Updated June 2013

CA Madhukar N Hiregange
CA Rajesh Kumar T R
CA Sudhir VS
2
PREFACE
Service tax is a subject which has been posing quite a few probles to assessees since its
introduction in the !ear 1""# through $hapter % of &inance 'ct 1""#( )ver *s(131+000 $rores
has been collected last !ear on this count( ,he service tax law li-e other tax laws prevalent in the
countr! is not siple+ not equitable+ not certain and tax adinistration not fair( )ver the !ears
there have been nuber of instances where assessees have had to face litigations with the
departent at various levels ainl! due to lac- of clarit! in the subject atter( .t has been
observed that though the ,ribunals and $ourt provide the clarit!+ the deands fro the revenue
for the past periods are raised( /ow with the Negative List slated to augent revenues to at least
*s( 1+00+000 crores+ the earlier understanding of the provisions have substantiall! changed( ,he
professional advisor would also face difficulties while advising the clients in this area which is in
a developing stage(
,hough an attept has been ade to reove confusion b! appropriate clarifications
1education guide2 where ever applicable+ the assessee3s woes and the advisors probles are far
fro over( )ne of the ain reasons for this has been the fact that the subject has not !et
developed to the fullest extent and we continue to see changes ever! !ear b! wa! of aendents+
exeptions+ clarifications being given even after 1(4(2012( ,he coprehensive approach to cover
the taxes has not been correspondingl! found sealess cenvat credit with ost ajor restriction
still reaining( .nvariabl! it is seen that the changes have been priaril! been aied at
increasing the revenue to the governent even if it eans aring the tax adinistrators undul!(
.t is not uncoon to find entrepreneurs 5 business advisors5 chartered accountants new to
service tax who are doubtful5 unclear about the legal provisions pertaining to the sae( ,his brief
online boo- is aied at such $hartered 'ccountants in eplo!ent as well as practice 5 assessees
who are new to service tax practice and are interested in understanding the basic concepts of the
subject so that the! can ta-e steps to ensure effective copliance with the law( ,he attesting
auditor a! also li-e to have a handil! eas! to refer boo- for ensuring copliance under laws he
certifies when he signs off the financials for corporate( 6eeping this fact in ind and as well as
the constraints as to space+ this boo- deals with concepts of service tax to guide the assessee5
professional rather than an in7depth discussion of the legal provisions+ especiall! the taxable
services individuall!(
,his boo- has attained its present for partl! due to the efforts of the partners of 8iregange
9 'ssociates+ $hartered 'ccountants nael! 7 $' :adhu-ar / 8iregange+ $' *ajesh 6uar
3
,*+ $' Sudhir % S and also the efforts of qualified staff who have contributed especiall! $'
*oopa /a!a-(( ;e ac-nowledge their efforts(
,he boo- contains an overview of service tax initiall! which would provide the reader with a
bird3s e!e view of service tax( ,he reader is advised to go through the sae before proceeding
onto the subsequent chapters( ,his boo- also contains soe of the iportant procedures which
would be useful to the assessee in copl!ing with the legal provisions of service tax(
,he authors have tried their best to a-e this online boo- as coplete as possible but where
the readers have an! doubt regarding the subject atter are advised to refer a ore
coprehensive publication regarding the sae or see- expert opinion(
,he chapters in this boo- have been arranged in such a wa! as to give the reader a fairl! good
idea as to the provisions of law( ,he authors would also welcoe valuable suggestions fro the
readers+ which would help us in ensuring a better offering next tie around( &or an! coents or
feedbac- please write to hiregange<gail(co+ rajesh<hiregange(co or
sudhir<hiregange(co &or !our queries on the subject !ou a! also host !our queries on
pdicai(org under Service ,ax segent(
&inall!+ we wish the reader all the best in their career5 practice(
,ea 8iregange
02(4(2013
=angalore
#
Tabe !" C!ntents
#VERV$E% #F SERV$CE TA&(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10
$onstitutional validit! and concepts((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10
>ev! and collection((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((12
$oncept of $lassification(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((13
*egistration((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#
$oncept of consideration and valuation((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#
?a!ent of service tax(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1@
?a!ent of .nterest((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A
$B/%', $redit schee((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((14
Bxport of Services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((14
&iling of returns(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10
'ssessent((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"
?rovisions as to recover!(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"
?rovisions pertaining to penalt!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((20
$ollecting aounts representing service tax(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21
?rovisions pertaining to 'ppeals(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21
SERV$CE TA& ' LEV(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23
>ev! and charge of service tax((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23
;hat is ServiceC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23
$lassification of Service((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2@
)ECLARE) SERV$CE((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((24
1( *enting of .ovable ?ropert!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((20
2( $onstruction of $oplex(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2"
3( ,eporar! transfer or peritting the use or enjo!ent of an! intellectual propert!
right((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((31
#( Developent etc of ., software((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((32
@( /on $opete &ee((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((33
A( ,ransfer of goods b! wa! of hiring+ leasing+ licensing or in an! such anner without
transfer of right to use such goods(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((3#
4( Deliver! of goods on hire7purchase or an! s!ste of pa!ent b! installents(((((((3@
0( Service portion in execution of ;or-s $ontracts((((((((((((((((((((((((((((((((((((((((((((((((((((((3A
"( Suppl! of &ood or other articles of 8uan $onsuption((((((((((((((((((((((((((((((((((((((((30
NE*AT$VE L$ST((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((#2
1( Services provided b! Eovernent or >ocal authorit!F((((((((((((((((((((((((((((((((((((((((((((((#2
2( Services provided b! *eserve =an- of .ndia(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((##
3( Services b! a &oreign Diploatic :ission >ocated in .ndia((((((((((((((((((((((((((((((((((((##
#( Services relating to agriculture((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((##
@( ,rading of Eoods(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((#A
A( ?rocesses aounting to :anufacture or ?roduction of Eoods(((((((((((((((((((((((((((((((((#4
4( Selling of Space or ,ie Slots for 'dvertiseents other than 'dvertiseents
=roadcast b! *adio or ,elevision((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((#0
0( 'ccess to a *oad or a =ridge on ?a!ent of ,oll $harges(((((((((((((((((((((((((((((((((((((((@1
"( =etting+ Eabling or >otter!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@1
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10( Bntr! to Bntertainent Bvents and access to 'useent &acilities(((((((((((((((((((((((@2
11(,ransission or Distribution of Blectricit!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@3
12( Specified services relating to Bducation((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@#
13( Services b! wa! of *enting of residential dwelling for use as residence((((((((((((((((@A
1#( &inancial Sector(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@4
1@( Service relating to ,ransportation of ?assengers(((((((((((((((((((((((((((((((((((((((((((((((((((((@0
1A( Service relating to ,ransportation of Eoods((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@0
14( &uneral+ =urial+ $reatoriu or :ortuar! services including transportation of the
deceased(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((@"
=rea- of $envat $hain(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A0
CLASS$F$CAT$#N #F SERV$CE((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A1
*elevance of the concept of classification(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A1
?ossible raifications where the assessee gets the classification wrong((((((((((((((((((((((A#
?ointers for practice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A@
E&EMPT$#NS $NCL+)$N* ME*A E&EMPT$#N(((((((((((((((((((((((((((((((((((((((((((((((((A4
:ega Bxeption /otification(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((A4
Sall Service ?rovider Bxeption((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((04
'bateents(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("0
?ointers for practice((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("2
)ther exeptions((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("3
PLACE #F PR#V$S$#N #F SERV$CE R+LES, -./-(((((((((((((((((((((((((((((((((((((((((((((("@
*ule 1#F )rder of application of rules((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("A
*ule 13F ?owers to notif! description of services or circustances for certain purposes
((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("4
*ule 12F ?lace of ?rovision of services provided on board a conve!ance(((((((((((((((((((("4
*ule 10F ?lace of ?rovision of goods transportation services((((((((((((((((((((((((((((((((((((((("0
*ule "F ?lace of ?rovision of Specified services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((("0
*ule 0F ?lace of ?rovision of services where provider and receiver are located in
taxable territor!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((101
*ule 47 ?art perforance of a service at different locations(((((((((((((((((((((((((((((((((((((((102
*ule AF ?lace of ?rovision of Services relating to events((((((((((((((((((((((((((((((((((((((((((((102
*ule @F ?lace of provision of services relating to iovable propert!((((((((((((((((((((((103
*ule #F ?lace of provision of perforance based services((((((((((((((((((((((((((((((((((((((((((10#
*ule 3F Eeneral *esiduar! rule((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10@
$onclusionF((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10@
REVERSE CHAR*E 0 1#$NT CHAR*E MECHAN$SM(((((((((((((((((((((((((((((((((((((10A
.ntroduction((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10A
/o $harging section w(e(f(1(4(12 on reverse charge(((((((((((((((((((((((((((((((((((((((((((((((((((10A
;hat is reverse chargeC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10A
;hat is Joint $harge :echanisC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((104
;hat is covered under *everse $hargeC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((104
;hat is covered under Joint $hargeC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10"
)ther relevant aspects((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((110
.portant point to be considered(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((111
$onclusion(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((112
CENVAT CRE)$TS AN) PA(MENTS((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((113
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.ntroduction((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((113
$oncept of .nput((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((11@
$oncept of )utput service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((11A
$oncept of $apital goods(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((114
$oncept of .nput Service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((110
Bxepted Service eans(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((121
Duties5taxes which can be considered for set off or availing credits(((((((((((((((((((((((((((122
UtiliGation of the credits((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((122
;hen inputs5capital goods are reoved outside the preises((((((((((((((((((((((((((((((((((((123
;hen inputs5capital goods are written off full!((((((((((((((((((((((((((((((((((((((((((((((((((((((((((12#
*estriction in case of capital goods(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((12#
$envat $redits *efund for exporter of service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((12A
*ule A *eversal of $envat $redit(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((124
Docuentation wor- to be done((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((130
$oncept of input service distributor((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((132
?a!ent of service tax(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((133
*ecover! of cenvat credit wrongl! ta-en or erroneousl! refunded(((((((((((((((((((((((((((((13#
$onfiscation and penalt! in case of wrong availent of $envat $redits((((((((((((((((((((13#
?ointers for ?ractice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((13@
VAL+AT$#N +N)ER SERV$CE TA&(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((134
;hat is the ain basis for valuationC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((134
$an the $entral Bxcise )fficer question the valuationC((((((((((((((((((((((((((((((((((((((((((((((130
;hether the gross aount charged for the service would include charges reibursed
b! the service receiverC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((13"
're there an! other specific inclusions and exclusions with regard to aount charged
for specific servicesC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#1
;here during the course of providing service+ there is transfer of propert! in goods+
what would be the valueC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#2
%alue of service portion in the execution of wor-s contract(((((((((((((((((((((((((((((((((((((((1#2
Deterination of value of the service in relation to one! changing(((((((((((((((((((((((((1##
?ointers for practice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#@
$MP#RT AN) E&P#RT #F SERV$CES(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#4
.port of Services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#4
?ointers for practice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#4
)EMAN), APPEALS, REC#VER( AN) PENALT$ES((((((((((((((((((((((((((((((((((((((((((1#"
Deand 9 'djudicationF(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1#"
'ppeals((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1@#
?enalties(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1@"
REF+N)S AN) RE2ATES((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A2
.ntroductionF((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A2
*efund under Section 11= of $entral Bxcise 'ct+ 1"##F(((((((((((((((((((((((((((((((((((((((((((((1A2
*efund of $envat $redit under *ule @ of $$* 200#((((((((((((((((((((((((((((((((((((((((((((((((((1A3
?rocedure for filing the refund clai(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A@
?rocedure for refund of credits u5r @ of $$* 200# prior to the 01(0#(2012(((((((((((((((1AA
*efund Under /otification /o #1520127S, dated 2"(0A(2012 w(e(f 1(4(2012((((((((((((1A0
?rocedure for claiing *ebate((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1A0
4
8ow does the schee of rebate wor-C((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((14@
*ebate of the service tax on taxable services exported(((((((((((((((((((((((((((((((((((((((((((((((14@
*ebate of the service tax on input services or dut! on inputs(((((((((((((((((((((((((((((((((((((144
PR#CE)+RES %$TH RE*AR) T# RE*$STRAT$#N(((((((((((((((((((((((((((((((((((((((((100
;hen does the service provider require registration under Service ,axC(((((((((((((((((((100
;hat is the procedure for registrationC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((100
8ow is centraliGed registration differentC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((102
8ow to a-e aendents with regard to changes in particularsC(((((((((((((((((((((((((((((102
Service ,ax *egistration /uber((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((103
?reise code((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((103
PR#CE)+RE %$TH RE*AR) T# $NV#$C$N*(((((((((((((((((((((((((((((((((((((((((((((((((((10#
8ow to raise a proper invoiceC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10#
REC#R) KEEP$N*(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10A
PA(MENT #F SERV$CE TA&((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10"
Deterination of ?oint of ,axation(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((10"
8ow to pa! service taxC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"2
SERV$CE TA& RET+RNS(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"#
8ow to file the service tax returnC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"#
;hat is the procedure to file the returns onlineC(((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"@
SERV$CE TA& A+)$TS 2( PR#FESS$#NALS((((((((((((((((((((((((((((((((((((((((((((((((((((((1"4
;hat is required of the auditorC((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1"4
?ointers for practice(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((201
FRE3+ENT ERR#RS C#MM$TTE) $N SERV$CE TA&(((((((((((((((((((((((((((((((((((((204
#THER M$SCELLANE#+S ASPECTS $N SERV$CE TA&(((((((((((((((((((((((((((((((((((20"
.nterest and penalt! calculations((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((20"
?rovisions as to penalt!(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((210
Searching of preises b! authoriGed officers((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((211
)ther recover! provisions((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((211
>iabilit! under 'ct to be &irst $harge(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((212
)ffence and penalties(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((212
'pplication of the provisions of the $entral Bxcise 'ct 1"##((((((((((((((((((((((((((((((((((((212
S#ME #F THE $MP#RTANT C#MM#N SERV$CES(((((((((((((((((((((((((((((((((((((((((((21#
*enting of .ovable ?ropert! Services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21#
:anageent+ :aintenance or *epair Services(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21A
.nforation ,echnolog! Software Services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((214
Eoods ,ransport 'genc! Services(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((21"
;or-s contract service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((220
Suppl! of tangible goods for use service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((22@
$onstruction of coplexes((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((22"
=usiness 'uxiliar! Service((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23#
Support services of business or coerce((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23A
Sale of goods((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((23"
.nterior decorator(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#0
*enting of cabs((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#1
,our operator3s service((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#2
$oercial training or coaching((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2##
0
:anageent or business consultant3s services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#0
$oposite services((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#"
8ealth Service((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2#"
>egal $onsultanc! service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2@1
=rand ?rootion service(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2@2
2$2L$#*RAPH(4REFERENCES4 ACKN#%LE)*EMENTS(((((((((((((((((((((((((((((2@#
APPEN)$&(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2@@
"
#VERV$E% #F SERV$CE TA&
,ax on services has been in vogue in .ndia since 1""# when it was introduced for the first tie(
;hen it was introduced initiall!+ there were three services which were liable but over the !ears
various other services have been added to ta-e it to 11" in 2011( ,his !ear with the negative list
the nuber of services could be guesstiated to be in excess of 300H
)ne of the ain reasons for the services to be taxed is that the anufacturing sector can be taxed
onl! to a certain extent if we are to ensure the copetitiveness of our industr!+ since ours is no
longer a closed econo!I all activities are to bear the burden( Services presentl! foring ore
than @4 J of the ED? are expected to reach 40J this decade+ which should also bear the burden
of tax( ,his tax would be subsued into the Eoods and Service ,ax which a!be in place in the
next few !ears(
,he lev! of service tax was initiall! under the residuar! powers conferred to the Union b! entr!
"4 of >ist . to the Seventh Schedule to the $onstitution of .ndia( >ater entr! "2$ was introduced
specificall! to cover K,axes on Services3+ though not put into effect till date( Unli-el! with ES,
in the horiGon(
Constitutional validity and concepts
Whether tax on services is constitutionally valid?
.n a nuber of cases+ the constitutional validit! of service tax has been questioned and the
decisions of the 8igh $ourts5 Supree $ourt have been in favour of revenue( .n Tamil Nadu
Kalyana Mandapam Assn Vs UOILL200#M L1A4M B>, 3M S $++ the lev! of service tax on andap
-eepers and outdoor caterers was upheld b! the Supree $ourt as a tax on services and not a tax
on sale of goods or hire purchase activities( ,he lev! of service tax on professional services of
$hartered 'ccountant+ $ost 'ccountant and 'rchitect was also upheld b! the Supree $ourt in
'll .ndia &ederation of ,ax ?ractitioners %s U). L2004 L04M S,* A2@7S$M(
.n GDA Security Private Ltd. Vs. UOIL200AL02MS,*@#2M it was held b! the :adras 8igh $ourt
that the tax on profession was levied in order to allow professionals to carr! on a particular
profession+ trade or calling or eplo!ent in a particular state( ,he aspect of providing a service
was held to be different and independent of the aspect of profession and the lev! of service tax on
securit! agenc! was upheld(
,his has been the case for the chartered accountants+ architects and advertisers also( ,he question
of constitutionalit! would favour the revenue( 's on date+ the validit! of service tax lev! on rental
10
of iovable propert! is an issue to be decided b! the Supree $ourt though the Delhi 8igh
$ourt has aditted a writ petition in 8oe Solution *etail .ndia >td %s U). L200"7,.)>71"A7
DB>78$7S,M challenging the lev! of service tax on pure renting of iovable propert! without
there being a service associated with the renting(
,he Supree $ourt recentl! upheld the validit! of service tax on financial leasing services
including equipent leasing and hire purchase in 'ssociation of >easing 9 &inancial Service
$opan! L20107,.)>7047S$M and observed that service tax would be pa!able as there is a
rendition of service in financial transactions(
.n addition to the above+ the other relevant decisions are discussed below where the courts have
upheld the validit!F
i( 'ddition 'dvertising %s U). 1""0 L"0M B>, 1#F Service tax on advertising service is
constitutional and not violative of article 1# and 1"L1M of $onstitution of .ndia(
ii( .ndian .nstitute of 'rchitects %s U). 2002 L13"M B>, 2#@F Service tax is a tax levied on
services and it is not a tax on professionals( ?arliaent is copetent under entr! "4 to
lev! service tax on architects(
iii( Secretar!+ &ederation of =us )perators 2001 L13#M B>, A10F ,ax on service is distinct
fro tax on profession+ trade or calling and not falls under entr! A0 of list ..( Different
aspects are liable for tax(
iv( >% San-eshwar 200A L#M S,* 2@4F ,our operator not to be tered as transferor of right
to use vehicles as per article 3AAL2"'M of the $onstitution of .ndia( >ev! of service tax
neither tax on passenger nor goods(
v( .nfotech Software Dealers 'ssociation L2010 L020M S,* 020" :adMF wherein an
iportant decision in the context of taxation of software has been delivered( ;hile
holding that software Lpac-aged or custoiGedM is goods+ the $ourt has also upheld the
validit! of lev! of service tax on ., software services(
What is the concept of service as understood here?
'ssessees should note that in order to attract the lev! under service tax law+ there should first of
all be a service finding a ention in sec A@L10@M( ,he concept of NserviceO though has not been
defined for this purpose and one would have to refer the eanings given b! dictionar! to
understand the sae or even the word as understood coerciall! can also be considered( ,his
view has been followed in =ajaj 'uto >td %s $$B ?une 11""4 L"#M B>, @#@ L,riM2(
Under the positive list based taxation+ the ter service was not defined( Under negative list based
taxation+ wef 1(4(2012+ there is a specific definition of ter service(
11
,he concept has been explained in the chapter on lev!(
What would be the position under law, where service involves goods?
Service tax is a tax on service and not a tax on sale of goods( ,he various decisions given b! the
$ourts on the constitutional validit! of service tax have also clarified his aspect( .t has
accordingl! been held that service tax and %', are utuall! exclusive and the definition of
service confirs this( ,here are notifications issued under service tax providing deduction 5
abateent in respect of the transfer of propert! in goods ade during the provision of services
and this deduction5abateent would be fro the gross value charged for the service( ,he
applicabilit! of these notifications would depend on the nature of the services involved and the
activities perfored( =efore opting for the benefit of these notifications+ the assessee should
ideall! perfor a cost7benefit anal!sis as there are associated conditions to be et to clai such
deduction(
Governing provisions
,he provisions pertaining to service tax are given in $hapter % and %' of &inance 'ct 1""# as
aended fro tie to tie( ,he $entral Eovernent has also been epowered to a-e rules to
carr! out the provisions of this $hapter+ through section "# of this chapter( ,his coes along with
the power to grant exeptions fro Service ,ax u5s "3( ,he Eovernent has consequentl!
notified various sets of rules+ the provisions of which have been explained as we proceed with
this boo-( ,he rules which a! be noted are as follows
Service ,ax *ules 1""#I
$envat $redit *ules 200#I
Bxport of Service *ules 200@I
Service ,ax L*egistration of Special $ategor! of ?ersonsM *ules 200@I
Service ,ax LDeterination of %alueM *ules 200AI
?oint of ,axation *ules 2011
?lace of ?rovision of Services *ules
,axation of Services L?rovided fro outside .ndia and received in .ndiaM *ules
200AI;or-s $ontract L$oposition Schee for ?a!ent of Service ,axM *ules 2004I
Service ,ax L'dvance *ulingsM *ules 2003I
Service ,ax L?ublication of /aesM *ules 2000I
Service ,ax L?rovisional attachent of propert!M *ules 2000
12
Levy and collection under earlier service tax law[upto !"!#$#%
,helev! of service tax extends to whole of .ndia except that it does not extend to a service
provider providing taxable services fro the state of Jau and 6ashir b! virtue of section A#
of $hapter % of &inance 'ct( Under negative list based taxation+ the service tax lev! is applicable
on the services provided in taxable territor! of .ndia(
Under positive list based taxation+ the question of taxing a service would arise where the service
that is provided b! the service provider happens to be covered under the an! of the sub7clauses of
section A@L10@M ( )nce the relevant clause is identified+ the concept of Nservice providerO and
Nservice receiverO would also have to be satisfied in order to tax the concerned service( .n ost of
the categories+ the Nservice providerO and the Nservice receiverO can be any pers!n(
.n other words+ under erstwhile service tax law+ the lev! of service tax was on the provision of
specified taxable service at the rate of 12J wef 1(#(2012110J wef 20(2(200"2( &urther to
understand the lev! and collection of the service tax upto 1(4(2012+ understanding the eaning
and scope of the ter taxable service would be iportant(
;here the criteria discussed above are satisfied+ the tax would be levied on the service provider
who would be liable to collect the service tax aount fro the service receiver and reit it to the
governent in the anner prescribed( 8owever in certain cases the statute requires the service
receiver to pa! the service tax to the governent( ,he charge of service tax would be at the rates
set out in section AA which was increased fro 10J to 12J wef 1(#(2012( ,he education and
secondar! higher education cess would be pa!able on this aount at 3J and the total service tax
including cess is 12(3AJ1fro 1(#(2012 to 30(A(20122(
Since the lev! of service tax is on the provision of service+ the services provided before the date
on which such services were brought under the tax net+ would not be subjected to service tax(
*eaders here a! note that even if the bills for the services provided are raised b! the service
provider after the date on which the service becae taxable+ there would be no liabilit! as the
services had been provided during the period when the service was not taxable at all( ,his has
been confired b! the 'hedabad 8igh $ourt in Schott Elass .ndia L?M >td %s $oissioner
$entral Bxcise and $ustos %adodara .. L200"7,.)>70278$7'8:7S,M
Concept of Classification under earlier service tax law [upto !"!#$#%
,he classification of the service is defined to ean identification of the appropriate sub7clause
under sec A@L10@M( ,he service provider should ensure that the service 5 activit! is classified
properl! as this would enable hi to ascertain his liabilit! properl!( $orrect classification is
13
critical as the exeptions under service tax barring the general exeptions are based on specified
categories and if the classification is not proper+ the service provider a! either end up pa!ing
ore than what is required or even face a liabilit!(
.t is possible that the services provided a! fall under ore than one categor!( Siilarl! the
service provider a! be providing nuerous individual services or cobined services( &or the
purposes of classification+ the categor! which gives the ost specific description of the service
should be adopted( ;here coposite services Lcobination of different servicesM are provided+
the classification should be on the basis of the service which gives the their essential character(
;here the aforesaid two principles cannot be followed for classification+ the classification shall
be under the sub7clause which occurs first aong the sub7clauses which equall! erit
consideration as per section A@'( .n addition to this+ the non statutor! principles as to
consideration of trade parlance especiall! where certain NtersO are not defined under law would
also assue significance as indicated in "" General #Ne$ Del%i& Vs Gu'arat Perst!rp
(lectr!nics Ltd 200@ L10AMB>,@32
&egistration
Bver! person liable to pa! service tax is required to register b! a-ing an application to the
Superintendent of $entral Bxcise in ters of section A"( ,he service provider before registering
shall ensure that the basic exeption liit for registration available to all service provider has
been crossed( ,he present notified liit at present is *s( 10 la-hs+ specified b! notification A5200@
S, dated 01(03(0@ as aended fro tie to tie( ,his notification superseded b! notification
no(33520127S,( =randed service providers i(e( providing services under brand nae or trade nae
of others would not be eligible for the exeption( 'n illustration could be the coercial
coaching franchisees( 1 exaple tall! acadeies2( ,he exeption fro registration would not
be available for a person who is liable to pa! service tax as receiver of services( :oreover+ the
aggregate value of taxable services provided in the preceding financial !ear should not exceed *s(
10 la-hs in order to avail the benefit of exeption(
.n ters of *ule # of Service ,ax *ules 1""#+ an application in &or S, 1 would have to be filed
within thirt! da!s fro the date on which the taxable service is provided5tax is levied on such
service( Such for is now to be filed online through www(aces.)!v.in wherein the assessee would
have to first register hiself as a user and then fill the for S,71 Lthe procedure in this respect is
discussed in the chapter N?rocedures with regard to *egistrationOM,he service provider also has
1#
an option of going in for centraliGed registration where the accounting and5or billing activities are
centraliGed(
' change in the inforation or an! additional inforation sought to be given shall be intiated in
writing to the jurisdictional 'ssistant $oissioner of $entral Bxcise or Deput! $oissioner
of $entral Bxcise( ,here is a penalt! of *s 10+00057 for dela! in registration(
Concept of consideration and valuation
'fter ascertaining the taxabilit!+ the valuation of taxable services becoes iportant for the
reason that the service tax liabilit! is deterined based on the value of taxable service( ,he value
is arrived norall! on gross basis and is on the aounts charged for the taxable services
provided( ,he non7taxable services or non7service activities would not for part of gross value
for service tax coputation( 's per section A4+ where the consideration is wholl! in one!+ the
gross aount charged for the service would be liable( Bven reiburseents of expenses shall be
liable as per *ule @L1M of Service ,ax LDeterination of %alueM *ules 200A unless the sae is
incurred b! the service provider as a pure agent of the service receiver( ,he conditions to be
satisfied for this are explained in the chapter on valuation( ,he gross aount charged shall
include pa!ent b! cheque+ credit card+ deduction fro account and an! for of pa!ent b!
issue of credit notes or debit notes and boo- adjustent( )ne would have to refer the rules on
valuation to ascertain the value where the consideration is not wholl! or partl! in onetar! ters
or where the sae is not ascertainable(
'ay(ent of service tax
,he service provider providing taxable services shall be required to pa! service tax under section
A0L1M( 8owever+ the service provider does not have to pa! service tax until the value of service is
collected+ fro the service receiver towards the taxable services provided b! virtue of *ule A of
Service ,ax *ules 1""#(
8owever with the introduction of ?oint of Service *ules+ effective fro 01(0#(2011+ the above
said discussion would not be of uch of iportance+ since it requires pa!ent of service tax at
earliest of the following
a( Date on which service is provided or to be provided
b( Date of invoice
c( Date of pa!ent
8owever in case of iport of service under section AA' point of taxation shall be date on which
invoice was received or pa!ent is ade which ever was earlier(
1@
i( 'pplicabilit! of rate of service taxF ,he service tax rate shall be the rate
prevailing on the date on which the service is deeed to be provided as per the
?oint of ,axation *ules+ 2011( Barlier the rate prevailing at the tie of raising the
invoice was considered for charging service tax+ irrespective of date of
realiGation(
ii( 's per section A4'+ the rate of service tax is rate applicable when service
provided or agreed to be provided( .n Delhi $hartered 'ccountants Societ!
L*egdM vs U). and )rsL20137,.)>70178$7Del7S,M held that where services of
$hartered 'ccountants were actuall! rendered before 1(#(2012 and the invoices
also issued before that date+ but the pa!ent was received after that date+ the rate
of service tax would be 10J and not 12J(
iii( ?a!ent of Service ,axF ,he service tax has to be paid to the credit of $entral
Eovernent within due dates iediatel! the following onth5quarter in which
the services are deeed to be provided as per the ?oint of ,axation *ules+ 2011(
iv( 'djustent for non7provision of serviceF .n case of assessee who has issued an
invoice5 received pa!ent towards a service to be provided and has not provided
service Lin full or partM or where aount of invoice is renegotiated due to
deficient provision of service or an! ters of contract+ he is eligible to ta-e the
credit of excess S, paid b! hi if heF
i. *efunded the pa!ent along with the S, to the receiver of service or
ii( .ssued a credit note for the value of service not so provided to the person
to who he has issued invoice(
Bnhanceent of the adjustent liitF .n case where the assessee has paid to the credit of $entral
Eovernent an! aount in excess of the aount required to be paid towards service tax liabilit!+
can be adjusted in the subsequent period without an! onetar! liit(
?a!ent u5s A0L2M b! the service receiver under earlier service tax law
Eenerall! it is the service provider providing taxable services+ who is responsible for collection of
service tax fro his custoer5client(( =ut section A0L2M epowers the governent to notif! the
services with regard to which the service receiver would be held liable to pa! service tax to the
governent( ,he governent has consequentl! notified the following services in this regard
through notification 3A5200# S, dated 31(12(200# as aended fro tie to tie
Eoods ,ransport 'genc! service specified person pa!ing the freight
=usiness auxiliar! service of distribution of utual fund b! a utual fund distributor or
agent utual fund or asset anageent copan! receiving such service
1A
Sponsorship service provided to an! bod! corporate5fir in which case+ thebod!
corporate or fir receiving such sponsorship service would be liable
,axable services received b! an! person in .ndia fro abroad the recipient of such
service in .ndia(
.nsurance auxiliar! service b! an insurance agent person carr!ing the general insurance
business or life insurance business
.n the opinion of the authors+ where the service provider pa!s the service tax+ the service receiver
can still be called upon b! the departent to pa! service tax as a receiver of such services(
8owever+ if one were to go as per the clarification provided b! the departent through its aster
circular on procedural issues "45A52004 dated 23(00(04+ it had clarified that where service tax had
been paid b! the service provider the sae could be ta-en as credit( ,his would lend credibilit! to
the theor! that a transaction cannot be taxed twice which could be a possible defense(
'ay(ent of )nterest
Section4@ of $hapter % of &inance 'ct 1""# as aended fro tie to tie provides for pa!ent
of interest b! the assessee where there is short pa!ent or dela! in pa!ent of service tax( ,he
present notified rate is 10J p(a( siple interest and this should be paid along with the tax( ,he
interest shall be for the period of default( .nterest is andator! in nature as far as the service tax
is concerned( ,he calculation of interest under service tax law is different and considers the actual
dela! in ters of da!s i(e( the calculation is not siilar to the one followed under the .ncoe ,ax
law or the 67%', law(
C*+,-. Credit sche(e
,he service provider providing taxable services is entitled to avail cenvat credit of the service tax
paid on input services in addition to the excise dut! paid on inputs and5or capital goods provided
the! are used for providing such taxable service( ,his credit can be used b! the service provider
to set off the liabilit! on his services( ,his would reduce the outflow in cash on account of service
tax and ore iportantl! avoids cascading effect of taxes(
Bg .f the liabilit! is *s( 1000057 and the accuulated credits is *s( #@0057+ the service provider
can set off his liabilit! with the accuulated credit and is required to pa! the balance of onl! *s(
@@0057 in cash(
,he credit of service tax on input services Leg( ,elephone service+ anageent consultanc!+
professional services+ securit! service etcM would be available on accrual basis 8owever+ the
14
credit of excise dut! 1 additional dut! of custosL$%DM2 either on inputs or capital goods is
available on receipt i(e( the pa!ent to the vendor or the anufacturer is not required( ,he
service provider would however have to be careful where the service provider provides both
taxable and exepted services in which case the service provider is required to follow rule A of
$envat $redit *ules 200# for the purpose of availent(( *eversal 5 restriction on availent a!
have to be done in such cases(
*xport of /ervices upto !"!#$#
,he services has been structured b! brea-ing up the sae into three groups5sectors i.e. based on
the situation of iovable propert!+ based on the perforance of service and based on the
location of the recipient of service( &or each of the categor!+ the coon condition is the receipt
of consideration in $onvertible &oreign Bxchange( ?rior to 24(02(2010+ in addition to the said
condition+ there was one ore condition requiring the service provider to provide service fro
.ndia and service receiver to use the sae outside .ndia(
,he service provider who exports his service in accordance with the Bxport of Service *ules
200@ would not have to pa! service tax on such exports( 8e would also have the option of going
in for the rebate of service tax paid on taxable service exported or service tax paid on input
services or excise dut! paid on inputs used in providing such taxable services exported in
accordance with *ule @ of Bxport of Service *ules 200@ and the notifications specified
thereunder( 1/otification 11 0r 12 of 200@2 'nother option would be that of refund in accordance
with *ule @ of $envat $redit *ules 200#(
0iling of returns
,he service provider is required to subit half7!earl! returns in &or S,73 or &or S,73' Lin
case of provisional assessentM as the case a! be with relevant copies of &or E'* 4+ in
triplicate b! the 2@
th
da! of the onth following the end of the relevant half7!ear in ters of *ule
4 of Service ,ax *ules 1""#( &ro 01(0#(2010 e7filing of return is andator! for the service
providers who have paid central excise dut! or service tax of *s( 10 la-hs or ore in the
preceding financial !ear+ whether b! cash or debit in $envat credit account or both vide circular
/o( "1"50"520107$P dated 23(03(2010( &or S,73' is to be used where a deposit is to be ade
provisionall! Li(e( the assessee has opted for provisional assessentM( ,he returns are to be filed
for the half !ear ending 30
th
Septeber and for the half !ear ending on 31
st
:arch( ,his !ear the
tie for filing of the return has been extended to 1"
th
Januar! 2013 due to the need for different
inforation consequent to negative list(
10
;here the assessee a-es a ista-e in the return+ the revised return in &or S, 3 should be
subitted within ninet! da!s and not three onths fro the date of subission of the return
under *ule 4(
;here the filing of the return is dela!ed+ the service provider would have to pa! a su to the
credit of the central governent as follows under *ule 4$ of Service ,ax *ules 1""#
*s( @00 for a dela! of 1@ da!s fro the prescribed date
*s( 1000 where the dela! is between 1@ and 30 da!s fro the prescribed date
*s( 1000Q *s( 100 per da! of dela! where the dela! is be!ond 30 da!s fro the
prescribed date but not exceeding *s( 2000 in ters of Section 40(#N!$ t%e ma*imum
penalty is increased +r!m ,s -... t! -....&
*ule 4$ epowers the $entral Bxcise )fficer to reduce or waive the penalt! for dela!ed filing of
return+ where the gross aount of service tax pa!able is nil and there was sufficient cause for not
filing the return(
Section 41enables the =oard to notif! a schee for preparation and filing of service tax returns
through a class of persons -nown as Service ,ax *eturn ?reparer authoriGed for this purpose( ,he
assessee could thus utiliGe the services of S,*? where he has an! difficult! in filing the returns(
,he Eovernent has fraed the Service ,ax *eturn ?reparer Schee 200" notified through
/otification 45200" S, dated 03(02(0"+ a cop! of which can be obtained on the website
www(cbec(gov(in(
*ecentl! with an :)U with $=B$ and .$'.+ $hartered 'ccountant can register as a $ertified
&iling $enter and can offer the service of filing service tax and excise returns online through
'$BS website( 1visit icai(org2
-ssess(ent
,he assessee is required to assess the tax pa!able b! hi and pa! the sae on onthl! or
quarterl! basis as applicable( .n other words+ what is envisaged here is self7assessent( *ule AL#M
of Service ,ax *ules 1""# enables the service provider to opt for pa!ent on provisional basis
where there is a difficult! in ascertaining the aount to be paid( &or this+ the service provider
shall a-e an application to '$$B5D$$B( ,he assessent would be finaliGed at a later date( ,he
departental authorities can call for further inforation as the! a! require fro tie to tie(
,he provisions of $entral Bxcise *ules would appl! here in relation to such provisional
assessent with the exception as to requireent of furnishing of bond(
1"
.s best judgent assessent possible under service taxC
Section 42 authoriGes the $entral Bxcise )fficer to a-e such assessent after allowing the
assessee to represent his case+ where the assessee has failed to a-e service tax returns or assess
the tax properl!( ,hus where the assessees fail to assess tax properl! or fail to furnish return itself
the! could face the ris- of the departent calling for a best judgent assessent( 8owever these
assessents are expected to lead to substantial litigation(
'rovisions as to recovery
's per section 43 of $hapter % of &inance 'ct 1""# as aended+ where the service tax has not
been levied or paid or has been short7levied or short7paid or erroneousl! refunded+ the $entral
Bxcise )fficer handling service tax can serve a Show $ause /otice on the person chargeable with
service tax as to wh! he should not pa! the aount specified in the notice( ,he notice shall state
the aount involved(
,his can be done within one !ear fro the relevant date unless such short pa!ent5 non7
lev!5refund was b! reason of fraud or collusion or willful is7stateent or suppression of facts or
contravention of the provisions of $hapter % or rules ade there under with the intent to evade
pa!ent of service tax( .n such cases+ the tie liit would be five !ears(
,here is an option of copleting the proceedings b! pa!ent of the tax aount along with
interest u5s 4@ before issue of notice in cases pertaining to fraud+ collusion etc(+ b! pa!ing the said
tax and interest along with penalt! of 2@J of the service tax specified in the notice within 30
da!s fro the date of counication of notice( In t%e /inance 0ill -.11 t%e said 2ene+it $as
e*cluded $it% respect t! cl!sure !+ pr!ceedin)s a+ter payment !+ penalty under secti!n 34#1A&&
5!$ever revised 2ene+it %as 2een pr!p!sed 2y intr!ducin) secti!n 34#6A& 2y virtue !+ $%ic%
$%ere true and c!mplete rec!rds are availa2le in t%e speci+ied rec!rds and t%e assessee durin)
t%e c!urse !+ audit veri+icati!n !r investi)ati!n pays t%e ta* interest penalty. T%e e*tent !+
penalty in t%is re)ard is 17 P.M !+ t%e ta* am!unt +!r t%e durati!n !+ t%e de+ault upt! a
ma*imum !+ -87 !+ t%e ta* am!unt. It is imp!rtant t%at t%e am!unt !+ ta* is paid 2e+!re t%e issue
!+ n!tice and in+!rmati!n !+ t%e same is pr!vided t! t%e central e*cise !++icer !+ suc% payment in
$ritin).
