Overview of Service Tax Provisions And Important Services under the Service Tax Rishabh R. Adukia rishfca@gmail.

com 098198-61049 CA Final Student, Mumbai

1

AGENDA
• • • • • • • Introduction Administration of Service Tax Act & Rules Applicable Category of Services Finance Bill (No.2),2009 Amendments Few Important Services Question & Answer Session

2

INTRODUCTION
• Recommended by Dr. Raja Chelliah Committee (Tax Reforms Committee) • No separate law • First introduced in the year 1994 vide Chapter V (Section 64 to 96) of Finance Act,1994 • Chapter VA (Section 96A to 96I) was inserted by Finance Act,2003 • Applicable to whole of India except the state of Jammu and Kashmir and its provisions were made applicable with effect from July 1,1994.Ex: • In India the service sector contributes nearly 53% of GDP • Rate Applicable as of now is 10.3%
3

Administration of Service Tax
• Administered by the Excise department working under Department of Revenue , Ministry of Finance , Government of India • The responsibility of administration and collection of service tax has been vested with CBEC (Central Board of Excise and Customs)

• Section 93 and 94 of Chapter V and section 96 I of Chapter VA of Finance Act , 1994 empowers the Central Government to issue Notifications to exempt any service or part of service from service tax Accordingly Notifications have been issued by Department of Revenue ,Ministry of Finance from time to time

4

Act and Rules Applicable to Service Tax
1. Chapter V and Chapter VA of Finance Act 1994 2. Service Tax Rules,1994
• • • • Forms Procedure for Registration Due dates Records

1. Service Tax (Removal of Difficulty) Order,2002 2. Service Tax (Advance Rulings)  Rules, 2003 3. Cenvat Credit Rules 2004(Earlier Service Tax Credit Rules,2002) 4. Export of Service Rules,2005
5

Act and Rules Applicable to Service Tax(Contd.)
8. 9. 10. 11. 12. 13. 14. 15. Service Tax (Registration of Special Category of Persons) Rules, 2005 Service Tax (Determination of Value) Rules, 2006 Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 Service Tax (Publication of Names) Rules, 2008 Service Tax Dispute Resolution Scheme, 2008 Service Tax (Provisional Attachment of Property) Rules, 2008 Service Tax Return Preparer Scheme,2009

6

Acid Test to decide Taxability
Service Provider Service Recipient of Service

Place Where service is delivered

Taxable Service Section 65(105)

Threshold limit of Rs 10 lakhs for service providers

7

Taxable services

8

Category of Services
• • • • • • • • • • Communication Services 5 Travel & Transport Services Entertainment Services Professional/Marketing/Agency Real Estate 5 Insurance 4 Cargo/Port 7 Financial 13 Business/Commercial 17 Others 8
– TOTAL 106

14 13 20

9

3 New services added
Finance(No. 2) Bill, 2009 • Cosmetic and Plastic surgery services introduced [Sec 65(105)(zzzzk)] • Transport of goods by National waterways and Inland Waters introduced [Sec 65(105)(zzzzl)] • Legal services to a business entity, by any other business entity introduced [Sec 65(105)(zzzzm)]

10

1.Practicing Chartered Accountant/CS/CWA Services
• Introduced : 16.10.1998 • Definition: Sec 65(83) • "practicing chartered accountant" means a person who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provision of the Chartered Accountants Act, 1949 (38 of 1949) and includes any concern engaged in rendering services in the field of Chartered accountancy; • Taxable service- Taxable service means any service provided or to be provided “to any person, by a practising chartered accountant in his professional capacity, in any manner”-S.65(105)(s);

11

Practicing Chartered Accountant/CS/CWA Services(Contd.)
• • • CA in practice may act as Liquidator, Trustee, Executor, Administrator, Arbitrator, Receiver, or representative in taxation or financial matter Services rendered in professional capacity – subject to service tax Services rendered in a professional capacity relating to representing the client before any statutory authority in the course of proceedings initiated under any law- exempt from tax from 13.07.2006 (Notification No. 25/2006)

12

Issues
• What is professional capacity ? • Is Royalty income from authorship of books taxable ? • Personal/Group tutions given by practicing CA’s taxable ? • Whether receipts from Manpower recruitment work or Management Consultancy will be taxed under this head ? • Persons not holding COP and rendering Tax advisory services liable to pay service tax ?

13

2.Legal Services
• Introduced : yet to be effective • Finance (No.2) Bill,2009
• Legal services to a business entity, by any other business entity introduced [Sec 65(105)(zzzzm)] • In relation to : – Advice – Consultancy – Assistance in any branch of law

14

Issues
• What is a Law ? • Whether Non advocates are taxable ? • Firm of advocates giving consultancy on any matter other than branch of law ? • Advice on Package Scheme of Incentives,other schemes of State or Central Government ?

