A PROJECT REPORTOnServices provided by temporary transfer of copyright, services performed by performing artists, services by way of collecting or providing news by an independent journalist in exempt servicesIn the subject: Taxation

Submitted to University of MumbaiFor IVth semester of M.Com.BY Name of student: Shamee Arun WalkeRoll No. 79Under the guidance of Prof. Santosh Nadar2014 2015

DECLARATION BY THE STUDENT

I, Ms. Shamee Arun Walke student of M.Com. (Semester IVth) Accountancy , Roll No. 79 hereby declare that the project for the Subject Taxation titled, Services provided by temporary transfer of copyright, services performed by performing artists, services by way of collecting or providing news by an independent journalist in exempt services submitted by me to University of Mumbai, examination during the academic year 2014-2015, is based on actual work carried by me under the guidance and supervision of Prof. Santosh Nadar.

I further state that this work is original and not submitted anywhere else for any examination.

Name : Shamee Arun WalkeSignature of student __________________

CERTIFICATEThis is to certify that the project entitled Services provided by temporary transfer of copyright, services performed by performing artists, services by way of collecting or providing news by an independent journalist in exempt services submitted by Ms. Shamee Arun Walke Roll No. 79 student of M.Com. Accountancy (University of Mumbai) (IVth Semester) examination has not been submitted for any other examination and does not form a part of any other course undergone by the candidate. It is further certified that s he has completed all required phases of the project. This project is original to the best of our knowledge and has been accepted for Internal Assessment.

Internal Examiner External Examiner

Co-ordinator PrincipalCollege seal

ACKNOWLEDGEMENTAt the beginning, I would like to thank GOD for his shower of blessing. The desire of completing this project was given by my guide Prof. Santosh Nadar. I am very much thankful to him for the guidance, support and for sparing her precious time from a busy schedule.I would fail in my duty if I dont thank my parents who are pillars of my life. Finally I would express my gratitude to all those who directly and indirectly helped me in completing this project.

Shamee Arun Walke

INDEXSRCONTENTSPAGE NO

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IiDECLARATION

IiiCERTIFICATE

IvACKNOWLEDGEMENT

1Chapter 1: Introduction to taxObjective of the studyScope of the studyLimitations of the study

2Chapter 2: Service Tax

3Chapter 3: Services provided by temporary transfer of copyright, services performed by performing artists, services by way of collecting or providing news by an independent journalist in exempt services.

5Chapter 5FindingsRecommendationsConclusions

6.Bibliography

Chapter 1: IntroductionA tax (from the Latin taxo; "rate") is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay, or evasion of or resistance to collection, is punishable by law. Taxes are also imposed by many administrative divisions. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent.OverviewThe legal definition and the economic definition of taxes differ in that economists do not consider many transfers to governments to be taxes. For example, some transfers to the public sector are comparable to prices. Examples include tuition at public universities and fees for utilities provided by local governments. Governments also obtain resources by creating money (e.g., printing bills and minting coins), through voluntary gifts (e.g., contributions to public universities and museums), by imposing penalties (e.g., traffic fines), by borrowing, and by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector levied on a basis of predetermined criteria and without reference to specific benefit received.In modern taxation systems, taxes are levied in money; but, in-kind and corve taxation is characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised are often highly debated in politics and economics. Tax collection is performed by a government agency such as the Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her Majesty's Revenue and Customs (HMRC) in the United Kingdom. When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration) may be imposed on the non-paying entity or individual.PurposeThe main purpose of taxation is to accumulate funds for the functioning of the government machineries. No government in the world can run its administrative office without funds and it has no such system incorporated in itself to generate profit from its functioning.In other words, a government can run its administrative set up only through public funding which is collected in the form of tax. Therefore, it can be well understood that the purpose of taxation is very simple and obvious for proper functioning of a state. Taxes are charges levied against a citizen's personal income or on property or for some specified activity.Further, the other important purposes of taxation are as follows - Increase in effectiveness and productivity of the nation Increase in the quantum of revenue collection Improvement in services of the government Improve employment at all industry verticals Induction of modern technology in to the system Rationalization of terms and condition of the economic system Rationalization of employment terms and conditions

