Technical Inspection & Certification Services

September 19, 2016   admin  Service Wise Implications
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  • 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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