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SERVICE TAX

CS K.K. Agrawal Never Say Die

Faculty of Direct Tax and Indirect Tax + 15 years experience

Online classes available at SuperProfs.com

for Nov 2016 / Dec 2016 and 2017 exams


1 Background on

Service Tax

Birth of Service Tax

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learning sections whole service tax

66B Charging 64 Taxable Territory Point of Taxation Rules 2011

66D Negative list 65B(37) Person Service Tax Valuation Rules 2006

66E Declared service 65B(44) Service Service Tax Rules 1994

66F Interpretation of description of service

65B(51) Taxable Service

67 Valuation of service

68 Assessee

69 Registration

70 Return

introduction

The journey of taxation of services began by selective taxation of just three services on July 1, 1994.

a. Telephone.

b. Non Life Insurance.

c. Brokers.

The first year collections was very modest at ₹ 407 crore.There was a near unanimity across a wide section of thinkers that potential of service tax remained huge and largely untapped. Part of the problem identified was the lack of comprehensive taxation of services, not so much in the lack of coverage but more on account of lack of clarity and significant gaps in existing definitions, exposing the tax collection process to avoidable leakages and litigation.

Budget 2012 has ushered a new system of taxation of services w.e.f. 1-7-2012 popularly known as Negative List. The new changes are a paradigm shift from the existing system where only services of specified descriptions are subjected to tax. In the new system all services, except those specified in the negative list, will be subject to taxation.

Comprehensive Approach Selective Approach

In this approach all services are taxable. In this approach on the basis of revenue potential few services are selected which are taxable.

On taxability of all services it might create hardship and may entail widespread inflation. Therefore Govt. has introduced negative list of services which are not taxable. These negative list has been introduced keeping in mind Constitution of India and other social considerations.

There is no negative list of services instead positive list which are taxable. Though Govt. out of social consideration has introduced a list of exempted services. These exempted services has been introduced via exemption notification.

note 1: Comprehensive approach has aligned itself to excise where in all goods are taxable with some exception vide negative list or exemption notification.note 2 : Most of the developed nations taxes both goods and services via one Act called Goods and Service Tax Act.

levy, collection and assessment

Service tax is an indirect tax. Burden shall be passed on to the consumer. It follows consumption based taxation system. Therefore import of services are taxable, export of services are not taxable.


levy collection assessmentService tax is levied only if taxable services are rendered in India. If services falls in negative list then there is no levy and hence no collection.

But if services are 100% exempted then there is levy but no collection.

Collection is possible only if there is levy. No Levy No collection. Collection can take place before, during or after levy. Collection is an administrative functions of the Central Govt. which can be postponed. Whereas levy is a parliamentary function which is created by enacting an Act.

Assessment is valuation of service and computation of service tax. Assessment is first done by assessee called self assessment. Then by department called adjudication.

By using which power in the constitution tax on service was levied?

As per article 265 of Constitution of India ‘No tax shall be levied or collected except by the authority of Law’

The Central Govt. can levy tax if it is empowered in Constitution of India. Schedule VII of the Constitution of India has 3 list. List 1 called Union List. List II called State List and List III called concurrent list.

Central Govt levied tax on services by using entry 97 in Union list which is a residuary entry which says that : Any other matter not enumerated in List II or List III including any tax not mentioned in either of those lists.

Now let us see Schedule VII of the Constitution of India.

List I : Union List List II : State List(Only CG can make laws on following subjects) (Only SG can make laws on following subjects)

entry no subject entry no subject82 Tax on Income other than Agricultural

Income46 Tax on Agricultural Income

83 Custom Duty x x

84 Duties of excise on tobacco and other goods manufactured or produced in India except alcoholic liquors for human consumption, Opium, Narcoticsbut including medicinal and toilet preparations containing alcoholic liquors, Opium, Narcotics.

51 Duties of excise on alcoholic liquors for human consumptionOpium, Narcotics.

92 Taxes on the sale or purchase of news-papers and on advertisements published therein.

x x

92A Taxes on inter state sales of goods. x x

x x 54 Tax on sale of goods inside the State.

92C* Tax on Service (* introduced in 2004 but ineffective) x x

x x 49 Land & Building (Stamp duty)

x x 52 Tax on entry of goods into the lo-cal area for consumption, use or sale therein.

x x 60 Taxes on professions, trades, callings and employments. (Employment tax)

97 Residuary x x

x x 55 Taxes on advertisements other than advertisments published in the newspa-pers and advertisements broadcast by radio or television

x x 53 Electricity


x x 59 Toll

x x 62 Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.

Birth of service tax

1. Entry No 97 enabled the birth of service tax but not with own Act but a surrogate Act called Finance Act 1994. Therefore we do not have separate Service Tax Act in our country.

2. Chapter V of the Finance Act, 1994 contained the statutory provisions with respect to the taxation of the services. Any amendment in the provisions of services is carried out by making amendment in Chapter V of the Finance Act, 1994.

3. In 2003 Chapter VA was added in the Finance Act, 1994 which contains the provisions of advance rulings.

4. The officers of the Excise department shall implement the procedures part of tax on services.

chapter v of the finance act 1994

Chapter Sections

V OF FINANCE ACT 1994 [introduced in 1994]

Section 64 to Section 96 - The Basics of service Tax, Definitions, Classification of services, Charge of Service Tax, Charge of service Tax on services received from outside India, Valuation of Taxable services, Payment of service tax , Registration, Returns, Assessments, Penalties, appeals etc.

VA OF FINANCE ACT 1994 [introduced in 2003]

Section 96A to 96 I- Advance ruling with respect to a question of law or fact regarding the Liability to pay service Tax.

VI OF FINANCE ACT 2004 [introduced in 2004]

Education cess on service tax.

VI OF FINANCE ACT 2007 [introduced in 2007]

Secondary and Higher education cess was also imposed on service tax.

Following rules have been issued by the Central Govt for proper implementation of provisions of service tax.

1. Service Tax Rules 19942. Point of Taxation Rules 20113. Service Tax (Determination of Value) Rules 2006 4. CENVAT Credit Rules, 20045. Place of Provisions Services Rules 2012

w .e.f 1-7-2012 india has switched to comprehensive approach to align itself to gst .

• Section 66B : Charge of service tax. Service tax levied on all services.

• Section 66E : Charges service tax on declared service. (Positive list).

• Section 66D : Negative list of services. (17 heads).

• Mega exemption notification : Which exempt few taxable services.

is service tax levied on sale of goods?

Service tax cannot be levied on sale of goods since State Govt. has exclusive power to levy tax on sale of goods. This is as per Entry No 54 of the Constitution of India. Also service tax cannot be levied on that sale which is deemed as sale. Deemed sale is defined in Article 366(29A) of the Constitution of India.


2 Deemed Sale

Definition of sale widened

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Background for levy of sales tax on deemed sale

Various State Govt. enacted Sales tax laws on the assumption that expression ‘sale of goods’ would be given a wide expression since it related to entries in the legislative lists.

However, in gannon dunkerley’s case, the Supreme Court held that the expression ‘sale of goods’ would have the same meaning as it had in the Sale of Goods Act, 1930. As a result of this decision, a transaction, in order to be subject to the levy of sales tax under Entry 92A of the Union List (CST) or Entry 54 of the State List (State VAT) should have the essential ingredients namely, parties competent to contract, mutual assent and transfer of property in goods from one of the parties to the contract to the other party thereto for a price.

Consequently many transactions which resembled sale transaction, were not subjected either to CST or to local sales tax. This position resulted in the scope for avoidance of tax in various ways.

We shall analyse each transactions separately.

Compulsory acquisition of controlled commodity for consideration

In new india sugar mills ltd. 1963. SC held in case of transfer of controlled commodities, there is no mutual consent between buyer and seller. The seller is under an obligation to sell the goods on the order of the controlling authorities at the controlled prices. Hence it is not sale as defined in the Sale of Goods Act, 1930. Sales tax is not leviable in such transaction.

Works Contract (It is indivisible contract where there is transfer of material but value of material is not fixed).

In gannon drunkerly 1958 SC held in case where there is both contract of material and contract of labour and consideration for each work is not fixed then it is called indivisible works contract. In works contract there is transfer of property in the goods involved in the execution of works contract but there is no sale of material as such and property in them may not pass as movable. Hence it is not sale as defined in the Sale of Goods Act, 1930. Sales tax is not leviable in such transaction.

However in the case of works contract, if the contract treats the sale of materials separately from the cost of the labour, the sale of materials would be liable for sales tax.

Hire Purchase transaction (It is option to purchase goods on hire.)

In k l Johar case SC held in hire purchase agreement the purchaser gets delivery of goods on the date of hire purchase agreement but ownership is transferred only on payment of last installment. In this case timing of levy is not the date of hire purchase agreement but it is at the time of payment of last installment. Sale is completed if there is both delivery and transfer of ownership.

Second question arose at what value sales tax should be levied. There are 2 options.

a. On last installment. SC held payment of last installment shall lead to absurd price. Therefore depreciated value of goods shall be

taken as taxable value.

b. At depreciated value since goods become second hand at the time of payment of last installment.

Lease of goods for certain period.

In a.v . meiyappan 1978 sc held that lease transaction did not connote a sale and therefore not liable to sales tax.

Sale by unincorporated association to its members.

Sale by a registered club (having a corporate statue) to its members is taxable, Sales by an unincorporated club or association of persons to its members is not taxable as such club has no separate existence from that of the members.


Supply of food / drinks by hotels / restaurants.

In the associated hotels of india 1972, the SC held that there is no sale involved in the supply of food or drink by a hotelier to a person lodged in the hotel.

SC reasoned when hotelier receives a guest in his hotel it’s intention is not to sell food during his stay in hotel. The transaction between hotelier and customer is essentially a contract of service. The bill prepared by the hotelier is one and indivisible not being capable of by approximation of being split into one for residence and the other for meals.

The aforementioned problems connected with the power of the States to levy tax on the sale of goods and with the levy of CST, were referred to the Law Commission which recommended that certain amendments should be made in the Constitution to overcome the problems created by the above judicial decisions. Consequently, the Constitution (46th Amendment) Act, 1982 was passed.

The new clause (29A) was inserted in Article 366 which widened the scope of levy of sales tax both by the Government of India as well as by State Governments. Both the Governments may, after enacting suitable legislations, levy tax on the transactions of the following nature—

deemed sale of goods under constitution [ article 366(29 a )]

Tax on sale or purchase of goods includes -

1. A transfer, otherwise than in pursuance of a contract, of any goods for cash, deferred payment or other valuable consideration.

2. A transfer of goods (whether as goods or in some other form) involved in the execution of works contract.

3. A delivery of goods on hire purchase or any system of payment by installments.

4. A transfer of the right to use any goods for any purpose for cash, deferred payment or other valuable consideration.

5. A supply of goods by any unincorporated association or body of persons to a member for cash, deferred payment or other valuable consideration.

6. A supply or service of food or any drink for human consumption, for cash, deferred payment or other valuable consideration.

The above clause is adopted by every State Govt. in their respective acts and also incorporated in Central Sales Tax Act 1956. Now the above sale is either subjected to sales tax or CST as the case may be.

can service tax Be levied on an indivisiBle contract?

Works contract which was indivisible one, is by a legal fiction altered into one for sale of goods and other for supply of labour and services. E.g. Building contract.

After 46th amendment, it has become possible for States to levy tax on value of goods involved in works contract in the same way in which the sales tax was leviable on the price of goods and materials supplied in a building contract which had been entered into two distinct and separate parts.

The splitting of service and supply has been constitutionally permitted in Article 366(29A). Only works contract and supply of food and services has been permitted to be split.

Now, VAT is imposed on goods portion and service tax on service portion.

Hence, no service tax if transaction is on sale of goods.


3 Charge of Service Tax

Main Section. No Levy No Service tax

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learning sections

1. Section 65B(44) Meaning of Service

2. Section 65B(51) Taxable service

3. Section 66B Charge of service tax

4. Section 66D Negative service

5. Section 66E Declared service

6. Section 66F Interpretation rules

section 66B. charge of service tax

1. There shall be levied a tax (hereinafter referred to as the service tax) Exact date of levy shall be decided by POT Rules.

Place of consumption of service shall be decided by POP Rules

2. at the rate of 14.5% (w.e.f 15-11-2015) [for nov 2016 / dec 2016 attempt]at the rate of 15% (w.e.f 1-6-2016) [for 2017 attempt]

3. on the value (S 67) of all services, [S 65B(44)]

4. other than those services specified in the negative list, [S 66D]

5. provided or agreed to be provided (Advance received)

(To be decided by POP Rules)

6. in the taxable territory [S 65B(51)]

7. by one person [S 65B(37)] (Service provider) to another (Service Receiver) and

8. collected in such manner as may be prescribed. (Service Tax Rules 1994 shall decide due date of payment of service tax and from whom ST shall be recovered SP or SR)

note 1 : w.e.f 15-11-2015 Swach Bharat Cess @ 0.5% on value of taxable services. for Nov / Dec 2016 exam

note 2 : w.e.f 1-6-2016 Krishi Kalyan Cess @ 0.5% on value of taxable services. From 2017 exam onwards

meaning of agreed to Be provided

• Services which have only been agreed to be provided but are yet to be provided are taxable.• Receipt of advances for services agreed to be provided become taxable before the actual provision of service.• Advances that are retained by the service provider in the event of cancellation of contract of service by the

service receiver become taxable as these represent consideration for a service that was agreed to be provided. (Forfeiture of advance money is retained consideration therefore taxable)

note 1 : Amount of refund shall always be assumed to be inclusive of service tax.

note 2 : Refund of service tax to service provider subject to doctrine of unjust enrichment.

note 3 : In case of refund service receiver shall reverse the CCR.

Example 1

sp -----------------------------> sr2,00,000 + 28,000 = 2,28,000 Claim CCR of 28,000

It shall deposit ₹ 28,000 to Govt.

amount refunded reversal of ccr by sr either govt. shall refund or sp shall book ccr1. 2,28,000 28,000 28,000

2. 1,00,000 14,000 14,000


3. No refund. Treated as consideration.

No effect No effect

section 65B(51). taxaBle service

Taxable service means any service on which service tax is leviable under section 66B. It means if conditions of section 66B is satisfied then services becomes taxable service.

If services are provided in negative list then such services are not taxable service. If services are taxable service then it may be dutiable or not dutiable. Exempted services are non dutiable service.

Analysis 1

is it service? is it in negative list? is service provided in taxable territory?

status

1. Yes No Yes Taxable service

2. Yes No No Non Taxable service

3. Yes Yes NA Non Taxable service

4. No NA NA Non Taxable service

Analysis 2

servicesTaxable Not Taxable

Dutiable Non Dutiable Examples.

1. An activity not amounting to service.

2. Services falls in negative list.

3. Services provided in Non Taxable territory

Full dutiable

Partial dutiable

(Abatement)

100% exempted service

General exemption also available to SSP

section 65B(44). meaning of service

Part 1

1. service means analysis1. Activity should be carried out for a consideration by a person for another +

Declared service.2. It involves the element of contractual relationship between 2 different

persons.3. Services provided to self not treated as service.4. HO to BO treated as same person. Exceptions are there where HO and BO

are treated as separate person.

2. any activity 3. carried out

4. by a person 5. for another 6. for consideration,

analysis

Activity----------->

X Ltd Y Ltd

<-----------Consideration

|-----------------------------Distinct Person ----------------------------|

Activity : Activity is not defined in the Act. It can be positive activity or negative activity. It can be activity of breach of contract also. It would include an act done or act not done, a work done or work not done. To tolerate an act or a situation is also treated as activity.a Non - Competing fees. Not doing an act or tolerate an act can also termed as an activity. Like in a merger

and acquisition deal, promoter of selling company agrees not to do similar business for an agreed period. Consideration paid for such non compete fees would attract service tax.


b Demurrage charges for not clearing goods within prescribed period.

f Cancellation charges charged by hotels, airlines, builders, contractors.

c Late delivery charges. g Forfeiture of deposit as penalty (like quality, late delivery, violation of any terms of contract etc).d Guarantee commission

e Agreeing not to appear for opposite party in a Court.

h Penalty for breach of contract.

The concept ‘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. No contract No Activity No Service No Service Tax. E.g. Award, reward, performance on street.

activity for considerationIt pre supposes the existence of a contract

not at the desire of the promisor (there do not exists a contract)

at the desire of the promisor (it means there exists a contract)

An award received in consideration for contribution over a life time will not comprise an activity for consideration.

There can be many activities without consideration. 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 or gift without reciprocity. (personal gift)

A gift with reciprocity. (professional gift).

Reward However a reward given for an activity performed explicitly on the understanding that the winner will receive the specified amount in reciprocity for a service to be rendered by the winner would be a consideration for such service. Thus amount paid in cases where people at large are invited to contribute to open software development (e.g. Linux) & getting an amount if their contribution is finally accepted will be examples of activities for consideration.

Imposition of a fine or a penalty for violation of a provision of law not treated as an activity since to be a service an activity has to be carried out for a consideration. Therefore fines and penalties which are legal consequences of a person’s actions are not in the nature of consideration for an activity.

Penalty for breach of contract. It is a service and service tax is levied.

Donations or free charities outside the scope of taxable service. For example grants given for a research where the researcher is under no obligation to carry out a particular research would not be a consideration for such research.

Donations to a charitable organization are not consideration unless charity is obligated to provide something in return e.g. display or advertise the name of the donor in a specified manner or such that it gives a desired advantage to the donor unless otherwise exempted. E.g. Sponsorship services.

Amount paid as alimony for divorce.

Tips to waiter

Meaning of non-monetary consideration. : Non-monetary consideration essentially means compensation in kind such as supply of goods and services in return for provision of service.

if... then...A agrees to dry clean B’s cloths. B agrees to click A’s photograph.


A agrees not to open dry clean shop in B’s neighbourhood. B agrees not to open his shop in A’s neighbourhood.

A agrees to construct 3 flats for B on land owned by B. B agrees to provide 1 flat to A without any monetary consideration.

Other examples of consideration

name of payment whether consideration for service...Amount received as advances for performance of service

Such advance are consideration for the agreement to perform a service. S 66B has also made provision for taxability of service agreed to be provided.

Deposits returned on cancellation of an agreement to provide a service.

Returned deposits are in the nature of a returned consideration. Tax already paid, tax payer would be entitled to refund subject to doctrine of unjust enrichment.

Advances forfeited for cancellation of an agreement to provide a service.

Since service becomes taxable on a agreement to provide service such forfeited deposits would represent consideration for the agreement that was entered into for provision of service. If a work is not done then also treated as service.

Security deposit that is returnable on completion of provision service.

Returnable deposits in the nature of security and hence do not represent consideration for service. However if deposit is in the nature of colourable device where in the interest on the deposit substitute for the consideration for service provided or the interest earned has a perceptible impact on the consideration charged for service then such interest would form part of gross amount received for the service. Also security deposit should not be in lieu of advance payment for the service.

situation

rent of immovable propertysecurity ₹ 20 Lakhs ₹ 100 Lakhsrent ₹ 2,00,000 p.m. ₹ 1 p.m.service tax

Service tax on ₹ 2,00,000 p.m.

Service tax on reasonable rent shall be levied.

Security deposits forfeited for damages done by service receiver in the course of receiving a service.

If the forfeited deposits relate to a accidental damages due to unforeseen actions not relatable to provision of service then such forfeited deposits would not be consideration. In fact it is compensation for loss of damaged goods therefore no service tax.

Demurrages payable for use of service beyond the period initially agreed upon E.g retention of containers beyond the normal period.

This will be consideration.

Excess payment made as a result of a mistake.

If returned it is not consideration. If not returned and retained by the service provider it becomes part of the taxable value.

Part 2 : and includes a declared service,

Part 3 : but shall not include—

(a) an activity which constitutes, ––

(i) merely (only) a transfer of title (change in ownership) in goods or immovable property, by way of sale, gift or in any other manner (exchange, inheritance); or

Renting of movable or immovable property is taxable service.

(ii) merely (only) such, transfer, delivery or supply of goods which is deemed to be a sale within the meaning of Article 366(29A) of the Constitution of India.

(iii) merely (only) a transaction in money or actionable claim (unsecured debts or right to participate in draw).


Explanation 2 : Following transaction shall not be treated as transaction only in money

(i) any activity relating to 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.Conversion of Into

One currency to same currency Paper money into coins Where Face value and market value after conversion remains same it is treated as transaction only in money. But where it differs then it is not transac-tion only in money.

Big denomination to small denomination ₹ 1,000 into ₹ 100One currency to another currency ₹ to $, $ to ₹more examples

• Deposit in Bank • Withdrawal from Bank • Giving Loan• Repayment of Loan with interest

• Making of draft or pay order

• Investment in Mutual Fund or Provident fund

But for this separate consideration is charged then it shall not be regarded as transaction only in money. That separate consideration is treated as commission and shall be subject to service tax. Examples of separate consideration which is subject to service tax.

• Commission for making draft

• Processing charges for arranging loan

• Minimum balance charge levied by Bank

Goods includes securities and derivatives.

• ATM card or Credit card fees

• Debt collection services • Inbuilt commission on ex-change of foreign currency.• Recovery agent commission

(ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out––

(a) by a lottery distributor or selling agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner;

w.e.f 14-5-2016 from Dec 2016 exams onwards

by a lottery distributor or selling agent on behalf of the State Government, in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act, 1998. [to be discussed in negative list]

(b) by a foreman of chit fund for conducting or organising a chit in any manner.

(b) a provision of service by an employee to the employer in the course of or in relation to his employment.

note : Employee providing extra service outside the employment then service tax is levied. E.g. Taking tuitions of employer child is not a service in the course of employment therefore liable to service tax. Similarly setting question paper, acting as an invigilator.

Board sitting fees received by Director from a Company is subjected to service tax since there do not exist relationship of employer and employee.

contract of employment

Contract of employment not subjected to service tax.

If...taxable Then...

Services provided by casual worker to employer who gives wages on daily basis to the worker.

These are services provided by the worker in the course of employment.

Casual workers are employed by a contractor, like a building contractor or a security services agency who de-ploys them for execution of a contract or for provision of security services to a client.

Services provided by workers to the contractor are services in the course of employment and hence not taxable. However, services provided by the contractor to his client by deploying such workers would not be a service provided by the workers to the client in the course of employment. The consideration received by the contractor would therefore be taxable if other conditions of taxability are present.


1. Compensation paid for termination of employee : No service tax

2. However where payment is made so that employee do not join any other competitive business then it is non competing fees and is subjected to service tax.

(c) Fees taken in any Court or tribunal established under any law.

Since it is constitutional right to approach court therefore no service tax. Where arbitrator is appointed then service tax is levied since arbitrator is neither Court nor Tribunal nor appointed under any Law.

Part 4

Explanation 1. Followings are also not treated as service hence no service tax is levied. For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,

A The functions (activity) performed

by

Members of Parliament (MP)performing the

functions of that office as such member

Members of State Legislative (MLA)

Members of Panchayats

Members of Municipalities / local authorities

B The duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (E.g. President, Judges of SC, CEC, CAG)

C The duties (activity) performed by any

person as a

Chairperson in a body established by the Central Government or State Governments or local authority

who is not employee of such body.

Member

Director

E.g. SEBI, enquiry committee, Finance Commission, TRAI,

Part 5

Explanation 3. In following cases service tax shall be levied.

(a) An unincorporated association or a body of persons, 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.

note 1 : 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.

note 2 : By treating them as distinct person, now service tax shall be levied.

