (m)]

Exemptions: -

(i) Exception with respect to specified percentages of taxable value of Pandal or Shamiana [Notification No.1/2006-ST, dated 1-3-2006].

In exercise of the powers conferred by sub-section (1) of section93 of the Finance Act, 1994 (32 of 1994)(hereinafter referred toas the Finance Act), the Central Government, on being satisfiedthat it is necessary in the public interest so to do, hereby exemptsthe taxable service of the description specified in column (3) of

the Table below and specified in the relevant sub-clauses of clause (105) of section 65 of the Finance Act, specified in thecorresponding entry in column (2) of the said Table, from so muchof the service tax leviable thereon under section 66 of the saidFinance Act, as is in excess of the service tax calculated on avalue which is equivalent to a percentage specified in thecorresponding entry in column (5) of the said Table, of the gross

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amount charged by such service provider for providing the saidtaxable service.

Provided that this notification shall not apply in cases where, -(i) The CENVAT credit of duty on inputs or capital goods or theCENVAT credit of Service tax on input services, used for providingsuch taxable service, has been taken under the provisions of theCENVAT Credit Rules, 2004; or

(ii) The service provider has availed the benefit under thenotification of the Government of India in the Ministry of Finance(Department of Revenue), No. 12/2003-Service Tax, dated the20th June, 2003[G.S.R. 503 (E), dated the 20th June, 2003].

(ii) Exemption to Mandap keepers serving religiousplaces [Notification No. 14/2003-ST, dated 20-6-2003].

In exercise of the powers conferred by section 93 of the FinanceAct, 1994 (32 of 1994), the Central Government, being satisfiedthat it is necessary in the public interest so to do, hereby exemptsthe taxable services provided to any person by a Mandap keeperfor the use of the precincts of a religious place as a Mandap, fromthe service tax leviable thereon, under section 66 of the said Act.

Explanation: - For the purpose of this notification, "religious place"means a place which is meant for conduct of prayers or worshippertaining to a religion.

(iii) Exemption of 40% for Mandap keeper if providingcatering services also [Notification No. 21/97-ST, dated26-6-1997] (Rescinded by Notification No. 2/2006-ST, dated1-3-2006 )

In exercise of the powers conferred by section 93 of the FinanceAct, 1994 (32 of 1994), the Central Government, beingsatisfaction that it is necessary in the public interest so to do,hereby exempts so much of the service tax livable on a Mandapkeeper, as is in excess of the amount of services tax calculatedon 60% of the gross amount charged from the client by theMandap keeper, for the use of Mandap including the facilities

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provided to the client in relation to such use and also for thecatering charges:*Provided that the said exemption shall apply in such cases

where-

a) Such Mandap keeper also provides catering services,that is, supply of food and the invoice, bill or challan

issued for this purpose indicates that it is inclusive of charges for catering services; and

b) No credit of duty paid on inputs or capital goods hasbeen taken under the provisions of the Cenvat creditRules, 2004; and

c) Such Mandap keeper has not availed the benefit underthe notification of the Government of India in theMinistry of Finance (Department of revenue), No.12/2003-ST, dated the 20th June, 2003 [GSR 503(E),

dated the 20th

june,2003].

*[“Provided that the said exemption shall only in such caseswhere the Mandap keeper also provides catering services, that is,supply of food and the bill issued for this purpose indicates that itis inclusive of charges for catering services.”]

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3. Information Technology Software Service: -

Effective date: - 16th May 2008

Definition: -

“Information technology software” means any representation of instruction, date sound or image, including source code and objectcode, recorded in a machine readable form, and capable of beingmanipulated or providing interactivity to a user, by means of a

computer or an automatic data processing machine or any otherdevice or equipment [section 65(53a)].

