Service Tax - Crtical Analysis of Certain Services

1. Critical analysis of Service Tax
obligations on certain services
- Vakharia Vaibhav

2. Definition of Service

3. Section 65(44) - Ch.V of Finance Act, 2012
65(44) "service" means any activity carried out by a person for
another for consideration, and includes a declared service, but
shall not include —
(a) an activity which constitutes merely,––
(i) a transfer of title in goods or immovable property, by
way of sale, gift or in any other manner; or
(ii) a transaction in money or actionable claim;
(b) a provision of service by an employee to the employer in
thecourse of or in relation to his employment;
(c) fees taken in any Court or tribunal established under any law
for the time being in force.

4. Taxability of Service
Taxable
Not specified in Negative List and/or Exemption Notification
within Taxable Territory
Service provided or agreed to be provided

5. Goods Transport Services

6. (p)Services by way of transportation of goods –
(i) by road except the services of –
(A) a goods transportation agency; or
(B) a courier agency;
(ii) by an aircraft or a vessel from a place outside India up to the
customs station of clearance in India; or
(iii) by inland waterways;
As per Section 65B(26) "goods transport agency" means any person
who provides service in relation to transport of goods by road and issues
consignment note, by whatever name called.
As per Section 65B(20), "courier agency" means any person engaged in
the door-to-door transportation of time-sensitive documents, goods or
articles utilising theservices of a person, either directly or indirectly, to
carry or accompany such documents, goods or articles;
Service (p) of Negative List u/s. 66D

7. Service No. 21 of Mega Exemption
Notification No. 25/2012
[As amended by Notification No. 03/2013 & 06/2015]
21.Services provided by a goods transport agency by way of
transportation of –
a) agricultural produce;
b) goods, where gross amount charged for the transportation of goods on
a consignment transported in a single carriage does not exceed one
thousand five hundred rupees;
c) goods, where gross amount charged for transportation of all such
goods for a single consignee does not exceed rupees seven hundred
fifty;
d) milk, salt and food grain including flours, pulses and rice
e) chemical fertilizer and oilcakes;
f) newspaper or magazines registered with the Registrar of Newspapers;
g) relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap;

8. Point (A)(ii) of Reverse Charge Mech.
Notification No. 30/2012
(A)(ii) Taxable services provided or agreed to be provided by
goods transport agency in respect of transportation of goods by
road, where the person liable to pay freight is :-
• any factory registered under or governed by the Factories Act,
1948
• any society registered under the Societies Registration Act, 1860
or under any other law for the time being in force in any part of
India;
• any co-operative society established by or under any law;
• any dealer of excisable goods, who is registered under the
Central Excise Act, 1944 or the rules made thereunder;
• any body corporate established, by or under any law; or
• any partnership firm whether registered or not under any law
including association of persons;

9. Thus, Reverse Charge Mechanism is applicable
• if transporter is Goods Transport Agency (i.e. any
person who transports goods by road and issues
consignment note by whatever name called)
and
• the transportation charges are more than the
minimum specified limit (i.e. 1500 or 750 as the
case may be)

10. Renting of Motor Vehicle
and
Manpower & Security Services

11. Point (A)(v) of Reverse Charge Mechanism
Notification No. 30/2012
(A)(v)Taxable services provided or agreed to be provided by way of
1. renting of a motor vehicle designed to carry passengers to
any person who is not in the similar line of business, or
2. supply of manpower for any purpose, or
3. security services, or
4. service portion in execution of works contract
• by any Individual, Hindu Undivided Family or Partnership
Firm, whether registered or not, including Association of
persons, located in the taxable territory
• to a business entity registered as body corporate, located in
the taxable territory

12. Liability for such services
Particulars
Service
Provider
Service
Recipient
(a) In respect of services provided or agreed to be provided
by way of renting of a motor vehicle designed to carry
passengers on abated value to any person who is not
engaged in the similar line of business
(b) In respect of services provided or agreed to be provided
by way of renting of a motor vehicle designed to carry
passengers on non abated value to any person who is
not engaged in the similar line of business
[Amended by Notification No. 10/2014]
Nil
50%
100%
50%
In respect of services provided or agreed to be provided by
way of supply of manpower or security services for any
purpose [Amended by Notification No. 07/2015]
Nil 100%
In respect of services provided or agreed to be provided in
service portion in execution of works contract
50% 50%