Example 1


Club Members of club

<-----------Consideration

|---------------------though same person but treated as distinct person ---------------------|

Example 2


X Inc Branch office of X IncPE outside India <-----------Consideration PE in India



Example 3


X Ltd Branch office of X LtdPE in J & K <-----------Consideration PE in Delhi


Example 4


X Ltd Branch office of X LtdPE in Delhi <-----------Consideration PE in Ajmer

|---------------------Same person therefore no service tax ---------------------|

section 65B(37). meaning of person

The following shall be considered as persons for the purposes of the Act:1. an individual

2. a Hindu undivided family

3. a company

4. a society

5. a limited liability partnership

6. a firm7. an association or body of individuals, whether incorporated or not

8. government. It means both Central Govt. and State Govt. Article 289 bars levy of tax on income / property of Govt. It does not bar levy of indirect tax.9. a local authority, or

10. every artificial juridical person, not falling within any of the preceding sub-clauses.

note : Government and local authorities also liable to pay tax. However, most of the services provided by the Government or local authorities are in the negative list. But certain activity provided by the Government or local authorities is taxable to provide a level playing field to private entities in these areas as exemption to Government in such activities would lead to competitive inequities.

inter departmental services


CG / SG CG / SG<-----------Consideration

|---------------------Same person therefore no service tax ---------------------|

services provided by govt.

Governmental ServiceStatutory Service Commercial Service

Exempt from service tax Liable to service tax

examples of statutory service examples of commercial service1. Registration of agreements relating to immovable property 1. Railways

2. Certification of films 2. Post Office3. Issuance of driving licence 3. Airline

4. Incorporation of company 4. Security service

5. The above services are also mentioned in negative list 5. Research and development service


analysis

movable property immovable propertySale No VAT | No ST No VAT | No ST | Stamp Duty is levied

Deemed Sale No VAT | No ST NA

Gifts, inheritance

No VAT | No ST No VAT | No ST | Stamp Duty is levied

all aBout swachh Bharat cess and krishi kalyan cess

sBc kkcEffective from 15-11-2015

(for Nov / Dec 2016 exams)1-6-2016 (from 2017 exams onwards)

Through which Act Chapter VI (Section 119) of the Finance Act 2015

Chapter VI as per Section 161 of the Finance Act, 2016

Objective It is a programme of hygiene and cleanliness but, at a deeper level, a programme for preventive health care, and building awareness

In order to finance and promote the welfare of farmers and development of agriculture.

Levied on Taxable ServiceNot applicable on Excise Act

Customs Act

Excise Act

Customs ActRate 0.5% on value of taxable service 0.5% on value of taxable serviceCCR available ? No Yes only to service provider.

Not available to manufacturers.Is this rate applicable on reverse charge?

Yes Yes

Is this rate applicable on composition scheme

Yes Yes

Is this rate applicable on abated value

Yes Yes

Effective service tax rate

14.5% 15%

Is this rate to be shown separately in the invoice?

Yes Yes


Questions and answers

w ould amounts received by an employee from the employer on premature termination of contract of employment be chargeable to service tax?

No. Such 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.

w ould a business chit fund comes under ‘transaction only in money’?

In business chit fund since certain commission received from members is retained by the promoters as consid-eration for providing services in relation to the chit fund it is not a transaction only in money. The consideration received for such services is therefore chargeable to service tax.

w ould the making of a draft or a pay order by a bank be a transaction only in money?

No. Since the bank charges a commission for preparation of a bank draft or a pay order it is not a transaction only in money. However, for a draft or a pay order made by bank the service provided would be only to the extent of commission charged for the bank draft or pay order. The money received for the face value of such instrument would not be consideration for a service since to the extent of face value of the instrument it is only a transaction in money.

w ould an investment be transaction only in money?

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. Thus a partner being admitted in a partnership against his share will be a transaction in money. However, if a commission is charged or a portion of the return is retained as service charges, then such commission or por-tion of return is out of the purview of transaction only in money and hence taxable. Also, if a service is received in lieu of an investment it would cease to be a transaction only in money to the extent the investment represents the consideration for the service received.

w ould debt collection services or credit control services be considered to be transaction only in money?

No. Such services provided for consideration are taxable.

if an unsecured debt is transferred to a third person for a consideration would this activity be treated as service?

No. Since unsecured debt is an actionable claim, a transaction only in such actionable claim is outside the ambit of service. However if a service fee or processing fee or any other charge is collected in the course of transfer or assignment of a debt then the same would be chargeable to service tax.

w ould sale, purchase, acquisition or assignment of a secured debt like a mortgage also constitute a trans-action in money?

Yes. However if a service fee or processing fee or any other charge is collected in the course of transfer or as-signment of a debt then the same would be chargeable to service tax.

w ould vouchers that entitle a person to enjoy a service, for example a health club, be an actionable claim?

No. Such a voucher does not create a ‘beneficial interest’ in a moveable property but only entitles a person to enjoy a particular service for a single or specified number of times.

w ould recharge vouchers issued by service companies for enabling clients/ consumers to avail services like mobile phone communication, satellite tv broadcasts, dth broadcasts etc be ‘actionable claims?

No. Such recharge vouchers do not create a ‘beneficial interest’ in a moveable property but only enable a person to enjoy a particular service.


4 Section 66D.

Negative Services

Non Levy Not dutiable Service

₹

negative service exempted servicesNon Taxable service Taxable service but non dutiable

No Levy therefore no collection. There is a levy but no collection.

Section 66D part of Act Part of mega exemption notification. 25/2012note : Two negatives make one positive. The term used like excluding, other than, except would be taxable.

clause ( a). services By government or a local authority

Any services (both statutory services and commercial services) provided by Govt. or local authority is not taxable except the following.

exceptions (commercial services are taxable service)

(i) Service provided by post office.Not Taxable Post office service Taxable post office service• Basic mail service • Speed Post, Express Parcel Post These services shall also be

not taxable if provided to Govt.

• Money order service • Life Insurance

• Banking service • Agency Services

(ii) Services in relation to an aircraft or a vessel (ship), inside or outside the precincts of a port or an airport provided by Govt. is taxable service. E.g. Port provides services of loading and unloading of goods these are taxable. Warehouse services are taxable. Airport charges are subjected to service tax. Railway platform ticket not subjected to service tax.

port airport railwayCloakroom Taxable Taxable Not Taxable

Parking charges Taxable Taxable Not Taxable

Hanger charges Taxable Taxable Not Taxable

Platform ticket / lounge services Taxable Taxable Not Taxable

Warehouse services Taxable Taxable Not Taxable

(iii) Transport of goods or passengers by Govt. or local authority is taxable. E.g. Railways. However in clause (o) & (p) specifically mentions that Transport of passengers by Railways in AC is only taxable. Transport of goods by railways is taxable service.

(iv) any services, provided to business entities. [w.e.f. 1-4-2016 for nov 2016 exam onwards] E.g. (a) Testing services like ISI, Hall Mark provided by Govt. is taxable service. (b) BPO type of services provided by Govt. or local authority is taxable service. (c) Security services. Central Industrial Security Force provided by Govt. to PSU is taxable service.(d) Renting services provided by Govt. is taxable service.

Business entity

Business entity is defined in section 65B(17) of the Finance Act, 1994 as any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. Thus, it includes sole proprietors as well. ICAI, ICSI, ICWAI, tax by kk classes are few examples of business entity.

Political parties, Politicians, CBI, TRAI, Govt., NGO etc are not treated as business entity.

Intention of the Govt. was to tax right to use assignment of natural resources, mining rights, telecommunication rights.

govt. providing statutory function not taxable is now exempt:

Thus, services which are provided by Government in terms of their sovereign right to business entities are not


support services e.g. grant of mining or licensing rights, driving licence, censor certificate, passport services, voter I card, PAN, property registration, Fees to ROC. Refer mega exemption.

conclusion

1. 3 commercial services provided by Govt./ local authority to any person is taxable.2. Any service provided by Govt./ local authority to a business entity is taxable. However certain specified

services has been made exempted.

Insertion of definition of Govt. w.e.f 14-5-2015 (to avoid interpretational issues)

“Government means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitu-tion or the rules made thereunder”.

Followings are not treated as Govt.

1. Corporations formed under Central Act. ONGC, IOC, HPCL, SAIL,

Services provided by these entities are taxable unless covered under other entry of negative list. The services provided by these entity can be exempted if covered under any entry of Mega exemption.

2. Corporations formed under State Act. DTC,

3. Govt. company registered under Companies Act. E.g. MTNL, 4. Institution set up special Acts. e.g. ICAI, ICSI, AIIMS, IIM

clause ( b). services By rBi

Services by the Reserve Bank of India is not taxable service. Generally RBI provides it services to Bank and Govt. only. Any type of output service provided by RBI is not taxable. Input services of RBI is taxable.

However services provided to RBI are not in negative list and would be taxable unless the same is covered in any other entry of negative list or exempted. Following services are received by RBI. Technical consultancy, legal services, banking services either from India or from outside India.

note 1 : Services provided from outside India to RBI in respect of foreign exchange services are exempted services.

Examples

The objects of formation of RBI is to regulate the functioning of banking system in the country. RBI has opened various clearing houses for clearance of cheques deposited by the customers in the bank. The clearing houses ensures that the account holder of the respective banks gets the credit in cheque deposited by him. In many places, the clearing houses are not operated by RBI but RBI has permitted the other banks like Canara Bank etc to open and operate clearing houses. These banks collect the bank charges from the member banks whose cheques are cleared. These services are taxable even if providing same services as RBI.

Other functions of RBI (not taxable)1. Formulation and execution of monetary policy.2. Issuer of currency.3. Banker and debt manager to the Government.4. Banker to banks5. Regulator of the banking system.6. Manager of foreign exchange.7. Regulator and supervisor of the payment and settlement systems.

clause ( c). services By foreign diplomatic mission also called emBassy

Services by a foreign diplomatic mission located in India. A diplomatic mission is a group of people from one State / Country present in another State / Country to represent the sending the State / Country. Following services are provided by Embassy like attestation of documents, issuance of certificates, visa etc.

Output services of embassy are not taxable. Input services of embassy are exempt. [EN 27 / 2012]


clause ( d). services relating to agriculture

Services relating to agriculture by way of—

Services relating to agriculture and agricultural produce. (Agriculture means cultivation of plants and rearing or breeding of animals and other species of life forms for foods, fibre, fuel, raw materials or other similar products. it does not include rearing of horses.

Therefore breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture (It is the science, technology and business involved in intensive plant cultivation for human use - garden, orchard and nursery), forestry included in the definition of agriculture therefore not taxable.

agricultural produce means any produce resulting from cultivation or rearing of plants, animals including all life forms, on which either no further processing is done or such processing is done as is usually done by the cultivator or producer which does not alter essential characteristics of agricultural produce but make it marketable for primary market’

note 1 : Agricultural produce results after agriculture.

not t axaBle service relating to agriculture t axaBle service relating to agriculture• Poultry farming • Rearing of horses : Taking care• Breeding of fish (pisciculture) • Camel, elephant or horses used for tourist

purpose / Fist spa for cosmetic purpose.• Rearing of silk worms (sericulture)

• Cultivation of ornamental flowers Conclusion : No life forms taxable except rearing of horses which is taxable.• Horticulture (gardening)

• Breeding of horses : Hybridisation

(i) agricultural operations (basic operation) directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing.

But is does not include that operation which alter its essential characteristics of agricultural produce. But if it alters the essential characteristics then such operation shall be treated as manufacturing process and shall not be subjected to service tax. But if not treated as manufacturing process then may or may not be subjected to service tax.

Thresh : Beat the seeds out of crops. Testing of seed, crops & soil.

Testing of soil or crops : There were some services like laboratory testing services, testing of plants or animals, soil testing, animal feed testing in relation to agriculture or agriculture produce which are essential to determine the quality of agriculture or agricultural produce. Such testing is not subjected to service tax.

Agricultural Operation : Conversion of biological assets into agricultural produce not subject to service tax.

Manufacturing Operation : Conversion of agriculture produce into final processed goods is subjected to service tax if not subjected to excise.

Biological assets agriculture produce final processed goods (food stuff)Sheep Wool Carpets

Plants Cotton Thread, cloths

Sugarcane Harvested cane Sugar

Dairy cattle Milk Cheese

Bushes Leaf Tobacco

Vines Grapes Wine

Fruit trees Picked fruits Processed fruits/juices

Pigs Carcass Sausages (minced meat), cured hams


(ii) Subsequent operation : 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. (wholesale market)

fumigating : Eradicating pest / insected through fire.(iii) Supply of farm labour.(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 (LUPSW) of agricultural produce.

(vi) Agricultural extension services. E.g. Education of farmer and their training.

(vii) Services by any agricultural produce marketing committee or a commission agent for sale or purchase of agricultural produce.

p1 : Paddy is grown in farms and that is an agricultural produce and rice is obtained by shelling of paddy. Issue is whether activity of shelling of paddy can be type of processing which does not alter its essential characteristics, but only makes it marketable to the primary market?

soln : Shelling of paddy make it marketable only for secondary market. Thus it is not agricultural produce. Thus storage and cargo handling services of rice shall attract service tax.

Now there is amendment by FA 2014 which is shown below :

services paddy or agricultural produce rice

Agricultural produce Yes No

Agricultural operations Directly related to produce including, alteration, harvesting threshing, testing

etc. in negative list.

No

Supply of labour In negative list Taxable service

Agricultural process In negative list No

Services provided by APMC In negative list Taxable service

Transportation in goods carriage Exempt Exempt

Loading, unloading, packing, ware-housing storage

In negative list Exempt

Job work / processing (milling from paddy to rice)

NA Exempt

p2 : Whether following transaction subjected to service tax.

s.no particulars(i) Cultivation of ornamental flowers(ii) Packing of tomato ketchup

(iii) Warehousing of potato chips

(iv) Sale of tea leafs on commission basis

(v) Packaging of pulses in retail packs

(vi) Training of farmers on use of scientific tools and agro machinery(vii) Leasing of vacant land to a stud farm

(viii) Grading of wheat according to its quality(ix) Testing of samples from plants for pest detection

(x) Rearing of silk worms

(xi) Renting of vacant land for poultry farming.

ans : (i) not taxable (ii) taxable (iii) taxable (iv) not taxable (v) taxable (vi) Not taxable (vii) taxable (viii) not taxable (ix) not taxable (x) not taxable (xii) Not taxable.


p3 : ‘WOW Agro furnishes the following details with respect to the activities.

(i) Supply of farm labour 58,000

(ii) Warehousing of biscuits 1,65,000

(iii) Sale of rice on commission basis 68,000

(iv) Training of farmers on use of new pesticides and fertilizers 10,000

(v) Renting of vacant land to a stud farm 1,31,500

(vi) Testing undertaken for soil of a farm land 1,21,500

(vii) Leasing of vacant land to a poultry farm 83,500

Compute the service tax liability of WOW Agro for the month of June. Assume that the point of taxation in respect of all the activities mentioned above falls in the month of June itself. WOW Agro has paid service tax of ₹ 6,18,000 during the Financial Year.

solution

(i) Supply of farm labour not taxable

(ii) Warehousing of biscuits 1,65,000

(iii) Sale of rice on commission basis Not taxable

(iv) Training of farmers on use of new pesticides and fertilizers developed through scientific research

Not taxable

(v) Renting of vacant land to a stud farm 1,31,500

(vi) Testing undertaken for soil of a farm land Not taxable

(vii) Leasing of vacant land to a poultry farm Not taxable

Net amount charged 2,96,500

clause ( e). trading of goods

Service tax not levied on sale price of goods. VAT is levied. Also in trading of goods, the relations with suppliers as well as with customers are purely that of a buyer and seller. No services of whatsoever nature is provided by the trader either to sellers or to purchasers.

However commission charged by agent or a clearing and forwarding agent, who sells goods on behalf of another for a commission is subjected to service tax. Also services provided in relation to trading of goods is taxable service like warehousing of goods, packing of goods, transportation of goods.

note 1 :Where a person who is engaged in both sale of goods and provision of service and is availing common services then Rule 6 and Rule 2 of CCR restricts availment of full CCR.

clause ( f). process amounting to manufacture

Services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption.

Consequently, Service Tax shall be levied on contract manufacturing /job work for production of potable liquor for a consideration.

Section 65B(40). Meaning of process amounting to manufacture or production of goods

It means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force. Also process amounting to manufacture under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955.

note 1 : Job work [Entry No 30] : Carrying out an intermediate production process as job work in relation to agriculture, printing or textile processing.


p1 : State whether following activities undertaken by M & M Manufacturers at Chandigarh would be liable to service tax.

(i) Manufacture of herbal cosmetics liable to excise duty under the Central Excise Act, 1944.

(ii) Manufacture of alcoholic drinks liable to excise duty under the Punjab Excise Act, 1914.

(iii) Processing of raw materials to make them fit for further production. The process is not liable to any excise duty.

(iv) Manufacture of medicines liable to excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.

(v) Manufacture of phones liable to excise duty but excise duty is exempt.

ans : Not taxable; taxable; taxable; not taxable. not taxable.

clause ( g). advertisements

Selling of space for advertisements in print media.

S 65B(2) Meaning

of advertisement

It is 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.

(Taxable)

S 65B(39a)

Meaning

of

print media

(i) book as defined in the Press and Registration of Books Act, 1867,

but does not include business directories , yellow pages and trade catalogues which are pr imar i ly meant for commercial purposes.

(Taxable)

(ii) Newspaper as defined in the Press and Registration of Books Act, 1867.

Newspapers means any printed periodical work containing public news or comments on public news. It can cover magazine also.

Taxable

Sale of space for advertisement of goods, services, immovable property, person in

• Cinema halls • Hoardings • Door to door (canvasing) • Business directories• Metro • Bill Boards • Auto, taxi • Yellow pages• Internet • Cell Phones • Mail box • Brand ambassador• Malls • Phone Messaging • Radio, TV • Aerial advertising

note 1 : Services provided by advertisement agencies (LINTAS) relating to making or preparation of advertisements would not be covered in this negative list entry and would thus be taxable. note 2 : Commission received by commission agents for booking of advertisement is subject to service tax.

clause ( h). toll road services

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

Services of toll collection on behalf of an agency to levy toll is subjected to service tax. However no service tax on amount collected as toll.

note 1 : Output service not taxable, input service taxable like, security service, manpower supply service.


clause ( i). Betting services

Betting, gambling or lottery. (Ticket price not subjected to service tax)

analysis

Following activity not treated as transaction only in money and hence taxable service

Any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out––

(a) by a lottery distributor or selling agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner;

w.e.f 14-5-2016 Dec 2016 exams onwards

by a lottery distributor or selling agent on behalf of the State Government, in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act, 1998.

Section 65B(15). Meaning of Betting or Gambling (Need not memorise)

It is 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.

note 1 : Though lottery is in negative list. No service tax on price printed on lottery tickets. However services provided by lottery distributors will attract service tax on commission. Optional composition scheme is framed for lottery agent for easy computation of service tax.

note 2 : Output service not taxable, input service taxable.

clause ( j). entertainment events and amusement services

clause ( k). electricity services

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

note 1 : Power Grid Corporation is responsible for transmission of electricity and BSES etc are responsible for distribution of electricity.

note 2 : Services provided by way of installation of gensets or similar equipment by private contractors for distribution of electricity is subjected to service tax.

clause ( l). education services

Education services

Negative List Exemption List

Till 13-5-2016 w.e.f. 14-5-2016

Till Nov 2016 exam From Dec 2016 exams onwards

Services by way of—

(i) pre-school education and education up to higher secondary school (+ 2) or equivalent. (International schools)

(ii) education as a part of a curriculum (syllabus) for obtaining a qualification recognised by any law for the time being in force. (Graduate or post graduate courses / ICAI / ICSI / ICMAI)

(iii) education as a part of an approved vocational education course. (Direct Job courses)


• Course run by an industrial training institute (ITI) or industrial training centre (ITC) affiliated to the national council for vocational t raining offering courses in designated trades as notified under the Apprentices Act, 1961.

vocational coursesEngineering trades Non Engineering trade

Welder, plumber, wire man (Total 50) Photographer, Medical transcription etc (Total 60)

• Modular Employable Skill Course approved by national council of v ocational t raining. There are around 1100 approved courses like banking, accounts, printing, fashion designing etc.

Note : These courses are designed as per client requirement but should be approved by NCVT. These courses can be run by any person.

• Course run by an industrial training institute (ITI) or industrial training centre (ITC) affiliated to the state council for v ocational t raining offering courses in designated trades as notified under the Apprentices Act, 1961

note : The courses which are mentioned in Apprentices Act run by ITI / ITC and affiliated to either NCVT / SCVT are only in negative list.

• a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India. (deleted)

note 1 : Private tuitions are subjected to service tax.

note 2 : Services provided by way of education as a part of a prescribed curriculum for obtaining a qualification recognized by a law of a foreign country is not covered in the negative list. Therefore subjected to service tax. To be in negative list a course should be recognized by an Indian law.

note 3 : Foreign language courses training subjected to service tax. Private coaching services is subjected to service tax.

note 4 : Output service to student is in negative list. Certain input services to educational institute is exempt like transportation, conduct of examination etc.

p1 : Comment on the taxability of service tax ?

1. Courses offered by ITI/ITC affiliated to state council of v ocational t raining Not taxable

2. Courses offered by ITI/ITC affiliated to national council of v ocational t raining Not taxable

3. Modular Employable Skill Course Not taxable

4. Courses run by an institute affiliated to the national skill development corporation Taxable

p2 : Comment on the applicability of service tax in case of vocational educational courses (VEC).

(a) ‘Udaan’ an industrial training institute (ITI) affiliated to the National Council for Vocational Training (NCVT).

(b) ‘A-Star’ a vocational education provider affiliated to Sector Skill Council formed under National Skill Development Corporation (NSDC).

(c) ‘Best Skill Centre’ an industrial training centre (ITC) affiliated to the State Council for Vocational Training, Delhi.

(d) ‘Horizon’, an institute, registered with Directorate General of Employment and Training (DGET), Union Ministry of Labour and Employment, running a Modular Employable Skill Course (MESC) approved by the National Council of Vocational Training.

(e) Computer courses run by Aptech or NIIT

(f) Placement services provided by colleges

(g) Services of conducting test for admission to engineering colleges

ans : Not taxable; Taxable; Not taxable; Not taxable; taxable; taxable. not in negative list but exempt from service tax.


clause ( m). renting of residential units

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

Section 65B(41). Meaning of Renting. (Need not memorise)

It is allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property.

Residential accommodation, but does not include hotel, motel, inn, guest house, camp site, lodge, house boat, or like places meant for temporary stay.

if then Taxable / Not Taxable

(i) A residential house taken on rent is used only or predominantly for commercial or non-residential use.

the renting transaction is not covered in this negative list entry.

taxable

(ii) If a house is given on rent and the same is used as a hotel or a lodge.

the renting transaction is not covered in this negative list entry because the person taking it on rent is using it for a commercial purpose.

taxable

(iii) Rooms in a hotel or a lodge are let out whether or not for temporary stay.

the renting transaction is not covered in this negative list entry because a hotel or a lodge is not a residential dwelling.

taxable

(iv) Government department allots houses to its employees and charges a license fee.

such service would be covered in the negative list entry relating to services provided by government.

not taxable

(v) Furnished flats given on rent for temporary stay (a few days).

such renting as residential dwelling for the bonafide use of a person or his family for reasonable period shall be residential use; but if the same is given for a short stay for different persons over a period of time the same would be liable to tax.

Residential use.

not Taxable.