Scope of Taxable service shall include service provided or to beprovided to any person, by any other person in relation toinformation technology software for use in the course, orfurtherance, of business or commerce, including,-

(i) Development of information technology software,

(ii) Study, analysis, design and programming of informationtechnology software,

(iii) Adaptation, upgradation, enhancement, implementation andother similar services related to information technologysoftware,

(iv) Providing advice, consultancy and assistance on mattersrelated to information technology software, including

conducting feasibility studies on implementation of a system,specifications for a database design, guidance and assistanceduring the start up phase of a system,

(v) Acquiring the right to use information technology software forcommercial exploitation including right to reproduce,distribute and sell information technology software and right

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to use software components for the creation of and inclusionin other information technology software products,

(vi) Acquiring the right to use information technology softwaresupplied electronically [section 65(105) (zzzze)].

Exemption:-

1. Exemption from service tax of packaged or cannedsoftware [Notification No. 17/2010-ST (F. No. 334/1/2010-

TRU), dated 27-2-2010].

In exercise of the powers conferred by sub-section (1) of thesection 93 of the Finance Act, 1994 (32 of 1994), the centralGovernment, on being satisfied that it is necessary in thepublic interest so to do, hereby exempts the taxable serviceproviding packaged or specified in item (v) of clause (zzze)of sub-section 105 of section 65 of the said Finance Act, fromthe whole of service tax, subject to the following conditions,

namely;-

(i) Document proving the right to use such software, bywhatever name called, if any, is packed along with thesoftware;

(ii) The importer has paid the appropriate duties of customs on the entire amount received from thebuyer; and

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(iii) The benefit under notification No. 31/2010-Customs,dated 27-02-2010 is not availed of by the importer.

2. Exemption from service tax of packaged or cannedsoftware [Notification No. 2/2010-St [F. No. 334/1/2010-

TRU], dated 24-2-2010].

In exercise of the powers conferred by sub-section (1) of thesection 93 of the Finance Act, 1994 (32 of 1994), the centralGovernment, on being satisfied that it is necessary in thepublic interest so to do, hereby exempts the taxable serviceas referred to under item (v) of clause (zzze) of sub-section105 of section 65 of the said Finance Act, for packaged orcanned software, intended for single use and packedaccordingly, from the whole of service tax, subject to thefollowing conditions, namely:-

(i) The document providing the right to use such software, bywhatever name called, if any, is packed along with thesoftware;

(ii) The manufacturer, duplicator, or the person holding thecopyright to software has paid the appropriate duties of excise on the entire amount received from the buyer; and

(iii) The benefit under notification No. 17/2010-Central Excise,dated the 27-02-2010 is not availed of by themanufacturer, duplicator or the person holding thecopyright to software.

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3. The service should be in the furtherance of business orcommerce: -

IT services are taxable only in cases where they areused in the course of or furtherance of business or commerce.

Therefore in cases where such services are provided to theGovernment or to charitable institute or to individuals for their

personal use, there could not be any liability towards payment of service tax.

4. Club or Association Services: -

Effective Date: - 16th June 2005

Definition: -

Section 65 (105) (zzze) of the Finance Act, 1994 defines thetaxable service for club and association services as under: -

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“Taxable service means any service provide or to beprovided to its members, by any club or association inrelation to provision of services, facilities or advantagesfor a subscription or any other amount.”

Thus, for transaction to be liable for tax, it should be a taxableservice as defined above. From the definition, the essential

requirements for taxability can be understood as under: -1. The transaction should amount to a service.

2. The service should be provided or to be provided to itsmembers by any club or association.

3. The service should be in relation to provision of services, facilities or advantages for a subscription orany other amount.

However, the following clubs or association are excluded from thepurview of the definition of the service provider and hence wouldnot be liable to pay the service tax: -

1. Any body establish or constituted by or under any law for thetime being in force; or

2. Any person or body of person engaged in the activities of trade unions, promotion of agriculture, horticulture or animalhusbandry; or

3. Any person or body of person engaged in any activity havingobjectives which are in the nature public service and are of acharitable, religious or political nature; or

4. Any person or body of person associated with press ormedia.

Meaning of Charitable: -

Since clubs or association having objectives which are in

the nature of public service and are of a charitable, religious orpolitical nature are excluded from the scope of levy, an issue whicharises is whether the exemption under the Income Tax Act, 1961 asa charitable trust is sufficient to claim exemption from service taxas well. The CBEC has clarified that the exemption under theIncome Tax Act is of no consequence to levy of service tax. Thedefinition of “Charity” and “Charitable” as defined in Black’s Law

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Dictionary may be kept in mind. “Charity” is defined as “aid givento the poor, the suffering or to general community for religious,educational, economic, public safety or medical purpose”, and“Charitable” as “dedicated to a general public purpose, usually forthe benefit of needy people who cannot pay for the benefitsreceived”. The officers should examine the matter and take a callon a case to case basis.