15

3.Commercial Training & Coaching Services
• • • Introduced: 01.07.2003 DefinitionsSec 65(27)- "commercial training or coaching centre“
– – – – – Any institute or establishment Imparting skill,knowledge,lessons Any subject other than sports Excludes pre school coaching Also excludes any institute or establishment issuing certificates recognized by law

Taxable service- any service provided or to be provided “To any person, by a commercial training or coaching centre in relation to commercial training or coaching” -Sec 65(105) (zzc)
16

Issues
• What is the meaning of word Commercial ? • NGO making surplus out of training,Does NGO become commercial ? • Person taking group tutions,is it commercial coaching ? • Certification courses provided by colleges and universities not recognized by law,Will it be taxed ?

17

4.Stock Broker Services
• Introduced : 1.7.1994 • Definition: Sec 65(101) • Stock Broker means – Application made for registration – Registered as a stock broker or – Sub broker
• Taxable service- Taxable service means any service provided or to be provided “to any person, by a stock broker in connection with sale or purchase of securities listed on recognized stock exchange”-S.65(105)(s); • The Finance (No.2) Bill,2009 has proposed to omit the words Sub Broker from definition of Stock Broker

18

Issues
• Services provided by Unregistered Stock Broker,taxable ? • Services provided by one broker to another broker,taxable ? • Whether arbitrage,jobbing done by the broker on his own account,taxable ? • Transactions of unlisted securities of listed companies I.e Debentures,Commercial Papers,taxable ?

19

5.Management or Business Consultant’s Services
• Introduced : 16/10/1998 • Definition : 65(65) • “Management or Business Consultant” means any person who is engaged in providing any service,either directly or indirectly,in connection with the management of any organisation or business in any manner and includes any person who renders any advice,consultancy or technical assistance in relation to :
20

Management or Business Consultant’s Services(Contd.) – Financial management
Human Resources Management Marketing Management Production Management Logistics Management Procurement & Management of Information Technology resources ;or – other similar areas of management – – – – –
• Taxable service- Taxable service means any service provided or to be provided

“to any person by a management or business consultant in connection with the management of any organisation or business in any manner”-S.65(105)(r);

21

Issues
• Are the following activities management ?
– Service of Drafting of Whistle Blower Policy – Drafting a Risk Management Framework – Corporate Governance Rating – Internal Audit by a non practicing CA/CS/CWA – Advisory services in getting ISO certification,various government approvals like SEZ,environment clearances,FDA approvals

22

6.Sponsorship Services
• • Introduced : 01.05.2006 Definition: Sec 65(99a)

• “sponsorship" includes naming an event after the sponsor,displaying the sponsor’s company logo or trading name,giving the sponsor exclusive or priority booking rights,sponsoring prizes or trophies for competition; But does not include any financial or other support in the form of donations or gifts,given by the donors subject to the condition that the service provider in under no obligation to provide anything in return to such donors; • Taxable service- Taxable service means any service provided or to be provided “to any body corporate or firm,by any person receiving sponsorship,in relation to such sponsorship,in any manner but does not include services in relation to sponsorship of sports events”-S.65(105)(s);

23

Issues
• • • • What is a Sports event? What is a body corporate? What is a firm ? In respect of Services provided from outside India and received in India,Whether services provided to other than body corporate and firms can be taxed ?
24

7.Security Agency Services
• Introduced : 16.10.1998
• Definition: Sec 65(94) “Security Agency” means
– Any person engaged in business – Security of any property,movable & immovable – Includes services of investigation – Detection or verification – Of any fact or activity – Supply of security personnel • Taxable service- any service provided or to be provided To any person, by a security agency in relation to security of any property or person and detection,etc services -Sec 65(105) (zzc)

25

Issues
• Is security agency service provided by a Police Department taxable ? • Is security agency service provided by a NGO taxable ? • Is security agency service provided by animal keepers like dog,horse,other pets taxable ?

26

8.Cosmetic & Plastic Surgery Services
• Introduced : yet to be effective • Finance (No.2) Bill,2009 • Services by any person to any person in relation to
– Costmetic & Plastic surgery – Excludes any surgery undertaken to restore or reconstruct anatomy or functions of body due to diseases
27

Issues
• Removal of Fat • Smile surgery • Dental Surgery

28

Useful Links
• • Directorate of Service Tax, Ministry of Finance http://www.servicetax.gov.in/ Union Budget http://www.indiabudget.nic.in/ub2009-10/fb/bill5.pdf

29

QUESTIONS? SUGGESTIONS?? COMMENTS???