13. Job-work Services

14. Service No. 30 of Mega Exemption
Notification No. 25/2012
[As Amended by Notification No. 06/2015]
30. 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
c) any goods on which appropriate duty is payable by the principal
manufacturer (except Alcohol), or
d) processes of electroplating, zinc plating, anodizing, heat treatment,
powder coating, painting including spray painting or auto black, during
the course of manufacture of parts of cycles or sewing machines ….
Here, “appropriate duty” means duty payable on manufacture or
production under a Central Act or a State Act, but shall not include ‘Nil’
rate of duty or duty wholly exempt;

15. Service (f) of Negative List u/s. 66D
(f) Any process amounting to manufacture or production of goods.
As per Section 65B(40), “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.
Further, Section 3 of Central Excise Act, 1944 levies duty ongoods
specified on First & Second schedules of the Central Excise Act.

16. Advocate Services

17. Service No. 6 of Mega Exemption
Notification No. 25/2012
6, Services provided by-
a) an arbitral tribunal to – (i) any person other than a business entity; or
(ii) a business entity with a turnover up to rupees ten lakh in the
preceding financial year;
b) an individual as an advocate or a partnership firm of advocates by
way of legal services to,-
(i) an advocate or partnership firm of advocates providing legal services,
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to rupees ten lakh in the
preceding financial year; or
c) a person represented on an arbitral tribunal to an arbitral tribunal;
Here, “Legal Services” means any service provided in relation to advice,
consultancy or assistance in any branch of law, in any manner and includes
representational services before any court, tribunal or authority

18. Point (A)(iv) of Reverse Charge Mech.
Notification No. 30/2012
(iv) provided or agreed to be provided by,-
A. an arbitral tribunal, or
B. an individual advocate or a firm of advocates by way of legal services;
or
C. Government or local authority by way of support services excluding,-
(1) Renting of immovable property, and
(2) Services specified in sub-clauses (i), (ii) and (iii) of clause (a) of
section 66D of the Finance Act,1994,
to any business entity located in the taxable territory;
Thus, RCM is applicable on Legal services provided by Advocates / Firm
of advocates to any Business Entity with Turnover above 10 lakhs in PY.
Also, Turnover is nowhere defined in service tax laws so it might be
pertaining to Business Turnover.

19. Educational services
and
other Charitable activities

20. Service (l) of Negative List u/s. 66D
(l) Services by way of –
a) pre-school education and education up to higher
secondary school or equivalent;
b) education as a part of a curriculum for obtaining a
qualification recognized by law;
c) education as a part of an approved vocational
education course

21. Service No. 9 of Mega Exemption Notification
No. 25/2012 r.w. Notification No. 06/2014
9. Services provided,-
• by an educational institution to its students, faculty and
staff;
• to an educational institution, by way of,-
o transportation of students, faculty and staff;
o catering, including any mid-day meals scheme sponsored by
the Government;
o security or cleaning or house-keeping services performed in
such educational institution;
o services relating to admission to, or conduct of examination
by, such institution;

22. Renting of Immovable Property

23. Section 65B(41) – Ch. V of Finance Act, 2012
65(41) “Renting" means
• allowing, permitting or granting access, entry, occupation,
use or any such facility,
• wholly or partly, in an immovable property,
• with or without the transfer of possession or control of
the said immovable property and
• includes letting, leasing, licensing or other similar
arrangements in respect of immovable property;

24. Notification No. 29/2012
• Exemption to service tax leviable in excess of the service
tax calculated on a value which is equivalent to the gross
amount charged for renting of such immovable property
less taxes on such property, namely property tax levied
and collected by local bodies
• Provided that any amount such as interest, penalty paid to
the local authority by the service provider on account of
delayed payment of property tax or any other reasons
shall not be treated as property tax for the purposes of
deduction from the gross amount charged

25. Para 2.3.2 of CBEC’s Education Guide
Security deposit
that is returnable on
completion of
provision of service
• Returnable deposit is in the nature of
security and hence do not represent
consideration for service.
• However if the deposit is in the nature of a
colorable device wherein the interest on the
deposit substitutes for the consideration for
service provided or the interest earned has a
perceptible impact on the consideration
charged for service then such interest would
form part of gross amount received for the
service. Also, security deposit should not be in
lieu of advance payment for the service.

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