It is +urt%er pr!vided t%at t%e central e*cise !++icer may determine t%e am!unt !+ service ta*
$%ic% is unpaid 2y t%e assessee and t%e central e*cise !++icer in t%is scenari! %as p!$ers t!
pr!ceed +!r rec!very 2y issuin) a s%!$ cause under secti!n 34#1&
20
9Speci+ied rec!rds: means rec!rds includin) c!mputeri;ed data as are re<uired t! 2e
maintained 2y t%e assessee in acc!rdance $it% any la$ +!r t%e time 2ein) in +!rced !r $%ere
t%ere is n! suc% re<uirement t%e inv!ices rec!rded 2y t%e assessee in t%e 2!!=s !+ acc!unts s%all
2e c!nsidered as speci+ied rec!rds.
'rovisions pertaining to penalty
Section 4A of the &inance 'ct provides for a penalt! in case of failure to pa! tax+ of an aount
equal to the higher of 7
1( ' su of not less than rupees one hundred for ever! da! during which the failure to pa!
tax in accordance with section A0 continues+ or
2( )ne percent of the tax for ever! onth+ starting with the first da! after the due date till
the date of actual pa!ent of service tax due(
,he total aount of penalt! cannot exceed @0J of the aount of service tax pa!able(
Section 44 deals with penalt! for a contravention where no specific penalt! is prescribed( ,he
penalt! in cases of fraud+ collusion+ willful isstateent+ suppression of facts or contravention of
an! provision with an intention to evade the pa!ent of service tax would be u5s 40( LSection 40
is being aended to provide that in a case where penalt! u5s 40 is iposed+ penalt! for failure to
pa! service tax u5s 4A shall not appl!M( &urther an explanation to section 43L3M is being added
whereb! if the aount of service tax and interest is paid b! the assessee before the issue of show
cause notice then no penalt! is leviable under an! of the provisions of this 'ct or the *ules ade
thereunder(
Collecting a(ounts representing service tax
'n! person collecting an! aount as representing service tax or in excess of the service tax
liable+ or collecting service tax on transaction not liable for service tax has to depositsuch
aounts with the $entral Eovernent as per section 43'( ,he provision for the interest on the
sae is governed b! section 43=(
'rovisions pertaining to -ppeals
Section 0@ of the &inance 'ct+ allows an assessee or revenue aggrieved b! an! decision or order
passed b! an adjudicating authorit! subordinate to the $oissioner of $entral Bxcise+ to appeal
to the $$B L'ppealsM within sixt! da!s wef 1(#(2013 1earlier it was three onths2 fro the date
of receipt of the decision of the authorit!(
21
*ule 0 of Service ,ax *ules 1""# requires the appeal to be ade on &or S,7# in duplicate( '
cop! of the order sought to be appealed against is also to be filed with the appeal(
Section 0A allows the assessee or revenue to a-e an appeal to the 'ppellate ,ribunal against the
order passed b! either the $$B or $$B L'ppealsM( ,he appeal is to be filed within three onths
of the date on which the order sought to be appealed against is received b! the assessee and as per
*ule " of Service ,ax *ules 1""#+ would be filed on &or S,7@ and would be in quadruplicate(
Bven orders passed either under section 43 dealing with recover! or a revision order of the $$B
u5s 0# or order adjudging penalt! u5s 03' a! be appealed against(
's far as appeals to 8igh $ourt and Supree $ourt are concerned the provisions of sections 3@E
and 3@> of the $entral Bxcise 'ct 1"## would appl!( ,he appeal to 8igh $ourt can be ade
against the order of the 'ppellate ,ribunal once the 8igh $ourt is satisfied that the case involves
a substantial question of law( ,he appeal shall be within 100 da!s fro the date on which the
order appealed against is received b! the assessee( ,he fee shall be rupees two hundred(
,he appeal against the order of the 8igh $ourt shall be with the Supree $ourt once the 8igh
$ourt certifies the case to be one that is fit for appeal to Supree $ourt( ,his a! be done on its
own otion or on an application b! the assessee once its judgent is delivered( ,he decision of
the Supree $ourt shall be final and binding on the parties concerned( ,he practice of the
revenue departent to continue to raise protective deands or litigate a atter uch after its
judicial confiration should be discouraged as it aounts to a harassent to the tax copliant
service providers5 receivers who contributes ore than 00J of the total collections of taxes
whether in direct or indirect taxes( .t would also ebrace the global best practice of trusting the
tax pa!er both in word and spirit reduces the cost of tax adinistration(
22
SERV$CE TA& ' LEV(
Levy and charge of service tax
Barlier+ Service tax was applicable to defined service providers+ providing defined taxable
services+ to defined service receivers+ in .ndia( ,he tax was liable on the gross aounts charged
for such service less the deductions and exeptions set out therein( /ow+ the Service ,ax law has
undergone a sea change with the ter Kservice3 b! itself being defined and all the activities which
satisf! the definition criterion fall under the service tax net ( ' list of 14 activities called the
negative list is provided which are copletel! outside the service tax net ( :ost of the earlier
exeption notifications have been scrapped and a ega exeption notification consisting of 3"
ites is given( ,hus one has to chec- the negative list+ then the exeption notification and if an!
activit! is not specified therein+ it is a taxable service( ,he lev! now is still on the provision of
service+ but for cr!stalliGation we have to chec- the ?oint of ,axation *ules+ 2011(
What is /ervice?
' new Section AA= has been introduced in this &inance 'ct and KService3 has been defined in
clause L##M of the new section A@=( ,he definition of service has be divided into three parts i(e(
Keans part3+ Kinclusive part3 and Kexclusion part3(
Means 5art !" the de"initi!n
RServiceR eans an! activit! carried out b! a person for another for consideration( ,he definition
of service has the following essential requireentsF
a( .t has to be an! activit!+
b( Such activit! has to be carried out b! a person+
c( Such person has to carr! out the sae for another person+
d( ,he activit! has to be for a consideration
$n6usive 5art !" the de"initi!n
.nclusive part of the definition has ipact of enlarging the scope of the definition( .t gives wider
eaning to words or phrases in the statute( ;hen it is used in words or phrases+ it ust be
construed as coprehending not onl! such things as the! signif! according to their nature and
ipact+ but also those things which interpretation clause declares the! shall include( ,he
definition of service also includes the declared service in the inclusive part( ,his is done to avoid
abiguit! in so far as the activities entioned under declared services which could lead to
continued litigation( 8owever the contradiction between the definition part and the inclusion part
as well as the possible variance with the $entres powers laid down under the $onstitution of
.ndia are li-el! to see disputes continuing(
S5e6i"i6 e76usi!ns "r!m the de"initi!n !" servi6e
,he definition of Kservice3 as provided in Section A@= L##M specificall! excludes certain activities
23
which would not be considered as service( ,hat is to sa! that these activities when
perfored5executed shall be out of scope of the service tax lev!(
LaM an activit! which constitutes erel!+
LiM a transfer of title in goods or iovable propert!+ b! wa! of sale+ gift or in an!
other annerI or
LiiM a transaction in one! or actionable claiI
LbM a provision of service b! an eplo!ee to the eplo!er in the course of or in relation to
his eplo!entI
LcM fees ta-en in an! $ourt or tribunal established under an! law for the tie being in force(
,here are three explanations inserted after the eans+ inclusive and exclusive libs of the
definition of service( ,he! are as followsF
Bxplanation 1 stipulates that the definition sha n!t a558 t!
L'M the functions perfored b! the :ebers of ?arliaent+ :ebers of State >egislative+
:ebers of ?ancha!ats+ :ebers of :unicipalities and :ebers of other local
authorities who receive an! consideration in perforing the functions of that office as
such eberI or
L=M the duties perfored b! an! person who holds an! post in pursuance of the provisions of
the $onstitution in that capacit!I or
L$M the duties perfored b! an! person as a $hairperson or a :eber or a Director in a bod!
established b! the $entral Eovernent or State Eovernents or local authorit! and who
is not deeed as an eplo!ee before the coenceent of this section(
Bxplanation 2 provides that
transaction in one! shall not include an! activit! relating to the use of one! or its
conversion b! cash or b! an! other ode+ fro one for+ currenc! or denoination to
another for+ currenc! or denoination for which a separate consideration is charged(
Bxplanation 3 is an exception to the part that there have to be 2 distinct persons for provision of
service(
LaM an unincorporated association or a bod! of persons+ as the case a! be+ and a eber
thereof shall be treated as distinct personsI
LbM an establishent of a person in the taxable territor! and an! of his other establishent in
a non7taxable territor! shall be treated as establishents of distinct persons(
Bxplanation # stipulates that
' person carr!ing on a business through a branch or agenc! or representational office in an!
territor! shall be treated as having an establishent in that territor!(
Classification of /ervice
Barlier+ the classification of the service provided should have been with reference to the specific
coverage within the 11" alternatives( .t was possible that the services provided b! one service
provider a! appear to fall under ore than one categor! of specified services( .t was possible
2#
that one service provider a!be providing nuerous individual services or cobined services(
8e was required to register under all of the(
;here the entr! was not clear or ore than one classification appeared to be correct+ then
reference was to be ade to Section A@' for the rules of interpretation(
,hus+ a lot of confusion prevailed here and also litigation(
/ow+ Section A@' has been replaced with Section AA&(
Section AA& has laid down the principles of classification of services(
$lause 1F Unless otherwise specified+ reference to a service Lherein referred to as ain
serviceM shall not include reference to a service which is used for providing ain service(
$lause 2F ;here a service is capable of differential treatent for an! purpose based on its
description+ the ost specific description shall be preferred over a ore general
description(
$lause 3F Subject to the provisions of sub7section L2M+ the taxabilit! of a bundled service
shall be deterined in the following anner+ nael!F
LaM if various eleents of such service are naturall! bundled in the ordinar! course
of business+ it shall be treated as provision of the single service which gives such
bundle its essential characterI
LbM if various eleents of such service are not naturall! bundled in the ordinar!
course of business+ it shall be treated as provision of the single service which
results in highest liabilit! of service tax(
Bxplanation(S &or the purposes of sub7section L3M+ the expression Rbundled serviceR
eans a bundle of provision of various services wherein an eleent of provision of one
service is cobined with an eleent or eleents of provision of an! other service or
servicesO(
E7em5ti!ns
Barlier+ there were an! notifications general exeptions as well as exeptions relating to
specific categor! of services( /ow all the exeptions have been cobined into a ega
notification /o( 2@52012( ,he exeption notification is to be exained carefull! as non7
following of the substantive conditions could lead to a denial of the benefit(
#ther Maj!r Change9
2@
,he &inance 'ct has introduced joint charge along with reverse charge echanis for dual
responsibilit! to pa! service tax( ,his is to ensure ore chaos along with enhancing the treasur!T
?lace of ?rovision *ules+ 2012 have been introduced replacing the erstwhile Bxport of Services
*ules+ 200@ and the ,axation of Services L?rovided fro )utside .ndia and *eceived in .ndiaM
,ules+ 200A( ,hese rules have been put in place for the purpose of the deterination of the place
of provision of services(
2A
)ECLARE) SERV$CE
Declared Services
Declared Services are defined under Section A@= L22M of the &inance 'ct+ 1""# to ean an!
activit! carried out b! a person for another person for consideration and declared as such under
Section AAB of the &inance 'ct+ 1""#( .t eans for a service to coe under the categor! of
declared services+ it has to satisf! two basic conditions conjunctivel!
it ust be an activit! b! one person to another for consideration
it ust be specifiedLi(e( declaredM under section AAB
Need "!r )e6ared Servi6e9
,he definition of service in the first instant is ver! wide to cover an! transaction done for a
consideration( 8owever+ there exist few activities which would overlap with the other levies of
state with a arginal difference+ thereb! questioning the constitutional validit! of the lev! under
service tax( .n soe cases there a! be a doubt whether that activit! could possibl! called a
service at all( ,o rest the doubt about the validit! of a transaction to be considered as service+ the
authorities have intended to declare such activities to be a service( ,o give an instance+ the first
declared service Nrenting of iovable propert! serviceO was challenged as to whether it was a
NserviceO as well as the copetence of the Union to lev! the tax on a propert!+ which is a subject
to state governance( Siilarl! ost of the declared services were challenged( &or all events and
purposes these transactions shall be deeed to be service(
The "!!:ing nine a6tivities have been s5e6i"ied in se6ti!n ;;E9
a. renting of iovable propert!I
b. construction of a coplex+ building+ civil structure or a part thereof+ including a coplex
or building intended for sale to a bu!er+ wholl! or partl!+ except where the entire
consideration is received after issuance of certificate of copletion b! a copetent
authorit!I
c. teporar! transfer or peritting the use or enjo!ent of an! intellectual propert! rightI
d. developent+ design+ prograing+ custoiGation+ adaptation+ up gradation+
enhanceent+ ipleentation of inforation technolog! softwareI
e. agreeing to the obligation to refrain fro an act+ or to tolerate an act or a situation+ or to
do an actI
f. transfer of goods b! wa! of hiring+ leasing+ licensing or an! such anner without transfer
of right to use such goodsI
24
g. activities in relation to deliver! of goods on hire purchase or an! s!ste of pa!ent b!
installentsI
h. service portion in execution of a wor-s contractI
i. service portion in an activit! wherein goods+ being food or an! other article of huan
consuption or an! drin- Lwhether or not intoxicatingM is supplied in an! anner as part
of the activit!(
Bach individual declared service is explained belowF7
! &enting of )((ovable 'roperty
*enting of .ovable propert! has been taxed under the earlier tax regie vide Section
A@ L10@M LGGGGM( *enting of iovable propert! has been brought into tax net vide
/otification /o( 23520047S, dated 01(0A(2004(
*enting eans facilit! allowing+ peritting or granting access+ entr!+ occupation+ use(
Such facilit! has to be in an iovable propert!+ either wholl! or partl!
Such facilit! a! be provided with or without the transfer of possession or control
,he sae specificall! includes letting+ leasing+ licensing or other siilar arrangeents in
respect(
*enting in negative listLS(AADM and BxeptionL2@520127S,M
Renting under Negative ist9
Services provided b! wa! of renting or leasing of following are covered b! the negative list
'gro :achiner!
%acant land with or without a structure of incidental to its use
E7em5ti!ns
*enting of precincts of a religious place eant for general public L/otification 2@520127
S,M
*enting of a hotel+ inn+ guest house+ club+ capsite or other coercial places eant for
residential or lodging purposes+ having declared tariff of a unit of accoodation below
rupees one thousand per da! or equivalent L/otification 2@520127S,M
Services b! wa! of vehicle par-ing to general public excluding leasing of space to an
entit! for providing such par-ing facilit!( L/otification 2@520127S,M( ,his has been
oitted b! &inance 'ct 2013 wef 1(#(2013(
,hus+ par-ing charges collected at cinea theatres+ alls etc+ is exepted fro service
tax as it falls under services b! wa! of otor vehicle par-ing to general public(
'fter aendent+ these would be liable to service tax(
C!vers
20
*enting for teporar! purpose li-e arriages or other social functions because it
includes renting without transfer of possession or control+
?eritting use of propert! for vending5dispensing achine
'llowing erection of tower
*enting for entertainent or sports
*enting of theatres b! owners to fil distributor
#! Construction of Co(plex
$onstruction of $oplex covers the following
$onstruction of a coplex+ building+ civil structure or part thereofI
$onstruction of coplex or building intended for sale to a bu!er either in part or full
before issue of copletion certificate b! copetent authorit!(
Meaning !" C!nstru6ti!n9
,he expression RconstructionR includes additions+ alterations+ replaceents or reodeling of an!
existing civil structure which has been defined b! wa! of explanation to the subject declared
service( Since+ the definition is defined in the inclusive anner+ the eaning as understood b!
trade assues iportance( K$onstruction3 eans K:a-e b! fitting parts togetherI buildI erect3
1)xford Bnglish Dictionar!2
Ta7abe A6tivit89
C!nstru6ti!n !" C!m5e7, 2uiding, Civi Stru6ture9
,he construction of a coplex which eans a group of buildings or construction of independent
building or construction of civil structure or part of the coplex+ building and civil structure is
liable to service tax( ,his covers all the activities of sub7contractors who provide the service to
the builder or developer or prooter pertaining to construction and also the contractor who is
engaged directl! b! the service receiver pertaining to the construction activit!(
$n6uding a 6!m5e7 !r buiding intended "!r sae t! bu8er, :h!8 !r 5art89
,his lib of the definition intends to cover those services LdeeedM provided b! the builder5
developer5prooter in relation to building or coplex which is for sale to bu!er wholl! or partl!(
,his is to bring the deeing fiction into pla! whereb! the builder5prooter5developer is liable for
service tax when an! aount is received fro the prospective bu!er Lprior to copletion
certificateM+ where earlier the! have claied that the services are not provided to bu!er and to
theselves consequentl! escaping service tax(
E76e5t :here the entire 6!nsiderati!n is re6eived a"ter issuan6e !" 6!m5eti!n 6erti"i6ate b8
the 6!m5etent auth!rit89
2"
,his lib of the definition assues iportance since it pla!s a significant role in deterining the
taxabilit! of the activit!( ,he entire activit! of the builder5developer5prooter shall be deeed to
be service onl! if an! aount has been received prior to issuance of copletion certificate b! a
copetent authorit!( .f the entire aount is received post issuance of copletion certificate+ the
activit! shall be a ere transfer of title in iovable propert! and thereb! not falling in the
definition of service(
C!m5etent auth!rit89 ,his has been defined b! wa! of Bxplanation to ean the Eovernent or
an! authorit! authoriGed to issue copletion certificate under an! law for the tie being in force
and in case of non requireent of such certificate fro such authorit!+ fro an! of the following+
nael!F
L'M architect registered with the $ouncil of 'rchitecture constituted under the 'rchitects
'ct+ 1"42I or
L=M $hartered engineer registered with the .nstitution of Bngineers L.ndiaMI or
L$M >icensed surve!or of the respective local bod! of the cit! or town or village or
developent or planning authorit!I
Reated entries given in N!ti"i6ati!n N! -<4-./-'ST dated -.=.;=-./- >dis6ussed ater?
0ood for thought
/= $" there are m!re than @ residentia units under the same 6!m5!und but :ith
se5arate 5an san6ti!n, is su6h 6!nstru6ti!n !" units iabeA
,he concept of ore than 12 residential units is no ore relevant( .f the construction is
pertaining to ore than 1 residential unit+ the entire construction wor- shall be taxable(
/= $" the 6!nstru6ti!n !" residentia Buarters is undertaken "!r the em5!8ees !" the
"a6t!r8, is there a iabiit8 under this entr8A
Ues+ there shall be liabilit! under the new schee because the ter Kpersonal use3 has
been deleted and the exeption for residential coplex pre7doinantl! for self7 use has
been extended onl! to governent or local authorit! or use of their eplo!ees(
-= %hether the buider 6!nstru6ting :ith his !:n materias is 6!veredA
Ues+ the builder providing service with his own aterials is covered( ,his would be
treated as wor-s contract(
C= $" C!mmer6ia 6!m5e7 is 6!nstru6ted :ith agreement t! se, :hether it :!ud be
ta7abeA
C!mments9 Despite the nature of agreeent entered b! the parties+ if there is an!
consideration received fro the bu!er prior to issuance of copletion certificate b!
copetent authorit!+ it shall be taxable in light of being declared as Service vide Section
30
AA B(
1! .e(porary transfer or per(itting the use or en2oy(ent of any intellectual property right
.?* covers the followingF
,here should be an intellectual propert! right
Such right is being teporaril! transferred to the service receiver or
.t is peritting the use or enjo!ent of such right
,he phrase .ntellectual propert! right has not been defined under the &inance 'ct( ,his has to be
understood as per noral parlance as per intellectual propert! rights includes the followingF
?atents
$op!rights
,radear-s
Designs
'n! other siilar right in an intangible propert!(
Ta7abe A6tivit89
,here shall be a charge of service tax when a person assigns or agrees to assign right to use of
intangible propert! to another person for consideration+ where the assignent is not of peranent
transfer(
Tem5!rar8 Trans"er9
,ransfer+ whether peranent or teporar! shall depend upon the tie period for which the right
in the propert! subsists( F!r e7am5e+ as per Section 2A of .ndian $op!right 'ct+ 1"@4+ the right
in the cineatographic fil shall be subsist for the period of A0 !ears fro the beginning of the
calendar !ear next following the !ear in which the fil is published( ,herefore+ if the transfer of
the propert! in the right is for period exceeding A0 !ears+ the intention can be safel! concluded to
be a peranent transfer and if it is for a period less than A0 !ears+ it shall be a teporar! transfer
and subjected to service tax(
E7em5ti!n
,eporar! transfer or peritting the use or enjo!ent of a cop!right covered under clause LaM or
LbM of sub7section L1M of section 13 of the .ndian $op!right 'ct+ 1"@4+ relating to original literar!+
draatic+ usical+ artistic wor-s is exept L/ot( 2@52012M( =! &inance 'ct 2013+ there is an
exeption to teporar! transfer or peritting the use or enjo!ent of a cop!right of
cineatograph fils for exhibition in a cinea hall or cinea theatreI
0ood for thought
1. Mr= M h!ds the $PR !" a 5r!du6t and the same is tem5!ra8 trans"erred t! Mr= S, i"
Mr= S a!:s Ms= M t! use the same, is it iabe "!r servi6e ta7A
31
,he taxable service required the service provided b! the holder of .?* and not the owner of
the .?*( 's long as :r( S holds the .?* at the tie of letting it for use b! :s( :+ he would be
liable for service tax(
-= %hether granting !" the !!m right is ta7abeA
>oo right is also an intangible propert! and hence allowing the sae to be used is also
taxable irrespective of it being recogniGed or not recogniGed under the law(
3! 4evelop(ent etc of ). software
.t covers the followingF
,he activit! perfored has to be onl! developent+ design+ prograing+ custoiGation+
adaptation+ upgradation+ enhanceent or ipleentation
Such activit! has to pertain to .nforation ,echnolog! Software(
,he phrase K.nforation ,echnolog! Software3 has been specificall! defined in the &inance 'ct
vide Section A@=L20M to ean an! representation of instructions+ data+ sound or iage+ including
source code and object code+ recorded in a achine readable for+ and capable of being
anipulated or providing interactivit! to a user+ b! eans of a coputer or an autoatic data
processing achine or an! other device or equipent(
0ood for thought
/= %!ud 5r!viding advi6e, 6!nsutan68 and assistan6e !n matters reating t! $n"!rmati!n
Te6hn!!g8 S!"t:are be 6hargeabe t! servi6e ta7A
,hese services a! not be covered under the declared list entr! relating to .nforation
,echnolog! Software( 8owever+ such activities when carried out b! a person for another for
consideration would fall within the definition of service and hence chargeable to service tax if
other requireents of taxabilit! are satisfied(
2. %hether the 6anned !r !"" the she" s!"t:are are 6!veredA
,he taxable service here is in relation to developent of the software for other person( .n the
case of canned software the developent is underta-en for oneself and after copletion the
sale is affected( .n such case there is no separate service receiver therefore the lev! fails(
8owever the sae is covered under the anufacture and are governed under central excise
provisions(
C= %hether re5airs and maintenan6e !" s!"t:are is 6!veredA
Bven though not specificall! covered b! the entr!+ it would be taxable since it is an activit!
done b! person to another person for a consideration(
D= %hether the s!"t:are i6enses are 6!veredA
32
.f the software wor-s on the license basis+ then it shall be transfer of right to use goods and
the sae is taxable under another declared service entr! nael! Ntransfer of goods b! wa! of
hiring+ leasing+ licensing or in an! such anner without transfer of right to use such goodsO
5! +on Co(pete 0ee
.t covers
'greeing to the obligation to refrain fro an act+
'greeing to tolerate an act or a situation
'greeing to do an act
-greeing to the obligation to refrain fro( an act6 ;here a person underta-es an obligation not
to do an act on the request of the other person+ it eans that the first person has agreed to refrain
fro doing that act( .t is iportant that the first person should underta-e the obligation in return
of the request or proise b! another(
&or exapleF
i. .n a erger and acquisition deal+ prooter of selling copan! agrees not to do siilar
business for an agreed period( $onsideration paid for such non copete fees would
attract service tax(
-greeing to tolerate an act or a situation6 ;here a person has to tolerate a particular situation or
act and consideration is received for such situation+ it would also be liable to service tax( &or
exaple+ a person gives personal guarantee to a ban- against loan advanced to a borrower(
Euarantor underta-es to honour outstanding dues(
-greeing to the obligation to do an act6 ;here a person underta-es an obligation to do an act in
return of provision of services+ consideration received for agreeing to the obligation would be
covered in declared service( &or exaple is given in ,*U letter that if ' agrees to construct 3
flats for = on land owned b! = and in return = agrees to provide one flat to ' without an!
onetar! consideration+ then the act of = for underta-ing the obligation to provide constructed
flat would be liable to service tax(
7! .ransfer of goods by way of hiring, leasing, licensing or in any such (anner without
transfer of right to use such goods
,his is covered under deeed sale as per 'rticle 3AAL2"'M of the $onstitution( ,he following are
the essentials to be satisfied for falling under the service categor!F
,here has to be goods Lwhether tangible or intangibleM
Such goods would be transferred fro one person to another
Such transfer is b! wa! of hiring or+ leasing or licensing or in an! such anner
33
Such transfer would be without transfer of right to use such goods
Situati!ns t! de6ide :hether the a6tivit8 6!mes under trans"er !" right t! use g!!ds !r n!t
,ransfer of goods b! wa! of hiring+ leasing+ licensing or an! such anner without
transfer of right to use such goods is declared service under section AA&(
' car is given on hire b! a person to a copan! along with a driver on pa!ent of
charges on per onth5 ileage basis *ight to use is not transferred as the car owner
retains the perissions and licenses relating to the cab( ,herefore possession and
effective control reains with the owner( ,he service is therefore covered in the declared
list entr!(
8iring of ban- loc-ers ,he transaction does not involve the right to use goods as
possession of the loc-ers is not transferred to the hirer even though the contents of the
loc-er would be in the possession of the hirer( LState =an- of .ndia and )thers vs State of
'ndhra ?radesh 1"00 L40M S,$ 021@M
8iring out of vehicles where it is the responsibilit! of the owner to abide b! all the laws
relating to otor vehicles /o transfer of right to use goods as effective control and
possession is not transferred L'llahabad 8igh $ourt judgeent in 'huja Eoods 'genc!
%s( State of U?M
8iring of audio visual equipent where ris- is of the owner 7 /o transfer of right to use
goods as effective control and possession is not transferred(
0ood for thought
1. $n 6ase the Ma6hiner8 is 5r!vided t! 6ust!mer a!ng :ith !5erat!r, :hether su6h
transa6ti!n is iabe "!r servi6e ta7A
>%en t%e mac%ine is !perated 2y t%e pers!n !+ service pr!vider t%e c!ntr!l and pr!cessi!n is
n!t trans+erred t%en t%e ri)%t t! use t! pr!perty lies $it% t%e service pr!vider and %ence suc%
transacti!n is n!t !ne !+ sale. T%e ta*a2le service includes supply !+ mac%inery and t%ere+!re
t%e same is ta*a2le.
-= %here the ma6hiner8 is 5r!vided a!ng :ith the !5erat!r :!ud it be iabeA
?es as t%e c!ntr!l and p!ssessi!n !+ t%e mac%inery is n!t trans+erred t! t%e cust!mer t%e
activity is a service and n!t a trans+er !+ )!!ds.
"! 4elivery of goods on hire8purchase or any syste( of pay(ent by install(ents
,his is covered under deeed sale as per 'rticle 3AAL2"'M of the $onstitution( Section 2 of the
8ire ?urchase 'ct+ 1"42 defines a Khire purchase agreeent3 as an agreeent under which goods
are let out on hire and under which the hirer has the option to purchase the in accordance with
the ters of the agreeent and included an agreeent under which
3#
i( ?ossession of goods is delivered b! the owner thereof to a person on condition that
such person pa!s the agreed aount in periodical installents+ and
ii( ,he propert! in the goods is to pass to such person on the pa!ent of the last of such
installents+ and
iii( Such person has a right to terinate the agreeent at an! tie before the propert! so
passesI
6e! ingredients of the deeed sale categor! of Kdeliver! of goods on hire7purchase or an! s!ste
of pa!ent b! installents3+ therefore are
,ransfer of control and possession Land not just of custod!M
,he hirer has the option or obligation to purchase the goods in accordance with the ters of the
agreeent(
0ood for thought
/= %hat is the di""eren6e bet:een a n!rma hiring agreement and a hire'5ur6hase
agreementA
.n a ere hiring agreeent the hirer has no option to purchase the goods hired and the ris-s
and rewards incidental to ownership of goods reain with the owner and are not transferred
to the hirer( .n a hire7purchase agreeent the hirer has an option or an obligation to purchase
goods(
-= $" deiver8 !" g!!ds !n hire 5ur6hase !r an8 s8stem !" 5a8ment !n instament is deemed
t! be sae !" g!!ds :hat are the a6tivities in reati!n t! su6h deiver8 :hi6h are 6!vered
in the de6ared servi6eA
.t has been held b! Supree court in the case of 'ssociation )f >easing 9 &inancial Service
$opanies Vs Union )f .ndia 12010 L20M S(,(*( #14 LS($(M2 that in equipent leasing5hire7
purchase agreeents there are two different and distinct transactions+ viG(+ the financing
transaction and the equipent leasing5hire7purchase transaction and that the financing
transaction+ consideration for which was represented b! wa! of interest or other charges li-e
lease anageent fee+ processing fee+ docuentation charges and adinistrative fees+ which
is chargeable to service tax( ,herefore+ such financial services that accopan! a hire7
purchase agreeent fall in the abit of this entr! of declared services(
9! /ervice portion in execution of Wor:s Contracts
,his is covered under deeed sale as per 'rticle 3AAL2"'M of the $onstitution( ' contract to be
covered under the definition of the wor-s contract under service tax+ the following conditions
would be the essential criteria
3@
,here would be a contract for provision of service
During the provision of such service+ there is involveent of transfer of propert! in
goods which are leviable to %', and
,he scope of the contract has to be essentiall! be for construction+ erection+
coissioning+ installation+ copletion+ fitting out+ repairs+ aintenance+ renovation+
alteration or an! other siilar activit! ofI
Such activit! has to be either on ovable or iovable propert!
Vauati!n in %!rks C!ntra6t Servi6e
=roadl!+ there are two ethods for valuation of service
iM %alue of service V Eross aount value of propert! in goods
iiM .f not LiM value of service shall be
&or execution of original wor-s VW #0J of total aount shall be value
&or aintenance or repair or reconditioning or restoration or servicing of an!
goods VW 40J of total aount shall be value
&or other wor-s contracts VW A0J of total aount shall be value
,he ;or-s $ontract $oposition schee has been scrapped(
.n the above cases+ $B/%', credit cannot be availed of excise dut! paid on goods+ the propert!
of which is transferred to custoer( ,hus+ $B/%', credit cannot be availed on excise dut! paid
on building aterial li-e ceent+ steel+ tiles+ fittings+ etc(
0ood for thought
/= %!ud ab!ur 6!ntra6ts in reati!n t! a buiding !r stru6ture treated as a :!rks
6!ntra6tA
/o( >abour $ontracts do not fall in the definition of wor-s contract( .t is necessar! that the
contractor brings in aterials used for the wor-s and there should be transfer of propert! in
goods involved in the execution of such contract which is leviable to tax as sale of goods(
?ure labour contracts are therefore not wor-s contracts and would be leviable to service tax
li-e an! other service and on full value(
-= %!ud 6!ntra6ts "!r ere6ti!n 6!mmissi!ning !r instaati!n !" 5ant, ma6hiner8,
eBui5ment !r stru6tures, :hether 5re"abri6ated !r !ther:ise be treated as a :!rks
6!ntra6tA
Such contracts would be treated as wor-s contracts if
,ransfer of propert! in goods is involved in such a contractI
;! /upply of 0ood or other articles of <u(an Consu(ption
,he following are the pre7requisites to fall under this entr!F
3A
,here is an activit!