Objectives of TaxTax is permanent instrument for collecting revenues. It is a major source of revenue in the developed world and has been appearing as an important source of revenue in the developing world as well. It has been an instrument of social and economic policy for the government. The main objectives of tax are as follows:1. Raise More RevenueThe fundamental objective of taxation is to finance government expenditure. The government requires carrying out various development and welfare activities in the country. For this, it needs a huge amount of funds. The government collects funds by imposing taxes. So, raising more and more revenues has been an important objective of tax.2. Prevent Concentration of Wealth in A Few HandsTax is imposed on persons according to their income level. High earners are imposed on high tax through progressive tax system. This prevents wealth being concentrated in a few hands of the rich. So, narrowing the gap between rich and poor is another objective of tax.3. Redistribute Wealth for Common GoodTax collected by the government is expended for carrying out various welfare activities. In this way, the wealth of the rich is redistributed to the whole community.4. Boost up The EconomyTax serves as an instrument for promoting economic growth, stability and efficiency. The government controls or expands the economic activities of the country by providing various concessions, rebates and other facilities. The effective tax system can boost up the economy. Similarly, taxes can correct for externalities and other forms of market failure (such as monopoly). Import taxes may control imports and therefore help the country's international balance of payments and protect industries from overseas competition.5. Reduce UnemploymentThe government can reduce the unemployment problem in the country by promoting various employment generating activities. Industries established in remote parts or industries providing more employment are given more facilities. As a result, the unemployment problem can be reduced to a great extent through liberal tax policy.6. Remove Regional DisparitiesRegional disparity has been a chronic problem to the developing countries. Tax is one of the ways through which regional disparities can be minimized. The government provides tax exemptions or concessions for industries established or activities carried out in backward areas. This will help increase economic activities in those areas and ultimately regional disparity reduces to minimum.

Importance of taxFor the worldwide operation of firms, taxation plays a vital role. Taxation has become the core of various financing decisions which includes international investment decisions, international working capital decisions, fund raising decisions andthe decisionsrelated to dividend and other payments. The tax decision is also relevant in domestic firms also.The managing of taxation is an extremely difficult issue for the international corporations. The various reasons are given as follows: The firms are supposed to work in several tax jurisdiction or authorities where thetax ratesare diverse and also the administration of the tax system is not uniform. The ultimate load of tax in the framework of international firms is determined by means of a more complex interaction of varying descriptions of the tax base. The difference in tax treatment in different nations will direct to distortions in worldwide trade and investment. The companies which are situated in the low-tax country can have a periphery over other firms in worldwide market. There are possibilities to divert the investment to those countries that have low cost rates. The overlapping takes place between the international firms with different tax jurisdictions, utilise the arbitrage opportunities and retain an edge over the domestic firms.The bases of international tax system are: Tax neutrality- The neutrality of international tax system is important because it must not affect the economic efficiency. If the tax is neutral then it will not influence the locality of the investment or nationality of theinvestor. The capital can shift from a nation with lesser return to a nation with higher return. Therefore, resources will be allocated well, and the gross world output in turn will be high. Tax equity- The principle of tax equity states that all equally positioned tax players contribute in the cost of operating the government according to the equal rules. The idea of equity can be understood in two ways. The first one states that the input of each tax player must be consistent with the amount of public services as received. The second idea is that the contribution of each tax player must be in terms of their ability to pay. The ability to pay means the one with greater ability is likely to pay a larger amount of tax. Avoidance of double taxation- The avoidance of double income states that one must not be taxed twice for the same income. However, if the post-tax income is sent to the foreign countries then in that case the receiver of such income is taxed again. This implies the same income is subjected to double taxation. As an alternative, the requirements of foreign tax credits may be formed in the domestic tax system.There also exist some tax laws which prevent the tax through artificial transactions such as transfer pricing. In addition,the corporatestructures will help to reduce the overall tax burden to the enterprise.

Objective of the StudyThe objectives of the resent study is as follows- To study about taxation in India. To study about service tax. To study about services provided by temporary transfer of copyright, services performed by performing artists, services by way of collecting or providing news by an independent journalist in exempt services

Scope of StudyThe scope of the study is limited to Services provided by temporary transfer of copyright, services performed by performing artists, services by way of collecting or providing news by an independent journalist in exempt services.

Limitation of Study The time period of the study was not sufficient to get more information regarding project . Lack of accurate, centralized and statewide information