Commercial use

Taxable

p1 : Determine whether in following cases services taxable or not taxable?

1. Renting of vacant land or building relating to agriculture.

2. Renting of any property by RBI for commercial purpose. .

3. Renting of any property by a Govt. or a local authority to all non-business entity. 4. Renting of any property by a Govt. or a local authority to a business entity. 5. House is rented to X Ltd for residence of director.

ans : (1) not taxable. (2) not taxable. (3) not taxable. (4) taxable as a support service (5) Not taxable.

clause ( n). financial services

Services by way of—

(i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. (Interest on loan / advance / deposit is not taxable. However commission on making of draft, processing charges are subject to service tax).

(ii) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers. (However banks or authorised forex dealers dealing with companies, tourist are subjected to service tax on value of inbuilt commission).

note 1 : The definition of ‘service’ excludes activities that constitute transactions only in money or actionable claims.


clause ( o). transport services of passengers ( local passengers)

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

(i) A stage carriage.

2(40) of MV Act

Stage carriage means a motor vehicle to carry more than 6 passengers excluding the driver for hire or reward at separate fairs paid by or for individual passengers, either for whole journey or for stages of the journey. (Gramin sewa, mini bus, Bus) is not subjected to service tax.

A stage carriage services deleted w.e.f. 1-6-2016. [applicable for May 2017 exam onwards] Also see Entry No 23.

(ii) Railways not taxable railway service t axable railway service.Non AC service. AC coach service.

(iii) Metro, monorail or tramway is not subjected to service tax.

(iv) Inland waterways. (within city) is not subjected to service tax.

a. public transport, in a vessel (ship) of less than 15 tonne net is not taxable service.

b. public transport, in a vessel (ship) of atleast 15 tonne net is taxable service.

c. t ourist transport predominantly for tourism purpose in a vessel of any tonne is taxable service. (Cruise, Yacht)

note : Normal public ships or other vessels that sail between places located in India would be covered in the negative list even if some of the passengers on board are using the service for tourism as predominantly such service is not for tourism purpose. However if services provided by leisure or chartered vessels or cruise, predominant purpose of which is tourism, would not be covered in the negative list even if some of the passengers in such vessels are not tourist.

(v) Metered cabs, radio taxis or auto rickshaws is not subjected to service tax.

Metered cab means any contract carriage on which an automatic device, is fitted which indicates reading of the fare chargeable at any moment and that is charged accordingly but does not include radio taxi.

Following are taxable service since not covered in negative list.

a. Air transport service of passengers is taxable service.

b. Ropeways, Tanga or aerial tramway is subjected to service tax since mega exemption withdrawn w.e.f. 1-4-2016. [from Nov 2016/ Dec 2016 exam onwards]

clause ( p). transport services of goods

Services by way of transportation of goods—

(i) Transport of goods by road by any vehicle is not subjected to service tax. E.g. Bus, Mini Bus, Taxis, auto rickshaws.

However transport of goods by truck is subjected to service tax. (see note)

Service by courier agency is subjected to service tax.

(ii) By an aircraft or a vessel (ship) from a place outside india to the first customs station of landing in India not subject to service tax.

[w.e.f. 1-6-2016 from Nov 2017 exams onwards]

By an aircraft or a vessel (ship) from a place outside india to the first customs station of landing in India not subject to service tax.

Entry No 53. Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India.

However, the services provided by vessels would be taxable. It is clarified that Service tax levied on such services shall not be part of value for custom duty purposes.

(iii) Inland waterways not subject to service tax. (within city limits)

TAXABLE SERVICES


A. Domestic airways, International airways from India to outside India is not taxable since location of service is in Non Taxable Territory, railways is subjected to service tax.

examples

Air Cargo (Destination) Air Passengers (Origin)

1. London to Delhi Not taxable as per negative list

Exempt w.e.f 1-6-2016

Not Taxable as per POP rules

2. Delhi to London Not Taxable as per POP rules Taxable

3. Mumbai to Delhi Taxable Taxable

Cargo Ship (Destination) Passenger ship (Origin)

1. London to Delhi Not taxable as per negative list

Taxable w.e.f. 1-6-2016

Not Taxable as per POP rules

2. Delhi to London Not Taxable as per POP rules Taxable

3. Mumbai to Delhi Taxable Taxable

note : Also see specific exemption, partial exemption and reverse charge in case of services of goods transport agency.

p1 : Determine whether in following cases services taxable or not taxable?

1. Tempo for transportation of goods.

2. Transportation of goods by railways.

3. Packers and Movers services by truck.

4. Cargo ships from India to outside India.

ans : (1) not taxable. (2) taxable. (3) taxable. (4) Not taxable.

clause ( q). funeral services

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

what are non taxaBle service

1. Those services which falls in negative list.

2. Those services which are outside the definition of service.

3. Those services which are provided in non taxable territory.


5Interpretation of

Description of Service

Classification of Service

₹

introduction

It is also called classification of service. Although all services are taxable (Activity and declared service). But there are few services which are in negative list. Few services enjoys 100% exemption. Even few services enjoys partial exemption. Services are taxable in India if consumed in India. Consumption of services is decided by POP Rules. Availability of CCR is also decided by nature of services.

section 66f(1). input service cannot Be used to identify main service

Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service.

analysis

• ‘Provision of access to any road or bridge on payment of toll’ is a specified entry in the negative list in section 66D of the Act.

Any service provided in relation to collection of tolls or for security of a toll road would be in the nature of service used for providing such specified service and will not be entitled to the benefit of the negative list entry.

• Transportation of goods on an inland waterway is a specified entry in the negative list in section 66D of the Act.

Services provided by an agent to book such transportation of goods on inland waterways or to facilitate such transportation would not be entitled to the negative list entry.

illustration

The services by the Reserve Bank of India, being the main service is in the negative list does not include any agency service provided by any bank to the Reserve Bank of India. Such agency service, being input service, used by the Reserve Bank of India for providing the main service, for which the consideration by way of fee or commission or any other amount is received by the agent bank, does not get excluded from the levy of service tax by virtue of inclusion of the main service in the negative list and hence, such service is leviable to service tax.’.

sect ion 66f(2). most speci f ic descr ipt ion preferred over general description

Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description.

For example, ‘road repair’ would be better understood as ‘repairs to road’ rather than ‘repairs of immovable property’

section 66f(3). t ax treatment of Bundled service

Subject to the provisions of section 66F(2), the taxability of a bundled service (service + service) shall be determined in the following manner, namely:––

(a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character.

- If essential character falls in negative list or 100% exempted then such bundled service is not taxable.

- If essential character do not fall in negative list or 100% exempted service then such bundled service is taxable.

(b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be


treated as provision of the single service which results in highest liability of service tax.

Explanation. Bundled service means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.

note : Where there is bundled of service + goods then section 66F(3) is not applicable. It is case of either of Deemed sales where goods elements and service elements shall be segregated and taxed separately. If it is not case of deemed sales then apply principle of dominant nature.

manner of determining if the services are Bundled in the ordinary course of Business

Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines, Services of Tour operator - Providing services of air booking, hotel booking, city tour, visa services etc. 5 star hotel providing room + breakfast.

services provided by boarding schools whether taxable or not?

Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. This may be a case of bundled services if the charges for education and lodging and boarding are inseparable. Their taxability will be determined in terms of the principles laid down in section 66F(3) of the Act. Such services in the case of boarding schools are naturally bundled in the ordinary course of business. Therefore the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle. In this case since dominant nature is determined by the service of education other dominant service of providing residential dwelling is also covered in a separate entry of the negative list, the entire bundle would be treated as a negative list service.

If a course in a college leads to dual qualification only one of which is recognized by law would the service provided by the college by way of such education be covered in this entry?

Provision of dual qualifications is in the nature of two separate services as the curriculum and fees for each of such qualifications are prescribed separately. Service in respect of each qualification would, therefore, be assessed separately. If an artificial bundle of service is created by clubbing two courses together, only one of which leads to a qualification recognized by law, then by application of the rule of determination of taxability of a service which is not bundled in the ordinary course of business contained in section 66F(3) of the Act it is liable to be treated as a course which attracts the highest liability of service tax.

However incidental auxiliary courses provided by way of hobby classes or extra-curricular activities in furtherance of overall well being will be an example of naturally bundled course.

hotel providing a services of room + breakfast

A hotel provides a 4-D/3-N package with the facility of breakfast. This is a natural bundling of services in the ordinary course of business. The service of hotel accommodation gives the bundle the essential character and do not fall in negative list and is not exempt therefore taxable. But this service is partially exempt.

Example 1

t axable portionHotel Accommodation 60% This is a case of naturally bundled service. Whole

service shall be classified into Hotel accommoda-tion. Accordingly CCR shall be applicable.

Breakfast 40%

air service package on board

An example of ‘naturally bundled service’ would be air transport services provided by airlines wherein an element of transportation of passenger by air is combined with an element of provision of catering service on board. Each service involves differential treatment as a manner of determination of value (Abatement) of two services for the purpose of charging service tax is different. This service do not fall in negative list and is not exempt therefore taxable.

Example 1


t axable portionAir fare 60% This is a case of naturally bundled service. Whole

service shall be classified into air service. Accord-ingly CCR shall be applicable.

Food and beverages on board

40%

house given on rent both for residential and commercial purpose

A house is given on rent one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is a negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property.

other cases (hotel)

A 5 star hotel is booked for a conference of 100 delegates on a lump sum package with the following facilities:• Accommodation for the delegates and breakfast for the delegates,• Tea and coffee during conference.• Access to fitness room for the delegates and availability of conference room.• Business centre.

As is evident a bouquet of services is being provided, many of them chargeable to different effective rates of tax. None of the individual constituents are able to provide the essential character of the service. However, if the service is described as convention service it is able to capture the entire essence of the package. Thus the service may be judged as convention service and chargeable to full rate. However it will be fully justifiable for the hotel to charge individually for the services as long as there is no attempt to offload the value of one service on to another service that is chargeable at a concessional rate.

Example 1

t axable portionHotel Accommodation 60% This is a case of naturally bundled service. Whole

service shall be classified into conference service. Accordingly CCR shall be applicable.

Breakfast and snacks 40%

Banquet hall for confer-ence

100%

other cases (gta service)

A GTA is providing following services.1. Transportation of goods by Road

2. Packing services

3. Loading services

4. Unloading services.

The above services services are naturally bundled there abatement is available on entire consideration.


6 Section 64.

Taxable Territory

Domestic Tariff Area

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introduction

1. Indirect tax is consumption based taxation system or destination based taxation system.

2. If place of provision of services is in India then taxable service & if place of provision of services are outside India then it is not taxable.

section 64. extent, commencement and application

1. This chapter extends to whole of India except the State of Jammu and kashmir.

2. Applicability of ST provisions has been extended upto Exclusive Economic Zone (EEZ - upto 200 nm)

section 65B(52). taxaBle territory

It means the territory to which the provisions of Chapter V of the Finance Act, 1994 apply i.e. whole of India excluding the State of Jammu and Kashmir.

section 65B(35). non taxaBle territory

It is territory other than the taxable territory.

section 65B(27). india

India means—

(a) the territory of the Union of India as referred to in of Article 1 (2) and (3) of the Constitution.

(b) its territorial waters (upto 12 nm), continental shelf (it is inside 12 nm ), exclusive economic zone (upto 200 nm) or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976.

(c) the sea-bed and the subsoil underlying the territorial waters.

(d) the air space above its territory and territorial waters; and

(e) the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof.

note : The new charging section, section 66B, enables taxation of only such services as are provided in taxable territory. Thus services that are provided in a non-taxable territory are not chargeable to service tax.


7 Date of Payment of

Service Tax

Deposit of tax is compulsory whether collected or not

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learning sections

1. Rule 6 of Service Tax Rules 1994. Due dates of payment of service tax

2. Point of Taxation Rules 2011.

3. Section 75 : Interest

4. Section 76 : Penalty

rule 6. p ayment of service tax [w.e.f. 1-4-2016 from nov 2016 exam onwards]

Category 1

In case of individuals, HUF, partnership firms and one person company (opc) whose aggregate value of taxable services (avts) provided from one or more premises is ₹ 50 lakh or less in the previous financial year the due dates for payment of service tax on taxable services provided or to be provided by him upto a total of ₹ 50 Lakh in the current financial year, at the option of the service provider, is as follows : -1. In case of e - payment : by the 6th day of next month immediately following the end of quarter in which

the payment is received.

2. In any other case (cheque cash): by the 5th day of next month immediately following the end of quarter in which the payment is received.

3. In the case payment is received in the quarter ending in march : 31st day of march.

AMJ : 5/6 July JAS : 5/6 Oct OND : 5/6 Jan JFM : 31 March

Category 2

In case of individuals, HUF, partnership firms and one person company (opc) whose aggregate value of taxable services (avts) provided from one or more premises exceeds ₹ 50 lakh in the previous financial year the due dates for payment of service tax on taxable services provided or to be provided by him in the current financial year :1. In case of e - payment : by the 6th day of next month immediately following the end of quarter in which

the service is deemed to be provided as per potr.

2. In any other case (cheque / cash): by the 5th day of next month immediately following the end of quarter in which the service is deemed to be provided as per potr.

3. In the case payment is of quarter ending in march : 31st day of march.

Category 3

In case of company the due dates for payment of service tax on taxable services provided or to be provided by him in the current financial year :1. In case of e - payment : by the 6th day of next month immediately following the end of month in which the

service is deemed to be provided as per potr.

2. In any other case (cheque / cash): by the 5th day of next month immediately following the end of month in which the service is deemed to be provided as per potr.

3. In the case payment is of the month of march : 31st day of march.


rule 6(2) & (2 a ) of service tax rules, 1994. mode of payment of service tax

Cheque Deemed payment : On the date of presentation of cheque. Form : GAR 7 ChallanMandatory E payment

Every assessee shall electronically pay the service tax payable by him, through internet banking.

However AC / DC of Central Excise, having jurisdiction, may for reasons to be recorded in writing, allow the assessee to deposit the service tax by any mode other than internet banking.

note 1 : The tax payable shall be rounded off in rupees.

section 75. interest on delayed payment of service tax

With effect from 1.10.2014, interest for delayed payment of service tax would be charged at new rates which would vary on the extent of delay. Simple interest rates per annum payable on delayed payments under section 75, are prescribed as follows:

extent of delay rate of interesthigh v alue assessee assessee whose taxable services is upto

₹ 60 Lakhs in preceding FYUpto 6 months 18% p.a. 15% p.a.

For next 6 months 24% p.a. 21% p.a.

Balance period 30% p.a. 27% p.a.

note 1 : Due date is not counted as delay. Whereas date of payment shall be counted as delay.

w.e.f. 14-5-2016 [from dec 2016 exams onwards]

rate of interesthigh v alue assessee assessee whose aggregate value of

taxable services (avts) is upto ₹ 60 Lakhs in preceding FY

Service tax collected but not deposited on or before the date on which such payment becomes due.

24% p.a. 21% p.a.

Other cases 15% p.a. 12% p.a.

illustration 1

Amount due 2,00,000

Due date 6-7

Payment date 8-9

service tax collected but not deposited other cases24% of 2,00,000

-------------------- x 64 = 8,416

365

15% of 2,00,000

-------------------- x 64 = 5,260

365

p1 : Compute the interest payable for the delayed payment of service tax by the service providers in the following cases:

name of the service provider lmn ltd. mr. sharadCase Service tax not collected Service tax collected

Service tax liability ₹ 1,25,600 ₹ 2,18,000Delay in payment of service tax 20 days 30 days

The aggregate value of taxable services rendered in the previous financial year by LMN Ltd. was ₹ 50 lakhs and by Mr. Sharad was ₹ 65 lakhs.

ans : 1,032; 4,300


section 76. penalty for failure to pay service tax (non fraud cases)

1. Show cause cum demand notice issued and service tax alongwith interest is paid within 30 days of issue of SCN .

No penalty

2. Show cause cum demand notice issued and service tax alongwith interest is not paid within 30 days of issue of SCN

Penalty levied is maximum 10% of service tax evaded

3. Show cause cum demand notice issued and service tax alongwith interest and reduced penalty is paid within 30 days of issue of SCN

Penalty levied is maximum 25% of service tax evaded

service t ax interest penalty paid within 30 days max penaltyYes Yes NA Yes Nil

Yes Yes NA No 10%

Yes Yes Yes Yes 25%

in Brief

category 1 category 2 category 3status Ind / HUF/ Firm / OPC Ind / HUF/ Firm / OPC Company

avts (dutiable) from one or more premises

upto ₹ 50 Lakhs in preceding FY

exceeding ₹ 50 Lakhs Not applicable

deposit Receipt POTR POTR

due date of deposit of tax with the govt.

receipt paymentAMJ 5/6 - 7

JAS 5/6 - 7

OND 5/6 - 7

JFM 31-3

potr paymentAMJ 5/6 - 7

JAS 5/6 - 7

OND 5/6 - 7

JFM 31-3

potr paymentA to F 5/6 - of next

month

March 31-3


8 Point of Taxation

Rules, 2011

Fixt the levy. Administrative Possibilities

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introduction

1. Point of taxation also known as point of collection. It is not point of levy. Point of levy is always date of rendering of services.

2. On the date of point of collection rate of service tax, value of services and whether service is taxable or exempted is required to be seen.

rule 2 : definitions

1. Invoice means the invoice referred to in rule 4A of the Service Tax Rules, 1994 and shall include any document as referred to in the said rule.

2. Point of taxation means the point in time when a service shall be deemed to have been provided.

3. Taxable service means a service which is subjected to service tax, whether or not the same is fully exempt by the Central Government under Section 93 of the Act.

rule 3 : determination of point of taxation. ( general rule)

For the purposes of these rules, unless otherwise provided, ‘point of taxation’ shall be,—

(a) the time when the invoice for the service provided or to be provided is issued.

Provided that where the invoice is not issued within 30 days of the completion of the provision of the service, the point of taxation shall be date of such completion.

(b) 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.

Explanation.—For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.

The above rule 3 shall also apply in case of continuous supply of service

Continuous supply of service means any service which is provided, or to be provided continuously or on recurrent basis, under a contract, for a period exceeding 3 months with the obligation for payment periodically or from time to time, or where the Central Government, by a notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition.(Telephone, cable, internet, coaching classes).

Milestone of payment is treated as date of completion of service.

examples of date of completion of service.

1. Filing of return The date on which return is filed2. Audit The date on which audit report is signed.

3. Issue of DD The date of issue of DD.

4. Loan The date loan cheque is handed over to the borrower.

5. Repair The date on which repair work is over to the satisfaction of service receiver.

6. Bus tickets The date of issuance of tickets.

7. Coaching The date the syllabus is completed.


rule 2 a : date of payment

It shall be the earlier of the dates on which the payment

a. is entered in the books of accounts; or of the person liable to pay tax. (Service provider)b. is credited to the BANK ACCOUNT

Minor advances upto ₹ 1,000 not taxable

Where Vodafone already issues invoice of ₹ 2,890. The subscriber pays ₹ 3,000. Excess amount of ₹ 110 is legally advance. But w.e.f. 1-4-2012 Vodafone is not required pay ST on such advance and generate invoice.

S No Date of completion of service Date of issue of invoice Date of receipt of payment

1. 10-4-2016 (₹ 6 L) 20-4-2016 (₹ 6 L) 21-4-2016 (₹ 2 L)30-7-2016 (₹ 1 L)

2. 10-4-2016 (₹ 6 L) 26-5-2016 (₹ 6 L) 10-4-2016 (₹ 6 L)3. 10-4-2016 ( ₹ 6 L) 20-4-2016 (₹ 6 L) 15-4-2016 (₹ 2 L)

22-7-2016 (₹ 3 L)4. 10-4-2016 (₹ 6 L) 26-5-2016 (₹ 6 L) 5-4-2016 (₹ 1 L)

25-7-2016 (₹ 5 L)5. 3-8-2016 18-9-2016 (₹ 6 L) 11-8-2016 (₹ 1 L)

19-9-2016 (₹ 5 L)6. 3-8-2016 4-8-2016 (₹ 4 L) 25-7-2016 (₹ 1 L)

7-8-2016 (₹ 3 L)7. 3-8-2016 18-9-2016 (₹ 4 L) 25-7-2016 (₹ 1 L)

7-9-2016 (₹ 3 L)8. 3-8-2016 15-7-2016 (₹ 3 L) 16-7-2016 (₹ 1 L)

3-8-2016 (₹ 2 L)

S N. Point of Levy Due date of payment of ST

S N. Point of Levy Due date of payment of ST

1. C 3 : 20-4-2016 (₹ 6 L) 5/6 – 5 (₹ 6 L) 5. C 3 : 3-8-2016 (₹ 6 L) 5/6 - 9 (₹ 6 L)C 2 : 20-4-2016 (₹ 6 L) 5/6 – 7 (₹ 6 L) C 2 : 3-8-2016 (₹ 6 L) 5/6 - 10 (₹ 6 L)C 1 : 21-4-2016 (₹ 2 L) 30-7-2016 (₹ 1 L)

5/6 – 7 (₹ 2 L)5/6 – 10 (₹ 1L)

C 1 : 11-8-2016 (₹ 1 L) 19-9-2016 (₹ 5 L)

5/6 - 10 (₹ 6 L)

2. C 3 : 10-4-2016 (₹ 6 L) 5/6 – 5 (₹ 6 L) 6. C 3 : 25-7-2016 (₹ 1 L) 4-8-2016 (₹ 3 L)

5/6 - 8 (₹ 1 L) 5/6 - 9 (₹ 3 L)

C 2 : 10-4-2016 (₹ 6 L) 5/6 – 7 (₹ 6 L) C 2 : 25-7-2016 (₹ 1 L) 4-8-2016 (₹ 3 L)

5/6 - 10 (₹ 4 L)

C 1 : 10-4-2016 (₹ 6 L) 5/6 – 7 (₹ 6 L) C 1 : 25-7-2016 (₹ 1 L) 7-8-2016 (₹ 3 L)

5/6 - 10 (₹ 4 L)

3. C 3 : 15-4-2016 (₹ 2 L) 20-4-2016 (₹ 4 L)

5/6 – 5 (₹ 6 L) 7. C 3 : 25-7-2016 (₹ 1 L) 3-8-2016 (₹ 3 L)

5/6 - 8 (₹ 1 L) 5/6 - 9 (₹ 3 L)

C 2 : 15-4-2016 (₹ 2 L) 20-4-2016 (₹ 4 L)

5/6 – 7 (₹ 6 L) C 2 : 25-7-2016 (₹ 1 L) 3-8-2016 (₹ 3 L)

5/6 - 10 (₹ 4 L)

C 1 : 15-4-2016 (₹ 2 L) 22-7-2016 (₹ 3 L)

5/6 – 7 (₹ 2 L)5/6 – 10 (₹ 3 L)

C 1 : 25-7-2016 (₹ 1 L) 7-9-2016 (₹ 3 L)

5/6 - 10 (₹ 4 L)

4. C 3 : 5-4-2016 (₹ 1 L) 10-4-2016 (₹ 5 L)

5/6 – 5 (₹ 6 L) 8. C 3 : 15-7-2016 (₹ 3 L) 5/6 - 8 (₹ 3 L)

C 2 : 5-4-2016 (₹ 1 L) 10-4-2016 (₹ 5 L)

5/6 – 7 (₹ 6 L) C 2 : 15-7-2016 (₹ 3 L) 5/6 - 10 (₹ 3 L)

C 1 : 5-4-2016 (₹ 1 L) 25-7-2016 (₹ 5 L)

5/6 – 7 (₹ 1 L)5/6 – 10 (₹ 5 L)

C 1 : 16-7-2016 (₹ 1 L) 3-8-2016 (₹ 2 L)

5/6 - 10 (₹ 3 L)


p1 : Henna Builders Ltd. entered into an agreement on 28th March, 2015 for providing construction services to Mirage Hotel for an agreed consideration of ₹ 8,00,000. The construction started on 20th April, 2015. As per the terms of the contract, Mirage Hotel made the payment of ₹ 3,00,000 in advance on 28th March, 2015 and paid the balance amount in two equal installments each on 26th May, 2015 and 31st July, 2015 on completion of 50% and 100% of the construction project on 15th May, 2015 and 28th July, 2015 respectively. The invoices raised by Henna Builders Ltd. were as follows:-

date of invoice Amount (₹)28th March, 2015 3,00,000

20th May, 2015 2,50,000

31st August, 2015 2,50,000

Determine the point of taxation in each of the above cases.

solution

date of completion of event date of issue of invoice date of payment point of levy28th March, 2015 28th March, 2015 28th March, 2015 28th March, 2015

15th May, 2015 20th May, 2015 26th May, 2015 20th May, 2015

28th July, 2015 31st August, 2015 31st July, 2015 28th July, 2015

rule 4. determination of point of taxation in case of change in effective rate of tax.

Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a change in effective rate of tax (change in rate of tax or change in valuation vide exemption notification / Abatement) in respect of a service, shall be determined in the following manner, namely:—

(a) in case a taxable service has been provided before the change in effective rate of tax,— [GUIDE OLD RATE]

(i) new rate : where the invoice for the same has been issued and the payment received after the change in effective rate of tax, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or

Rule 4(a)(i) New Rate

------------•------------ ------------•------------ ------------•------------ ------------•------------Taxable service

renderedChange in effective

rate of taxInvoice issued Payment received

[----------------------------------------------]

Whichever date is earlier

(ii) old rate : where the invoice has also been issued prior to change in effective rate of tax but the payment is received after the change of rate, the point of taxation shall be the date of issuing of invoice; or

Rule 4(a)(ii) Old rate

------------•------------ ------------•------------ ------------•------------ ------------•------------Taxable service

renderedInvoice issued Change in effective

rate of taxPayment received

POT

(iii) old rate : where the payment is also received before the change in effective rate of tax, but the invoice for the same has been issued after the change of rate, the point of taxation shall be the date of payment.

Rule 4(a)(iii) Old Rate

------------•------------ ------------•------------ ------------•------------ ------------•------------Taxable service

renderedPayment received Change in effective

rate of taxInvoice issued

POT


(b) in case a taxable service has been provided after the change in effective rate of tax,— [GUIDE NEW RATE]

(i) new rate : where the payment for the invoice is also made after the change in effective rate of tax but the invoice has been issued prior to the change of effective rate of tax, the point of taxation shall be the date of payment; or

Rule 4(b)(i) New Rate

------------•------------ ------------•------------ ------------•------------ ------------•------------Invoice issued Change in effective

rate of taxPayment received Taxable Service ren-

dered

(ii) old rate : where the invoice has been issued and the payment for the invoice received before the change of effective rate of tax, the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier; or

Old rate

------------•------------ ------------•------------ ------------•------------ ------------•------------Invoice issued Payment received Change in effective

rate of taxTaxable Service ren-

dered

[----------------------------------------------]

Whichever date is earlier

(iii) new rate : where the invoice has also been raised after the change of rate but the payment has been received before the change in effective rate of tax, the point of taxation shall be date of issuing of invoice.

Rule 4(b)(iii) New Rate

------------•------------ ------------•------------ ------------•------------ ------------•------------Payment received Change in effective

rate of taxInvoice issued Taxable Service ren-

dered

Explanation.—For the purposes of this rule, “change in effective rate of tax” shall include a change in the portion of value on which tax is payable in terms of a notification issued under the provisions of Finance Act, 1994 or rules made thereunder.

change in effective rate of tax : 1-6-2016

old rate 14.5 % | new rate 15%

t axable service rendered on

date of issue of invoice

date of payment

point of taxation

applicable rate

1. 26-5-2016 1-6-2016 1-7-2016 1-6-2016 New Rate 15%

2. 26-5-2016 27-5-2016 11-6-2016 27-5-2016 Old Rate 14.5%

3. 26-5-2016 5-6-2016 29-5-2016 29-5-2016 Old Rate 14.5%

4. 4-6-2016 30-5-2016 3-6-2016 3-6-2016 New Rate 15%

5. 4-6-2016 30-5-2016 31-5-2016 30-5-2016 Old Rate 14.5%

6. 4-6-2016 3-6-2016 30-5-2016 3-6-2016 New Rate 15%

rule 5. p ayment of tax in cases of new services

(a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable.

Rule 5(a)

------------•------------ ------------•------------ ------------•------------ ------------•------------Invoice issued Payment received Service becomes

taxableTaxable Service ren-

dered


(b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within 14 days from the date service becomes taxable for the first time.

Rule 5(b)

-------•--------- --------•--------- -------•--------- ------------•------------Payment received

Service becomes taxable

Taxable Service rendered

Invoice issued within 14 days from the date the service becomes taxable

for the first time

But if any situation which do not fall in Rule 5, follow rule 3 to determine point of levy.

note 1 : If any services are rendered before the services becomes taxable for the first time then there is no levy and no question of collection.

note 2 : When there is deletion in any entry of negative list or withdrawal of any exemption notification.

p1 : Suppose services becomes taxable for the first time w.e.f. 1-7-2015.

date of rendering of service

date of invoicedate of receipt or

paymentwhether taxable

1. 30-6-2015 27-6-2015 30-6-2015 Beyond the provision of ST

2. 15-7-2015 15-7-2015 30-6-2015 No tax

3. 2-7-2015 20-7-2015 (₹ 6 L) 30-6-2015 (₹ 1 L) 30-6-2015 (₹ 1 L) 20-7-2015 (₹ 5 L)

rule 7. point of taxation in case of reverse charge and payment to associated enterprises.

Notwithstanding anything contained in these rules rule 3,4 and 8

applicable to every reverse charge except govt. services

Full Reverse Charge

Service receiver shall pay service tax on the date on which payment is made.

Where the payment is not made within a period of 3 months of the date of invoice, the point of taxation shall be the date immediately following the said period of 3 months.

Partial reverse charge

Service receiver shall pay service tax on the date on which payment is made.

note 1 : Service provider shall pay service tax as per Rule 3 of POTR 2011.

Transitional provision

Notwithstanding anything contained in the first proviso to rule 7, if the invoice in respect of a service, for which point of taxation is determinable under rule 7 has been issued before the 1-10-2014 but payment has not been made as on the said day, the point of taxation shall,–

(a) if payment is made within a period of 6 months of the date of invoice, be the date on which payment is made

(b) if payment is not made within a period of 6 months of the date of invoice, be determined as if rule 7 and this rule do not exist. Apply Rule 3.

illustration

t axable service rendered on date of issue of invoice date of payment point of taxation1. 1-8-2014 3-8-2014 6-9-2014 6-9-2014

2. 1-8-2014 3-8-2014 7-1-2015 3-11-2014

Extra Topics

Cross border transaction between AE

In case of associated enterprises, service provider is located outside India, the point of taxation shall be the date of debit in the books of account of the service receiver or date of making the payment whichever is earlier. (Since


rule 3 cannot be applied).

p1 : Mihir of Assam received some taxable services from Freddie Enterprises of U.K on 20-9-2015 for which an invoice was raised on 19-10-2015. Determine the point of taxation in accordance with POTR if Mihir makes the payment for the said services on:-Case I: 17-1-2016

Case II: 25-5-2016

solution

t axable service rendered on date of issue of invoice date of payment point of taxation1. 20-9-2015 19-10-2015 17-1-2016 17-1-2016

2. 20-9-2015 19-10-2015 25-5-2016 19-1-2016

rule 8. determination of point of taxation in case of copyrights, etc

1. In respect of royalties and payments pertaining to copyrights, trademarks, designs or patents (CTDP),

2. where the whole amount of the consideration

3. for the provision of service is not ascertainable (since royalty depends on actual sale of copyrighted material) at the time when service was performed, and

4. subsequently the use or the benefit of these services by a person other than the provider gives rise to any payment of consideration,

5. the service shall be treated as having been provided

6. each time when a payment in respect of such use or the benefit is received by the provider in respect thereof, or an invoice is issued by the provider, whichever is earlier.

p1 : Pranav Desai is a well known author of a book on management. Hindustan Publishing House enters into an agreement with him and obtains the copyright of the said book on 20-4-2013 at a consideration fixed @ ₹ 15/- per book sold by Hindustan Publishing House. The no. of books sold by Hindustan Publishing House during different financial years as well as other relevant details is given in the following table:

relevant y ear no. of books sold date of issuance of invoice by pranav desai

date of receipt of payment from hindustan publishing house

2013-14 5,00,000 29-7-2014 16-8-2014

2014-15 8,00,000 3-6-2015 23-5-2015

2015-16 2,00,000 16-6-2016 16-6-2016

solution

relevant y ear point of taxation2013-14 29-7-2014

2014-15 23-5-2015

2015-16 16-6-2016

rule 8a . determination of point of taxation in other cases

Where the point of taxation cannot be determined as per these rules as the date of invoice or the date of payment or both are not available, the Central Excise officer, may, require the concerned person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account such material and the effective rate of tax prevalent at different points of time, shall, by an order in writing, after giving an opportunity of being heard, determine the point of taxation to the best of his judgment. (It is applied in case of search and seizure)


9 Valuation of

Taxable Service

Value of similar service : Dispute

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learning sections

1. Section 67 : Valuation of taxable service2. Service Tax (Determination of Value) Rules, 2006

section 67. v aluation of taxaBle service

(1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, -

(i) if whole consideration is in monetary form TV = Gross amount charged by the service provider. note : If question do not provide whether service tax is inclusive or exclusive it is deemed that it is exclusive.

1. Coaching fees ₹ 1,00,000 inclusive of ST. Rate of service tax 14%.

TV = ₹ 87,719. ST ₹ 14,000

2. Coaching fees ₹ 1,00,000 exclusive of ST. Rate of service tax 14%.

TV = ₹ 1,00,000. ST 14,000

(ii) provision of service is for a consideration part monetary and part non monetary and such non monetary consideration is ascertainable.

TV = monetary consideration + ascertainable non monetary consideration inclusive of service tax.

1. Fees ₹ 1,00,000 + Laptop worth ₹ 20,000. Rate of service tax 14%.

TV = ₹ 1,05,263; ST = ₹ 14,737

2. Laptop worth ₹ 50,000. Rate of service tax 14%.

TV = ₹ 43,860; ST = ₹ 6,140

(iii) In a case where the provision of service is for a consideration which is not ascertainable.

In following cases consideration is not ascertainable

- Consideration of service being wholly or partly in the nature of non monetary consideration. E.g. Service in lieu of service.

- Consideration of service being inbuilt in the total amount received as consideration for a composite activity involving elements of provisions of service and element of sale of goods. (Works contract & supply of food)

TV = STVR 2006 shall be applied.

Specific RuleRule 2A Execution of works contract

Rule 2B Foreign exchange dealing.

Rule 2C Supply of food / drinks in restaurant / outdoor catering.

general ruleRule 3 Other services

If similar service provided then TV = GAC of similar serviceIf no similar service is provided then TV = atleast cost of provisioning of service

(2) st is deemed to be included in gac : Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.

(3) advance payment : The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. If advance payment is received it is always inclusive.

(4) The above value is subject to Rule 5 and Rule 6 of STVR 2006.


other cases of gac

Where bank deducts any amount from account in lieu of providing any service

GAC = Amount deducted

Payment by way of issue of debit note. GAC = Amount mentioned in Debit noteSettlement by book adjustment GAC = The amount which is settled by book

adjustment.

Credit of amount by Service Provider or Debit of an amount by Service Receiver to any ledger account. (Applicable only in case of associated enterprises)

GAC = Amount debited or credited in the books of account

as per section 73 and rule 4. can ceo reJect the value as determined By assessee

Section 73 : Recovery of service tax not levied or paid or short levied or short paid or erroneously refunded.Rule 4

(1) Nothing contained in Rule 3 shall be construed as restricting or calling into question the power of the Central Excise Officer to satisfy himself as to the accuracy of any information furnished or document presented for valuation.

(2) show cause notice : Where the Central Excise Officer is satisfied that the value so determined by the service provider is not in accordance with the provisions of the Act or these rules, he shall issue a notice to such service provider to show cause why the value of such taxable service for the purpose of charging service tax should not be fixed at the amount specified in the notice.

(3) gac determined by ceo : The Central Excise Officer shall, after providing reasonable opportunity of being heard, determine the value of such taxable service for the purpose of charging service tax in accordance with the provisions of the Act and these rules.

Analysis

inclusion or exclusionRule 5 Rule 6

(1) (2) (1) (2)

Inclusion Exclusion Specific inclusion Specific exclusion

rule 5 inclusion in or exclusion from value of certain expenditure or costs

(1) inclusion of expenditures incurred in providing services : Where any expenditure or costs are incurred by the service provider in the course of providing taxable service (dominant nature), all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.

note 1 : For the removal of doubts it is clarified that the value of the taxable service is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration is indicated separately in the invoice.

note 2 : It is immaterial whether these expenses are incurred by service receiver or re-imbursed by service receiver. Then also such expenses and re-imbursement is subject to service tax. Where any expenditure which should have been incurred by service provider but is incurred by service receiver then such expenditure is also subjected to service tax. As per explanation to s 67 Consideration includes re imbursable expenditures.

e.g. 1 : Coaching fees + expenses on books both the amount subjected to service tax.

e.g. 2 : Rent of commercial property + repairs of property both the amount subjected to service tax.

(2) exclusion of expenditure if incurred as pure agent : Subject to the provisions of rule 5(1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service.


meaning of pure agent

(a) Enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service.

(b) Neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service. (In case of rail booking bill is in the name of the customer and not the agent)

(c) Does not use such goods or services so procured; and

(d) Receives only the actual amount incurred to procure such goods or services.

e.g. Railway agent booking rail tickets in the name of client, CA in practice depositing tax in the name of client, Custom house agent depositing custom duty in the name of client, CS in practice depositing fees in ROC in the name of client.

In simple words when a third party is generating a bill in the name of service receiver.

illustration 1. X contracts with Y, a real estate agent to sell his house and thereupon Y gives an advertisement in television. Y billed X including charges for Television advertisement and paid service tax on the total consideration billed. In such a case, consideration for the service provided is what X pays to Y. Y does not act as an pure agent on behalf of X when obtaining the television advertisement even if the cost of television advertisement is mentioned separately in the invoice issued by X. Advertising service is an input service for the estate agent in order to enable him to perform his output services as an estate agent. The agent can claim CENVAT credit on service tax paid on advertisement.

illustration 2. In the course of providing a taxable service, a service provider incurs costs such as traveling expenses, postage, telephone, etc., and may indicate these items separately on the invoice issued to the recipient of service. In such a case, the service provider is not acting as an agent of the recipient of service but procures such inputs or input service on his own account for providing the taxable service. Such expenses do not become reimbursable expenditure merely because they are indicated separately in the invoice issued by the service provider to the recipient of service.

illustration 3. A contracts with B, an architect for building a house. During the course of providing the taxable service, B incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc., to enable him to effectively perform the provision of services to A. In such a case, in whatever form B recovers such expenditure from A, whether as a separately itemised expense or as part of an inclusive overall fee, service tax is payable on the total amount charged by B. Value of the taxable service for charging service tax is what A pays to B.

illustration 4. Company X provides a taxable service of rent-a-cab by providing chauffeur driven cars for overseas visitors. The chauffeur is given a lump sum amount to cover his food and overnight accommodation and any other incidental expenses such as parking fees by the Company X during the tour. At the end of the tour, the chauffeur returns the balance of the amount with a statement of his expenses and the relevant bills. Company X charges these amounts from the recipients of service. The cost incurred by the chauffeur and billed to the recipient of service constitutes part of gross amount charged for the provision of services by the company X.

p1 : Whether expenses of travelling, boarding and lodging are recovered on actual basis, then whether in that case such expenditure can be treated as re-imbursements and thus be excluded from value of service.

ans : Where service receiver contract on behalf of service provider with third party for supply of any goods or services to service provider the consideration charged by third party is subjected to service tax.

rule 6(1)/(2). special inclusion / special exclusion of certain expenditure or costs

Subject to the provisions of section 67, the value of the taxable services shall include, -

risk premium and insurance commission

Inclusion

1. The amount of risk premium charged by the insurer from the policy holder.


2. The commission, fee or any other sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer.

3. The commission, fee or any other sum, paid to insurance auxiliary agent by the insurer for marketing of insurance products.

note 1 : Investment premium not subjected to service tax since transaction only in money. Interest not subjected to service tax since in negative list.

airline

Inclusion

1. The commission received by the air travel agent from the airline.

Exclusion

1. The airfare collected by air travel agent in respect of service provided by him.

2. The taxes levied by any Government on any passenger travelling by air, if shown separately on the ticket, or the invoice for such ticket, issued to the passenger.

note 1 : Airlines for transportation of passengers are eligible for abatement.

note 2 : Composition scheme is applicable to airline agent.

rail

Inclusion

1. The commission or any amount received by the rail travel agent from the Railways or the customer.

Exclusion

1. The rail fare collected by rail travel agent in respect of service provided by him.

note 1 : Rail for transportation of passengers and goods are eligible for abatement.

stock broker

Inclusion

1. The commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any sub-broker.

note 1 : Commission received by sub stock broker is exempt from service tax.


t elephone

Exclusion

1. initial deposit made by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or telegraph or telex or for leased circuit.

Inclusion

1. The adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit.

note 1 : Refundable security deposit not a consideration therefore no service tax.

Following telephone services are fully exempt from tax

Services by way of making telephone calls from -

(a) departmentally run public telephone.

(b) guaranteed public telephone operating only for local calls; or

(c) free telephone at airport and hospital where no bills are being issued.

service of motor vehicle

Inclusion

1. The reimbursement received by the authorised service station, from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer.

clearing and forwarding agent

1. The remuneration or commission, paid to clearing and forwarding agent by the client for rendering services of clearing and forwarding operations in any manner.

following rules are applicable for valuation of any services

Inclusion

1. The amount realized as demurrage or by any other name whatever called for the provision of service beyond the period originally contracted or in any other manner relatable to the provision of service.

1. The port allows storage facility of maximum period of 30 days for ₹ 100 per day. Beyond a period of 30 days demurrage charges are payable @ ₹ 200 per day. Mr. X stores his goods for 40 days.

TV = 30 x 100 + 10 x 200 = 3,000 + 2,000 = ₹ 5,000 is subjected to ser-vice tax.

Exclusion

1. interest on delayed payment of any consideration for the provision of services or sale of property, whether movable or immovable is not subjected to service tax. However late payment charges is subjected to service tax.

Example

1. Mr. X provides engineering service to Mr. Y for ₹ 10 Lakhs. Payment period 1 month. If payment is not made within a period of 1 month from the date of invoice interest @ 10% p.a. is payable. Mr. Y makes payment in 2 month.

₹ 10 Lakh is taxable service. How-ever interest on late payment of ₹ 10 Lakhs is not taxable.

2. Mr. X is distributor of TV. He sells TV on credit for a maximum period of 1 month. If payment is not made within a period of 1 month from the date of invoice interest @ 10% p.a. is payable. One of the buyer makes payment in 2 month.

No service tax on sale price of TV. Also no service tax on interest on de-layed payment.


3. DLF launches a project in Noida for sale of flats for ₹ 50 Lakhs. Booking amount ₹ 50,000. Balance payment in 3 months. If payment is not made within a period of 3 month from the date of booking interest @ 10% p.a. is payable. One of the buyer makes payment in 5 months.

₹ 50 Lakhs shall be subject to service tax as declared service (Works con-tract). However interest on delayed payment not subjected to service tax.

4. Late payment of telephone bills Late payment charges subjected to service tax.

5. Interest on loan No service tax since interest on loan in negative list.

6. Interest on late payment of credit card bill and penalty. Penalty is subjected to service tax however interest on late payment not subjected to service tax.

Inclusion

Provided that this clause shall not apply to any service provided by Government or a local authority to a business entity where payment for such service is allowed to be deferred on payment of interest or any other consideration. meaning thereby interest on delayed payment is subject to service tax. [w.e.f. 13-4-2016 from nov 2016 exam onwards ]

2. Accidental damages due to unforeseen action (natural causes) not relatable to the provision of service is not subjected to service tax.

Example 1: In case a landlord who has rented out his office building to a tenant receives compensation from the tenant for the damage caused to the building by an unforeseen action then such compensation would not form part of the value of taxable service related to tenant of his building as an unforeseen damage caused by the tenant is not relatable to provision of service of renting of the office building.

Example 2 : Insurance Companies provide insurance services to the clients for which the premium is charged. The premium charged is a consideration for the insurance service provided. However, in case due to an unforeseen action ,like an accident etc., a compensation is paid by the insurance company to the client then the money would not be included as part of value of taxable service as it is not relatable to the provisions of service but is only in the nature of consequence of provisions of insurance service.

3. Subsidies or grants disbursed by the Government, not in the nature of directly influencing the value of service not subjected to service tax. (A subsidy influences the price directly when the price goes down proportionately to the amount of subsidy).

1. Cost of service ₹ 20,000. Govt. gives subsidy of ₹ 2,000.

TV = 18,000. ₹ 2,000 subsidy included in TV since subsidy is revenue in nature which directly influences the price of service. Service tax levied on ₹ 20,000.

5. Cost of service ₹ 20,000. Govt. grants ₹ 20,00,000 for purchase of plant and machinery.

TV = 20,000. ₹ 20,00,000 excluded from TV since subsidy is capital in nature and do not directly influences the price of service.

whether tds should Be deducted including st or excluding st

Now there is a circular that tax is to be deducted on amount excluding service tax. Also tax deducted is to be included in gross amount charged.


10 Composition Scheme

Presumptive basis of taxation

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introduction

Composition schemes for determination of value under the Service Tax Rules, 1994.

In addition to the Service Tax (Determination of Value) Rules, 2006 various sub-rules Rule (6) of the Service Tax 1994 also provides for simplified composition mechanism for determining the amount of service tax payable. These sub-rules either specify the service tax payable as a certain percentage of the gross amount of a specified sum received by the service provider or also provide for manner of determination of value of taxable service for other specified services. This facility is normally available as an option to the person responsible to pay service tax.

rule 6(7) of str . air travel agent

The person liable for paying the service tax in relation to the air travel agent services, shall have the option, to pay an amount calculated at the rate of

a. Domestic booking 0.7% of the basic fare.

b. International bookings 1.4% of the basic fare.

of passage for travel by air, during any calendar month or quarter.

note 1 : The option, once exercised, shall apply uniformly in respect of all the bookings of passage for travel by air made by him and shall not be changed during a financial year under any circumstances. note 2 : The expression “basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airline. Basic fare do not include any kind of taxes levied by Govt.note 3 : Full CCR is available.

p1 : Compute the service tax liability of Mr. Saksham, an Air Travel Agent for the quarter ended 30-9 using the following details:

particulars ₹(i) Basic Air collected for Domestic booking of tickets. 45,00,000

(ii) Basic Air collected for International booking of tickets 90,00,000

(iii) Commission received from the airlines towards the sale of above ticket 12,00,000

In the above cases, would the Service Tax liability of Mr. Saksham be reduced if he opts for for special provision for payment of Service Tax Rules, 1994 instead of paying Service Tax @14%.

