Works Contract Services

  • Important Definition

Section 65B(54): “works contract” means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;

Thus, the service includes all types of services which involve transfer of property in goods during provision of such services.  The services can be provided in relation to both moveable as well as immovable properties.

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  • Accounting Codes

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:

 

  • Provision relating to Negative List

Works Contract services are not included in the Negative list as specified under section 66D of the Finance Act, 1994.  Rather it has been included in the list of declared services.

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  • Provisions relating to exemptions

  1. General Exemption
  • 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.

  1. Specific Exemptions

Notification No. 25/2012 provided for the following exemptions in respect of works contract services:

12. Services provided to the Government, a local authority or a governmental authority by way of erection, commissioning, installation of –

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

(d) canal, dam or other irrigation works;

(e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

Prior to 01.04.2015, the following structures were also covered in exemption:

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;

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

However, in relation to above exemption, the following exemption has again been provided w.e.f 01-03-2016 by inserting new clause (12A) in Notification No. 25/2012 which reads as under:

12A.Services provided to the Government, a local authority or a governmental authority by way of constructionerection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of—

  1. a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
  2. a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or
  3. a residential complex predominantly meant for self-use or the use of their employees or other persons specified in theExplanation 1 to clause (44) of section 65B of the said Act;

under a contract which had been entered into prior to the 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date:

 

Provided that nothing contained in this entry shall apply on or after the 1st April, 2020.

  1. Services provided by way of erection, commissioning, installation of,-

(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;

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

(ba) a civil structure or any other original works pertaining to the ‘In-situ rehabilitation of existing slum dwellers using land as a resource through private participation’ under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers (w.e.f. 01-03-2016).

(bb) a civil structure or any other original works pertaining to the Beneficiary-led individual house construction/enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (w.e.f. 01-03-2016);

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

(d) a pollution control or effluent treatment plant, except located as a part of a factory; or

(e) a structure meant for funeral, burial or cremation of deceased;

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

(a) railways, including monorail or metro (Prior to 01-03-2016, metro and monorail were also included and prior to 01.4.2015, an airport or port were also covered)

(b) a single residential unit otherwise than as a part of a residential complex;

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

(ca) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under (w.e.f 01-03-2016):

(i) the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;

(ii) any housing scheme of a State Government.(d)            post-harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or

(e) mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;

In respect of above exemption, a specific exemption for contracts prior to 1.3.2015 has been inserted w.e.f. 1.3.2016 which reads as under:

14A. Services by way of construction, erection, commissioning, or installation of original works pertaining to an airport or port provided under a contract which had been entered into prior to 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date:

Provided that Ministry of Civil Aviation or the Ministry of Shipping in the Government of

India, as the case may be, certifies that the contract had been entered into before the 1st March, 2015:

Provided further that nothing contained in this entry shall apply on or after the 1st April, 2020;

  1. Services by the following persons in respective capacities:

(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt

Further, two sections 101 and 102 have been inserted in Finance Act, 1994 to provide retrospective relief in case of following contracts:

Section Particular of Services Period for which exemption granted
101 Taxable services of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of canal, dam and other irrigation work when provided to a governmental authority 01.07.2012-29.01.2014
102 Taxable services of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of non commercial civil structure or original works, structures meant for education, arts, clinical establishment, residential complex meant for persons specified in 65B(44) or their employees when provided to Government, local authority or a governmental authority in case of contracts entered prior to 01-03-2015 01.04.2015-29.02.2016

  • 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 services tax should be levied.

In respect of Works Contract Services, whe such services qualify as works contract is provided as under:

Type of Works Contract Options Manner of computation of service tax
Original Works

(a) “original works” means-

(i) all new constructions;

(ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

(iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;

In other cases Service tax shall be payable on 40% cent of the total amount including such gross amount.

 

in case of works contract, not covered under sub-clause (A), including works contract entered into for,—

(i)  maintenance or repair or reconditioning or restoration or servicing of any goods; or

(ii)  maintenance or repair or completion and finishing services such as glazing or plastering or floor and wall tiling or installation of electrical fittings of immovable property, service tax shall be payable on seventy per cent of the total amount charged for the works contract.

Service tax shall be payable on

70% of the total amount charged for the works contract

Levy of Service Tax on Free of cost material provided by Contractee

It has been always a dispute that while taking benefit of Valuation Rules or abatement, the value of free goods supplied by contractee be added to the consideration receveid by the asseessee to arrive at true value of service portion in the contract.  i.e. to say that the arrangement of provision of free material of goods provides extra benefit to contractor as the intent of law was to provide abatement / value determination from total value of contract.  However, the matter has been decided by Larger Bench in the case of of Bhayana Builders P. Ltd. v CST, Delhi (Tribunal – LB) wherein Hon’ble Tribunal examined the scope of Section 67 as under:

“(iv) The expression “consideration” occurring in the U.P. Imposition of Ceiling on Land Holdings Act, 1961 fell for consideration in Ku. Sonia Bhatia v. State of U.P. and Others – AIR 1981 SC 1274 the Court explained that since the expression “consideration” was not defined in the U.P. Act, its meaning as derived from the definition of the expression in Section 2(d) of the Contract Act, 1872 could be considered. After considering the definition of the expression in the Contract Act and referring to Black’s Law Dictionary; other dictionaries, English judgments and Corpus Juris Secundum, the Supreme Court held that : the in escapable conclusion that follows is that consideration means a reasonable equivalent for other valuable benefit passed on by the promisor to the promisee or by the transfer of to the transferee.

(v) Clearly, Section 67 of the Act deals with valuation of taxable services and intends to define what constitutes the value received by the service provider as “consideration” from the service recipient for the service provided. Implicit in this legislative architecture is the concept that any consideration whether monetary or otherwise should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the later. “Free supplies”, incorporated into construction (cement or steel for instance), even on an extravagant inference, would not constitute a non-monetary consideration remitted by the service recipient to the service provider for providing a service, particularly since no part of the goods and materials so supplied accrues to or is retained by the service provider. Wherever a monetary consideration is charged for providing the taxable service and no non-monetary consideration forms part of the agreement between the parties, it is clause (i) that applies and the value of the taxable service would in such case be the gross amount charged by the service provider and paid by the service recipient.

(vi) In Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India – 2013 (29) S.T.R. 9 (Del.), the Delhi High Court was essentially considering a challenge of the validity of Rule 5 of the Service Tax (Determination of Value) Rules, 2006. This provision was challenged to the extent it includes reimbursement of expenses in the value of taxable services for the purpose of levy of service tax. Apart from the challenge to its constitutionality, the provision was challenged on the ground that it is ultra vires the provisions of Sections 66 and 67 of the Act. The High Court held that Section 66 of the Act levies tax only on the taxable services; that this is an inbuilt mechanism to ensure that only the taxable service shall be evaluated under the provisions of Section 67; that on construing the provisions of Sections 66 and 67(1)(i) together and harmoniously, it is clear that the value of taxable service shall be the gross amount charged by the service provider; and nothing more and nothing less than the consideration paid as a quid pro quo for the service can be brought to charge. The High Court further held that the common thread that runs through Sections 66 and 67 and 94 (the Rule making power), manifests that only the service actually provided by the service provider can be valued and assessed to tax. The High Court concluded that the provisions of Rule 5(i) of the valuation Rules are repugnant to Sections 66 and 67 of the Act since the provision purport to tax not, what is due from the service provider under the charging section, but seeks to extract something more from him by including in the valuation of the taxable service other expenditure and costs which are incurred by the service provider in the course of providing taxable service.

(vii) In the light of the clear Legislative text, the unambiguous provisions of Sections 66 and 67 of the Act and in the light of the judgment in Intercontinental Consultants and Technocrats Pvt. Ltd. (supra), the conclusion is compelling and inviolable that the value “free supplies” by a construction services recipient, for incorporation in the constructions would not constitute a non-monetary consideration to the service provider nor form part of the gross amount charged for the services provided. Whether the legislature may enact that the value of “free supplies” should be included in the value of the service provided for levy of tax; and within its legislative competence, is an aspect that is speculative for the nonce and outside the purview of either the substantive appeals or the issue referred to us. In this view of the matter it is not necessary to consider the contention on behalf of the assessees that an interpretation that Section 67 of the Act enables or mandates inclusion of the value of goods and materials incorporated into construction services (whether provided by the service provider or as a free supplies by the service recipient) would render the legislative provision unconstitutional, since value of the goods incorporated being sale of goods would be liable to sales tax, an area within the legislative competence of State, the value of goods sold would thus be beyond the legislative competence of Parliament for levy of tax on such sale; consequently could not also constitute the value of taxable services. Ld. Counsel placed reliance on the judgment in M/s. Gannon Dunkerley and Co. and Others v. State of Rajasthan and Others – (1993) 1.”

