Prologue

It is with immense pleasure we bring forth the Service tax update in our handbook called Service tax at a glance which is intended to provide a summarised view of some of the applicable provisions of the newly introduced service tax regime based on the negative list of services.

We hope that you find this compilation to be handy for a preliminary understanding of the provisions of the Service Tax. We will look forward to receiving your feedback on what you would like us to cover in our future publications at info@arsk.in

CHAPTER 1- INTRODUCTION

The Finance (No. 2) Bill, 2014 received assent of the President of India on 06 th August 2014.

The amendments /changes till 06th August, 2014 have been incorporated in the note herein below :-

New scheme of taxation

•  Service has been defined in clause (44) of section 65B of the Act.

•  Section 66B specifies the charge of service tax which is essentially that service tax shall be levied on all services provided or agreed to be provided in a taxable territory, other than services specified in the negative list.

Note: The Explanation is omitted vide Finance Act,2013.

•  The negative list of services is contained in section 66D of the Act.

•  Since provision of service in the taxable territory is an important ingredient of taxability, section 66C empowers the Central Government to make rules for determination of place of provision of service. Under these provisions the Place of Provision of Services Rules, 2012 have been made.

•  To remove some ambiguities certain activities have been specifically defined by description as services and are referred as Declared Services (listed in section 66E).

•  In addition to the services specified in the negative list, certain exemptions have been given. Most of the exemptions have been consolidated in a single mega exemption for ease of reference.

•  Principles have been laid down in section 66F of the Act for interpretation.

wherever services have to be treated differentially for any reason and also for determining the taxability of bundled services.

•  The system of valuation of services for levy of service tax and of availment and utilization of Cenvat credits essentially remains the same with only incidental changes required for the new system of taxation.

MEANING OF SERVICE - NEW REGIME

Negative list: concept

To verify whether the services are taxable or not, the following points need to be checked, whereas the activity:

•  Should be covered under the definition of Services

•  Should be provided in the Taxable territory

•  Should not be excluded in the Negative list, or should be declared service

•  Should not be exempted under various Exemption notifications

•  Not mere IMAGE

I : Immovable property

M : Money

A : Actionable claim

G : Goods

E : Employee

Service has been defined in Sec.65B (BB) of Chapter V of the Finance Act, 1994.

Service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include an activity which constitutes merely:

•  a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

•  such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution; or

•  a transaction in money or actionable claim;

•  a provision of service by an employee to the employer in the course of or in relation to his employment;

•  fees taken in any Court or tribunal established under any law for the time being in force.

Explanation 1 . - For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,

•  the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or

•  the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or

•  the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority and who is not deemed as an employee before the commencement of this section.

 

Explanation 2 . For the purposes of this clause, transaction in money shall not include any activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

Explanation 3 .For the purposes of this Chapter, -

•  an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons;

•  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.

 

Explanation 4 . - 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.

 

Meaning of activity

Generally the work activity means an act done, a deed done, an operation carried out, execution of an act, provision of a facility etc. It is a term with very wide connotation. Activity could be active or passive and would also include forbearance to act.

Meaning of consideration

According to Sec.67 (explanation (a)) of the Finance Act, consideration includes any amount that is payable for the taxable services provided or to be provided. Sec.2(d) of the Indian Contract Act, 1872 defines consideration as - 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.Thus consideration means everything received or recoverable in return for a provision of service which includes monetary payment and any consideration of non-monetary nature or deferred consideration. Therefore consideration will include both monetary and non-monetary consideration. To be taxable to service tax, an activity should be carried out for a consideration.

For example - donations, gifts, free charities etc will not be covered. Monetary consideration means any consideration received in the form of money. Money means legal tender, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any such similar instrument but shall not include any currency that is held for its numismatic value. (Sec.65B(33))

Non-monetary consideration means compensation received in kind namely - supply of goods and services in return for provision of services, refraining to do an act in return for provision of service, doing or agreeing to do an act in return for provision of service.

Non-monetary consideration also needs to be valued for determining the tax payable on the taxable service and is done according to the provisions of the Service Tax (Determination of Value) Rules 2006.

 

Activity for consideration

The term activity for a consideration involves an element of contractual relationship wherein the person doing an activity does so at the desire of the person for whom the activity is done in exchange for a consideration. An activity done without such a relationship i.e. without the express or implied contractual reciprocity of a consideration would not be an activity for consideration even though such an activity may lead to accrual of gains to the person carrying out the activity.

For example - An artist performing on a street does an activity without consideration even though passersby may drop some coins in his bowl kept after feeling either rejoiced or merely out of compassion. They are, however, under no obligation to pay any amount for listening to him nor have they engaged him for his services. On the other hand if the same person is called to perform on payment of an amount of money then the performance becomes an activity for a consideration. Grant of pocket money, a gift or reward (which has not been given in terms of reciprocity), amount paid as alimony for divorce would be examples in this category. Consideration itself pre-supposes a certain level of reciprocity.

By a person for another

The term provided by one person to another means that services provided by a person to self are outside the ambit of taxable service.

For example - service provided by one branch of a company to another or to its head office or vice-versa. But there are two exceptions to this rule namely -

•  an establishment of a person located in taxable territory and another establishment of such person located in non-taxable territory are treated as establishments of distinct persons (Sec.66A(2))

•  an unincorporated association or body of persons and members thereof are also treated as distinct persons (explanation to Sec.65)

For example, services provided by a club to its members and services provided by the branch office of a multinational company to the headquarters of the multi-national company located outside India would be taxable provided other conditions relating to taxability of service are satisfied.

 

Meaning of Person

According to Sec.65B(37), person includes, -

•  an individual,

•  a Hindu undivided family,

•  a company,

•  a society,

•  a limited liability partnership,

•  a firm

•  an association or body of individuals, whether incorporated or not,

•  Government,

•  a local authority, or

•  every artificial juridical person, not falling within any of the preceding sub-clauses;

ACTIVITIES, WHICH ARE NOT SERVICE UNDER THE SERVICE TAX - (IMAGE):

 

Transfer of title in goods or immovable property does not constitute service

Mere transfer of title in goods or immovable property by way of sale, gift or in any other manner for a consideration does not constitute service. Goods has been defined in section 65B of the Act as every kind of moveable property other than actionable claims and money; and 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 contract of sale. Immovable property has not been defined in the Act. Therefore the definition of immovable property in the General Clauses Act, 1897 will be applicable which defines immovable property to include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.