CHAPTER 2: SERVICE TAXIndia being a developing economy and a welfare state, and it has been striving hard to maintain the level of growth and meet the requirements of its citizens. The major hurdle in its path is the limited amount of revenue/resources available.Two major sources of revenue for Indian government are customs duty and Central Excise duty on the goods manufactured/produced in India. Revenue receipts from custom duty and Central Excise duty have been decreasing in the past years due to world trade commitments and rationalisation of commodity duties.On the other hand, service sector has been growing phenomenally all over the world (especially in India). This tertiary sector(service sector) has grown at an unimaginable pace due to cheap labour available in India.Businesses in the West are being outsourced to the East . The contribution made by service sector to GDP can now be compared to the contribution made by agriculture and manufacturing sectors.So, the government decided tap in on additional revenues by imposing Service Tax in India.Genesis of service tax in India.The imposition of service tax in India started after the report of Chelliah committee on tax reforms.Based on this report, the Finance Minister of India (Dr Manmohan Singh , 1994-95) introduced the concept of tax on services. The concept of service tax in India widened with every successive Finance Minister, India has embraced a new system of taxation of all services by introduction of a negative list.Constitutional authority Of Service Tax in India .Article 265 of the Constitution of India prohibits arbitrary collection of tax. It states.No tax shall be levied or collected, except by the authority of law this means that the government can impose taxes on its citizens under (only under) the authority of the Constitution of India.Schedule 7 of the Constitution of India has clearly defined the matters on which central government and state government can make laws. Schedule 7 of the Constitution of India contains three lists.1). List 1: union list (it contains the matters in respect of which only central government can make laws).2). List 2: State list. It contains the matters in respect of which only state government can make laws).3). List 3: concurrent list (it contains the matters in respect of which both Central government and state governments have the power to make laws).Entry 92C of the union list of the Constitution of India enables the Central government to levy service tax in India. Initially there was no specific entry in the union list for levying service tax. Service tax in India was levied by the Central government by drawing power from entry 97 of the union list. Entry 97 is a residue re-entry in list 1, which has been reproduced below:97-any other matter, not enumerated in list 2 list 3, including any tax not mentioned in either of those listsThis residue entry provides wide powers to Central government in respect of taxation on the subjects not mentioned in any of the lists. However, on the recommendations of various committees, entry 92 C was introduced in the schedule 7 in the union list by amendment in the Constitution act 2003 with effect from 7 January 2004, which is specific to service tax in India.AnalysisSo even after approximately 2 decades of inception of service tax in India, there is no proper law to govern it. Matters related to service tax in India are handled by CBEC (Central board of Excise and Customs).Approaches to service tax in India.For the past two decades, service tax in India was levied under selective approach which means only selective services were taxed. The government used to issue a list of services on which service tax was to be paid by the person providing the services.However, budget 2012 introduced a new concept of negative list, under which all services are to be taxed, except for those mentioned in the negative list. This approach is known as comprehensive approach.Administration of service tax in India.Service tax in India is administered in the following manner. The topmost authority for service tax in India is listed first.1 Ministry of Finance.2 Department of revenue.3 Central board of Excise and Customs.4 Central Excise zones headed by Chief Commissioners.5 Central Excise Commissionerates headed by Commissioners.6 Service tax commissionerate.7 Additional Commissioner.8 Joint Commissioner.9 Asst Commissioner/Deputy Commissioner.10. Superintendent.11 Inspector.Extent, commencement and application of service tax in India.Extent of service tax on India: Service tax in India is levied on the entire country (including territorial waters, continental shelf, exclusive economic zones, airspace above Indian territory, etc ) except the State of Jammu and Kashmir. Provisions of the Finance act 1994 do not extend to the state of Jammu and Kashmir.This means that aservice provided in the State of Jammu and Kashmir is not liable to service tax.This is because article 370 of the Constitution of India states that any act passed in the Parliament will apply to the State of Jammu and Kashmir only after the State government has given its consent. As per today, the State government of Jammu and Kashmir has not given its consent for the applicability of service tax in Jammu and Kashmir.However,services provided from Jammu and Kashmir outside Jammu and Kashmir are still liable to service tax.This means that if a person from Jammu and Kashmir provides a service to another person who is not located in Jammu and Kashmir, then the provision of service tax will be applicable. In simpler words,location of the consumption of service is important.Nature of Service Tax in IndiaIt must be noted that service tax is not a tax on the service provider. In fact, it is a tax on service. The end burden of service tax falls on the person receiving the services. Service providers providing the services specified in the selective list of services collect service tax from the person receiving the services and the same is deposited with the government.Service Taxis a tax imposed byGovernment of Indiaon services provided inIndia. The service provider collects the tax and pays the same to the government. It is charged on all services except the services covered in the negative list (Section 66d of Finance Act 1994) of services & services covered under Mega Exemption Notification (Notification NO. 25/2012 ST dated 20.06.2012). The current rate is 14% on gross value of the service.[1]History of Service TaxDr.Raja chelliah committee on tax reforms recommends the introduction of service tax. Service tax had been first levied at a rate of five per cent flat from 15 July 1994 till 13 May 2003, at the rate of eight percent flat w.e.f 1 plus an education cess of 2% thereon w.e.f 10 September 2004 le services provided by service providers. The rate of service tax was enhanced to 12% by Finance Act, 2006 w.e.f 18.4.2006. Finance Act, 2007 has imposed a new secondary and higher education cess of one percent on the service tax w.e.f 11.5.2007, increasing the total education cess to three percent and a total levy of 12.36 percent. The revenue form the service tax to theGovernment of Indiahave shown a steady rise since its inception in 1994. The tax collections have grown substantially since 1994-95 i.e. from Rs. 410 crores in 1994-95 to Rs.132518 crores in 2012-13. The total number of Taxable services also increased from 3 in 1994 to 119 in 2012. However, from 1 July 2012 the concept of taxation on services was changed from a 'Selected service approach' to a 'Negative List regime'. This changed the taxation system of services from tax on someSelected servicesto tax being levied on the every service other than services mentioned inNegative list.[2]