'ctivit! involves an eleent of service
Such activit! is in relation to goods
,he goods being food or an! other article for huan consuption or
'n! drin- whether intoxicating or not and
,his is supplied in an! anner as a part of such activit!(
.t is to be noted that the activit! of suppl!ing food or drin- has the case a! be+ would also
necessaril! have the service eleent has a part and parcel of such activit!( ;here onl! goods are
sold during the activit! of selling of food and no service eleent is involved+ it would not be
covered b! the declared service( ,herefore activities where ere food is supplied but no service is
offered has a part of suppl!ing of food+ it would not be liable to service tax(
&or BxapleF ?ic- up or free hoe deliver! ade for which no separate charges are levied fro
the custoer(
Vauati!n
%aluation is broadl! classified in to two categor!I
#5ti!n /9 ,he value of service shall be deterined as per *ule 2$ of the Service ,ax
LDeterination of %alueM *ules+ 200A which provides as underF
S=
N!=
)es6ri5ti!n Per6entage !" t!ta am!unt
!n :hi6h servi6e ta7 eviabe
1( Service involved in the suppl! of food or an! other
article of huan consuption or an! drin- at a
restaurant
#0
2( Service involved in the suppl! of food or an! other
article of huan consuption or an! drin- as outdoor
catering service
A0
So where service provider is a restaurant+ the value for the purpose of charging of service tax
would be #0J of the gross aount charged( .n case of outdoor caterer+ chargeable value will be
A0J of the gross consideration(
Meanin) !+ !utd!!r caterer@ )utdoor caterer is not defined under the 'ct( 8owever+ as ordinaril!
understood+ it eans a person providing food and drin- outside the place of its regular business
for soe social or foral event(
#5ti!n -F
,he provider of taxable services other than covered above i(e( restaurant or outdoor caterer when
engaged in the suppl! of food or an! other article of huan consuption or an! drin- in a
34
?reise including
8otel
$onvention centre
$lub
?andal+ Shaiana or
'n! other place speciall! arranged for organiGing a function(
,hen he would charge service tax on 40J of the total aount received for the service provided
b! wa! of outdoor catering service(
.otal -(ount@ &or the purpose of )ption 1 and 2 N,otal 'ountO would include the followingF
%alue of aterial supplied including
%alue of free aterial and
%alue of free service
Bither under the sae contract or an! other contract
2ut :!ud n!t in6ude9
%alue added tax levied on the sale of food and drin-s(
0ood for thought
/= $n 6ase the 5a6e "!r the 6a"eteria is 5r!vided b8 an $T 5ark "ree !" 6!st= Em5!8ees !"
vari!us 6!m5anies situated in the said $T 5ark bu8s the "!!d "r!m the 6a"eteria,
:hether su6h servi6e is ta7abeA
$afeteria facilit! provided b! ., par- to eplo!ees of various copanies situated in the said
par- is in the nature of food joint facilit!( .t is covered b! the exeption notification 2@520127
S, subject to that there is no '$ facilit! accopanied b! license to serve liquor( ;ef
1(#(2013+ even if there is '$ facilit! in an! part of establishent+ it would be liable( ,he
exeption would be restricted to restaurant+ eating joint or ess without '$ facilit!(
-= %hether the 6!ntra6t "!r 6!!king in a "a6t!r8 !r !""i6e :!ud be 6!vered under this
servi6eA
,he contract for coo-ing in a factor! or office would generall! be not covered b! the declared
services as the service provider engaged in the coo-ing activities is not engaged in the sale of
food( 8owever+ if the activit! of coo-ing satisfies the definition of service+ it would be liable
to service tax though not under this declared service(
C= %hether AC restaurants :ith!ut iBu!r i6ense :!ud be iabe t! servi6e ta7A
Ues+ wef 1(#(2013 it would be liable to service tax( (
D= $n 6ase the AC "a6iit8 is 5r!vided b8 the restaurant !n8 in 6ase !" summer, then :!ud
the servi6e 5r!vided b8 restaurant in :inter attra6t servi6e ta7A
,he exeption is available onl! when restaurant does not have '$ during an! part of the
!ear( ,herefore service tax would be pa!able even for the service provided in the winter+
when '$ a! not be switched on(
30
<= %hether AC restaurant n!t having iBu!r i6ense a!:ing the 6!nsum5ti!n !" iBu!r at
the risk !" 6ust!mer :!ud be iabe "!r servi6e ta7A
;ef 1(#(2013 as long as the restaurant has '$ facilit! in an! part of establishent during an!
part of the !ear would be liable to service tax (
'ointers for practice
,he new law needs frequent reading of the bare provisions as well as articles on the sae
as it is not free of vagueness(
,he Bducation guide could also provide a degree of revenue view of the subject(
,he professional here should have to have a fair idea as to the provisions prevailing under
the %', law of the concerned state if he is reall! to add value to his client3s business(
,his would be so+ as the ore appropriate course of action is to be selected fro a given
set of alternatives( ,his would involve the stud! of deductions available for labour as per
the %', law+ coposition benefits+ deduction for aterials transferred under service tax+
conditions to be et in order to clai deductions etc(
,he professional would have to go through the agreeents the client has with his
custoers so that the essence of the sae could be understood( ,his is critical in order to
deterine the liabilit! or the absence of one under service tax(
.t a! also be iportant to exaine the taxation of the incoing services5 goods as well
as the custoers3 liabilit! for central excise or service tax(
3"
NE*AT$VE L$ST
2a6kgr!und
.n the earlier s!ste+ onl! the services specified in clause L10@M of section A@ of the &inance 'ct+
1""# were taxed under the charging section AA( .n the new s!ste+ all services+ other than the
services specified in the negative list+ provided or agreed to be provided in the taxable territor! b!
a person to another would be taxed under section AA=(
Negative ist9
;(e(f 01(04(2012 there is sea change in the wa! services are to be taxed( ,axation would be
based on what is popularl! -nown as N/egative >ist of ServicesO( ,his is a coprehensive
ethod of taxation norall! adopted b! advanced5 developed countries( ,his ethod does not
differentiate between the organiGed and unorganiGed sector and covering all the service providers(
Developing countries where the econo! has not developed5 population not literate avoid this
ethod of taxation to avoid the disputes due to large scale non copliance on account of
ignorance(
%e ana8se the negative ist !" servi6es as under9
/= Servi6es 5r!vided b8 *!vernment !r L!6a auth!rit89
:ost of the services provided b! the $entral or State Eovernent or >ocal authorities are in the
negative list except the followingF
aM Services provided b! the Departent of ?osts b! wa! of speed post+ express parcel post+
life insurance and agenc! services carried out on pa!ent of coission on non
governent businessI
bM Services in relation to a vessel or an aircraft inside or outside the precincts of a port or an
airportI
cM ,ransport of goods and5or passengersI
dM Support services+ other than those covered b! clauses LaM to LcM above+ to business entities(
,he service tax on support services is to be paid b! the service recipient business entit! under
reverse charge echanis(
%hat is meaning !" *!vernmentA
KEovernent3 has not been defined in the 'ct+ the definition of KEovernent3 as contained in the
Eeneral $lause 'ct+ 10"4 would be applicable as per which KEovernent3 includes both $entral
and State Eovernent( &urther as per the Eeneral $lause 'ct 10"4+ State includes Union
,erritor!( KEovernent3 would also include various departents and offices of the $entral or
#0
State Eovernent or the U(,( 'dinistrations which carr! out their functions in the nae and b!
order of the ?resident of .ndia or the Eovernor of a State(
%hat is meant b8 L!6a Auth!rit8A
>ocal authorit! is defined in A@= and eans the followingF7
' ?ancha!at as referred to in clause LdM of article 2#3 of the $onstitution
' :unicipalit! as referred to in clause LeM of article 2#3? of the $onstitution
' :unicipal $oittee and a District =oard+ legall! entitled to+ or entrusted b! the
Eovernent with+ the control or anageent of a unicipal or local fund
' $antonent =oard as defined in section 3 of the $antonents 'ct+ 200A
' regional council or a district council constituted under the Sixth Schedule to the
$onstitution
' developent board constituted under article 341 of the $onstitution+ or
' regional council constituted under article 341' of the $onstitution(
%hat is meant b8 Su55!rt Servi6esA
Support services have been defined in section A@= of the 'ct as Kinfrastructural+ operational+
adinistrative+ logistic ar-eting or an! other support of an! -ind coprising functions that
entities carr! out in ordinar! course of operations theselves but a! obtain as services b!
outsourcing fro others for an! reason whatsoever and would include advertiseent and
prootion+ construction or wor-s contract+ renting of ovable or iovable propert!+ securit!+
testing and anal!sis3( ,hus+ services which are provided b! Eovernent in ters of their
sovereign right to business entities are not support services e(g( grant of ining or licensing
rights(
)ssue
%hether subsid8 granted b8 *!vernment "!r setting u5 !" business is ta7abeA
Subsid! granted b! business is generall! in the nature of open offer to large public( 'n! person
fulfilling the conditions of the subsid! a! be granted the subsid!( ,here is no counter obligation
to the Eovernent b! the business receiving the subsid!( $opl!ing with the conditions of the
subsid! is erel! for the purpose of gaining own business advantage( ,here are no services
rendered to Eovernent which can be ade liable to tax(
%hether CFTR$ >Centra F!!d te6hn!!gi6a Resear6h $nstitute? undertaking testing and
ana8sis servi6es "!r 5reaun6h !" edibe items is 6!vered b8 su55!rt servi6esA
.t is the statutor! obligation of the $&,*. to carr! out the testing of edible ites before launch in
the ar-et( ,he activit! perfored b! $&,*. is not outsourced to the b! business entit! and is
not covered b! the first lib of the definition of the support services( 8owever+ testing and
anal!sis is specificall! covered b! the inclusive part of the definition and accordingl! is in the
nature of support service(
#1
-= Servi6es 5r!vided b8 Reserve 2ank !" $ndia
'll services provided b! the *eserve =an- of .ndia are in the negative list( Services provided to
the *eserve =an- of .ndia are not in the negative list and would be taxable unless otherwise
covered in an! other entr! in the negative list(
C= Servi6es b8 a F!reign )i5!mati6 Missi!n L!6ated in $ndia
'n! service that is provided b! a diploatic ission of an! countr! located in .ndia is in the
negative list( ,his entr! does not cover services+ if an!+ provided b! an! office or establishent of
an international organiGation(
D= Servi6es reating t! agri6uture
,he services relating to agriculture that are specified in the negative list are services relating to
agricultural operations directl! related to production of an! agricultural produce including
cultivation+ harvesting+ threshing+ plant protection or seed testingI Seed word is oitted b!
&inance 'ct 2013( /ow entr! extended to all -inds of testing in relation to agricultural
produce and not restricted to seed testing alone(
suppl! of far laborI
processes carried out at the agricultural far including tending+ pruning+ cutting+
harvesting+ dr!ing cleaning+ triing+ sun dr!ing+ fuigating+ curing+ sorting+ grading+
cooling or bul- pac-aging and such li-e operations which do not alter essential
characteristics of agricultural produce but a-es it onl! ar-etable for the priar!
ar-etI
renting of agro achiner! or vacant land with or without a structure incidental to its useI
loading+ unloading+ pac-ing+ storage and warehousing of agricultural produceI
agricultural extension servicesI
services provided b! an! 'gricultural ?roduce :ar-eting $oittee or =oard or services
provided b! coission agent for sale or purchase of agricultural produceI
&urther the activities li-e breeding of fish LpiscicultureM+ rearing of sil- wors LsericultureM+
cultivation of ornaental flowers LfloricultureM and horticulture+ forestr! is also included in the
definition of agriculture( ,he plantation crops li-e coffee+ tea are also covered in agricultural
produce(
%hat is the meaning !" Eagri6utureFA
K'griculture3 has been defined in the 'ct as cultivation of plants and rearing or breeding of
anials and other species of life fors for foods+ fibre+ fuel+ raw aterials or other siilar
products but does n!t include rearin) !+ %!rses(
%hat is agri6utura 5r!du6eA
#2
'gricultural produce eans an! produce of agriculture on which either no processing is done or
such processing is done as is usuall! done b! a cultivator or producer which does not alter its
essential characteristics but a-es it ar-etable for priar! ar-et( .t also includes specified
processes in the definition li-e tendin) prunin) )radin) s!rtin) etc( which a! be carried out at
the far or elsewhere as long as the! do not alter the essential characteristics(
&or exapleF ?otato chips or toato -etchup are anufactured through processes which alter the
essential characteristic of far produce Lpotatoes and toatoes in this caseM therefore+ it does not
qualif! as agricultural produce(
)ssue
%hether etting !" shed "!r st!rage !" agri6utura 5r!du6e is as! 6!veredA
Ues+ .n ters of the specified services relating to agriculture Kleasing3 of vacant land with or
without structure incidental to its use3 is covered in the negative list(
%hether agri6uture !5erati!ns 6arried !ut in rura area are !n8 6!vered under negative
istA
/o( ,here is no condition that the agriculture activities should be perfored in rural area onl!(
%hether a6tivities !" h!rti6uture, anima husbandr8 !r dair8ing et6 are 6!vered b8 the
agri6uture !5erati!nsA
Ues( ,hese activities are also in the nature of agriculture onl!( 'nial husbandr! and dair!ing are
specificall! used in the definition of agriculture(
%hether a6tivities !" "ishing are as! 6!vered under agri6uture as the a6tivities are n!t
6arried !ut !n the andA
Ues( ,here is no requireent that the activities should be perfored on land onl!(
<= Trading !" *!!ds
,ransfer of title of goods is one of the essential conditions for a transaction to coe under the
abit of trading of goods( 8owever+ the services supporting or ancillar! to the trading of goods
would not coe under the above ite of /egative >ist(
%hat is 6!veredA
&utures contracts would be covered as these are contracts which involve transfer of title
in goods on a future date at a pre7deterined price(
.n coodit! futures+ actual deliver! of goods does not norall! ta-e place and the
purchaser under a futures contract norall! offsets all obligations or closes out b! selling
an equal quantit! of goods of the sae description under another contract for deliver! on
the sae date( ,here are+ therefore+ two contracts of sale5purchase involved which would
fall in the categor! of trading of goods(
%hat is n!t 6!veredA
#3
'ctivities of a coission agent or a clearing and forwarding agent who sell goods on
behalf of another for a coission would not be included in trading of goods(
'uxiliar! services relating to future contracts or coodit! futures would not be covered
in the negative list entr! relating to trading of goods(
)ssue
%hether servi6e ta7 is a55i6abe :hen there is a right t! use the g!!ds given b8 & t! ( in
e76hange "!r a 6!nsiderati!nA
/o+ as it is a transfer of right to use goods( ,his is specificall! liable to %',( ,here is no service
involved in sae(
%hether the um5 sum singe 6!ntra6t "!r sae !" g!!ds "!!:ed b8 instaati!n is 6!vered in
negative istA
;hen it is a single contract+ a view is possible that the installation charges collected could be
treated as a part of the coposite contract+ the doinant nature of which is to a-e a sale of
goods( 8owever+ the entr! of Nservice portion of wor-s contractO in declared services would
cover such transactions(
%hether the transit sae is as! 6!nsidered as tradingA
Ues+ transit sale is also considered as trading in goods+ since the ephasis here is sale and
purchase and the deliver! or procession of goods( ,he sae done during the transit of goods
would also be trading(
*!!ds s!d !n Esae !n a55r!vaF basis are returned ba6k b8 the 6ust!mer= S!me usage
6harges are 6!e6ted "r!m the 6ust!mer "!r the 5eri!d !" use !" g!!ds= $s it 6!vered b8 the
trading !" g!!dsA
,rading of goods eans bu!ing or selling of goods( .t should result in transfer of propert! in
goods( ;hen goods sold are returned bac- b! the custoer+ propert! therein does not pass on to
the client( .t is not covered b! the definition of trading of goods and accordingl! usage charges
levied are liable to service tax(
;= Pr!6esses am!unting t! Manu"a6ture !r Pr!du6ti!n !" *!!ds
,he phrase Kprocesses aounting to anufacture or production of goods3 has been defined in
section A@= of the 'ct as a process on which duties of excise are leviable under section 3 of the
$entral Bxcise 'ct+ 1"## L1 of 1"##M or an! process aounting to anufacture of alcoholic
liquors for huan consuption+ opiu+ .ndian hep and other narcotic drugs and narcotics on
which duties of excise are leviable under an! State 'ct( ,he &inance 'ct 2013 extends scope of
##
this entr! to cover process aounting to anufacture or production under the :edicinal and
,oilet ?reparations LBxcise DutiesM 'ct+ 1"@@
,his entr!+ therefore+ covers anufacturing activit! carried out on contract or job wor- basis
provided duties of excise are leviable on such processes under the $entral Bxcise 'ct+ 1"## or
an! of the State 'cts(
)ssue
%hether 5r!6essing !" g!!ds resuting in manu"a6ture !" g!!ds that are e7em5ted !r ni
dut8 is 6!veredA
,he anufacture of excisable goods is covered in negative list irrespective of whether leviable to
a rate of dut! or exepted fro such dut! b! exeption notification( .t would also cover the
excisable goods+ which are at NnilO rate of dut!=
%hether the 5r!6ess undertaken b8 a j!b :!rker n!t am!unting t! manu"a6ture but used
b8 5rin6i5a in manu"a6turing !" g!!ds subje6t t! ENiF rate !" dut8 is 6!vered in negative
istA
Service tax would be levied on processes+ not aounting to anufacture or production of goods
carried out b! a person for another for consideration( =ut there is an exeption under notification
no(2@52012 S, dated 20(0A(2012 for the interediate production process as job wor-+ where
appropriate dut! is paid b! anufacturer( 8ere+ appropriate rate of dut! :!ud n!t include K/il3
rate of dut! or dut! wholl! exept( .t could be liable(
%hether the 6!verage in negative ist is avaiabe in 6ase :here the manu"a6tured e76isabe
g!!ds resuting "r!m 5r!6ess are returned t! an!ther 5r!6ess!r and n!t t! the 5rin6i5a
manu"a6turerA
,he returning of the goods to the principal anufacturer is constructive when the sae are sent to
another processor as per the direction of the principal( ,herefore+ the benefit would be available(
G= Seing !" S5a6e !r Time S!ts "!r Advertisements !ther than Advertisements 2r!ad6ast
b8 Radi! !r Teevisi!n
%hen is Sae !" s5a6e and time Ta7abeA
Ta7abe N!n'ta7abe
Sale of space or tie for advertiseent to be
broadcast on radio or television
Sale of space for advertiseent in print edia
Sale of tie slot b! a broadcasting Sale of space for advertiseent in bill boards+
#@
organiGation( public places+ buildings+ conve!ances+ cell
phones+ autoated teller achines+ internet
'erial advertising
)ssue
%hether sae !" s5a6e !r time s!d t! advertisement agen68 !n um5 sum basis :!ud be
6!vered b8 the negative ist entr8A
'n! sale of space or tie for advertiseent purpose is covered under the negative list entr!(
,here is no condition in the definition that the sale of space or tie should be directl! ade to the
advertiser( =ul- selling of space or tie to advertiseent agenc! for a specified period which in
turn sells it to different advertisers on pieceeal basis would also be covered b! the negative list
entr! and exepted fro service tax( 8owever+ it does not include broadcasting on ,% or radio(
An advertiser a55r!a6hes advertisement agen68 t! undertake advertisement a6tivities "!r
its 6!m5an8 "!r the entire 8ear "!r a 6!ntra6tua am!unt= S6!5e !" :!rk in6udes
advertisement 6!nsutan68, 6h!!sing !" di""erent advertising medium, 5re5arati!n !"
advertisement and dis5a8 !n mediums, 5ur6hase !" s5a6e !r time "!r dis5a8 !"
advertisement !n 5ubi6 5a6es C!ud this be 6!vered in negative ist entr8A
$oposite contract is given to advertiseent agenc! for handling entire advertiseent activit!
for the !ear on lup su basis( ,his would be a case of bundled services taxabilit! of which has
to be deterined in ters of the principles laid down in section AA& of the 'ct( 8ere the doinant
nature of the transaction needs to be deterined in order to chec- if it could be chargeable to
service tax( 8ere the following two services are bundled+ nael!+ taxable service of advertising
agenc! services in relation to design+ conceptualisation+ preparation of advertiseent and non
taxable service of displa! in public spaces( .n the opinion of the paper writer+ the doinant nature
would be the services which are being offered b! advertising agenc! related to creativit!
including designing+ planning+ preparation and displa! of the advertiseent would be onl! the
incidental activit!( ,herefore the contract would be liable to service tax(
%!ud servi6es 5r!vided b8 advertisement agen6ies reating t! 5re5arati!n !"
advertisements be 6!vered in the negative ist entr8 reating t! sae !" s5a6e "!r
advertisementsA
/o( Services provided b! advertiseent agencies relating to a-ing or preparation of
advertiseents would not be covered in this negative list entr! and would thus be taxable( ,his
would also not cover coissions received b! advertiseent agencies fro the broadcasting or
publishing copanies for facilitating business+ which a! also include soe portion for the
preparation of advertiseent(
#A
H!: :!ud the Servi6e Ta7 iabiit8 be determined :hen an advertisement agen68 raises
se5arate bi t!:ards its 6!mmissi!n and sae !" s5a6e 6hargesA
$harges received b! advertiseent agenc! towards its coission are not covered b! the
negative list entr!( $onsideration received towards sale of space or tie slots for advertiseents
other than advertiseents broadcast b! radio or television would not be liable to service tax if
contracted and aount invoiced separatel!(
%hether the sae !" s5a6e in a 5rivate 6ir6uati!n magaHine is ta7abeA
Sale of space or tie on an! ediu except broadcasting b! ,% or radio is covered b! the
negative list entr!( 'ccordingl!+ sale of space in private circulation agaGine is not liable to
service tax(
%hat :!ud be the ta7abiit8 !" s5a6e a!:ed in buses and 5ubi6 trans5!rt s8stem t! run
dis5a8 !" advertisementA
/ot liable to service tax as per discussion in previous question(
%hether advertisement in a m!vie is 6!vered under the entr8 Isae !" s5a6e !r time "!r
advertisementJA
'dvertiseent in a ovie a! not be said to be a sale of space or tie for advertiseent as it is
not a sale of space or tie for advertiseent on radio or television(
%hether 5ur6hase !" s!ts "r!m br!ad6aster and s!d t! advertising agen68 is iabe t!
servi6e ta7A
=roadcasting not covered under the negative list entr!( 'ccordingl!+ it would be liable to service
tax(
%hether advertisement servi6e rendered t! *!vernment de5artments is e7em5ted "r!m
servi6e ta7A
,here is no exeption on the advertiseent services provided to governent departent( .t is
liable to service tax(
%hether 6anvassing advertisements "!r 5ubishing !n a 6!mmissi!n basis is iabe t! servi6e
ta7A
$anvassing refers to selling or reselling of space( .t is not covered b! the negative list and is
liable to service tax(
%hether the agen68 6!mmissi!n 5aid b8 5rint media t! advertising agen68 is ta7abeA
Sale of space or tie in print edia is not liable to service tax( 8owever+ coission or discount
received b! the advertiseent agenc! is not in the nature of sale of space or tie( .t is liable to
service tax(
%hether 5rinting and 5ubishing !" 8e!: 5ages !r business dire6t!r8 is iabe t! servi6e
#4
ta7A
?rinting and publishing of !ellow pages and business director! is not in the nature of sale of
space or tie for advertiseent and hence are liable to service tax(
K= A66ess t! a R!ad !r a 2ridge !n Pa8ment !" T! Charges
,he negative list entr! covers access to a road or a bridge on pa!ent of toll charges( ,he access
to /ational highwa!s or state highwa!s+ which are also roads+ is hence covered in this entr!(
)ssue
%hether servi6es 5r!vided in reati!n t! 6!e6ting t! 6harges are iabe t! servi6e ta7A
;here a toll collecting agenc! is engaged for collecting the above entioned toll charges+ then
the collecting agenc! would be liable to pa! service tax on its charges(
@= 2etting, *ambing !r L!tter8
N=etting or gabling3 has been defined in section A@= of the 'ct as Kputting on sta-e soething
of value+ particularl! one!+ with consciousness of ris- and hope of gain on the outcoe of a
gae or a contest+ whose result a! be deterined b! chance or accident+ or on the li-elihood of
an!thing occurring or not occurring3( ,he State Eovernent lev! a betting tax on such activities(
0ood for thought
%hether 5a8ment "!r admissi!n t! h!rse ra6e as a s5e6tat!r is 6!vered under this entr8A
,his entr! see-s to cover the aount which is involved in the betting( ,herefore+ the aount
collected b! the $lub fro the viewer is not covered since it does not pertain to betting( 8owever+
the sae gets excluded fro the lev! of service tax net because this transaction is covered under
the entr! relating to Nadission to entertainent event or access to auseent facilit!O( Since+
horse race is a sporting event+ it gets excluded(
Su55!se EMr= &F bets an am!unt !" Rs=<...4' !n a h!rse in a ra6e event= The ra6e 6ub has
!n8 5aid betting ta7 t! the State *!vernment !n Rs= C...4' and Rs=/...4' is 6harged "!r the
entr8 int! the ra6e and baan6e trans"erred t! a 6!mm!n 5!! a66!unt "r!m :hi6h the 5riHe
am!unt is a:arded= %hether entire am!unt is 6!vered b8 this entr8A
,his entr! reads as Nservices b! wa! of betting+ gabling or lotter!O( :r( P with the
consciousness of ris- and hope has bet an aount of *s+ @00057 and therefore in the opinion of
the paper writer+ the entire aount is covered b! the subject entr! irrespective on what aount
the betting tax is paid to the state governent(
Mr= (, member !" the H!rse ra6ing Cub has s5!ns!red 6ertain am!unt "!r a 5arti6uar ra6e
in the 6ub= $s the am!unt 5aid b8 Mr= ( 6!vered under this entr8A
#0
/o+ the betting or gabling has been defined under the &inance 'ct( ,he aount paid b! the
eber is not with the Kconsciousness of ris- and hope of gain and the outcoe of gae3 which
is priar! requisite to be covered under this entr!( Since+ the aount sponsored b! :r( U does
not have this attribute it falls into the definition of service and hence service tax is applicable(
%hether an8 su55!rt servi6es rendered b8 the Cub and 6ertain am!unt 6!e6ted "r!m the
members :!ud be 6!vered b8 this entr8A
'n! aount received b! club for rendering support services does not have the attribute of
consciousness of ris- and hope of gain on the outcoe of gae and therefore + is liable to service
tax(
%hether au7iiar8 servi6es used t! 5r!vide betting4gambing servi6es are iabe t! servi6e
ta7A
'uxiliar! services that are used for organiGing or prooting betting or gabling events+ which
are not betting per se or a part thereof are not covered in the negative list( ,he! could be liable to
service tax(
/.= Entr8 t! Entertainment Events and a66ess t! Amusement Fa6iities
%hat isF Entertainment eventFA
Bntertainent event3 has been defined in section A@= of the 'ct Kas an event or a perforance
which is intended to provide recreation+ pastie+ fun or enjo!ent+ such as exhibition of
cineatographic fils+ circus+ concerts+ sporting events+ fairs+ pageants+ award functions+ dance
perforances+ usical perforances+ theatrical perforances including cultural progras+ draa+
ballets or an! such event or progra(
%hat is amusement "a6iit8A
K'useent facilit!3 has been defined in the 'ct as Ka facilit! where fun or recreation is provided
b! eans of rides+ gaing devices or bowling alle!s in auseent par-s+ auseent arcades+
water par-s+ thee par-s or such other place but does not include a place within such facilit!
where other services are provided3(
0ood for thought
& Ltd :ishes t! dis5a8 its 5r!du6ts in a musi6a event 6!ndu6ted b8 L Ltd= The 6!m5an8
has br!ught the admissi!n rights "!r the entr8 t! the event and dis5a8ed its 5r!du6ts= $s the
in6!me re6eived b8 L Ltd 6!vered under this entr8A
/o+ the entr! to the event is covered onl! when it is for fun+ recreation+ pastie or enjo!ent( .f
the person has an! other otive+ it would be liable to service tax( Since+ P >td( has ta-en
#"
adission rights for prooting its products+ this is in the nature of business and not covered
under this entr!(
Mr= H g!es t! an amusement 5ark b8 5a8ing the entr8 "ee !" Rs= <.4'= The 5ark has vari!us
amusement "a6iities "!r :hi6h se5arate "ee is 6harged= %hether the am!unt re6eived b8
5ark is 6hargeabe t! servi6e ta7A
Ues( ,he aount is not covered b! the entr!( ,he fee onl! gives adission to the par- but not the
access to the auseent facilit!( ,herefore+ the entr! fee of *s(@057 is liable to service tax(
Mr= A g!es t! an amusement 5ark b8 5a8ing the entr8 "ee !" Rs= <..4'= The 5ark has vari!us
amusement "a6iities "!r :hi6h Rs= C..4' is 6!e6ted at the entr8 itse"= %hether the entire
am!unt re6eived b8 5ark is 6hargeabe t! servi6e ta7A
Since *s( 30057 is giving an access to auseent facilit!+ it would be covered b! this entr!(
8owever+ the aount of *s( 20057 is collected onl! for adission to the par- and not for
accessing an! auseent facilit!( ,herefore+ *s(20057 would be liable(
L Ltd=, !:ns and manages a res!rt :herein the 5r!5ert8 has "a6iities "!r 6!nventi!n 6enter,
amusement "a6iities, a66!mm!dati!n servi6es and !thers= A "ami8 b!!ks the entire res!rt
"!r < da8s "!r 6!ndu6ting marriage= The "ami8 has unimited a66ess t! amusement "a6iities
and as! uses the 6!nventi!n 6enter and a66!mm!dati!n servi6es= %hether the entire
am!unt re6eived b8 L Ltd= is iabeA
Ues liable as the aount received b! X >td( is not for the access to auseent facilities(
,herefore+ b! appl!ing the principles of classification as provided under Section AA&+ the said
aount would not be covered under this entr! since the essential character of service is to hire
convention centre(
//=Transmissi!n !r )istributi!n !" Ee6tri6it8
'n Kelectricit! transission or distribution utilit!3 has also been defined in section A@= of the act
to eans the followingF
the $entral Blectricit! 'uthorit!
a State Blectricit! =oard
the $entral ,ransission Utilit! L$,UM
a State ,ransission Utilit! LS,UM notified under the Blectricit! 'ct+ 2003 L3A of 2003M
a distribution or transission licensee licensed under the said 'ct
an! other entit! entrusted with such function b! the $entral or State Eovernent
0ood for thought
%hether the Egenerati!nF !" ee6tri6it8 "!r a 6!nsiderati!n is 6hargeabe t! servi6e ta7A
Blectricit! is specified NgoodsO in the &irst Schedule of $entral Bxcise ,ariff 'ct+ 1"0@( .t has
been held in the case of $:SL.M )perations 9 :aintenance $o( ?( >td( v( $$B+ ?ondicherr! 7
@0
2004 L4M S(,(*( 3A" L,ri(7$hennaiM that generation of electricit! aounts to process of
anufacture( ,herefore+ would not be liable to service tax(
%hether the 6harges 6!e6ted b8 a deve!5er "!r distributi!n !" ee6tri6it8 :ithin a
residentia 6!m5e7 are 6!vered in this entr8A
$harges collected b! a developer of a housing societ! for distribution of electricit! within a
residential coplex are not covered in the /egative >ist( ,he! would be liable to service tax
/-= S5e6i"ied servi6es reating t! Edu6ati!n
,he following services relating to education are specified in the negative list
pre7school education and education up to higher secondar! school or equivalent
education as a part of a prescribed curriculu for obtaining a qualification recogniGed b!
an! law for the tie being in forceI
education as a part of an approved vocational education course
%hat are the 6!urses :hi6h :!ud Buai"8 as an a55r!ved v!6ati!na edu6ati!n 6!ursesA
'pproved vocational education courses have been specified in section A@= of the 'ct( ,hese are
a course run b! an industrial training institute or an industrial training centre affiliated to
the /ational $ouncil for %ocational ,raining or State $ouncil for %ocational ,raining
1inserted b! &inance 'ct 20132+ offering courses in designated trades as notified under the
'pprentices 'ct+ 1"A1L@2 of 1"A1M
a :odular Bplo!able S-ill $ourse+ approved b! the /ational $ouncil of %ocational
,raining+ run b! a person registered with the Directorate Eeneral of Bplo!ent and
,raining+ :inistr! of >abour and Bplo!ent+ Eovernent of .ndiaI
1 a course run b! an institute affiliated to the /ational S-ill Developent $orporation set
up b! the Eovernent of .ndia2( 1,his is oitted b! &inance 'ct 20132
0ood for thought
%hether servi6es 5r!vided b8 internati!na s6h!!s are as! 6!veredA
Ues( Services provided b! international schools are not liable as the! are equivalent to the 12
th
standard(
Are servi6es 5r!vided b8 :a8 !" edu6ati!n as a 5art !" a 5res6ribed 6urri6uum "!r
!btaining a Buai"i6ati!n re6!gniHed b8 a "!reign a: 6!vered in the negative ist entr8A
/o( ,o be covered in the negative list+ a course should be recogniGed b! an .ndian law(
%hether servi6es 5r!vided b8 2!arding s6h!!s are 6!vered in this entr8A
=oarding schools provide service of education coupled with other services li-e providing
dwelling units for residence and food( ,his a! be a case of bundled services if the charges for
education and lodging and boarding are inseparable( ,heir taxabilit! would be deterined in
ters of the principles laid down in section AA& of the 'ct( Such services in the case of boarding
schools are bundled in the ordinar! course of business( ,herefore+ the bundle of services would
@1
be treated as consisting entirel! of education service( =ut the other doinant service of providing
residential dwelling is also covered in a separate entr! of the negative list( ,herefore+ entire
bundle is a negative list service(
Are 5rivate tuiti!ns 6!vered in the entr8 reating t! edu6ati!nA
,here is an abiguit! as the tuition covers parts of the curriculu and is an education( 8owever
Bducation guide issued b! $=B$ in this regard provides that private tutors can avail the benefit
of threshold exeption( ,hus+ this could lead to disputes(
$" a 6!urse in a 6!ege eads t! dua Buai"i6ati!n !n8 !ne !" :hi6h is re6!gniHed b8 a:
:!ud the servi6e 5r!vided b8 the 6!ege b8 :a8 !" su6h edu6ati!n be 6!vered in this entr8A
?rovision of dual qualifications is in the nature two separate services as the curriculu and fees
for each of such qualifications are prescribed separatel!( Service in respect of each qualification
would+ therefore+ be assessed separatel!( .f an artificial bundle of service is created b! clubbing
two courses together+ onl! one of which leads to a qualification recogniGed b! law+ then b!
application of the rule of deterination of taxabilit! of a service which is not bundled in the
ordinar! course of business contained in section AA& of the 'ct+ it is liable to be treated as a
course which attracts the highest liabilit! of service tax(
Are servi6es !" 6!ndu6ting admissi!n tests "!r 6!eges e7em5tA
Ues+ in case the educational institutions are providing qualification recogniGed b! law for the tie
being in force(
%hether 5r!viding v!6ati!na training in the "ied !" bi!te6hn!!g8 thr!ugh 6!m5uter is
6!vered under this entr8A
,he entr! provides exeption for an approved vocational training ( ,he approved vocational
education course is defined( .f the service is covered under the approved list the sae would not
be taxable+ otherwise it is subjected to service tax(
%hether the vaue 5ertaining t! buiding "ee, 6a5itati!n "ee and !thers 6!e6ted at the time
!" admissi!n int! the instituti!n is 6!vered under this entr8A
/o+ the services provided b! an educational institution in relation to adission are exept where
the educational services provided b! the institution are also exept( ,herefore+ all the fees
entioned above would be excluded onl! if the educational services provided b! the institution
are also in the negative list(
/C= Servi6es b8 :a8 !" Renting !" residentia d:eing "!r use as residen6e
K*enting3 has been defined in section A@= as KKallowing+ peritting or granting access+ entr!+
occupation+ usage or an! such facilit!+ wholl! or partl!+ in an iovable propert!+ with or
@2
without the transfer of possession or control of the said iovable propert! and includes letting+
leasing+ licensing or other siilar arrangeents in respect of iovable propert!3(
Sna5 sh!t !n ta7abiit84 n!n'ta7abiit8 !" Renting Transa6ti!ns9
$" Then
' residential house ta-en on rent is used onl!
or predoinantl! for coercial or non7
residential use(
,he renting transaction is not covered in this
negative list entr!(
' house is given on rent and the sae is used
as a hotel or a lodge
,he renting transaction is not covered in this
negative list entr! because the person ta-ing it
on rent is using it for a coercial purpose(
*oos in a hotel or a lodge are let out whether
or not for teporar! sta!
,he renting transaction is not covered in this
negative list entr! because a hotel or a lodge is
not a residential dwelling(
Eovernent departent allots houses to its
eplo!ees and charges a license fee
Such service would be covered in the negative
list entr! relating to services provided b!
