Presentation on Service Tax at Ernakulam dated 28.07.2013

Presentation
on
Service Tax
Organized By By
Indirect Tax Committee of ICAI Dr. Sanjiv Agarwal
@ Ernakulam FCA, FCS,
28th July, 2013 Jaipur
© Dr. Sanjiv Agarwal
1

SESSION – I
SERVICE TAX
Overview
and
Negative List
2
Certificate Course on Indirect Taxes

3
Certificate Course on Indirect Taxes
This Presentation covers –
• Overview of Taxation of Services in India
• Selective Approach (Positive)
• Shift to Comprehensive Approach (Negative)
• Charge of Service Tax
• Services under Negative List

4
Indian Economy – An Overview
 Indian economy is the 11th largest economy in the world
and the third fastest growing even in today‘s recession,
after China and Indonesia (Present growth rate around
5.5%)
 World is presently facing recession-II but Indian
economy is still a growth economy
 Inflation –food, lifestyle
 Agriculture, services and industry are the major sectors
of Indian economy. Contribution of different sectors in
March, 2012 was :
 Agriculture 19%
 Services 59%
 Industry 22%
(likely to be @ 64% in March, 2013)

5
GDP CO MPO SITIO N IN MARCH, 2012
Agriculture
19%
Industry
22%
Service
Sector
59%
Brief Overview of Services / Service Tax
Share of Services in GDP

6
Share of services in GDP tracked
Year % of GDP
 1950 15
 1970 33
 1980 36
 1994 40
 1995 41
 2000 47
 2005 53
 2010 57
 2012 59
In 2011-12 and 2012-13 , services have grown by over 9%
which is more than GDP growth rate

 Indian GDP to grew at 5.8 percent in 2012-13 and growth expected
at 6.0-6.5 percent in 2013-14
 Tax Policy – clarity in tax Laws, stable tax regime, non-adversarial
tax administration, fair mechanism for dispute resolution,
independent judiciary
 Need to raise tax – GDP ratio which is presently around 6-7
percent.
 Service Tax contributes 11.50 percent of the gross tax revenue
 Service sector growth @ 9%, much higher than the GDP growth
itself.
 Contribution of services sector in GDP at 64% including
construction sector.
7
Economy / Taxation – A Status

Growth of Service Tax
Year No of new
services
Total No of
services
Total collection
(Rs. in crore)
1994 3 3 407
2001 - 26 2612
2005 13 72 14199
2008 7 103 51301
2010 3 112 58000
2012 0 120 97509
2013 - All 132697 (RE)
131884 (A)
2014 - All 180141 (BE)

9
Taxonomy of Indian Taxation
TAXATION POWERS OF UNION
 Income Tax – on income, except
agricultural income
 Excise Duty – on goods manufactured
 Custom Duty – on imports
 Service Tax – on specified services
 Central Sales Tax – on inter-state sale of goods
 Stamp Duty – on 10 specified instruments

10
Service Tax in India (The Past)
 Introduced in India in 1994 as a simple, modest tax with just three
services.
 Service tax – an indirect tax.
 Approach to Service Tax – Selective as against comprehensive
one.
 Desirable from revenue, equity and economic view point.
 Governed by Finance Act, 1994 and a dozen of rules.
 Legislative dependence on over 25 other laws.
 Scattered and heterogeneous large mass of service providers as
well as wide spectrum of services.
 Jurisdictional application.

11
Service Tax in India (The Past)
Selective Approach to Service Tax
 Taxation by choice
 Service not defined but taxable service defined.
 > 120 taxable services [section 65(105)]
 Resulted in distortions / prejudice
 Untapped tax potential
 Economically unjustified
 Issues – Classification, Illogical definitions,
Constitutional challenges, deemed services etc.

12
Service Tax – The Present
Shift to Comprehensive Approach
 W.e.f. 1st July, 2012
 Finance Act, 2012 – A land mark Act to shift from selective
positive approach to negative approach.
 It took 18 years to shift from selective approach (positive) to
comprehensive approach (negative ) to tax services
 All services to be taxed other than services specified in
the negative list and exempted services – Section 66B.

13
Service Tax – The Present
New Law of Taxation of Services
 Negative list (17 in number) specified through
statutory provisions – Section 66D.
 ‗Service‘ defined for the first time.
 ‗Negative List‘ and ‗declared services‘ also
defined.