CollectionsThe collections under the Service tax from the year of original levying year of 1994 are constantly growing. The collections are shown as in the following table:Financial YearRevenue Rupees(in crores)Number of servicesNumber of Assessees

1994-199540733943

1995-199686264866

1996-19971059613982

1997-199815861845991

1998-1999195726107479

1999-2000212826115495

2000-2001261326122326

2001-2002330241187577

2002-2003412252232048

2003-2004789162403856

2004-20051420075774988

2005-20062305584846155

2006-20073759899940641

2007-2008513011001073075

2008-2009609411061204570

2009-2010584221091307286

2010-2011710161171372274

2011-2012975091191535570

2012-2013132518Negative List Regime1712617

Small Scale ExemptionService tax is only liable to be paid in case the total value of the service provided during the financial year is more than Rs. 10 Lakhs. If the value of services provided during a financial year is less than 10 Lakhs, it is optional for the service provider to pay service tax or not. But, in case he has received the service tax from the service recipient, he would be required to deposit it with the govt.This exemption is called Small Scale Exemption and it is at the discretion of the service provider whether he wants to avail this exemption or not.[4]Negative ListBudget 2012 revamped the taxation provisions for services by introducing a new system of taxation of services in India. In the new system all services, except those specified in the negative list, are subject to taxation. Earlier the levy of service tax was based on positive list specified 119 taxable services.As per clause (34) of section 65B of the Finance Act, 1994, the term "Negative List" means the services which are listed in section 66D......

Service Tax Return, Records & InvoiceRecordsAccording to Rule 5 of Service Tax Rules, 1994, records include computerized data and means the record as maintained by an assessee in accordance with the various laws in force from time to time. Records maintained as such shall be acceptable to Central Excise Officer. Every assessee is required to furnish to the Central Excise Officer at the time of filing his return for the first time a list of all accounts maintained by the assessee in relation to Service Tax including memoranda received from his branch offices. This intimation may be sent along with a covering letter while filing the service tax return for the first time.Invoice Rule 4A prescribes that taxable services shall be provided and input credit shall be distributed only on the basis of a bill, invoice or challan. Such bill, invoice or challan will also include documents used by service providers of banking services (such as pay-in-slip, debit credit advice etc.) and consignment note issued by goods transport agencies. Rule 4B provides for issuance of a consignment note to a customer by the service provider in respect of goods transport booking services.

CHAPTER 3: Services provided by temporary transfer of copyright, services performed by performing artists, services by way of collecting or providing news by an independent journalist in exempt services