Eovernent and hence non7 taxable(
&urnished flats given on rent for teporar! sta! ,hese are in the nature of lodges or guest
houses and hence not treatable as a residential
dwelling
0ood for thought
%!ud renting !" a residentia d:eing 5art8 used as a residen6e and 5art8 "!r n!n
residentia 5ur5!se ike an !""i6e be 6!vered under this entr8A
*enting of a residential dwelling which is for use partl! as a residence and partl! for non
residential purpose li-e an )ffice would be a case of bundled services( ,axabilit! of such bundled
services has to be deterined in ters of the principles laid down in section AA& of the 'ct( ,he
taxabilit! would be based on the predoinant service(
/D= Finan6ia Se6t!r
,he services of loans+ advances or deposits are in the list in so far as the consideration is
represented b! wa! of interest or discount( 'n! charges or aounts collected over and above the
interest or discount aounts would represent taxable consideration( Soe exaplesF
&ixed deposits or saving deposits or an! other such deposits in a ban- for which return is
received b! wa! of interest(
?roviding a loan or over draft facilit! for a credit liit facilit! in consideration for
pa!ent of interest(
:ortgages or loans with a collateral securit! to the extent that the consideration for
advancing such loans or advances are represented b! wa! of interest(
@3
$orporate deposits to the extent that the consideration for advancing such loans or
advances are represented b! wa! of interest or discount(
,he .nvoice discounting is covered onl! to the extent consideration it is represented b! wa! of
discount( 'n! charges or aounts collected over and above the interest or discount aounts
would represent taxable consideration( Services provided b! ban-s or authoriGed dealers of
foreign exchange b! wa! of sale of foreign exchange to general public are not covered in
/egative >ist(
/<= Servi6e reating t! Trans5!rtati!n !" Passengers
,he following services relating to transportation of passengers, with or without accopanied
belongings+ have been specified in the negative list( Services b!F
a stage carriageI
railwa!s in a class other than LiM first classI or LiiM an '$ coachI
etro+ onorail or trawa!I
inland waterwa!sI
public transport+ other than predoinantl! for touris purpose+ in a vessel between
places located in .ndia I and
etered cabs+ radio taxis or auto ric-shaws(
,he various other equivalent odes of transport not specified herein could be cause of dispute as
the above list is not coplete within each segent(
0ood for thought
Are servi6es b8 :a8 !" giving !n hire !" m!t!r vehi6es t! state trans5!rt undertakings
6!vered in this negative ist entr8A
Services b! wa! of giving on hire of otor vehicles to state transport underta-ings are not
covered in the negative list( 8owever such services provided b! wa! of hire of otor vehicle
eant to carr! ore than 12 passengers to a State transport underta-ing is exept(
%!ud servi6es b8 6!ntra6t 6arriages :hi6h get 5ermissi!n !r tem5!rar8 5ermits t! 58 as
stage 6arriages be ta7abeA
Specific exeption is available to services of transport passengers b! a contract carriage for
transportation of passengers+ excluding touris+ conducted tours+ charter or hire(
/;= Servi6e reating t! Trans5!rtati!n !" *!!ds
,he following services provided in relation to transportation of goods are specified in the
negative listF7
b! road except the services of LiM a goods transportation agenc!I or LiiM a courier agenc!
b! aircraft or vessel fro a place outside .ndia upto the custos station of clearance in
.ndiaI or
@#
=! inland waterwa!s( L( Services provided as agents for inland waterwa!s are not covered in
the negative list(M
0ood for thought
Are *TA servi6es e76udedA
'll services provided b! goods transport agenc! are excluded fro the negative list( 8owever+
there are separate exeptions available to the services provided b! the goods transport agenc!(
,hese are services b! wa! of transportation of
LaM agricultural produceI
LbM goods+ where gross aount charged for the transportation of
goods on a consignent transported in a single carriage does not
exceed one thousand five hundred rupeesI
LcM goods+ where gross aount charged for transportation of all
such goods for a single consignee does not exceed rupees seven
hundred fift!I
LdM foodstuff including flours+ tea+ coffee+ jagger!+ sugar+ il- products+
salt and edible oil+ excluding alcoholic beveragesI
LeM cheical fertiliGer and oilca-esI
LfM newspaper or agaGines registered with the *egistrar of
/ewspapersI
LgM relief aterials eant for victis of natural or an7ade disasters+
calaities+ accidents or ishapI or
LhM defence or ilitar! equipentsIOI (
,he provisions relating to reverse charge+ i(e( service tax is liable to be paid b! the consigner or
consignee in specified cases+ are applicable even after the introduction of negative list(
%hether a kinds !" trans5!rtati!n !" g!!ds are 6!vered in negative istA
Nature !" servi6e reating t! trans5!rtati!n !" g!!ds C!vered in the negative istA
=! railwa!s /o
=! air within the countr! or abroad /o
=! a vessel in the coastal waters /o
=! a vessel on a national waterwa! Ues
Services provided b! a E,' /o
%hether trans5!rtati!n servi6e 5r!vided b8 the tru6k !:ner and tru6k !5erat!r t! end user
dire6t8 is iabe t! servi6e ta7A
Service provided b! truc- owner directl! to end user is covered b! the negative list entr! and is
not liable to service tax(
@@
/G= Funera, 2uria, Cremat!rium !r M!rtuar8 servi6es in6uding trans5!rtati!n !" the
de6eased
,his entr! exepts services in relation to creation etc( of dead(
2reak !" Cenvat Chain
.t is iportant to note that there is no corresponding exclusion fro service tax lev! to the
auxiliar! services or to the service providers who are rendering services to such service providers
who are rendering services covered in negative list( ,his leads to a brea- in tax chain( .t adds to
cascading effect+ which was the ver! thing that was sought to be avoided(
'n option could be given to such input service providers who are rendering services to negative
list service providers to go for a cenvat credits refund w(r(t( the services provided b! the to
recipients whose services are covered in negative list(
@A
CLASS$F$CAT$#N #F SERV$CE
)ntroduction
,his chapter gives the echanis+ anner and approach for classification of services( Eenerall!
under an! tax laws+ classification erits iportance for the purpose of identif!ing the rate of
dut!5tax( Under the service tax provisions+ the classification is essential to identif! the taxabilit!
itself( $lassification of service under service tax essentiall! would deterine the taxabilit! and
specific exeptions5abateents available if an!( .t would also deterine the effective date of
service(
$lassification of the service involved under service tax is perhaps the single ost iportant step
in ensuring legal copliance( $lassification of services poses certain challenges unli-e
classification of goods as services are intangible( ?rofessionals handling service tax atters often
face probles here as the service sector involves specialists who specialiGe in certain select fields
Ltechnocrats+ scientists+ engineersM and who are not attuned to the requireents under service tax
and the possible raifications of non7copliance( Soeties+ the service provider a! even be
uneducated Lfor instance if he is a goods transport agenc!+ sub contractors in the construction
industr!+ pandal or shaiana contractorM( %er! often when it coes to classif!ing a service+
difficulties are faced in understanding the exact nature of services being provided b! the service
providers as the explanations given can onl! be understood b! another technicall! qualified
individual rather than a professional who is well versed onl! in atters pertaining to taxation(
,he understanding of the trade is critical in this regard(
Reevan6e !" the 6!n6e5t !" 6assi"i6ati!n
'n assessee under $entral Bxcise would -now the iportance of classification and the influence
it would have on his liabilit!( Siilarl! the iportance of classification under service tax is not to
be underestiated as it is iportant to deterine the specific exeptions5abateents available if
an!( .t would also deterine the effective date of service(
,here have been nuerous instances where assessees differ with the departental authorities on
the issue of classification of services the! provide(
,he legal axi which states 9N!t%in) is t! 2e read int! a de+initi!n and n!t%in) s%!uld 2e
!mitted t! 2e read.: has to be -ept in ind while deterining
the classification of services( &or the purpose of classification+ one would have to follow the
provisions as laid down in Section AA&( ,he sae has been discussed belowF7
@4
S6!5e !" Sub Se6ti!n >/? t! Se6ti!n ;;F9
,he sub section L1M of section AA& provides that an! input service required to provide
ain service will not be covered in ain service( ,his eans input service will be
considered as a separate service( ,his position was also prevalent prior to 1st Jul!+ 2012(
,he sub section reads as followsF
=nless otherwise specified, reference to a service >herein referred to as (ain
service? shall not include reference to a service which is used for providing
(ain service!
,he sub section L1M of the section AA& deals with interpretation of specified description of
services( ,his is ephasiGing that the classification of the ain contract cannot be used
for the sub7contract or an! other service provided for rendering the ain service( ,his
eans+ if a service Lain serviceM is specificall! excluded or exepted b! wa! of
/egative >ist or Bxeption notification then an! service used for providing the ain
service is precluded fro the sae benefit(
&or exaple+ Kprovision of access to an! road or bridge on pa!ent of toll3 is in /egative
>ist( 8owever+ service provided for collection of toll or securit! of cash would not fall
under negative list ?aras #(0(2 and "(1(1 of $=B$3s ,axation of ServicesF 'n Bducation
Euide3 published on 20(0A(2012(
.f construction of a Eovernent building is exept Lain serviceM+ architect or labour
supplier providing service to builder5 contractor for such contract will not be able to avail
that exeption+ even if used to provide Kain service3(
8owever+ if a contractor outsources the wor- of construction to a sub7contractor+ the
service provided b! the sub7contractor is exept( ,his is because of a specific exeption
given under /otification /o( 2@520127S, dated 20(0A(2012 effective fro 01(04(2012
which provides that if the ain ;or-s contract is exept+ sub7contractor providing wor-s
contract service to ain contractor will be exept fro service tax( ,his exeption is
onl! when the sub7contractor provides wor-s contract service and not in other cases(
S6!5e !" Sub Se6ti!n >-? T! Se6ti!n ;;F9
Section AA&L2M reads as follows7
@0
Where a service is capable of differential treat(ent for any purpose based on
its description, the (ost specific description shall be preferred over a (ore
general description
,his sub section iplies that if a particular service is classifiable under ore than one
categor! then the categor! of service which specificall! covers such service will be
preferred than the general service( ,he sae can be understood with the exaples( &or
exaple+ a hotel rents out a conference roo for an official conference where lunch is
also served( .t can be classified as Kandap -eeper3 or Kconvention service3( =etween
these two entries+ Kconvention service3 is ore specific as it covers onl! conventions
which are li-e official function( K:andap -eeper3 is general description as it includes
official+ social as well as business functions( 8ence+ such service will be a Kconvention
service3( $=B$ circular /o( @1513520027S, dated 04(01(2003(
,he sae principle was applied in $oal 8andlers ? >td( v( $$B L2004M A S,, @13
L$BS,',M+ where it was held that $9& 'gent is specific description copared to
Kbusiness auxiliar! services3(
.t is also otherwise a general rule of interpretation that a specific heading should be
preferred over general heading( ,here are an! Supree $ourt cases supporting the
sae+ li-e $$B v( &rito >a! .ndia L200"M 2#2 B>, 3 LS$M+ and 8industan ?oles
$orporation v( $$B L200AM 1"A B>, #00 LS$M+ etc(
S6!5e !" Sub Se6ti!n >C? T! Se6ti!n ;;F9
.t is pertinent to understand what =undled Services is before proceeding to sub section
L3M of section AA&( ,he eaning of E2unded Servi6esF has been given in Bxplanation to
section AA&L3M of the &inance 'ct+ 1""#( .t eans a bundle of provision of various
services wherein an eleent of provision one service is cobined with an eleent or
eleents of provision of an! other service or services( =asicall! it is a coposite service
consisting of two or ore services( &or exaple+ an airline provides ovie or catering on
board( Bach service involves differential treatent as the anner of deterination of
value of two services for the purpose of charging service tax is different(
8owever+ if the service provider clubs two or ore services to provide a single service to
a service recipient and such single service is alread! present in the statute as a separate
@"
entr! in /egative >ist+ or exeptions or Declared services+ then the sae will be
accordingl! classified instead of following the principle of =undled services( ,wo rules
have been prescribed for deterining the taxabilit! of such bundled services in sub7
section L3M of section AA& of the 'ct( ,hese rules+ which are explained below+ are subject
to the provisions of the rule contained in sub section L2M of section AA&+ viG a specific
description will be preferred over a general description as explained above( ,he sub7
section L3M of section AA& reads as followsF
/ub2ect to the provisions of sub8section >#?, the taxability of a bundled service
shall be deter(ined in the following (anner, na(ely6@@ >a? if various ele(ents
of such service are naturally bundled in the ordinary course of business, it shall
be treated as provision of the single service which gives such bundle its
essential characterA >b? if various ele(ents of such service are not naturally
bundled in the ordinary course of business, it shall be treated as provision of
the single service which results in highest liability of service tax!
Se6ti!n ;;F>C?>a? explains that if services are naturall! bundled in the ordinar! course of
business then it should be classified as per the categor! of service which gives it the
essential character( &or exaple+ a hotel provides a #7D537/ pac-age with the facilit! of
brea-fast( ,his is a natural bundling of services in the ordinar! course of business( ,he
service of hotel accoodation gives the bundle the essential character and would+
therefore+ be treated as service of providing hotel accoodation(
.t is provided in section AA&L3MLbM of the 'ct that when various services are not naturall!
bundled in the ordinar! course of business+ then the service shall be the one attracting
highest service tax liabilit!( ,he following has been given in the Bducation Euide issued
b! $=B$ on 20th June+ 2012(
&or exaple+ preises are rented which are partl! for residential purposes and partl! for
anufacturing activit!( ,hus+ it is not service bundled in ordinar! course of business( .n
such case+ though residential use is not taxable+ coercial use is taxable( 8ence+ the
entire bundle will be treated as renting of coercial propert!(

P!ssibe rami"i6ati!ns :here the assessee gets the 6assi"i6ati!n :r!ng

;here the assessee gets the classification of service wrong+ the result could be as follows
A0
>osing out on the exeptions which could have been claied if the classification had
been done correctl!+ as a result of which the assessee pa!s ore than what is required to
be paid
>oss of business due to rivals5copetitors being cost7effective
;rongl! claiing exeption that he was not entitled to in the noral course as a result
of which he is saddled with additional liabilit! along with interest and penalties which
cannot be collected fro clients5custoers thereb! affecting his cash flows
?a!ing service tax when he was not required to pa! as a result of wrongl! classif!ing his
service under a categor! which was not appropriate leading to huge debts( 8e could lose
where the refund period of 1 !ear would also be over(
/ot pa!ing service tax when he was actuall! liable to pa! the sae as a result of
classif!ing his service under a categor! which was not being taxed earlier but is taxed
fro a later date(
Eetting the liabilit! on .port of Services all wrong or not claiing the benefit of export
on service exports due to iproper classification could also happen( ,his could happen
when the alternative headings available have different iport5export criterion being
applicable to the(
,o avail for an! beneficial clarification given b! circulars and
,o ta-e advantage of an! notifications issued retrospectivel! for particular service(
Cassi"i6ati!n !" servi6es under negative ist based ta7ati!n
,here is no concept of taxable services categor! under negative list based taxation( .f
the classification is incorrect+ it a! not be treated as a violation as it is not
specificall! prescribed for taxabilit! under specified taxable services categor! under
negative list based taxation(
8owever circular no( 1A@51A52012 7S, dated 20(11( 2012 and notification
no(#0520127S, was issued giving a list of 120 descriptions of services for the purpose
of registration and accounting codes corresponding to each description of service for
pa!ent of tax( Descriptions of taxable services given in the annexure to such a
circular are solel! for the purpose of statistical anal!sis( 's per said notification the
registrant has to a-e a choice of taxable services( ,hese entries are based on earlier
taxable services clauses( .n addition+ there is a residuar! entr! 120 covering other
than the 11" entioned earlier(
A1
P!inters "!r 5ra6ti6e
,he professional handling service tax atters would be required to go through the
various records aintained b! the assessee before arriving at a final decision regarding
classification and exeption( ,his would ensure that the exeption or exclusion claied
is done on the basis of docuentar! evidence rather than onl! on the basis of interviews(
8owever in the absence of docuents the sae a!be ade clear in the opinion(
,he professional would have to be careful in case of bundled service( 8ere+ the trade
practice+ agreeent available or the ethod of invoicing or charging need not in itself
deterine whether the service is a single service or ultiple services( 8ere+ the real
nature and the substance of the transaction should be the guiding factor rather than for
of the transaction( 8e5she should therefore tr! to find out the categor! of service which
gives the essential character and then adopt that categor! for classification
?eriodical review of the exeptions a! also be underta-en b! the professional to
ascertain whether the concerned services can be classified under other headings which
would disentitile the exeption(
,he shelf life of the opinion is to ade clear to the client(
.n case of an! doubt in the exeption+ the sae is preferable to be intiated to the
departent and their confiration sought( .n case the sae can be collected fro the
custoer then a!be paid under protest(
A2
E&EMPT$#NS $NCL+)$N* ME*A E&EMPT$#N
Under the previous service tax law Li(e(+ law prevailing upto 30th of June+ 2012M there were
totall! around 00 exeption notifications( ,hough this new s!ste of tax has coe into effect the
need for exeptions is not obviated( Soe of the existing exeptions have been built into the
negative list+ while soe are continued to be exepted in the current scenario under the new
categor!( &or the sa-e of convenience and siplicit!+ ost of the exeptions now fors a part of
one notification which is popularl! called as Y:ega Bxeption /otificationY 2@520127S,+ dated
20
th
June+ 2012(
Mega E7em5ti!n N!ti"i6ati!n
,he Bxeptions contained in the notification are discussed below in detailF
/= Servi6es 5r!vided t! the +nited Nati!ns !r a s5e6i"ied internati!na !rganiHati!n
,his entr! exepts all the services provided to the United /ations or a specified international
organisation i(e(+ service recipient is U/ or specified .nternational )rganisation( ,here are no
specific conditions that have been given for claiing exeptions( .t a! be noted that though the
law a-ers have given the exeption for the services provided to a U/ or specified international
organisation+ there is no such exeption given for the services provided b! U/ or specified
international organisation(
.llustrative list of specified international organisations are as followsF
1( .nternational $ivil 'viation )rganisation
2( ;orld 8ealth )rganisation
3( .nternational >abor )rganisation
#( &ood and 'griculture )rganisation of the United /ations
@( U/ Bducational+ Scientific and $ultural )rganisation LU/BS$)M
A( .nternational :onetar! &und L.:&M
4( .nternational =an- for *econstruction and Developent
0( Universal ?ostal Union
"( .nternational ,elecounication Union
10( ;orld :eteorological )rganisation
11( ?eranent $entral )piu =oard
12( .nternational 8!drographic =ureau
13( $oissioner for .ndus ;aters+ Eovernent of ?a-istan and his advisers and
assistants
1#( 'sian 'frican >egal $onsultative $oittee
1@( $oonwealth 'sia ?acific Uouth Developent $entre+ $handigarh
1A( Delegation of $oission of Buropean $ounit!
14( $ustos $o7operation $ouncil
A3
10( 'sia ?acific ,elecounit!
1"( .nternational $entre of ?ublic Bnterprises in Developing $ountries+ >jubljana
LUugoslaviaM
20( .nternational $entre for Eenetic Bngineering and =iotechnolog!
21( 'sian Developent =an-
22( South 'sian 'ssociation for *egional $o7operation
23( .nternational Jute )rganisation+ Dha-a+ =angladesh
-= Heath 6are servi6es
,his entr! exepts health care services b! a clinical establishent+ an authorised edical
practitioner or ?ara7edics(
.n order to understand what exactl! has been exepted+ the following ters has to be understood7
a( ,he ter Khealth care services3 has been defined in clause 2LtM of this notification to
eanan! service b! wa! of diagnosis or treatent or care for illness+ injur!+ deforit!+
abnoralit! or pregnanc! in an! recognised s!ste of edicines in .ndia and includes
services b! wa! of transportation of the patient to and fro a clinical establishent+ but
does not include hair transplant or cosetic or plastic surger!+ except when underta-en to
restore or to reconstruct anato! or functions of bod! affected due to congenital defects+
developental abnoralities+ injur! or traua(
b( $linical Bstablishent as per clause 2LjM of the notification eans a hospital+ nursing
hoe+ clinic+ sanatoriu or an! other institution b!+ whatever nae called+ that offers
services or facilities requiring diagnosis or treatent or care for illness+ injur!+ deforit!+
abnoralit! or pregnanc! in an! recognised s!ste of edicines in .ndia+ or a place
established as an independent entit! or a part of an establishent to carr! out diagnostic
or investigative services of diseases(
c( Nauthorised edical practitionerO eans a edical practitioner registered with an! of the
councils of the recognised s!ste of edicines established or recogniGed b! law in .ndia
and includes a edical professional having the requisite qualification to practice in an!
recognised s!ste of edicines in .ndia as per an! law for the tie being in forceI
d( K?ara7edics3 have not been defined in notification( 8owever+ the eaning of the sae
has been given b! wa! of clarification in $=B$3s Bducation guide( ?araedics are
trained health care professionals+ for exaple nursing staff+ ph!siotherapists+ technicians+
lab assistants etc( Services b! the in a clinical establishent would be in the capacit! of
eplo!ee and not provided in independent capacit! and will thus be considered as
services b! such clinical establishent( Siilar services in independent capacit! are also
exepted(
C= Servi6es b8 a veterinar8 6ini6 in reati!n t! heath 6are !" animas !r birds
A#
,he ter Kveterinar! clinic3 has not been defined in the said notification( .t has to be understood
in coon parlance( ,hus+ generall! it eans a healthcare facilit! for care of birds and anials(
D= Charitabe $nstituti!ns
Services b! an entit! registered under section 12'' of the .ncoe tax 'ct+ 1"A1 L#3 of 1"A1M b!
wa! of charitable activities(
N$haritable activitiesO eans activities relating to 7
LiM public health b! wa! of 7
(a) care or counselling of LiM terinall! ill persons or persons with severe ph!sical or
ental disabilit!+ LiiM persons afflicted with 8.% or '.DS+ or LiiiM persons addicted to
a dependence7foring substance such as narcotics drugs or alcoholI or
(b) public awareness of preventive health+ fail! planning or prevention of 8.%
infectionI
LiiM advanceent of religion or spiritualit!I
LiiiM advanceent of educational prograes or s-ill developent relating to+7
(a) abandoned+ orphaned or hoeless childrenI
(b) ph!sicall! or entall! abused and trauatiGed personsI
(c) prisonersI or
(d) persons over the age of A@ !ears residing in a rural areaI
LivM reservation of environent including watershed+ forests and wildlifeI or
LvM 1advanceent of an! other object of general public utilit! up to a value of+7
(a) eighteen la-h and sevent! five thousand rupees for the !ear 2012713 subject to the
condition that total value of such activities had not exceeded twent! five la-hs rupees
during 2011712I
(b) twent! five la-h rupees in an! other financial !ear subject to the condition that total
value of such activities had not exceeded twent! five la-hs rupees during the
preceding financial !ear2I ,his clause is excluded wef 1(#(2013
-nalysis of the above8
.f a $haritable .nstitution is rendering an! activities falling under LiM to LivM above+ then the sae
will be exept fro service tax without an! liit( 8owever+ for the activities as entioned in LvM
above+ service tax is exept upto *s(2@ la-hs in a financial !ear if the total value of such services
had not exceeded *s(2@ la-h during the preceeding financial !ear( ,he later LvM exeption would
be available onl! if such activit! is eant for general public and general public is defined in the
notification as Kbod! of people at large sufficientl! defined b! soe coon qualit! of public or
ipersonal nature3( ,he exeption under this lib is no longer available to charitable trust(
<= Servi6es 5r!vided "!r Reigi!us 5ur5!se
,his entr! exepts the following service provided b! an! person7
LaM Service b! wa! of renting of precincts of a religious place eant for general public+ or
LbM Service b! wa! of conduct of an! religious cereon!(
Analysis !+ t%e entry
A@
,he notification vide clause 2LGbM has defined the ter religious place as to a place which is
priaril! eant for conduct of pra!ers or worship pertaining to a religion(
.n the first lib of this entr!+ the essential aspects to be considered areF
LaM ,he place should be religious place+
LbM *eligious place should be eant for general public(
,his eans there should be no restriction or liitation in noral conditions on an! person
entering or leaving fro the place(
,he second lib covers the activit! of priest+ clerg!+ ullah+ etc(+ providing services of
conducting of an! religious cereon!( ,hese functions a! be for an! of the religion( 'lso in the
case of $oissioner of $entral Bxcise+ :angalore v( 6rishnapur :utt 200A L3M S(,(*( 1##
L,ri(7=ang(M it has been held that arriage is also a religious cereon!(
;= Servi6es 5r!vided b8 Adv!6ates
,he entr! reads as followsF
Services provided b!'
(a) an arbitral tribunal to 7
i( an! person other than a business entit!I or
ii( a business entit! with a turnover up to rupees ten la-h in the preceding financial
!earI
(b) an individual as an advocate or a partnership fir of advocates b! wa! of legal services
to+7
i( an advocate or partnership fir of advocates providing legal services I
ii( an! person other than a business entit!I or
iii( a business entit! with a turnover up to rupees ten la-h in the preceding financial
!earI or
(c) a person represented on an arbitral tribunal to an arbitral tribunal(
Analysis !+ t%is entryA
,he first part of this entr! exepts the services provided b! an 'rbitral ,ribunal to an! person+
however+ in case the recipient is a business entit! then the exeption would be available onl! if
such entit! is with a turnover up to *s(10 la-h in the preceeding financial !ear( K,urnover3 in
coon parlance eans the aggregate of the sale or service provided in a financial !ear(
's per the second lib+ the service provider for claiing this service has to be an individual
advocate or could be a partnership fir having onl! advocates as a partners( 'lso+ not ever!
service that is provided b! an 'dvocate is exept( ,he service that is exepted is legal services(
,he ter has not been defined and hence+ it is ver! wide to cover the chaber practice as well as
court practice of an advocate(
,he last part of this entr! exepts the service provided b! an! person who is representing in an
arbitral tribunal to resolve dispute between parties(
AA
,he ter business entit! is defined as follows7 's per section A@=L14M7 Rbusiness entit!R eans
an! person ordinaril! carr!ing out an! activit! relating to industr!+ coerce or an! other
business or professionI
G= Te6hni6a testing !r ana8sis !" ne:8 deve!5ed drugs, in6uding va66ines and
herba remedies !n human 5arti6i5ants b8 a 6ini6a resear6h !rganisati!n a55r!ved
t! 6!ndu6t 6ini6a trias b8 the )rug C!ntr!er !" $ndia=
,he said notification exepts the services b! wa! of technical testing or anal!sis of newl!
developed drugs+ including vaccines and herbal reedies on huan participants b! a clinical
research organisation approved to conduct clinical trials b! Drug $ontroller Eeneral of .ndia(
,he ter Ntechnical testing or anal!sisO is not defined in the notification( 'lthough the definition
of the technical testing or anal!sis is given under section A@L10AM of the &inance 'ctLwhich is
now redundantM+ it is not relevant for the interpretation of the present notification( 8owever+ an
inference can be ade to the sae to understand what the statute intends to ean b! technical
testing or anal!sis(
K= Training !r 6!a6hing in re6reati!na a6tivities
,his notification exepts services b! wa! of training or coaching in recreational activities
relating to arts+ culture or sports( *ecreational activities are often done for enjo!ent+
auseent+ or pleasure and are considered to be Kfun3( ,his notification has intended to exept
not all recreational courses but has restricted the exeption to art+ culture and sports onl!(
8owever+ it a! be noted that where the activities of art+ culture or sports are otherwise than for
recreational purposes then the! would not be covered under the said exeption notification(
0ood for thought6
' cric-et acade! renders professional cric-et training classes( ;ill it be exept fro service
tax under said notificationC
/o+ as the cric-et acade! renders cric-et training on a professional basis and not erel! for
enjo!ent+ auseent or pleasure+ it would not be covered b! said exeption notification( .t is
noteworth! that earlier the field of sports was specificall! excluded fro the definition of
coercial training or coaching centre(
@= Edu6ati!na Servi6es
,his entr! exepts services provided to 1or b!2 an educational institution in respect of education
exepted fro service tax+ b! wa! of+71the words K or b!3 is oitted b! &inance 'ct 20132( ,his
exeption now restricted to specified services provided b! educational institution is no longer
covered in the exeption(
LaM auxiliar! educational servicesI or
A4
LbM renting of iovable propert!
$ertain services provided b! wa! of education facilities have been included under negative list of
services under section AAD of the 'ct( &urther this notification has been issued to exept other
services related to educational institutions which are not included in the negative list( ,he purpose
of these exeptions is to ensure that the education sector is not burdened with unnecessar! tax(
&or the purpose of claiing exeption under this notification+ it is necessar! that the educational
services b! institution receiving the services should be covered b! the negative list(
0ood for thought
' school providing preschool education arranges for a picnic for which bus is hired( ;hether
hiring charges paid to bus owner and recovered fro staff and students is liable to service taxC
Bxeption is applicable onl! when the transportation service is provided to an institution in
relation to educational services( .n the instant case the bus is hired for the purpose of picnic(
8ence+ hiring charges paid to bus owner and recovered fro staff and student is liable to service
tax( 8owever+ if one was to loo- at it with a holistic approach+ it can be said that the trip is
organised as a part of the curriculu of the institute+ exeption would be available to charges
paid to bus owner(
/.= Servi6es re6eived b8 a re6!gnised s5!rts b!d8
,he said notification exepts services provided b! the following persons to a recognised sports
bod! fro service taxF
LaM 'n individual as a pla!er+ referee+ upire+ coach or a anager for participation in a
sporting event organised b! a recognised sports bod!I
LbM )ne recognised sports bod! providing service to another sport bod!(
,he essential condition for claiing exeption under this entr! is that the service to be
provided should be onl! for participation in a tournaent or chapionship organised b! a
recognised sports bod!(
0ood for thought'
;hether services provided b! doctor5 ph!sicianto the recogniGed sports bod! for a tournaent or
chapionships are covered under this exeptionC
/o( Since the exeption is onl! for specific persons li-e pla!er+ upire+ referee+ coach or a
anager+ doctor5ph!sician is not covered here(
;hen services provided b! a coach are on a onthl! basis or a retainer ship basis+ is it exept
under this sectionC
/o( ,he services shall be provided specificall! for a tournaent or a chapionship organiGed b!
the recogniGed sports bod!(
//= S5!ns!rshi5 servi6es t! 6ertain s5!rts events
A0
Sl( /o( 11 of the said notification exepts the following services b! wa! of sponsorship of
tournaents or chapionships when organiGedF7
LaM =! a national sports federation+ or its affiliated federations+ where the participating teas
or individuals represent an! district+ state or Gone
,he condition for claiing this exeption is that+ the participating teas or individuals of
such tournaents or chapionship shall represent their district+ state or Gone(
>bM =! 'ssociation of .ndian Universities+ .nter7Universit! Sports =oard+ School Eaes
&ederation of .ndia+ 'll .ndia Sports $ouncil for the Deaf+ ?aral!pics $oittee of
.ndia+ Special )l!pics =harat
'n! aount sponsored to the below entioned organiGations for the purposes of
conducting tournaents or chapionships are exept fro service taxF
o 'ssociation of .ndian Universities
o .nter7Universit! Sports =oard
o School Eaes &ederation of .ndia
o 'll .ndia Sports $ouncil for the Deaf
o ?aral!pics $oittee of .ndia
o Special )l!pics =harat
LcM =! $entral $ivil Services $ultural and Sports =oard
LdM 's part of national gaes+ b! .ndian )l!pic 'ssociation
LeM Under ?ancha!at Uuva 6reeda 'ur 6hel 'bhi!aan L?U66'M Schee(
/-= Servi6es t! *!vernment 4 *!vernmenta Auth!rit8 4 L!6a Auth!rit8
,his entr! reads as Services provided to the Eovernent+ a local authorit! or a governental
authorit! b! wa! of c!nstructi!n, erecti!n c!mmissi!nin) installati!n c!mpleti!n +ittin) !ut
repair maintenance ren!vati!n !r alterati!n !+ 7
a( a civil structure or an! other original wor-s eant predoinantl! for use other than for
coerce+ industr!+ or an! other business or professionI
b( a historical onuent+ archaeological site or reains of national iportance+
archaeological excavation+ or antiquit! specified under the 'ncient :onuents and
'rchaeological Sites and *eains 'ct+ 1"@0 L2# of 1"@0MI
c( a structure eant predoinantl! for use as LiM an educational+ LiiM a clinical+ or LiiiM an art
or cultural establishentI
d( canal+ da or other irrigation wor-sI
e( pipeline+ conduit or plant for LiM water suppl! LiiM water treatent+ or LiiiM sewerage
treatent or disposalI or
f( a residential coplex predoinantl! eant for self7use or the use of their eplo!ees or
other persons specified in the (*planati!n 1 to clause ## of section A@ = of the said 'ctI
,his exeption notification intends to cover onl! services provided to specified service
recipient viG(+ Eovernent+ >ocal authorit! and Eovernental authorit!(
A"
Eovernental 'uthorit! is defined as follows in said notification7LsM eans a board+ or an
authorit! or an! other bod! established with "0J or ore participation b! wa! of equit! or
control b! Eovernent and set up b! an 'ct of the ?arliaent or a State >egislature to carr! out
an! function entrusted to a unicipalit! under article 2#3; of the $onstitutionI
,he functions entrusted to unicipalit! as per article 2#3; are as follows7
'rticle 2#3; of the $onstitution is as underF
KSubject to the provisions of this $onstitution+ the >egislature of a State a!+ b! law+
endowS
aM the :unicipalities with such powers and authorit! as a! be necessar! to enable the
to function as institutions of self7governent and such law a! contain provisions for the
devolution of powers and responsibilities upon :unicipalities+ subject to such conditions
as a! be specified therein+ with respect toS
iM the preparation of plans for econoic developent and social justiceI
iiM the perforance of functions and the ipleentation of schees as a! be entrusted
to the including those in relation to the atters listed in the ,welfth ScheduleI
LbM the $oittees with such powers and authorit! as a! be necessar! to enable the
to carr! out the responsibilities conferred upon the including those in relation to the
atters listed in the ,welfth Schedule(3
:atters listed in twelfth schedule areF
1( Urban planning including town planning(
2( *egulation of land7use and construction of buildings(
3( ?lanning for econoic and social developent(
#( *oads and bridges(
@( ;ater suppl! for doestic+ industrial and coercial purposes(
A( ?ublic health+ sanitation conservanc! and solid waste anageent(
4( &ire services(
0( Urban forestr!+ protection of the environent and prootion of ecological aspects(
"( Safeguarding the interests of wea-er sections of societ!+ including the handicapped
and entall! retarded(
10( Slu iproveent and upgradation(
11( Urban povert! alleviation(
12( ?rovision of urban aenities and facilities such as par-s+ gardens+ pla!grounds(
13( ?rootion of cultural+ educational and aesthetic aspects(
1#( =urials and burial groundsI creations+ creation groundsI and electric
creatorius(
1@( $attle poundsI prevention of cruelt! to anials(
1A( %ital statistics including registration of births and deaths(
14( ?ublic aenities including street lighting+ par-ing lots+ bus stops and public
conveniences(
10( *egulation of slaughter houses and tanneries(
0ood for thought'
;hat will be the service tax iplication in the following caseF
40
$onstruction service is provided b! the contractor to the governent Lthe building after
construction was supposed to be utiliGed for non coercial purposeM( 8owever+ after
copletion of ajorit! of construction wor-+ sa! "0J of the said building+ the Eovt( notified it to
use for coercial purpose(
"!mments7 Since the exeption is onl! when the nature of usage of building is for non7
coercial or non7industrial purposes and in the instant case the building is put to use for
coercial exploitation+ service tax would be applicable and the service provider would pa!
service tax accordingl!( 8owever+ if the building is decided to be used for coercial purpose
after copletion of construction+ the exeption could be claied(
' >td has entered a contract with Eovernent for construction of building which is for non7
coercial purposes( Subsequentl!+ ' >td has sub7contracted part of the construction activit! to
= >td( ;hether the wor-s executed b! = >td are also covered b! the exeptionC
/o+ under this notification the services provided b! = ltd( are not exept since the services are
not provided to the Eovt(+ but provided to ' >td( 8owever+ exeption can be claied vide Sl(no(
2"LhM of this notification if sub7contracted wor-s is of nature of aterial plus labour wor- of
nature of wor-s contract which is sub7contracted b! ain contractor who is also executing a
wor-s contract(
;hether the educational institutions which are governent aided are also covered under this
exeptionC
/o+ the educational institutions which are adinistered and run b! governent or local authorit!
are onl! covered under this exeption( .f a private college which is partl! funded b! governent
constructs a building it would not be covered under this categor!(
/C= Servi6es t! s5e6i"ied 6ateg!ries
,he said notification exepts services provided b! wa! of construction, erection+ coissioning+
installation+ copletion+ fitting out+ repair+ aintenance+ renovation+ or alteration of+7
(a) a road+ bridge+ tunnel+ or terinal for road transportation for use b! general publicI
(b) a civil structure or an! other original wor-s pertaining to a schee under Jawaharlal
/ehru /ational Urban *enewal :ission or *ajiv 'waas UojanaI
(c) a building owned b! an entit! registered under section 12 '' of the .ncoe tax 'ct+
1"A1L#3 of 1"A1Mand eant predoinantl! for religious use b! general publicI
(d) a pollution control or effluent treatent plant+ except located as a part of a factor!I or a
structure eant for funeral+ burial or creation of deceasedI
,his exeption intends to cover the services provided b! an! person to an! person( Unli-e the
previous entr! of exeption which restricted exeption to specified services to Eovernent+
>ocal authorit! or Eovernental authorit! under Sl(no(12 the service recipient can be an! person(
41
,herefore+ the services provided b! wa! of sub7contractor to the ain contractor is also covered
subject that the service is of the nature described in this entr!(
0ood for thought'
,he contract of construction of road is given to ' >td( ' >td sub7contracts the sae to = >td(
Shall the sub7contractor is also eligible for the exeptionC
Ues+ the sub7contractor is exepted because the exeption is relating to the service provided
irrespective of the service provider5 receiver(
;hether the contract for la!ing road in the factor! which is used fro one departent to another
departent or one unit to another unit is out of service taxC
/o+ since the road is not used b! general public+ the sae is liable for service tax(
/D= C!nstru6ti!n !" s5e6i"ied !rigina :!rks9
,his categor! covers services b! wa! of construction+ erection+ coissioning+ or installation of
original wor-s pertaining to+7
(a) an airport+ port or railwa!s+ including onorail or etroI
(b) a single residential unit otherwise than as a part of a residential coplexI
(c) low7 cost houses up to a carpet area of A0 square etres per house in a housing project
approved b! copetent authorit! epowered under the KSchee of 'ffordable 8ousing
in ?artnership3 fraed b! the :inistr! of 8ousing and Urban ?overt! 'lleviation+
Eovernent of .ndiaI
(d) post7 harvest storage infrastructure for agricultural produce including a cold storages for
such purposesI or
(e) echaniGed food grain handling s!ste+ achiner! or equipent for units processing
agricultural produce as food stuff excluding alcoholic beveragesI
)riginal wor- would ean
'll new constructionsI
'll t!pes of additions and alterations to abandoned or daaged structures on land
that are required to a-e the wor-ableI
Brection+ coissioning or installation of plant+ achiner! or equipent or
structures+ whether pre7fabricated or otherwiseI
0ood for thought6
. a setting up a wheat flour ill( ,he supplier of achines is deanding service tax on erection
and installation of achineries and equipents in the flour ill( .s the supplier is right in
deanding the service taxC
,here is no service tax liabilit! on erection or installation of achineries or equipents for units
processing wheat( Uou are processing wheat which is ade fro processing an agricultural
produce( Siilarl! erection or installation of achineries or equipents for dal ills+ rice ills+
il- dairies or cotton ginning ills would be exept(
;hether construction of villas exepted fro service taxC
42
,he exeption at sl no(1#LbM is available where plan approval is given for construction of a single
residential unit which is eant for use of a fail!+ then it is covered in this exeption( .n which
case not liable to service tax( ,his would also be as per decision in :acro :arvel ?rojects >td( v(
$oissioner S 2000 L12M S(,(*( A03 L,ribunalM where held that construction of individual
residential units not subject to lev! of Service tax( :aintained in 2012 L2@M S,* J1@# LSupree
$ourtM(
/<= Tem5!rar8 trans"er !r 5ermitting the use !r enj!8ment !" a 6!58right9
,his notification provides exeption in relation to teporar! transfer or peritting the use
or enjo!ent of a cop!right covered under clauses LaM or LbM of sub7section L1M of section 13
of the .ndian $op!right 'ct+ 1"@4 L1# of 1"@4M+ relating to original literar!+ draatic+
usical+ artistic wor-s or cineatograph filsI
.n this case it should be noted that two conditions are entioned here i(e(7
,here should be a specified cop!right7 this exeption is applicable onl! if the owner transfers
teporaril! the rights relating to original literar!+ draatic+ usical+ artistic wor-s or
cineatograph filsI
,here ust be a teporar! transfer7 .n case it is peranent transfer it aounts to sale of good and
not a service(
,he &inance 'ct 2013+ has restricted exeption to teporar! transfer or peritting the use or
enjo!ent of a cop!right of cineatograph fils for exhibition in a cinea hall or cinea
theatreI
0ood for thought6
;ill a usic copan! having the cop!right for an! sound recording be taxable for his activit! of
distributing usicC
,eporar! transfer of a cop!right relating to original literar!+ draatic+ usical+ artistic wor- or
cineatographic fil for exhibition in a cinea hall or cinea theatre falling under clause
LaM and LbM of sub7section L1M of section 13 of the .ndian $op!right 'ct+ 1"@4 is exept( ' usic
copan! would be required to pa! service tax as the cop!right relating to sound recording falls
under clause LcM of sub7section L1M of section 13 of the .ndian $op!right 'ct+ 1"@4(
/;= E7em5ti!ns t! 6ertain Artists9
,he said /otification exepts services b! a perforing artist in fol- or classical art fors of LiM
usic+ or LiiM dance+ or LiiiM theatre+ excluding services provided b! such artist as a brand
abassadorI
,o avail this exeption+ the essential conditions areF
43
1( ,he perforance would be fol- or classical 77 the word fol- would ean soething that
is originated fro beliefs and custos of ordinar! people+ the word classical eans a
traditional and long established for or st!le(
2( ,he perforance would be in relation to usic+ dance or theatre(
3( ,he perforance would not be provided as a brand abassador7 .n general parlance+
brand abassador eans a person+ who is -nown for his s-ills and talents+ when agrees
to represent a brand in a direct wa!(
0ood for thought6
;hen an artist perforing a dance or usic which is &ol- of a different countr!+ whether services
provided b! hi5her are exept under this entr!C
Ues+ it would be exept under the said entr! as it has not been specified as to it has to .ndian
&ol-5usic5theatre(
/G= Ne:s agen68 servi6e9
,his /otification exepts services b! wa! of collecting or providing news b! an independent
journalist+ ?ress ,rust of .ndia or United /ews of .ndiaI
.ndependent JournalistF 'n .ndependent journalist has not been defined( 8owever+ in coon
parlance the ter would be all journalists who provide service as a freelance( ?rovision of
services in for of collation or provision of news b! independent journalist would be exept
fro service tax( ' corporate owned news gathering organiGation would not be equated to
independent Journalist(
?ress ,rust of .ndia L ?,.M and United /ews of .ndia are two priar! .ndian /ews agencies( ,hus
services provided b! the are exept(
/K= Servi6es !" renting h!te4inn4guesth!use et6= having de6ared tari"" !" ess than Rs=
/...
