Work Shop on New Regime of Taxation of service-part III

Slide 1

Presents

A Knowledge Master Class

On

Understanding New Regime of Service Taxation in India

Conducted byDr. Sanjiv Agarwal

FCA, FCS

Thursday,13th December, 2012Gurgaon Dr. Sanjiv Agarwal

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Corporate Knowledge Foundation

SESSION III

Services not liable to Service Tax

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This Presentation Covers

What is Negative ListSectors in Negative ListAnalysis of Negative list of Services

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Scope of Service Tax

Services on which no Service Tax shall be payable comprise of :

Service which are specifically excluded from the scope of definition of service itself u/s 65(44).17 broad services specified in the negative list of services u/s 66D.Services which are exempt from levy of Service Tax under N. No. 25/2012-ST dated 20.06.2012.Specified services otherwise exempt under specific notifications. Activities where service provider and service receiver are in non taxable territory

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Negative list of Services

What is negative list

Defined in new section 66D

Section 66D specifies seventeen 17 broad categories of services.

Effective from 1-7-2012

If an activity meets the characteristics of service , it is taxable unless specified in Negative List.

Based on socio-economictax criterion

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Consideration in Negative List

Socio Economic Considerations in Negative list

Administrative considerations: taxation of Government, difficult to tax sectors.Under contractual obligations: Specified international bodies and diplomatic missionsWelfare considerations: welfare of vulnerable sections of society, essential education, public health; public transport, services by non-profit entities, religious services, promotion of art, culture and sports.Economic considerations: transport of export goods, services meant for agriculture, animal husbandry and infrastructure development.Explicit activities in the nature of services, which are within the taxing powers of States: betting and lotteries, tolls.

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Sectors in Negative List

Negative list of services is drawn from seven sectors, viz.services provided by specified person ie, Governmentsocial welfare & public utilitiesfinancial sectortransportation construction & real estateeducationhealth careothers & miscellaneous

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Services by Government or a local authority

Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere

Services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;

Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

Transport of goods or passengers; or

Support services provided to business entities to be contd..

Service provided by Government or Local Authority

Most of services provided by Central / State Governments exempt from service tax.But following services are taxable -Department of posts - speed post, express parcel, life insurance and agency service to non government business entity but basic mail, money orders, operation of saving accounts ,pension payment etc services are covered in negative listIn relation to vessel or aircraft service within/outside port/airportTransport of goods and/ or passengersSupport service to business entities To be contd..


Services by government as sovereign functions (grant of licensing rights or audit of government, passport etc.)Excludes corporations formed under Central Acts or State Acts or various Government companies registered under Companies Act, 1956 or autonomous institutions set up by a Special Acts Government Department needs to be registered and to pay tax on support services ofRenting of immovable propertiesSpeed post, express parcel, life insurance.Transport of goods and/ or passengers Services in relation to vessel or aircraft For other services, Government not liable to pay service tax as tax paid by service recipient in reverses charge (N. No. 30)To be contd..


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 whatsoever shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis;Services provided by Government Security agencies are covered under support service - under reverse charge, Service Receiver is liable to tax.

Service by Reserve Bank of India

All services provided by RBI are in Negative List

Service Provided to RBI is taxable unless covered in negative list.

Service provided by banks to RBI taxable unless covered in Negative List or exempted services

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Services by a foreign diplomatic mission located in India

Services by diplomatic mission of any country located in IndiaDoes not cover services provided by any office or establishment of an International organization (Section 3 of United Nation Privileges & Immunities Act 1947)Example- UNESCO, UNICEF, IMF, IBRD etc.Notification No. 27/2012-ST dated 20.6.2012 conditionally exempts service provided by any person for the official use of a provision of a foreign diplomatic mission or consular post in India for personal use or use of the family member of diplomatic agents or career consular officers posted in India