14
All Services
(including declared Services
(-)
Specific Exclusions
(-)
Negative List Services
Exemptions
Taxable Services
(-)
Present Taxation of Services
(=)

15
Service Tax provisions no longer applicable
(w.e.f. 1.7.2012)
 Section 65 Old definitions of Services / Taxable
Services
 Section 65A Classification of Services
 Section 66 Charge of Service Tax
 Section 66A Charge of Service Tax on Services
received from outside India.
 Import of Service Rules, 2006
 Export of Service Rules, 2005

16
New Provisions in Service Tax under
Negative List
 Section 66 B deals with charge of service tax
on or after Finance Act, 2012
 Section 66 C provides for determination of
place of provision of service.
 Section 66 D comprises of negative list of
services
 Section 66 E comprises of the services which
constitute declared services
 Section 66 F provide principles of interpretation
of specified description of services
or bundled services

17
Taxable Services w.e.f. 1.7.2012
 All services Taxable
[section 65B (44)]
 Declared services Taxable
(section 66E)
 Services covered under Not Taxable
negative list of services
(section 66D)
 Services exempt under Mega Exempted
Notification No. 25/2012-ST
dated 20.6.2012
 Other specified Exemptions Exempted

 Service Tax Law made shorter by about 40 percent
 Effective rate of Service Tax @ 12.36 percent w.e.f. 01.04.2012
including education cess.
 Definition of ‘service’ finds place in statutory provisions
 All services taxed including a set of services called ‘declared
services’
 Negative list of services containing 17 broad service categories
out of Service Tax ambit.
 Withdrawal of many existing exemptions / abetments or their
rationalization
18
MAJOR CHANGES IN SERVICE TAX IN 2012-
13 AT A GLANCE

 Place of provision of service rules determine the location of
service and become be basis of taxation.
 Withdrawal of export of service rules and import of service rules
in view of place of provision of service rules coming into
operation.
 Concept of taxable territory and non- taxable territory
introduced
 Taxation of Service to be determined by provision of service in
taxable territory and non taxable territory.
 Basis of charge of Service Tax shifted under new section 66B.
 Classification of service criteria replaced by new section 66F on
interpretation principles of specified description of services or
bundled services. 19
MAJOR CHANGES IN SERVICE TAX IN
2012-13 AT A GLANCE

 Under new reverse charge mechanism, onus of paying Service Tax
will be shared by service provider and service receiver in case of
specified services.
 Service Tax on taxable services provided by service provider located
in Jammu & Kashmir state liable under reverse charge.
 Change in valuation rules in relation to works contracts and outdoor
catering / supply of food.
 Payment of Service Tax on receipt basis for all service providers
being individuals / firms / LLPs, if aggregate value of taxable services
in previous year does not exceed Rs. 50 lakh. 20
MAJOR CHANGES IN SERVICE TAX IN 2012-13
AT A GLANCE

 Criteria for Rs 10 lakh threshold exemption changed to invoices
 Time limit for appeal by assessees to Commissioner (Appeals)
reduced from 3 months to 2 months
 Revision Application Authority and Settlement Commission
provisions made applicable to service tax.
 Special Audit of Service tax assesses by CAs /CWAs
 Recovery of tax dues – legal smartness (Circular dated 1.1.2013)
21
MAJOR CHANGES IN SERVICE TAX IN 2012-13
AT A GLANCE

Changes in Budget / Finance Act, 2013
 Stability in negative list maintained with only a few changes.
 Vocational courses offered by institutes affiliated to the State Council of
Vocational Training and testing activities in relation to agriculture and
agriculture produce to be in the negative list.
 Service Tax to be levied on all restaurants which are air conditioned.
The condition of liquor license done away with (held unconstitutional by
Kerala High Court recently )
 Certain exemptions curtailed / withdrawn in relation to auxiliary
education service and renting by educational institutes, transportation
of goods by railway / vessel, vehicle parking to general public, repair or
maintenance of government aircrafts, charitable activities etc. (w.e.f.
1.4.2013)
22
Recent Amendments in Service Tax

 Penalty u/s 77(a) (in case of non-registration) shall be restricted to a
maximum of Rs. 10,000.
 Abatement reduced w.e.f. 1.3.2013 from 75% to 70% in case of luxury
apartments / residential complexes and others (with carpet area of
2000 sq. ft. or more or value of Rs. 1 crore or more).
 New provisions for revised punishments for offences u/s 89, making
certain offences cognizable and others non cognizable and bailable.
 New Section 78A inserted to impose penalty on directors and officials
of company for specified willful actions / offences.
23