1. Temporary transfer of copyright - Section 65(105)(zzzzt) of FA, 1994 - taxability on film distribution - Imposition of Service Tax upheld: Madras High CourtBy TIOL News ServiceCHENNAI, JULY 05, 2013:INa landmark judgement the Madras High Court upheld the Service Tax on temporary transfer of copyright.Introduction - Service Tax on Copyrights: Tracing the history of Service Tax on copyrights, the High Court observed,When service tax was levied on 'Intellectual Property Services' namely trademarks, designs, patents or any other similar intangible property, with effect from 10.9.2004, copyright was specifically excluded from the definition of Intellectual Property Rights (IPRs). Copyright is nothing but intellectual property right which explicitly remained outside the scope of service tax just to encourage authors, artists, etc. The Finance Act, 2010 has levied service tax on transferring temporarily or permitting the use or enjoyment of any copyright except the rights covered under section 13(1)(a) of the Copyright Act, 1957.Services of copyright are taxable with effect from 1.7.2010. With effect from 1.7.2010, sub-clause (zzzzt) of clause (105) of Section 65 defines the "Taxable Service" as:"Taxable service" means any service provided or to be provided to any person, by any other person, for -(a) transferring temporarily; or(b) permitting the use or enjoyment of,Any copyright defined in the Copyright Act, 1957, except the rights covered under sub-clause (a) of clause (l) of Section 13 of the said Act."At the time of introduction of Finance Bill, 2012, in his Speech, Finance Minister stated that the Year 2012 is the Centenary Year of Indian Cinema and proposed to exempt the Industry from service tax on Copyrights relating to recording of Cinematograph films. The Finance Act, 2012 introduced Section 66B as the new Charging Section with effect from 1.7.2012 for the levy of service tax on all services other than those services specified in the Negative list. Notification No.25 of 2012 provided for number of exemptions effective from 1.7.2012 and Entry No.15 of the said exemption is:"Temporary transfer or permitting the use or enjoyment of a copyright covered under clause (a) or (b) of sub-section (1) of Section 13 of the Indian Copyright Act relating to original literary, dramatic, musical, artistic works."Notification No .25 of 2012 was amended by Notification No.3 of 2013 w.e.f . 1.4.2013 and Entry No.9 in the notification No.25/2012 is substituted as under :-"Services provided by way of temporary transfer or permitting the use or enjoyment of copyright(a) covered under clause (a) of sub-section (1) of Section 13 of the Copyright Act, 1957, relating to original literary, dramatic, musical or artistic works; or(b) of cinematograph films for exhibition in a cinema hall or cinema theatre."Thus the issue relates to the temporary transfer or permitting the use or enjoyment of copyright, except the rights covered under sub-clause (a) of sub-section (1) of Section 13 of the Indian Copyright Act for the period from 1.7.2010 to 31.06.2012 and the period from 01.4.2013 onwards since the levy of service tax on Copyright Services (Section 65(105)(zzzzt) is revived from 1.4.2013 with the exception of Section 13(1)(a) or Cinematograph films for exhibition in a cinema hall or a cinema theatre.Writ Petitions and the averments :-Contending that the levy of service tax on transfer of copyright, which is goods, is transfer of right to use the goods amounting to sale and no service element is involved and that temporary transfer of copyright is not exigible to service tax, writ petitions are filed challenging the vires of Section 65(105)(zzzzt) and to declare that the provisions of Section 65(105)(zzzzt) is beyond the legislative competence of the Union of India.The following points arise for consideration in these Writ Petitions :-1. Whether the taxable event provided under Section 65(105)(zzzzt) of the Finance Act, 1994 is covered by Article 366 (29A)(d), which is a "deemed sale of goods"?2. Whether the Petitioners are right in contending that the levy of service tax on "temporary transfer or permitting the use or enjoyment of copyright" provided under Section 65(105)(zzzzt) of the Finance Act, 1994 is covered under Entry 54 of List II and whether it amounts to transgression by Parliament into the exclusive domain of the State Legislature?3. Whether the Petitioners are right in contending that the copyright is goods and transfer of copyright of Cinematograph films is only delivery of goods for consideration and is absolute transfer and no service element is involved?4. Even assuming that there is an element of service involved in the nature of transaction done by the Petitioners, should the dominant intention of the transaction being transfer of goods has to be only taken into consideration?5. Whether the Petitioners are right in contending that Parliament has no authority to dissect a composite transaction as in the case of the Petitioners and levy service tax?6. Whether Section 65(105)(zzzzt) levying service tax on the temporary transfer or permitting the use or enjoyment of copyright is ultra vires the Constitution?The High Court heard elaborate arguments and considered a plethora of Supreme Court judgements and upheld the levy. Some of the contentions and rulings:Held:On a careful analysis of the decisions of the Hon'ble Supreme Court, it is seen that the Hon'ble Supreme Court on four occasions, upheld the levy of service tax with reference to Entry 97 of List I and in all the four cases, the Hon'ble Supreme Court held that the levy of service tax falls within Entry 97 of List I. Therefore, any challenge on this aspect by the petitioners must necessarily fail .