Mr. Saksham is not eligible for small service provides exemption, also service Tax has been charged separately

solution

option 1Value of taxable service 12,00,000

Service tax @ 15% 1,80,000

option 20.7% of basic fare ₹ 45,00,000 31,500

1.4% of basic fare ₹ 90,00,000 1,26,000

Service Tax 1,57,500

+ Swachh Bharat Cess @ 0.5% (0.5% * 1,57,500 / 14%) 5,625

+ Krishi Kalyan Cess @ 0.5% (0.5% * 1,57,500 / 14%) 5,625

Total Service Tax 1,68,750


rule 6(7a ) of str . life insurance

An insurer carrying on life insurance business liable for paying the service tax in relation to the risk cover in life insurance provided to a policy holder shall have the option to pay an amount calculated

a. For first year @ 3.5% of the gross amount of premium and

b. Subsequent year @ 1.75% of the gross amount of premium

charged by such insurer towards the discharge of his service tax liability instead of paying service tax @14.5% / 15% of risk premium.

exceptions

However the above option shall not be available in cases where-

(a) the entire premium paid by the policy holder is only towards risk cover in life insurance. (single premium policy is subjected to 14.5% / 15% ST); or

W.e.f. 1-4-2016 the the effective alternate Service tax rate (composition rate) is being prescribed of the total premium charged, in cases where the amount allocated for investment or savings on behalf of policy holder is not intimated to the policy holder at the time of providing of service.

(b) the part of the premium payable towards risk cover in life insurance is shown separately in any of the documents issued by the insurer to the policy holder.

note 1: Gross amount of premium covers both risk premium and investment premium. Investment premium is not subjected to service tax since it is transaction only in money. Investment of funds by person with another for which return on such investment is returned / repatriated without retaining any portion of the return of such investment is mere transaction in money. However if commission is charged or a portion of return is retained as service charges, then such commission or service charge is subjected to service tax.

note 2 : Full CCR is available.

rule 6(7c ) of str . promotion of lottery ticket

Who is service provider : Distributor or selling agents of lottery tickets.Nature of service : Promotion, marketing or organising / assisting in organising lottery Optional rate of service tax shall be following

(a) If the lottery or lottery scheme is one where the guaranteed prize payout atleast 80%.

₹ 8,200 on every ₹ 10 Lakhs (or part of ₹ 10 Lakhs) of aggregate face value of lottery tickets printed by the organising State for a draw.

(b) If the lottery or lottery scheme is one where the guaranteed prize payout less than 80%

₹ 12,800 on every ₹ 10 Lakhs (or part of ₹ 10 Lakhs) of aggregate face value of lottery tickets printed by the organising State for a draw.

note 1 : In case of online lottery, aggregate face value of lottery tickets will be the aggregate value of tickets sold.

note 2 : The distributor/selling agent will have to exercise such option within a period of 1 month of the beginning of each financial year. The new service provider can exercise such option within a period of 1 month of providing the service.

note 3 : The option once exercised cannot be withdrawn during the remaining part of the financial year. note 4 : Full CCR is available.

note 5 : No service tax on sale price of lottery ticket as it is actionable claim. But service tax is levied on commission received on sale of lottery tickets.

overview excise act vat service t ax

Sections / Rules Rule 15 of CER 2002. Duty of specified amt required to be paid.

Small Dealer. TO exceeds 10 L and is upto 50 L

Rule 6 of STR 1994

Impact on CCR No CCR is available No ITC is available CCR available

Product / services covered

Aluminium circles + Stainless steel pattas / pattis

All products. Local purchase and local sale.

Air travel agent, Lottery agent, Gross LIP, Dealing in FX.


11 Valuation in foreign

exchange dealing

Actual vs presumptive

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rule 2B. determination of value of services in relation to money changing

The value of taxable services provided for the services so far as it pertains to purchase or sale of foreign currency shall be determined by the service provider in the following manner, namely

where any one of the currencies is indian rupees then value of taxable service =

where neither of the currencies exchanged in indian rupees.

RBI reference rate is available

(Difference between BR rate and RBI BR) x units of currencies exchanged

1% of the lower of the following

(Difference between BR rate and RBI BR) x units of currencies exchanged RBI SR x Units of

FX soldRBI BR x Units of FX bought

RBI reference rate is not available

1% of the gross amount of rupee provided / received by the person changing the money.

p1 : Riddhi Ltd. exported some goods to Harison Inc. of USA. It received US $ 8,500 as consideration for the same and sold it @ ₹ 65 per US dollar. Compute the value of taxable service under rule 2B of the Service Tax (Determination of Value) Rules, 2006 in each of the following independent cases:-

(a) RBI reference rate for US dollar at that time is ₹ 66 per US dollar.

(b) RBI reference rate for US dollars is not available.

What would be the value of taxable service if US $ 8,500 are converted into UK £ 4,250. RBI reference rate at that time for US $ is ₹ 67 per US dollar and for UK £ is ₹ 90 per UK Pound.

solution

(a) (RBI reference rate for $ – Selling rate for $) × Total units of US $ = ₹ (66 – 65) × 8,500 = ₹ 8,500

(b) If the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received, by the person changing the money. Hence, in the given case, value of taxable service would be as follows:- 1% of ₹ (65 × 8,500) = ₹ 5,525

Where neither of the currencies exchanged is Indian Rupee, the value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI.

Hence, in the given case, value of taxable service would be 1% of the lower of the following:-

(a) US dollar converted into Indian rupees = $ 8,500 × ₹ 67 = ₹ 5,69,500

(b) UK pound converted into Indian rupees = £ 4,250 × ₹ 90 = ₹ 3,82,500

Value of taxable service = 1% of ₹ 3,82,500 = ₹ 3,825

rule 6(7B) of str . sale and purchase of foreign currency (money exchanger)

Who is service provider : Foreign exchange broker, including an authorised dealer in foreign exchange or an authorised money changer.

Nature of service : Purchase or sale of foreign currency, including money changing.


Optional rate of service tax shall be following

s. no. for an amount service tax shall be calculated @ 1. upto 1,00,000 0.14% of the gross amount of foreign currency exchanged or ₹ 35

whichever is higher.

2. Exceeding 1,00,000 & upto 10,00,000

₹ 140 + 0.07% of the gross amount of foreign currency exchanged

3. Exceeding 10 Lakhs ₹ 770 + 0.014% of the gross amount of foreign currency exchanged or ₹ 7,000 whichever is lower

note 1 : However above option shall not be available in cases where the consideration for the service provided or to be provided is shown separately in the invoice, bill or challan issued by the service provider.

note 2 : However the person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

note 3 : Full CCR is available.

p1 : Compute ST payable in following cases.

1. Currency exchanged for ₹ 50,000.

2. Currency exchanged for ₹ 8,00,000.

3. Currency exchanged for ₹ 18,00,000

Ans : (1) 70 + 5 = 75 (2) 630 + 45 = 675 (3) 882 + 63 = 945


12 Who is Liable For

Payment of Service Tax (Assessee)

Service provider is the agent of Govt. for collection of service tax

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section 68. who should pay service tax

General Rule : Service Provider shall pay service tax.

(1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66B in such manner and within such period as may be prescribed.

Bill raised by Service Provider Payment by Service Receiver

Value 1,00,000

+ ST @ 15% 15,000

Value 1,15,000

₹ 1,15,000

Exception to general Rule : Service receiver shall pay service tax. (Reverse Charge)

(2) Notwithstanding anything contained in section 68(1), in respect of any notified taxable service by the Central Government in the Official Gazette (N/N 15 2012), the service tax thereon shall be paid by notified person, in prescribed manner to the prescribed extent (wholly or partially) and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. SR is treated as deemed Service Provider.

r ule 2(1)(d ) of str 1994. person liaBle to pay service tax. notified person notified service

full reverse charge

service provider (sp) service receiver or other than sp1. SSP

exemption?Service provider can claim exemption of SSP

Not available on value of service under reverse charge since it is input service. It can claim CCR. However service receiver can claim exemption in respect of that service which is provided by him. Further SP cannot apply his limit of ₹ 10 Lakhs on service which is payable on reverse basis. This is expressly prohibited in E/N 33 / 2012.

2. Registration SP shall get itself registered if conditions of registration are satisfied. Facility of centralised registration also available.

SR shall compulsorily get itself registered even if AVTS received is less than ₹ 9 Lakhs. Centralised registration facility available.

3. Payment? Monthly or Quarterly as per status of SP. [Rule 6 of STR 1994]

Monthly or Quarterly as per status of SR. Status of SP is not relevant. [Rule 6 of STR 1994]

4. POT Rules Rule 3 of POT Rules applicable. Invoice or payment whichever date is earlier.

Rule 7 of POT Rules applicable. Service is deposited on payment basis.


5. Mode of payment?

First by setting off CCR then balance by GAR 7 challan.

By GAR 7 challan. (Cannot set off CCR) Input service CCR cannot be adjusted with input service CCR.

6. Bill raised by Value 1,00,000

+ ST Nil

Value 1,00,000

Payment to Service Provider : ₹ 1,00,000Payment to Govt. : ₹ 15,000

7. CCR available?

No, since service tax is not recovered from his pocket.

Yes, since service tax is paid by SR under reverse charge.

1. insurance service

An Insurance agent to any person carrying on the insurance business Insurance Companies is liable to pay service tax.

Rule 2(1)(cba). Insurance agent means an insurance agent licensed u/s 42 of the Insurance Act, 1938 who receives or agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business including business relating to the continuance, renewal or revival of policies of insurance.

2. gta service

A goods transport agency in respect of transportation of goods by road, where the person liable to freight is,- Reverse charge is applicable if

person liable to pay freight is specified person (BCD SFP).

If person liable to pay freight is not BCD SPF then GTA shall pay service tax.

provided that if BCD SPF is located in Non taxable territory, then GTA is liable to pay service tax.

i. Any factory registered under or governed by the Factories Act, 1948.

ii. Any society registered under the Societies Registration Act, 1860.

iii. Any co-operative society established by or under any law.

iv Any dealer of excisable goods, who is registered under the Cen-tral Excise Act, 1944. FSD – First Stage Dealer / SSD – Second Stage Dealer

v Any body corporate established under any law.

vi Any partnership firm whether registered or not under any law including AOP and LLP.


note 1 : S 65B(26). GTA means any person who provides service in relation to transport of goods by road and issue consignment note by whatever name called. If GTA is not required to issue consignment note then it is in negative list, thus not chargeable to service tax.

note 2 : Transportation of certain goods is fully exempt under Mega Exemption 25/2012.

note 3 : Generally consignor is the person liable to pay freight. Consignee pays freight.

a. X Ltd books goods for transportation from Delhi to Agra with GTA.

Person liable to pay freight is X Ltd which is a body corporate. Therefore reverse charge is applicable. X Ltd shall pay service tax.

b. Mr. Z agent of X Ltd books goods for transportation from Delhi to Agra with GTA.

Person liable to pay freight is X Ltd which is a body corporate. Therefore reverse charge is applicable. X Ltd shall pay service tax. Concept of reverse charge do not depend upon who actually pays freight but who is liable to pay freight.

c. Snapdeal Ltd agent of Mr. X books goods for transportation from Delhi to Agra with GTA.

Person liable to pay freight is Mr. X which is Individual not a specified person. Therefore reverse charge concept is not applicable. GTA who is providing service is liable to pay service tax.

3. sponsorship service

By way of sponsorship to any body corporate or partnership firm located in taxable territory.

Service receiver

Illustration

service provider nature of service service receiver statusRWA’s Letting out of commercial

space of a colony.HTC Reverse charges is applicable. HTC is

liable for payment of ST.

School / College Brochure, Pamphlet, website.

Pepsi India (P) Ltd. Reverse charges is applicable. HTC is liable for payment of ST.

BCCI Ticket, stadium etc Coca Cola. Exempt as per Mega Exemption

DLF Letting out of space in Mall

GUCCI located outside India.

Reverse charge not applicable since ST is not located in taxable territory.


4. legal service

Arbitral tribunal providing legal service to business entity located in taxable territory

Business entity shall pay service

tax.

Individual as an advocate / Firm of advocates by way of legal services to business entity located in taxable territory.

Senior advocate by way of legal services to business entity located in taxable territory. (w.e.f 6-6-2016 from may 2017 exam onwards)

note 1 : Rule 2(1)(cca). Legal service means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.

note 2 : Legal service is generally exempt if provided to business entity whose turnover in preceding FY is upto ₹ 10 Lakhs.note 3 : Senior Advocate” has the meaning assigned to it in section 16 of the Advocates Act, 1961 i.e. ‘An advocate may, with his consent, be designated as senior advocate if the Supreme Court or a High Court is of opinion that by virtue of his ability or standing at the Bar or special knowledge or experience in law he is deserving of such distinction.

5. import of service

By any person which is located in a non taxable territory and received by any person located in taxable territory.

Service receiver shall pay service tax.

p1 : In following cases who is liable for payment of service tax.

service provider located in

service receiver located in

who is liable for payment of service tax

1. Mumbai Delhi Service provider

2. J & K Delhi Service receiver

3. Milan Delhi Service receiver

4. Delhi Milan Not taxable

6. service provided in capacity of director

In relation to service provided by a director of a company or a body corporate to the said company or the body corporate.


note 1 : However where director is working in capacity of employee then not treated as service. Therefore no question of service tax.

note 2 : Body corporate can be Bank, FI, foreign company, one person company, RBI.

note 3 : Company shall deduct tax at source u/s 194J @ 10%.

7. service provided By a recovery agent

By a recovery agent to a banking company or a financial institution or a non-banking financial company.


8. service provided By a lottery agent w.e.f. 1-4-2015

Lottery agent / Marketing agent --> Lottery distributor Lottery distributor the service receiver shall pay service tax


9. any service provided By a person to aggregator (w.e.f 1-3-2015)

Any person --> Aggregator

Aggregator the service receiver shall pay service tax if aggregator have the physical pres-ence in taxable territory. If it does not have physical presence in taxable territory any per-son representing the aggregator is liable to pay service tax. If the aggregator neither has a physical presence nor does it have a representative in the taxable territory then it would appoint a person in the taxable territory for the purpose of paying service tax.

Rule 2(1)(aa)] Meaning of Aggregator

“Aggregator means a person, who owns and manages a web based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator”

Rule 2(1)(bca). Brand name or trade

It means a brand name or a trade name whether registered or not, that is to say, a name or a mark, such as an –

invented word or writing, or a symbol, monogram, logo, label, signature,

which is used for the purpose of indicating, or so as to indicate a connection, in the course of trade, between a service and some person using the name or mark with or without any indication of the identity of that person”

10. supply of manpower + security service w.e.f 1-4-2015

Conditions

1. Service is provided by Individual or HUF or Firm including LLP or AOP; and

2. Service receiver is a body corporate; and

3. Both service provider and service receiver is located in taxable territory.

service provider service receiver impactIndividual / HUF / Firm + LLP + AOP located in taxable territory

Body Corporate located in taxable territory

Reverse charge

Body Corporate Body Corporate Forward Charge

then

service provided or agreed by way of service provider service receiverSupply of manpower for any purpose or security service. NA 100% of ST

note 1 : Rule 2(1)(fa). Security service means 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.

note 2 : Rule 2(1)(g). Supply of manpower means supply of manpower, temporarily or otherwise, to another person to work under his superintendence or control. It means manpower should work under supervision of service receiver.

Placement agencies and supplier of labour both covered here.

11. any service provided By a govt to Business entity (w.e.f. 1-4-2016)

Govt --> Business entity Business entity the service receiver shall pay service tax

Exception

1. Renting of immovable property

2. Postal Service

3. Railway Service.

12. service provided By mutual fund agent ( Deleted w.e.f. 1-4-2016 from Nov 2016 exam onwards)


service provided By govt / local authority to Business entity

rule 7. point of taxation in case of reverse charge [w.e.f. 1-4-2016 from nov 2016 exam]

In case of services provided by the Government or local authority to any business entity, the point of taxation shall be the earlier of the dates on which, –

(a) any payment, part or full, in respect of such service becomes due, as specified in the invoice, bill, challan or any other document issued by the Government or local authority demanding such payment; or

(b) payment for such services is made.

In short due date or date of payment which ever date is earlier.

example

due date of payment date of payment point of taxation1. 30-4-2016 10-5-2016 30-4-2016

2. 30-4-2019 20-4-2019 20-4-2019

To be discussed after valuation

rule 6. of valuation of rules. valuation of service

Where any service provided by Government or a local authority to a business entity is allowed to be deferred then interest on late payment shall also be subjected to service tax. [w.e.f. 13-4-2016 from nov 2016 exam onwards ]

full reverse charge in case service provided By a govt to Business entity (w.e.f. 1-4-2016 from nov 2016 exam onwards)

Govt --> Business entity Business entity the service receiver shall pay service tax

Exception

1. Renting of immovable property

2. Postal Service

3. Railway Service.


partial reverse charge

partial reverse charge is applica Ble if all the following conditions are satisfied.

1. Service is provided by Individual or HUF or Firm including LLP or AOP; and

2. Service receiver is a body corporate; and

3. Both service provider and service receiver is located in taxable territory.

service provider (sp) service receiver or person other than sp1. SSP

exemption?Service provider can claim exemption of SSP in respect of his share of value of services. However SR shall remain liable to pay his share of service tax liability.

Not available on value of service under reverse charge. However service receiver can claim exemption in respect of that service which is provided by him. Further SP cannot apply his limit of ₹ 10 Lakhs on service which is payable on reverse basis. This is expressly prohibited in E/N 33 / 2012.

2. Registration SP shall compulsorily get itself registered. Facility of centralised registration also available.

SR shall compulsorily get itself registered. Centralised registration facility available.

3. Payment? Quarterly as per status of SP. [Rule 6 of STR 1994]

Monthly as per status of SR. Status of SP is not relevant. [Rule 6 of STR 1994]

4. POT Rules Rule 3 of POT Rules applicable. Invoice or payment whichever date is earlier.

Rule 7 of POT Rules applicable. Service is deposited on payment basis.

5. Mode of payment?

By setting off CCR or by GAR 7 challan. By GAR 7 challan. (Cannot set off CCR)

6. Bill raised (50%)

Value 1,00,000

+ ST @ 10% / 2 5,000

Value 1,05,000

Payment to Service Provider ₹ 1,05,000.Payment to Govt. ₹ 5,000

7. Is CCR available?

No. But if service provider do not recover this service tax from SR then CCR can be claimed.

Yes, as per above example on ₹ 10,000.

1. renting of motor vehicle

service provided or agreed by way of service provider service receiver

Renting of Motor Vehicle designed to carry passengers, to any person who is not engaged in a similar business.a. Service tax paid on abated value. Nil 100% of ST

40% of 14.5% = 5.8%40% of 15% = 6%

b. Service tax paid on full value 50% of 14.5% = 7.25%

50% of 15% = 7.5%

50% of 14.5% = 7.25%

50% of 15% = 7.5%

Analysis

1. If a motor vehicle is leased without driver then it is treated as deemed sales, VAT is levied. Service tax provisions are not applicable.

2. Reverse charge is not applicable if renting of motor vehicle is designed to carry goods.

3. If both service provider and service receiver are in similar line of business then reverse charge is not applicable.


2. service portion in execution of works contract

service provided or agreed by way of service provider service receiverService portion in execution of a works contract. 50% of ST 50% of ST

note 1 : Pure labour contract is under forward charge.

note 2 : Both service provider and service receiver can opt for independent method of valuation.


13 Exemption To Small

Service Provider (SSP)

Creating employment : Small is Beautiful

₹

introduction to exemption

There are following 3 types of exemption available.

1. General Exemption It is applicable only when specific exemption is not available. General exemption cannot be availed by Service Receiver.

2. Specific 100% exemption Can be availed by service provider on the basis of nature of service. Reverse charge is not applicable if 100% exemption is availed.

3. Special partial exemption also known as abatement

Can be availed by service provider on the basis of nature of service. Reverse charge is applicable on the lower value.

This notification shall come into force on the 1st day of July, 2012.

exemption notification no. 33/2012- st , dated: June 20, 2012

If aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ₹ 10 Lakhs in the preceding financial year then no service tax upto ₹ 10 Lakhs in the current financial year.

Meaning of aggregate value : It means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax

Meaning of taxable service: Taxable service means dutiable service. It do not include 100% exempted service and non taxable service. If any service is eligible for abatement (partial exemption), then, whole of the amount of value of service would be considered for computing aggregate value without excluding abatement. However if services falls in declared service then only value of service element is to be considered for exemption.

Exemption is not available in following cases.

1. Use of others Brand name : Taxable services provided by a person under a brand name or trade name, whether registered or not, of another person.

Meaning of brand name or trade mark : Brand Name or Trade name means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person.

2. Where service tax is payable on the basis of reverse charge.

- Full reverse : No service tax exemption is available either to service provider or service receiver.

- Partial reverse charge. : Service tax exemption is available to service provider in respect of his share. Service receiver cannot claim any exemption.

The exemption contained in this notification shall apply subject to the following conditions, namely:-

(i) Exemption is optional : the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him and such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year.

(ii) Aggregate value computed for all premises for all services : Where taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services.


illustation : Suppose business starts on 1-4-2011.

2011-12 2012-13 2013-14 2014-15

Value of tax-able service

8 Lakhs 11 Lakhs 9 Lakhs 12 Lakhs

On 1-4-2011 it is SSP since value of taxable service in 2010-11 is nil. Exemption of ₹ 10 Lakhs is available.

On 1-4-2012 it is SSP since value of taxable service in 2011-12 is ₹ 8 Lakh. Exemption of ₹ 10 Lakhs is available. ₹ 1 Lakh is taxable.

On 1-4-2013 it is Non SSP since value of taxable service in 2012-13 exceeds ₹ 10 Lakh. Exemption of ₹ 10 Lakhs is not avail-able. ₹ 9 Lakh is taxable.

On 1-4-2014 it is SSP since value of taxable service in 2013-14 is ₹ 9 Lakh. Exemption of ₹ 10 Lakhs is available. ₹ 2 Lakh is taxable.

ssp in brief

preceding financial year current financial yearIf services are exempt from whole of service tax

Not included. Not included. Service tax is also exempt.

If services are partially exempted from service tax. (Abatement)

Taxable value of services shall not include abated value.

Taxable value of services shall include abated value. Whole value is eligible for SSP exemption of ₹ 10 Lakhs. Then abatement shall be allowed to compute service tax liability.

If services are payable on the basis of reverse charge

- Full reverse charge not included not included. Service tax is payable. Exemption cannot be claimed.

- Partial Reverse charge Share of service provider included. Share of service receiver not included.

Share of service provider included. Share of service receiver not included. Share of service provider threshold exemption of ₹ 10 Lakhs available.

Value of goods Not included Not included. No service tax.

Negative service Not included Not included. No service tax.

Services provided in Non taxable territory

Not included Not included. No service tax.

Advance received Included Included. Advance taxable if value of taxable service exceeds threshold limit of ₹ 10 Lakhs.

Taxable service provided under a brand name of other person

Not included Not included. Value of taxable service subjected to service tax. Threshold exemption of ₹ 10 Lakhs not available.

difference

service t ax exciseLimit If in preceding FY value of taxable

service is upto ₹ 10 lakhs then treated as SSP.

If in preceding FY value of excisable goods is upto ₹ 400 Lakhs then treated as SSI.