Transfer of title means change in ownership. Mere transfer of custody or possession over goods or immovable property where ownership is not transferred does not amount to transfer of title. For example giving the property on rent or goods for use on hire would not involve a transfer of title. A transaction which in addition to a transfer of title in goods or immovable property involves an element of another activity carried out or to be carried out by the person transferring the title would not be out rightly excluded from the definition of service. Such transactions are liable to be treated as follows. If two transactions, although associated, are two discernibly separate transactions then each of the separate transactions would be assessed independently. In other words the discernible portion of the transaction which constitutes, lets say, a transfer of title in goods, would be excluded from the definition of service by operation of the said exclusion clause while the service portion would be included in the definition of service.

For example a builder carrying out an activity for a client wherein a flat is constructed by the builder for the client for which payments are received in instalments and on completion of the construction the title in the flat is transferred to the client involves two elements namely provision of construction service and transfer of title in immovable property. The two activities are discernibly separate. The activity of construction carried out by the builder would, therefore, be a service and the activity of transfer of title in the flat would be outside the ambit of service.

Transactions only in money or actionable claims does not constitute service

 

Deposits in or withdrawals from a bank account, advancing or repayment of principal sum on loan to someone or conversion of currency note to coins to the extent of amount received etc will not constitute service. Investment of funds by a person with another for which the return on such investment is returned or repatriated to the investors without retaining any portion of the return on such investment of funds is a transaction only in money. However, if a commission is charged or a portion of the return is retained as service charges, then such commission or portion of return is out of the purview of transaction only in money and hence taxable. According to Section 3 of the Transfer of Property Act, 1893, actionable claims means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. Unsecured debts, right to participate in the draw to be held in a lottery are examples of actionable claims.

Deemed Sales does not constitute service

Activity to be taxable should not constitute merely 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. The six categories of deemed sales as defined in article 366(29A) of the Constitution are -

•  transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;

•  transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

•  delivery of goods on hire-purchase or any system of payment by instalments;

•  transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

•  supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;

•  supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration.

 

Provision of service by an employee to the employer

Provision of service by an employee to the employer is outside the ambit of service. Only services that are provided by the employee to the employer in the course of employment are outside the ambit of services. Services provided outside the ambit of employment for are not services provided in the course of employment. Amounts paid by the employer to the employee for premature termination of a contract of employment are treatable as amounts paid in relation to services provided by the employee to the employer in the course of employment. Hence, amounts so paid would not be chargeable to service tax. However any amount paid for not joining a competing business would be liable to be taxed being paid for providing the service of forbearance to act.

consideration would be a service. For example, if an employee provides his services on contract basis to an associate company of the employer, then this would be treated as provision of service. Services provided on contract basis i.e. principal- to-principal basis

CHAPTER 2-NEGATIVE LIST OF SERVICES - NEW REGIME

Sl. No.

Nature

or Service/Entity providing or receiving service

Negative List

Relevant section of the Act

1

Government or local authority

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

•  Services provided 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 a vessel or an aircraft inside or outside the precincts of a port or an airport.

•  transport of goods or passengers

•  support services, other than those covered by clauses (i) to (iii) above, provided to business entities.

66D(a)

2

Reserve Bank of India

Services by the Reserve Bank of India

66D(b)

3

Foreign Diplomatic Mission

Service by a foreign diplomatic mission located in India

66D(c)

4

Agriculture or Agriculture produce

The services relating to agriculture or agricultural produce by way of :-

•  agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing plant protection or 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 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

66D(d)

5

Trading

Trading of goods

66D(e)

6

Manufacturing

Any process amounting to manufacture or production of goods

66D(f)

7

Selling of Space or Time Slots for advertisement

Selling of Space for advertisements in Print Media [amendment w.e.f. 01.10.2014]

66D(g)

8

Toll Charge

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

66D(h)

9

Gaming of chance

Betting, gambling or lottery.

66D(i)

10

Entertainment/amusement Facility

Admission to entertainment events or access to amusement facilities.

66D(j)

11

Electricity Transmission or Distribution

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

66D(k)

12

Education

Service by way of :-

•  pre-school education and education up to higher secondary school or equivalent.

•  education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force.

•  education as a part of an approved vocational education course.

66(D)(l)

13

Renting

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

66D(m)

14

Financial Services

Service by way of :-

•  Extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

•  Inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks & such dealers.

66D(n)

15

Transportation of passengers

Service of transportation of passengers , with or without accompanied belongings by

•  a stage carriage;

•  railways in a class other than (a) first class; or (b) an AC coach;

•  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 or auto rickshaws. [as amended w.e.f. 01.10.2014.]

66D(o)

16

Transportation of Goods

Service by way of transportation of goods:-

•  by road except the services of (a) a goods transportation agency; or (b) a courier agency

•  by an aircraft or a vessel from a place outside India up to the customs station of clearance in India; or

•  by inland waterways.

66D(p)

17

Funeral Related Services

Funeral, burial, crematorium or mortuary services including transportation of the deceased.

66D(q)

 

CHAPTER 3-DECLARED SERVICES UNDER THE SERVICE TAX - NEW REGIME

In the definition of service contained in clause (44) of section 65B of the Act it has been stated that service includes a declared service. The phrase declared service is also defined in the said section as an activity carried out by a person for another for consideration and specified in section 66E of the Act. The following nine activities have been specified in section 66E:


Declared services

Sl.

No.

Nature of service

Declared List

Relevant Section of the Act

1

Renting of Immovable Property

Renting of Immovable Property.

66E(a)

2

Construction Services - commercial, Industrial or Residential

construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority.

Explanation- For the purpose of this clause:-

•  The expression Competent authoritymeans the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non requirement of such certificate from such authority ,from any of the following namely:-

•  Architect registered with the council of Architecture constituted under the Architects Act,1972(20 of 1972) or:

•  Chartered engineer registered with the Institution of Engineers (India);or

•  Licensed surveyor of the respective local body of the city or town or village or development or planning authority;

•  The expression constructionincludes additions, alternations, replacements or remodeling of any existing civil structure.