 Power to arrest provided u/s 91 where Service Tax default is more than Rs. 50
lakhs.
 Resident public limited companies also allowed to seek advance ruling from
Advance Ruling Authority (w.e.f 1.3.2013)
 Stay orders of Cestat to have a maximum period of 365 days (180+185) upto
which stay granted will be operational even when assessee is not at fault.;
Stay to get vacated after 365 days.
 Voluntary Compliance Encouragement Scheme, 2013 (VCES) introduced as a
one time amnesty measure to effect compliance and recovery and provide
amnesty from interest and penalties (last date 31.12.2013).
 Service Tax appeal forms ST-5,6,7 amended w.e.f. 1.6.2013
24

‗Service' has been defined in clause (44) of the section 65B
and means –
 any activity
 For a consideration
 carried out by a person for another
 and includes a declared service (66E)
25
What is Service

26
The New Taxability Concept
Taxable
3.
Exemptions
(39)
1. Non -
Taxable
territory
(POPS)
2.
Negative
list (17)
SERVICE FOR A CONSIDERATION
E - MAGIC TEST
E: Employee
M: Money
A: Actionable claim
G: Goods
I: Immovable property
C: Court Fee
9DECLAREDSERVICES

 Activity must be for a consideration (nexus / reciprocity)
 Activity – includes both activity as well as non-activity
 Consideration – includes both monetary and non
monetary consideration.
 Two persons are involved –
Service provider
Service receiver
 Only services provided by one person to another are
taxable
 Person – natural as well as artificial
27
What is Service

Activity
 Not defined in the Act
 In common understanding, activity includes –
 An act done
 A work done
 A deed done
 An operation carried out
 Execution of an act
 Provision of a facility etc.
 Activity could be active or passive and forbearance to act
 Agreeing to an obligation to refrain from an act or to tolerate
an act or a situation - listed as a declared service u/s 66E
28
What is Service

Consideration
 Means everything received or recoverable in return for a
provision of service which includes -
○ Monetary payment
○ Non-monetary payment
○ Deferred consideration
 Under Indian Contract Act, 1872, consideration means -
―When, at the desire of the promisor, the promisee or any other
person has done or abstained from doing, or does or abstains from
doing, or promises to do or to abstain from doing, something, such
act or abstinence or promise is called a consideration for the
promise‖
29
What is Service

Activity for a Consideration
 Activity should be carried out by a person for a
consideration
 Activity without consideration like-
○ Donation
○ Gifts
○ Free charities
outside the ambit of service
 Charity for consideration would be service and
taxable unless otherwise exempted
30
What is Service

Person-65B(37)
"person" includes,––
• an individual,
• a Hindu undivided family,
• a company,
• a society,
• a limited liability partnership,
• a firm,
• an association of persons or body of individuals, whether incorporated
or not,
• Government,
• a local authority, or
• every artificial juridical person, not falling within any of the above
31
What is Service

'Service' does not include -
 any activity that constitutes only a transfer in title of goods or immovable
property by way of sale, gift or in any other manner.
Sale of developed plots is a service (Narne Constructions Pvt. Ltd.
v UOI 2013 (29)STR 3 (SC)
 a transfer, delivery or supply of goods which is deemed to be a sale of
goods within the meaning of clause (29A) of article 366 of the Constitution
 a transaction only in money or actionable claim
 a service provided by an employee to an employer in the course of the
employment.
 fees payable to a court or a tribunal set up under a law for the time being
in force
32
What is Service : Exclusions

This scope shall not apply to –
a) functions performed by M.P., M.L.A., Members of
Panchayats / Municipalities who receive any consideration
in performing the functions of that office as such member;
or
b) duties performed by any person who holds any post in
pursuance of the provisions of the Constitution in that
capacity; or
c) duties performed by any person as a Chairperson or a
Member or a Director in a body established by the Central
Government or State Government or local authority and
who is not deemed as an employee before the
commencement of this section.
33
What is Service