Service relating to Agriculture or Agricultural Produce

services relating to agriculture by way ofagricultural 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 an 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 the essential characteristics of agricultural produce but make it only marketable for the primary market;renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;loading, unloading, packing, storage or warehousing of agricultural produce;agricultural extension services;services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce;to be contd


The Services relating to agriculture or agriculture produce specified in negative list-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 not for retail market; (e.g. cleaning of Wheat)to be contd .


renting of agro machinery or vacant land with or without a structure incidental to its use (e.g. green house, storage shed.)loading, unloading, packing, storage and warehousing of agricultural produce; agricultural extension services (application of scientific research, farmer education & training) services provided by any Agricultural Produce Marketing Committee or Board (APMC) for agriculture or agricultural produce but does not include non -agricultural activities (e.g. renting of shops or other property or services provided by commission agent for sale or purchase of agricultural produce)to be contd .


Agriculture -Section 65 B(3)Cultivation of plants and rearing of all life-forms of animals except the rearing of horses, for food, fiber, fuel, raw material or other similar products

Agriculture Produce -Section 65B(5)any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market (E.g. Plantation crops like rubber, tea or coffee but does not include potato chips or tomato ketchup)to be contd .

Trading of Goods

Trading of goods is not a taxable service, it being a sale and not a service.If a transaction is a sale, it is not a service and vice versaTransfer of title in goods is crucial Activities of a commission agent / clearing and forwarding agent who sells goods on behalf of another for a commission are not trading of goods (Title of goods does not pass)Forward contracts are in the nature of trading of goods.Future contracts are not trading of goods

to be contd .

Trading of Goods

Goods - Section 65B(25)goods" means every kind of movable property other than actionable claim and money includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale

Process amounting to manufacture or production of goods

process amounting to manufacture or production of goods" means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 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 for the time being in force.

Covers manufacturing activity carried out on contract or job work basis where Transfer of title of goods is not involvedDuties of excise are leviable on such process

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What is Excisable Goods

excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt

Mobility and marketability are essential conditions

Goods includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.

Exemption to Service - Clause 30 (N. No. 25/2012-ST)

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 manufactureror(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

Selling of space or time slots for advertisements

Selling of space or time slots for advertisements other than advertisements broadcast by radio or television

This entry in negative list should qualify the following tests involves selling of space (in case of print media)involves selling of time slots ( in case of electronic media)purpose of selling time slots / space to be for advertisements (publicity / sales promotion, awareness etc.) excludes broadcast by radio or television ( i.e. broadcast will be taxable)

to be contd .


Taxable

Non-taxable

Sale of space or time for advertisement to be broadcast on radio or television

Sale of space for advertisement inprint media

Sale of time slot by a broadcastingorganization

Sale of space for advertisement in billboards, public places (includingstadia), buildings, conveyances, cellphones, automated teller machines, internet

Aerial advertising

Presentation made in person


Not covered in Negative List

Covered In Negative List

Printing & Publishing of yellow pages, business directory and trade catalogues etc.

Spaces allotted in buses and public transport system public transport system to run display of advertisement

Advertisement services to Government departments

Private circulation of magazines / journals

Purchase of time slots from broadcaster and sold to advertising agency

Telephone directories

Preparingadvertisementfor displayduring a movie in theatre

Clubs, associations, professional bodies etc. member's list / directories

Services provided by advertisement agencies in relation to preparation of advertisement

Internal directories / businessinformations

Commission received by advertisement agencies from broadcasting or publishing companies


Advertisement" means any form of presentation for promotion of,or bringing awareness about, any event,idea, immovable property, person, service,goods or actionable claim through newspaper, television, radio or any other meansbut does not include any presentation made in person;Services provided by advertisement agencies relating to preparation / designing etc of advertisements are taxable. Print media includes newspaper and books.