Exemption upto ₹ 10 lakhs in current FY. upto ₹ 150 Lakhs in current FY.Name SSP exemption, threshold exemption

upto ₹ 10 LakhsSSI exemption upto ₹ 150 Lakhs


Coverage All taxable services are eligible for exemption

Specified goods covered.

CCR Not available on inputs, capital goods and input service.

Not available on inputs and input service. However 100% CCR available on capital goods in first year itself.

Payment of tax No special benefit available Special benefit available.Filing of return No special benefit available Special benefit available.

practical Questions

p1 : Company starts its business for the 1st time from 1-4. You are required to find out whether assessee is eligible for SSP exemption or not. What is status on 1-4.

service 1 service 2 service 3 service 4 t otalTaxable service Taxable service Exempted service Negative service

4 Lakhs 2 Lakhs 8 Lakhs 7 Lakhs 21 Lakhs

solution

AVTS 6 Lakhs Exempted service and negative service

not included in AVTS.For next year also its status is SSP

Less : Basic Exemption 6 Lakhs

Taxable Service Nil

Service Tax Nil

p2 : Company starts its business for the 1st time from 1-4. It renders coaching services. You are required to find out whether assessee is eligible for SSP exemption or not. What is status on 1-4.

Gross Billing (Raised invoice) 14 Lakhs

Amount received 9 Lakhs

Amount outstanding 5 Lakhs

solution

AVTS 14 Lakhs

AVTS is computed as per total billing done. For next year the company is Non SSP.


Taxable Service 4 Lakhs

Service Tax levied on ₹ 4 Lakhs

p3 : A Company starts its business for the 1st time from 1-4. It renders coaching services. You are required to find out whether assessee is eligible for SSP exemption or not. What is status on 1-4.

Gross Billing (Raised invoice) 7 Lakhs

Advance received 4 Lakhs

solution

AVTS 11 Lakhs AVTS is computed as per total billing done + advance received. We are including advance since

as per Rule 4A invoice must be raised for the advance received also. For next year the company

is Non SSP.



Service Tax levied on ₹ 1 Lakhs


p4 : A Company starts its business for the 1st time from 1-4. You are required to find out whether assessee is eligible for SSP exemption or not. What is status on 1-4.

service 1 service 2 t otalOwn brand name With other brand name

9 Lakhs 5 Lakhs 14 Lakhs

solution

AVTS 9 LakhsAVTS shall not include service provided through

others brand name. For next year also its status is SSP


Taxable Service Nil

Service Tax Nil


service 1 service 2 t otalNormal charge Full reverse charge

9 Lakhs 5 Lakhs 14 Lakhs

solution

AVTS 9 Lakhs However it shall pay service tax on full reverse charge basis on ₹ 5 Lakhs. AVTS shall not include service provided on

full reverse charge basis. For next year also its status is SSP


Taxable Service Nil

Service Tax Nil

p6 : a Company starts its business of tour operator (Abatement available 75%) for the 1st time from 1-4. Value of taxable services rendered ₹ 20 Lakhs. You are required to find out whether assessee is eligible for SSP exemption or not. What is status on 1-4.

solution

AVTS rendered 20 LakhsAVTS rendered 20,00,000

Less : Abatement (75%) 15,00,000

AVTS 5,00,000

For next year AVTS shall include abated value which is ₹ 20 Lakhs. For next year its status is Non SSP



Less : Abatement 7.5 Lakhs

Taxable service 2.5 Lakhs

+ ST @ 14% 35,000


Manpower supply service 20 Lakhs

Partial reverse charge [25% payable by SP. 75% payable by SR]

solution

Option 1

share of service provider (25%) service receiverAVTS rendered (25% of 20 L) 5 Lakhs AVTS received 20,00,000

Less : Basic Exemption 5 Lakhs + ST @ 14% 2,80,000

Taxable Service Nil ST payable by SR 75% 2,10,000

+ ST @ 14% Nil

ST payable by SP 25% Nil


Next year status is Non SSP since AVTS rendered is ₹ 20 L.

Option 2

service provider service receiverAVTS rendered 20 Lakhs AVTS received 20,00,000

Less : Basic Exemption 10 Lakhs + ST @ 14% 2,80,000

Taxable Service 10 Lakhs ST payable by SR 75% 2,10,000

+ ST @ 14% 1,40,000

ST payable by SP 25% 35,000

Next year status is Non SSP since AVTS rendered is ₹ 20 L.

extra topics

Following 2 topics are in final syllabus

1. Works contract

2. Valuation of food

Discussed in separate chapters.


14 100% Mega Exemption

It is an executive decision

₹

25/2012 : 100% Exemption notification26/2012 : Partial exemption. Abatement27/ 2012 : 100% Exemption notificationDo not forget whereever specific exemption is not available SSP Exemption is available.

negative services exempt servicesThere is no levy. These services are not liable to service tax.

There is levy, there is charge of service tax but no service tax is payable on them.

It is in Act. It is by way of notification.It is not taxable service therefore no question of exemption.

It is taxable service but non dutiable.

Service provider do not have the option to pay service tax. These services are outside the scope of levy.

Exemption is not compulsory. Service provider may not claim exemption and opt to pay service tax. The service becomes dutiable in this case CCR is available.

Exemption is optional. In excise as per section 5A(1A) exemption is compulsory.

input service output service effect on ccr1. Dutiable Exempt CCR not available

2. Exempt Dutiable No question of CCR

3. Exempt Exempt No question of CCR

4. Negative List Dutiable / Exempt No question of CCR

5. Dutiable / Exempt Negative list CCR not available

services provided to the united nations or a specified international organization [entry no 1]

all Services provided to UNO or a specified international organization

Services provided by UNO or a specified international organization

Input service is exempt. No question of CCR arises since input service is

exempt.

Output service is taxable. It shall collect service tax and deposit with the Govt. No adjustment of CCR since input service was

exempt from tax. But practically it do not charges any consider-ation therefore no contract of service no service tax.

Spec i f i ed In te rna t iona l Organ iza t ion means an international organization declared by the Central Government in pursuance of section 3 of the United Nations (Privileges and Immunities) Act, 1947, to which the provisions of the Schedule to the said Act apply.

Illustrative list of specified international organisations is as follows:(a) International Civil Aviation Organisation

(b) World Health Organisation

(c) International Labor Organisation

(d) Food and Agriculture Organisation of the United Nations

(e) UN Educational, Scientific and Cultural Organisation (UNESCO)(f) International Monetary Fund (IMF)

E.g. : Services like security, renting, works contract service provided to above organisation shall be exempt from tax.


health care services [entry no 2]

a. Health care services by a clinical establishment, an authorised medical practitioner or para-medics.

b. Services provided by way of transportation of a patient in an ambulance, other than those specified in (i) above. w.e.f 1-4-2015

Nature of health care services

(a) (b) (c)means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India; and

includes services by way of transportation of the patient to and from a clinical establishment, but

Transportation : Air, Rail, Ambulance, Ship

does not include hair transplant or cosmetic or plastic surgery,

except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects , developmental abnormalities, injury or trauma.

It is exempt. It is exempt. It is taxable It is exempt.

Only recognized systems of medicines exempt: Only services in recognized systems of medicines in India provided by the persons specified under this head are exempt. In terms of section 2(h) of the Clinical Establishments Act, 2010, the following systems of medicines are recognized systems of medicines:-

1. Allopathy 4. Ayurveda 7. Unani2. Yoga 5. Homeopathy 8. Any other system of medicine that may be recognized by

Central Government. 3. Naturopathy 6. Siddha

Authorised medical practitioner

Authorised medical practitioner means a medical practitioner registered with any of the councils of the recognized system of medicines established or recognized by law in India and includes a medical professional having the requisite qualification to practice in any recognized system of medicines in India as per any law for the time being in force.

Clinical establishment

Clinical establishment means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.

Para-medics Para-medics are trained health care professionals, for example nursing staff, physiotherapists, technicians, lab assistants etc. Services by them in a clinical establishment would be in the capacity of employee and not provided in independent capacity and will thus be considered as services by such clinical establishment. Similar services in independent capacity are also exempted. Thus, paramedics need not be medical professionals possessing professional qualifications.

note 1 : Mortuary services or transportation of dead person is not a health care services since patient is dead. It falls in negative list service therefore not taxable.

note 2 : Health care services cannot be treated as works contract or supply of food / drinks therefore not treated as deemed sales.

services By cord Blood Banks [entry no 2 a]

Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such p2reservation has been exempted.

services By treatment or disposal of Bio-medical waste [entry no 2B]

Services provided by operators of the Common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-2Bedical waste or the processes incidental thereto (collection charges).


service provider service receiver t reatment taxOperators of common bio medical waste treatment facility

Clinical establishment

Treatment or disposal of bio medical waste or the process incidental thereto

Exempt

Operators of common effluent plant

Manufacturing Industry

Treatment of waste Exempt (Entry No 43)

veterinary health care services [ entry no 3]

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

services By an entity registered under section 12 aa of the income tax act, 1961 By way of specified charitaBle activities [ entry no 4]

Specified charitable activities means activities relating to -(i) public health by way of -

(a) care or counseling of

(i) terminally ill persons or persons with severe physical or mental disability,

(ii) persons afflicted with HIV or AIDS, or(iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

(b) public awareness of preventive health, family planning or prevention of HIV infection;

(ii) advancement of religion or spirituality;

(iii) advancement of educational programmes or skill development relating to,-

(a) abandoned, orphaned or homeless children;

(b) physically or mentally abused and traumatized persons;

(c) prisoners; or

(d) persons over the age of 65 years residing in a rural area;

(iv) preservation of environment including watershed, forests and wildlife; or

(v) advancement of any other object of general public utility up to a value of ₹18,75,000 for the year 2012-13 subject to the condition that total value of such activities had not exceeded ₹ 25 lakh during 2011-12. Deleted w.e.f 1-4-2013. (However SSP exemption can be claimed)

note 1 : Where charitable trusts undertake any commercial activity like renting of auditorium then taxable.

renting of religious place / conduct of religious ceremony [ entry no 5]

Services by a person by way of-

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

(b) conduct of any religious ceremony.

Religious place

Religious place means a place which is primarily meant for conduct of prayers or worship pertaining to a religion, meditation, or spirituality.

General public

General public means the body of people at large sufficiently defined by some common quality of public or impersonal nature.

Religious ceremonies

Religious ceremonies are life-cycle rituals including special religious poojas conducted in terms of religious texts by a person so authorized by such religious texts. Occasions like birth, marriage, and death involve elaborate religious ceremonies.

note 1 : Where it let out its guest house to pilgrims then taxable.


legal services [ entry no 6]

service provider service receiver t ax treatmentArbitral tribunal (Panel of arbitrators)

Arbitral tribunal (see note) Exempt

Any person other than business entity Exempt

A business entity with a turnover of up to ₹ 10 lakh in the preceding financial year.

Exempt

A business entity with a turnover exceeds ₹ 10 lakh in the preceding financial year.

Taxable as per reverse charge basis. CCR can be claimed.

Individual as an advocate / Firm of advocates by way of legal services

An advocate or partnership firm of advocates providing legal services

Exempt

Any person other than a business entity. Exempt

A business entity with a turnover up to ₹ 10 lakh in the preceding financial year.

Exempt


Taxable as per reverse charge basis. CCR can be claimed.

w.e.f. 6-6-2016 [from 2017 exams onwards]

Services provided by Senior Advocate to

Any person other than a business entity. Exempt

A business entity with a turnover upto ₹ 10 lakh in the preceding financial year.

Exempt


Taxable Reverse charge applicable

Legal service

Rule 2(1)(cca)

Legal service means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.

Business entity

Business entity is defined in section 65B of the Finance Act, 1994 as any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. Thus, it includes sole proprietors as well. ICAI, ICSI, ICWAI, tax by kk classes are few examples of business entity.

Political parties, Politicians, CBI, TRAI, Govt., NGO etc are not treated as business entity.

note 1 : Arbitral Tribunal appoints members as arbitrator. In turn arbitrator renders its services to arbitrator tribunal. Such services of arbitrator is exempt from tax.

note 2 : Assistance provided to Govt. in respect of legal matters is exempt since Govt. is not a legal entity.

technical testing or analysis services [entry no 7]

1. Services by way of technical testing or analysis of

Deleted

hence now taxable

2. newly developed drugs, including vaccines and herbal remedies,

3. on human participants

4. by a clinical research organisation approved to conduct clinical trials by the Drug Controller General of India.

training or coaching in recreational activities [entry no 8]

Services by way of training or coaching in recreational activities relating to arts (dance, music, painting, sculpture making, theater etc), culture or sports (Cricket, football, tennis, chess, basketball, squash, badminton etc).


input services and output services of educational institution [entry no 9]

(a) Services provided, by an educational institution to its students, faculty and staff. (Faculty and staff are the employees of the educational institution. Services rendered by employer to employee not in negative list. Hence covered by exemption)

Following services provided to students shall be exempt from tax.

i. Conduct of examination and charging fees.

ii. Sale of prospectus

note 1 : Tuition services provided by educa t iona l i n s t i t u t i o n t o i t s s t u d e n t s i s in negative l is t t h e r e f o r e n o t taxable.

(b) Services provided, to an educational institution, by way of,-

(i) Transportation of students, faculty and staff. (Generally schools charges these separately which were subjected to service tax inspite of the fact these where incidental services to education. These services should have fallen in negative list. But few Courts held otherwise. But now there is clear cut exemption.

(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.

E.g. Schools let out its building to IIT for conduct of examination is exempt from service tax. However school let out its building to a company for conducting meetings or seminars shall be taxable service.

Similarly services of development of software to an educational institution is taxable services.

note 1 : Campus recruitment fees received from companies is a commercial activity therefore taxable service.

note 2 : Grants in aid received from Govt. as subsidy not directly affecting the value of service is not liable to service tax as per Rule 6(2) of Valuation Rules 2006.

note 3 : Development of software, development of content for educational institution is taxable service since only 4 specific types of services are made exempted remaining services are taxable service.

vocational courses By nsdc / ssc or affiliated institutes [entry no 9 a ]

Any services provided by

National Skill Development Corporation set by CG

in relation

to

National Skill Development Program

Sector Skill Council approved by NSDC Vocational Skill Development Programme under the National Skill Certification and Monetary Reward Scheme

Assessment agency approved by SSC or NSDC Any other scheme implemented by NSDC

Training partner approved by SSC or NSDC

services provided By iim [entry no 9B] w.e.f. 1-3-2016 (from Nov 2016 exams onwards)

Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme, –

(a) two year full time residential Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management;

(b) fellow programme in Management;

(c) five year integrated programme in Management.

services under sdi scheme [entry no 9 c ] w.e.f. 1-3-2016 (from Nov 2016 exams onwards)

Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme;


services under grameen kaushalya yoJna [entry no 9 d ] w.e.f. 1-3-2016 (from Nov 2016 exams onwards)

Services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training.

inputs services to a recognised sports Body [entry no 10]

Services provided to a recognised sports body by-

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

note : Service of players etc to IPL Franchisee is not service to a recognised sports body and hence, shall be chargeable to service tax.

(b) another recognised sports body.

service provider service receiverPlayer, referee, umpire, coach or team manager Recognised sports body

Recognised sports body Recognised sports body

Recognized sports body means –

(i) Indian Olympic Association (iv) National sports promotion organisations recognised by the Ministry of Sports and Youth Affairs of the Central Government

(ii) Sports Authority of India (v) International Olympic Association or a federation recognised by the International Olympic Association, or

(iii) A national sports federation recognised by the Ministry of Sports and Youth Affairs of the Central Government, and its affiliate federations

(vi) A federation or a body which regulates a sport at international level and its affiliated federations or bodies regulating a sport in India.

sponsorship services of sporting events [entry no 11]

Services by way of sponsorship of sporting events organised,-

(a) by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone or country.

(b) 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;

(c) by Central Civil Services Cultural and Sports Board;

(d) as part of national games, by Indian Olympic Association; or

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

entry no 12 to 15 in final (will Be discusses later with students at final level)

output services By artists in folk or classical form [entry no 16]

Services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre where amount charged is upto ₹ 1,50,000 per performance. w.e.f. 1-4-2016 limit enhanced from 1,00,000 to 1,50,000. [for Nov 2016/ Dec 2016 and 2017 attempt]

However services provided by such artist as a brand ambassador is taxable without any monetary limit.

n ote : Brand ambassador means a person engaged for promotion or marketing of a brand of goods, service, property or actionable claim, event or endorsement of name, including a trade name, logo or house mark of any person.


services provided By independent Journalist or specified news agency [entry no 17]

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

note 1 : Services provided by Reuters, bloomberg, times news network to others is taxable service.

hotel services [entry no 18]

Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below ₹ 1,000 per day or equivalent.note 1 : Renting of rooms by Dharamshalas, Ashram or any such like entity would be covered by E/N

Significance of declared tariff: The relevance of declared tariff is in determining the liability to pay service tax on renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes as exemption is available where declared tariff of a unit of accommodation is below ₹ 1,000 per day or equivalent. However, the tax will be liable to be paid on the amount actually charged i.e. declared tariff minus any discount offered.

Thus if the declared tariff is ₹ 1100/-, but actual room rent charged is ` 800/-, tax will be required to be paid on ` 800/-When the declared tariff is revised as per the tourist season, the liability to pay tax shall be only on the declared tariff for the accommodation where the published/printed tariff is above ₹ 1000/- However, the revision in tariff should be made uniformly applicable to all customers and declared when such change takes place.

Declared tariff includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air-conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.

services in restaurant [entry no 19]

Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages. (Only Non AC food joints are exempt)

note 1 : Abatement available.

note 2 : The whole value is also subjected to VAT as it is deemed sales as per Article 366 of the Constitution of India.

services provided in factory canteen [entry no 19 a ]

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

note 1 : AC / Non AC canteen in factory exempt from tax. Where as only Non AC canteen outside factory is taxable.

general exemption of transportation of specified goods By rail or vessel or goods transport agency [entry no 20]

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

(a) Petroleum and petroleum products falling under Chapter heading 2710 and 2711 of the First Schedule to the Central Excise Tariff Act, 1985.

(f) Newspaper or magazines registered with the Registrar of Newspapers;

(g) Railway equipments or materials;


(b) Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap.

(h) Agricultural produce;

(i) Milk, salt and food grain including flours, pulses and rice excluding alcoholic beverages w.e.f 1-4-2015

foodstuff (Sauces, juices, rice, dahi etc) including flours, tea, coffee, jaggery, sugar, milk products, milk , salt and edible oil,

Milk exempt; Milk product taxable.

Food grain exempt; Non food grain is taxable.

(c) Defence or military equipments.

(d) Postal mail or mail bags.

(e) Household effects. (Like transfer of house from one city to another city);

(j) Chemical fertilizer, organic manure and oil cakes.

(k) cotton, ginned (no seed cotton) or baled

special exemption of transportation of any goods By goods transport agency [entry no 21]

Services provided by a goods transport agency, by way of transport in a goods carriage of,-

(a) Goods, where gross amount charged for transportation of all such goods for a single consignee (receiver) does not exceed ₹ 750 only (It is like booking a space in a truck); or

(b) Goods, where gross amount charged for the transportation of goods on a consignment transported in a single carriage does not exceed ₹ 1,500 only. (It is like booking a full truck)

note 1 : Goods carriage means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods.

note 2 : Full reverse charge is applicable.

illustration

Booking a space in a truck claim exemption

Booking a full truck claim exemption

A to B : ₹ 1,350. Full amount is taxable. A to B : ₹ 1,350. It is taxable.A to C : ₹ 750. It is exempt A to B : ₹ 1,800. Full amount is taxable

hire of motor vehicle [entry no 22]

Services by way of giving on hire -

(a) to a state transport undertaking, a motor vehicle meant to carry more than 12 passengers; or

note : Renting of any motor vehicle designed to carry passengers of upto 12 passengers to a State Transport Undertaking is subject to full service tax.

State transport undertaking means any undertaking providing road transport service, where such undertaking is carried on by,-

(i) the Central Government or a State Government. Explanation.

Road transport service m e a n s a s e r v i c e o f motor vehicles carrying passengers or goods or both by road for hire or reward.

(ii) any Road Transport Corporation established under section 3 of the Road Transport Corporations Act, 1950.

(iii) any municipality or any corporation or company owned or controlled by the Central Government or one or more State Governments, or by the Central Government and one or more State Governments.

(iv) Zila Parishad or any other similar local authority.

(b) to a goods transport agency, a means of transportation of goods.


analysis

nature of motor vehicle service provider service receiverPassenger meant to carry more than 12 passengers Any person State Transport Undertaking

Goods vehicle Any person Goods transport agency

transportation of passengers [entry no 23]

Transport of passengers, with or without accompanied belongings, by -

(a) 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.

Journey t axability1. Dibrugarh-Kolkata-Mumbai

Journey is taxable, but no service tax is payable

owing to the exemption.

2. Dibrugarh-Kolkata-Mumbai-Kolkata-Dibrugrah

3. Guwahati-Kolkata-Bangkok-Kolkata-Guwahati4. Kolkata-Guwahati-Kolkata

(b) non-airconditioned contract carriage for transportation of passengers (other than radio taxi), excluding tourism, conducted tour, charter or hire; or

note 1 : Contract carriage means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorised by him in this behalf on a fixed or an agreed rate or sum-

(a) on a time basis, whether or not with reference to any route or distance; or

(b) from one point to another, and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey.

note 2 : Radio taxi‖ means a taxi including a radio cab, by whatever name called, which is in two-way radio communication with a central control office and is enabled for tracking using Global Positioning System (GPS) or General Packet Radio Service (GPRS).

analysis : what is taxable?

ac / non ac purpose statusAC to school for transportation of students Exempt (Entry 9)

Other purpose Taxable

Non AC Radio Taxi (Uber, Ola) Taxable

Tourism Taxable

Conducted tour (Booking of bus by a family for haridwar tour) Taxable

Charter / Hire (Hiring bus for transportation of employees) Taxable

Other cases, Hiring of bus by DTC Exempt

special case : Hiring of AC / Non AC bus by school for transportation of students or faculty is exempt. (Entry No 9)

(bb)Stage carriage other than air-conditioned stage carriage. (w.e.f. 1-6-2016 from May 2017 exams onwards)

The essential difference between the stage carriage and the contract carriage, as per the Motor Vehicles Act, is that a stage carriage permit holder picks passengers from one point and there can be various stages till the final destination point which are various stages, that is why its is called a ‘stage carriage’. On the other hand, a contract carriage permit holder runs from one point to the destination point only.

A contract of carriage is a contract between a carrier of goods or passengers and the consignor, consignee or passenger.

(c) ropeway, cable car or aerial tramway. w.e.f. 1-4-2016 exemption withdrawn and hence taxable. [for Nov 2016/ Dec 2016 and 2017 attempt]


parking services [entry no 24]

Services by way of Motor Vehicle parking to general public excluding leasing of space to an entity for providing such parking facility. This has been deleted and hence forth it is taxable service. Deleted. hence taxable.

functions of local athority provided to govt. [entry no 25]

Services provided to Government, a local authority or a governmental authority by way of -(a) water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-

gradation; or

note : However the exemption would not be extendable to other services such as consultancy, designing, etc., not directly connected with these specified services.