Contention: Levy of service tax amounts to Double Taxation :-Held: Film produced by the producer does not fetch any value unless it passes through various commercial activities including the distribution agreements and gets exhibited. As held by the Supreme Court, 'service tax' is a "value added tax', which in turn, is a 'general tax', which applies to all commercial activities involving production of goods 'cinematograph films and provision of services' from the stage of production - negative of the films are made till it gets exhibited in theatre or exploited through other media. Lot of economic/commercial activities are involved. Those commercial activities amounting to temporary transfer of copyright or permitting use or enjoyment of copyright, Parliament is well within its competence to levy 'service tax'. 'Transfer of right to use the goods' or 'permission to use the copyright' or 'enjoyment of copyright' operate in different fields. There may be overlapping. The impugned legislation cannot be held to be vitiated merely because there is overlapping and that both sales tax and service tax becomes leviable .Contention - No element of service is involved :-Contention of Petitioners is that tax is leviable only on services provided i.e. on the value addition and there is no service or element of service in the act of temporary transfer or permitting use or enjoyment of a copyright to another for his business.Held: The legislative competence of the Parliament does not depend upon whether any services are made available within the definition of 'taxable services' contained in Finance Act, and in a given case, 'taxable services' are rendered or not is a matter of interpretation of the statute and for adjudication under the provisions of the Statute and the same cannot affect the vires of the legislation and/ or the legislative competence of the Parliament. Therefore, the Supreme Court held that the levy of service tax on a particular kind of service could not be struck down on the ground that it does not conform to common understanding of the word 'service' so long as it does not transgress any specific restriction contained in the Constitution.Contention - Computation is not possible:- Petitioners submitted that even assuming that there is service element, Legislature has not identified the nature of services and there is no mechanism in the legislation to identify and quantify the taxes.Held: legislative competence is to be determined with reference to the object of the levy and not with reference to its incidence or machinery. The substance of the impugned provision must be looked at to determine whether it is in pith and substance within a particular entry, whatever its ancillary effect may be. Basis of computation and ultimate economic results cannot be a ground to challenge the vires of the impugned provision.Conclusion:- The High Court held that:1. The variant modes ofbusiness transactions between the producer and distributor, distributor and sub-distributor or area distributor or exhibitor (theatre owner) are not 'sale of goods' to fall under Entry 54 List II or Entry 92A List I.2. By resorting to Entry 97 of List I Residuary Entry to levy service tax, the Parliament is within its legislative competence and Section 65(105)(zzzzt) is not ultra vires the Constitution.3. From the production of the cinematograph film till it is exhibited, there are host of commercial activities. Service tax is the value added tax, which applies to the business transactions for consideration involving commercial activities. Over all, there is a huge rise in business of film industry and huge money is involved. The temporary transactions of copyrights or the permission to use or enjoyment of the copyright cannot be brought either under Entry 54 of List II or Entry 92A of List I.4. Applying the ratio of the decisions of the Supreme Court, the Parliamentis well within its legislative competence in levying service tax resorting to Entry 97 of List I.

2. Services performed by performing artists-Guidelines for Determining Worker StatusPerforming ArtistsThe following are guidelines used by the Unemployment Insurance Division, the Division of Labor Standards and the Division of Safety and Health to establish whether the relationship between a performing artist and the party engaging the services is an employment relationship or that of an independent contractor.Independent contractors are excluded from coverage under the Unemployment Insurance Law and are not afforded the protections provided by Labor Standards and Safety and Health requirements. These are persons who are actually in business for themselves and hold themselves available to the general public to perform services. A person is an independent contractor only when free from control and direction in the performance of services. All factors concerning the relationship between the two parties must be taken into consideration to determine if the party contracting for the services exercises, or has the right to exercise supervision, direction or control over the performer. No one single factor is controlling, nor do all factors need to be present to establish the nature of the relationship.For the purposes of these guidelines, the term "performer" will include, but is not limited to, services performed by a musician, singer, comedian, disc jockey, magician, karaoke player or dancer. These guidelines address performers' relationships with establishments, band or orchestra leaders, theatrical and film productions or symphony organizations and agencies. Refer to the section that applies to your type of organization.Section 511.1(b)(1-a) of the Unemployment Insurance Law includes in the definition of employment the services of performing artists at certain establishments unless there is a written contract stipulating them to be employees of someone else. However, the courts and the Unemployment Insurance Appeal Board have held that the statute creates a presumption of employment which can be rebutted. Through application of common law tests of supervision, direction and control, an employer may rebut the presumption of employment and demonstrate that it was not the entity engaging the services, or that the relationship with the performer was that of an independent contractor.Employers may request a formal determination of the status of individuals or groups performing services for unemployment insurance purposes by writing to the Liability and Determination Section and furnishing complete details of the relationship. An employer who assumes an individual performs services as an independent contractor and does not report and pay contributions based upon the assumption, may find they are subject to a retroactive assessment, interest, or increased contribution rates, if it is later determined through an audit, benefit claim or some other review, that there was an employment relationship. Therefore, it is to the employer's advantage to request a determination when the status of performers is in question.