66E(b)

3

Intellectual Property Right

temporary transfer or permitting the use or enjoyment of any intellectual property right

66E(c)

4

Information Technology software services

development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software

66E(d)

5

Promise to do or no to do an Act

agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

66E(e)

6

Leasing Services

transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods

66E(f)

7

Hire Purchase

activities in relation to delivery of goods on hire purchase or any system of payment by installments

66E(g)

8

Execution of a Works Contract

service portion in execution of a works contract

66E(h)

9

Supply of Food or Drink

service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity

66E(i)

CHAPTER 4- PLACE OF PROVISION OF SERVICE - AN OVERVIEW - NEW REGIME


Place of Provision of Service Rules make specific provisions in respect of certain specified services - (a) banking company, FI to account holders, online information and database access or retrieval services, intermediary of Goods or services, hiring of means of transport upto one month (rule 9) (b) goods transport services (rule 10) (c) passenger transportation (rule 11) and (d) Services provided on board a conveyance. (Rule 12)

These rules in respect of these specific services prevail over other rules. In case of other services, the rules will apply in following sequence -

•  Place of provision of service is taxable territory where both service provider and service receiver are in taxable territory, except the specified services covered under rules 9 to 12 above [Rule 8]

•  Place of provision of service is taxable territory if services covered under rule 4,5 or 6 are provided even partly in taxable territory [Rule 7]

•  In case of service relating to event, Place of provision of service is where the event is actually held [Rule 6]

•  In case of services directly in relation to immovable property, Place of provision of service is where the immovable property is located or intended to be located [Rule 5]

•  In case of performance based services (relating to goods or recipients of services) place of Provision of service is where service is actually performed [Rule 4]

•  in all other cases, place of provision of service is the location of service receiver [Rule 3]

•  If service does not fall under any of rules 4 to 12 and location of service receiver is not available, location of provider of service is the place of provision of service [ Provision to rule 3]


CHAPTER 5-EXEMPTIONS UNDER THE SERVICE TAX - NEW REGIME

•  Mega Exemption: Notification 25/2012-ST dated 20/06/2012, effective from 01-07-2012


The Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable services from the whole of the service tax leviable thereon under section 66B of the said Act, namely:


Mega Exemptions

Sl. No.

Nature of service / Entity providing or receiving service

Exemption

1

United Nations / International Organisation

Services provided to the United Nations or a specified international organization;

2

Health Care Services

Health care services by a clinical establishment, an authorized medical practitioner or Para-medics;

3

Core Blood Bank

Services provided by core blood banks by way of preservation of stem cells or any other service in relation to such preservation. [w.e.f. 17.02.2014]

4

Bio-Medical Waste Treatment Facility

Services provided by operators of the common Bio-medical Waste Treatment Facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto. [w.e.f. 117.07.2014]

5

Healthcare of animals and Birds

Services by a veterinary clinic in relation to health care of animals or birds;

6

Entity registered under Section 12AA of the income Tax act

Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) by way of charitable activities;

7

Renting of Religious place / Conduct of religious ceremony

Services by a person by way of:

•  renting of precincts of a religious place meant for general public; or

•  conduct of any religious ceremony;

8

Specified Organization in respect of a religious pilgrimage.

Services by a specified organization in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement.

9

Arbitral Tribunal

Services provided by an arbitral tribunal to -

•  any person other than a business entity; or

•  a business entity with a turnover up to rupees ten lakh in the preceding financial year;

10

Services Provided by an Individual as Advocate or a Partnership firm of Advocates

Services provided by an individual as an advocate or a partnership firm of advocates by way of legal services to -

•  an advocate or partnership firm of advocates providing legal services ;

•  any person other than a business entity;

•  a business entity with a turnover up to rupees ten lakh in the preceding financial year;

11

Service provided by a person on an Arbitral Tribunal

Services provided by a person represented on an arbitral tribunal to an arbitral tribunal.

12

Training or Coaching for Arts, Culture or Sports.

Services by way of training or coaching in recreational activities relating to arts, culture or sports;

13

Services provided to or by an Educational Institution.

Services provided

•  by an educational institution to its students, faculty and staff.

•  to an educational institution, by way of

• i. transport of students, faculty and staff;

• ii. catering, including any mid-day meals scheme sponsored by the Government;

• iii. Security or cleaning or house-keeping services performed in such educational institution;

• iv. Services relating to admission to, or conduct of examination by such institution.

14

Sports - Services to a recognized Sports Body.

Services provided to a recognized sports body by

•  an individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a recognized sports body;

•  another recognized sports body;

15

Sports - Sponsorship of Sporting Events Organized

Service by way of sponsorship of sporting event organized

•  by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone;

•  by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;

•  by central civil services cultural and sports board.

•  as part of national games, by Indian Olympic Association;

•  under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme.

16

Services provided by-

•  the NSDC

•  a sector skill council

•  an assessment agency

•  a training partner

in relation to (a) NSDC Programme (b) vocational skill development course (c) any other scheme.

Any services provided by -

• i. the National Skill Development Corporation set up by the Government of India;

• ii. a Sector Skill Council approved by the National Skill Development Corporation;

• iii. an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;

• iv. a training partner approved by the National Skill Development Corporation or the Sector Skill Council

in relation to (a) the National Skill Development Programme implemented by the National Skill Development Corporation; or (b) a Vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill Development Corporation.

17

Services provided to the Government or Local or Governmental Authority

•  Civil Structure or any other Original Works

•  Historical Monument, Archeological site, etc

Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

•  a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession.

•  a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

18

Services provided to the Government or Local or Governmental Authority -

Educational/ Health/Art or Cultural Establishment

Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of structure meant predominantly for use as

•  an educational,

•  a clinical, or

•  an art or cultural establishment

19

Services provided to the Government or Local or Governmental Authority -

Canal Dam or other Irrigation Works

Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of canal, dam or other irrigation works

20

Services provided to the Government or Local or Governmental Authority -

Water Supply or Sewage Treatment or Disposal

Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of pipeline, conduit or plant for

•  water supply

•  water treatment, or

•  sewerage treatment or disposal;

21

Services provided to the Government or Local or Governmental Authority - Construction, erection, alteration, repair, etc.

Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of

•  a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;

•  road, bridge, tunnel, or terminal for road transportation for use by general public

22

Erection, Construction, Maintenance, Repair, Alteration, Renovation or Alteration

Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of

•  civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

•  a building owned by an entity registered under section 12 AA of the Income tax Act, 1961(43 of 1961) and meant predominantly for religious use by general public;

•  a pollution control or effluent treatment plant, except located as a part of a factory.