In conclusion, the Hon’ble Court held that “from the several aids to interpretation, referred to (supra) we are compelled to conclude that goods and materials, supplied/provided/used by the service provider for incorporation in the construction, which belong to the provider and for which the service recipient is charged towards the value of such supply/provision/use and the corresponding value whereof was received by the service provider, to accrue to his benefit, whether independently specified as attributable to the specific material/goods incorporated or otherwise, would alone constitute the gross amount charged.”

Thus, it was held that free of cost material provided by Contractee would not for part of Gross valuation for the purpose of applying valuation /abatement.

  • 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 Works Contract subject to conditions as specified in Rule 2A of Determination of Value Rules, which provides that of a service provider has availed the benefit of adhoc deduction of 60% / 30% towards goods, then the provider of taxable service shall not take Cenvat credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of 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-

  1. 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.
  2. 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. Since Works Contract services are required to be performed either in relation to movable goods or immovable property, the two set of Rules from Place of Provision Rules, 2012 as relevant for this category of service is as follows:

Rule 4:   services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service :

Rule 5:   The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located.

  • Provisions relating to reverse charge

If services qualifies as works contract, reverse charge liability has been prescribed for service recipient as under:

 

Description of Service Service Provider Service Recipient % of service tax payable by the person providing service

 

% of service tax payable by the person receiving the service

 

In respect of services provided or agreed to be provided in execution of  works contract

 

Any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons located in the taxable territory To any business entity registered as body corporate located in the taxable territory 50% 50%

  • Taxability as settled by precedents / Circulars / trade notices

Activity Whether falls within the scope of present service Reference
Service tax on ‘works contract’ Pprior to 1-6-2007 Soma enterprise ltd vs commr. Of cus., c. Ex. & S.T., Hyderabad-ii-  2009 (15)STR 559
If the agreement between the buyer and the developer to sell the flat is entered into before the construction is complete would be a works contract. Yes K Raheja development corporation vs state of Karnataka
Levy of servive tax in respect of work contract in respect of the roads i.e. works contract in regard to the improvement and repair of roads No Govinda Swamy Balraj v CCE, Mangalore
Held that it was not possible to apportion the consideration for design on one part and for other activities on the other part. No CIT v Mitsui engineering and ship  building Co 259 ITR 248
Rule 3(2) of the works contract (composition scheme for payment of service tax) rules, 2007 provides that the provider of taxable service opting to pay service tax under the composition scheme is not entitled to take Cenvat credit of duty on inputs, used in or in relation to the said works contract, under

The provisions of the Cenvat credit rules,2004.

There is no restriction under Notification no. 32/2007-service tax, dated

22-5-2007 to take Cenvat credit of duty paid on capital goods and service tax paid on input services.

Circular no. 96/7/2007-ST, dated 23-8-2007, as amended by Circular no. 98/1/2008-ST, dated 4-1-2008

 

 

Related Circulars and Notification

  • Para 8.4 of letter F. No. B1/16/2007-TRU, dated 22-5-2007
  • Para 9 of letter b1/16/2007-TRU, dated 22-5-2007
  • Relevant extract of Circular DOF no. 334/1/2007-TRU, dated 28-2-2007
  • Circular no. 96/7/2007-ST, dated 23-8-2007, as amended by Circular no. 98/1/2008-ST, dated 4-1-2008
  • Relevant extracts of ministry’s Circular letter D.O.F. No. 334/13/2009-TRU, dated 6-7-2009
  • Circular no. 116/10/2009-S.T., dated 15-9-2009
  • Circular no. 128/10/2010-ST, dated 24-8-2010
  • Relevant extracts of letter no. D.O.F. 334/3/2011-TRU, dated 28-2-2011
  • Para 8.4 of letter F. No. B1/16/2007-TRU, dated 22-5-2007

8.4 construction of ports is specifically exempted from levy of service tax under commercial or industrial construction service [section 65(25b)] vide Notification no. 16/2005-service tax, dated 7-6-2005. Construction of ports under the newly introduced commercial or industrial construction service provided in relation to the execution of works contract under section 65(105) has also been exempted. Accordingly, Notification no. 16/2005-service tax, dated 7-6-2005 has been rescinded and a combined Notification no. 25/2007-service tax, dated 22-5-2007 has been issued exempting commercial or industrial construction service, and services provided in relation to the execution of works contract, provided to any person by any other person in relation to construction of a port or other port. However, services such as completion and finishing, repair, alteration, renovation, restoration, maintenance or repair provided in relation to existing port or other port shall be outside the scope of this exemption and hence, leviable to service tax.

  • Para 9 of letter b1/16/2007-TRU, dated 22-5-2007 
  1. Services provided in relation to the execution of a works contract [section 65(105)] is a taxable service. Works contract for the purposes of levy of service tax has been defined to mean a contract wherein:
  • transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and
  • such contract is for the purposes of carrying out,—
  1. erection, commissioning or installation,
  2. commercial or residential construction and related completion and finishing services, and
  3. turnkey projects including engineering, procurement and construction or commissioning (EPC) projects.

9.1 works contract is a composite contract for supply of goods and services. A composite works contract is vivisected and,—

  • vat/sales tax is leviable on transfer of property in goods involved in the execution of works contract [art. 366(29a)(b) of the constitution of India], and
  • service tax will be leviable on services provided in relation to the execution of works contract.

9.2 service tax is chargeable on the gross amount charged by the service provider for the taxable services provided (section 67). In the case of works contract, the taxable value of services is to be determined by vivisecting the composite works contract. Rule 2a of service tax (determination of value) rules, 2006 [Notification no. 29/2007-service tax, dated 22-5-2007], provides that value of works contract service shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. Thus, wherever the service provider maintains records, the value of services shall be the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the works contract.

9.3 wherever vat/sales tax on transfer of property in goods involved in the execution of works contract is paid on actual value, the same value is also taken for the purpose of determining the value of works contract service. In other cases, value of works contract service shall be determined based on the actuals. It has also been explained that value of works contract service shall include:

  • labour charges for execution of the works;
  • amount paid to a sub-contractor for labour and services;
  • charges for planning, designing and architect’s fees;
  • charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract;
  • cost of consumables such as water, electricity, fuel, used in the execution of the works contract, the property in which is not transferred in the course of execution of a works contract;
  • cost of establishment of the contractor relatable to supply of labour and services;
  • other similar expenses relatable to supply of labour and services; and
  • profit earned by the service provider relatable to supply of labour and services;

9.4 if the gross amount charged for the works contract is inclusive of vat or sales tax, the value for the purposes of service tax shall be computed as follows:

[gross amount charged – (value of transfer of property in goods involved in the execution of works contract and vat or sales tax paid, if any, on the said transfer of property in goods involved in the execution of the said works contract)].

9.5 as a trade facilitation measure and also for ease of administrative convenience, the service provider has been given an option to adopt the composition scheme for payment of service tax on works contract service. The works contract (composition scheme for payment of service tax) rules, 2007 has accordingly been notified vide Notification no. 32/2007-service tax, dated22-5-2007.

9.6 the scheme provides that the service provider shall have an option to pay an amount equivalent to two per cent of the gross amount charged for the works contract instead of paying service tax at the rate specified in section 66. Gross amount charged for the works contract shall not include vat or sales tax paid on transfer of property in goods involved in the execution of the said works contract. The provider of taxable service opting to pay service tax under the said composition scheme is not entitled to take Cenvat credit of duty on inputs, used in or in relation to the said works contract, under the provisions of Cenvat credit rules, 2004.

9.7 the provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and cannot be withdrawn until the completion of the said works contract.

9.8 presently, erection, commissioning or installation service [section 65(105)], commercial or industrial construction service [section 65(105)] and construction of complex service[section 65(105)] are separate taxable services.

9.9 various trade and industry associations have raised apprehension in respect of classification of a contract either under the newly introduced works contract service or under erection, commissioning or installation and commercial or residential construction services.

9.10 contracts which are treated as works contract for the purpose of levy of vat/sales tax shall also be treated as works contract for the purpose of levy of service tax. This is clear from the definition under section 65(105).

  • Relevant extract of Circular D.O.F. no. 334/1/2007-TRU, dated 28-2-2007

 6.4 vat/sales tax is leviable on transfer of property in goods involved in the execution of a works contract. The proposed taxable service is to levy service tax on services involved in the execution of a works contract. It may be noted that under this service only the following works contracts wherein transfer of property in goods involved in execution of such works contract i s leviable to vat/sales tax, are covered, namely:—

  • works contract for carrying out erection, commissioning or installation
  • works contract for commercial or industrial construction
  • works contract for construction of complex
  • works contract for turnkey projects including engineering procurement and construction or commissioning (epc) projects.