(b) repair or maintenance of a vessel or an aircraft.

services of general insurance Business [entry no 26]

Services of general insurance business provided under following schemes -

(a) Hut Insurance Scheme; (i) Jan Arogya Bima Policy;

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

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

(c) Scheme for Insurance of Tribals; (k) Pilot Scheme on Seed Crop Insurance;

(d) Janata Personal Accident Policy and Gramin Accident Policy;

(l) Central Sector Scheme on Cattle Insurance;

(e) Group Personal Accident Policy for Self-Employed Women;

(m) Universal Health Insurance Scheme;

(f) Agricultural Pumpset and Failed Well Insurance; (n) Rashtriya Swasthya Bima Yojana; or

(g) Premia collected on export credit insurance; (o) Coconut Palm Insurance Scheme;

(h) 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;

(p) Pradhan Mantri Suraksha Bima Yojna w.e.f. 1-4-2015.

(q) Services of general insurance business provided under ‘Niramaya’ Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability Act, 1999. (w.e.f 1-4-2016 from Nov 2016 exam onwards)

note : General insurance business means fire marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them, but does not include capital redemption business and annuity of certain business.

life insurance service [entry no 26 a ]

Services of life insurance business provided under following schemes -

(a) Janashree Bima Yojana (JBY); or

(b) Aam Aadmi Bima Yojana (AABY);

(c) life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having maximum amount of cover of ₹ 50,000.

(d) Varishtha Pension Bima Yojna w.e.f 1-4-2015

(e) Pradhan Mantri Jeevan jyoti Bima Yojna w.e.f 30-4-2015

(f) Pradhan Mantri Jan Dhan Yojna w.e.f 30-4-2015

collection of contriBution under atal pension yoJna [entry no 26B]

Collection of contribution under Atal Pension Yojna is exempt from service tax w.e.f 30-4-2015


services By way of life insurance Business [entry no 26 c ]

Services of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority of India (PFRDA) under the Pension Fund Regulatory and Development Authority Act, 2013. (w.e.f 1-4-2016 from Nov 2016 exam onwards)

services provided By an incuBatee [entry no 27]

Services provided by an incubatee up to a total turnover of ₹ 50 lakh in a financial year subject to the following conditions, namely:-(a) the total turnover had not exceeded ₹ 50 lakh during the preceding financial year; and(b) a period of 3 years has not been elapsed from the date of entering into an agreement as an incubatee.

note 1 : Incubatee means an entrepreneur located within the premises of a Technology Business Incubator (TBI) or 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 India and who has entered into an agreement with the TBI or the STEP to enable himself to develop and produce hi-tech and innovative products.

note 2 : NN 32/ 2012 exempts services provided by incubators to incubatees.

mutual Benefit service [entry no 28]

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 -

(a) as a trade union;

(b) for the provision of carrying out any activity which is exempt from the levy of service tax; or

(c) up to an amount of ₹ 5,000 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.

note : Trade union means any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen, or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business, and includes any federation of two or more Trade Unions.

agent or intermediary services [entry no 29]

Services by the following persons in respective capacities -

(a) sub-broker or an authorised person to a stock broker.

(b) authorised person (sub broker) to a member (Broker) of a commodity exchange.

(c) mutual fund agent to a mutual fund or asset management company. Deleted w.e.f. 1-4-2015

However entry load or exit load is subject to service tax. Deposit in mutual fund is not subject to service tax since it is transaction only in money. Income from mutual fund also not subjected to service tax since it is represented by way of interest which is in negative list.

(d) distributor to a mutual fund or asset management company. Deleted w.e.f. 1-4-2015

(e) selling or marketing agent of lottery tickets to a distributor or a selling agent; (Sub broker) Deleted w.e.f. 1-4-2015

(f) selling agent or a distributor of SIM cards or recharge coupon vouchers.

(g) business facilitator or a business correspondent to a banking company or an insurance company, in a rural area; or

(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt.


Business facilitator / Business correspondent

Business facilitator or business correspondent means an intermediary appointed under the business facilitator model or the business correspondent model by a banking company or an insurance company under the guidelines issued by Reserve Bank of India. (They are allowed only to refer clients, pursue clients proposal and facilitate the bank to carry out its transactions but do not transact on behalf of the bank)

Business correspondent are permitted to carry out transactions on behalf of the bank as agents.

Distributor or selling agent

Distributor or selling agent means an individual or a firm or a body corporate or other legal entity under law so appointed by the Organising State through an agreement to market and sell lotteries on behalf of the Organising State and shall include distributor or selling agent authorised by the lottery-organising State.

Sub-broker Sub-broker means any person not being a member of stock exchange who acts on behalf of a stock broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock brokers

JoB work [entry no 30]

(a) Carrying out an intermediate production process as job work in relation to 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 excluding intermediate production process of alcoholic liquor for human consumption on job work; or (w.e.f 1-6-2015)

(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 ₹ 150 Lakhs in a financial year subject to the condition that such aggregate value had not exceeded ₹ 150 Lakhs during the preceding financial year.

Appropriate duty

Appropriate duty means duty payable on manufacture or production under a Central Act or a State Act, but shall not include ‘Nil’ rate of duty or duty wholly exempt.

Principal manufacturer

Principal manufacturer means any person who gets goods manufactured or processed on his account from another person.

Business exhiBition service outside india [entry no 31]

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

note 1 : As per POP Rules if both service provider and service receiver are both in India then it is assumed services are consumed in India.

telephone service [entry no 32] deleted w.e.f. 1-4-2015

Services by way of making telephone calls from -

(a) departmentally run public telephone.

(b) guaranteed public telephone operating only for local calls; or

(c) free telephone at airport and hospital where no bills are being issued.

slaughtering of animals [entry no 33]

Services by way of slaughtering of all animals are exempt from service tax.

service provided from non taxaBle territory [entry no 34]

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

(a) 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.

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

(c) a person located in a non-taxable territory.


services of puBlic liBraries [entry no 35]

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

services By esic [entry no 36]

Services by Employees‘ State Insurance Corporation to persons governed under the Employees‘ Insurance Act, 1948.

transfer of a going concern [entry no 37]

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

Transfer of going concern means transfer of running business which is capable of being carried on by the purchaser as an independent business. Such sale of business is called slumpsale. Slumpsale is sale of immovable property, movable property, tangible and intangible assets as a whole without assigning individual value to each asset. since the transfer of title is not merely a transfer of title of either immovable property or movable property it may amount to service and has thus been exempted.

puBlic conveniences services [entry no 38]

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

local authority service [entry no 39]

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

other exemption

entry no 40

Services by way of loading, unloading, packing, storage or warehousing (LUPSW) of rice, cotton (ginned or baled). For other agricultural produce refer Negative list.

entry no 41

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

entry no 42

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

entry no 43

Services by operator of Common Effluent Treatment Plant by way of treatment of effluent. w.e.f. 1-4-2015

entry no 44

Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables. w.e.f. 1-4-2015

entry no 45

Services provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve have been exempted. w.e.f. 1-4-2015

entry no 46

Service provided by way of exhibition of movie by an exhibitor to the distributor or an association of persons consisting of the exhibitor as one of its members has been exempted. w.e.f. 1-4-2015

entry no 47. entertainment services (w.e.f. 1-6-2015)

Services by way of right to admission to

1. Exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet.2. Recognized sporting event.

3. Award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is not more than ₹ 500 per person.

note 1 : Entry to amusement facility is taxable service


[w.e.f. 13-4-2016 [for nov 2016 / dec 2016 and 2017 attempt]

Entry No 48 Services provided by Government or a local authority to a business entity with a turnover up to ` 10 lakh in the preceding financial year.

w.e.f. 1-4-2016 [for nov 2016 / dec 2016 and 2017 attempt]

Entry No. 49 Services provided by Employees’ Provident Fund Organisation (EPFO) to persons governed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

Entry No. 50 Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999.

Entry No. 51 Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market

Entry No. 52 Services provided by National Centre for Cold Chain Development under Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge dissemination

following govt. services exempt from tax [w.e.f. 13-4-2016 [for nov 2016 / dec 2016 and 2017 attempt]

Entry No 54 Services provided by Government or a local authority to another Government or local authority. Provided that nothing contained in this entry shall apply to services specified in sub-clauses (i),(ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994.

Entry No 55 Services provided by Government or a local authority by way of issuance of passport, visa, driving licence, birth certificate or death certificate.

Entry No 56 Services provided by Government or a local authority where the gross amount charged for such services does not exceed ₹ 5000/- Provided that nothing contained in this entry shall apply to services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994. Provided further that in case where continuous supply of service, as defined in clause (c) of rule 2 of the Point of Taxation Rules, 2011, is provided by the Government or a local authority, the exemption shall apply only where the gross amount charged for such service does not exceed ₹ 5000/- in a financial year.

Entry No 57 Services provided by Government or a local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority under such contract.

Entry No 58 Services provided by Government or a local authority by way of- (a) registration required under any law for the time being in force. (b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under any law for the time being in force.

Entry No 59 Services provided by Government or a local authority by way of assignment of right to use natural resources to an individual farmer for the purposes of agriculture.

Entry No 60 Services by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution.

Entry No 61 Services provided by Government or a local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Government or the local authority before the 1st April, 2016. Provided that the exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource;

Entry No 62 Services provided by Government or a local authority by way of allowing a business entity to operate as a telecom service provider or use radio frequency spectrum during the financial year 2015-16 on payment of licence fee or spectrum user charges, as the case may be;

Entry No 63 Services provided by Government by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges (MOT).”.


15 Abatement /

Partial Exemption₹

aBatement

There are 2 rates given

1. First service tax rate is applicable for those students who are appearing in Nov 2016 / Dec 2016 exam.

2. Second service tax rate is applicable for those students who are appearing in 2017 exam.

t ransportation of passengers or goodsRail (passengers / goods) GTA by Road (used

household goods)GTA by Road (goods other than used household goods)

w.e.f 1-4-2016

Vessel from one port in India to another

(Goods)30% of gross billing

is subject to service tax4.35%4.5%

40% of gross billing is subject to ST

5.8%6%

30% of gross billing is subject to service tax

4.2%4.5%


4.2%4.5%

1 2 2A 3

t ransportation of passengers by airEconomy class Business class

40% of gross billing is subject to service tax5.8%6%

60% of gross billing is subject to service tax 8.7%9%

4 4

services by way ofTransport of passengers with or without accompanied

belonging by a contract carriage and radio taxi (Contract carriage do not include motor cab) (w.e.f. 1-6-2016 by AC stage carriage also)

Renting of motor cab designed to carry passengers.


5.8%6%

40% of gross billing is subject to service tax. Bill includes cost of fuel also.

5.8%6%

5 6

t our operator w.e.f. 1-4-2016Arranging or booking solely

accommodation in relation to tourOther cases

(Only transportation)

10% of gross billing is subject to service tax if it includes cost of accommodation

1.45%1.5%


4.35%4.5%

7 8


othersServices provided

by foreman of chit fund w.e.f

1-4-2016

Renting of hotels, inns, guest houses, clubs, campsites or other

commercial places meant for residential or lodging purposes.

Financial leasing including hire purchase

Transport of goods in containers by rail by any person other than Indian Railways w.e.f 1-4-2016

70% of gross billing is subject

to service tax 10.15%10.5%


8.7%9%


1.45%1.5%


5.8%6%

9 10 11 12

impact on ccr on availment of aBatement

s no.

whether ccr available to service provider?

whether ccr available to service

receiver?input input service capital goods input service

1. Rail - Passengers / Goods 4.35% / 4.5%

No Yes w.e.f 1-4-2016

No Yes

2. GTA by Road - Used house hold goods. 5.8% / 6%

No No No Yes

2A GTA by Road - Goods. 4.35% / 4.5%

No No No Yes

3. Vessel - Goods. 4.35% / 4.5%

No Yes w.e.f 1-4-2016

No Yes

4. Air - Passengers. 5.8% / 6%

No Yes No Yes

5. Contract carriage, Radio Taxi Stage carriage 5.8% / 6%

No No No Yes

6. Renting of Motor cab. 5.8% / 6%

No No No Yes (see note 1)

7. Acco. 1.4% / 1.5%No No No

Yes

8. Other cases 4.35% / 4.5% Yes

9 Foreman 10.15% / 10.5% No No No Yes

10. Hotel. 8.7% / 9% No Yes No Yes

11. Financial leasing including hire purchase 1.45% / 1.5%

No No No Yes

12 Container No Yes No Yes

note 1 :

service provider (sub contractor) service receiver (main contractor)Paying service tax 30% of 15% = 4.5% Full CCR can be taken i.e. 4.5%

Paying service tax @ 15% Only 30% of 15% = 4.5% CCR available


p1 : Questions and answers

1. Operation of shelling of paddy on job work basis. Exempt

2. A temple was let out for religious purpose for general public. Exempt

3. Providing food to the students under mid day meals scheme sponsored by Government.

Exempt

4. A partnership firm of advocates provides legal services a partnership firm of advocates.

Exempt

5. A partnership firm of advocates provides assistance in respect of income tax to Government.

Exempt

6. A building was let out to Modern School. Taxable

7. A lory was given on hire to a goods transport agency. Exempt

8. A motor vehicle having seating capacity of 12 persons was given on hire to a State Transport undertaking.

40% taxable

9. A 15 seater motor vehicle was given on hire to a State Transport undertaking. Exempt

10. A building which was let out to school providing pre-school education. Taxable

11. Receipts from running hobby classes. Exempt

12. Service provider: Central Govt. Department Government authority provided services relating to functions of municipality.

Exempt

13. Charges for cutting polishing work of diamond and gemstones for the client. Exempt

14. Training in recreational activities relating to culture. Exempt

15. Training and coaching of Hockey. Exempt

16. Charges for printing work undertaken for the client. Exempt

17. Charges for textile processing work for the client. Exempt

18. Passengers embarking at Assam. Exempt

19. Passengers where journey terminated at Manipur. Exempt

20. Transport of passengers by contract carriage. Exempt

21. Transport of passengers by contract carriage for tour. Not exempt

22. Transport of passengers by ropeway. Exempt.

23. Running cruise ships (within territorial waters of India); Taxable

24 Transport of relief materials to earthquake affected areas. Exempt

25. Transport of newspapers. Exempt

26. Transport of food grain Exempt

27. Transport of alcoholic beverages. Taxable

28. Transport of defence equipments. Exempt

29. Transport of books. Taxable

30. Transport of chemical fertilizers. Exempt

31. Transport of household goods 40% Taxable

32. Testing (with transmission of medical samples between laboratories). Exempt;

33. Medicines consumed as a part of health care services. Fully exempt

34. Preventive health care services. Exempt

35. Treatment along with facilities provided such as TV, AC, room rent, meal to patient (as a part of package).

Fully exempt

36. Genetic affinity examination for determining biological father. Not exempt

37. Hair transplant services due to injury in a fire accident. Exempt

38. Cosmetic surgery of a film star. Taxable

39. Conducting medical examinations of individuals. Exempt

40. Acting as a member of a arbitral tribunal. Exempt


41. Advocate providing legal services to a firm of advocates. Exempt

42. Services to an individual for his personal litigation. Exempt

43. Services to an individual for litigation relating to his sole proprietary business having turnover of ₹ 25 lakh.

Taxable

44. Legal services by an Individual to a company having turnover of ₹ 10 lakh. Exempt

45. Representational services before tribunal in relation to a matter pertaining to a corporate house with turnover of ₹ 15 lakh;

Taxable.

46. Collections from organizing health care camps. Exempt

47. Collections from 100 members @ ₹ 5,000 per month per member in a residential complex.

Exempt

48. Collections from 100 members @ ₹ 5,000 per month per member in a commercial complex.

Taxable

49. Organization of a business exhibition outside India. Exempt.

50. Organization of a business exhibition in India. Taxable.

51. Sale of a running business to Shyam. Exempt.

52. Sale of assets of discontinued business to Mr. Rohan. Not taxable

53 Sub-broking services provided to a broker on stock exchange. Exempt.

54. Acting as a business correspondent of a banking company in rural area. Exempt.

55. Acting as a business facilitator of an insurance company in urban area. Taxable.

56. Commission from mutual fund for selling mutual fund units. Taxable


16 S 68, R 4 of STR

Registration

We need to know who is providing taxable service

₹

who should apply for registrationPerson liable for paying service tax has to register with Superintendent of Central Excise under whose jurisdiction the premises falls.

• If service falls in negative list then provider of such service provider is not liable to pay service tax therefore no requirement of registration.

• If whole of services are exempted as per mega exemption then also service provider is not liable to pay service tax therefore exemption from registration.

• If service provider is SSP whose turnover from taxable services is upto ₹ 10 Lakhs then also service provider is not liable to pay service tax therefore exemption from registration. Exception is there.

• In other cases service provider should get itself registered. If service receiver is liable to pay service tax then it shall also get itself compulsorily registered.

procedure of application1. Every person liable for paying the service tax has to register with superintendent of central excise. He

has to apply in form st -1 for registration within following period.

Where service becomes taxable for the first time.

within 30 days from the date the service becomes taxable for the first time i.e. from the date on which S 66B becomes applicable. provided turnover from dutiable taxable service exceeds ₹ 9,00,000.

Where a person starts business after service becomes taxable for the first time.

within a period of 30 days from the date of such commencement of business provided turnover from dutiable taxable service exceeds ₹ 9,00,000.

note 1: The date of taxable service or date of commencement of business should be excluded while computing 30 days.

note 2 : In case of online application registration number is generated immediately. In case of manual filing an acknowledgement shall be given in duplicate copy of ST 1.

note 3 : As per section 77 penalty upto ₹ 10,000 is levied for non registration.

2. CBEC has prescribed following documents is to be submitted within 7 days of online application.

1 Copy of the PAN Card of the proprietor or the legal entity registered.

2 Photograph and proof of identity of the person filling the application3 Document to establish possession of the premises to be registered such as proof of ownership,

lease or rent agreement, allotment letter from Government, No Objection Certificate from the legal owner.

4 Details of the main Bank Account

5 Memorandum/Articles of Association/List of Directors

6 Authorisation by the Board of Directors/Partners/Proprietor for the person filing the application7 Business transaction numbers obtained from other Government departments or agencies such as

Customs Registration No. (BIN No), Import Export Code (IEC) number, State Sales Tax Number (VAT), Central Sales Tax Number, Company Index Number (CIN) which have been issued prior to the filing of the service tax registration application


registration certificate

1. Applicants seeking registration for single premises shall file an online application for registration on ACES website in form st -1. [aces : automation of central excise and service t ax]

2. Following details are to be mandatorily furnished in the application form: (a) Permanent Account Number (PAN) of the proprietor or the legal entity being registered (except Government Departments) (b) E-mail and mobile number

3. Registration would be granted online within 2 days of filing the complete application form. On grant of registration, the applicant would be enabled to electronically pay service tax.

4. Registration Certificate downloaded from the ACES website would be accepted as proof of registration and there would be no need for a signed copy. Registration form ST 2

5. stc code i.e. registration number : Registration number also known as Service Tax Code (STC) is a 15 digit PAN based number. 1st 10 digits of this number are the same as the PAN of such person. Next 2 digits are ST. Next 3 digits are serial numbers indicating the number of registration taken by the service taxpayer against a common PAN.

suBseQuent changes in details

Where there is change in infor-mation / details

Such change in informations / details shall be intimated in writing within 30 days of such change. E.g. New services being rendered, retirement of partner, admission of partner.

Transfer of business.

Where a registered assessee transfers his business to another person, the transferee shall obtain a fresh certificate of registration.

Cessation of business

(a)Every registered assessee, who ceases to provide the taxable service for which he is registered, shall surrender his registration certificate immediately to the Superintendent of Central Excise.

(b)

On receipt of the surrendered certificate the Superintendent of Central Excise shall ensure that the assessee has paid all monies due to the Central Government under the provisions of the Act, and the rules and the notifications issued thereunder, and thereupon cancel the registration certificate.

Revocation of registration certificate

The registration certificate may be revoked by the Deputy/Assistant Commissioner in any of the following situations, after giving the assessee an opportunity to represent against the proposed revocation and taking into consideration the reply received, if any:

1 The premises are found to be non existent or not in possession of the assessee.

2No documents are received within 15 days of the date of filing the registration application.

3 The documents are found to be incomplete or incorrect in any respect.

registration is of premises not of services

premises services registrationSingle Single Single

Single Multiple Single

Multiple Single Multiple

Multiple Multiple Multiple

note : Where an assessee is providing more than one taxable service, it shall make a single application, mentioning therein all the taxable services provided by him.

single registration for multiple premises : centralised registration

Where a person, liable for paying service tax on a taxable service,

(i) provides such service from more than one premises or offices. (e.g. providing banking service or maintenance service from various branches/offices, railways, airline); or


(ii) receives such service in more than one premises or offices (Reverse charge cases); and

(a) he has centralised billing system or centralised accounting system in respect of such service, and

(b) such centralised billing or centralised accounting systems are located in one or more premises,

he may, register such premises or offices from where centralised billing or centralised accounting systems are located.

note 1 : Registration shall be granted by the commissioner of central excise in whose jurisdiction the premises or offices, from where centralised billing or accounting is done, are located.note 2 : Concept of automatic registration within 7 days do not apply in case of CAS / CBS. Calcutta HC 2010.

ssp registration

Any provider of taxable service whose aggregate value of taxable service in a financial year exceeds ₹ 9 lakhs shall make an application to jurisdictional SCE for registration within 30 days of exceeding the aggregate value of ₹ 9 Lakhs.

input service distriButor registration

It shall make an application to the jurisdictional SCE for registration within 30 days of the commencement of business.


17 S 70. R 7 of STR

Return of Service Tax

Return is evidence : Immediate filing

₹

section 70. furnishing of e return By service provider

Every person liable to pay the service tax (also see chapter registration) both service provider and service receiver shall himself assess the tax due on the services provided by him and shall furnish to the superintendent of central excise where the assessee is registered, a half yearly return in Form st 3 in triplicate within 25 days of the end of the half year.

S 70(1) : Service Provider April to Sept 25th Oct Oct to March 25th AprilS 70(1) : Service Receiver April to Sept 25th Oct Oct to March 25th April

with such late fee not exceeding ₹ 20,000 for delayed furnishing of return.

ssp shall suBmit return

Where a person is not liable for payment of service tax but is required to get itself registered if his aggregate value of his service exceeds ₹ 9,00,000 then he shall also submit return in Form ST 3.

input service distriButor

It need not file return of income, Cenvat return is acceptable as service tax return.

late fees for Belated filing of return

upto 15 days : ₹ 50016 days to 30 days : ₹ 1,000beyond 30 days : ₹ 1,000 + ₹ 100 per day continues till limit of Rs. 20,000 is reached. Maximum Penalty ₹ 20,000. This limit will be reached after total delay of 220 days.

note 1 : Late fees is payable even if gross amount of service tax payable is nil. However CEO may on being satisfied that there is sufficient reason for not filing the return, reduce or waive the late fees.

note 2 : No Late fees in case return is required to be filed by service receiver.

note 3 : Late fees is payable by the assessee on his own.

revision of return

An assessee may submit a revised return, in Form ST 3, in triplicate, to correct mistake or omission, within a period of 90 days from the date of submission of the return u/r 7.

note 1 : Both original return and belated can be revised. Revised return can further be revised if revised within 90 days from the date of filing of first return.

note 1 : multiple premises multiple services only 1 return : If assessee is providing more than one taxable service, he should file only one return. However, details of each taxable service shall be shown separately.

note 2 : Even if there was no business during the period, assessee will have to file nil return as long as registration certificate is valid.

annual return

Service tax assessees above a certain threshold limit shall also submit an annual return for the financial year, in such form and manner as may be specified by the CBEC, by the 30thday of November of the succeeding financial year.