Service way of access to a road or a bridge on payment of toll charges

Only covers toll charges for access to road and bridge

Includes National highways or state highways

Toll on other roads not in negative list

Collection charges or service charges paid to any toll collection agency are not covered under negative list

Does not include services used for providing such service

Betting, Gambling or Lottery

Betting or Gambling means 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

Betting is a form of wagering contract in which money or moneys worth is made payable by the parties on the result of an uncertain event, usually a game or sport

Gambling means playing game of chance for money or risky action undertaken with the hope of success

Lottery is a game of chance (e.g. lottery, bingo, lotto etc.) which may include online games

to be contd .

Betting, Gambling or Lottery

Auxiliary services for organizing or promoting betting or gambling events are not covered in negative listState subject covered in list IIActionable claim In Union of India & Others v. Martin Lottery Agencies Ltd (2009) 14 STR 593 (Supreme Court), it was held that service tax can not be levied on sale of lottery ticketIn Martin Lottery Agencies Ltd. v. Union of India (2007) 8 STR 561 (Sikkim), it was held that petitioner was not rendering services in relation to promotion of clients goods and service tax liability did not arise

Admission to entertainment events and access to amusement facilities

Entertainment event if it is intended (may not necessarily provide) to provide any one or more of the following to the recipients / viewers / audience recreation pastimefun , or enjoyment

to be contd .


This could be by way of exhibition of cinematographic filmcircus concerts sporting events pageants award functions dance performance musical performance theatrical performances drama, ballets or any such event / programme. to be contd .


Amusement facility" means a facility where fun recreation is provided by means of rides gaming devices bowling alleys in amusement parksamusement arcadeswater parkstheme parks such other places but does not include a place within such facility where other services are providedto be contd .


Amusement means entertainment, diversion, pastime, sport etc. Theatrical performances need not be performed in theatre Standalone amusement ride in a mall fun or recreation by means of ride covered under amusement excluded Membership of club which provides amusement facilities - excludedEvent manager for organizing an entertainment event or entertainment is not covered in this category

Transmission or distribution of Electricity by an electricity transmission or distribution utility

Provided by Electricity Transmission or Distribution utility Covers both TransmissionDistribution Installation of gensets or similar equipment by private contractor for distribution - taxableCharges collected by developer or a housing society for distribution of electricity within a residential complex - taxable but excluded if it acts as a licensed authority

Specified services relating to education

Service by way of -Pre-school education and education up to higher secondary school or equivalentEducation as a part of a prescribed curriculum for obtaining a qualification recognized by law Education as a part of an approved vocational education course

Conduct of degree courses by colleges, universities or institutions which lead to grant of qualifications recognized by law

to be contd .


Approved vocational education coursea 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, 1961a 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 Indiaa course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India

to be contd .


Education upto higher secondary school or equivalent are in negative list.Services provided to or by an educational institution for Auxiliary educational services and renting of immovable property exempted under mega notification

Negative list will not include Private tuitions Education as a part of prescribed curriculum for obtaining qualification recognized by law of a foreign country Services provided to educational institutions Placement services to be contd .


Education related services not in negative list but exempt from tax under Notification No. 25/2012-ST dated 20.06.2012 Transportation of students to / from institutions Provision of mid-day meal in schools Admission related services to educational institutes where education services are exempt.Coaching / training in recreational activities of arts, culture or sports.

Services by way of renting of residential dwelling for use as residence

Renting coves all types of arrangements in relation to immovable property with or without its transfer of possession or control and whether wholly or partly. It would cover / include allowing permitting granting access / entry / occupation use of facility letting leasing licensing, or other similar arrangements (such as right to use, sub-lease, space sharing etc.)

to be contd .


Renting of certain kinds of property already covered inthe negative listrenting of vacant land, with or without a structure incidental to its use, relating to agriculture. renting of residential dwelling for use as residence renting out of any property by Reserve Bank of India renting out of any property by a Government or a local authority to non-business entity

to be contd .