,his entr! covers services b! wa! of renting of a hotel+ inn+ guest house+ club+ capsite or other
coercial places eant for residential or lodging purposes+ having declared tariff of a unit of
accoodation below rupees one thousand per da! or equivalentI
0ood for thought6
;hether accoodation facilit! provided in a hotel5 hostel is covered b! the exeption
notificationC
8otels can be covered under Kan! other coercial places eant for residential or lodging
proposes3( 8owever+ in case of hostels+ there is no declared tariff and rate is generall! quoted on
per onth basis( /otification perits exeption where declared tariff is less than *s( 1000 per
da! or equivalent( *ates charged hotels+ if converted per da! basis+ is less than *s( 1000+
exeption will be available(
4#
.s the luxur! tax iposed b! states required to be included for the purpose of deterining either
the declared tariff or the actual roo rentC
$oentsF &or the purpose of service tax luxur! tax has to be excluded fro the taxable value(
;hether hospitals providing the accoodation to patients would be covered under this
exeptionC
,he service providers as defined in the definition are hotels+ inn+ guest house+ club or capsite or
other coercial places eant for residential or lodging purposes( 8ospitals are not eant for
residential or lodging purpose( 8ence exeption is not available under this notification( 8owever+
exeption a! be exained under health care facilities(
/@= Servi6es !" s5e6i"ied restaurants9
,his /otification exepts services provided in relation to serving of food or beverages b! a
restaurant+ eating joint or a ess+ other than those having LiM the facilit! of air7conditioning or
central air7heating in an! part of the establishent+ at an! tie during the !ear+ and LiiM a license
to serve alcoholic beveragesI 'fter 1(#(2013+ exeption is available onl! if there is no '$ in an!
part of establishent in an! part of !ear(
,o avail this exeption it is iportant to satisf! both the conditions i(e( LiM and LiiM above(
-.= Trans5!rtati!n !" s5e6i"ied items b8 Rai !r vesse9
,his entr! exepts services b! wa! of transportation b! rail or a vessel fro one place in .ndia to
another of the following goods 7
(a)
(b) relief aterials eant for victis of natural or an7ade disasters+ calaities+ accidents
or ishapI
(c) defence or ilitar! equipentsI
(d)
(e)
(f) newspaper or agaGines registered with the *egistrar of /ewspapersI
(g) railwa! equipents or aterialsI
(h) agricultural produceI
(i) food stuff including flours+ tea+ coffee+ jagger!+ sugar+ il- products+ salt and edible oil+
excluding alcoholic beveragesI or
(j) cheical fertiliGer and oil ca-esI
,his /otification has not clearl! spelt whether services provided b! private rail are also covered
or not( ,herefore exeption can be claied in the absence of an! restriction on the sae(
'part fro rail+ if transportation is done through vessel fro one port to another+ it is also
covered b! the exeption notification(
-/= Servi6e !" 6ertain g!!ds b8 *TA9
,his entr! exepts services provided b! a goods transport agenc! b! wa! of transportation of 7
4@
(a) fruits+ vegetables+ eggs+ il-+ food grains or pulses in a goods carriageI
(b) goods where gross aount charged for the transportation of goods on a consignent
transported in a single goods carriage does not exceed one thousand five hundred rupeesI
or
(c) goods+ where gross aount charged for transportation of all such goods for a single
consignee in the goods carriage does not exceed rupees seven hundred fift!I
.he above entry is substituted by following wef !3!#$1
21( Services provided b! a goods transport agenc!+ b! wa! of transport in a
goods carriage of+7
LaM agricultural produceI
LbM goods+ where gross aount charged for the transportation of goods on a
consignent transported in a single carriage does not exceed one thousand five
hundred rupeesI
LcM goods+ where gross aount charged for transportation of all such goods for a
single consignee does not exceed rupees seven hundred fift!I
LdM foodstuff including flours+ tea+ coffee+ jagger!+ sugar+ il- products+ salt and
edible oil+ excluding alcoholic beveragesI
LeM cheical fertiliGer and oilca-esI
LfM newspaper or agaGines registered with the *egistrar of /ewspapersI
LgM relief aterials eant for victis of natural or an7ade disasters+ calaities+
accidents or ishapI or
LhM defence or ilitar! equipentsIOI
0ood for thought6
' goods carriage carr!ing @ consignents Lall for different consigneeM at the *ate of *s( 200 per
consignee(
,he sae is exept under this exeption since the gross aount charged is less than *s( 1@00(
' goods carriage carr!ing @ consignents+ Lall for different consigneeM at the *ate of *s( 1000
per consignent(
,he sae is taxable since the gross aount charged is ore than *s( 1@00(
Eoods where gross aount charged for transportation of all such goods for a single consignee in
the goods carriage does not exceed rupees seven hundred fift!(
--= Hiring !" M!t!r Vehi6e and means !" trans5!rtati!n9
,his entr! exepts services b! wa! of giving on hire 7
(a) to a state transport underta-ing+ a otor vehicle eant to carr! ore than twelve
passengersI or
(b) to a goods transport agenc!+ a eans of transportation of goodsI
8iring eans transferring teporar! use of a thing5article5goods for a certain period( .t should be
distinguished with transfer of right to use goods which is liable to %',( :otor vehicle should be
for transportation of ore than 12 passengers( 8ere there is no ention about driver and the
4A
conductor+ the! should not be included in the calculation in specified nuber of passengers(
Bxeption is available onl! for giving otor vehicle on hire+ not for an! other services(
0ood for thought6
&or-lift is supplied on hire to a E,' for loading and unloading of goods in a truc-( ;hether
exeption is availableC
Bxeption is available when Na eans of transportation of goodsO is supplied( .t eans a vehicle
usable in actual transportation of goods( &or-lift cannot be used in actual transportation of goods(
'ccordingl!+ exeption benefit is not available(
-C= Trans5!rt !" 5assengers t!4"r!m s5e6i"ied areas, and !thers9
,his entr! covers transport of passengers+ with or without accopanied belongings+ b! 7
(a) air+ ebar-ing fro or terinating in an airport located in the state of 'runachal ?radesh+
'ssa+ :anipur+ :eghala!a+ :iGora+ /agaland+ Si--i+ or ,ripura or at =agdogra
located in ;est =engalI
(b) a contract carriage for the transportation of passengers+ excluding touris+ conducted
tour+ charter or hireI or
(c) ropewa!+ cable car or aerial trawa!I
,he transportation should be through air( .t a! include airlines+ helicopter+ and charter flight of
an! other -ind or siilar eans of transportation(
' contract carriage is generall! carriage of passengers for hire+ which is engaged under a contract+
which a! be express or iplied( ,he contract a! be for use of the vehicle as a whole for such
carriage and is entered into b! a person with the holder of the perit for such vehicle( ,he
consideration a! be fixed on tie basis of the points involved(
,ransportation of passengers through contract carriage is exepted( 8owever+ if the vehicle is
used for touris+ conducted tour+ charter or hire+ it would not be covered b! the exeption
notification(
-D= M!t!r vehi6e 5arking
,his entr! covers services b! wa! of vehicle par-ing to general public excluding leasing of space
to an entit! for providing such par-ing facilit!I
&ood for thoughtF
,his exeption is not available wef 1(#(2013(
-<= S5e6i"ied servi6es 5r!vided t! g!vernment !r !6a auth!rit8 !r g!vernment
auth!rit89
,his entr! covers services provided to Eovernent+ a local authorit! or a governental authorit!
b! wa! of 7
(a) carr!ing out an! activit! in relation to an! function ordinaril! entrusted to a unicipalit!
in relation to water suppl!+ public health+ sanitation conservanc!+ solid waste
anageent or slu iproveent and upgradationI or
44
(b) repair or aintenance of a vessel 1or an aircraft2I ,he repairs or aintenance of aircraft
oitted wef 1(#(2013(
'n! activit! underta-en b! an! other person for a consideration to the governent in relation to
water suppl!+ public health+ sanitation conservanc!+ solid waste anageent or slu
iproveent and up gradation is exepted(
'n! service of repair or aintenance of a vessel is covered under this exeption notificationI
however the sae service provided to rail is not covered under this entr! of exeption(
-;= S5e6i"ied *enera $nsuran6e s6hemes9
,his entr! exepts services of general insurance business provided under following schees 7
(a) 8ut .nsurance ScheeI
(b) $attle .nsurance under Swarnaja!nti Era SwaroGgar Uojna Learlier -nown as .ntegrated
*ural Developent ?rograeMI
(c) Schee for .nsurance of ,ribalsI
(d) Janata ?ersonal 'ccident ?olic! and Erain 'ccident ?olic!I
(e) Eroup ?ersonal 'ccident ?olic! for Self7Bplo!ed ;oenI
(f) 'gricultural ?upset and &ailed ;ell .nsuranceI
(g) preia collected on export credit insuranceI
(h) ;eather =ased $rop .nsurance Schee or the :odified /ational 'gricultural .nsurance
Schee+ approved b! the Eovernent of .ndia and ipleented b! the s:inistr! of
'gricultureI
(i) Jan 'rog!a =ia ?olic!I
(j) /ational 'gricultural .nsurance Schee L*ashtri!a 6rishi =ia UojanaMI
(k) ?ilot Schee on Seed $rop .nsuranceI
(l) $entral Sector Schee on $attle .nsuranceI
(m) Universal 8ealth .nsurance ScheeI
(n) *ashtri!a Swasth!a =ia UojanaI or
(o) $oconut ?al .nsurance ScheeI
-G= E7em5ti!ns t! $n6ubatee9
Services provided b! an incubatee up to a total turnover of fift! la-h rupees in a financial !ear
subject to the following conditions+ nael!F7
(a) the total turnover had not exceeded fift! la-h rupees during the preceding financial !earI
and
(b) a period of three !ears has not been elapsed fro the date of entering into an agreeent
as an incubateeI
,he ter K.ncubateeO has been defined to ean an entrepreneur located within the preises of a
,echnolog! =usiness .ncubator L,=.M or Science and ,echnolog! Bntrepreneurship ?ar- LS,B?M
recogniGed b! the /ational Science and ,echnolog! Bntrepreneurship Developent =oard
L/S,BD=M of the Departent of Science and ,echnolog!+ Eovernent of .ndia and who has
40
entered into an agreeent with the ,=. or the S,B? to enable hiself to develop and produce hi7
tech and .nnovative products(
-K= E7em5ti!ns t! trade uni!ns4s!6ieties9
,his entr! covers service b! an unincorporated bod! or a non7 profit entit! registered under an!
law for the tie being in force+ to its own ebers b! wa! of reiburseent of charges or share
of contribution 7
(a) as a trade unionI
(b) for the provision of carr!ing out an! activit! which is exept fro the lev! of service
taxI or
(c) up to an aount of five thousand rupees per onth per eber for sourcing of goods or
services fro a third person for the coon use of its ebers in a housing societ! or a
residential coplexI
,he essential feature of the present exeption is as followsF
service should be provided or to be provided b! specified unincorporated bod! or an
specified entities registered as a societ!
such services should be to its own ebers
such services should be b! wa! of reiburseent of charges or shares of contribution
0ood for thought6
' societ! provides pre7school education services( ,he societ!+ to provide services ta-es
contribution fro its ebers( ;hether the services provided b! the ebers are taxableC
$oentsF /o+ this is not taxable under this entr! since the contribution received b! the
ebers is providing certain services which are exept and the services are provided to third
parties(
-@= Servi6es e7em5t b8 6ertain 5ers!ns9
,his entr! covers services provided b! the following persons in respective capacities 77
(a) sub7bro-er or an authorised person to a stoc- bro-erI
(b) authorised person to a eber of a coodit! exchangeI
(c) utual fund agent to a utual fund or asset anageent copan!I
(d) distributor to a utual fund or asset anageent copan!I
(e) selling or ar-eting agent of lotter! tic-ets to a distributer or a selling agentI
(f) selling agent or a distributer of S.: cards or recharge coupon vouchersI
(g) business facilitator or a business correspondent to a ban-ing copan! or an insurance
copan!+ in a rural areaI or
(h) sub7contractor providing services b! wa! of wor-s contract to another contractor
providing wor-s contract services which are exeptI
C.= Servi6es !" j!b :!rk as $ntermediate 5r!du6ti!n9
4"
,his entr! covers the services of $arr!ing out an interediate production process as job wor- in
relation to 7
(a) agriculture+ printing or textile processingI
(b) cut and polished diaonds and gestonesI or plain and studded jeweller! of gold and
other precious etals+ falling under $hapter 41 of the $entral Bxcise ,ariff 'ct +1"0@ L@
of 1"0AMI
(c) an! goods on which appropriate dut! is pa!able b! the principal anufacturerI or
(d) processes of electroplating+ Ginc plating+ anodiGing+ heat treatent+ powder coating+
painting including spra! painting or auto blac-+ during the course of anufacture
of parts of c!cles or sewing achines upto an aggregate value of taxable service of the
specified processes of one hundred and fift! la-h rupees in a financial !ear subject to the
condition that such aggregate value had not exceeded one hundred and fift! la-h rupees
during the preceding financial !earI
,his liit of *s 1@0 >acs is applicable onl! to the last lib of the entr! LdM+ and not to the first
three( 'll the above exeptions existed in the positive based taxation and even continues to be
exepted in the negative regie(
C/= Servi6es "!r a business e7hibiti!n hed !utside $ndia9
,his entr! covers services b! an organiGer to an! person in respect of a business exhibition held
outside .ndiaI
Service of a business exhibition held outside .ndia shall fall outside the abit of &inance 'ct+
1""#(
8owever services of coission agent and event anagers would not be tested b! this categor!
and their liabilit! would be deterined as would be specific to their effects(
C-= E7em5ti!n in the tee5h!ne se6t!r9
Services b! wa! of a-ing telephone calls fro 7
departentall! run public telephoneI
guaranteed public telephone operating onl! for local callsI or
free telephone at airport and hospital where no bills are being issuedI
CC= Servi6es b8 :a8 !" saughtering !" animasM
's per the latest aendents+ the exeption is for services b! wa! of slaughtering of anials(
Barlier onl! =ovine anials were covered b! this notification( .t is to be noted that the new
exeption has not specified as to the requireent of echaniGed slaughter houses which was a
criteria in the positive list based taxation( (
CD= Servi6es im5!rted e7em5ted in 6ertain 6ases9
00
Services when iported b! certain specified entities are exept fro service tax( ,he entities
covered b! this notification are F
a( Eovernent+ local authorit!+ a governental authorit! or an individual in relation to an!
purpose other that coerce+ industr! or an! other business or profession
b( 'n entit! registered under section 12'' of the .ncoe ,ax 'ct+1"A1 for the purpose of
providing charitable activitiesI
c( ' person located in non taxable territor!(
,he last lib of the above clause eans the service provided fro outside taxable territor! to a
person outside taxable territor!( ,his activit! would an!wa!s not taxable based on the place of
provisions of service+ *ules+ 2012( ,he need for inserting this clause is un-nown(
C<= Servi6es !" Pubi6 Libraries9
,he services provided b! a public librar! b! wa! of lending of boo-s+ publications or an! other
-nowledge enhancing content or aterial shall not be subject to service tax( :ost of the libraries
do not charge an! consideration for lending boo-s( 8owever+ one tie ebership fees are
charged( ,his one tie ebership would also be covered under this exeption(
C;= Servi6es b8 Em5!8ees State $nsuran6e C!r5!rati!n t! 5ers!ns g!verned under the
ES$ A6t, /@DK
Services provided b! the BS. to persons governed b! the BS. 'ct are exept fro service tax(
CG= Trans"er !" a g!ing 6!n6ern as a :h!e
;hen a going concern in full or an independent part of the concern is transferred as such+ such
transaction is exepted fro service tax( ,his concept of transfer is tered as NSlup saleO in
.ncoe ,ax(
CK= Servi6es b8 :a8 !" 5ubi6 6!nvenien6es
'ounts collected towards providing services for public conveniences li-e public toilets+
washroos etc are exept fro service tax(
C@= S5e6i"ied servi6es 5r!vided b8 a g!vernmenta auth!rit8
$ertain specified services which are entrusted to a unicipalit!+ but which are provided b! a
governental authorit! are exept fro service tax( ,he specified services are those which are
entioned under 'rticle 2#3; of the $onstitution of .ndia( ,he list of services was set out earlier
in context of exeption in sl no(12 F
01
Sma Servi6e Pr!vider E7em5ti!n
Service tax provides for an exeption to sall service providers who provide taxable services of
a value not exceeding the specified liit( ,he specified liit is now *s( 10 la-hs( .n other words
where the value of taxable services provided do not exceed *s( 10 la-hs in the previous financial
!ear+ the concerned service provider would not be required to pa! service tax upto receipts of *s(
10 la-hs in the current financial !ear( ,he exeption is through notification 3352012S, as
aended fro tie to tie( ,he service provider should however satisf! certain conditions in
order to avail the benefit of this exeption( ,he conditions to be noted here are as follows
,axable services provided b! a person under a brand nae or a trade nae Lwhether
registered or notM of another person would N#T be eligible for this exeption
' receiver of services who is liable to pa! service tax on the services he has received
b! virtue of section A0L2M cannot avail the benefit of this exeption with regard to
such pa!ents( :ore coonl! this is relevant for recepient of E,' Services or in
case of iport of services where no exeption is entitled(
)nce an option is exercised in regard to this exeption during a financial !ear+ it
cannot be changed in the sae financial !ear( 1 ,his however does not ean that the
claiing of the exeption a-es it copulosor! to clai for the whole !ear( .n
between even without reaching *s(10 la-hs the option to pa! can be ade(2
/o cenvat credit can be availed on inputs or input services used in providing such
output service for which exeption is being claied(
$envat credit cannot be availed on capital goods received in the preises of provider
of such service during the exeption period(
,he service provider shall pa! an aount equivalent to the cenvat credit ta-en b! hi
in respect of inputs l!ing in stoc- or in process on the date of availent of
exeption( 'fter pa!ing such an aount+ if there is an! balance of cenvat credit
reaining unutiliGed+ such balance would lapse(
,he exeption shall appl! in respect of the aggregate value of all taxable services
provided b! the service provider Leven if fro ore than one preisesM and not
individuall!(
Bxepted services shall be outside the purview of the exeption of this notification(
.n other words+ the value for ascertaining the liit of *s( 10 >a-hs would be that of
taxable services alone on which service tax is pa!able(
02
,he aggregate value of such services provided in the preceding financial !ear should
not exceed the aforesaid exeption liit(
)s there any exe(ption fro( service tax where the service provider transfers property
in goods during the course of provision of services?
,he service provider who transfers propert! in goods during the course of providing taxable
service would be entitled to avail the benefit of notification 1252003 S, dated 20(0A(03 as
aended fro tie to tie( ,his notification provides a deduction for the value of aterials and
goods sold b! the service provider to the recipient of service+ fro the gross aount charged for
the service+ provided there is supporting docuentation for the sae+ evidencing use of aterial
in course of providing service( ,he service provider in effect is required to pa! service tax on the
balance aount constituting labour charges alone( 8owever+ where the service provider avails the
benefit of this notification+ he cannot avail cenvat credit of the excise dut! paid on goods and
aterials so sold but can avail credit of service tax paid on input services( Bven excise duties paid
on capital goods can be availed as credits( )ne big advantage of this notification is that the sae
is not restricted to an! one single categor! of service( ,hus where the service provider -nows the
aounts being charged for labour and the aounts towards sale of goods or aterials+ this
notification can be followed(
,his exeption is not available wef 1(4(2012( ,herefore post negative list+ when there are
eleents of both goods and service in provision of service+ the taxabilit! would be deterined
based on essential nature test(
03
Abatements
Dictionar! eaning of abateent is R*eduction+ Decrease or discount(R .n reference to service
tax+ this ter is used for aount liable to be reduced fro value of taxable service as per finance
act and rules therein( .n other words+ abateent also is an partial exeption( .n this context the
Eovernent has provided certain abateents for certain classes of services( ,hese are provided
vide /otification 2A520127S, dated 20(0A(2012(
,he abateents areF
S
N!=
)es6ri5ti!n !" Servi6e Ta7abe
5!rti!n
C!nditi!ns
1 Services in relation to financial
leasing including hire purchase
10 /il(
2 ,ransport of goods b! rail 30 /il(
3 ,ransport of passengers+ with or
without accopanied belongings
b! rail
30 /il(
# =undled service b! wa! of
suppl! of food or an! other
article of huan consuption or
an! drin-+ in a preises
Lincluding hotel+ convention
center+ club+ pandal+ shaiana or
an! other place+ speciall!
arranged for organiGing a
functionM together with renting of
such preises
40 LiM $B/%', credit on an! goods classifiable
under $hapters 1 to 22 of the $entral Bxcise
,ariff 'ct+ 1"0@ L@ of 1"0AM used for providing
the taxable service+ has not been ta-en under the
provisions of the $B/%', $redit *ules+ 200#(
@ ,ransport of passengers b! air+
with or without accopanied
belongings
#0 $B/%', credit on inputs and capital goods+
used for providing the taxable service+ has not
been ta-en under the provisions of the $B/%',
$redit *ules+ 200#(
A *enting of hotels+ inns+ guest
houses+ clubs+ capsites or other
coercial places eant for
residential or lodging purposes(
A0 Sae as above(
4 Services of goods transport
agenc! in relation to
2@ $B/%', credit on inputs+ capital goods and
input services+ used for providing the taxable
0#
S
N!=
)es6ri5ti!n !" Servi6e Ta7abe
5!rti!n
C!nditi!ns
transportation of goods( service+ has not been ta-en under the provisions
of the $B/%', $redit *ules+ 200#(
0 Services provided in relation to
chit
40 Sae as above(
" *enting of an! otor vehicle
designed to carr! passengers
#0 Sae as above(
10 ,ransport of goods in a vessel @0 Sae as above(
11 Services b! a tour operator in
relation to+7
LiM a pac-age tour
2@ LiM $B/%', credit on inputs+ capital goods
and input services+ used for providing the
taxable service+ has not been ta-en under the
provisions of the $B/%', $redit *ules+ 200#(
LiiM ,he bill issued for this purpose indicates that
it is inclusive of charges for such a tour(
LiiM a tour+ if the tour operator is
providing services solel! of
arranging or boo-ing
accoodation for an! person
in relation to a tour
10 LiM $B/%', credit on inputs+ capital goods
and input services+ used for providing the
taxable service+ has not been ta-en under the
provisions of the $B/%', $redit *ules+ 200#(
LiiM ,he invoice+ bill or challan issued indicates
that it is towards the charges for such
accoodation(
LiiiM ,his exeption shall not appl! in such
cases where the invoice+ bill or challan issued b!
the tour operator+ in relation to a tour+ onl!
includes the service charges for arranging or
boo-ing accoodation for an! person and
does not include the cost of such
accoodation(
LiiiM an! services other than
specified at LiM and LiiM above(
#0 LiM $B/%', credit on inputs+ capital goods
and input services+ used for providing the
taxable service+ has not been ta-en under the
provisions of the $B/%', $redit *ules+ 200#(
LiiM ,he bill issued indicates that the aount
charged in the bill is the gross aount charged
for such a tour(
0@
S
N!=
)es6ri5ti!n !" Servi6e Ta7abe
5!rti!n
C!nditi!ns
12(
$onstruction of a coplex+
building+ civil structure or a part
thereof+ intended for a sale to a
bu!er+ wholl! or partl! except
where entire consideration is
received after issuance of
copletion certificate b! the
copetent authorit!+7
LiM for residential unit having
carpet area upto 2000 square feet
or where the aount charged is
less than rupees one croreI
LiiM for other than the LiM above
2@J
30J
1M /o $B/%', $redit on inputs to be availed
2M ,he value of land is included in the gross
value
3M ,he aount charged is the su total of the
aount charged for the service including the
fair ar-et value of all goods or services
supplied b! the recipient in or in relation the
service+ whether or not supplied under the
sae contract or an! other contract+ after
deducting aount charged for such goods or
services supplied to the service provider+ if
an! 9 the %',5Sales ,ax levied+ if an!(
;here the fair value of goods or services so
supplied is not ascertainable+ the sae shall be
deterined in accordance with the generall!
accepted accounting principles(
'part fro these abateents+ in relation to certain services have been provided in Service ,ax
%aluation *ules( ,hough these are the provisions for valuation+ these are indirectl! called as
abateents( ,he following services are covered thereF
a( ;or-s $ontract
a( .n case of )riginal wor-s7 A0 J
b( .n case of contract for aintenance or repair of goods7 30 J
c( .n case of other ;or-s $ontract7 #0 J
b( $ontract involving suppl! of &ood and other article of huan consuption
a( &ood supplied as a part of activit! in restaurant7 A0J
b( &ood supplied as outdoor catering7 #0 J
.n the Delhi $hit &und 'ssociation vs U). L 20137,.)>733178$7DB>7S, M where writ was
filed to quash notification no(2A520127S, 1post negative list2 in so far as it see-s to subject the
0A
activities of a business chit fund copanies to service tax( Delhi 8igh $ourt allowed the writ
holding that
a( Sl (/o( 0 of notification /o(2A520127S, dated 207A72012 was quashed(
b( .n a chit business+ the subscription is tendered in an! one of the fors of Yone!Y
as defined in section A@=L33M( .t would+ therefore+ be a transaction in one!( So
considered+ the transaction would fall within the exclusionar! part of the
definition of the word YserviceY as being erel! a transaction in one!(
,he services rendered b! the forean of the chit business+ not being an activit! of the nature
of relating to the use of one! or its conversion b! cash or b! an! other ode+ fro one
for+ currenc! or denoination to another for+ currenc! or denoination for which a
separate consideration is charged+ would be out of the clutches of the definition
P!inters "!r 5ra6ti6e
,he professional should ensure that where benefits of exeptions are claied+ the
conditions prescribed for the sae are coplied with+ failing which the benefit could be
denied(
,he professional should also weigh the benefits of all the concerned alternatives before
suggesting the exeption to be claied where he acts in an advisor! capacit!( ,he
availent of exeptions at ties liits5 bars the whole or part of availent of cenvat
credits( ,his needs to be confired and logic does not wor- here(
,he professional should also confir that the assessee is reall! entitled to clai the
benefit of exeption and this should be ascertained on a review of the records of the
assessee( ;here services are wrongl! classified+ or the values incorrectl! deterined
under service tax+ it could have a huge ipact on availabilit! of exeptions and service
tax liabilit!(
#ther e7em5ti!ns
1( Services provided b! an! person+ for the official use of a foreign diploatic ission
or consular post in .ndia+ or for personal use or for the use of the fail! ebers of
diploatic agents or career consular officers posted therein /otification /o(
2452012 dated 20(0A(2012(
2( Under *enting of iovable propert!+ the propert! tax paid on the propert! which
has been let out+ shall be allowed to be reduced fro the taxable value /otification
/o( 2"52012 dated 20(0A(2012
04
(*ampleF
?ropert! tax paid for 'pril to Septeber V *s( 12+00057
*ent received for 'prilV *s( 1+ 00+00057
Service tax pa!able for 'pril V *s( "0+00057 L1+ 00+000 712+0005AM Z applicable rate of
service tax
3( Services provided to an exporter for the transport of the said goods b! a goods
transport agenc! in a goods carriage froF7
a( an! container freight station or inland container depot to the port or
airport+ as the case a! be+ fro where the goods are exportedI
b( their place of reoval+ to an inland container depot+ a container freight
station+ a port or airport+ as the case a! be+ fro where the goods are
exported( /otification /o 3152012 dated 20(0A(2012
#( Services provided b! a ,echnolog! =usiness .ncubator L,=.M or a Science and
,echnolog! Bntrepreneurship ?ar- LS,B?M recogniGed b! the /ational Science and
,echnolog! Bntrepreneurship Developent =oard L/S,BD=M of the Departent of
Science and ,echnolog!+ Eovernent of .ndia /otification /o( 3252012 dated
20(0A(2012(
@( Services provided to a unit located in a Special Bconoic Xone Lhereinafter referred
to as SBXM or Developer of SBX and used for the authorised operations /otification
/o( #052012 dated 20(0A(2012(
A( Service provided b! a coission agent located outside .ndia and engaged under a
contract or agreeent or an! other docuent b! the exporter in .ndia+ to act on behalf
of the exporter+ to cause sale of goods exported b! hi /otification /o( #252012
dated 20(0A(2012(
4( Services as specified in the table below+ provided b! the .ndian *ailwa!s+ are exept
fro Service tax upto and including the 30thSepteber 2012F7
00
a( Service of transportation of passengers+ with or without accopanied
belongings+ b! railwa!s in 77
L'M first classI or
L=M an air conditioned coach(
b( Services b! wa! of transportation of goods b! railwa!s
,his exeption was provided vide /otification /o( #352012 dated 02(04(2012(
0"
PLACE #F PR#V$S$#N #F SERV$CE R+LES, -./-
&inance 'ct+ 2012 has introduced various aendents in tax laws( ,hese aendents are
basicall! done with the ai of rationaliGing the tax regie of the $ountr!( Service tax law has
attained ajorit! in this !ear( Eovernent has brought several new concepts in Service tax law(
)ne such concept is disseination of the concept of the K?lace of ?rovision of Service3( .n ters
of Section AA$ of the &inance 'ct+ the ?lace of ?rovision of Service *ules+ 2012 have been
issued vide /otification /o(20520127S,+ dated 20(0A(2012 and with this the earlier Bxport of
Service *ules+ 200@ and ,axation of Services L?rovided fro )utside .ndia and *eceived in
.ndiaM *ules+ 200A have been repealed(
$m5!rtan6e !" Pa6e !" Pr!visi!n !" Servi6e'
?resentl! the ?lace of provision is relevant for the following purposesF
;hether service has been provided in taxable territor!