18 R 4A of STR

Invoice

Base of filing of return

₹

introduction

If proper invoice is not issued credit can be denied. Service provider shall issue an invoice and service receiver shall generate a challan (GAR 7).

issue of invoice (general)

a. Every person providing taxable service, shall issue an invoice, a bill or, a challan within 30 days from the date of completion of taxable service or receipt of any payment (advance payment) towards the value of such taxable service, whichever is earlier.

Thus invoice, bill or challan is required to be issued even when advance is received, even if service is to be provided later. Cenvat Credit should be available to service receiver, on the basis of this invoice, as service to be provided is also a taxable service.

b. Invoice should be signed by such person or a person authorised by him.

c. Invoice should be serially numbered.

d. Invoice shall contain the following, namely: -(i) the name, address and the registration number of service provider.

(ii) the name and address of the person receiving taxable service.

(iii) description, classification and value of taxable service provided or to be provided; and(iv) the service tax payable thereon.

Though the rule do not mention the date but date should be mentioned.

note 1 : Invoice is required to be issued within 30 days from the date of completion of service (to the satisfaction of customer). The invoice needs to indicate value of service. Thus, even if physical part of providing the service is completed, invoice cannot be issued unless auxiliary part like measurement, quality testing is completed (e.g. software services, construction services). Thus, service can be treated as completed only when these activities are also completed. However, such activities do not include flimsy or irrelevant grounds of delay in issuance of invoice. This interpretation applies in determination of the date of completion of provision of service in case of continuous supply of service also.

note 2 : Education cess and SHEC should be shown separately in the Invoice for complying with the requirements of Cenvat Credit Rules to facilitate availment of Cenvat Credit by recipient.

note 3 : Rounding of tax in each invoice not required. It is only at the time of making payment of service tax to the Govt. service tax should be rounded to nearest rupee.

relaxation in case of Banking and other financial services

Service is being provided by banking and other financial services (Banks, FI, NBFC or a commercial concern)

1. Whether invoice should be serially numbered : Optional

2. Whether name and address of service receiver should be mentioned in the invoice : Optional

3. Whether invoice should contain remaining information : Yes

note 1: The time limit for issuance of invoice, bill or challan shall be 45 days where service provider is Banking company or Financial institution or NBFC.

note 2: The remainder letter issued by life insurance companies for payment of premium is not treated as invoice.


relaxation in preparing invoice in case of passenger transport service

The ticket including e ticket issued shall be treated as valid invoice if following conditions are satisfied.

1. Whether ticket should contain registration number of service provider : Optional

2. Whether address of service receiver should be mentioned in the invoice : Optional

3. Whether name of service receiver should be mentioned in the invoice : Yes

4. Whether description of journey should be mentioned in the invoice : Yes

5. Whether amount of service tax collected should be mentioned in the invoice : Yes

6. Whether invoice should contain remaining information : Yes

wHeRe PAYmeNT IS mAde UPTo ₹ 1,000 oF THe INvoIced AmoUNT

No need to issue separate invoice in the above case.

continuous supply of service

Some services like construction services, telephone services, renting services are provided for a continuous period exceeding 3 months.

W.e.f. 1-4-2011 every person providing continuous service shall issue invoice, bill or challan within 30 days of the date when each event specified in the contract, which requires the service receiver to make any payment to service provider is completed.

goods transport agency

GTA shall issue consignement note (Bilty) to the recipient of service. Consignment note means a document issued by a GTA against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered.

Contents of consignment note

a. Name of the consignor and consignee

b. Registration number of the goods carriage in which goods are transported.

c. Details of the goods transported.

d. Details of the place of origin and destination.

e. Person liable for paying service tax whether consignor or the GTA.

Invoice shall include a document containing the details of the consignment note number and date, gross weight of the consignment and other required information.

input service distriButor

It shall issue an invoice for distributing credit to each of recipient of credit. The invoice shall contain :

a. Name, address and registration number of the person providing input services and the serial number and date of invoice.

b. Name and address of the input service distributor.

c. Name and address of the recipient of the credit distributed.

d. Amount of the credit distributed.

Even in case of centralised registration, ISD is required to be separately registered to enable credit from those locations where there is no service being provided.


19 Consequences of

excess payment of Service Tax

This happens only in service tax

₹

excess payment of service tax with the intention to self adJust [rule 6(1 a )]

1. Every person liable to pay service tax, may, on his own volition, pay any amount as service tax in advance, towards future tax liability. There is no monetary limit for such advance payment.

2. condition : After such payment the assessee should intimate the details of the amount of service tax paid in advance, to the jurisdictional Superintendent of Central Excise within a period of 15 days from the date of such payment.

3. The excess payment so made and its adjustment is shown in the subsequent service tax return.

4. There is no limits of self adjustment.

computation of service tax

Gross service tax payable (for month / quarter) 4,00,000

Less : CCR as per CCR 2004 (upto the end of month / quarter) (1,00,000)

Less : Self adjustments of excess service tax paid earlier (50,000)

Balance pay in GAR 7 challan 2,50,000

note : In excise balance is paid through PLA.

credit of service tax where service is not provided or value in invoice is re negotiated. [ rule 6(3)]

1. Where an assessee has issued an invoice or received any payment against a service to be provided

2. which is not so provided by him either wholly or partially for any reason ; or

3. amount of invoice is re-negotiated due to deficient provision of service or any terms contained in the contract

4. the assessee may take the credit of such excess service tax paid by him. (The Govt. does not refund).

Condition

1. If the assessee has refunded the payment or part thereof, so received for the service to be provided by him to the person from whom it was received.

2. Has issued credit note for the value of the service not so provided to the person to whom such an invoice had been issued.

illustration

1. Mr. X had booked an auditorium in Hindi Bhawan by paying Value ₹ 1,00,000 + ST ₹ 12,360 = ₹ 1,12,360. Subsequently he asks for cancellation of booking and refund of whole amount. Hindi Bhawan refunds ₹ 1,12,360. In this Govt. shall allow credit of ₹ 12,360 to Hindi Bhawan.

2. In the above case Hindi Bhawan refunds only ₹ 1,00,000. Then credit allowed is 1,00,000 x 12.36 / 112.36 = ₹ 11,000.

3. If Hindi Bhawan do not refund any amount then credit cannot be availed.


20 Practical Questions

Applied theory

₹

assume in all the questions rate of service tax to be 15%

set 1

p1 : Taxbykk Ltd. has agreed to render taxable services to Mr. Guru. The following are the chronological events:

Contract for services entered into on 31.10.2016 for ₹ 4,41,200 (inclusive of service tax)

Advance of ₹ 60,000 was received in 10-11-2016 towards above services to be provided.

Date of completion of service 28-12-2016

Date of issue of invoice 5-1-2017.

The detail of payment received:

29-12-2016 2,00,000

15-1-2016 1,00,000

16-2-2016 81,200

When does the liability to pay service tax arises and for what amount ?

ans:

Date of service Issue of Invoice Date of payment Point of taxation Date of collection

28-12-2016 5-1-2017 10-11-2016 (60,000) 10-11-2016 (60,000) 5/6 of Dec (Note 1)

29-12-2016 (2,00,000) 29-12-2016 (2,00,000) 5/6 of Jan (Note 2)

15-1-2017 (1,00,000) 5-1-2017 (1,81,200) 5/6 of Feb (Note 3)

16-2-2017 (81,200)

note 1Amount of service tax to be deposited in the month of December

60,000 --------- x 15% = 7,826

115%

note 2Amount of service tax to be deposited in the month of January

2,00,000 ----------- x 15% = 26,087

115%

note 3Amount of service tax to be deposited in the month of February

1,81,200 ----------- x 15% = 23,635

115%

p2 : J, a partnership firm, gives the following particulars relating to the services provided to various clients on 25-9-2016 for the half year ended on 30-9-2016.

(a) Total bills raised on 25-9-2016 for ₹ 12,75,000 out of which bill for ₹ 75,000 was raised for loading and unloading of agricultural produce and payments of bills for ₹ 1,00,000 were not received till 30-09-2016.

(b) Amount of ₹ 50,000 was received as an advance from T Ltd. on 25-9-2016 to which the services were to be provided in October, 2016.

You are required to work out the:

(a) Taxable value of services

(b) Date and amount of services tax payable.


Assume service tax is not included in the above amount. The value of taxable services rendered in the preceding financial year was ₹ 44,00,000.

ans :

Computation of taxable value of Services

Total bills raised 12,75,000

Less: Bill raised for loading and unloading of agricultural produce [not taxable since in negative list]

(75,000)

Less : Amount not received (1,00,000)

Add: Advance received for the services to be provided 50,000

Taxable value of services (Net amount charged) 11,50,000

Computation of service tax payable

Taxable value of services 11,50,000

Service tax @ 15% 1,72,500

Service tax is required to be paid by 5/6 Oct 2016.

p3 : Ms. Priya rendered a taxable service to a client on 25-8-2016. A bill for ₹ 4,00,000 was raised on 29-8-2016. ₹ 1,50,000 was received from the client on 1-10-2016 and the balance on 23-10-2016. No service tax was separately charged in the bill. The value of taxable services rendered in the previous financial year was ₹ 100,00,000. The questions are:

(a) Is Ms. Priya liable to pay service tax, even though the same has not been charged by her?

(b) In case she is liable, what is the value of taxable service and the service tax payable?

ans :

Priya is liable to pay service tax even though the tax has not been collected by her. The service tax payable shall be as per POTR 2011.


25-8-2016 29-8-2016 1-10-2016 (1,50,000) 29-8-2016 (4,00,000) 6th of Oct (Note 1)

23-10-2016 (2,50,000)

note 1Amount of service tax to be deposited in the month of October

4,00,000 --------- x 15% = 52,174

115%

p4 : A Ltd registered “Service provider” provides following details in respect of taxable services provided during the Financial Year 2016-17:

date particulars amount 30-8-2016 Advance received from a customer X, services yet to be provided 1,00,000

30-9-2016 Part payment received against a bill of ₹ 9,50,000 raised on customer Y on 25-9-2015 after completion of service on 16-9-2016

5,00,000

31-12-2017 Money received against taxable services to be provided to Z during January, 2017 3,00,000

Taxable services rendered on 16-2-2017 and the bill was raised on 5-3-2017 on 1,00,000. Amount not yet received.

Taxable services rendered on 15-3-2017 and the bill was raised on 16-3-2017 2,00,000. Amount not yet received.

Compute the service tax liability and the date of payment of service tax assuming that the rate of service tax is separately charged. (may 2009 marks 3)

ans :


Date of service Issue of Invoice Date of payment Point of taxation Date of collectionNot yet rendered Not yet issued 30-8-2016 (1,00,000) 30-8-2016 (1,00,000) 14,000 by 6th of Sept

16-9-2016 25-9-2016 30-9-2016 (5,00,000) Balance not yet received

25-9-2016 (9,50,000) 1,42,500 by 6th of Oct

Not yet rendered

Not yet issued 31-12-2016 (3,00,000)

31-12-2016 (3,00,000) 45,000 by 6th of Jan

16-2-2017 5-3-2017 not yet received 5-3-2017 (1,00,000) 15,000 by 31st Mar

15-3-2017 16-3-2017 not yet received 16-3-2017 (2,00,000) 30,000 by 31st Mar

p5 : RAL Ltd. provides security agency service received ₹ 1,00,000 by an account payee cheque, as advance while signing a contract on 5-7-2016 for providing taxable services. She receive ₹ 5,00,000 by credit card on 5-12-2016 and another ₹ 5,00,000 by a pay order on 16-2-2017. The date of completion of service was January 31, 2017 and the bill was raised on 5-2-2017. All three transactions took place during financial year 2016-17. She seeks your advice about her liability towards value of taxable service and the service tax payable by her. Her gross receipts during the preceding FY were 24 L.

ans :


31-1-2017 5-2-2017 5-7-2016 (1,00,000) 5-7-2016 (1,00,000) 5/6 of Aug

5-12-2016 (5,00,000) 5-12-2016 (5,00,000) 5/6 of Jan

16-2-2017 (5,00,000) 5-2-2017 (5,00,000) 5/6 of March

p6 : XY & Co a partnership firm received the following amounts. The value of service rendered in the previous financial year was ₹ 45,00,000.

Date of receipt Nature of receipt Amount Timing of providing Service

20-4-2016 For service 1,00,000 Services were rendered in July, 2016

30-6-2016 Advance for service 5,00,000 Services were rendered in July and Aug, 16

5-8-2016 For service 50,000 Services were rendered in March, 2017

10-9-2016 Advance for service 3,50,000 A sum of ₹ 50,000 was refunded in April, 2017 after termination of agreement. For the balance amount, service was provided in 30-9-2016.

Compute:(i) The amount of taxable service for the first two quarters.(ii) The amount of Service tax payable.

ans:


July 2016 no data 20-4-2016 (1,00,000) 20-4-2016 (1,00,000) 5/6 July

July & Aug no data 30-6-2016 (5,00,000) 30-6-2016 (5,00,000) 5/6 July

March 2017 no data 5-8-2016 (50,000) 5-8-2016 (50,000) 5/6 Oct

30-9-2016 no data 10-9-2016 (3,50,000) 10-9-2016 (3,50,000) 5/6 Oct

Calculation for the amount of taxable value of services and service tax liability.

note

point of taxation value of services service tax liability20-4-2016 86,957 13,043

78,261 payable by 6th of July30-6-2016 4,34,783 65,217

5-8-2016 43,478 6,522

52,174 payable by 6th of Oct10-9-2016 3,03,348 45,652


p7 : Vishal Piyush & Sons. a partnership firm is engaged in providing construction service. Aggregate value of its taxable service provided during the financial year 2016-17 was ₹ 47 Lakh. However during the financial year 2017-18 upto 20-9-2017 value of its taxable service was ₹ 50 lakh. Subsequently on 22-9-2017 the firm provided service of ₹ 15 lakh the payment for which was received by it January 2018. Compute the taxable value of service, the amount of service tax payable and due date of payment of service tax. Assume service tax is not included in the above amount.

solution

Assessee is a partnership firm his total taxable service in preceding FY is upto ₹ 50 Lakhs. Therefore it is required to pay service tax on quarterly basis on receipt basis till the payment of upto ₹ 50 Lakhs. Beyond the receipt of ₹ 50 Lakhs it is required to make payment on quarterly basis by applying POTR. It is required to pay service tax even if he has not received the consideration.

point of levy due date of payment service tax22-9-2017 (₹ 50 Lakhs) 5/6 - 10 7,50,000

22-9-2017 (₹ 15 Lakhs) 5/6 - 10 2,25,000

p8 : Florus Advertising agency provided the following service during the quarter.

services rendered Amounts (₹)Sale of space for advertisement in newspaper 45,000

Services related to preparation of advertisement 85,000

Sale of time for Advertisement to be broadcast on FM Radio 65,000

Advertisement via banner at public places 50,000

Sale of time for advertisement to be broadcast on TV Channel 1,00,000

Aerial bill boards 9,00,000

Canvassing advertisement for publishing on a commission basis 35,000

Compute the service tax liability for Florus Advertising agency.

Note: 1. Point of taxation for all the aforesaid cases falls during the quarter.

2. All the charges stated above are exclusive of service tax

3. Small service providers’ exemption need not be taken into account while solving the aforesaid.

solution :

services rendered Amounts (₹)Sale of space for advertisement in newspaper. (in negative service) Not taxable

Services related to preparation of advertisement 85,000

Sale of time for Advertisement to be broadcast on FM Radio 65,000

Advertisement via banner at public places. 50,000

Sale of time for advertisement to be broadcast on TV Channel 1,00,000

Aerial bill boards 9,00,000

Canvassing advertisement for publishing on a commission basis 35,000

Total Taxable services 12,35,000

Service tax @ 15% 1,85,250

set 2

Question 1

Q Ltd. is engaged in providing the taxable services. Ascertain the amount of service tax payable by it in the month of September, 2016 from the information given below:

particulars amount


Supply of farm labour for agriculture purpose. 1,00,000

Service to people free of cost. 60,000

Advance received in September, 2016 from clients for which no service has been rendered till date. 85,000

Amount received for the services rendered in June, 2016 (bills for the same were issued on 25th June, 2016) 90,000

Bills raised for the services rendered in the month of September, 2016 against which no amount is received so far. 75,000

The above amounts are exclusive of service tax. Q. Ltd is not eligible for small service provider’s exemption in the financial year 2016-17.

solution

status Company due date of payment of service tax Monthly basis and POTR applies

computation of service tax for the month of september

Supply of farm labour (negative services hence not taxable) nil

Service free of cost (no consideration, no contract, therefore no service tax) nil

Advance received 85,000

Amount received in the month of June (not taxable in the month of Sept) nil

Bill raised 75,000


Service tax @ 15% 24,000

gross amount charged 1,84,000

Question 2

What is meant by EASIEST scheme? Enlist the benefits of EASIEST scheme to an assessee under the service Tax Provisions.

solution

EASIEST (Electronic Accounting System in Excise and Service Tax). EASIEST has been developed to make payment of tax easy. The facility is available with 28 banks. The benefits of EASIEST to the taxpayer are(a) Only one copy of the challan has to be filled instead of earlier four copies.(b) Facility of online verification of the status of tax payment using Challan Identification Number (CIN).

Question 3

State with reasons whether the following statements are correct or incorrect under the Service Tax provisions:

(1) mr. p provides the service in March, 2015. He receives the payment by cheque on 30-3-2015 and the cheque is cleared on 15-4-2015. The point of taxation of this service will be 30-3-2015 and the rate of service tax will be 10%. Assume rate of service tax upto 31-3-2015 is 10%.

(2) Postal services for registered post are liable to service tax.

(3) M/s SR Brothers having office in Jammu, provide the services to M/s QR Ltd in Patna. These services are not liable to service tax.

(4) Jaipur Branch of ABC Ltd. provides services to Baroda Branch of ABC Ltd. These services are not liable to services tax.

solution


1. Incorrect If POT Rule appliesRule 4 applies. Services is rendered before 1-4-2016. It is assumed invoice is raised on the same day. Payment is made on 15-4-2016. (Rule 2A). Rate of service tax should be 10%.If POT Rule do not apply since IndividualThe date of payment is date of levy. Therefore new rate is applicable

2. Incorrect Only speed post, express mail, insurance and agency services are taxable.

3. Incorrect Service tax follows consumption based taxation system. Service is consumed in Patna which is a taxable territory therefore it is taxable. Reverse charge is applicable. M/s QR Ltd shall pay service tax.

4. Correct Separate entity concept is applicable only if one of the branches are outside India. S 65B(44)

Question 4

ABC & Co. is partnership firm engaged in the business of recruitment and supply of labourers. The firms, which had rendered taxable services to the tune of ₹ 30 lacs in the financial year 2015-16, furnishes the following de-tails pertaining to the half year ended on 30-9-2016:

S.No. Particulars

1. Amounts collected from companies for pre-recruitment screening. 3,00,000

2. Amounts collected from companies for recruitment - Permanent staff- Temporary staff

1,80,0004,50,000

3. Advances received from prospective employers for conducting campus interviews in colleges. 80,000

Wherever applicable, service tax has been charged separately and received from clients. Compute the value of taxable service rendered and the service tax payable by the assessee for the relevant half year.

solution

status Firm due date of payment of service tax Quarterly basis and POTR do not apply



Net amount charged. Advance received. (see note) 71,200

Total 10,01,200

Service tax @ 15% 1,50,180


note : The question says wherever applicable service tax is charged separately. It means students are required to apply the law. In case of 67(2) advance received includes service tax. Therefore 80,000 / 115% = 71,200. ₹ 71,200 is an amount excluding service tax which is called net amount charged.

Question 5

Mr. Rajesh, a proprietor of Z enterprise provides taxable services. He received the following amount during the financial year 2016-17:

(i) 1,25,000 as advance while signing a contract.

(iii) 6,00,000 by pay order during process of providing service.

(iii) 5,25,000 by credit card after completion of service as on 31st Dec 13.

Compute the value of taxable service and amount of service tax payable by him. Assume service tax has been charged separately. Z enterprise is not eligible for small service provider’s exemption in the financial year 2016-17.

solution


status Ind due date of payment of service tax Quarterly basis and POTR do not apply


Advance received 1,25,000

Amount received by pay order 6,00,000

Amount received through credit card 5,25,000


Service tax @ 15% 1,87,500


set 3

p1 : Professionals Ltd. is engaged in providing services which became taxable with effect from July 01, 2015. Compute the service tax payable by Professionals Ltd. on the following amounts (exclusive of service tax) received for the month of March, 2016:

particulars amountServices performed before such service became taxable (Invoice issued on 28th June, 2015) 5,00,000

Services by way of renting of residential of dwelling for use as residence 1,50,000

Free services rendered to the friends of directors 20,000

Advance received for services to be rendered in July, 2016 5,00,000

Other receipts 12,00,000

solution

status Company due date of payment of service tax Monthly basis and POTR applies


Services performed before 1-7-2015 not taxable since no levy nil

Services by way of renting of residential units. Not taxable since fall in negative list nil

Free services not taxable since not a contract for consideration nil

Advance received taxable on receipt basis 5,00,000

Other receipts (assumed to be related to taxable services) 12,00,000


Less : The assessee is small service provider since in the preceding FY taxable ser-vices do not exceeds ₹ 10 Lakhs. Exemption provided is

10,00,000


Service tax @ 15% 1,05,000


p2 : Mr. Visvakshena, who has been regularly assessed to service tax for the past four years, with taxable service tax receipts of ₹ 12 lacs in the earlier financial year, furnishes the following details for the quarter

nature of receipts Amount (₹ in lakhs)Accounting services rendered to charitable trusts 26

Selling time slots for TV advertisements 32

Selling time slots for advertisements in news papers 24

Compute the value of taxable service and the total service tax payable by him. Is he required to e-file his service tax return for the half year ended.

solution 5(c)


status Individual due date of payment of service tax

Quarterly basis and service tax is payable on receipt basis since his taxable services during the preceding FY do not exceeds ₹ 50 L.


Accounting services rendered to charitable trusts. Taxable service 26,00,000

Selling time slots for TV advertisements. Taxable service 32,00,000

Selling time slots for advertisement in newspaper Not taxable since fall in nega-tive service as specified in S 66D

Nil


Service tax @ 15% 8,70,000


note : Filing of E return is mandatory for all assessee w.e. 1-10-2011.

p3 : Farm Heroes is engaged in providing services for the last five years. The value of taxable services provided by Farm Heroes during the preceding financial year was ₹ 45 Lakhs. It has received the following sums (Exclusive of service tax) in the month of January 2017. Calculate the value of taxable services and tax payable thereon for the month of January 2017.

(1) Supply of farm labour 55,000

(2) Testing of soil of farm land 1,65,000

(3) Value of services provided free 50,500

(4) Processing of raw material to make it fit for production and this process is not liable to Excise Duty

6,35,000

(5) Advance received for such services [As mentioned in (4) above] to be provided in May 2017.

2,13,000

solution

1. It is assumed that Farm Heroes is a Partnership Firm.

2. As per the question the value of taxable services provided by Farm Heroes during the preceding financial year was ₹ 45 lakhs. Therefore POT rule do not apply. It is required to pay service tax on receipt basis.


Supply of farm labour in negative list therefore not taxable Nil

Testing of soil of farm land in negative list therefore not taxable Nil

Value of services provided free. Free services not taxable. Nil

Processing of raw material to make it fit for production and this process is not liable to Excise Duty. Therefore subjected to service tax on receipt basis.

6,35,000

Processing of raw material to make it fit for production and this process is not liable to Excise Duty. It is subjected to service tax on receipt basis.

2,13,000


Service tax @ 15% 1,27,200


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