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The Department of Labor is implementing these guidelines with an effective date of January 1, 1998. Therefore, employers may discontinue reporting individuals for unemployment insurance purposes where the application of the guidelines results in a status of independent contractor as of the first quarter of 1998. Please note the prospective nature of the implementation. As a result, the Unemployment Insurance Division will not issue redeterminations and refunds for previously reported individuals.Employers with questions regarding the interpretation or application of the "indicators" outlined in the guidelines in relation to an unemployment insurance matter may contact the Liability and Determination Section at (518) 457-5807. Employers with questions in relation to a Division of Labor Standards issue should call (518) 457-4321. Division of Safety and Health issues may be referred to (518) 457-1212.Establishments (such as restaurant, tavern, night club, comedy club, fraternal organization)Indicators of IndependenceThe strong indicators a performer (or group) is an independent contractor when performing services for an establishment are:1. The performers share in the fee received from the establishment for services performed. 2. The performer provides his own equipment for sound, lighting and stage design. 3. The performer has an investment in equipment utilized in the performance. 4. The performers are in business for themselves as evidenced by operating as a corporation or joint venture. 5. The performer retains the right to exercise artistic control over the elements of the performance. 6. The performer sets or negotiates the rate of pay received from the establishment. Other indicators a performer (s) is an independent contractor when performing services for an establishment are:7. The performer retains ultimate authority in establishing the type of music for the performance. 8. The performer dictates to the establishment the conditions of the engagement, for example the stage set up, security arrangements, transportation requirements, and food and beverage provisions. 9. The featured performer provides services under a single engagement arrangement. 10. The performer establishes when breaks will occur or duration.

Indicators of EmploymentThe strong indicators a performer (or group) is an employee when performing services for an establishment are:1. The performer is paid at a rate determined solely by the establishment. 2. The establishment makes standard withholding deductions from the performer's fee, e.g. income tax, social security, etc. 3. The performer is covered under the establishment's Workers' Compensation Policy. Other indicators a performer is an employee when performing services for an establishment are:4. The establishment provides substitutes or replacements when the performer is unable to participate at a scheduled performance. Orchestra/Band LeadersIndicators of IndependenceThe strong indicators a performer is an independent contractor when performing services for an orchestra/band leader are:1. The band/orchestra is in business for itself as evidenced by operating as a corporation or joint venture and the performer is a principal of the corporation or joint venture. 2. The band/orchestra mutually agrees on the method of distributing profit or loss. 3. The band/orchestra members jointly retain the right to exercise artistic control over the elements of the performance.

4. The band/orchestra members jointly establish the music to be played at the performance. 5. The band/orchestra members jointly own, rent or lease equipment such as sound, lighting and stage design. 6. A replacement, added or featured performer sets or negotiates the rate of pay for a performance. Other indicators a performer(s) is an independent contractor when performing services for an orchestra/band leader are:7. The members of the orchestra/band jointly dictate conditions of engagement such as stage setup, security arrangements, transportation requirements, and food and beverage provisions. 8. The musician provides his/her own replacement if unable to participate at a scheduled performance. 9.

Indicators of EmploymentThe strong indicators a performer is an employee when performing services for an orchestra/band leader are:1. The orchestra/band is in the name of the orchestra/band leader and the leader contracts with the customer in the name of the orchestra/band leader. 2. The orchestra/band leader pays the musicians even if the customer fails to pay the band leader. 3. The orchestra/band leader provides the substitute or replacement if a performer is unable to participate at a scheduled performance. 4. The performer is covered under the orchestra/band leader's Worker's Compensation Policy. 5. The orchestra/band leader retains ultimate right to exercise artistic control over the performance. 6. The performer is paid to attend, or required to attend rehearsals. 7. The orchestra/band leader makes standard withholdings from the performer's fee, e.g. income tax, social security, etc.Other indicators a performer is an employee of the orchestra/band leader are:8. The performer is provided through a local union. 9. The performer is provided with a music stand by the orchestra/band leader. 10. The orchestra/band leader dictates the music to be performed. 11. The orchestra/band leader dictates the attire to the performer.12. The orchestra/band leader auditions the musician (live or by tape) for the position. 13. The orchestra/band leader establishes break times or length. 14. The orchestra/band leader dictates conditions of engagement, for example stage setup, food and beverage provisions. 15. The orchestra/band leader establishes the fee paid to the performer16.

Theatrical and Film Productions and Symphony OrganizationsIndicators of IndependenceIn most film and theatrical production cases, performers would not be determined to be independent contractors.The indicators a performer is an independent contractor when performing services for a Symphony Organization are:1. The performer or featured performer negotiates the rate of pay. 2. The performer retains the right to exercise artistic control over the performance. 3. The performer negotiates or controls the conditions of the engagement, e.g. stage set up, security, transportation, food, beverage, etc. 4. The featured performer provides services under a single engagement arrangement. Indicators of EmploymentThe strong indicators a performer is an employee when performing services for a theatrical or film production, or symphony organization are:1. The performer is paid at a rate established solely by the production company or organization. 2. The production company or organization makes standard withholdings from the performer's pay, e.g. income tax, social security, etc. 3. The performer is covered under the production company or organization's Worker's Compensation policy. 4. The production company or organization retains artistic control of the performance. 5. The performer is paid to attend, or is required to attend rehearsals. Other indicators a performer is an employee when performing services for a theatrical or film production, or symphony organization are:6. The production company or organization provides substitutes or replacements if the performer is unable to provide services. 7. Attire is dictated by the production company or organization. 8. The production company or organization establishes breaks. 9. The performer is provided with music or other materials for the performance.