6.4-1 works contract in respect of specified infrastructure projects namely roads, airports, railways, transport terminals, bridges, tunnels and dams are specifically excluded from the scope of the levy.

6.4-2 taxable value under this service is that part of the value of the works contract which is relatable to services provided in the execution of a works contract. Such value is to be determined on actual basis based on the records maintained by the assessee. However, it is proposed to give an option to an assessee to opt for a composition scheme. Under the composition scheme, the assessee is required to pay 2% of the total value of the works contract as service tax. Assessee opting for the composition scheme is not entitled to avail Cenvat credit of capital goods, inputs and input services required for use in the works contract. Valuation of works contract and details of the composition scheme will be notified separately.

  • Circular no. 96/7/2007-ST, dated 23-8-2007,as amended by Circular no. 98/1/2008-ST, dated 4-1-2008  
Reference code Issue Clarification
(1) (2)  (3)
097.01/23.08.07 Whether Cenvat credit of duty paid on capital godsend service tax paid on input Services can be taken by a service provider who opts to pay an amount equivalent to Two per cent of the gross amount charged for the works contract instead of paying  service tax at the rate specified in section 66, under The works contract(composition scheme for Payment of service tax)rules, 2007, notified vide Notification no.32/2007-service tax, dated22-5-2007?

 

 

Rule 3(2) of the works contract (composition scheme for payment of service tax) rules, 2007 provides that the provider of taxable service opting to pay service tax under the composition scheme is not entitled to take Cenvat credit of duty on inputs, used in or in relation to the said works contract, under

The provisions of the Cenvat credit rules,2004.

There is no restriction under Notification no.

32/2007-service tax, dated

22-5-2007 to take Cenvat credit of duty paid on capital goods and service tax paid on input services.

097.02/04.01.08 Services provided in relation to execution of a works contract is leviable to service tax [section 65(105)(zzzza)]. Vat/sales tax is payable on the transfer of property in goods involved in the execution of a works contract. Service tax is leviable on the value equivalent to the gross amount charged for the works Contract less value of the transfer of property in goods involved in the execution of the works contract which is leviable to vat/sales tax[rule 2a of the service tax(determination of value)rules, 2006].

Whether or not, excise duty paid on goods, subjected to levy of vat/sales tax under works contract service, can be taken as credit under the Cenvat credit rules,2004?

Value for the purposes of Levy of service tax under Works contract service does not include the value

Pertaining to transfer of Property in goods involved In the execution of a works

Contract leviable to Vat/sales tax. Works Contract service provider is, therefore, not eligible to

Take credit of excise duty Paid on such goods involved in the execution

Of works contract.

 

097.03/04.01.08 Services provided in relation to execution of works contract is leviable to service tax w.e.f. 1-6-2007 [section65 (105)(zzzza)].

Works contract (composition scheme for Payment of service tax)rules, 2007 provides option to pay service tax @ 2% of the gross amount charged for the works contract. However, the service provider opting for composition scheme for payment of service tax should exercise the option prior to payment of service tax.

The issue pertains to,—

(i)    contracts entered into prior to 1-6-2007 For providing erection, commissioning or Installation and commercial or residential construction service, and

(ii)  service tax has already been paid for Part of the payment received under the Respective taxable service. Whether in such cases, the service provider can revise the classification to works contract service from the respective classification and Pay service tax for the amount received on or after 1-6-2007under the composition scheme?

 

 

Prior to 1-6-2007, service

Provider classified the

Taxable service under

Erection, commissioning or

Installation service [section

65(105)(zzd)], commercial

Or industrial construction

Service [section65(105)(zzq)] or construction of complex

Service [section65(105)(zzzh)], as the case

May be, and paid service

Tax accordingly. The contract for the service was a single composite contract. Part of service tax liability corresponding to payment received was discharged and the balance amount of service tax is required to be paid on or after 1-6-2007 depending upon receipt of payment.

Classification of a taxable

Service is determined based on the nature of service provided whereas liability to pay service tax is related to receipt of consideration. Vivisecting a single composite service and classifying the same under two different taxable services depending upon the time of receipt of the consideration is not legally sustainable.

In view of the above, a service provider who paid service tax prior to1-6-2007 for the taxable service, namely, erection,

Commissioning or installation service, commercial or industrial construction service or construction of complex service, as the case may be, is not entitled to change the classification of the single composite service for the purpose of payment of service tax on or after1-6-2007 and hence, is not entitled to avail the composition scheme.

 

 

  • Relevant extracts of ministry’s Circular letter D.O.F. No. 334/13/2009-TRU, dated 6-7-2009

 5.1 Changes in the works contract (composition scheme for payment of service tax) rules,2007

These rules provide a simplified procedure for working out the tax liability by the service providers providing works contract service. Instead of working out the service element from the value of works contract and paying service tax at full rate (i.e. 10%) the service provider is allowed to pay 4% on the ‘gross amount charged’ for the works contract. The reason for prescribing the lower rate under the scheme is that the service provider need not bifurcate the gross value of works contract. It was expected that the gross value should be shown to include the total value of materials as well as services used in providing the taxable services. However, it has been reported that in certain cases, the taxpayers are not including the full value of the goods required for execution of works contract for working out service tax liability under the composition scheme by either excluding the value of goods received free of cost from their client or splitting the contract into a sale contract (for a portion of goods required to execute the works contract) and works contract (for only a portion of the total value of goods and the labor charges), thus reducing the value of works contract for the purposes of calculating service tax. In order to plug this loophole, the explanation appearing in sub-rule (3) is being amended to provide that the composition scheme would be available only to such works contracts where the gross value of works contract includes the value of all goods used in or in relation to the execution of works contract whether received free of cost or for consideration under any other contract. This condition would not apply to those works contracts, where either the execution of works contract has already started or any payment (whether in part or in full) has been made on or before the date of the amendment, i.e. 7-7-2009, from which the said amendment becomes effective (refer Notification no. 23/2009-ST, dated 7-7-2009). 

  • Circular no. 116/10/2009-S.T., dated 15-9-2009

On a reference being received by the board, two following issues were examined for a clear understanding of facts. The first is regarding leviability of service tax on construction of canals for government projects.

  1. As per section 65(25b) of the finance act, 1994 “commercial or industrial construction service” means —
  2. construction of a new building or a civil structure or a part thereof; or
  3. construction of pipeline or conduit; or
  4. completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or
  5. repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit,

Which is —

  • used, or to be used, primarily for; or
  • occupied, or to be occupied, primarily with; or
  • engaged, or to be engaged, primarily in,

Commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.

  1. Thus the essence of the definition is that the “commercial or industrial construction service” is chargeable to service tax if it is used, occupied or engaged either wholly or primarily for the furtherance of commerce or industry. As the canal system built by the government or under government projects, is not falling under commercial activity, the canal system built by the government will not be chargeable to service tax. However, if the canal system is built by private agencies and is developed as a revenue generating measure, then such construction should be charged to service tax.
  1. The second issue is about government taking up construction activity of dams, buildings or infrastructure construction etc. Through epc (engineering procurement & construction) mode the said service is covered under section 65(105)(zzzza) of finance act, 1994. The said section itself excludes works contract in respect of dams, roads, airports, railways, transport terminals, bridges and tunnels executed through epc mode. Hence works contract in respect of above works even if done through epc mode are exempt from payment of service tax.
  • Circular no. 128/10/2010-ST, dated 24-8-2010 

It has been brought to the notice of the board that the following confusions/disputes prevail with respect to long term works contracts which were entered into prior to 1-6-2007 (when the taxable service, namely, works contract came into effect) and were continued beyond that date:

  • while prior to the said date services like construction; erection, commissioning or installation; repair services were classifiable under respective taxable services even if they were in the nature of works contract, whether the classification of these activities would undergo a change?
  • whether in such cases of continuing contracts, the works contract (composition scheme for payment of service tax) rules, 2007 under Notification no. 32/2007-ST, dated 22-5-2007 would be applicable?
  1. 2. The matter has been examined. As regards the classification, with effect from 1-6-2007 when the new service ‘works contract’ service was made effective, classification of aforesaid services would undergo a change in case of long-term contracts even though part of the service was classified under the respective taxable service prior to 1-6-2007. This is because ‘works contract’ describes the nature of the activity more specifically and, therefore, as per the provisions of section 65a of the finance act, 1994, it would be the appropriate classification for the part of the Service provided after that date.
  1. As regards applicability of composition scheme, the material fact would be whether such a contract satisfies rule 3(3) of the works contract (composition scheme for payment of service tax) rules, 2007. This provision casts an obligation for exercising an option to choose the scheme prior to payment of service tax in respect of a particular works contract. Once such adoption is made, it is applicable for the entire contract and cannot be altered. Therefore, in case a contract where the provision of service commenced prior to 1-6-2007 and any payment of service tax was made under the respective taxable service before 1-6-2007, the said condition under rule3(3) was not satisfied and thus no portion of that contract would be eligible for composition scheme. On the other hand, even if the provision of service commenced before 1-6-2007 but no payment of service tax was made till the taxpayer opted for the composition scheme after its coming into effect from 1-6-2007, such contracts would be eligible for opting of the composition scheme.
  1. The board’s previous Circular no. 98/1/2008-ST, dated 4-1-2008and the ratio of judgment of the high court of Andhra Pradesh in the matter of m/s. Nagarjuna Construction Company limited v. Government of India [writ petition no. 6558/2008, dated 7-6-2010] are in line with the above interpretation.
  • Relevant extracts of letter no. D.O.F. 334/3/2011-TRU, dated 28-2-2011 

10.1 a new sub-rule (2a) is being added in rule 3 in the works contract (composition scheme for payment of service tax) rules, 2007 vide Notification 1/2011-st so as to restrict the Cenvat credit to 40% of the tax paid on services relating to erection, commissioning and installation; commercial or industrial construction and construction of residential complex, in case tax has been paid on full value of the service after availing Cenvat credit on inputs i.e. Without availing exemption Notification no. 1/2006-ST, dated 1-3-2006. This has been done to ensure that the credit on inputs is not availed of indirectly while availing of the composition scheme.

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Vocational Education Services

  • Important Definition

The term “Education” has not been defined in the Finance Act, 1994.  The other terms as are relevant from the perspective of the current sector have been defined in Section 65B of Finance Act 1994 are as follows:

  • Sec 65B (11) “Approved Vocational Education Course” means,––
  1. A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961; or
  2. A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment”

Under the constitution of India, Vocational training is the concurrent subject of both Central and State Governments. The development of training schemes at National level, evolution of policy, laying of training standards, norms, conducting of examinations, certification, etc. are the responsibilities of the Central Government, whereas the implementation of the training schemes largely rests with the State Govts./UT Administrators. The Central Govt. is advised by the National Council of Vocational Training (NCVT), a tripartite body having representatives from employers, workers and Central/State Governments. Similar Councils termed as State Councils for Vocational Training are constituted for the same purpose by the respective State Governments at state levels.

  • Provisions relating to Negative List

The clauses (a) to (q) of section 66D specify certain services as non-taxable services.

Clause (l) of section 66D which provides for education related services has been withdrawn w.e.f 14-05-2016. Prior to its omission, the relevant portion of the said clause reads as follows:

“ (l) services by way of-

(iii) education as a part of an approved vocational education course;”

The Counsils aim to set up ITIs to impart craftmenship program to devel skilled labour in the country.  It is pertinent to note that there are many private institutes also in India which offer courses in vocational training and finishing, but most of them have not been recognized by the Government.  Such colleges when recognized by government for their program would get into negative list in higher education, under this segment, only programs of NCVT and SCVT are covered.

  • Provisions relating to exemptions

  1. General Exemption
  • 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.

  1. Specific Exemptions
  • Clause 9 of Notificaiton No. 25/2012

Item No. 9 of the Notification No. 25/2012-ST, dated 20-6-2012 exempts following services received by eligible educational institutions are exempted from service tax:

(i)            transportation of students, faculty and staff of the eligible educational institution;

(ii)           catering service including any mid-day meals scheme sponsored by the Government;

(iii)          security or cleaning or house-keeping services in such educational institution

(iv)          services relating to admission to such institution or conduct of examination.

Further, for the purposes of this exemption, “educational institution” is being defined in clause (oa) of the exemption notification 25/2012-ST as institutions providing educational services specified in the negative list. However, w.e.f. 14-05-2016, clause (oa) has been substituted and new clause reads as under:

“educational institution” means an institution providing services by way of:

  • pre-school education and education up to higher secondary school or equivalent;
  • education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
  • education as a part of an approved vocational education course;
  • Clause 9A of Notification No. 25/2012 dated 20-06-2012 provides for exemption against any services provided by,
  • the National Skill Development Corporation set up by the Government of India;
  • a Sector Skill Council approved by the National Skill Development Corporation;
  • an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;
  • a training partner approved by the National Skill Development Corporation or the Sector Skill Council,

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

  • Clause 9C of Notification No. 25/2012 dated 20-06-2012 provides for exemption against 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.
  • Clause 9C of Notification No. 25/2012 dated 20-06-2012 provides for exemption against 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.
  • Clause 8 of Notificaiton No. 25/2012 dated 20-06-2012 provides for exemption against services by way of training or coaching in recreational activities relating to arts, culture or sports.Thus vocational training in such programs when provided for recreational purpose shall be exempt.

  • 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 Education 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 Education services is to be determined in terms of provision of Section 67 read with the prescribed rules.

No abatement has been granted in case of Education Service in Notification No. 26/2012-ST dated 20-6-2012.

  • Provisions relating to Cenvat Credit

The Credit is available to the service provider or the manufacture of the duty or tax paid on ‘capital goods’, ‘inputs’ and ‘input services’. The Cenvat Credit is not available when used for providing exempted output service. Thus, to the extent output services are exempt from the payment of service tax, the credit of duties and taxes paid on inputs/input services used therein will not be available.

Hence, if the services are covered by Negative List / Notification No. 25/2012-ST dated 20-6-2012, then, no Cenvat Credit will be available for such exempted services.

  • Provisions relating to point of taxation

If the service provider is providing only those services which are specified in the Negative List, then, the determination of point of taxation is not of much importance. But, in other cases, the point of taxation will be determined as per Rule 3 of Point of taxation Rules, 2011.

As per rule 3, the point of taxation shall be:

  1. a) 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.
  2. b) 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.

In case of Educational services, fees are received in advance even before the actual service is rendered. Hence, as per Rule 3(b), the service tax will be payable on receipt of such an advance even if the services are rendered later.

  • 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 present context, Rule 4(b) of Place of Provision Rules, 2012 requiring presence of individual for rending of service is important  and thus, the place of provision of service would be the place where the services are rendered as provided under rule 4(b) of Place of Provision of service rules, 2012.  Thus, place where education is provided to student shall be place of provision of services.

  • Provisions relating to reverse charge

No exemption for payment of Service Tax as a receipient of services is provided and thus, all services which require payment of Service Tax under Reverse charge under Notification No. 30/2012-ST dated 20-6-2012 shall be application on vocational educational institutions.

  • FAQs from Education Guide issued from Department relating to Education sector

The following questions have been compiled from the clarifications from the clarifications provided by the government vide Master Circular D.O.F. No 334/1/2012-TRU dated March 16, 2012 and Taxation of Services – An Education Guide dated 20.06.2012 for the convenience of the readers:

  • Are services provided to educational institutions also covered in this entry?

No. Such services are not covered under the negative list entry. However certain services provided to educational institutions are separately exempted under the mega–notification. These are services provided to or by an educational institution in respect of education exempted from service tax, by way of,-

(a) auxiliary educational services; or

(b) renting of immovable property

        (please note that the above exemptions stands modified as on date)

  • 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 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. One relevant consideration in such cases will be the amount of extra billing being done for the unrecognized component viz-a-viz the recognized course.

  • Structure meant for Educational Establishment

As per Notification No 25/2012 dated 20.06.2012 Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a structure meant predominantly for use as an educational establishment.

 

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Technical Testing & Analysis Services

  • Understanding of the service

The essential requisite of the present taxable service are:

  • Services are provided or to be provided to any person.
  • Services are rendered by a technical testing and analysis agency.
  • Technical testing and analysis must be of goods or immovable property and not in relation to human beings or animals.

  • Taxability as settled by precedents / Circulars / Trade notices

Activity Whether falls within the scope of present service Reference
Collection of blood for testing Yes Dr. Path Lab Pvt. Ltd. v CCE, Ludhiana 2006 (4) STR 527
Testing of electric metering board No  Kerala State Electricity Board, Kottayam v CCE, Cochin 2007 (8) STR 403

  • Accounting codes

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
00440249 00440250

  • Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of Technical Testing and Analysis 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 Technical Testing and Analysis Services is to be determined in terms of provision of Section 67 read with the prescribed Rules

  • Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

  • Exemptions available

  1. General Exemption
  • 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.

  1. Specific Exemptions:
  • Exemption to approved clinical establishments – Notification No. 25/2012-ST
  • Exemption to Central and State Seed Testing Laboratories- Notification No. 25/2012-ST

  • 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. Since no specific Rule applied to such services, the place of provision shall fall under Rule 3 which provides that location of service recipient shall determine place of provision of such services.  Thus, if the recipient is within taxable territory, place of provision shall be within taxable territory and taxable, else, non taxable.