•  a structure meant for funeral, burial or cremation of deceased.

23

Erection, Construction or Installation of Original Work Airport, Port, etc.

Services by way of construction, erection, commissioning, or installation of original works pertaining to

•  an airport, port or railways, including monorail or metro.

•  a single residential unit otherwise than as a part of a residential complex.

•  low- cost houses up to a carpet area of 60 square meters per house in a housing project approved by competent authority empowered under the Scheme of Affordable Housing in Partnership framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

•  post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or

•  mechanized food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;

24

Temporary Transfer or Permitting the use or enjoyment of a copyright.

Services provided by way of temporary transfer or permitting the use or enjoyment of a copyright,-

(a) covered under clauses (a) of sub-section (1) of section 13 of the Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical, artistic works; or

(b) of cinematograph films for exhibition in a cinema hall or cinema theatre;";

25

Services by Performing Artists.

Services by a performing artist in folk or classical art forms of

•  music, or

•  dance, or

•  theatre, excluding services provided by such artist as a brand ambassador;

26

Services of Collecting and Providing News.

Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India;

27

Short Term Accommodation - Tariff Below - Rs. 1,000/-

Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below rupees one thousand per day or equivalent;

28

Restaurant Services

Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having

•  the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year,

29

Service provided in a canteen

Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year.

30

Transportation by Rail or Vessel

Services by way of transportation by rail or a vessel from one place in India to another of the following goods.

•  relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;

•  defense or military equipments;

•  newspaper or magazines registered with the Registrar of Newspapers

•  railway equipments or materials;

•  agricultural produce;

•  foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages; or

•  chemical fertilizer, organic manure and oilcakes;

•  cotton, ginned or baled.

31

GTA Exemption - Agricultural Produce

Services provided by a goods transport agency by way of transportation of agricultural produce in a goods carriage

32

GTA Exemption - Monetary Limits

Services provided by a goods transport agency by way of transportation of

•  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; or

•  goods, where gross amount charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred fifty

33

GTA Exemption - Food stuff

Services provided by a goods transport agency, by way of transportation of foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages, in a goods carriage

34

GTA Exemption - Chemical Fertilizer

Services provided by a goods transport agency by way of transportation of chemical fertilizer, organic manure and oilcakes.

35

GTA Exemption-Newspapers

Services provided by a goods transport agency by way of transportation of newspaper or magazines registered with the Registrar of Newspapers

36

GTA Exemption - Relief Materials

Services provided by a goods transportation agency by way of transportation of relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap.

37

GTA Exemption - Defense Equipments

Services provided by a goods transportation agency by way of transportation of defense or military equipments.

38

GTA Exemption - Cotton

Services provided by a goods transportation agency by way of transportation of cotton, ginned or baled.

39

Supply of Tangible Goods -

State Transport Undertaking

Services by way of giving on hire to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers;

40

Supply of Tangible Goods -

GTA

Services by way of giving on hire to a goods transport agency, a means of transportation of goods

41

Transport of Passengers

Specified States/Areas

Transport of passengers, with or without accompanied belongings by air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal;

42

Transport of Passengers

Contract Carriage

Transport of passengers, with or without accompanied belongings by non air-conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or

43

Transport of Passengers

Transport of passengers, with or without accompanied belongings by ropeway, cable car or aerial tramway;

44

Services Provided to the Government or Local Authority

Services provided to Government, a local authority or a governmental authority by way of

•  water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation.

•  repair or maintenance of a vessel

45

General Insurance Services - Specified Insurance Schemes

Services of general insurance business provided under following schemes

•  Hut Insurance Scheme;

•  Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development Programme);

•  Scheme for Insurance of Tribals;

•  Janata Personal Accident Policy and Gramin Accident Policy;

•  Group Personal Accident Policy for Self-Employed Women;

•  Agricultural Pumpset and Failed Well Insurance;

•  premia collected on export credit insurance;

•  Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture;

•  Jan Arogya Bima Policy;

•  National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);

•  Pilot Scheme on Seed Crop Insurance;

•  Central Sector Scheme on Cattle Insurance;

•  Universal Health Insurance Scheme;

•  Rashtriya Swasthya Bima Yojana; or

•  Coconut Palm Insurance Scheme;

46

Life Insurances Services - Specified Insurance Schemes

Services of life insurance business provided under following schemes -

•  Janashree Bima Yojana (JBY); or

•  Aam Aadmi Bima Yojana (AABY);

•  life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having maximum amount of cover of fifty thousand rupees.

47

Services Provided by Incubatee.

Services provided by an incubatee up to a total turnover of fifty lakh rupees in a financial year subject to the following conditions, namely

•  the total turnover had not exceeded fifty lakh rupees during the preceding financial year; and

•  a period of three years has not been elapsed from the date of entering into an agreement as an incubatee.

48

Services by Unincorporated Body or Society

Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution -

• i. as a trade union;

• ii. for the provision of carrying out any activity which is exempt from the levy of service tax; or

• iii. up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex;

49

Intermediary Services - Stock Broking; Commodity Exchange; Mutual Fund Agent or Distributor; Lottery Tickets; Sale of SIM Cards; Banking/Insurance Company in rural areas.

Services by the following persons in respective capacities -

•  sub-broker or an authorized person to a stock broker;

•  authorized person to a member of a commodity exchange.

•  mutual fund agent to a mutual fund or asset management company.

•  distributor to a mutual fund or asset management company.

•  selling or marketing agent of lottery tickets to a distributer or a selling agent.

•  selling agent or a distributer of SIM cards or recharge coupon vouchers.

•  business facilitator or a business correspondent to a banking company or an insurance company, in a rural area; or

•  sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;

50

Job-Work

Carrying out an intermediate production process as job work in relation to

•  agriculture, printing or textile processing

•  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);

•  any goods on which appropriate duty is payable by the principal manufacturer;

•  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;

51

Business Exhibition Service

Services by an organiser to any person in respect of a business exhibition held outside India

52

Telecommunication Services

Services by way of making telephone calls from

•  departmentally run public telephone;

•  guaranteed public telephone operating only for local calls; or

•  free telephone at airport and hospital where no bills are being issued;

53

Slaughtering of Animals.