Residential dwelling not defined but includes residential accommodation

Does not include hotel, motel, inn, guest house, camp site, lodge, house boat or other place meant temporary stay

Residential dwelling used partly as a residence and partly for non residential purpose- treated as bundled service

Residential unit independent residential unit with specific facilities for living, cooking and sanitation

to be contd .

Financial Services

Services by way of(i) extending deposits, loans or advances in so far as the consideration is represented byway of interest or discount;(ii) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers;

to be contd .

Financial Services

Transactions in money outside the ambit of serviceAny activity related to a transaction in money by way of its use or conversion by cash or by any other mode, from one form , currency or denomination to another form, currency or denomination would not be treated as a transaction in money if a separate consideration is charged for such an activityService tax levied on service charges for transactions in money including of charges for making of drafts, letter of credits issuance charges, service charges relating to issuance of CDs/ CPs etcInterest rate swaps and foreign exchange swaps are excluded being securities.

to be contd .

Financial Services

Only interest and discount are in negative listInterest onMoney borrowed Debt incurredDepositClaim / obligation/ similar rightService charge / fee/ commission not covered (e.g. pre payment fee, late fee, cheque bounce charges)interest on credit facility not utilized (commitment charges ) not covered in negative listBill discounting only discount coveredto be contd .

Financial Services

Any charges over and above interest/ discount taxablePurchase/ sale of foreign currency between banks and authorized dealers under negative listExamples of services in negative list-Fixed deposits or saving deposits or any other such deposits in a bank for which return is received by way of interestProviding a loan or over draft facility for in consideration for payment of interestMortgages or loans with a collateral security to the extent that the consideration for advancing such loans or advances are represented by way of interestCorporate deposits to the extent that the consideration for advancing such loans or advances are represented by way of interest or discount

Services relating to transportation of passengers

Services by-a stage carriage;railways in a class other than (i) first class; or (ii) an AC coach; ( exempt upto 30.9.2012)metro, monorail or tramway;inland waterways;public transport, other than predominantly for tourism purpose, in a vessel, between places located in India; andmetered cabs, radio taxis or auto rickshaws.to be contd .


Stage Carriage is defined in section 2(40) of Motor Vehicles Act, 1988. It means a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, for the whole journey or for stages of the journeyNational waterways covered in inland waterways Metered cab - any contract carriage on which an automatic device, of the type and make approved by the State Transport Authority, is fitted which indicates reading of the fare chargeable at any moment and that is charged accordingly under the conditions of its permit issued under the Motor Vehicles Act, 1988 to be contd .


Covered under negative list

Not Covered under negative list

Motor vehicles on hire to state transport undertaking (more taken 12 passengers)

Motor vehicles to state transport undertaking (upto12 passengers)

Exemption to Transport of passengers by a contract carriage

No exemption for Tourism, conducted tours, chartered or hire

Service relating to transportation of Goods

services provided in relation to transportation of goods is specified in the negative list by road except the services of (i) a goods transportation agency or(ii) a courier agencyby aircraft or vessel from a place outside India up to the customs station of clearance in India; orby inland waterways (agents covered)

to be contd .


Services provided by GTA taxable except under separate exemption available for fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage;goods where gross amount charged on a consignment transported in a single goods carriage does not exceed one thousand five hundred rupees; orgoods 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.

Courier services Express cargo service, angadia taxable

to be contd .


Nature of service relating to transportation of Goods

Whether covered in the negative list entry

By railways

No

By air within the country or abroad

No

By a vessel in the coastal waters

No

By a vessel on a national waterway

Yes

Services provided by a GTA

No

Funeral, Burial, Crematorium or Mortuary Services including Transportation of the deceased

Funeral Burial Crematorium Mortuary Transportation of deceased

THANK YOU FOR YOUR PRECIOUS TIME AND ATTENTIONDr. Sanjiv AgarwalFCA, FCS, [email protected]@gmail.com

Date post:	20-Oct-2014
Category:	Education
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