Since present Professional services are required may also be provided in relation to movable or immovable property, Rule 4 and rule 5 of Place of Provision Rules, 2012 is relevant for this category of service is as follows:

Rule 4:   services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service.  In present case, place of provision shall be place where actual services has been rendered.

Rule 5:   The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located.

  • Provisions relating to reverse charge

These services are not included under the mechanism of Reverse Charge. Hence, the person providing the service shall be the person liable to pay service tax.

 

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Technical Inspection & Certification Services

  • Understanding of the service

The essential requisites of the present taxable service are:

  • Services are provided or to be provided to any person
  • Services are rendered by a technical inspection and certification agency
  • The inspection or examination shall be of goods or process or material or any immovable property or Information technology software.
  • The inspection or examination shall result in certification.

  • Accounting codes

By virtue of section 65B (44), any activity done for a consideration will be considered as a service. Therefore, services of a Travel Agent will be considered as a taxable service.

Services shall be taxable when the services are provided by a travel agent to any person in relation to the booking of passage of travel.

  • Accounting codes

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
00440249 00440250

  • Taxability as settled by precedents / Circulars / Trade notices

Activity Whether falls within the scope of present service Reference
Calibration of measuring instruments service Yes Roots Industries Ltd Vs CCE (2005) 2 STT 30 (Tri. Chennai)
Charges collected by Bureau of Indian Standards towards marketing fees Yes Grasim Industries Ltd. v CCE, Chennai (2009) 15 STR 734
Periodical testing of cylinder on behalf of Indian Oil Corporation No CCE, Bhopal v Harshita Handlings 2011 (24) STR J135
Certification of immovable property Yes Circular No. 59/8/2003, dated 20-6-2003
Certificate issued by Central Board of Film Certification No DGST Order F. No. V/DGST/30-Misc.-185/2008/429, dated 16-1-2009, issued from File C. No.IV/16/06/2009-STU/Trade Notice No. 18/2009, dated 13-3-2009, issued by Office of the Commissioner of Central Excise : Madurai

 

“Certificate of origin of goods” issued by Chamber of Commerce Yes Circular No 145/14/2011-ST, dated 19.08.2011

  • Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of Technical inspection and Certification 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 Technical inspection and Certification Services is to be determined in terms of provision of Section 67 read with the prescribed Rules.

  • 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 Travel Agent 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 Travel Agent services is to be determined in terms of provision of Section 67 read with the prescribed rules.

Vide Circular No. 80/10/2004-ST, dated 17.09.2004 it has been clarified that the value of taxable services would be the commission/ fee charged by the travel agent from the customer.

No abatement has been granted to any person liable to pay service tax under the Section

  • Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

  • Exemptions available

  1. General Exemption
  • 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.

  1. Specific Exemptions:

Exempts Technical inspection and certification services provided in relation to agriculture – Notification No 25/2012-ST.

  • 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. Since no specific Rule applied to such services, the place of provision shall fall under Rule 3 which provides that location of service recipient shall determine place of provision of such services.  Thus, if the recipient is within taxable territory, place of provision shall be within taxable territory and taxable, else, non taxable.

Since present Professional services are required may also be provided in relation to movable or immovable property, Rule 4 and rule 5 of Place of Provision Rules, 2012 is relevant for this category of service is as follows:

Rule 4:   services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service.  In present case, place of provision shall be place where actual services has been rendered.

Rule 5:   The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located.

  • Provisions relating to reverse charge

These services are not included under the mechanism of Reverse Charge. Hence, the person providing the service shall be the person liable to pay service tax.

  • Related Circulars and Notification

  • Circular No. 59/8/2003, dated 20-6-2003
  • Circular/Letter D.O.F. No. 334/1/2008-TRU, dated 29-2-2008
  • DGST Order F. No. V/DGST/30-Misc.-185/2008/429, dated 16-1-2009, issued from File C. No.IV/16/06/2009-STU/Trade Notice No. 18/2009, dated 13-3-2009, issued by Office of the Commissioner of Central Excise : Madurai
  • Circular No. 59/8/2003, dated 20-6-2003 

A doubt has been raised whether certification given in respect of immovable property should fall under the purview of ‘technical inspection and certification services’. In this regard it may be recalled that earlier, CBEC vide its Order No. 1/1/2002, dated 26-2-2003, issued under section 37B (of the Central Excise Act as made applicable to service tax) had clarified that certification given under authority of any code or statute cannot be considered as a consulting engineer service. However, the new service included in 2003 Budget, namely ‘technical inspection and certification services’ would cover certification of all types including that of immovable property. Therefore, it is clarified that such services become taxable from the notified date.

 

  • Circular/Letter D.O.F. No. 334/1/2008-TRU, dated 29-2-2008 
  • To include ‘testing and analysis of IT software’ services under Technical testing and analysis service [section 65(105)(zzh)].
  • To include ‘Certification of IT software’ services under Technical inspection and certification service [section 65(105)(zzi)].
  • DGST Order F. No. V/DGST/30-Misc.-185/2008/429, dated 16-1-2009, issued from File C. No. IV/16/06/2009-STU/Trade Notice No. 18/2009, dated 13-3-2009, issued by Office of the Commissioner of Central Excise :Madurai

 

The issue whether service tax is payable by Central Board of Film Certification under the category of ‘Technical Testing and Analysis Service’ and/or ‘Technical Inspection and Certification Service’, on the services provided by Central Board of Film Certification by way of certification of films has been examined by Board.

  1. Central Board of Excise & Customs has issued the following clarification:

“The certification by Central Board of Film is done to ensure that film is suitable for exhibition and not against interest of sovereignty and integrity of India, the security of the State, friendly relation with foreign States, public order, decency or morality or involves defamation or contempt of court etc. It is a mandatory requirement under the provisions of Cinematographic Act, 1952. The Act provides that any person, who exhibits a film other than a film which has been certified by the Board as suitable for unrestricted public exhibition or for public exhibition restricted to adults, he shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to one lakh rupees, or with both, and in the case of a continuing offence with a further fine which may extend to twenty thousand rupees for each day during which the offence continues. Hence certification by Central Board of Film Certification is a statutory requirement. CBEC vide Circular No. 96/7/2007-ST, dated 23-8-2007 has clarified that any activity assigned to and performed by a sovereign/public authority under the provisions of any law, do not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration for the purpose of levy of service tax. In the instant case, CBFC issues certificates as required under the provisions of law i.e., Cinematographic Act, 1952 and thus does not constitute taxable service.”

3.     This may be brought to the notice of all constituent members of your trade associations.

 

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Travel Agent Services

“Travel Agent” means any person engaged in providing any service connected with booking of passage for travel, but does not include air travel agent and rail travel agent.

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  • Important Definition

Section 65B (44) provides the definition of service as any activity carried out by a person for another for a consideration. The scope of the definition is very wide so as to cover wide range of activities under its ambit.

 

  •  Taxability

By virtue of section 65B (44), any activity done for a consideration will be considered as a service. Therefore, services of a Travel Agent will be considered as a taxable service.

Services shall be taxable when the services are provided by a travel agent to any person in relation to the booking of passage of travel.

  • Accounting codes

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
00440294 00440295

  • Provision relating to Negative List

Travel Agent services are not included in the Negative List. Therefore, service tax is payable on service of booking of passage of travel.

  • Provisions relating to exemptions

  1. General Exemption
  • 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.

  1. Specific Exemption

Vide Notification No. 25/2012, the following exemption is available:

Clause 42 – Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India.

  • 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 Travel Agent 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 Travel Agent services is to be determined in terms of provision of Section 67 read with the prescribed rules.

Vide Circular No. 80/10/2004-ST, dated 17.09.2004 it has been clarified that the value of taxable services would be the commission/ fee charged by the travel agent from the customer.

No abatement has been granted to any person liable to pay service tax under the Section

  • Provisions relating to Cenvat Credit

The Cenvat Credit Rules, 2004 provides for availment of credit of excise duty paid on inputs and capital goods and service tax paid on input services. The words ‘capital goods’, ‘inputs’ and ‘input service’ are defined respectively in rule 2(a), 2(k) and 2(l). The credit is available to the manufacturer or service provider for the duty or tax paid on the above items.

  • Provisions relating to point of taxation

The point of taxation in case of travel agent services will be governed by Rule 3 of Point of Taxation Rules, 2011. As per the said rules, the Point of Taxation will be the date of issue of invoice or the date of receipt of payment, whichever is earlier. In case the invoice is not issued within 30 days of booking (provision of service), the date of booking will be the point of taxation.