Services by way of slaughtering of animals

54

Import of Services

Services received from a provider of service located in a non- taxable territory by

•  Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;

•  an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or

•  a person located in a non-taxable territory

55

Services to be Provided for Libraries, Knowledge Enhancing.

Services of public libraries by way of lending of books, publications or any other knowledge- enhancing content or material.

56

Services- Employee State Insurance Corporation

Services by Employees State Insurance Corporation to persons governed under the Employees Insurance Act, 1948 (34 of 1948).

57

Service by way of Transfer of Going Concern.

Services by way of transfer of a going concern, as a whole or an independent part thereof.

58

Services by way of Public Conveniences.

Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets

59

Services by a Government Authority - Municipality.

Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution.

60

Loading or unloading of rice, cotton, ginned or baled.

Services by way of loading, unloading, packing, storage or warehousing of rice, cotton, ginned or baled.

61

Services received by Reserve Bank of India

Services received by the Reserve Bank of India, from outside India in relation to management of foreign exchange reserves.

62

Service provided by a tour operator to a foreign tourists

Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India.

 

 

•  Other Exemptions as per various notifications:

Other Exemptions as per various notifications

Sl No

Nature or Service /Entity providing or receiving service

Exemption

1

Research and development Cess Paid on the import technology

Service involving import of technology, from so much of the service tax leviable thereon under section 66B of the said Act, as is equivalent to the amount of cess payable on the said import of technology.

Major condition - such cess paid within six months from the date of invoice

2

Foreign diplomatic Mission or Consular post in India

Service provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.

3

Property Tax paid on immovable property

Service of renting of an immovable property, from so much of the service tax leviable thereon under Section 66B of the Finance Act, as is in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable properties less taxes on such property, namely property tax levied and collect by local bodies.

4

Exporter of goods - GTA

Service provided to an exporter for transport of the said goods by GTA in a goods carriage from any container freight station or inland container depot to the port or air port, as the case may be, from where the goods are exported;:or

Service provided to an exporter in relation to transport of the said goods by GTA in a goods carriage directly from their place of removal, to an inland container depot, a container freight station, a port or airport, as the case may be, from where the goods are exported.

5

Exporter of Goods - Foreign Commission Agent

Service provided by a commission agent located outside India and engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter to cause sale of goods exported by him - from so much of the service tax leviable thereon under Section 66B of the said Act, as is in excess of the service tax calculated on a value of export goods for which the said specified service has been used, subject to the specified condition.

6

TBI/STEP

Service, Provided or to be provided by a Technology Business incubator (TBI) or a Science and technology Entrepreneurship Park (STEP) recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and technology, Government of Indi, from the whole of the service tax leviable thereon

7

Small Service Providers

Service of aggregate value not exceeding ten lakh rupees in any financial year from the whole of the service tax leviable thereon.

8

SEZ

Service, on which service tax is leviable, received by a unit located in a SEZ or Developer of SEZ and used for the authorised operations, from the whole of the service tax, education cess and secondary and higher education cess leviable thereon.

9

Transport of Goods and Passengers by Indian Railways

Service provided by Indian Railways by way of service of transportation of passengers in specified class and services by way of transportation of goods till 30 th September 2012.

CHAPTER 6-ABATEMENT IN VALUATION UNDER THE NEW SERVICE TAX REGIME


Abatement which were available earlier under Notification No.1/2006 now available w.e.f 1st July 2012 vide exemption (abatement) Notification No 26/2012. Apart from exemption (abatement) notification, Rule 2A of the Service Tax (Determination of Value) Rules, 2006, as amended vide Notification No 24/2012 dated 06.06.2012 has provided the methodology and portion of abatement to ascertain the value of service portion in the Execution of Works Contract/ Restaurant/Outdoor Catering. New abatement table is given below with portion of CENVAT Credit allowable under the services :- CENVAT


 

Taxable Services Abatement As Per

Notification 26/2012

Taxable

 

(%)

CENVAT Credit Allowed

Input

Input

Services

Capital

Goods

Financial leasing including hire purchase

[No abatement against lease management, processing, documentation and administrative fees]

10

ü

ü

ü

Transport of goods by rail

30

ü

ü

ü

Transport of passengers by rail

30

ü

ü

ü

Convention / Mandap Keeper Service. If Bundled by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, pandal shamiana, club etc) specially arranged for organizing a function together with renting of such premises

70

ü «

ü

ü

Transport of passengers by air

40

×

ü

×

Renting of hotels, inns, guest houses, clubs, campsites or other commercial places for residential or lodging purposes.

60

×

ü

×

Goods Transport Agency

25

×

×

×

Services in relation to Chit.

70

×

×

×

Renting of any motor vehicle designed to carry passengers

40

×

× « « «

×

Transport of goods in a vessel

40

×

×

×

Services by a tour operator in relation to,-

•  a package tour.

•  a tour solely for arranging or booking accommodation.

•  any other service.

25

10

40

×

×

×

×

×

×

×

×

×

Construction of Complex Service

(a) for a residential unit satisfying both the following conditions, namely:-

(i) the carpet area of the unit is less than 2000

square feet; and

(ii) the amount charged for the unit is less than

rupees one crore;

(b) for other than the (a) above

25

30

×

ü

ü

Service portion in supply of food or any other articles of human consumption or any drink (Rule 2C).

(a) at a restaurant

(b) in outdoor catering

40

60

ü «

ü «

ü

ü

ü

ü

Works Contract Service (Rule 2A)

in relation to :

  1. Execution of Original Works#
  2. Maintenance or repair or reconditioning or restoration or servicing of any goods
  3. All other cases

# Original Work means

•  all new constructions

•  all types of addition and alteration to abandoned or damaged structures on land that are required to make them workable

•  erection, commissioning or

•  installation of plant, machinery or

equipment or structures, whether pre-fabricated or otherwise.

40

70

70

×

×

×

ü

ü

ü

ü

ü

ü

•  CENVAT credit on food items classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985, used for providing the taxable service, is not allowed as input.

« « CENVAT credit on input services and capital goods are available and Cenvat credit on inputs used for providing the taxable service is not available.

« « « CENVAT credit on input service of motor cab is available w.e.f. 01.10.2014. However, CENVAT Credit of any other input service is not available.