Services provided to and fro Jau and 6ashir
'ssessees providing services fro different locations without having $entralised
*egistration
Bxport of service for exeption and .port of Service for liabilit! of service tax on
reverse charge basis
Services provided to and fro Special Bconoic Xone LSBXM
S8n!5sis !" the 5r!visi!ns'
=efore going into the depth of each and ever! *ules of ?lace of provision of Service *ules+ the
following has to be understood for the ease of understanding the *ules(
*ule 1# states that later rule prevails over the earlier rules(
?lace of provision of Service *ules a-e specific provisions in respect of certain specified
services in ?lace of ?rovision of Service *ules( .n respect of such services the specific rules will
prevail over other rules( ,he following are the Specific services for which specified *ules has
been givenF
*ule "7 &ollowing are the specified servicesF7
i( Services provided b! a ban-ing copan!+ or a financial copan!+ or a non7
ban-ing financial copan! to account holdersI
ii( )nline inforation and database access or retrieval servicesI
iii( .nterediar! servicesI
iv( Service consisting of hiring of eans of transport+ up to a period of one onth(
*ule 107 'n! service of transportation of goods+ b! an! ode of transport Lair+ vessel+
rail or b! a goods transportation agenc!M+ is covered here(
*ule 117 ?assenger ,ransportation Services
"0
*ule 127 Services provided on =oard a conve!ance
.n respect of the other services+ the following *ules will appl! in following SequenceF
?lace of ?rovision of Service is taxable territor! where both service provider and service
receiver are in taxable territor!+ except the specified services covered under rules " to 12
1*ule 02
?lace of ?rovision of Service is taxable territor! if services covered under rule #+ @ or A
are provided even partl! in taxable territor! 1*ule 42
.n case of services relating to event+ ?lace of ?rovision of Service is where the event is
actuall! held 1*uleA2
.n case of perforance based services Lrelating to goods or recipient of serviceM+ ?lace of
?rovision of Service is where service is actuall! perfored 1*ule #2
.n all other cases+ ?lace of ?rovision of Service is the location of service receiver 1*ule 32
.f service does not fall under an! of rules # to 12 and location of service receiver is not
available+ location of provider of service is the place of provision of Service 1?roviso to
rule 32
Rue /D9 #rder !" a55i6ati!n !" rues
,his rule provides the anner in which the place of provision of service is to be deterined in
case where it sees prie facie that ore than one rule of the place of provision rules is
applicable( .t is provided that in such cases the place of provision shall be deterined in
accordance with the rule that coes later and which erit equal consideration(
$ustrati!n
'n architect based in :ubai provides his service to an .ndian 8otel $hain Lwhich
has business establishent in /ew DelhiM for its newl! acquired propert! in Dubai( .f
*ule @ L?ropert! ruleM were to be applied+ the place of provision would be the location of the
propert! i(e( Dubai Loutside the taxable territor!M( ;ith this result+ the service would not be
taxable in .ndia(
;hereas+ b! application of *ule 0+ since both the provider and the receiver are located in taxable
territor!+ the place of provision would be the location of the service receiver i(e(+ /ew Delhi(
?lace of provision being in the taxable territor!+ the service would be taxable in .ndia( =!
application of *ule 1#+ the later of the *ules i(e( *ule 0 would be applied to deterine the place
of provision(
Rue /C9 P!:ers t! n!ti"8 des6ri5ti!n !" servi6es !r 6ir6umstan6es "!r 6ertain 5ur5!ses
=! virtue of this rule+ $entral Eovernent is given power to notif! an! description of service or
circustances in which the place of provision shall be the place of effective use and enjo!ent of
"1
a service( 8owever+ an! notification issued under this provision should be onl! for the reason of
either prevention of double taxation or ensuring the taxation if it is being oitted(
Ana8sis as 5er C2ECFs Edu6ati!n guide
,he rule is an enabling power to correct an! injustice being et due to the applicabilit! of rules
in a foreign territor! in a anner which is inconsistent with these rules leading to double taxation(
Due to the cross border nature of an! services it is also possible in certain situations to set up
businesses in a non7taxable territor! while the effective enjo!ent+ or in other words
consuption+ a! be in taxable territor!( ,his rule is also eant as an anti7avoidance easure
where the intent of the law is sought to be defeated through ingenious practices un-nown to the
ordinar! wa!s of conducting business(
Rue /-9 Pa6e !" Pr!visi!n !" servi6es 5r!vided !n b!ard a 6!nve8an6e
,his rule intends to cover services li-e ovie+ usic+ video+ software gaes+ etc( provided on
board against a specific charge+ which is not supplied as part of the fare( ,he place of provision of
such services provided on board a conve!ance during the course of a passenger transport
operation is the first scheduled point of departure of that conve!ance for the journe!(
$ustrati!n
' video gae or a ovie7on7deand is provided as on7board entertainent during the 6ol-ata7
Delhi leg of a =ang-o-76ol-ata7Delhi flight( ,he place of provision of this service will be
=ang-o- Loutside taxable territor!+ hence not liable to taxM( .f the above service is provided on a
Delhi76ol-ata7=ang-o-7Ja-arta flight during the =ang-o-7Ja-arta leg+ then the place of provision
will be Delhi Lin the taxable territor!+ hence liable to taxM(
Rue //9 Pa6e !" Pr!visi!n !" 5assenger trans5!rtati!n servi6es
's per this rule+ the place of provision in respect of a passenger transportation service shall be the
place where the passenger ebar-s on the conve!ance for a continuous journe!(
$ontinuous Journe! as per *ule 2LdM eans a journe! for which
a( a single tic-et has been issued for the entire journe!I or
b( ore than one tic-et or invoice has been issued for the journe!+ b! one service
provider+ or b! an agent on behalf of ore than one service providers+ at the sae
tie+ and there is no scheduled stopover in the journe!(
,he ter NStopoverO has been explained in $=B$3s Bducation guide( .t eans a place where a
passenger can disebar- either to transfer to another conve!ance or brea- his journe! for a
certain period in order to resue it at a later point of tie( 'll stopover do not cause a brea- in
continuous journe!( )nl! such stopovers will be relevant for which one or ore separate tic-ets
are issued( ,hus+ a travel on Delhi7>ondon7/ew Uor-7>ondon7Delhi on a single tic-et with a halt
at >ondon on either side+ or even both+ will be covered b! the definition of continuous journe!(
"2
8owever+ if a separate tic-et is issued+ sa! /ew Uor-7=oston7/ew Uor-+ the sae will be outside
the scope of a continuous journe!(
Rue /.9 Pa6e !" Pr!visi!n !" g!!ds trans5!rtati!n servi6es
,he place of provision of transportation of goods services provided b! an! ode of transportation
shall be the place of destination of the goods+ Lexcept when the sae is provided b! ail or
courierM( 8owever+ in case of E,'+ the place of provision of service shall be the location of the
person liable to pa! service tax( ,he sae is given in *ule 2L1MLdM of the Service ,ax *ules+ 1""#(
's per this rule+ the person liable to pa! tax shall be the person who pa!s+ or liable to pa! freight
for the transportation of goods b! road(
Rue @9 Pa6e !" Pr!visi!n !" S5e6i"ied servi6es
's per *ule "+ the place of provision of service shall be the location of the service provider in
respect to the following services7
aM Services provided b! a ban-ing copan!+ or a financial copan!+ or a non7ban-ing
financial copan! to account holdersI
bM )nline inforation and database access or retrieval servicesI
cM .nterediar! servicesI
dM Service consisting of hiring of eans of transport+ up to a period of one onth(
Servi6es 5r!vided b8 a banking 6!m5an8, !r a "inan6ia 6!m5an8, !r a n!n'banking
"inan6ia 6!m5an8 t! a66!unt h!dersM
N'ccountO has been defined in the rule 2LbM to ean an account which bears an interest to the
depositor( Services provided to holders of deand deposits+ ter deposits+ /*B Lnon7resident
externalM accounts and /*) Lnon7resident ordinar!M accounts will be covered under this rule(
=an-ing services provided to persons other than account holders will be covered under the ain
rule i(e(+ *ule 3 and the place of provision of such services shall be the location of receiver(
E7am5es !" Servi6es that are 5r!vided b8 a 2anking 6!m5an8 t! an a66!unt h!der9
aM services lin-ed to or requiring opening and operation of ban- accounts such as lending+
deposits+ safe deposit loc-er etcI
bM transfer of one! including telegraphic transfer+ ail transfer+ electronic transfer etc(
E7am5es !" Servi6es that are N#T 5r!vided b8 a 2anking 6!m5an8 t! an a66!unt h!der9
aM financial leasing services including equipent leasing and hire7purchaseI
bM erchant ban-ing servicesI
cM Securities and foreign exchange LforexM bro-ing+ and purchase or sale of foreign currenc!+
including one! changingI
"3
#nine in"!rmati!n and database a66ess !r retrieva servi6es9
's per rule 2LlM+ N)nline inforation and database access or retrieval servicesO eans providing
data or inforation+ retrievable or otherwise + to an! person+ in electronic for through a
coputer networ-(
Bssentiall! these services are delivered over the internet or an electronic networ- which relies on
internet or siilar networ- for provision of service( &or providing this service+ huan
intervention is not required(
E7am5es !" su6h servi6es are'
aM Download of digital content
bM digitiGed content of boo-s and other electronic publications+ subscription of online
newspapers and journals+ online news+ flight inforation and weather reportsI
8owever+ the following shall not be treated as N)nline inforation and database access or
retrieval servicesO7
aM Sale or purchase of goods+ articles etc over the internetI
bM ,elecounication services provided over the internet+ including fax+ telephon!+ audio
conferencing+ and videoconferencingI
cM ' service which is rendered over the internet+ such as an architectural drawing+ or
anageent consultanc! through e7ailI
dM *epair of software+ or of hardware+ through the internet+ fro a reote locationI
eM .nternet bac-bone services and internet access services(
$ntermediar8 servi6es9
N.nterediar!O eans a third part! that offers interediation services( .t acts as a conduit for
providing services between two persons( ,hus+ an interediar! is involved with two supplies at
an! one tie7
aM the suppl! between the principal and the third part!I and
bM the suppl! of his own service Lagenc! serviceM to his principal+ for which a fee or
coission is usuall! charged(
&or the purpose of this rule+ an interediar! in respect of goods Lsuch as a coission agent i(e(
a bu!ing or selling agent+ or a stoc-bro-erM is excluded b! definition(
'lso excluded fro this sub7rule is a person who arranges or facilitates a provision of a service
Lreferred to in the rules as Nthe ain serviceOM+ but provides the ain service on his own account(
$=B$ in the education guide has clarified the following as regards to interediaries(
.n order to deterine whether a person is acting as an interediar! or not+ the following factors
need to be consideredF7
Nature and vaue9 'n interediar! cannot alter the nature or value of the service+ the suppl! of
which he facilitates on behalf of his principal+ although the principal a! authoriGe the
interediar! to negotiate a different price( 'lso+ the principal ust -now the exact value at which
"#
the service is supplied Lor obtainedM on his behalf+ and an! discounts that the interediar! obtains
ust be passed bac- to the principal(
Se5arati!n !" vaue9 ,he value of an interediar!3s service is invariabl! identifiable fro the
ain suppl! of service that he is arranging( .t can be based on an agreed percentage of the sale or
purchase price( Eenerall!+ the aount charged b! an agent fro his principal is referred to as
NcoissionO(
$dentit8 and tite9 ,he service provided b! the interediar! on behalf of the principal is clearl!
identifiable(
.n accordance with the above guiding principles+ services provided b! the following persons will
qualif! as Kinterediar! services3F7
a( ,ravel 'gent Lan! ode of travelM
b( ,our )perator
c( $oission agent for a service 1an agent for bu!ing or selling of goods is
excluded2
d( *ecover! 'gent
Bven in other cases+ wherever a provider of an! service acts as an interediar! for another
person+ as identified b! the guiding principles outlined above+ this rule will appl!( /orall!+ it is
expected that the interediar! or agent would have docuentar! evidence authoriGing hi to act
on behalf of the provider of the Kain service3(
&ollowing will /), constitute eans of transportF
aM *acing carsI
bM $ontainers used to store or carr! goods while being transportedI
cM Dredgers+ or the li-e(
&ollowing will constitute eans of transportF
aM >and vehicles such as otorcars+ buses+ truc-sI
bM %esselsI
cM 'ircraftI
dM %ehicles designed specificall! for the transport of sic- or injured personsI
eM :echanicall! or electronicall! propelled invalid carriagesI
fM ,railers+ sei7trailers and railwa! wagons(
Rue K9 Pa6e !" Pr!visi!n !" servi6es :here 5r!vider and re6eiver are !6ated in ta7abe
territ!r8
,he place of provision of service+ which is provided b! the service provider in taxable territor! to
a receiver in taxable territor!+ shall be the location of the recipient of service( ,here a! be
situations where the place of provision of a service a! be deterinable to be outside the taxable
territor! b! virtue of *ule # to A+ but the service provider+ as well as service receiver is located in
"@
the taxable territor!( .n such situations *ule 0 will be applicable and the place of provision shall
be deeed to be in taxable territor!+ notwithstanding the earlier rules(
&or Bxaple+ a tour operator in .ndia organiGes tour outside .ndia( 8ere+ the entire service is
perfored outside .ndia( 8owever+ appl!ing the rule 0+ service tax will be pa!able(
Ana8sis !" this Rue'
,hus+ this rule is dangerous and a doubt arises in respect to the validit! of the sae( ,he rule
appears to be against section AA= which provides for lev! of service tax onl! when the service is
provided or agreed to be provided in taxable territor!( 's seen in the above exaple+ onl! a ere
execution of agreeent in .ndia a-es the transaction taxable in .ndia+ even though the service
has been perfored outside .ndia( .f that being the logic+ shall the service be taxable in .ndia if
the agreeent is executed outside .ndia and service is actuall! perfored in .ndiaCCC
Rue G' Part 5er"!rman6e !" a servi6e at di""erent !6ati!ns
,his rule overrides *ule # L?erforance or goods related servicesM+ *ule @ Liovable propert!
related servicesM and *ule A Levent based servicesM( ,his rule covers the situations where the
actual perforance of a service is at ore than one location and occasionall! one or ore such
locations a! be outside the taxable territor!(
,his rule provides that where an! service referred to in rule #+ @+ or A is provided at ore than
one location+ including a location in the taxable territor!+ its place of provision shall be the
location in the taxable territor! where the greatest proportion of the service is provided( 8owever+
this rule is not intended to capture the inor services which are rendered in the taxable territor!+
li-e+ ere issue of invoice+ processing of purchase order or recoveries+ which are not actuall!
perfored on goods(
$ustrati!n given in $=B$ Bducation guide is given belowF
'n .ndian fir provides a Ktechnical inspection and certification service3 for a newl! developed
product of an overseas fir Lsa!+ for a newl! launched otorbi-e which has to eet eission
standards in different states or countriesM( Sa!+ the testing is carried out in :aharashtra L20JM+
6erala L2@JM+ and an international location Lsa!+ $olobo @@JM(
/otwithstanding the fact that the greatest proportion of service is outside the taxable territor!+ the
place of provision will be the place in the taxable territor! where the greatest proportion of
service is provided+ in this case 6erala(
Ana8sis !" this rue'
's per section AA=+ service tax is leviable onl! when service is provided or agreed to be provided
in taxable territor!( 8owever+ as seen in the above entioned illustration+ *ule 4 of the ?lace of
?rovision of Service *ules+ 2012 also a-es the service taxable even if the sae is rendered
"A
partl! in taxable territor!( ,hus+ it can be so concluded that the provision given in section will
prevail when there is a conflict between section and rules(
Rue ;9 Pa6e !" Pr!visi!n !" Servi6es reating t! events
?lace of provision of services provided b! wa! of adission to+ or organiGation of a cultural+
artistic+ sporting+ scientific+ educational+ entertainent event+ or a celebration+ conference+ fair+
exhibition+ or an! other siilar event and of services ancillar! to such adission+ shall be the
place where the event is held(
Rue <9 Pa6e !" 5r!visi!n !" servi6es reating t! imm!vabe 5r!5ert8
.n case of a service that is Kdirectl! in relation to iovable propert!3+ the place of provision of
service shall be the location of the iovable propert!+ irrespective of where the provider or
receiver is located( 'lso it is needless to ention that this rule doesn3t appl! if a provision of
service has onl! an indirect connection with the iovable propert!(
's per the $=B$ Bducation Euide+ the following criteria will be used to deterine if a service is
in respect of iovable propert! located in the taxable territor!7
LiM ,he service consists of lease+ or a right of use+ occupation+ enjo!ent or exploitation
of an iovable propert!(
LiiM Service is ph!sicall! perfored or agreed to be perfored on a specific iovable
propert! Le(g(+ aintenanceM or propert! to coe into existence Le(g(+ constructionM(
LiiiM ,he direct object of the service is the iovable propert! in the sense that the
service enhances the value of the propert!+ affects the nature of the propert!+ relates
to preparing the propert! for developent or redevelopent or the environent
within the liits of the propert! Le(g( engineering+ architectural services+ surve!ing
and sub7dividing+ anageent services+ securit! services etcMI
LivM the purpose of the service isF
"4
aM the transfer or conve!ance of the propert! or the proposed transfer or
conve!ance of the propert! Le(g(+ real estate services in relation to the actual or
proposed acquisition+ lease or rental of propert!+ legal services rendered to the owner
or beneficiar! or potential owner or beneficiar! of propert! as a result of a will or
testaentMI
bM ,he deterination of the title to the propert!(
E7am5es !" Servi6es :hi6h are and reated'
LiM *enting of .ovable propert!+
LiiM Surve!ing of land or sea bed+
LiiiM Suppl! of hotel accoodation or warehouse space+ etc(
E7am5es !" Servi6es :hi6h are n!t and reated'
LiM Services of an agent who arranges finance for the purchase of a propert!+
LiiM >and or *eal Bstate &easibilit! studies+ sa! in respect of the investent potential of a
developing suburb+ since this service does not relate to a specific propert! or site(
Rue D9 Pa6e !" 5r!visi!n !" 5er"!rman6e based servi6es
.n respect of the following services+ the place of provision of service shall be the location where
the services are actuall! perfored7
(a) Services in respect of goods that are required to be ade ph!sicall! available b! the
service receiver to the service provider+ in order to provide the service( ,he essential
characteristic of a service to be covered under this rule is that the goods teporaril! coe
into the ph!sical possession or control of the service provider+ and without this
happening+ the service cannot be rendered( ,hus+ the service involves ovable objects or
things that can be touched+ felt or possessed(
LBxaples of such services are repair+ reconditioning+ storage+ warehousing+ etc(M
8owever+ where such services are provided fro a reote location b! wa! of electronic
eans the place of provision shall be the location where goods are situated at the tie of
provision of service( ,his is ost coon in the field of .nforation ,echnolog!( 'lso
this sub rule shall not appl! in the case of a service provided in respect of goods that are
teporaril! iported into .ndia for repairs+ reconditioning or re7engineering for re7
export+ subject to conditions as a! be specified in this regard(
"0
(b) Services provided to an individual+ represented either as the recipient of service or a
person acting on behalf of the recipient+ which require the ph!sical presence of the
receiver or the person acting on behalf of the receiver+ with the provider for the provision
of the service(
LBxaples of such services are cosetic or plastic surger!+ beaut! treatent
services+ photograph! services+ .nternet caf[ services+ etc(M
Rue C9 *enera Residuar8 rue
*ule 3 of ?lace of ?rovision of Service *ules is the residuar! rule( .t will appl! onl! when a later
specific rule is not applicable( /orall!+ the location of the service receiver should be the place
of provision of service( 8owever+ in case the location of the service receiver is not available in the
ordinar! course of business+ the place of provision shall be the location of the service provider(
&urther as per *ule 1#+ where the provision of a service is+ prie facie+ deterinable in ters of
ore than one rule+ the place of provision shall be deterined as per the rule that occurs later
aong the rules that erit equal consideration(
,hese rules are eant to deterine place where the services are provided( .n other to deterine
whether such services are exported+ the *ule A' of Service ,ax *ules has to be exained( Sae
is discussed later b! the paper writer(
C!n6usi!n9
.n practice it a! be better for the officer5 consultant to appl! the rules bac-wards starting fro
*ule 1# then 13H and so on( .t is expected that an! unintended iplications a!be faced b!
various exporters of service and the! a! require to rectif! the anoal! b! wa! of
representation(
,he ?lace of ?rovision *ules has expanded the provisions for interpretation while it has restricted
the export benefits b! introducing soe of the ischief rules li-e rule 4+ 0 and 1# Las explained
aboveM( ,hese rules have widened the gap between the intention of the law not to export taxes and
the ipleenting agencies( .t is+ thus+ suggested that before underta-ing an! international
transactions+ the iplication has to be chec-ed out to avoid an! tax litigation(
""
REVERSE CHAR*E 0 1#$NT CHAR*E MECHAN$SM
$ntr!du6ti!n
,he new service tax law based on negative list taxation is effective fro 1
st
of Jul! 2012( ,hough
there are a nuber of aspects and issues under the sae+ one of the ain issue and concern is
about the reverse charge and joint charge echanis( ,his article discusses the concept for this
echanis w(e(f( 01(04(2012(
N! Charging se6ti!n :=e="=/=G=/- !n reverse 6harge
,here is no separate charging section to tax receipt of services under reverse charge and section
AA= is the solitar! section for charging service tax( ?ost 10(#(200A when AA' was inserted it
created two deeing fictions+ one treating the service as a taxable service and deeing the
recipient as the provider of such taxable service( /o such treatent exists in the present AA=
which is applicable to service provided within .ndia onl!( ,here is no nexus or lin- or connection
between AA= 9 AA$Lin ters of which the ?)?)S* have been fraed and which rules creates a
charge on the receipt of service fro outside .ndiaM( .n other words the situation is bac- to the pre
10(#(200A era and the tax has turned a full circle( .t is also to be noted that the charge under *$:
is levied b! virtue of the ?lace of ?rovision of Service *ules+ 2012+ which is illegal because
essential legislative functions cannot be delegated( .n other words the ?)?)S* are rules fraed
b! a delegatee who does not have the power+ copetence or jurisdiction to frae a charge in
ters of the rules when the section does not conteplate such a contingenc!( .t is pertinent to
ention here that the above interpretation can be ta-en onl! if assessees prefer to challenge the
?)?)S* before the appropriate foru(
%hat is reverse 6hargeA
Bver! person providing a taxable service is required to pa! service tax at the prescribed rate(
8owever in certain cases the service recipient is ade liable to pa! service tax on the services
received( Since the person receiving services is ade liable to pa! service tax+ the echanis of
collection of such tax is called as reverse charge L*$:M(
,his concept is set out in service tax law b! virtue of section A0L2M b! epowering the $entral
Eovernent to notif! services positivel! on which the said *$: would appl!( ,o support this the
person liable to pa! service tax as defined in rule 2L1MLdM of the Service ,ax *ules+ 1""# also
100
includes service recipients(
Such a concept was in place even before introduction of the new schee of negative based
taxation( 8owever+ in addition to the concept of reverse charge a new concept of joint charge
Lrecipient and provider of services liable to pa! taxM is also introduced(
%hat is 1!int Charge Me6hanismA
Under the concept of joint charge+ for one service the service provider as well as service receiver
are ade liable for pa!ent of service tax to the extent notified( ,his liabilit! is independent of
the other person3s liabilit!( .n other words the failure to copl! with the provisions b! one person
on his part would not ipact the copliance requireent of other person and vice versa(
%hat is 6!vered under Reverse ChargeA
E""e6tive ./st 1u8 -./- :h! are a 6!vered under Reverse Charge Me6hanism
'fter changes in the service tax law have been ade effective+ the notification which applies to
reverse charge as well as joint charge is N!ti+icati!n N!. 4.B-.1-AST dated -...C.-.1- as
amended 2y N!ti+icati!n N!.68B-.1-AST dated .3..D.-.1-( 's per the said notification+ the
following persons with regards to the corresponding services entioned are liable for pa!ent of
service tax on reverse charge(
S=N!= )es6ri5ti!n !" a servi6e Pers!n Liabe t! 5a8
Servi6e Ta7
1 Services b! an insurance agent to an! person carr!ing
on insurance business
person carr!ing on insurance
business
2 Services b! a goods transport agenc! in respect of
transportation of goods b! road
Specified person Lexplained
belowM who is liable to pa!
freight
3 Services b! wa! of sponsorship to an!bod!7corporate
or partnership fir located in the taxable territor!
Such bod! corporate or
partnership fir
# Services b! an arbitral tribunal to an! =usiness Bntit! Such =usiness Bntit!
@ Services b! individual advocate or a fir of advocates
b! wa! of legal services to an! business entit!
Such =usiness Bntit!
A Services other than
a( renting of iovable propert!I and
b( speed post+ express parcel post+ life insurance and
agenc! services provided b! departent of post to
a person other than Eovernent
Such =usiness Bntit!
101
S=N!= )es6ri5ti!n !" a servi6e Pers!n Liabe t! 5a8
Servi6e Ta7
c( Service in relation to aircraft or a vessel+ inside or
outside the precincts of a port or airport b!
EovernentI
d( ,ransport of goods or passengers b! Eovernent
?rovided b! Eovernent or local authorit! b! wa! of
support services to an! =usiness Bntit! located in
taxable territor!
4 Services provided or agreed to be provided b! a
director of a copan! to the said copan!
Such $opan!
0 Services of renting of a otor vehicle designed to carr!
passengers provided b!
7 an! individual+
7 8indu Undivided &ail! or
7 proprietar! fir or
7 partnership fir+ whether registered or not+
- including association of persons
wherein the service provider has clai(ed abate(ent of
A0J following the conditions of the /otification /o(
2A520127S, dated 20(0A(2012
'nd the services receiver is business entit8 :h! is a
b!d8 6!r5!rate
8owever if the service receiver is also in siilar line of
business+ the service provider hiself will have to pa!
service tax( &or eg( Such service provided b! to another
person who will give the vehicle on rent(
Such business entit! who is
bod! corporate
" 'n! taxable services received b! an! person who is
located in taxable territor! fro an! person who is
located in a non7taxable territor!
,he person located in taxable
territor! who is receiving
such service
10 Services b! director of copan! to copan! $opan! receiving services
%hat is 6!vered under 1!int ChargeA
E""e6tive ./st 1u8 -./- :h! are a 6!vered under 1!int Charge Me6hanism
Siilar to the reverse charge the sae /otification /o( 30520127S, dated 20(0A(2012 as
102
aended b! /otification /o(#@520127S, dated 4(00(2012 deals with even joint charge as well( 's
per the said notification+ the cases in which the joint charge would be applicable and to what
extent is provided below F
S=N!= )es6ri5ti!n !" a servi6e Per6entage !"
servi6e ta7
5a8abe b8 the
5ers!n 5r!viding
servi6e
Per6entage !"
servi6e ta7
5a8abe b8 the
5ers!n re6eiving
the servi6e
1( Services of renting of a otor vehicle
designed to carr! passengers provided b!
7 an! individual+
7 8indu Undivided &ail! or
7 proprietar! fir or
7 partnership fir+ whether registered
or not+
- including association of persons
wherein the service provider is not clai(ing
any abate(ent
'nd the services receiver is business entit8
:h! is a b!d8 6!r5!rate
8owever if the service receiver is also in
siilar line of business+ the service provider
hiself will have to pa! service tax( &or eg(
Such service provided b! to another person
who will give the vehicle on rent(
A0J #0 J
2( Services of suppl! of anpower for an!
purpose or securit! services provided b!
7 an! individual+
7 8indu Undivided &ail! or
7 proprietar! fir or
7 partnership fir+ whether registered
or not+
- including association of persons
'nd the services receiver is business entit8
2@J 4@ J
103
S=N!= )es6ri5ti!n !" a servi6e Per6entage !"
servi6e ta7
5a8abe b8 the
5ers!n 5r!viding
servi6e
Per6entage !"
servi6e ta7
5a8abe b8 the
5ers!n re6eiving
the servi6e
:h! is a b!d8 6!r5!rate
3( Services of service portion in execution of
wor-s contract provided b!
7 an! individual+
7 8indu Undivided &ail! or
7 proprietar! fir or
7 partnership fir+ whether registered
or not+
- including association of persons
wherein the service provider is not
clai(ing any abate(ent
'nd the services receiver is business entit8
:h! is a b!d8 6!r5!rate
@0J @0J
#ther reevant as5e6ts
;hile following the reverse charge or joint charge echanis the following aspects are
relevant(
a( ,he service recipient is liable to pa! service tax irrespective of the fact whether the
service provider was exepted or not b! virtue of sall service provider exeption
under /otification /o( 33520127S, dated 20(0A(2012( .n other words even if the total
value of service provider is less than 10 la-hs the service recipient wherever liable to pa!
service tax has to pa! tax(
b( ,he exeption if an! available to service provider Lother than sall scale service
provider exeptionM can also be availed b! the service recipient( &or eg( if the wor-s
contract is for construction of public road+ then service recipient need not pa! service tax(
c( ,he service recipient is given freedo to choose the ethodolog! of coputation of tax
in case of wor-s contract irrespective of the service provider3s option to pa! tax(
d( ,he service recipient is eligible to clai $B/%', $redit of service tax paid b! both the
service provider if an! and also recipient b! hiself(
10#
e( ,he service tax has to be paid b! the service recipient on a-ing pa!ent to service
provider if the pa!ent is ade within six onths fro the date of invoice( .f it is not so
paid the liabilit! would be considered to have been arisen when the invoice for the
service is raised or if it is dela!ed be!ond the period of 30 da!s fro copletion of
service the date of copletion of service would be considered( .n such cases the recipient
would be liable to pa! interest for the dela!(
f( ,he specified persons in case of E,' services are as followsF
an! factor! registered under or governed b! the &actories 'ct+ 1"#0
an! societ! registered under the Societies *egistration 'ct+ 10A0 or under an!
other law for the tie being in force in an! part of .ndia
an! co7operative societ! established b! or under an! lawI
an! dealer of excisable goods+ who is registered under the $entral Bxcise 'ct+
1"## or the rules ade thereunderI
an! bod! corporate established+ b! or under an! lawI or
an! partnership fir whether registered or not under an! law including
association of personsI
$m5!rtant 5!int t! be 6!nsidered
's discussed above the service recipient has to pa! tax once the service recipient a-es pa!ent
to service provider within six onths( 8owever+ if the service recipient fails to a-e the pa!ent
within six onths then the liabilit! of service tax would be deeed to have been arisen when the
invoice for the service is raised or if it is dela!ed be!ond the period of 30 da!s fro copletion
of service the date of copletion of service would be considered( 'ccordingl!+ the service
recipient would be liable for the interest( /ow the question that a! arise is7 %hether servi6e
ta7 has t! be dis6harged b8 servi6e re6i5ient b8 6ash !r 6an CENVAT 6redit be utiised t!
5a8 servi6e ta7 !n reverse 6hargeA 's discussed+ service recipient would be liable to pa!
interest under *ule 1# of $B/%', credit *ules+ 200# read with section 4@ of the &inance 'ct+
1""#( 's regards to the use of $B/%', credit in respect of reverse charge in ters of *ule "L1M
LeM of the $B/%', credit *ules+ the $hallan evidencing such pa!ent is the appropriate
docuent( ,he Bxplanation below *ule 3L#M specificall! bars use of $B/%', credit where the
person liable to pa! tax is the service recipient( 'lso *ule 2LpM excludes fro the definition of
output service+ the service where the whole of service tax is liable to be paid b! the service
recipient( 8ence+ it is not possible to utilise the $B/%', credit for reverse charge pa!ents and
10@
the sae has to be paid onl! b! wa! of cash+ if the sae has to be used for the purpose of availing
$redit and utilising the sae( ,he question which reains to be answered is whether in respect of
output service under joint charge cenvat credit can be utilised for pa!ent(
C!n6usi!n
.n soe respects+ the new schee of taxation under reverse charge and joint charge echanis is
to enable wider coverage of especiall! unorganiGed sector and bring the into service tax net(
8owever practicall! there a! be lot of challenges which businessen have to face initiall! to
align the existing practices to the new schee considering variations in business odels(
10A
CENVAT CRE)$TS AN) PA(MENTS
$ntr!du6ti!n
,he concept of %', provides that the indirect taxes paid in the earlier point of tie are allowed to
be set off against the tax pa!able at a later point of tie subject to conditions laid down in the
$envat $redit *ules+ 200#( ,his facilit! was first introduced in the anufacturing sector b! the %
? Singh as :)D%', in the !ear 1"0A( .n the first stage credit was allowed onl! for inputs in the
anufacture of final output( .t too- 0 !ears for the Eovernent to allow the cenvat credit of
excise dut! paid on $apital goods( .n the Uear 2002 this credit was extended to input services
also( .t a! also require that the chain is not bro-en for axiiGation of the gain under this
schee( ,he credits are available to the service provider and consequentl! awareness of the
provisions as well as the procedures is to be ensured for effective copliance under service tax(
'ssessees who are new to both central excise as well as service tax should note that cenvat credit
schee is a schee which provides for a schee of set off of the $entral Bxcise duties on inputs
and capital goods and on service tax paid on input services against the liabilit! arising on taxable
services or excisable goods( ,hus where a service provider uses certain aterials which have
suffered duties of $entral Bxcise at the tie of procureent+ for the purpose of providing a
taxable service on which he is liable to pa! service tax+ the $entral excise duties can be set off
against the service tax liabilit!( ,his set off facilit! would also be available in respect of service
tax paid on input services used for providing the taxable service(
,he set off schee tal-ed above is presentl! governed b! the $envat $redit *ules 200# which is
coon to both assessees under $entral Bxcise as well as Service ,ax( ,he *ules provide for
cross7sectional credit i(e(+ a service provider not onl! gets credit for the service tax paid on input
services but even for $entral Bxcise duties on raw aterials and capital goods used for providing
the taxable service( ,he present sets of *ules are in force fro 10
th
of Septeber 200# which is
also the date fro which the cross7sectional credit is adissible( ,his cross sector credit facilit!
was introduced b! ?( $hidhabara and this is the first ta-en b! governent of .ndia to
introduce the coprehensive Eoods and Service ,ax( ,he effect of these *ules would be to
reduce the cash outflows for the service provider on account of service tax( 'n exaple would
clarif! this
(*ample E Ms.La=s%mi F Ass!ciates is a service pr!vider $%!se service ta* lia2ility is ,s.
1-8... and t%e service ta* paid !n input services li=e c!nsultancy +ees tec%nical testin)
pr!+essi!nal +ees and security services put t!)et%er is ,s. C8... and t%e "entral (*cise duties !n
104
t%e ra$ materials and capital )!!ds as s%!$n 2y t%e suppliersG inv!ices are ,s. 48.... I+ t%e
!penin) 2alance !+ credits +r!m t%e previ!us m!nt%s is ,s. 1.... t%e calculati!n !+ t%e service
ta* am!unt t! 2e paid 2y Ms. La=s%mi Ass!ciates in cas% is as +!ll!$s E
Particulars Am!unt ,s Am!unt ,s
Service tax liabilit! as stated above
Less@ A "redits availa2le +!r set !++
)pening balance of $envat credits
LQM $envat $redit on raw aterials and capital goods
LQM $envat credit in respect of input services
,otal credits available for set off
Deducting the credits total fro the service tax pa!able
'ount of service tax to be paid in cash
10+000
3@+000
A@+000
\\\\\\\\\\\\\
110+000
12@+000
L7M 110+000
\\\\\\\\\\\
*s( 1@+000
\\\\\\\\\\\
=ut for the set off available in the above exaple+ the service provider would have had to pa! *s(
12@+000 in cash which would also have increased the cost of his services to his custoer( ,he
$envat credit can be utiliGed onl! to the extent such credit is available on the last da! of the
7onth+ for pa!ent of dut! or tax relating to that onth(
,he $envat $redit *ules 200# specif! the duties and the taxes which can be used for set off as
well as the conditions to be followed b! the service provider in order to clai these credits set
offs( ,he credits would not be available in respect of the $entral Bxcise duties on raw aterials
and service tax on input services used exclusivel! for providing an exepted service or
anufacture of exepted goods( In respect !+ capital )!!ds t%e credit !+ "( duties !n suc%
capital )!!ds can 2e denied $%ere t%ey are used e*clusively +!r manu+acture !+ e*empted )!!ds
!r pr!vidin) e*empted services. ,hat eans if the anufacturer or service provider is able to
establish that at least part of the tie of the $apital goods used for taxable service or dutiable
goods so that he can ta-e 100J cenvat $redit on the sae capital goods( :oreover $envat credit
on input services would be available on receipt of the .nvoice provided the pa!ent is ade to
the input service vendor within the three onths( 8owever in respect of inputs and capital goods+
100
the credit would be adissible once such inputs or capital goods reach the factor! of the
anufacturer(
=efore we proceed with the discussion on $envat $redits+ it is iportant to consider soe of the
critical definitions as relevant to a service provider( .n this regard+ the definitions of NinputO+
Ninput serviceO and Ncapital goodsO assue significance( ,he reader is advised to refer the $envat
$redit *ules 200# for the exact text though the definitions have been discussed below with
reference to a service provider(
C!n6e5t !" $n5ut
"!ncept !+ input %as 2een revamped $it% t%e !2'ective !+ %arm!ni;ati!n 2et$een input and input
service e++ective .1..6.-.11 +!r 2etter understandin) t%e 2el!$ menti!ned ta2le pr!vides t%e
snap s%!t.