  • Provisions relating to reverse charge

Travel Agent services are not included under the mechanism of Reverse Charge. Hence, service provider will be the person liable to pay service tax.

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Tour Operator Services

“Tour Operator” means any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit, other than a stage carriage permit, granted under the Motor Vehicles Act, 1988 or the rules made there under.”

  • Important Definition

Para 2(c) of Notification No.26/2012-ST, dated 20-6-2012 provides that   “tour operator” means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.

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  • Accounting codes

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
00440063 00440064

  • Provision relating to Negative List

Services of Tour Operator services are not included in the Negative List.

  • Provisions relating to exemptions

  1. General Exemption
  • 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.

  • 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.

  1. Specific Exemptions

 

Vide Notification No. 6/2014-ST, dated July 11, 2014, exemption has been provided to Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India.  Services provided by the Indian tour operators to foreign tourists in relation to tours wholly conducted outside India are being exempted. This exemption is available to Indian tour operators in cases where they organize tours for a foreign tourist wholly outside India, e.g., service provided to a Sri Lankan for a tour conducted in Bhutan. It may be noted that service provided by a tour operator in relation to an inbound or an outbound tours continue to be leviable to service tax.  In brief:

Tour Wholly In India Wholly Outside India Partially in India
Indian Tourist Taxable Taxable Taxable
Foreign Tourist Taxable Non Taxable Taxable

Further, vide Notification No. 17/2014-Service Tax amending Notificaiton No. 25/2012-ST, exemption has been granted to Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement.  For this purpose,

‘(zfa) “specified organisation” shall mean,-

 (a) Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking; or

 (b) ‘Committee’ or ‘State Committee’ as defined in section 2 of the Haj Committee Act, 2002 (35 of 2002);’.

Further, it has been clarified vide Circular No. 117/11/2009 – ST in respect of leviability of service tax on tour operator service in connection with Haj & Umrah Pilgrimage, The amount charged to the pilgrims in India undertaking Haj and Umrah pilgrimage, is for services provided by the Government of Saudi Arabia and the tour takes place outside India shall not be chargeable to Service Tax in India.  The present case shall be in exempt in present scenario also as these services are received by individuals from outside India from a person located outside India for purpose other than business or commerce.

  • 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 these 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 services is to be determined in terms of provision of Section 67 read with the prescribed rules.

Abatement

(A) Services provided by a tour operator in relation to a package tour, Abatement 75%

(B) Service is provided solely for arranging or booking accommodation for any person in relation to a tour, Abatement 90%

(C) For services other than package tour and booking of accommodation, Abatement 60%

Further, w.e.f 01-04-2016, the percentage of abatements have been substituted and new abatements in respect of tour operator services are given as under:

Description of service Abatement percentage
Services by a tour operator in relation to,-

(i) a tour, only for the purpose of arranging or booking accommodation for any person

90
(ii) tours other than (i) above 30

  • Provisions relating to Cenvat Credit

If a tour operator is providing service in relation to which abatement benefit are availed, in such a case benefit of Cenvat credit on inputs/input services/capital goods used for providing such service is not available to the tour operator.

However, in case tour operator is providing services on which service tax is paidat the full rate i.e. without availing any abatement. In such case Cenvat credit of Input/input service/capital good used for providing such service shall be available to the tour operator.

However, difficulty may arise when tour operator provides both kind of service i.e. service on which abatement benefit are availed and services on which tour operator service tax is paid at full rate.

In such a case it is advisable to the tour operator to maintain separate accounts for receipt, consumption and inventory of all input/input services/capital good in respect of taxable service and abated service (i.e. service in respect of which abatement is availed).

However, if no separate account is maintained by the tour operator, in such a case tour operator shall follow either of the following option:

  • The tour operator shall pay amount equal to 6% of value of the services on which abatement benefit are availed.
  • The tour operator shall pay amount equivalent to the CENVAT credit on inputs/input services/capital goods used for providing service on which abatement benefit are availed.

  • Provisions relating to point of taxation

As per Rule 3 of Point of Taxation Rules, 2011, the point of taxation shall be-

  1. 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.
  2. 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.

In case of Tour Operator service entire payment is received in advance by the tour operator before the actual service are provided by him.

As per clause (b) of Rule 3 of Point of Taxation Rules, the service tax would be payable on receipt of such advance by the service provider. The actual service may be provided subsequently.

  • 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. Tour operator is an intermediary services and accordingly, the same falls within Rule 9 of Place of Provision Rules, 2012.  The place is decided per the location of service provider.  If the Tour operator is located in taxable territory, his services to any person shall be taxable and if he is located outside taxable territory, such services even to resident of India shall be non taxable. Accordingly, if a Tour operator is located in Jammu and Kashmir and he arranges Kailash Mansarover trip, no Service Tax is leviable on such services.

  • Provisions relating to reverse charge

Tour Operator services are not included under the mechanism of Reverse Charge. Hence, the person providing the service will be the person liable to pay service tax.

  • Important Case Laws / Precedents

  • In the case of Mangalore Tourist Service v. Commissioner of Central Excise, Mangalore [2012] 25 taxmann.com 207 (Bang. – CESTAT), it was held that tour conducted using tourists vehicles hired from third parties are also liable to service tax under Tour Operator’s services i.e. they cannot be taxed under Business Auxiliary Services.
  • In the case of Choudhary Yatra Co. (P.) Ltd. v. Commissioner of Central Excise, Nashik [2012] 25 taxmann.com 476 (Mum. – CESTAT), it was held that activity of reservation/renting of ordinary buses (not tourist vehicles) is liable to service tax under Tour Operator Services with effect from 10-9-2004.
  • In the case of Ideal Travels v. Commissioner of Central Excise, Mangalore [2012] 19 taxmann.com 145 (Bang. – CESTAT), it was held that Running of buses on pre-determined routes in scheduled hours under tourist permits granted under Motor Vehicles Act, 1988 would be covered under activity of ‘Tour operator’s service’.
  • In the case of Rishabh Travels v. Commissioner of Central Excise, Jaipur [2012] 17 taxmann.com 3 (New Delhi – CESTAT), it was held that where assessee plied buses having tourist permits for various destinations, booked seats for individual customers either itself or through booking agents, assessee was said to be conducting ‘Tour’ and was liable to service tax for same.

 

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Scientific & Technical Consultancy Services

  • Understanding of the service

Companies across globe are investing a lot of their funds in research and development of new products and process. For the said purpose services of scientist or a technocrat, or any science or technology institution or organisation are taken. Any service taken from such scientist or a technocrat, or any science or technology institution or organisation in the form of any advise, consultancy or scientific or technical assistance is taxable under the present head of taxable service. Basis the definition, it can be said that only the advise, consultancy and scientific or technical assistance is taxable and not actual execution of work.

  • Accounting codes

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
00440125 00440126

  • Taxability as settled by precedents / Circulars / Trade notices

Activity Whether falls within the scope of present service Reference
Mere carrying out the chemical analysis and furnishing test results for pesticides No Rallis India Ltd Vs. CCE 2006 (4) STR 289 (Tri Bang)
Service such as complete technical information, methods, procedure, data and techniques and also training of employees about the project relating to research and development activities with regard to automotive tyres Yes CCE, Chennai v M.R.F. Ltd. 2005 (179) ELT 472 (Tri Chennai)
The technical know-how and quality expertise were transferred before collaborating the unit in an agreement Yes CCE, Calicut/Cochin  v Rubco Sales International Pvt. Ltd. & Sun Metal & Alloys (P) Ltd. 2006 (1) STR 291
Appellant received technical assistance from the manufacturer of the goods for manufacturing the products in India No MitaHarig (India) Ltd. v CCE, Ghaziabad 2006 (3) STR 660 (Tri Del)
Mere testing will not attract service tax. However, in case testing is an integral part of the consultancy, then such activity is part and parcel of the taxable service Yes Ministry’s Letter F. No. B-II/I/2000-TRU, dated 9-7-2001 – Annexure I
scientific or technical consultancy service is rendered whether by public funded institutions or by private agencies Yes Ministry’s Letter F. No. B-II/I/2000-TRU, dated 9-7-2001 – Annexure I
Whether services rendered by doctors, medical colleges, nursing homes, hospitals, diagnostic and pathological

labs, etc. would come under the purview of the proposed levy.

 

No Ministry’s Letter F. No. B-II/I/2000-TRU, dated 9-7-2001 – Annexure I

  • Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of Scientific and Technical Consultancy 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 Scientific and Technical Consultancy Services is to be determined in terms of provision of Section 67 read with the prescribed Rules.

  • Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

  • Exemptions available

  1. General Exemption
  • 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.

  1. Specific Exemptions:

No Specific Exemption had been granted by the government in case of Scientific And Technical Consultancy Services.

  • 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. Since no specific Rule applied to such services, the place of provision shall fall under Rule 3 which provides that location of service recipient shall determine place of provision of such services.  Thus, if the recipient is within taxable territory, place of provision shall be within taxable territory and taxable, else, non taxable.

  • Provisions relating to reverse charge

These services are not included under the mechanism of Reverse Charge. Hence, the person providing the service shall be the person liable to pay service tax.

  • Related Circulars and Notification

  • Ministry’s letter F. No. B-II/I/2000-TRU, dated 9-7-2001
  • Section 65(60) defines “scientific and technical consultancy” as any advice, consultancy, or scientific or technical assistance, rendered in any manner, by a scientist or a technocrat, or any science or technology institution or organisation, to a client, in one or more discipline of science or technology. The taxable service has been defined in clause (72)(za) of section 65 as “any service provided, to a client, by a scientist or a technocrat, or any science and technology institution or organisation, in relation to scientific or technical consultancy”.
  • The taxable service should be understood in the context of its commonly understood meaning and scope. For instance, it would cover consultation, advice or technical assistance provided by a scientist or a technocrat or a science or technology institution on any issue relating to any branch of science and technology. Such consultation may be in the nature of an expert opinion/advice in regard to scientific or technical feasibility or any other scientific or technical aspect of a project, process or design, recommending an apt technology, suggestion for improvement in existing technology or process, providing consultation on any technical problem or about new technology, etc. Some of the specific issues raised and clarifications thereon are given below.
  • Points for clarification:
 Point raised for clarification             Clarification
Whether services rendered by doctors, medical colleges, nursing homes, hospitals, diagnostic and pathological labs, etc. would come under the purview of the proposed levy. In common parlance, these categories of service providers are not known as scientists or technocrats or science or technology institutions or organisations. They will not be covered under service tax.

 

Whether public funded research institutions like CSIR, ICAR,DRDO, IITs and IISC, Regional Engineering Colleges etc., which are exempt from payment of income-tax are covered under the service tax. Yes. Service tax is liable to be paid when any scientific or technical consultancy service is rendered whether by public funded institutions or by private agencies.

 

Whether testing services will be covered under the proposed levy? Mere testing will not attract service tax. However, in case testing is an integral part of the consultancy, then such activity is part and parcel of the taxable service and no abatement of any kind admissible.
Many public funded research institutions receive grants or aids from the Government for conducting research/project work. Whether such activities would be covered under the

levy?

In the facts of this case, no service is rendered to any one. Hence the question of payment of service tax does not arise. However, if they render service to anyone on payment basis, service tax will be payable on such services.

 

Whether the service tax will be leviable on consultancy provided to Government departments, public sector undertakings? If scientific or technical consultancy is provided to a Government department for which consultation fees are received, then service tax would be applicable.

 

 

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Space or Time Selling Services for Advertisement

  • Definition of Taxable Service

Any service provided or to be provided to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but does not include sale of space for advertisement in print media.

“Sale of space or time for advertisement” includes,—

(i)    providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet;

(ii)   selling of time slots on radio or television by a person, other than a broadcasting agency or organisation; and

(iii) aerial advertising.

  • Understanding of the service

The services envisaged to be taxed under the given head of taxable service are in relation to sale of space or time for advertisement, in any manner; but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation. It is apprised that time slot sale by the broadcasting agency is not taxable under this category, eg sale of time slot by Star TV to the producer of the programme. However, if the producer sells the allotted time slot to any other person to advertise his or her goods or services, then that is subjected to service tax under this category. Selling of space or time for advertisements such as advertisements in conveyances, advertisement through ATM, internet, advertisements on buildings etc. is also chargeable to service tax under this category.

 

The present service when provide din print media is covered under Negative List and no Service Tax is leviable on such provision of space. For detail, please refer to Para 8.9. of the Book.  For this purpose, print media has been defined as:

(39a) “print media” means,—

(i) “book” as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867, but does not include business directories, yellow pages and trade catalogs which are primarily meant for commercial purposes;

(ii) “newspaper” as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867;’

Prior to 01.10.2014, Service tax leviable on sale of space or time for advertisements in broadcast media, namely radio or television [section 66D (g) read with section 66B].  However, post 01.10.2014, it was extended to cover such sales on other segments like online and mobile advertising. The new levy would further extend to advertisements in internet websites, out-of-home media, on film screen in theaters, bill boards, conveyances, buildings, cell phones, Automated Teller Machines, tickets, commercial publications, aerial advertising, etc. Sale of space for advertisements in print media, however, would continue to be in the negative list and hence remain excluded from service tax.

Taxability as settled by precedents / Circulars / Trade notices

Activity Whether falls within the scope of present service Reference
Space for display of advertisement No CCE V Azad Publications  2006(3) STR 249 (Tri. Del)
Selling of space for advertisement by railways and airlines Yes Instruction F No. V/DGST/21 (Deccan Air) 01-06 dated 4.03.2007

  • Accounting codes

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
00440354 00440355

 

  • Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of sale or time selling services for advertisement, 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 sale or time selling services for advertisements to be determined in terms of provision of Section 67 read with the prescribed Rules.

  • Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

  • Exemptions available

  1. General Exemption 
  • 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.

  1. Specific Exemptions:

No Specific Exemption had been granted by the government in case of sale or time selling services for advertisement.

 

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Storage & Warehousing Services

  • Taxability as settled by Precedents / Circulars / Trade notices

Activity Whether falls within the scope of present service Reference
Services pertaining to agricultural produce No Order No 1/2002-ST, dated 01.08.2002
Services of Storage and warehousing provided to Goods transport agency No

 

Notification No 1/2009-ST, dated 05/01/2009
handling/storage and

warehousing of empty containers

Yes Circular No. 60/9/2003-ST, dated 10-7-2003
Clock room service No Circular No F.No. B 11/1/2002-TRU, dated 01.08.2002
Terminal jandling charges Yes Circular No F.No. B 11/1/202-TRU, dated 01.08.2002

  • Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of Storage and warehousing 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 Storage and warehousing Services is to be determined in terms of provision of Section 67 read with the prescribed Rules.

  • Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

Exemptions available

  1. General Exemption
  • 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.

  1. Specific Exemptions:
  • Services of Storage and warehousing provided for Agricultural produce is in Negative List. For detail refer Para 8.6 of the Book.
  • Notification no. 25/2012 provides exemption to Services by way of loading, unloading, packing, storage or warehousing of rice and cotton
  • Same notification exempts Construction, erection, commissioning, or installation of specified original works relating to post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes.

  • Provisions relating to point of Taxation

  1. The point of taxation in case of Storage and Warehousing services will be governed by Rule 3 of the point of taxation rules, 2012. As per rule 3 of point of taxation rules, 2012, the point of taxation in case of restaurant service shall be:
    1. 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 date of completion of service.
    2. 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.

     

    If the period of providing the service is more than 3 months, it will be considered as continuous service as defined in rule 2(c) of Point of Taxation Rules, 2011. Accordingly, proviso to rule 3 of Point of Taxation Rules will apply for determining date of the completion of service.

  • Provisions relating to Place of Provision of Service Rules, 2012

  1. The Place of Provision of Service Rules, 2012 contains different rules for different nature of services. Since the services of Storage is relatable to immovable property, thus the place of provision of services shall be guided by Rule 5 of Place of Provision Rules, 2012.  If the immovable property is located in taxable territory services are taxable, else non taxable.

  • Provisions relating to reverse charge

The present services are not included under the mechanism of Reverse Charge. Thus, the person liable to pay service tax shall be the restaurant itself.