CHAPTER 7-REVERSE CHARGE MECHANISM UNDER THE NEW SERVICE TAX REGIME

Notification No 30/2012-ST, dated 20.06.2012 Service have been Notified for the purpose of Section 68/(2) for reverse charge purposes.

Amended w.e.f 01.07.2012, the Service Tax Rules,1994 by Notification No 36/2012 –ST, dated 20.06.2012 to specify the person liable for paying service tax in respect of such Notified services under Rule 2(1) (d) of the said Rules.


Reverse Charge Mechanism in service tax is not a new concept. Under this scheme, service tax is payable by service recipient instead of service provider. Under this charge service receiver has to register himself under service tax. Further service receiver can not claim general exemption limit of 10 Lakh rupees. So he has to pay even on few rupees of service received.

It will be very harsh on service receiver end where he has received services falls under reverse charge for only few hundred rupees but due to it he has to register himself in service tax and have to file service tax return on prescribed interval. Moreover under service tax act Nil return is also mandatory and every registered person have to file half yearly return.

Now after applicability of new service tax regime, new services which is very common like advocate, Hiring vehicle for passenger has been added under reverse charge.

Complete List is given as under. This is applicable from 01.07.2012.Few new services has been added with partial reverse charge .In case of these services both service receiver and provider has to pay service tax in prescribed ratio.


Sl. No.

Description of a service

Percentage(%) of service tax payable by the

The reverse charge is applicable if service receiver /service provider satisfy few conditions. In other case service provider has to pay tax on full amount of service.

Service Provider

Service Receiver

Service Provider

Service Receiver

1

services  provided or agreed to be provided  by an  insurance agent  to any person carrying on insurance business

Nil

100%

All service providers

All service receivers

2

services  provided or agreed to be provided by a  goods transport agency  in respect of  transportation of goods by road

Nil

100%

where the consignor or the consignee  is, -

•  any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

•  any society registered under the Societies Registration Act, 1860 (21 of 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 (1 of 1944) or the rules made there under;

•  any body corporate established, by or under any law; or

•  any partnership firm whether registered or not under any law including association of persons

3

services  provided or agreed to be provided  by way of  sponsorship

Nil

100%

Any

body corporate/partnership firm

4

services  provided or agreed to be provided  by an  arbitral tribunal

Nil

100%

Arbitral tribunal

Business entity with a turnover more than rupees ten lakh in the preceding  financial year; (Please refer Note - 1 for meaning of Business entity)

5

services  provided or agreed to be provided  by individual  advocate

Nil

100%

individual or firm

Business entity with a turnover more than rupees ten lakh in the preceding  financial year;

6

services  provided or agreed to be provided  by way of  support service by Government or local authority (Please refer Note - 2)

Nil

100%

Government /Local authority

Business entity

7

•  in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on abated value.

•  in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on non abated value.

Nil

50%

100%

50%

Individual (prop Partnership firm (registered or unregistered)           /HUF

any company formed or registered under the Companies Act, 1956 (1 of  1956) or a business entity registered as body corporate located in the taxable territory;

8.

services  provided or agreed to be provided  by way of supply of manpower (for definition of manpower, refer Note no. 3) including Security services (For definition of Security Services, refer Note - 4)

25%

75 %

Same as above

Same as above

9.

services  provided or agreed to be provided  by way of  works contract

50%

50%

Same as above

Same as above

10

any  taxable services  provided or agreed to be provided  by any person who is located in a non-taxable territory  and received by any person located in the taxable territory ( IMPORT OF SERVICES )

Nil

100%

Any

Any

11

provided or agreed to be provided by a director of a company or body corporate to the said company or the body corporate
(Inserted through notification 46-47/2012 dated 07/08/2012)


Nil

100%

Director (individual)

Company or Body Corporate


Note:

•  Business Entity has been defined under section 66B(17) of Finance Act to mean any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession.

•  Support services By Government or Local authority : Section 65B (49) of Finance Act, 1994 provides the definition of support services. Support services in respect of which service tax is payable by business entity receiving such services from government or local authority are as under: 

•  Infrastructural

•  Support Services; 

•  Operational

•  support Services; 

•  Administrative

•  Support Services; 

•  Logistic Services; 

•  Marketing Services; 

•  Advertisement Services; 

•  Promotion Services; 

•  Construction

•  or Works Contract Services; 

•  Security; 

•  Testing and Analysis 

•  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.  

•  Scope of Manpower Supply

The manpower supply is understood to mean when one person provides another person with the use of one or more individuals who are contractually employed or otherwise engaged by the first person . The essence of the employment should be that the individuals should be employed by the provider of the service and not by the recipient of the service . Moreover, as long as the manpower is not placed operationally under the control of the service receiver, it will not constitute a manpower supply service. Hence, if a provider of output service engages his own manpower in the process of providing such output service, then it shall not be a case of manpower supply since the control of manpower remains in the hands of the Service provider. In cases of secondments, where the parent companies place their staffs at the disposal of their subsidiaries or other associated companies, the definition of manpower supply will hold good as the contractual employment continues to be with the parent company.

Joint Employment

 

Services provided by the staffs, who are jointly employed by one or more employers, sharing the cost of such employment shall not be covered by the supply of manpower service. But in case such staff is employed by one employer and is only made available to other for a consideration , then it shall not be a case of joint employment and hence, shall be taxable under manpower supply service.

There can also be cases where one of the joint employers makes payment to the manpower on behalf of the other Joint employers, which is later on recouped from the other employers on an agreed basis on actuals. Such an arrangement shall not come under the levy of service tax, as it is merely a case of Cost reimbursement.

•  "Security services" has been defined to mean services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity".

Thus the activity of supply of security guards, including services of investigation, detection, verification of fact or activity would be liable to the provisions of reverse charge.

CHAPTER 8-CENVAT CREDIT ELIGIBILITY UNDER THE NEW SERVICE TAX REGIME

Cenvat Credit Rules 2004 Amendment vide Notification No 28/2012 Dated 20/06/2012


INPUT SERVICES

Definition of input service has been changed w.e.f. 1-4-2011. The new definition is significantly different from the earlier definition of input service.

Rule 2(l) of Cenvat Credit Rules (as effective from 1-4-2011), defines input service as follows -

 Input servicemeans any service, -

•  used by a provider of taxable service for providing an output service; or

•  used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,

and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

but excludes services, -

•  specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for- (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or

•  specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or

•  such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee.