&or better understanding of the definition of input inclusions and exclusions which has been
tabled below
$n6usi!ns E76usi!ns
'll goods used in the factor! b! the
anufacturer of the final product
>ight diesel oil+ high speed diesel oil+
:otor spirit coonl! -nown as petrol
'n! goods including accessories cleared
along with the final product and goods used
for providing free warrant! for final
products(
'n! goods used for the construction of a
building or a civil structure or la!ing of
foundation or a-ing of structure for
support of capital goods(
Siilarl!+ goods used for generation of
electricit! or stea for captive use also
constitute inputs(
$apital goods except when used as parts
and coponents in anufacture of final
products and also do not include the otor
vehicles(
'll the goods used for providing an! output
service(
Eoods used priaril! for personal use or
consuption of an! eplo!ee including
food articles etc(
'll the goods used for anufacture of
$apital goods which are used in the
anufacture of final products(
Eoods having no relationship with
whatsoever with the anufacture of final
product(
$ssues4$m5a6t !n the said amendments
10"
o Bplo!ees using safet! precaution unifors+ in order to protect theselves
while discharging their dut! of anufacturing activit!+ cenvat credits on such
unifors would be available(
o Eoods such as storage rac-s used in stores+ tables and chairs used in
adinistrative departent5 accounts departent5 sofas chairs -ept at
receptions5 waiting roos shall not be allowed as credits(
o ,ools and equipents used for garden aintenance+ tube lights+ fans+ exhaust
fans fitted either at the anufacturing area or adinistrative areas shall not
be allowed as input credits(
o Eoods used as staff welfare easures+ such as seasonal gifts to eplo!ees+
coplientar! gifts to clients during new !ear5 Dewali5 $hristas etc shall
also be denied(
o Eoing b! the principles of $ost 'ccounting Standards7 #+ in order to arrive at
the value of the cost of the product such anufacturer would have to factor
in the above said cost in its final price and excise dut! have to be paid on
such final price+ when anufacturer is denied enjo!ing the input credits on
above said ites+ would certainl! ipact the argins of the anufacturer+
which could result in undue tax planning(
o Such dearcation and denial of credits would create a barrier in
ipleenting ES,(
$onsidering the gaut of changes+ which have been ade without an! care for the needs of the
tax pa!ers while starting off to assist the+ these provisions would further coplicate and
confound the sta-eholders(
C!n6e5t !" #ut5ut servi6e
N)utput serviceO as per *ule 2LpM of $envat $redit *ules 200#+ eans an! service provided b!
the provider of service located in taxable territor! 8owever output service shall not include the
services covered under the negative list of services and where the whole of the service tax is
liable to be paid b! the recipient of service( .f the service is notified as service+ service tax is
liable to be paid b! both service receiver and service provider such notified service would still
constitute the output service( ,herefore where the receiver is required to pa! the whole of the
service tax+ the sae has to be paid full! in cash( ,he logic is that an input service credit cannot
be used to pa! the service tax on another input service( 8owever whether this restriction would
appl! for input services other than E,' is being judiciall! exained( 't sae tie under
110
negative list based taxation+ there is a specific restriction on service receiver to discharge service
tax liabilit! under reverse charge b! setting off against cenvat credits(
C!n6e5t !" Ca5ita g!!ds
N$apital goodsO as per *ule 2LaM of $envat $redit *ules 200#+ eans the following goods
1( 'll goods falling under chapters 02+ 0#+ 0@+ "0+ heading A00@+ grinding wheels and the
li-e+ and parts thereof falling under heading A00# of the &irst Schedule to $entral Bxcise
,ariff 'ct
2( ?ollution control equipent
3( $oponents+ spares and accessories of the goods specified at clauses L1M and L2M above
#( :oulds and dies+ jigs and fixtures
@( *efractories and refractor! aterials
A( ,ubes and pipes and fittings thereofI and
4( Storage tan-
0( :otor %ehicles other than falling under the ,ariff headings 0402+ 0403+ 040#+ 0411 and
their $hassis including Dupers and ,ippers
,he aforesaid ites should be used
LaM &or providing output service or
LbM .n the factor! of the anufacturer of the final products+ but does not include an!
equipents or appliance used in an office(
$oponents+ Spares and 'ccessories in respect of L1M and L2M need not be fall under the sae
tariff heading of the capital goods it a! be fall under an! of tariff heading in $B,' 1"0@( $redit
on coponents+ accessories and Spares in respect of goods specified in L#M to L4M is not allowed as
capital goods since it is not specificall! defined still !ou can get the credit as Kinput3 on
satisfaction of the definition of Kinput3(
:otor %ehicle credit other than falling under the heading 0402+ 0403+ 040# and 0411 is now
eligible for all the service providers and anufacturers(
?rior to 30(0A(2012 $envat credit on Dupers or tippers falling under chapter 04 are eligible onl!
for those who are providing the output service of site foration and ining service+ provided+
such dupers or tippers are registered in the nae of the service provider and used for providing
such taxable services(
'fter 01(04(2012 $envat credit on Dupers and ,ippers is available to all the service providers
and to all the anufactures used in anufacture( *estriction of registration of Duper and ,ipper
111
in the nae of the service provider is not applicable after 01(04(2012( ,hat eans service
provider provided the service with the aid of the tipper without registering also can get the credit(
L=M :otor vehicles designed for transportation of goods covered under ,ariff headings 0402+
0403+ 040#+ 0411 and their $hassis would also be regarded as capital goods where the! are
registered in the nae of the service provider and who used such vehicles for
1( ?roviding the output service of *enting of such otor vehicle
2( ,ransporting the inputs and capital goods for providing an! output service
3( ?roviding the output service of $ourier 'genc!
?rior to 30(0A(2012 credit on :otor vehicle is eligible to seven service providers onl! now credit
on otor is available to all the service providers( .f the service is provided with the aid of the
otor vehicle without registering in the nae of the service provider+ credit on such otor
vehicle is rightl! deniable(
L$M :otor %ehicle designed to carr! the passenger used for providing the output service of
1( ,ransportation of passenger
2( *enting of such otor vehicle
3( .parting otor Driving s-ills
Driving School having the otor vehicle which is designed to carr! the passengers providing
driving s-ills to learners is eligible for the credit provided otor vehicle registered in the nae of
service providers( .f the driving school having the :otor vehicle which is designed to carr! the
goods provided driving s-ills to learners+ credit on the otor vehicle is not eligible(
$redit on coponents+ spares and accessories used for the above otor vehicles is also eligible(
,he definition of capital goods under $opanies 'ct 1"@A or under .ncoe ,ax 'ct 1"A1 would
not be valid here(
C!n6e5t !" $n5ut Servi6e
i( ,he &inance =ill 20112 has now revaped the definition of 3input service3 with the
intention of providing clarit!( ,his definition is effective fro 01(0#(20112 .nput serviceO
eans an! service used b! a provider of output service for providing an output service or
ii( Used b! the anufacturer+ whether directl! or indirectl! in or in relation to the
anufacture of final product and clearance of final products up to the place of reoval
.t includes services used in relation to
112
:oderniGation or renovation or repairs of the preises of provider of output service
or an office relating to such preises
'dvertiseent or sales prootion
:ar-et research
Storage up to the place of reoval
?rocureent of inputs
'ccounting+ auditing+ financing+ recruitent and qualit! control+ coaching and
training+ coputer networ-ing+ credit rating+ share registr! and securit!+ business
exhibition+ legal service
.nward transportation of inputs or capital goods and
)utward transportation up to the place of reoval
=ut excludesF
aM Service portion in the execution of a wor-s contract and construction of a coplex+
building+ civil structure or a part thereof+ including a coplex or building intended for
sale to a bu!er+ wholl! or partl!+ to the extent used for
$onstruction or execution of wor-s contract of a building or a civil structure or a
part thereof or
>a!ing of foundation or a-ing of structures for support of capital goods(
bM Services b! wa! of renting of a otor vehicle should not be available as credits+ insofar
as the! relate to a otor vehicle+ which is not an eligible capital goods
cM Services such as general insurance service+ servicing+ repair and aintenance to an extent
the! relate to a otor vehicle+ which is not an eligible capital goods except when used b!F
' anufacturer of a otor vehicle in respect of a otor vehicle anufactured b!
such person
'n insurance copan! in respect of a otor vehicle insured or re insured b! such
person
dM Services such as those provided in relation to outdoor catering+ beaut! treatent+ health
service+ cosetic and plastic surger!+ ebership of a club+ health and fitness centre+ life
insurance+ health insurance and travel benefit extended to eplo!ees on vacation such as
leave or hoe travel concession+ when such services are used priaril! for personal use
or consuption of an! eplo!ee(
&or better understanding of the definition of input services inclusions and exclusions
which has been tabled below
113
.nclusions Bxclusions
'n! service used b! the provider of output
service for providing output service or
Used b! a anufacturer whether directl! or
indirectl! in relation to anufacture of final
product and clearance of final product upto
the place of reoval
Service portion in execution of wor-s
contract+ construction services used in
construction of a building or $ivil
structure or used for a-ing the structure
for support of capital goods(
Services in relation to
:oderniGation or renovation or
repairs of the preises of
provider of output service or an
office relating to such preises
'dvertiseent or sales
prootion
:ar-et research
Storage up to the place of
reoval
?rocureent of inputs
'ccounting+ auditing+ financing+
recruitent and qualit! control+
coaching and training+ coputer
networ-ing+ credit rating+ share
registr! and securit!+ business
exhibition+ legal serviceM
.nward transportation of inputs
or capital goods and
)utward transportation up to the
place of reoval
Services provided b! wa!s renting of
otor vehicles and the service provider is
not entitled to credit on capital goods( .f
the service provider is entitled to credit on
capital goods he is entitled to credit on
renting of otor vehicles input services(
Services such as those provided in
relation to outdoor catering+ beaut!
treatent+ health service+ cosetic and
plastic surger!+ ebership of a club+
health and fitness centre+ life insurance+
11#
health insurance and travel benefit
extended to eplo!ees on vacation such
as leave or hoe travel concession+ when
such services are used priaril! for
personal use or consuption of an!
eplo!ee(
Services of general insurance+ servicing+
repair and aintenance services relatable
to otor vehicles which are not capital
goods for the service providers( ,he
cenvat credit on repair+ aintenance
services are eligible for otor vehicle
anufacturer and for insurance copan!(
.ssues on the said aendents
o $redit on otor vehicles except otor vehicles covered under 0402+
0403+ 040# and 0411 extended to all(
o $envat credit on services of renting of otor vehicles is not eligible for
the credit except credit on otor vehicles is eligible for the credit(
,he aendent to this again appears to be short sighted and not in line with the basic schee of
the cenvat credit( ,he ain purpose of avoiding the cascading effect of ultipoint taxes would be
curtailed in the new provisions(
E7em5ted Servi6e means
1( ,axable service which is exept fro whole of the service tax b! the wa! of /otification
2( ' service on which no service tax is leviable as per Section AA=
3( ' taxable service whose part of value is exepted on the condition that no credit on
inputs and input services are available(
=ut shall not include a service which is exported in ters of *ule A' of Service tax *ules+ 1""#(
?rior to 01(04(2012 there was an explanation to the definition of the Kexepted service3 sa!ing
that trading of the goods is exepted service( &ro the 01(04(2012 there is no need of
explanation for trading of the goods since trading of the goods will cover under the L2M of the
above(
11@
)uties4ta7es :hi6h 6an be 6!nsidered "!r set !"" !r avaiing 6redits
,he duties and taxes which can be considered as per *ule 3L1M of $envat $redit *ules 200# for
set off or availent are as follows
=asic Bxcise Dut! L&irst Schedule to $B,'M
Bducation cess on excisable goods and on taxable services
Secondar! 8igher Bducation $ess of excisable goods and on taxable services
Service tax u5s AA+ AA' and AA= of $hapter % of &inance 'ct
Service tax paid under reverse charge echanis
$ounter %eiling Dut! u5s 3 L3M of $ustos ,ariff 'ct on iported goods
,he additional dut! leviable under section 3 of the $ustos ,ariff 'ct+ equivalent to the dut!
of excise specified above Lalso called $%D+ which is paid when goods are iportedM
,he aforesaid duties should have been incurred on input or capital goods received in the preises
of the provider of output service on or after 10(0"(200# and the taxes should have been paid on
an! input service received b! the provider of output services on or after 10(0"(200#(
,he service provider cannot clai credit of additional dut! LS'D #JM leviable under section 3L@M
of the $ustos ,ariff 'ct+ b! virtue of proviso to *ule 3L1M of $envat $redit *ules 200#(
+tiiHati!n !" the 6redits
,he service provider who avails $envat $redit on inputs+ capital goods or on input services can
utiliGe the credits as per *ule 3L#M of $$* 200#+ either for
?a!ent of excise dut! on an! final product or *eversal of $envat credit availed on
inputs when the inputs are reoved as such or after partial processing Lother than for
providing taxable servicesM or
*eversal of $envat credits under Sub rule L2M of *ule 1A of $entral Bxcise *ules+ 2002 or
?a!ent of service tax on output service or
*eversal of $envat credit on capital goods where the capital goods have been reoved as
such other than for providing taxable services
Bducation cess and secondar! higher education cess credit on service tax or on excisable goods
can be utiliGed for pa!ent of the $ess on service tax and5or cess on excisable goods( =ut the
credits of education cess and S8B cess cannot be used for pa!ent of an! other tax or dut!(
11A
Bducation cess credit is to be used for pa!ent of education cess and S8B cess credit is to be
used for pa!ent of S8B cess(
8owever credit of S8B cess can3t be used to offset education cess liabilit!+ siilarl! credit of
education cess can3t be used to offset liabilit! of excise dut!(
%hen in5uts46a5ita g!!ds are rem!ved !utside the 5remises
's per *ule 3L@M+ when inputs or capital goods on which cenvat credit has been ta-en+ are
reoved as such fro the preises of the service provider+ the cenvat credit availed would have
to be reversed unless the reoval was for providing taxable service( ;here the reoval of capital
goods or inputs is for providing an output service+ there would be no tie liit for receipt of the
sae bac- into the preises of the service provider( 8owever+ the service provider is advised to
trac- the oveent of inputs and capital goods using of challans and registers to avoid flouting
of *ules and end up with disputes5 deands(
.n case of capital goods reoved after use+ where the credits are to be reversed+ the reversal
would be reduced on S>: basis with as specified below for each quarter of a !ear or part thereof
fro the date of ta-ing the cenvat credit+ nael!
LaM &or coputer and coputer peripherals
&or each quarter in the first !ear < 10J
&or each quarter in the second !ear < 0J
&or each quarter in the third !ear < @J
&or each quarter in the fourth and fifth !ear < 1J
LbM &or capital goods other than coputer and coputer peripherals at 2(@J per quarter(
.f the capital goods reoved as scrape or waste the anufacturer shall pa! dut! equal to
dut! on transaction value( .f the service provider reoved the capital goods as scrape and
waste he need pa! the dut! on transaction value since the earlier Sub rule L@'M is tal-ing
onl! about the anufacturer (,his was the position prior to 14(03(2012(
'fter 14(03(2012 the aount required to be reverse when the capital goods reoving after use or
as waste and scrape is aount calculating <2(@J per each quarter after ta-ing the cenvat credit
or dut! leviable on transaction value of $apital goods or on scrape whichever is high(
*ule 3 L@M has also been aended to further include that the reversal of credit5 pa!ent of dut!
would not be required on inputs when the! are reoved under free warrant!( &or this purpose+
free warrant! eans Kwarrant!3 provided b! the anufacturer+ the value of which is included in
the price of the final product and is not charged separatel! fro the custoer(
114
%hen in5uts46a5ita g!!ds are :ritten !"" "u8
;hen inputs or capital goods before being put to use are written off full! partiall! or a provision
for such write off is ade in the boo-s of accounts then the anufacturer or service provider shall
pa! an aount equivalent to the cenvat credit ta-en on such input or capital good( Subsequentl!
where such input or capital good is put to use for anufacture or providing taxable service+ the
anufacturer or service provider would be entitled to ta-e credit of the aount paid earlier
subject to the other provisions in the *ules(
Barlier these provisions were applicable to anufacturer onl!( &ro 04(04(200" vide notification
1A5200" it is ade applicable to service providers as well(
,he following changes shall have iediate effect fro 01(03(2011
*ule 3L@=M is also aended and now the rule requires that the $envat credit availed to be paid
bac- even if the $envat availed inputs or capital goods are partiall! written off( Barlier it was
required onl! when the goods are full! written off( ,his change is effective fro 1st :arch 2011(
Restri6ti!n in 6ase !" 6a5ita g!!ds
's per *ule #L2MLaM of $$* 200#+ the cenvat credit in respect of capital goods received in the
preises of the service provider who provides taxable services+ shall be ta-en for an aount not
exceeding @0J of the dut! paid on such capital goods in the sae financial !ear and the balance
in the subsequent financial !ear if the capital goods are in possession of such service provider( .f
the service provider had not ta-en an! credit on a capital goods in the first financial !ear in which
it is received he can utiliGe 100J credit in the subsequent financial !ear( ,his view was supported
in the case of 6eihin &ie ?vt $$B+ ?une7... 2004 L213M B(>(, A34( .n case the assessee is eligible
to avail exeption under a notification based on the value of clearances in a financial !ear whole
of the credit on capital goods can be availed in the first !ear itself( ,he criterion as to possession
would not appl! to coponents+ spares+ accessories+ refractories and refractor! aterials+ oulds+
dies and goods falling under heading A00@+ grinding wheels and the li-e+ and parts thereof falling
under heading A00# of &irst Schedule of $entral Bxcise ,ariff 'ct( :oreover+ in case the capital
goods are cleared as such in the sae financial !ear of its purchaseM+ then balance credit can be
claied+ and subsequentl! entire credit needs to be reversed( ,he following changes shall have
iediate effect fro 01(03(2011
*ule #L2M state that the $envat credit would be allowed even on capital goods which are received
outside the factor! b! a service provider and also available to the anufacturer provided the! are
used for generation of electricit! for captive used in factor!(
110
;ith effect fro the 01(0#(2012 service provider can reove $apital goods to an! place for the
provision of output service without reversal of cenvat credit subject to docuentar! proof of
location of the capital asset( L&orth proviso to *ule #L2MLaMM
;here cenvat credit is claied on capital goods+ the dut! aount cannot for part of the cost of
the capital goods for the purpose of claiing depreciation u5s 32 of .ncoe ,ax 'ct 1"A1 b!
virtue of *ule #L#M of $$* 200#( )ne cannot clai both the cenvat credit up to @0J of dut! in
the first !ear and depreciation u5s 32 of .ncoe ,ax 'ct+ 1"A1 for the next @0J of dut! and
thereafter next !ear claiing the cenvat on reaining @0J credit( .f depreciation is claied on
the dut! aount on which cenvat credit had been claied earlier+ the credit would have to be
reversed(
$apital goods a! even be acquired on lease+ hire purchase or loan agreeent fro a financing
copan! u5r #L3M and credits would still be available as long as docuentation is in order(
Can the inputs or capital goods on which cenvat credit is clai(ed, be sent out to a sub
contractor for processing?
,he input or capital goods on which credit has been claied+ can be sent out under *ule #L@MLaM
of $envat $redit *ules 200# to a job wor-er for processing+ testing+ re7conditioning etc( ,he
goods after processing+ testing etc are to be received bac- in the preises of the anufacturer
within 100 da!s fro the date of sending the sae( ;here it is not so received+ the cenvat credits
availed earlier in respect of the inputs or capital goods needs to be reversed which can again be
claied bac- once the goods are received an! tie after the expir! of the said period of 100 da!s(
,here is no restriction to the service provider as to receipt within 100 da!s in case of capital
goods( ,he goods are norall! sent under a pre7nubered challan which would consist of details
li-e+ nae and address of the job wor-er+ the description of the goods+ value with dut! aount+
nature of processing required and the date on which the ites are expected( ,he challan can have
a provision for authenticating the receipt and despatch details at his end along with details of
dispatch li-e+ goods sent bac-+ scrap generated if an!+ processing underta-en+ date of sending and
details of invoices raised if an!( ,he service provider can also aintain a register to -eep trac- of
aterial oveents showing the issue and receipt details(
,he following aendent is effect fro 01(03(2011
,he *ule # L4M is aended to state that when an! pa!ent ade towards the input service is
returned then the anufacturer or service provider who has ta-en the credit on such input service
11"
shall pa! proportionate aount to the cenvat availed in respect of such aount returned( ,his
pa!ent can be b! utiliGing the $envat credit or otherwise(
Service tax credit can be utiliGed fro the da! on which bill or invoice or challan is received
provided pa!ent for such service is ade within the 3 onths( .f the pa!ent had not ade
along with service tax to the service provider+ after the end of the 3
rd
onth credit ta-en has to
reversed and again credit can be availed on the date of pa!ent(
Cenvat Credits N Re"und "!r e75!rter !" servi6e
's per *ule @ of $$* 200#+ where an! input or input service is used in providing an output
service which is exported L *ule A' of Service ,ax *ules+ 1""#M+ the $envat credit in respect of
that input or input service can be claied the refund of Bxcise dut! on input and service tax paid
on input services subject to the conditions laid down b! the =oard(
*efund aount V LBxport turnover of goods Q Bxport turnover of servicesMZ $envat credit5total
turnover
Bxport turnover of services eans
'ount received during the relevant period of export of services Q ?rovision of the service is
copleted during the relevant period of export of services for which the advance had ta-en period
prior to the relevant period of export of services(7 advances received during the relevant period of
export for which provision of service has not copleted b! the end of relevant period of export(
,otal ,urnover eans su total of
1( %alue of dutiable goodsQ value of exepted goods Q value of exported goods
2( %alue of export turnover deterined above Q value of all other services during the
relevant period of export(
3( %alue of all the input reoved as such against invoice
,he above provision will appl! for the exports ade on or after 01(0#(2012 for the exports ade
prior to 01(0#(2012 old provision of *ule @ will appl!( .n the old provision exporter has to first
utiliGe the credit towards the doestic clearances and then can go for refund of credit fro the
departent( /ow the *ule @ is tal-ing onl! about refund of credit without going for utiliGation of
credit for doestic clearance(
&ro 01(04(2012 a new provision was introduced to allow the refund of cenvat credit for the
service providers whose service is covered reverse charge echanis and he is unable to utiliGe
the credit for the pa!ent of service tax on output activit!(
,his refund shall not be allowed where the provider of output service avails of either
Drawbac- under the $ustos and $entral Bxcise Duties drawbac- rules 1""@ or
120
$lais rebate of dut! under $entral Bxcise *ules 2002 or
$lais rebate of service tax under Service ,ax *ules+ 1""# in respect of such dut!5tax(
Rue ; N Reversa !" Cenvat Credit
,here is been a coplete change in the options available to anufacturer and5 or service provider+
the essence of which is discussed below+ this rule is effective fro 01(0#(2011
,he heading of the rule has also been changed as K)bligation of a anufacturer or producer of
final products and a provider of output service3( Barlier the heading was K)bligation of
anufacturer of dutiable and exepted goods and provider of taxable and exepted services(
,his ver! change in the title of the rule will have serious iplication as the arguent of non
applicabilit! of the rule A+ when the anufacturer anufacturing dutiable goods also provides
services which are not liable to service tax would not stand( ,he converse of which also holds
good( .n other words the assessee is curtailed to ta-e the benefit of input5 input services+ when the
anufacturer was providing exept services and service provider anufacturing exepted
goods( &urther previousl! with trading not being considered either as exepted goods or
exepted services+ the benefit of input services which were coonl! used for trading activit!
was possible+ now with the change in definition of exepted service to include trading and also
with the oission of the words N'ctivities in relation to businessO+ such arguents would not
stand in the law(
T%e +!ll!$in) are !pti!ns availa2le under t%e present set !+ rules.
i( Sub *ule 1 provides that the $envat credit benefit would not be allowed on inputs or input
services which are used in or in relation to anufacture of exepted goods or for provision
of exepted service( Barlier the rule has the wordings that the credit would not be allowed
on Kinput or input service which is used in the anufacture of exepted goods or for
provision of exepted service3( Due to this change+ now the assesse is prevented fro
availing full credit on input or input service which are used in relation to anufacture of
exepted goods or provision of exepted goods(
ii( ,he sub rule 2 provides for aintenance of separate records in ore detailed anner in
respect of receipt+ consuption an inventor! of inputs and the receipt and use of input
services used
a( in or in relation to anufacture of exepted goodsI
121
b( in or in relation to the anufacture of dutiable final products excluding
exepted goodsI
c( for the provision of exepted servicesI
d( for the provision of output services excluding exepted services(
iii( ,he second option is that the assese would be required to pa! the tax at AJ+ when we
wishes not to aintain records as discussed above Barlier sub rule 3 required that the
provider of output service providing exepted service to pa! @J on the value of exepted
service and avail the $envat credit full! Lunless an! input5input service is exclusivel! used
for exepted serviceM( /ow this rate of @J has been increased to AJ(
iv( .n addition to the above two options( ,he new third option would be to aintain separate
accounts for the receipt+ consuption and inventor! of inputs as provided in the new rule
and pa! an aount as deterined under sub7rule L3'M in respect of input services( .n
addition to the above changes+ a new explanation has been added to state that the pa!ent
of aount of AJ as discussed above would be deeed to be $envat credit not ta-en for the
purpose of an exeption wherein exeption is granted on condition that no $envat credit
of inputs and input services shall be ta-en(
,he calculations 5 steps for ascertaining provisional credits in relation to exepted activit! would
be as follows 7
1( 'scertain the cenvat credit attributable to inputs services used for anufacturing
exepted goods5 providing exepted services+ if an! and let the credits be '(
2( 'scertain the cenvat credits provisionall! in respect of inputs services used for exepted
activit! L=5$M Z ,otal credits ta-en during the relevant onth not including aount '
indicated above(
&or this purpose+ = V total value of exepted activit! provided during the preceding financial
!ear
$ V total value of dutiable goods anufactured and reoved during preceding financial !ear Q
total value of exepted services and taxable services provided during preceding financial !ear(
At t%e end !+ t%e relevant +inancial year+ the following calculations would have to be ade
1 'scertain the cenvat credit attributable to inputs services used for anufacturing
exepted goods5 exepted services if an! and let the credits be 8(
122
2 'scertain the cenvat credits in respect of input services used for providing exepted
services5 goods during the financial !ear as follows LJ56M Z ,otal credits ta-en during
the relevant financial !ear not including aount 8 indicated above(
&or this purpose+ J V total value of exepted services 5 goods provided during the relevant
financial !ear
6 V total value of dutiable goods anufactured and reoved during relevant financial !ear Q total
value of exepted services and taxable services provided during relevant financial !ear(
&or the purpose of *ule A of cenvat credit *ules+ exepted eans the following
'ctivit! Status ,reatent
,rading activit! Bxepted service Difference between the
cost of goods sold and
sale price or 10J of cost
of goods sold needs to be
considered
Eoods attracting 1J rate of
dut! as specified in
notification 152011+ 2J
w(e(f 14(03(2012 vide
notification no 1A52012 $B
Bxepted Eoods ,urnover of such 1J
rated goods to be
considered
?a!ent of tax on taxable
services+ with a condition
that benefit of credit of input
and input services is not
available
Bxepted Service ,he portion of value in
respect of taxable services
on which service tax is
not paid would be treated
as the value of exepted
services (
;here the credits ascertained finall! in relation to exepted activit! are less than the credits
ascertained provisionall!+ the service provider can ta-e credit for the differential aount(
;here the credits ascertained finall! in relation to exepted activit! are ore than the credits
ascertained provisionall!+ the service provider would have to pa! the differential aount on or
before the 30
th
June of succeeding financial !ear( ;here the pa!ent is ade after 30
th
of June+
interest at 2#J p(a( would be pa!able for the period of dela!(
123
's per *ule ALAM of $envat $redit *ules+ 200#+ if excisable final products are dispatched without
pa!ent of dut! to B)U5SBX5B8,? export of goods5deeed exports goods supplied against
international copetitive bidding in ters of notification 1252012 $B+ supplied for foreign
diploatic ission or consular issions or career consular offices or diploatic agents such
supplies need not be considered as exepted goods and the assessee need not reverse cenvat
credit or pa! an! aount(
;ef 1(#(2011+ as per *ule ALAM 1renubered and substituted b! *ule AL4M wef 1(4(20122 we in
case a service provider providing taxable services without pa!ent of service tax to a unit or a
developer of a SBX without pa!ent of service tax for their authoriGed operations+ then rule A of
$envat credit rule would not be applicable(
&urther as per renubered rule A L4M has been introduced which sa!s $envat credit on inputs and
input services need not be reversed when the export of services are ade(
' new rule A L0M has been introduced which sa!s exepted services shall not include a service
which satisfies conditions specified under rule A' of Service ,ax *ules+ 1""# and pa!ent for
the service is received in convertible foreign exchange which has been received within the tie
liit or within extended tie liit given b! *=. fro tie to tie
*eaders a! exaine whether the new provision is an iproveent over the earlier one which
has ta-en a few !ears to be understood(
)!6umentati!n :!rk t! be d!ne
,he service provider should ensure that he clais the cenvat credits on a valid docuent
satisf!ing the requireents of *ule " of $envat $redit *ules 200#( ,he docuents a! be 7
'n invoice issued b! a anufacturer
'n invoice issued b! an iporter
'n invoice issued b! a registered first stage or second stage dealer
Suppleentar! invoice issued b! a anufacturer5iporter
=ill of entr!
$ertificate issued b! an 'ppraiser of $ustos in respect of goods iported through a
&oreign ?ost )ffice
' challan evidencing pa!ent of service tax where the service receiver is liable to pa!
u5s A0L2M
'n invoice+ bill or challan issued b! a provider of input service on or after 10(0"(200#
'n invoice+ bill or challan issued b! an .nput Service Distributor
12#
,he service provider would also be better off aintaining a cenvat credit register disclosing the
details as to the cenvat credits being claied( ,he register can disclose details as to the nae of
the supplier5input service provider+ bill nuber+ date+ basic value of dut!5tax+ education cess+ S8B
cess+ assessable value+ E*/ reference for aterial receipts+ pa!ent reference for input services+
colun for debits+ credits balance( ,his record would facilitate the tas- of preparation of returns
which would then be easier(
*ule "L1MLbbM has been introduced whereb! it debars the ta-ing of credit of service tax paid on a
suppleentar! invoice of a provider of output service where the dut! was short levied b! reason
of fraud+ collusion or an! willful is7stateent or suppression of facts or contravention of the
provisions( ,his rule would get attracted depending on the facts of each case(
>%ere t%e assessee !pts +!r ascertainin) t%e credits as per t%e met%!d prescri2ed under ,ule C !+
"", -..6 !n a pr!visi!nal 2asis
,he following particulars would have to be intiated to the Superintendent of $entral Bxcise
while exercising this option
/ae+ address and registration nuber of the provider of output service5anufacturer of
goods
Date fro which the option is to be exercised
Description of dutiable goods or output services
Description of exepted goods or exepted services
$envat credit of inputs and input services l!ing in balance as on the date of exercising the
option under this condition
)nce the credits have been deterined finall! and the excess credits availed paid bac- or credits
short availed have been availed+ the following details would have to be sent to the S$B within 1@
da!s fro date of pa!ent or adjustent
$envat credits attributable to exepted goods and exepted services for the whole
financial !ear+ deterined provisionall! on onthl! basis
$redits attributable to exepted goods and exepted services for the whole financial
!ear deterined finall!
'ount short paid with the date of pa!ent of the said aount
.nterest pa!able and paid on the shortfall
$redits ta-en on excess pa!ents ade earlier
12@
C!n6e5t !" in5ut servi6e distribut!r
;here the service provider is providing the output service fro the ultiple locations can receive
input services invoices at one location and distribute the credit on input services to various
locations of the service provider subject to the following conditions(
1( $redit distributed shall not exceed the aount of service tax paid on input service
2( $redit shall not be distributed on input service which is used exclusivel! in providing the
exepted service
3( ;here an input service which is used exclusivel! in one unit entire credit on such input
service shall be distributed to that unit onl!(
#( ;here an input service is used for ore than one location credit on such input shall be
distributed to all such units on the basis of turnover of each unit to the total turnover of
all the units(
,his facilit! could be used where the anufacturer or service provider has a s!ste of receiving
the bills for input services at the 8ead )ffice or at branch offices but the credits are to be
distributed to the registered service units providing taxable services or the factories engaged in
anufacturing( ;here the assessee has independent registration for the various service
units5factories+ this schee would be particularl! useful( ,he schee requires the 8ead
)ffice5branch office see-ing to distribute the cenvat credits to the individual units+ to register
under service tax as an .SD L.nput Service DistributorM(
)nce registered+ the 8ead )ffice5branch office would issue an invoice+ bill or a challan to each of
the recipient to who the credit is sought to be distributed( ,he invoice+ bill or challan is to be
seriall! nubered and shall contain
1( Details as to nae+ address and registration nuber of the provider of input services
2( Details of the docuent5bill given b! such input service provider
3( /ae and address of the input service distributor
#( /ae and address of the recipient of the distributed credit
@( ,he aount of the credit that is sought to be distributed
*eaders should note that the concept of input service distributor would enable in distributing the
credit of service tax on input service whereas what is envisaged u5r 4' is availent of credit of
excise dut! on inputs and capital goods( ,he availent u5r 4' would require the office or branch
passing on the credit to register as a dealer under central excise and aintain registers recording
12A
the oveent of aterials i(e( receipt fro supplier and issue to preises where credits is to be
availed as well as the details as to dut! per unit paid and dut! per unit passed on to the preises
where credit is to be availed( ' dealer3s invoice5bill or challan would have to be raised which
would indicate the aount of credit passed on along with the description of goods+ value+ details
of consignor5consignee etc( ' quarterl! return within 1@ da!s fro the end of the quarter would
have to be filed b! the consigning office5branch5unit(
Pa8ment !" servi6e ta7
,he pa!ent of service tax is to be ade to the credit of the $entral Eovernent b! the @
th
of the
onth iediatel! following the calendar onth LA
th
of the succeeding onth instead of @
th
if
pa!ent is ade electronicall!M in which the pa!ents towards taxable services are received+ as
per *ule A of Service ,ax *ules 1""#( &or the period ending :arch 31
st
+ the pa!ent would have
to be ade b! the 31
st
of :arch and not b! @
th
of 'pril of the calendar !ear( 8owever &inance =ill
2011 has introduced the concept of ?oint of ,axation *ules 2011+ for understanding the concept
and its relevance(
.n case the service provider happens to be an individual+ proprietar! fir or a partnership fir+
the pa!ent has to be ade b! the @
th
of the onth iediatel! following the quarter LA
th
of the
onth succeeding the quarter if pa!ent is ade electronicall!M in which the pa!ents towards
taxable services are received( ,he cenvat credits position consequentl! would be deterined as at
the end of the relevant onth5quarter as the case a! be depending on the pa!ent period(
'ssessees pa!ing service tax of ore than *s 10 >a-hs are now copulsoril! required to pa!
service tax through internet ban-ing(
'ssessees would also have the option to pa! service tax in advance and then adjust the aount
paid towards the service tax liabilit! on services provided( .ntiation would have to be given to
the S$B within 1@ da!s once pa!ent is ade( &or this+ rule AL1'M has been introduced in
Service ,ax *ules 1""#(
Can Cenvat credits be transferred?
's per *ule 10L2M of $envat $redit *ules 200#+ where a provider of output service shifts or
transfers his business on account of change in ownership or on account of sale+ erger+
aalgaation+ lease or transfer of business to a joint venture+ with the specific provision for
transfer of liabilities of such business+ then such provider of output service shall be allowed to
124
transfer the $envat credit l!ing unutiliGed in his accounts+ to such transferred+ sold+ erged+
leased or aalgaated business subject to perission5 following procedure as prescribed(
,he stoc- of inputs as such or in process or the capital goods are also to be transferred to the new
site5owner and the accounting of such inputs5capital goods should be to the satisfaction of the
'ssistant $oissioner of $entral Bxcise5Deput! $oissioner of $entral Bxcise(
Can the old balance of Cenvat Credit be brought forward?
,he service provider can bring forward the unutiliGed credits l!ing in his boo-s as on 10(0"(0# in
respect of the credits availed under Service ,ax $redit *ules 2002 and utiliGe the sae in
accordance with these rules(
Can credits be ta:en on inputs and capital goods received under invoice, bill or challan
issued by another office of service provider?