  • Related Circulars and Notification

  • Circular F.No. B/11/1/2002-TRU, Dated 1-8-2002
  • Circular No. 60/9/2003-ST, dated 10-7-2003
  • Circular No. 96/7/2007-ST, dated 23-8-2007as amended by Circular no. 98/1/2008-ST, dated4-1-2008
  • CircularNo. B/11/1/2002-TRU, Dated 1-8-2002

 

  1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002.
  1. As per clause (87), “storage and warehousing” includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage. As per sub-clause (zza) of clause (90), the taxable service is any service provided, to any person, by a storage or warehouse keeper in relation to storage and warehousing of goods.
  1. Storage and warehousing service for all kind of goods are provided by public warehouses, private warehouses, by agencies such as the Central Warehousing Corporation, Airport Authorities, Railways, Inland Container Depots, Container Freight Stations, storage godown and tankers operated by private individuals etc. The storage and warehousing service provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. Service provided in ports has already been covered under the category of port service.
  1. Service provided in relation to agriculture produce and service provided by cold storage is outside the ambit of the levy. Doubts have been raised about the scope of term “agricultural produce”. In order to clarify the scope of this term beyond doubts, an order has been issued under the power vested under section 95 of the Finance Act (see Order No. 1/2002-ST, dated 1-8-2002). As clarified in the order, the term agricultural produce would cover all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, and similar products. However, manufactured products such as sugar, edible oils, processed food etc. will not come under the purview of the term ‘agricultural produce’.
  1. It has been stated that in some case a storage owner only rents the storage premises. He does not provide any service such as loading/unloading, stacking, security etc. A point has been raised as to whether service tax would be leviable in such cases. It is clarified that mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area.
  1. A point has been raised by the Airport Authority of India (AAI) that they have established cold storage for perishable goods at cargo complexes at various places as part of cargo warehousing activities and whether the exemption provided in respect of cold storage would be applicable to these cold storages also. It is clarified that service provided by a cold storage has been specifically excluded from the tax net. Therefore, the service of cold storage provided by AAI will also be exempt.
  2. Another point raised is that AAI are collecting terminal charges which is only a facilitation charge for providing a terminal and as such does not involve any service. As per the Notification No.Cargo/13519/Pt.I, dated 4-6-1993of the International Airport Authority of India “terminal charges”, means charges payable to or collected by the Authority or Cargo Handling Agency for use of facilities for processing of cargo. As per this Notification “storage and processing charges” specifically include terminal charges also. Therefore, service tax is leviable on such charges.
  1. A doubt has been raised whether cloak room services for passenger’s luggage in railway stations, bus stations etc. would come within the purview of storage and warehousing services. It is clarified that these are passenger terminal services incidental to rail transport or road transport, they do not come within the purview of storage and warehousing services.
  1. 9. The Central Warehousing Corporation has stated that they have more than 450 warehouses which are controlled by 17 regional offices. The billing is done both at the warehouse level and at the Regional Office level. However accounting for the warehousing charges as well as the cargo handling services is done only at the Regional Office level. Therefore, they have requested that only their Regional Offices should be registered for service tax purposes. The Service Tax Rules empower the Commissioner of Central Excise to register only those offices which have centralised accounting facility. The Commissioners may exercise this power in such cases and register only the regional offices of CWC.
  1. Another point made by the CWC is that they engage handling and transport contractors (H&Tcontractors) to provide handling and transport services who would be charging them service tax for cargo handling services. CWC add supervision charges and raises the bill to the customers. For warehousing they raise a separate bill. The question is whether CWC is liable to pay service tax on cargo handling services and if so, whether they can take credit of the tax paid on cargo handling services by the H&T contractor. Similar situations may exist in respect of other storage and warehouse keepers. It is clarified that if the storage and warehouse keeper undertakes cargo handling services also and raises its own bill to the customer for such service, then he would be liable to pay service tax under the category of cargo handling services also. However, he would-be eligible to take credit of service tax paid on cargo handling services rendered by the H&Tcontractors and adjust the same against his service tax liability on cargo handling services provided he raises a separate bill for the same to his client. In other words, he cannot adjust the credit against storage and warehousing service charges.
  • Circular 60/9/2003-ST, dated 10-7-2003

 

I am directed to say that a doubt has been raised regarding levy of service tax on storage of empty containers. The matter has been examined. It is clarified that the handling/storage and warehousing of empty containers would be covered within the scope of storage and warehousingservices, as it is covered under the heading goods under section 65(87) of the Finance Act, 1994.

The Service Tax would be leviable on it. Further, the clarification issued vide letter No.F.B.II/I/2002/TRU, dated 1-8-2002 regarding empty containers not to be considered as Cargo for Cargo Handling Services, has no relevance in the instant case.

  • Circular No. 96/7/2007-ST, dated 23-8-2007as amended by Circular no. 98/1/2008-ST, dated 4-1-2008

 

Reference Code Issue Clarification

 

(1) (2)  (3)

 

047.01/23.08.07 Whether services provided in relation to handling/storage and warehousing of empty containers is liable to service tax under storage and warehousing service [section 65(105)(zza)]?

 

Empty containers are covered within the meaning of “goods” [section 65(50)]. Thus, services provided in

relation to storage and warehousing of empty containers is liable to service tax under storage and warehousing service [section 65(105)(zza)].

 

 

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Right to use of tangible goods Services

  • Understanding of the service

  • Services are provided or to be provided to any person.
  • Services are rendered by any other person.
  • The services shall be provided or to be provided in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances.
  • The imperative point to be noted in this service is that while goods are being supplied but the right to effective control and possession is not being transferred thereby making it an activity distinct and different from hire-purchase of goods. It is apprised that the moment effective control and possession is transferred the activity would be out of purview of this taxable service and would not be chargeable to service tax.

  • Accounting codes

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
00440445 00440447

 

  • Taxability as settled by Precedents / Circulars / Trade notices

Activity Whether falls within the scope of present service Reference
Erection of tower and leasing out to telecom/ cellular operator Yes State of AP and Anr.  V Rashtriya Ispat Nigam Ltd. 2002 (126) STC 0114 SC
When there is only hiring of audio visual and multi-media equipment, where the equipment is at the risk of the owner and possession and effective control remains with the owner, in such circumstances, can it be said that the customer has the right to use the equipment and there is no deemed sale, accordingly can it be covered under the present category. Yes Laxmi Audio Visual v Assistant Commissioner of Commercial Taxes 124 STC 426
Supply of tangible goods for use and leviable to VAT/sales tax as deemed sale of goods No Para 5 of Circular/Letter D.O.F. No. 334/1/2008-TRU, dated 29-2-2008
Charter aircrafts Yes Instruction No Dy 20/Comm (ST)/2009, dated 9.02.2009

  • Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of Right to use tangible goods 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 Right to use tangible goods Services is to be determined in terms of provision of Section 67 read with the prescribed Rules.

  • Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

Exemptions available

  1. General Exemption
  • 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.

  1. Specific Exemptions:
  • Exemption has been provided vide Notification No. 25/2012-ST, to services which are by way of giving on hire to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers.
  • Exemption has been provided vide Notificaiton No. 25/2012-ST, to Services by way of giving on hire to a goods transport agency, a means of transportation of goods

  • Related Circulars and Notification

  • Para 5 of Circular/letter D.O.F. No. 334/1/2008-TRU, dated 29-2-2008
  • Board’s letter F. No. 137/120/2008-CX 4, dated 23-10-2008, [issued from file C. No.iv/16/6/2009-stu]/trade notice no. 12/2009, dated 13-3-2009, Madurai Commissionerate
  • Para 5 of Circular/Letter D.O.F. No. 334/1/2008-TRU, dated 29-2-2008

 

4.4.1Transfer of the right to use any goods is leviable to sales tax/VAT as deemed sale of goods[Article 366(29A)(d) of the Constitution of India]. Transfer of right to use involves transfer of both possession and control of the goods to the user of the goods.

4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes, etc., offshore construction vessels and barges, geo-technical vessels, tug and barge flotillas, rigs and high value machineries are supplied for use, with no legal right of possession and effective control. Transaction of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service.

4.4.3 Proposal is to levy service tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Supply of tangible goods for use and leviable to VAT/sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid.

  • Board’s letter F. No. 137/120/2008-CX 4, dated 23-10-2008, [issued from File C. No. IV/16/6/2009-STU]/Trade Notice No. 12/2009, dated 13-3-2009, Madurai Commissionerate

 

Supply of tangible goods including machinery, equipments and appliance for use, without transferring right of possession and effective control of such tangible goods is a taxable service in terms of provision of section 65(105)(zzzzj) of the Finance Act, 1994. In some cases, vehicles, aircrafts, vessels etc., are also supplied in the above manner and such activities also fall under the said taxable service. In this regard, a doubt has arisen whether the credit of excise duty/Additional duty of Customs (commonly known as CVD) paid on such items are available to the provider of such taxable service and if so whether such goods should be considered as’ inputs’ or ‘capital goods’, for the purposes of the CENVAT Credit Rules, 2004.

  1. The matter has been examined. It is possible that some of such goods may either fall within the definition of ‘capital goods’ or may not be covered under the said definition. However, as these goods are primary requirements for providing the above-mentioned ‘output services’ for such service providers, the goods including vehicles, aircrafts, vessels etc., are in the nature of’ inputs’. It is emphasized here that this clarification is valid only when the output service is in the nature of service defined under the provisions of section 65(105)(zzzzj) of the Finance Act, 1994and the goods in question are the tangible goods supplied during the course of providing the taxable service.

3.     This may be brought to the notice of all constituent members of your trade associations.

 

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