Cenvat Credit Eligibility

Sl. No.

Service

Comment about eligibility

1

Accounting Expenses

Eligible as specifically included in definition

2

 

 

Advertisement (may be for recruitment, tenders, sales promotion, legal notices etc. as no restriction)

Eligible as specifically included in definition

Cenvat Credit Eligibility

Sl. No.

Service

Comment about eligibility

3

Air travel of employees

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, recruitment, accounts, audit, sales promotion, procurement of inputs, legal services, financing, computer networking

4

Airport Service

Not eligible if used for construction of a building or a civil structure or a part thereof, or laying of foundation or making of structures for support of capital goods. If the service is used for other purposes, e.g. for aircrafts, provided to importer/exporter or to CHA, it would be eligible.

The service is also eligible in case of construction or works contract services or port or airport services.

5

Architect Services

Not eligible if used for construction of a building or a civil structure or a part thereof, or laying of foundation or making of structures for support of capital goods. If the service is used for other purposes, e.g. finishing services, repair, alteration or restoration, these should be eligible.

The service is also eligible in case of construction or works contract services or port or airport services.

6

Auditing Service

Eligible as specifically included in definition

7

Authorised Service Station

See under Motor vehicle Related services (as per new definition)

8

Banking and other financial services

Eligible under Financing

9

Beauty Treatment

Specifically excluded - Hence not eligible

10

Brand Ambassadors

Eligible as relating to sales promotion

11

Business exhibition

Eligible as specifically included in definition

12

Business Support Service

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, recruitment, accounts, audit, sales promotion, procurement of inputs, legal services, financing, computer networking

13

Canteen Expenses for employees

Not Eligible as specifically excluded

14

Clearing & Forwarding Agent

Eligible for inputs and for final products upto place of removal (port is place of removal for export)

15

Club Membership

Specifically excluded for employee - Hence not eligible [Club membership fee of a director (who is not employee) would be eligible. Similarly, corporate membership of a club (not in name of any particular employee) should be eligible]

Cenvat Credit Eligibility

Sl. No.

Service

Comment about eligibility

16

Commercial Coaching and training

Eligible as specifically included in definition

17

Commission Agent

Eligible as relating to sales promotion or procurement of inputs

18

Computer networking

Eligible as specifically included in definition

19

Consignment Agents expenses

Eligible as consignment agents place is place of removal when sale is from depot

20

Construction of a building or a civil structure or a part thereof

Not eligible if used for construction of a building or a civil structure or a part thereof, or laying of foundation or making of structures for support of capital goods. If the service is used for other purposes, e.g. finishing services, repair, alteration or restoration, these should be eligible.

The service is also eligible in case of construction or works contract services or port or airport services.

21

Construction of residential complex

Not eligible if used for construction of a building or a civil structure or a part thereof, or laying of foundation or making of structures for support of capital goods. If the service is used for other purposes, e.g. finishing services, repair, alteration or restoration, these should be eligible.

The service is also eligible in case of construction or works contract services or port or airport services.

22

Consulting–Engineering, management

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, recruitment, accounts, audit, sales promotion, procurement of inputs, legal services, financing, computer networking

23

Courier

Eligible if related to modernization or repairs of factory or office, accounts, financing, procurement of inputs, sales promotion, inward and outward transportation, share registry, recruitment, legal services

24

Credit rating

Eligible as specifically included in definition

25

Customs House Agent

Eligible for procurement of inputs and also for exports as port is place of removal for export

26

Depot expenses

Eligible as depot is place of removal when sale is from depot. In other cases, may be eligible as sale promotion

27

Erection, commissioning or installation

Eligible since in relation to manufacture or provision of taxable goods/services

28

Financing(Bank charges, Lease, Hire Purchase)

Eligible as specifically included in definition

Cenvat Credit Eligibility

Sl. No.

Service

Comment about eligibility

29

 

Foundation or support of capital goods

Specifically excluded - Hence not eligible except for construction or works contract service

30

Gardening

Eligible only if done as a statutory requirement (since it can be argued that the service is used in relation to manufacture, as manufacture would be impossible if the statutory requirement is not met) or if in relation to modernization or renovation of factory or office, otherwise not eligible.

31

General Insurance for machinery, building and transportation of inputs, capital goods and final products upto place of removal (except motor vehicle - see discussions below for meaning of motor vehicle)

Eligible as in relation to manufacture, provision of taxable services, procurement of inputs, transportation of inputs and final products

32

General Insurance of motor vehicles

Specifically excluded - Hence not eligible except where motor vehicle is eligible as capital goods - see discussions bellow for meaning of motor vehicle

33

Health Insurance

Insurance of employees not eligible [Insurance of a director (who is not employee) would be eligible]

34

Hire purchase

Eligible under Financing

35

Information Technology Software

Eligible if in relation to manufacture or provision of taxable goods/services, modernisation or repairs of factory or office, storage, quality control, recruitment, accounts, audit, sales promotion, procurement of inputs, legal services, financing, computer networking

36

Insurance for machinery, building and transportation of inputs, capital goods and final products upto place of removal (except insurance of motor vehicle)

Eligible as in relation to manufacture, provision of taxable services, procurement of inputs, transportation of inputs and final products.

37

Insurance (Life or Health)

Insurance of employees not eligible [Insurance of a director (who is not employee) would be eligible]

38

Intellectual Property Service

Eligible if in relation to manufacture or provision of taxable goods/services, quality control, sales promotion, computer networking

40

Job work

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, computer networking

Cenvat Credit Eligibility

Sl. No.