30

31

2.Insurance Auxillary Services
• • • Introduced : 16.10.1998 Definition: Sec 65(83) "practicing chartered accountant" means a person who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provision of the Chartered Accountants Act, 1949 (38 of 1949) and includes any concern engaged in rendering services in the field of Chartered accountancy; • Taxable service- Taxable service means any service provided or to be provided “to any person, by a practising chartered accountant in his professional capacity, in any manner”-S.65(105)(s);

32

3. Event Management Services
• • • Introduced: 16.08.2002 Definition : Sec 65(40)- Event Management : Sec 65(41) – Event manager Taxable service - any service provided or to be provided to “to any person, by an event manager in relation to event management “[Sec 65(105) (zu)]

33

Event Management Services(Contd.)
• • • • • An event manager is hired to execute an event such as a product launch of any corporate, promotional activities, exhibitions and private functions, etc. Event manager uses his expertise and ideas to manage an event Includes any consultation provided for organizing event No service tax on sale proceeds of tickets or revenue generated from the sale of space Services provided by an organizer of trade fairs and exhibitions to an exhibitor in relation to business exhibition is liable to service tax under “Business Exhibition Service”

34

5. Information Technology Software Services
• • • Introduced: 16.05.2008 Definition – Sec 65(53a) "information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment

35

Taxable service
• Sec 65(105) (zzzze)
• • any service provided or to be provided “To any person, by any other person in relation to information technology software for use in the course, or furtherance, of business or commerce, including,— (i) development of information technology software,  (ii) study, analysis, design and programming of information technology software, (iii) adaptation, upgradation, enhancement, implementation and other similar services related to information technology software

36

(iv) providing advice, consultancy and assistance on matters related to information technology software, including conducting feasibility studies on implementation of a system, specifications for a database design, guidance and assistance during the startup phase of a new system, specifications to secure a database, advice on proprietary information technology software,  (v) acquiring the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in other information technology software products, (vi) acquiring the right to use information technology software supplied electronically

37

Points to note
• • • • • Software consists of carrier medium such as CD, Floppy and coded data Packaged software sold off the shelf, being treated as goods, is leviable to excise duty IT software services provided for use in business or commerce are included Supply of IT software electronically included Services provided in relation to advice, consultancy on IT software included

38

Amendment proposed in Finance Bill 2009
• the word “providing” is to be substituted for “acquiring” in Sec 65(105)(zzzze)- Information Technology Software Services with retrospective effect from 16.05.2008

39

6. Consulting Engineer
• Introduced : 07.07.1997 • Definition Sec 65(31) • "consulting engineer" means any professionally qualified engineer or anybody corporate or any other firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to any person in one or more disciplines of engineering • Taxable service- Sec 65(105) (g) • Taxable service means any service provided or to be provided “to any person, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering including the discipline of computer hardware engineering

40

Consulting Engineer…
• • Includes self-employed professionally qualified engineer, whether or not employing others for assistance. For services rendered by the sub-consultant to the prime consultant, the levy of Service Tax, on the prime or main consulting engineer who raises a bill on his client (which would include the charge for services by the subconsultant).

41

Illustrative list
(i) Feasibility study (ii) Pre-design services/project report (iii) Basic design engineering (iv) Detailed design engineering (v) Procurement (vi) Construction supervision and project management (vii) Supervision of commissioning and initial operation (viii) Manpower planning and training (ix) Post-operation and management (x) Trouble shooting and technical services, including establishing systems and procedures for an existing plant.

42

Specific Exemption
• taxable services provided by a consulting engineer to a client on transfer of technology

43

Taxable services
Communication Services
1. Telecommunication Service 65(105)(zzzx) 2. Mailing List Compilation and Mailing 65(105)(zzzg) 3. Internet Telephony 65(105)(zzzu) 4. Internet Cafe 65(105)(zzf) 5. Development and Supply of Contents 65(105)(zzzzb)

44

Travel and Transport
6. 7. 8. 9. Air Travel Agent 65(105)(l) Airport Services 65(105)(zzm) Transport of Goods by Aircraft 65(105)(zzn) Transport of passenger embarking in India for international journey by air 65(105)(zzzo) 10. Tour operator 65(105)(n) 11. Rent-A-Cab scheme operator 65(105)(o) 12. Rail Travel Agent 65(105)(zz) 13. Transport of goods by road 65(105)(zzp) 14. Travel Agent – Other 65(105)(zzx) 15. Transport of goods other than water through pipeline or other conduit 65(105)(zzz)

45

Travel and Transport…..
16. Transport of goods in Container by Rail 65(105)(zzzp) 17. Ship Management 65(105)(zzzt) 18. Transport by Cruise Ship (zzzv) 19. Courier

65(105) 65(105)(f)