34
What is Service
For the purpose of scope of service -
(a) an unincorporated association or a AOP and a member thereof shall be
treated as distinct persons;
(b) an establishment of a person in the taxable territory and any of his other
establishment in a non-taxable territory shall be treated as establishments of
distinct persons.
(c) A person carrying on a business through a branch or agency or
representational office in any territory shall be treated as having an
establishment in that territory

 Draft Circular (F. No. 354 /127/2012-TRU dated 27.7.2012) issued for
clarification on certain activities / facilities / reimbursements to employees by
the employers
(a) Treatment of supplies made by the employer to employees
 Amount deducted from salary / paid for service provided by the employer to
employee is for consideration and hence taxable
 Employer who provides some services free of cost (e.g.
crèche, gymnasium or a health club) are not liable to tax
(b) Treatment of reimbursements made by the employer to the employee
 Reimbursements of expenditure incurred on behalf of the employer in
course of employment would not amount to a service, hence non-taxable
35
Employer‘s Facilities to Employees

(c )Treatment of supplies and reimbursements made by the
employer to ex-employees/ pensioners
Same tax treatment for ex- employees of the company –
 Reimbursement of expenses on behalf of
company – non-taxable ?
 Facilities for consideration – taxable
 Facilities free of cost - non taxable ?
36
Employer‘s Facilities to Employees

Director‘s Services to Company - Taxable
 Director‘s services to the company are taxable w.e.f
1.7.2012
 Sitting fees, commission, bonus, etc. are subject to
service tax
 W.e.f. 1.7.2012 upto 6.8.2012, service tax to be
deposited by the directors while from 7.8.2012 vide
Notification No. 45/2012, Service Tax on such services
will be deposited by the company under reverse charge
 WTDs /MDs /EDs who are under contractual
employment with the company and receive salary or
remuneration from the company will not be covered -
considered as employees of the company
37

Director‘s Services to company- Taxable
 Interest paid on loan by director to company, dividend on shares,
other professional charges on account of services not rendered as
a director (in professional capacity) are not liable to Service Tax
under reverse charge
 In case of nominee director, the nominating company who receives
fees will be liable to pay service tax
 The invoice / receipt to be issued by the directors within 30 days
 In case of nominee directors, the invoice will be issued by the
nominating company if payment made to such Company
 In the case of Government nominees, the services shall be deemed
to be provided by the Government but liable to be taxed under
reverse charge basis (support service)
38

Remuneration to Partner – Not a Service
 Partnership firm is not a distinct legal entity apart from the
partners under the Partnership Act, 1932
 Partner is not an employee of the firm -contract of
employment requires two distinct firms, viz., employer and
employee
 Partners are the real owners of the assets of Firm to the
extent of their share
 Salary paid to partner is only profit known by a different
name
 It is only a transaction in money
 Incomes received from firm treated as income from Profits
and Gains of Business or Profession under I T Act, 1961
 Partnership Act, 1932 can not be over-looked
39

Examples of new activities which may be taxed
 Non commercial construction for non-government
purpose
 Private roads (not meant for general public)
 Residential construction of more than one unit
 Commercial artists/performers
 Film actors/ directors /reality show judges
 Tourism boats
 Board director‘s sitting fee
 Non-compete fee
 Arbitrators to business entities
 Discourses and lectures/ yoga classes
 Public parking
to be contd..

 Banking services to Government
 Unrecognized IPRs
 Services to RBI
 Hotel telephone calls
 Video library facilities by hotels
 Matrimonial sites
 Astrologers
 Laundry services
 Works contracts for movable properties
 All sub-contracts except exempted works contracts
 On board catering and other facilities
 Executive Lounge at railway station/ airport
41
Examples of new activities which may be
taxed

Section 66B (W.e.f 1.7.2012)
There shall be levied a tax at the rate of
twelve per cent on the value of all
services, other than those services specified
in the negative list, provided or agreed to be
provided in the taxable territory by one
person to another and collected in such
manner as may be prescribed
42
Charge of Service Tax

Essential ingredients for charge of Service Tax
 There should be a service involved
 Such service should not be one included in the negative
list as defined in section 66D.
 Services should be provided or agreed to be provided.
 Services should be provided in the taxable territory only.
 Services should be provided by one person to another
person.
 Tax shall be levied on value of services so provided or
agreed to be provided.
 Collection shall be in prescribed manner.
43
Charge of Service Tax

44
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-economic–tax criterion drawn from seven
sectors, viz. financial sector, transportation , construction & real
estate, education, health care, Government services

45
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
contd…..