Proprietary Clubs not covered:-

The scope of the service provider is very wide as the termused to define the club or association is “any person”. However, incase where the club does not serve its members but its customerson a professional basis, there can be no liability for service tax asthe requirement for taxability is that the club should serve itsmembers. For example, a hotel might have a scheme for privilegedcustomers by the nomenclature of ‘club’. However, this argumentwas not accepted in one of the cases where it was held thatholiday shares are liable for payment of service tax under thiscategory.

Exemption:-

1. Exemption of taxable services provided by certain

Resident Welfare Associations [Notification No. 8/2007-service Tax, dated 1-3-2007]

In exercise of the powers conferred by sub-section(1) of section 93 of the Finance Act, 1994 (32 of 1994), theCentral Government, on being satisfied that it is necessary in thepublic interest so to do, hereby exempts the taxable services,specified in sub-clause (zzze) of clause (105) of section 65 of thesaid Finance Act, provided or to be provided, by a residentwelfare association where the sole criterion for its membership is

the residential status of a person in a residential complex orlocality, to its members, from the whole of the service tax leviablethereon under section 66 of the said Finance Act, subject to thecondition that the total consideration received from an individualmember by the said association for providing the said servicesdoes not exceed three thousand rupees per month.

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2. Export promotion councils are also to be excluded:-

Associations, including trade associations, are taxable underclubs and association service. Federations of Indian ExportPromotion Organization (FIEO) and 32 specified export promotioncouncils sponsored by the Department of Commerce or by the

Ministry of Textiles have been exempted from the levy of servicetax under the said service.

5. Legal Consultancy Services:-

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Effective Date: - 1st September 2009

Definition: -

Taxable Service defined u/s 65(105): Taxable service means,

“Any service provided or to be provided to a businessentity, by any other business entity, in relation to advice,consultancy or technical assistance in any branch of law,in any manner”

Thus, for any transaction to be liable for tax, it should be ataxable service as defined above. From the essentialrequirements for taxability can be understood as under: -

1.The transaction should amount to a service.

2.The service should be provided or to be provided to anybusiness entity by any other business entity.

3.The service should be in relation to advice, consultancyor technical assistance in any branch of law.

4.The service may be provided in any manner.

However, any service provided by way of appearance before any

court, tribunal or authority shall not amount to taxable service.

The tax is not tax on the profession of lawyers but on theservices rendered by such lawyer in the nature of advice,consultancy or technical assistance in the branch of any law.Further, the intention of the Government is not to tax small andretail transactions. Accordingly, the following transactions are nottaxable: -

• Individual lawyers providing any services

• Services provided by any business entity to individuals

The term business entity has been specifically defined through anExplanation.

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Explanation: - For the purposes of this sub-clause, “businessentity” included an association of person, body of individuals,company or firm, but does not include an individual

Service Provider Service Recipient Whether taxable?Business entity Business entity YesBusiness entity Individual NoIndividual Business entity NoIndividual Individual NoBusiness entity Other than Business

entity (For example,charitableassociations,

Government, tec.)

NO

The Service should be provided in relation to advice,consultancy or technical assistance in any branch of law

The services rendered should be related to advice,consultancy or technical assistance in any branch of law. Further, fromthe definition itself the services which are in the nature of appearancebefore any court, tribunal or authority shall not be considered as

taxable service since such representation is made to light for anyrights awarded by the constitution. Further, service provided inindividual capacity as well as services provided to individuals shall notbe taxable. Also, if the services are rendered in employment (whetherfull-time or part time) the same shall not be liable for service tax. Forexample, many lawyers also offer their services as part –time lecturersto colleges and universities. Such services are rendered by them intheir individual capacity and hence cannot be considered as taxable.