Service

Comment about eligibility

41

Labour contractor

Eligible if in relation to manufacture or provision of service or modernization or repairs of factory or office, accounts, financing, procurement of inputs, sales promotion, inward and outward transportation, share registry, recruitment, legal services

42

Leasing

Covered under Financing. Hence eligible

43

Legal Consultancy

Specifically included under legal services

44

Life Insurance

Insurance of employees not eligible [Insurance of a director (who is not employee) would be eligible]

45

Maintenance and repairs

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, except of motor vehicles (see discussions above for meaning of motor vehicle)

46

Mandap Keeper

Eligible if in relation to recruitment, accounts, audit, sales promotion, procurement of inputs, legal services, financing, computer networking

47

Manpower recruitment and supply

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, recruitment, storage, quality control, accounts, sales promotion, financing, computer networking

48

Market Research

Eligible as specifically included in definition

49

Mobile phones (even if in name of employees, if endorsed in favour of employer and reimbursed by employer)

Eligible if related to modernization or repairs of factory or office, accounts, financing, procurement of inputs, sales promotion, inward and outward transportation, share registry, recruitment, legal services but not for personal use of employees

50

Motor Vehicle Related Expenses (earlier termed as authorised station services)

Specifically excluded - Hence not eligible except where motor vehicle is eligible as capital goods (see discussions bellow for meaning of motor vehicle)

51

Outdoor catering

Not eligible when given to employee - should be eligible if used for sales promotion, training, auditing (e.g. giving lunch to auditors), legal services, security or to directors who are not employees

52

Outward transportation

Outward transportation upto the place of removal is eligible (see meaning of place of removal discussed earlier)

53

Personal Insurance of employees

Not eligible

Cenvat Credit Eligibility

Sl. No.

Service

Comment about eligibility

54

Port Service

Not eligible if used for construction of a building or a civil structure or a part thereof, or laying of foundation or making of structures for support of capital goods. If the service is used for other purposes, e.g. provided to CHA, ships, importers/exporters, these should be eligible. The service is also eligible in case of construction or works contract services or port or airport services.

55

Procurement Expenses

Eligible under Procurement of inputs

56

Quality Control

Eligible as specifically included in definition

57

Realer Estate Agent service

May not be eligible

58

Recruitment

Eligible as specifically included in definition

59

Renovation of factory or office building

Renovation of a factory, premises of provider of output service or an office relating to such factory or premises is eligible

60

Renting of a cab

Specifically excluded - Hence not eligible except where motor vehicle is eligible as capital goods - - see discussions above for meaning of motor vehicle (may be eligible if charged by auditor, legal adviser or consulting engineer as part of their services, but they themselves will not be eligible for Cenvat credit on these services)

61

Renting of immovable property

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, recruitment, accounts, audit, sales promotion, procurement of inputs, legal services, financing, computer networking

62

Repairs of factory or office building

Repairs of a factory, premises of provider of output service or an office relating to such factory or premises are eligible

63

Repairs of motor vehicles

Specifically excluded - Hence not eligible except where motor vehicle is eligible as capital goods - see discussions bellow for meaning of motor vehicle

64

Residential Colony/quarters Expenses

Not eligible except security and legal services

65

Residential Complex

Specifically excluded - Hence not eligible except for construction or works contract service

66

Sales Promotion Expenses

Eligible as specifically included in definition

67

Security at factory, offices, godown, residential colonies

Eligible as specifically included in definition as  Security (no restriction where used)

68

Share registry

Eligible as specifically included in definition

69

Showroom Expenses

Eligible as sale promotion

Cenvat Credit Eligibility

Sl. No.

Service

Comment about eligibility

70

Software

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, recruitment, accounts, audit, sales promotion, financing, computer networking

71

Storage of inputs and final products

Eligible as specifically included in definition as Storage up to place of removal

72

Supply of tangible goods for use service

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, recruitment, accounts, audit, sales promotion, procurement of inputs, legal services, financing, computer networking.

However, supply of motor vehicle for use is not eligible - see discussions bellow for meaning of motor vehicle.

73

Telephones and telephones at residence of employees

Eligible if related to modernization or repairs of factory or office, accounts, financing, procurement of inputs, sales promotion, inward and outward transportation, share registry, recruitment, legal services but not for personal use of employees

74

Training

Eligible as specifically included in definition

75

Transport charges for transport of employees

Not eligible as specifically excluded

76

Travel by air, road or water except by motor vehicle.

Eligible if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, storage, quality control, recruitment, accounts, audit, sales promotion, procurement of inputs, legal services, financing, computer networking.

77

Works Contract Service

Not eligible if used for construction of a building or a civil structure or a part thereof, or laying of foundation or making of structures for support of capital goods. If the service is used for other purposes, e.g. finishing services, repair, alteration or restoration, these should be eligible.

The service is also eligible in case of construction or works contract services or port or airport services.

 


Motor vehicle - The term motor vehicle is not defined in Cenvat Credit Rules. As per Central Excise Tariff Act, motor vehicles are covered under chapter 87 of Central Excise Tariff.

As per section 65(73) of Finance Act, 1994; motor vehicle has same meaning as assigned to it under section 2(28) of Motor Vehicles Act. As per that Act, motor vehicle means any mechanically propelled vehicle adapted for use upon roads, whether the power or propulsion is transmitted thereto from internal or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle run on fixed rails or a vehicle of special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty five cubic centimeters.

Some vehicles (e.g. fork lift truck, excavators) require registration under Motor Vehicles Act, but they fall under chapter 84 of Central Excise Tariff. Goods falling under chapter 84 are eligible for Cenvat credit. Hence, insurance, repair services, renting etc. in respect of such vehicles should be eligible for Cenvat credit.  


CHAPTER 9- POINT OF TAXATION


The Point of Taxation Rules, 2011 have come into force with effect from 1st April, 2011. The major factors for determination of point of taxation have been briefly discussed as follows:

Determination of point of taxation:

 

For the purposes of these rules, unless otherwise provided, point of taxation? shall be,-

•  the time when the invoice for the service provided or to be provided is issued. However, in cases where the invoice is not issued within fourteen days of the completion of the provision of the service, the point of taxation shall be date of such completion.

•  in a case, where the person providing the service, receives a payment before the time specified paragraph (a) above, by whatever name called, the date of receipt of the payment would be considered the point of taxation to the extent of such payment.

Determination of point of taxation in case of continuous supply of service:

 

In case of continuous supply of service, the point of taxation? is considered to be:

•  the time when the invoice for the service provided or to be provided is issued. However, in cases where the invoice is not issued within thirty days of the completion of the provision of the service, the completion of service shall be deemed to be the point of taxation. Where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the service receiver to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service.

•  in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment.

Point of taxation principles:

•  Once a POT is determined chargeability is decided; subsequent change will not change the chargeability

•  If POT is not determined under an earlier rule then governed by new rule and consequences follow.

•  Effective 01.10.2014, the POT in relation to Reverse Charge would be the payment date or the first day after three months from the date of invoice, whichever is earlier.