• Services by government as sovereign functions (grant of
licensing rights or government audit, 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 of
 Renting of immovable properties
 Speed post, express parcel, life insurance.
 Transport of goods and/ or passengers
 Services in relation to vessel or aircraft
contd…..
46
Service provided by Government or Local
Authority

• For other services, Government not liable to
pay service tax as tax paid by service
recipient in reverse charge (N. No. 30)
Business Entity
• Any person ordinarily carrying out activities
relating to business / commerce/ profession
/industry
47
Authority

“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.
48
Authority

• 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
49
Service by Reserve Bank of India

• Services by diplomatic mission of any country located in
India
• Does 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
50
Services by a foreign diplomatic mission
located in India

services relating to agriculture by way of—
(i) agricultural operations directly related to production of any
agricultural produce including cultivation, harvesting, threshing, plant
protection or seed testing;
(ii) supply of farm labour;
(iii) 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;
(iv) renting or leasing of agro machinery or vacant land with or without a
structure incidental to its use;
(v) loading, unloading, packing, storage or warehousing of agricultural
produce;
(vi) agricultural extension services;
(vii)services by any Agricultural Produce Marketing Committee or Board
or services provided by a commission agent for sale or purchase of
agricultural produce;
contd…
51
Service relating to Agriculture or Agricultural
Produce

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)
Scope of testing to include all types of testing, not just seeds
(W.e.f 10.5.2013 )
52
Service relating to Agriculture or
Agricultural Produce

• 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 versa
• Transfer 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 in the nature of trading of goods
contd …….
53
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
54
Trading of Goods

55
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 the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 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 involved
 Duties of excise are leviable on such process under the respective Acts
 W.e.f 10.5.2013, manufacture of perfumery, cosmetics etc will also be covered

56
production of goods
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.

57
production of goods
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
(c) any goods on which appropriate duty is payable by the principal
manufacturer 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 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 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)
• Webcast is not a broadcast
contd …….
58
Selling of space or time slots for
advertisements

advertisements
Taxable Non-taxable
Sale of space or time for
advertisement to be broadcast on
radio or television
Sale of space for advertisement in
print media
Sale of time slot by a broadcasting
organization
Sale of space for advertisement in bill
boards, public places (including
stadia), buildings, conveyances, cell
phones, automated teller machines,
internet
Aerial advertising
Presentation made in person
59

advertisements
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
Preparing advertisement for display
during 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 / business information
Commission received by advertisement
agencies from broadcasting or publishing
companies
60

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 means
• but 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.
61
advertisements

• 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 (are
business auxiliary services)
• Does not include services used for providing such service
62
Service way of access to a road or a bridge
on payment of toll charges

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 money‘s
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
contd …….
63
Betting, Gambling or Lottery

• Auxiliary services for organizing or promoting betting or
gambling events are not covered in negative list
• State subject covered in list II
• Actionable 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 ticket
• In 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 client‘s goods
and service tax liability did not arise
64
Betting, Gambling or Lottery

‗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
• pastime
• fun , or
• enjoyment
contd …….
65
Admission to entertainment events and access
to amusement facilities

This could be by way of –
• exhibition of cinematographic film
• circus
• concerts
• sporting events
• pageants
• award functions
• dance performance
• musical performance
• theatrical performances – drama, ballets or any
such event / programme.
contd …….
66
Admission to entertainment events and access
to amusement facilities

Amusement facility means
• a facility where fun
• recreation is provided by means of rides
• gaming devices
• bowling alleys in amusement parks
• amusement arcades
• water parks
• theme parks
• such other places
• but does not include a place within such facility
where other services are provided
contd …….
67
Admission to entertainment events and
access to amusement facilities

• 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 - excluded
• Event manager for organizing an entertainment event
or entertainment is not covered in this category
68
Admission to entertainment events and
access to amusement facilities

• Provided by Electricity Transmission or
Distribution utility
• Covers both –
• Transmission
• Distribution
• Installation of gensets or similar equipment by
private contractor for distribution - taxable
• Charges 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
69
Transmission or distribution of Electricity by an
electricity transmission or distribution utility

• Service by way of -
i. Pre-school education and education up to higher
secondary school or equivalent
ii. Education as a part of a prescribed curriculum for
obtaining a qualification recognized by law
iii. 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
contd …….
70
Specified services relating to education