AgenciesThese indicators are intended to assist in determining if the agency is the employer. If the agency is not the employer, consult the preceding sections of this guide as appropriate to determine the identity of the employer or the status of the performer as an independent contractor.Indicators of IndependenceThe strong indicators a performer (or group) is not an employee of the agent are:1. The client makes the final choice of who the performer will be for the engagement. 2. The performer negotiates the rate of pay with the client, or the performer authorizes the agent to negotiate the rate of pay with the client but retains the right of final approval. 3. There is no requirement for the performer to report to the agent if services cannot be performed. 4. The performer is well known, a recognized "name" who is specifically sought by the client through the agent. Note: A band operating as a joint venture and meeting other indicators of independence as described in preceding sections will not be considered employees of the agent unless the agent has control over all aspects of the band, including artistic control over performances.Other indicators a performer (or group) is not an employee of the agent are:5. The performer or client has the responsibility to provide or obtain a replacement. This would also include situations where the client can request the agency to send a replacement. 6. No reports are required to be filed with the agent, or any reports required are filed directly with the client. Indicators of EmploymentThe strong indicators the performer (or group) is an employee of the agent are:1. The agent makes the final choice of the performer who will perform the service. 2. The agent negotiates and decides the rate of pay with the client and negotiates and decides the performer's rate of pay. 3. The services are exclusively performed for the agent, e.g. the performer cannot work for other agents or for the agent's clients. 4. The agent organizes the band and/or selects individual band members. Other indicators the performer (or group) is an employee of the agent are:5. The agent has responsibility to furnish a replacement. 6. The performer must report to the agent if services cannot be performed. The performer is paid even if the customer does not pay. 7. Reports must be filed with the agent, e.g. time sheets, record of nature of services, etc.

3. Services by way of collecting or providing news by an independent journalist[TO BE PUBLISHED IN THE GAZZETE OFINDIA, EXTRAORDINARY, PART II, SECTION 3,SUB-SECTION (i)]Government of IndiaMinistry of Finance(Department of Revenue)Notification No.25/2012-Service TaxNew Delhi, the 20thJune, 2012G.S.R(E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act) and in supersession of notification number 12/2012- Service Tax, dated the 17thMarch, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)videnumber G.S.R. 210 (E), dated the 17thMarch, 2012,the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable servicesfrom the who le of theservice taxleviablethereon under section 66B of the said Act, namely-17.Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India.

CHAPTER 4FNDINGS SUGGESTION & CONCLUSIONFindings & Suggestions- 1. The rate of service tax was enhanced to12%by Finance Act, 2006 w.e.f 18.4.2006. Finance Act, 2007 has imposed a new secondary and higher education cess of one percent on the service tax w.e.f 11.5.2007, increasing the total education cess to three percent and a total levy of 12.36 percent.2. Current service tax rate is 12%. On it, 2% education cess and 1% higher education cess are added. So the effective service tax rate is 12.36% (12% + 3%). This is standard rate and it can be reduced as per available abatement and exemptions.

Conclusion-Service tax is rightly referred to as Tax of the future. Well synchronized taxation on manufacturing, trade and service without giving rise to cascading effect of taxation would be an ideal worth pursuing in the immediate future. This would bring in VAT in its truest sense. Continued growth in GDP accompanied by higher rate of growth in service sector promises new and wider avenues of taxation to the Government. If the tax on services reduces the degree of intensity of taxation on manufacturing and trade without forcing the Government to compromise on the revenue needs, then one of the basic objectives of taxing the service sector would be achieved.Voluntary tax compliance on the part of taxpayers demands prudent accounting practices and transparency in the conduct of their business. Marginal rates of taxation would be conducive in this process. Many new services may be brought under the tax net in future. The inclusion of all value added services in the tax net would yield larger amount of revenue and make the existing tax structure more elastic.Advanced economies of Western Europe, North America and Far East have share of service sector in their GDP ranging from 60% to 80%. The growth in absolute quantum of GDP and proportion of Service-sector in GDP holds promise for larger revenue generation without increasing the existing level of taxation. However, the progress so far has been slow. Moreover, the law in this regard is not perfect and a separate legislation is keenly awaited.

BIBILOGRAPHY http://www.servicetax.gov.in

http://www.indiataxes.com

http://indiabudget.nic.in

http://www.laws4india.com

http://www.servicetax.com/cenvat1.htm