13/06/2012
Analysis of Service Tax Amendments & a Snapshot for Industry
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1. BASIS OF CHARGE
QUES1:- WHAT ARE THE ASPECTS WHICH NEED TO BE CONSIDERED TO ASCERTAIN WHETHER I AM PROVIDING ANY SERVICE OR NOT?
Ans:- As per Section 66B (Charging Section), Service tax is levied on all services provided in the taxable territory by one person to another. However, the services specified in the Negative List are not liable to be taxed.
Thus, the charge of service tax has been shifted from “Taxable Service” to “Service”. Presently, any person providing “Service” is liable to pay service tax. In accordance with this, the definition of the term “service” needs special mention. The term has been defined under Section 65B of Finance act’1994.
In simple terms the definition connotes that ‘Service’ means
• Any activity (Term not Defined in act)(In terms of the common understanding of the word, activity would include an act done, a work done, an operation carried out, ex*****on of an act, provision of a facility etc. It is a term with very wide connotation. Thus, anything done will be covered under the term activity)
• For consideration (Term not Defined in act)(In simple term, ‘consideration’ means anything received in return for a provision of service which includes monetary payment and any consideration of non-monetary nature as well as deferred consideration.)
• Carried out by a person for another
• And includes a declared service.
• But Shall Not Include
(a) an activity which constitutes merely,––
(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed to be sale within the meaning of clause (29A) of article 366 of the Constitution; or (i.e. Deemed Sale)
(iii) a transaction in money or actionable claim;
(b) a provision of service by an employee to the employer in the course of or in relation to his employment;
(c) fees taken in any Court or tribunal established under any law for the time being in force.
Thus from above it is somehow clear that any act done will be covered under the ambit of service tax provided the act must not be in respect of the activities excluded under sub-clauses (a), (b) and (c). Apart from this there are other services also on which service tax is not liable to be paid. These services are either specified under the Negative List or are exempted by way of a separate exemption notification.
Therefore, all types of activities undertaken for another person and for which consideration is received (Whether monetary or Non-monetary) is liable to be taxed. However, the services covered under the following categories are outside the purview of service tax and no service tax is required to be paid. These are as follows:-
(a) Services excluded from the definition of Service {See above clauses (a), (b), (c)}
(b) Services specified under the Negative List {Read Section 66D – 17 Services)
(c) Services specified under Exemption Notifications {Read Mega Exemption Notification No:- 12/2012 Dated 17/03/2012 – 34 Services}
The issue can also be explained with the help of examples below:-
For Example:-
(1) A trader of goods is not liable to pay service tax as he is excluded from the definition of service.
(2) Any person providing services of supplying manpower is liable to pay service tax as he is not covered under any of the above three categories.
(3) Amount charged as a donation is not liable to be taxed as nothing is received in return.
(4) A agrees to construct 3 flats for B on land owned by B and in return B agrees to provide one flat to A without any monetary consideration is liable to be taxed although no consideration is received. The valuation for service shall be as per the Service Tax (Determination of Value) Rules’2006.
(5) A agrees to provide free of cost coaching to B is not liable to be taxed as no consideration is received.
(6) A agrees to pay Rs 1 lac for advertisement in print media to Times of India is not liable to be taxed as this service is covered under the negative list.
(7) A contract for Construction of roads for use by general public is outside the purview of service tax as it is covered under the exemption notification.
Thus, a person must see the lists for all the above three excluded categories and decide whether he is liable to pay service tax or not. If he is covered under any of the aforesaid categories then he is not liable to pay service tax. Apart from the above exclusions, all activities are covered under services tax and tax is liable to be paid on the amount of consideration received.
Basic Exemption available to every person
Furthermore apart from above, there is another Exemption Notification No 06/2005 for Small Scale Service Provider providing services below Rs.10 lakh in a financial year. As per this notification, any person providing taxable services upto the limit of Rs. 10 lakh is not required to charge and pay service tax if the services provided by him in the previous year is upto the limit of Rs 10 lakh. Thus, although the activity comes under service tax, benefit of this exemption also needs to be considered.
QUES2:-WHETHER SERVICES PROVIDED OUTSIDE INDIA I.E. EXPORT OF SERVICES ARE LIABLE TO BE TAXED OR NOT?
Ans:- As per the provisions, service must be provided in the taxable territory i.e. in India excluding Jammu & Kashmir.
In other words any service provided Outside India (i.e. Export of Service) as well as service provided to Jammu & Kashmir is not liable to be taxed.
Further whether the service is Export of Service or not is to be ascertained in accordance with the Place of Provision of Service Rules, 2012 framed in this respect;
