Section 2(1)(o) of Information Technology Act, 2000: “Data means a representation of information, knowledge, facts, concepts or instructions which are being prepared or have been prepared in a formalized manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form (including computer printouts, magnetic or optical storage media, punched cards, punched tapes) or stored internally in the memory of the computer.”
Section 2(1)(v) of Information Technology Act, 2000: “Information includes data, text, images, sound, voice, codes, computer programmes, software and data bases or micro film or computer generated micro fiche.”
Such codes are no longer statutory but used for statistical purpose for the purpose of registration and for payment of tax as specified vide Circular No.165/16/2012 –ST dated 20.11.2012:
Tax Collection of Service
Interest and penalties on such service
Provision relating to Negative List
On-line access or retrieval services are not included in the Negative list as specified under section 66D of the Finance Act, 1994.
Provisions relating to exemptions
Small Service Provider
Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.
Import of Technology
Vide Notification No. 14/ 2012-ST, dated March 17, 2012 – Exemption in respect of Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of R&D Cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986.
To Foreign Diplomatic missions and their personnel
Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.
Services by TBI or STEP
Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted
Services provided to SEZ
Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.
Notification No. 25/2012-ST dated 20-6-2012 grants exemption to various services specified therein. None of the item in the said notification relates to on-line access or retrieval services
Provisions relating to Valuation and Abatement
Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which service tax should be levied.
In respect of On-Line access or retrieval services, no specific provision for determination of taxable value has been provided. However it has been clarified that the value of taxable services 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 are indicated separately in the invoice. Thus, the value of taxable on-line access or retrieval services is to be determined in terms of provision of Section 67 read with the prescribed rules.
No abatement has been granted to any person liable to pay service tax under the section.
Provisions relating to Cenvat Credit
The Credit is available to the service provider of the duty or tax paid on ‘capital goods’, ‘inputs’ and ‘input services’. Since all the services relating to internet cafe are taxable, the provider of service will get the credit of excise duty paid on capital goods, input and service tax paid on input services as defined in Cenvat Credit Rules, 2004.
Provisions relating to point of taxation
As per Rule 3 of Point of Taxation Rules, 2011, the point of taxation shall be-
Time when the invoice for the service provided or to be provided is issued. As per Rule 4A of Service Tax Rules, invoice shall be issued within 30 days from the date of completion of service. In case invoice is not issued within 30 days from the completion of service, the point of taxation shall be the date of completion of service.
In case where the person providing the service receives payment before the time specified above, the date of receipt of payment shall be the point of taxation.
Provisions relating to Place of Provision of Service Rules, 2012
The Place of Provision of Service Rules, 2012 contains different rules for different nature of services. In case of the present service, Rule 9 of Place of Provision Rules, 2012 that location of service provider shall be the place of provision of services. Thus, if the provider is within taxable territory, place of provision shall be within taxable territory and taxable, else, non taxable.
Provisions relating to reverse charge
On-line access or retrieval service is not included under the mechanism of Reverse Charge. Hence, the person providing the service shall be the person liable to pay service tax.