Approved vocational education course
 a course run by an industrial training institute or an industrial training
centre affiliated to the National / State Council for Vocational Training,
offering courses in designated trades as notified under the Apprentices
Act, 1961 , or
 a 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 India, or
 a course run by an institute affiliated to the National Skill Development
Corporation set up by the Government of India ( w.e.f. 10.5.2013)
to be contd …….
71
Specified services relating to
education

• Education upto higher secondary school or equivalent are in
negative list.
• Services provided to or by ( w.e.f. 1.04.2013) 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
contd …….
72
education

 Education related services not in negative list but
exempt from tax under Notification No. 25/2012-ST
dated 20.06.2012
 Auxiliary education services if provided to educational
institutions
• 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.
73
education

Exemption upto 31.03.2013 –
Service Provider Service Receiver Taxability
Educational Institution Educational Institution Exempt
Educational Institution Non Educational Institution Exempt
Non Educational Institution Educational Institution Exempt
Non Educational Institution Non Educational Institution Taxable
74
Note " CBEC in its Letter No. 334/3/2013-TRU dated 28/02/2013, it has been clarified that
–
―Exemption by way of auxiliary educational services and renting of immovable property by
(and not to) specified educational institutes under S.No. 9 will not be available w.e.f.
1.4.2013.‖
Exemption w.e.f. 01.04.2013 -
Educational Institution Educational Institution Exempt
Educational Institution Non Educational Institution Taxable
Non Educational Institution Educational Institution Exempt
Non Educational Institution Non Educational Institution Taxable

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.)
contd …….
75
Services by way of renting of residential dwelling for
use as residence

Renting of certain kinds of property already covered in
the negative list
• renting 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
contd …….
76
Services by way of renting of residential dwelling
for use as residence

• 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 for 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
contd …….
77
Services by way of renting of residential dwelling
for use as residence

Services by way of—
(i) extending deposits, loans or advances in so far as
the consideration is represented by way 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;
contd …….
78
Financial Services

• Transactions in money outside the ambit of ‗service‘
• Any 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 activity
• Service tax to be 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 etc
• Interest rate swaps and foreign exchange swaps are excluded being
securities (hence goods)
contd …….
79
Financial Services

• Only interest and discount are in negative list
• Interest could be on
 Money borrowed
 Debt incurred
 Deposit
 Claim / obligation/ similar right
• Service charge / fee/ commission not covered in
negative list (e.g. pre payment fee, late fee, cheque
bounce charges)
• interest on credit facility not utilized (commitment
charges ) not covered in negative list
• Bill discounting – only discount covered
contd …….
80
Financial Services

• Any charges over and above interest/ discount
taxable
• Purchase/ sale of foreign currency between banks
and authorized dealers under negative list
• Examples 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
interest
 Providing a loan or over draft facility for in consideration
for payment of interest
 Mortgages or loans with a collateral security to the extent
that the consideration for advancing such loans or
advances are represented by way of interest
 Corporate deposits to the extent that the consideration for
advancing such loans or advances are represented by
way of interest or discount
81
Financial Services

Tax on Money Remittance (Circular No. 163 dated 10.7.2012)
 No service tax on foreign currency remitted to India from
overseas
 Amount of remittance comprises money
 Service excludes money transactions
 Even fee for remittance is not taxable (POPS)
 Sender of money outside India bank / company remitting
located outside India
 Fee charged by Indian bank - remitter located outside
India (not taxable as per POPS)
82
What is Service

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;
and
• metered cabs, radio taxis or auto rickshaws.
contd …….
83
Services relating to transportation of
passengers

Services relating to transportation of
passengers
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 (upto 12 passengers)
Exemption to Transport of
passengers by a contract carriage
No exemption for Tourism,
conducted tours, chartered or hire
84

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 agency
• by aircraft or vessel from a place outside India up to
the customs station of clearance in India; or
• by inland waterways (but agents covered)
contd …….
85
Service relating to transportation of
Goods

• Funeral
• Burial
• Crematorium
• Mortuary
• Transportation of deceased
86
Funeral, Burial, Crematorium or Mortuary Services
including Transportation of the deceased

Presentation on Service Tax at Ernakulam dated 28.07.2013

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Presentation on Service Tax at Ernakulam dated 28.07.2013