46

Entertainment
20. Photography 65(105)(zb) 21. Online Information & Data Base Access or retrieval 22. Video-tape Production 65(105)(zi) 23. Sound Recording 65(105)(zj) 24. Broadcasting agency or organization 65(105)(zk) 25. Cable Operator 65(105)(zs) 26. Event Management 65(105)(zu) 27. Fashion Designer 65(105)(zv) 28. Club or Association 65(105)(zzze) 29. Mandap Keeper 65(105)(m) 30. Convention Centre 65(105)(zc) 31. Outdoor Caterer 65(105)(zzt) 32. Pandal or shamiana 65(105)(zzw) 65(105)(zh)

47

Professional / Marketing/Agency
33. Consulting Engineer 65(105)(g) 34. Architect 65(105)(p) 35. Interior decorator 65(105)(q) 36. Management or Business consultant 65(105)(r) 37. Chartered Accountant 65(105)(s) 38. Cost Accountant 65(105)(t) 39. Company Secretary 65(105)(u) 40. Scientific and Technical consultancy 65(105)(za) 41. Beauty Treatment 65(105)(zq) 42. Health Club & Fitness 65(105)(zw) 43. Opinion Poll 65(105)(zzs) 44. Programme Producer 65(105)(zzu)

48

Professional / Marketing/Agency…..
45. Security Agency 46. Credit Rating Agency 65(105)(x) 47. Market Research Agency 48. Advertisement Agency 49. Manpower Recruitment and Supply Agency 65(105)(k) 50. Registrar to an issue 65(105)(zzzi) 51. Share Transfer Agent 65(105)(zzzj) 52. Design Services (zzzzd) 65(105)(w) 65(105)(y) 65(105)(e)

65(105)

49

Real estate
53. Real Estate Agent 65(105)(v) 54. Commercial or Industrial Construction Service 65(105)(zzq) 55. Site formation and clearance, excavation and earthmoving and demolition and such other activities 65(105)(zzza) 56. Construction of Complex 65(105)(zzzh) 57. Survey and Map Making 65(105) (zzzc)

50

Insurance
58. General Insurance 65(105)(d) 59. Insurance auxiliary services concerning general insurance business 65(105)(zl) 60. Life insurance in relation to risk cover 65(105)(zx) 61. Insurance auxiliary services concerning life insurance business 65(105)(zy)

51

Cargo/Port
62. Custom House Agent 65(105)(h) 63. Steamer Agent 64. Clearing & Forwarding Agent 65(105)(j) 65. Cargo Handling 66. Port 65(105)(zn) 67. Other Port 65(105)(zzl) 68. Dredging Service (zzzb) 65(105)(i)

65(105)(zr)

65(105)

52

Financial
69. Stock-Broker 65(105)(a) 70. Underwriter 65(105)(z) 71. Banking or Financial Services 65(105)(zm) 72. Foreign Exchange Broker 65(105)(zzk) 73. Forward Contract 65(105)(zzy) 74. ATM operations, maintenance or management 65(105)(zzzk) 75. Recovery Agent 65(105)(zzzl) 76. Credit / Debit / Charge or Other payment Card 65(105)(zzzw) 77. Asset management service 65(105)(zzzzc) 78. Management of Investment ULIP Service 65(105)(zzzzf) 79. Stock Exchange Service 65(105)(zzzzg)

53

Financial…
80. Commodity Exchange Service 65(105)(zzzzh) 81. Processing and Clearing House Service 65(105)(zzzzi)

54

Business/ Commercial
82. Authorized Service Station 65(105)(zo) 83. Dry Cleaning 65(105)(zt) 84. Storage and warehousing 65(105)(zza) 85. Business Auxiliary Service 65(105)(zzb) 86. Commercial Training or Coaching Centre 65(105)(zzc) 87. Franchise 65(105)(zze) 88. Management, maintenance or repair 65(105)(zzg) 89. Technical testing and analysis 65(105)(zzh) 90. Technical inspection and certification 65(105)(zzi) 91. Business Exhibition 65(105)(zzo) 92. Intellectual Property 65(105)(zzr)

55

Business/ Commercial
93. Cleaning Activity (zzzd) 94. Packing Activity (zzzf) 95. Sale of space or time for advertisement 65(105)(zzzm) 96. Sponsorship 65(105)(zzzo) 97. Support services of business or commerce 65(105)(zzzq) 98. Information Technology Software Services 65(105)(zzzze) 65(105) 65(105)

56

Others
99. Erection, Commissioning or Installation 65(105)(zzd) 100.Survey and Exploration of Mineral Oil and Gas 65(105)(zzv) 101.Auctioneers 65(105)(zzzr) 102.Public Relation 65(105)(zzzs) 103. Mining 65(105)(zzzy) 104.Renting of immovable property 65(105)(zzzz) 105.Works contract 65(105)(zzzza) 106.Supply of Tangible Goods Service 65(105)(zzzzj)

57

Sign up to vote on this title
UsefulNot useful