The service may be provided in any manner

The term “in any manner” extends the scope of taxability to cover situation where-in the services may be providedindirectly (may be through the communication mediums or throughthird parties). Thus, if a legal consultant sub-contracts a part of theservice to another legal consultant, he would still be liable for the

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service tax on the entire amount and not only on services which aredirectly provided by him.

Notification: -

Scope of Service introduce by the Finance (No. 2) Bill, 2009

[D.O. F. NO. 334/13/2009-TRU, 6-7-2009]

Legal Consultancy Services: - As in the case of managementconsultancy or engineering consultancy service, any consultancy,

advice or technical assistance provided in any discipline of law isproposed to be subjected to service tax. However, the tax wouldbe limited to services provided by a business entity to anotherbusiness entity. It has been defined that a business entityincludes firms, associates, enterprises, companies etc. but doesnot include an individual or even to a business entity would beoutside the scope of the taxable service. Similarly, the servicesprovided by a corporate legal firm to an individual would also beoutside the purview of taxable service. Any service of appearancebefore any court of law or any statutory authority would also be

kept outside this levy.

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Q. 2 List down any 5 services which have been included inthe Budget 2010.

1. Services of Promoting, marketing or organizing of gamesincluding lottery.

2. Service provided for maintenance of medical records of employees of a business entity.

3. Services of promoting of a ‘Brand’ of goods, events, businessentity etc.

4. Services of permitting commercial use or exploitation of anyevent organized by a person or organization.

5. Service related to two types of copy rights not covered underexisting taxable services ‘Intellectual Property Right (IPR)’namely those,

a) Cinematographic films; or

b) Sound recording.

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Q. 3 Analysis of Service Tax Revenue

%Growth

No. of Services

taxed

No. of Assesses

%Growth

1994-95 410 Base Year 3 3943 Base Year1995-96 846 101 3 4866 191996-97 1022 24 6 13982 1871997-98 1515 49 18 45991 2281998-99 1787 18 30 107479 1331999-00 2072 16 27 115495 7.452000-01 2540 23 26 122326 5.912001-02 3305 26 41 187577 532002-03 4125 25 51 232048 242003-04 7890 91 58 403856 74

2004-05 14196 79.93 71 774988 912005-06 23053 62 80 846155 9.18

The Service Tax collections have shown a steady rise since itsinception in 1994. The tax collections have grown manifolds since1994-95 i.e. Rs. 410 crores in 1994-95 to Rs. 23053 crores in2005-06. Service Tax revenue collection target for the year 2005-06 was fixed at Rs. 22500 crores, however on the basis of figuresobtained from the Pr. C.C.A., the actual service tax revenue

collection stands at Rs. 23053 crores. It indicates a growth of 9.18% against the actual realization Rs. 7889.97 crores during thelast f.y. 2004-05.There is a normal growth in the assessee basefrom 774988 nos. in 2004-05 to 7, 846155 nos. in 2005-06. Itindicates a growth of almost 9.18%, which is significantly robustever after 1994-95 in comparison with 74% growth rate of previous year.

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Impact on service tax in Indian Economy:-

Because of constant growth of service tax revenue and otherdirect and indirect tax India’s GDP increase 6 to 6.5%.The Indianeconomy is expected to grow by 6.1-6.5 percent during 2009-10owing to high growth in key sectors like agriculture and services,according to an industry lobby study. According to the advanced

estimate figures of the Central Statistical Organization, theeconomy grew by 7.1 percent in 2008-09 after the expansion ratedipped to 5.3 percent in the third quarter. On the economicperformance last fiscal, the report said food grain productionstood at 227.9 million tones, short of the targeted 233 milliontons, while industrial growth decelerated to 2.8 percent duringApril-February 2008-09 from 8.8 percent in the like period theyear before.

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