*ule 4' of $$* 200# allows distribution of credits on inputs b! the office or another preises of
output service provider( 8ere+ the credits can be ta-en on inputs as well as capital goods received
on basis of an invoice or a bill or challan issued b! an office or preises of the said provider of
output service which receives invoices towards purchase of inputs and capital goods( ,he
assessee would have to note that provisions applicable to first stage and second stage dealers
under $entral Bxcise have been ade applicable in regard to the office issuing such invoice5bill
and distributing credit(
Re6!ver8 !" 6envat 6redit :r!ng8 taken !r err!ne!us8 re"unded
;here the credit was ta-en and utiliGed wrongl! or erroneousl! refunded the sae shall be
recovered along with the interest fro the service provider under Section 43 and 4@ of the
&inance 'ct+ 1""#(
C!n"is6ati!n and 5enat8 in 6ase !" :r!ng avaiment !" Cenvat Credits
's per *ule 1@L1M of $$* 200#+ where cenvat credit ta-en or utiliGes in respect of inputs or
capital goods or in respect of input services is wrongl! or in contravention of these *ules+ then all
such goods shall be liable to confiscation and the penalt! would be *s(200057 or dut! on such
goods or services whichever is greater(
;here under *ule 1@L3M credit on inputs or input services or on capital goods has been ta-en or
utiliGed wrongl! b! wa! of fraud+ collusion+ willful is7stateent or suppression of facts or
120
through contravention of an! of the provisions of the &inance 'ct or rules ade there under+ with
the intention to evade pa!ent of service tax+ the service provider shall be liable to pa! penalt!
equal to service evaded in accordance with section 40 of the &inance 'ct(
?rior to 24(02(2010 Sub rule L1M will appl! onl! to :anufacturers fro 24(02(2010 Sub rule L1M
will appl! both to the anufacturers and service providers( =ear reading of the sub rule L1M and
sub rule L2M gives an ipression that penalt! under sub rule L1M and L2M is equal to $envat
wrongl! ta-en(
;hen the *ule 3 is tal-ing about fraud+ suppression of the fact penalt! equal to cenvat wrongl!
utiliGed( .f there is no fraud+ suppression of the fact penalt! will be leviable under Sub rule L1M( .t
is settled position of the law that when there is no eleent of ensrea cenvat availed with the
bonafide belief iposition of the penalt! equal to cenvat ta-en under Sub rule L1M is not
sustainable( .n such situation penalt! leviable is iniu penalt! prescribed under Sub ruleL1M
that is *s( 200057( =agpat $ooperative Sugar :ills >td %s $$B+ :eerut7.. 2004 L212M B(>(, 44
L,ri7DelM it
P!inters "!r Pra6ti6e
1( ,he area of $envat credit is an area where cost control is possible as also tax planning(
%er! often+ the assessees have been found to have neglected the $envat credits aspect and
consequentl! pa! ore tax in cash(
2( 't ties non consideration of the aspects of credit a!be the difference between getting
an order or losing one( ,his is especiall! true now that the ajorit! of goods are liable for
central excise and services for service tax( ,herefore the need to avoid brea-ing the
cenvat chain is iportant(
3( ;here ever taxable and exepted services are provided+ the segregation of the inputs and
input services towards taxable and exepted services has also been found to be
inaccurate( ,his results in an! assessees giving up on credits rather than aintaining
detailed records and availing the credits that one is entitled to as an assessee(
#( ,he assessees should also ensure that where ever services are sub7contracted+ the sub7
contractor charges service tax as the sae can be availed as credit provided a proper bill
as discussed earlier is available(
@( ,he definition of input service should be noted carefull! as it differs fro that of inputs
and capital goods in such a wa! that the service provider can post 1(#(2011 avail credits
12"
in respect of services used in relation to oderniGation+ renovation and repairs of his
preises(
A( ;here the service provider has substantial service exports+ he should a-e it a point to
go in for either refund of credits or rebate of service tax both of which have been
explained in a separate chapter( ,he ., sector could therefore go in for these benefits if
exports are substantial(
4( ,he professional would have to be careful where the assessee opts for provisional
deterination of credits as an! change in value of either goods or services subsequent to
30
th
of June after end of financial !ear could lead to a situation where the credits for the
!ear would have to be deterined once again( ,his a! happen as a result of an! audits
being carried out b! the departent or internall! b! the anageent itself(
0( .t a! be noted that there is no tie liit specified for availent of issed out credits(
130
VAL+AT$#N +N)ER SERV$CE TA&
's entioned earlier service tax is charged under section AA= of &inance 'ct+ 1""# at a
prescribed percentage on K%alue3 of taxable service provided or agreed to be provided( ,his
chapter gives the provisions and echanis to deterine the value on which the service tax is
pa!able( Since it is a tax on services which is intangible+ valuation of such services for the
purpose of charging the tax would assue significance( ,his is because unli-e tangible propert!
in the for of goods which can be copared to other goods in ters of ph!sical attributes and
qualit!+ services cannot be copared easil!( ,he service provided b! a technician need not be of
the sae qualit! as that provided b! another technician( Bven if the! were to be copared+ the
coparison would be ver! difficult as the qualities that have to be copared would be intangible(
,here is also a ver! significant factor of Rwhat the traffic would bearR in services( :oreover+ there
could be significant differences between the cost of providing a service and the value that is
charged to the client 5 custoer for the sae signif!ing the argins for the service provider( ,he
value of experience a! be difficult to estiate(
8istoricall! in the area of valuation disputes are ore as the tax collector interprets the provisions
to his cofort without appreciating the intention( ,ill 200A+ there were no ajor issues under
valuationI however with the insertion of the Service ,ax LDeterination of %alueM *ules 200A+
wef 1"(#(200A this segent has witnessed substantial litigation
%hat is the main basis "!r vauati!nA
.n ters of section A4+ the aount chargeable to service tax is the gross aount charged for such
service provided or agreed to be provided as long as the consideration is wholl! in onetar!
ters( ,he gross aount charged for the taxable service shall include an! aount received
towards the taxable service before+ during or after provision of such service(
;here the assessee follows a ethod of charging one lup7su aount including service tax+
the value deterined with the addition of service tax cannot exceed the aount charged b! the
assessee( &or exaple where the value including service tax < 12(3AJ is *s( 10 la-hs+ the
service tax would be deterined as follows LL*s( 10 la-hs5112(3AMZ(12(3AM V *s(110003(@( ,he
value net of service tax on which such tax is charged V *s( 1000000 *s( 110003(@ V *s(
00"""A(#
131
NEross aount chargedO as per explanation LcM to section A4+ includes pa!ent b! cheque+ credit
card+ deduction fro account and an! for of pa!ent b! issue of credit notes or debit notes and
boo- adjustent(
=udget 2000 introduced a concept of associated enterprise wherein for a transaction with
associated enterprise+ the gross aount charged would also cover credit or debit to an! account
b! whatever nae called including accounting in suspense account in the boo-s of account of
person liable to pa! service tax(
;here the consideration is not wholl! in onetar! ters+ the value would be such that with the
addition of service tax would be equivalent to the consideration( ,he calculation of service tax
would be the sae as explained in the earlier exaple( .n short+ the equivalent one! value of
the non7onetar! consideration should be considered( L,hough there sees to be drafting error+
based on the interpretation placed b! the board this proposition existsM(.f the consideration is
partl! in one! and partl! in other for+ the aount charged onetaril! and the equivalent value
of the non7onetar! consideration should be considered(
;here the consideration for a service which cannot be deterined+ the assessee would have to
refer the Service ,ax LDeterination of %alueM *ules 200A in order to ascertain the value( 's per
*ule 3 of the said *ules+ the value shall be the gross aount charged b! the service provider to
provide siilar service to an! other person in the ordinar! course of trade( ,his proposition would
not wor- and such a price is not possible to be arrived at+ but a! have to be judiciall! confired
in this decade(
;here this aount is not available+ the equivalent one! value of the consideration should be
deterined and this should not be less than the cost of providing the service( ,his is possible but
a! at ties be ver! low as in an! services+ the actual costs a!be between 1J to 40J( L,oo
uch of subjectivit!M(
Can the Centra E76ise #""i6er Buesti!n the vauati!nA
;here the )fficer is satisfied that the value has not been deterined in accordance with the
provisions of this 'ct or the *ules+ he can issue a Show $ause /otice to the assessee to show
cause as to wh! the value should not be as per aount stated in such notice as per *ule # of
Service ,ax LDeterination of %alueM *ules 200A( ,he assessee is to be given reasonable
opportunit! of being heard before the )fficer can proceed with the tas- of deterining the value
in accordance with the provisions of the 'ct and the *ules( .t is felt that the judicial precedents in
132
regard to valuation of goods under central excise and $ustos a!be be useful in defending such
valuation disputes and a! not end up with an! revenue for the Eovernent(
%hether the gr!ss am!unt 6harged "!r the servi6e :!ud in6ude 6harges reimbursed b8 the
servi6e re6eiverA
.n principle+ no tax can be pa!able on reiburseent of expenses incurred on behalf of the
service receiver( ,he use of the word Ksuch3 in the valuation provision it iplies that tax can
levied onl! on the aount charged for the service( ,ill 10(0#(0A+ reiburseents were not liable(
8owever+ the Service ,ax LDeterination of %alueM *ules 200A were introduced with effect fro
10(0#(0A( 's per *ule @ of the said *ules+ the gross aount charged shall include the cost and
expenditure incurred in connection to the taxable services charged to the service receiver( /o
deduction is allowed for the reiburseent of expenses unless such expenses are incurred b! the
service provider as a pure agent of the service receiver( ,he concept of pure agent requires the
service provider to satisf! certain conditions if the reiburseent of expenses is not to suffer
service tax(
N?ure agentO as per explanation L1M to *ule @L2M of Service ,ax LDeterination of %alueM *ules
200A+ eans a person who
1( Bnters into a contractual agreeent with the recipient of service to act as his pure agent to
incur expenditure or costs in the course of providing taxable service
2( /either intends to hold nor holds an! title to the goods or services so procured or
provided as pure agent of the recipient of service
3( Does not use such goods or services so procured and
#( *eceives onl! the actual aount incurred to procure such goods or services
,he conditions to be satisfied in this regard as per *ule @L2M are as follows
1( Service provider to act as a pure agent of the recipient of service while a-ing pa!ent
to third part! for the goods or services procured
2( Service receiver to receive and use the goods or services procured b! the service provider
on his behalf
3( Service receiver to be liable to a-e pa!ent to the third part!
#( Service receiver to authorise the service provider to a-e pa!ent on his behalf
@( Service receiver to -now that the goods and services+ for which pa!ent has been ade
b! the service provider+ shall be provided b! the third part!
133
A( ,he pa!ent ade b! the service provider on behalf of the recipient of service is to be
separatel! indicated in the invoice issued b! the service provider to the recipient of
service
4( ,he service provider recovers fro the recipient of service onl! such aount as has been
paid b! hi to the third part!
0( ,he goods or services procured b! the service provider fro the third part! as a pure
agent of the recipient of service are in addition to the services he provides on his own
account
Ta7ati!n !" Reimbursements
,here has been an iportant judgent of Delhi 8igh $ourt in the case of .ntercontinental
$onsultants 'nd ,echnocrats ?vt >td vs( U). 9 'nr 120127,.)>7"AA7 8$7Del7S,2 changing the
position of law pertaining to valuation covering reiburseents( 8eld the *ule @L1M has been
struc- down in .ntercontinental decision entioned at supra( ,ill the rule is struc- out of the
%aluation *ules( .n case of separate collection of expenditure or costs is done+ better to ensure
that the pure agent conditions under *ule @ L2M are satisfied(
,herefore one needs to understand the differences between the expenses incurred b! the service
provider during the course of providing the taxable service and expenses incurred b! the service
provider on behalf of service receiver( )ne of the iportant conditions is that liabilit! for the
pa!ent of expense should be priaril! on the client( .f the service provider pa!s an! tax+ dut!
etc which is actuall! a liabilit! of the service receiver and get reibursed fro the service
receiver it will cover under concept of pure agent provided other conditions are satisfied(
Ta7ati!n !" Free $ssue Materias
's far as the value of aterials supplied free of cost is concerned+ authors view is that norall!
the value of aterials so supplied b! custoer is not to be included in the value of services for
charging service tax( ,his is considering the fact that aterials sold during the course of
providing service is generall! not subjected to service tax( ,he departent a! however not
agree to this view(' decision here would have to be ta-en on the basis of a review of the
agreeent entered into between contracting parties in order to see whether the provisions of
Section A4L1MLiiM can be invo-ed i(e( pertaining to consideration not being wholl! or partl! in
one!( 8ere+ the obligation of the service receiver towards the service provider for the services
involved would have to be quantified before one can arrive at a final conclusion( ;here the
service receiver is obligated to pa! certain su and pa!s it partl! through aterials+ the sae
could coe under the purview of section A4L1MLiiM and the service provider would be better off
13#
including the value of such aterials provided b! the service receiver in the gross aount for
charging service tax+ to be on the safer side of law(
Are there an8 !ther s5e6i"i6 in6usi!ns and e76usi!ns :ith regard t! am!unt 6harged "!r
s5e6i"i6 servi6esA
*ule A provides for certain specific inclusions as well as exclusions with regard to the aount
charged for the services( ,hese are given below
Inclusi!ns in am!unt c%ar)ed +!r service@
1( $oission or bro-erage charged b! a bro-er on the sale or purchase of securities
including the coission or bro-erage paid b! the stoc- bro-er to an! sub7bro-er
2( 'djustents ade b! the telegraph authorit! fro an! deposits ade b! the subscriber at
the tie of application for telephone connection or pager or facsiile or telegraph or
telex or for leased circuit
3( 'ount of preiu charged b! the insurer fro the polic! holder
#( $oission received b! the air travel agent fro the airline
@( $oission+ fee or an! other su received b! an actuar! or interediar! or insurance
interediar! or insurance agent fro the insurer
A( *e7iburseent received b! the authorised service station fro the anufacturer for
carr!ing out an! service of an! otor car+ light otor vehicle or two wheeled otor
vehicle anufactured b! such anufacturer
4( $oission or an! aount received b! the rail travel agent fro the railwa!s or the
Zcustoer
0( *euneration or coission b! whatever nae called+ paid to such agent b! the client
engaging such agent for the services provided b! a clearing and forwarding agent to a
client rendering services of clearing and forwarding operations in an! anner
"( $oission+ fee or an! other su b! whatever nae called paid to such agent b! the
insurer appointing such agent in relation to insurance auxiliar! services provided b! an
insurance agent
10( 'ount received for the use of the services be!ond the period originall! contracted or the
aount realiGed as deurrage charges or whatever the nae !ou li-e egI use of the
containers be!ond the noral period
(*clusi!ns $it% re)ard t! t%e am!unt c%ar)ed@A
13@
1( .nitial deposit ade b! the subscriber at the tie of application for telephone
connection or pager or facsiile or telegraph or telex or for leased circuit
2( 'irfare collected b! air travel agent in respect of service provided b! hi
3( *ail fare collected b! rail travel agent in respect of service provided b! hi
#( .nterest charged b! the service provider for dela!ed pa!ent of service consideration
to hi( )r interest on dela!ed pa!ent of sale consideration to seller of the goods or
propert!(
@( ,axes levied b! an! governent on an! passenger travelling b! air would also be
excluded while providing service of transportation of passengers b! air( 8owever+
this is subject to the condition that such taxes are shown separatel! on the tic-et or
the invoice for such tic-et issued to the passenger(
A( 'ccidental daages not relatable to provision of the service due to unforeseen
actions
4( Subsidies and Erants received b! service provider fro the Eovernent which are
not relatable to the provision of service(
%here during the 6!urse !" 5r!viding servi6e, there is trans"er !" 5r!5ert8 in g!!ds, :hat
:!ud be the vaueA
;here there is transfer of propert! in goods fro the service provider to the service receiver+ the
service provider would be entitled to a deduction fro the gross value to the extent of the value
of the goods and aterials sold as aforesaid( .n other words the service tax is chargeable on the
value charged towards labour alone( ;here in the invoice the value subjected to %', is clear+ that
value can be adopted( ;here it is not clear in the invoice the value in the %', returns can be an
indicator( ;here no such evidence is available+ the actual cost of the goods used for the provision
of the service would have to be arrived at and then the gross profit argin added up to arrive at
the value of goods sold( ,his would be in line with the decision in the case of Eannon 9
Dun-erle! LL1"@0M L"M S,$ 3@3 LS$M( )bviousl! the first option is advisable(
Vaue !" servi6e 5!rti!n in the e7e6uti!n !" :!rks 6!ntra6t
%aluation for wor-s contract for charging service tax would be as per *ule 2' of Service
,axLDeterination of %alueM *ules+ 200A as aended b! /otification /o( 2#52012 7 Service ,ax
dated Ath June+ 2012( &ollowing options have been stipulated under the *ules for deterination
of valuation for charging service tax(
13A
a( ,otal aount inus value of transfer of propert! in goods transferred in the
execution of wor-s contractF 's per this option+ deterination will be as per
following forulaF ,otal aount value of propert! in goods transferred in
execution of wor-s contract(
Bxplanation( 7 &or the purposes of this clause+7
i( gross aount charged for the wor-s contract shall not include value added tax or
sales tax+ as the case a! be+ paid or pa!able+ if an!+ on transfer of propert! in
goods involved in the execution of the said wor-s contractI

ii( value of wor-s contract service shall include+ 7
labour charges for execution of the wor-sI
aount paid to a sub7contractor for labour and servicesI
LiiiM charges for planning+ designing and architect3s feesI
charges for obtaining on hire or otherwise+ achiner! and tools used
for the execution of the wor-s contractI
cost of consuables such as water+ electricit!+ fuel used in the
execution of the wor-s contractI
cost of establishent of the contractor relatable to suppl! of labour
and servicesI
other siilar expenses relatable to suppl! of labour and servicesI and
profit earned b! the service provider relatable to suppl! of labour
and servicesI

iii( ;here value added tax or sales tax has been paid or pa!able on the actual value
of propert! in goods transferred in the execution of the wor-s contract+ then+ such
value adopted for the purposes of pa!ent of value added tax or sales tax+ shall
be ta-en as the value of propert! in goods transferred in the execution of the said
wor-s contract for deterination of the value of service portion in the execution
of wor-s contract under this clause(
;here the value has not been deterined under above ethod+ the person liable to pa! tax on the
service portion involved in the execution of the wor-s contract shall be deterine the service tax
pa!able in the following anner(
1( .n the case of original wor-s the value of the service portion in the execution of the wor-s
shall be #0J of the value of the total aount charged(
134
2( .n the case of the wor-s contract relating to ovable properties the value of the service
portion in the execution of the wor-s contract shall be 40J of the value of the total
aount charged(
3( .n the case of other wor-s contract other than those covered under the above L1M and L2M
including the aintenance+ repair+ copletion and finishing services of iovable
properties+ the value of service portion in the execution of the wor-s contract shall be
A0J of the total aount charged(
)riginal $ontract eans
a( 'll new constructions
b( 'll the t!pes of additions
c( 'lterations to daaged or abandoned structures on land that are required to a-e
the wor-able
d( Brection+ $oissioning and installation of the plant and achiner! or equipent or
structures+ whether pre fabricated or not
,otal aount eans
'( Su total of the gross aount charged for the wor-s contract
=( &air ar-et value of goods and services supplied b! the service receiver in or in
relation to execution of the wor-s contract after deducting the aount charged b!
the service receiver fro the service provider and %', or sales tax levied there
on(
&air ar-et value of goods and services shall be deterined in accordance with the generall!
accepted accounting principles(
,he persons who are claiing the deduction towards value of aterials fro the total aount
charged or who are pa!ing the service tax on #0J+ A0J or 40J of the total aount as the case
a! be shall not be eligible to ta-e the benefit of cenvat credit on inputs used during the course of
construction service(
)eterminati!n !" vaue !" the servi6e in reati!n t! m!ne8 6hanging
.f the currenc! is exchanged fro .ndian currenc! or to .ndian rupee the value of the taxable
service shall be equal to the difference between the bu!ing rate or selling rate+ as the case a! be
and *=. reference rate for the currenc! ultiplied b! total units of units of currenc!( &or this
purpose rate notified b! the *=. on the date of one! changing should be ta-en in to the
consideration(
130
&or exaple if the custoer is selling ]1000057 at *s(@057+ on that date rate notified b! the *=. as
selling rate of ]is *s( @@57 the value of the taxable service shall be 10000ZL@@7@0M V*s( @000057
.f the data relating to the corresponding *=. reference rate is not available on the date of one!
changing the value of the taxable service shall be 1J of the value of the gross aount of received
or paid in .ndian *upees(
,axable value of one! changing when both the currencies are foreign currenc!F the value of the
taxable service shall be 1J of the lesser of the two aounts the person changing the one!
would have received b! converting one of the currencies in to .ndian currenc! on that date
reference date notified b! the *=.(
)eterminati!n !" servi6e 5!rti!n inv!ved in su558 !" "!!d in a restaurant !r as !utd!!r
6atering9
Description of service %alue of the service
,he value of the service portion in an activit! of suppl! of food or an!
other article of huan consuption or an! drin- is supplied as part of the
activit! at a restaurant
#0J of the total aount
charged
,he value of the service portion in an activit! of outdoor catering where in
the goods being the food or an! article of huan consuption or drin- is
supplied
A0J of the total aount
charged
,otal aount eans the su total of gross aount charged and fair ar-et value of all the goods
and services supplied b! the service receiver in or in relation to suppl! of food and deducting the
aount charged b! the service receiver and %', or Sales tax if an! levied( &air ar-et value shall
be deterined in accordance with the generall! accepted accounting principles(
$envat credit on input services and capital goods shall be available however the excise dut! paid
on inputs pertaining to the chapter 1722 of $B,' 1"0@ shall not be available for the pa!ent of
service tax on output activit!(
P!inters "!r 5ra6ti6e
1( ,he professional would have to go through the relevant agreeents the assessee has with
his custoers to -now the exact aounts being charged towards taxable services and
others and the brea- ups for the sae(
2( ,he professional should be careful enough to ascertain whether the aounts charged are
inclusive of all taxes or are the taxes extra( ;here the aounts are including taxes and
represents aounts charged towards aterial as well as labour+ the gross aount has to
13"
be split up in ters of the aounts charged for aterial and the aounts charged for
service( ,he taxes L%', on aterial and service tax on labour portionM can then be
calculated using the sae inclusive philosoph! discussed earlier(
3( .n case of separate collection of expenditure or costs whether the pure agent conditions
under *ule @ L2M are satisfied(
1#0
$MP#RT AN) E&P#RT #F SERV$CES
,he aendents to the provisions w(e(f( 1(4(2012 included the withdrawal of the *ules relating
to .port and Bxport( .t is presued that the place of provision of the services rules would ta-e
care of all the issues soothl!( 8owever there are gaps in the provisions wherein the question of
whether the export of services are to suffer /il dut! itself is being questioned( 'lso the vires of
the present law to tax services on reverse charge or categoriGing as export has also seen soe
doubts being raised(
Understanding that the intention of the Eovernent is to tax the services under reverse charge
and to -eep export of services free of tax ipact+ we discuss further(
$m5!rt !" Servi6es
,he services received fro outside the taxable territor! are liable to pa!ent of service tax b! the
recipient fro 200A( Barlier it was based on criterion of location of iovable propert! 1 for
around 12 services related to real estate2 + place of perforance 1 around #0 Q where ph!sical
presence a! have been necessar!2 and rest based on the location of the recipient( ,he services
which were liable were the taxable services+ therefore all unspecified services or services which
were liable at nil rate would not be covered( 'lso there was a dispute whether the pa!ent for
such services could be ade b! utiliGing Ncenvat creditO as the output service was being equated
with the reverse charge( ,ribunal had held that the credit could have been utiliGed but revenue
view was different( ,he 6arnata-a 8igh $ourt held that the credits could be utiliGed b! service
recipient to set off service tax liabilit! on services received fro outside .ndia(
/ow wef 1
st
Jul! 2012+ the place of provision of services rules read with Section AA& and *ule
A' of the Service ,ax rules would be relevant(
,o deterine if the place of provision of service whether in the taxable territor! or not+ 5ease
revert t! the Pa6e !" Pr!visi!n !" Servi6e Rues=
PLACE #F PR#V$S$#N #F SERV$CES R+LES
%hat is Reevan6e !" Pa6e !" Pr!visi!n !" Servi6eA
;ith the introduction of new schee of tax+ the deterination of tax is dependent upon whether
the services are provided within the taxable territor! or not( .f it is provided within the taxable
1#1
territor!+ it would be taxable and if not in taxable territor! not taxable( ,his would be the position
irrespective where the service provider or service receivers are located(
Services being intangible it requires guidelines as to deterination of the place providing service
to ascertain taxabilit! considering whether it is provided within taxable territor! or not( &or
providing such guidelines ?lace of ?rovision of Services *ules+ 2012 is notified(
)etermining L!6ati!n !" servi6e 5r!vider and !6ati!n !" servi6e re6eiver
=efore we go to indentif! the place of provision of service+ one has to first identif! where the
location of service provider and location of service receiver(
,he location of a service provider or receiver Las the case a! beM is to be deterined b!
appl!ing the following steps sequentiall!F
'( .f the service provider5receiver has obtained onl! one registration+ a! be centraliGed
Lin case of ultiple placesM or otherwise Lhaving onl! one placeM 7 the 5remises "!r
:hi6h su6h registrati!n is taken is the !6ati!n
=( .n other cases i(e( either no registration is ta-en or ultiple registration is ta-en the
location of service provider5receiver is identified sequentiall! as followsF
a( .f services are provided fro =usiness Bstablishent Lplace where
anageent and control existM Pa6e !" su6h business estabishment is
the !6ati!n
b( .f services are not so provided but fro other establishent Lfixed
establishentsM Pa6e !" su6h "i7ed estabishment is the !6ati!n
a( .f the services are provided fro 5 received b! ore than one locations 7 the
estabishment m!st dire6t8 6!n6erned :ith the 5r!visi!n !" servi6e 4 use
!" the servi6e is the !6ati!n
b( .n the absence of an! places entioned above usua 5a6e !" residen6e is
the !6ati!n(
)eterminati!n !" 5a6e !" 5r!visi!n
,he ?lace of ?rovision of Services has been structured b! brea-ing up the services fro *ule # to
*ule 12 into sectors i(e( on following basis Lseparatel! explained later as to its scopeMF
a( *ule #7=ased on the perforance of service
b( *ule @7=ased on location of iovable propert!
c( *ule A7=ased on place of holding event
d( *ule 47=ased on perforance of services at ore than one location
e( *ule 07=ased on the provision of service where provider and recipient both
located in taxable territor!
1#2
f( *ule "7=ased on specified services where place of provision is at location of
service provider
g( *ule 107=ased on destination based transportation of goods services
h( *ule 117 passenger transportation service based on place where the passenger
ebar-s on the conve!ance for a continuous journe!+
i( *ule 127 based on services provided on board conve!ance in course of a
passenger transport operation(
;hen none of these specific rules is applicable+ then the place of provision is deterined based
on default *ule 3+ according to which+ the 5a6e !" 5r!visi!n !" servi6e :!ud be based !n
!6ati!n !" re6i5ient !" servi6e= 8owever+ in the ordinar! course of business+ the location of
service receiver is not available Lsa! for exaple wal- in custoers where the location of service
receiver is not -nown ordinaril!M+ then the place of provision is the place of the service provider(
P!:er !" Centra *!vernment t! n!ti"8 the 5a6e !" 5r!visi!n
.n addition to the above deterination as entioned above+ *ule 13 epowers the $entral
Eovernent to notif! the t!pe of services or circustances in which cases the place of provision
would be the place of effective use and enjo!ent of a service( 's on date the $entral
Eovernent has not notified an! t!pe services in this regard(
Res!ving 6!n"i6t in 6ase m!re than !ne rue 6!vering the situati!n=
's per *ule 1#+ provides that where the place of provision of a service could be deterined under
ore than one rule as it fits in there+ it has to be deterined according to the rule that occurs later
aong the rules that are equall! eriting consideration(
&or exaple based on the perforance rule L*ule #M the place of provision is sa! /ew7!or-+
however b! virtue of *ule 0 Lwhich provides that if both provider and receiver are located in
taxable territor! the location of receiver of service to be ta-enM the place of provision is /ew
Delhi+ the place of provision would be /ew7delhi as *ule 0 occurs later aount *ule 0 and *ule
#(
%hat is Pa6e !" 5r!visi!n !" servi6e as 5er the s5e6i"i6 ruesA
Rue
N!=
Nature !"
Servi6es
)eterminati!n !"
5a6e !" 5r!visi!n
T85es !" Servi6es
#
?erforance
based service
?lace of
perforance
iM services provided in respect of goods
that are required to be ade ph!sicall!
available b! the service receiver to the
1#3
Rue
N!=
Nature !"
Servi6es
)eterminati!n !"
5a6e !" 5r!visi!n
T85es !" Servi6es
service provider+ in order to provide the
service(
when such services are
provided fro a reote location b!
wa! of electronic eans+ the place
of provision shall be the location
where goods are situated at the tie
of provision of service(
,his sub rule shall not appl!
in case service provided in respect of
goods that are teporaril! iported
into .ndia for repairs+ reconditioning
or reengineering for re export
iiM services provided entirel! or
predoinantl!+ in the ordinar! course of
business+ in the ph!sical presence of an
individual+ represented either as the
service receiver or a person acting on
behalf of the receiver
BxapleF Services li-e cosetic or
plastic surger!+ beaut! treatent
services+ personal securit! service+
classroo teaching etc
@ *elated to
iovable
propert!
?lace where the
iovable
propert! is located
or intended to be
located
,he ter .ovable ?ropert! has
not been defined in the 'ct
'pplies onl! to services which
relate directl! to specific sites of
land or propert!( ,here needs to be
ver! close lin- between the service
and the iovable propert! >Para
<=<=D !" Edu6ati!n *uide?
BxapleF Services supplied in the
course of construction+
reconstruction alteration+
deolition+ repair or aintenance
Lincluding painting and decoratingM
of an! building or civil engineering
wor-+ renting of iovable
propert!+ services provided b!
experts and estate agents+ provision
of hotel accoodation or
warehouse space+ legal services
1##
Rue
N!=
Nature !"
Servi6es
)eterminati!n !"
5a6e !" 5r!visi!n
T85es !" Servi6es
dealing with applications for
planning perission+ services of an
architect contracted to design the
landscaping of a particular resort(
8owever+ services provided b! an
interior decorator to design coon
d[cor for all its stores in .ndia+
repair and aintenance of
achiner! which is not peranentl!
installed+ advice or inforation
relating to land prices or propert!
ar-ets+ services of an agent who
arranges finance for the purchase of
propert! :!ud n!t be 6!nsidered
as services which are land related
&ollowing services are not land
relatedF *epair and aintenance of
achiner! which is not peranentl!
installed+ 'dvice or inforation
relating to land prices or propert!
ar-ets because the! do not relate
to specific sites+ Services of an agent
who arranges finance for the
purchase of a propert!
A *elated to
events
,he place where
the event is
actuall! held
Services provided b! wa! of
adission to+ or organiGation of+ a
cultural+ artistic+ sporting+ scientific+
educational+ or entertainent event+
or a celebration+ conference+ fair+
exhibition+ or siilar events+ and of
services ancillar! to such adission
sha be the 5a6e :here the event
is hed
?rovision of sound engineering for
an artistic event which is a
prerequisite for staging of that event
would be considered as a service
ancillar! to its organiGation
Services of courier agenc! used for
distribution of entr! tic-ets for an
event is not a service ancillar! to its
organiGation
1#@
Rue
N!=
Nature !"
Servi6es
)eterminati!n !"
5a6e !" 5r!visi!n
T85es !" Servi6es
4 Services
provided at
ore than one
location
,he location in the
taxable territor!
where the greatest
portion of the
service is provided
'n! service referred to in rules #+ @+
or A is provided at ore than one
location+ including a location in the
taxable territor!+ its place of
provision shall be the location in the
taxable territor! where the greatest
proportion of service is provided(
.f testing services in relation to
client copan! equipents is being
provided b! .ndian copan! vide
contract at+ various locations
whereb! #0J of such testing done
at US'+ 30J at U6+ 20J at
'ustralia and 10J at .ndia+ out of
that 10J+ 0J is held at Delhi and
2J held at :ubai+ then in ters
of this rule for entire 100J+ place of
provision of service is at Delhi(
L=eing greatest proportion in .ndiaM
0 Service
provider 9
receiver both
are located in
,axable
,erritor!
>ocation of
service receiver
'n! service other than listed in negative list
or specificall! excluded(
;hen seinar is organiGed in Japan+
as long as service provider event
anageent copan! and receiver
fir are in .ndia( Bven thou b!
virtue of *ule A+ which specificall!
covers this scenario+ the place of
provision of service would be
location of happening of event ( 's
in ters of *ule 0+ when Service
provider and receiver both are
located in a taxable territor!+ then
location of service receiver is the
place of provision( 's in ters of
*ule 1#+ if a situation is covered b!
ore than one rule+ latter of such
rule shall prevail(
" Specified
services
>ocation of
service provider
aM Services provided b! a ban-ing
copan!+ or a financial institution+ or a
non7ban-ing financial copan!+ to
1#A
Rue
N!=
Nature !"
Servi6es
)eterminati!n !"
5a6e !" 5r!visi!n
T85es !" Servi6es
account holdersI
bM ,elecounication services provided to
subscribersI
cM )nline inforation and database access
or retrieval servicesI
dM .nterediar! servicesI L interediar!
services in respect of goods not covered
in this *uleM
eM Service consisting of hiring of eans of
transport+ up to a period of one onth(
10 Eoods transport
services !ther
than b8 :a8 !"
mai !r 6!urier
?lace of
destination of
goods
,he place of provision of services of
transportation of goods shall be the
place of destination of goods(
Pr!vided place of provision of
service of E,' shall be location of
the person liable to pa! tax
I+ t%e )!!ds are sent 2y air
c!nsi)nment +r!m Sin)ap!re t!
Mum2ai t! Du2ai irrespective !+
place !+ start p!int place !+
pr!visi!n is al$ays destinati!n !+
)!!ds. i.e. Du2ai
11 ?assenger
transportation
services
?lace where the
passenger ebar-s
on the conve!ance
for a continuous
journe!
>%en it is '!urney $it% sin)le tic=et n!
st!p!ver +!r a Del%iAL!nd!nANe$ ?!r=A
Del%i +li)%t. Ne$ Del%i is place !+ pr!visi!n
!+ service. (
12 Services
provided on
board a
conve!ance
,he first scheduled
point of departure
of that conve!ance
for the journe!
Services provided on board a conve!ance
during the course of a passenger transport
operation+ including services intended to be
wholl! or substantiall! consued while on
board( ' video gae or a ovie on deand
is provided as on board entertainent during
:ubai to Dubai leg of a Singapore 7
:ubai Dubai flight+ ,he place of
provision of this service will be Singapore
Loutside taxable territor! and hence not
liable to taxM
1#4
P!inters "!r 5ra6ti6e
,he professional should be carefull! go through the various agreeents the client has
with his custoers to understand the ters and conditions as the status as to ?lace of
?rovision of Services *ules 2012( ,he earlier understanding under the .port or Bxport
of services is no longer applicable 1though could be indicative2 and there are a few
departures( ,he rules have to be exained one b! one starting fro last for deterining
applicabilit!( .f none of the rules fro #712 applies to specific scenario on hand + then
default *ule 3 would be applicable(
,he billing and sales correspondences can also indicate the real nature of the transaction(
.t has been observed that at ties the explanation+ billing as well as the agreeent are
surprisingl! all different(
,he professional is also advised to exercise due care in cases where the perforance
based criterion applies in order to deterine the status as to .port or Bxport of service
as often the cost of non7copliance could be high(
,he criterion for specified service provider+ specified service receiver is as relevant as the
specified service for the attraction of the lev! where received fro a non resident(
,he professional should also ensure that the client clais the benefits associated with
export of services ainl! in the for of refunds+ rebates etc(
)EMAN), APPEALS, REC#VER( AN) PENALT$ES
)emand 0Adjudi6ati!n9
,he word NdeandO as per =lac-3s >aw Dictionar! eans assertion of a legal rightI an
iperative request preferred b! one person to another+ under a clai of right+ requiring the latter
to do or !ield soething or to abstain fro soe act(
Deand a! arise when the assessee doesn3t pa! the tax5dut! or short pa!s the tax5dut! or avails
the benefit of an! notification prescribed under law without satisf!ing the conditions set out in the
notification or avails ineligible credits( Section 43(
.n such cases and other related statutor! provisions relating to deand+ interest under service tax
are given in a table forat for better understandingF
Se6ti!n Statut!r8 5r!visi!ns
1#0
Sec 43 *ecover! of duties not levied or not paid or short levied or short paid within 10
onths( ,his is the principal section for invo-ing all deands b! the
Departent(
?roviso
to Sec(43
'bove said 10 onths will be extended to @ !rs( .f there involves fraud+
collusion+ willful isstateent or suppression of fact :ith intent t! evade the
5a8ment !" dut8(
Sub7
section
43L1'M
,he sae charges when a follow up deand is given for a period subsequent
to the previous noticeLsM on sae grounds(
Section
43L1'M
.ssue of onl! a stateent+ containing the details of service tax not levied or paid
or short levied or short paid or erroneousl! refunded for the subsequent period
on the sae grounds( Such stateent would be construed as service of notice(
Sec 43
L2M
Deals with deterination of deand after issue of notice and assessee shall pa!
the aount so deterined
Sec
43L#'M
.n case of during audit or investigation or verification+ it is found that there is
short lev!5 non lev!5short paid5not paid service tax or erroneous refund but
transaction are specified in the records+ the service tax paid full! or partl!+
along with interest and penalt! at 1J of such tax+ for each onth where default
continues+ upto 2@J of tax aount before notice is issued and infor the $B
officer in writing of sae( 'fter receipt of sae+ the notice would not be
serviced u5s 43 L1M and such proceeding in respect of such aount shall be
concluded( an! additional aounts could be collected as deterined is pa!able
b! the $B office
Sec 43L3M /o notice to be served when the service tax is paid before issuance of S$/ in
cases not involving fraud+ collusion etc(+ this is not applicable for service tax
becoe pa!able before 1#(0@(2003(
Sec 4@ Bver! person who fails to credit the tax or an! part to the Eovernent shall pa!
siple interest at 10J pa L1@J in case turnover is less than A0 >a-hs in the
previous financial !ear(
Sec 40 ?enalt! in case of fraud+ suppression+ willful is7stateent etc(
Sec 43' Service provider should have to pa! the aounts so collected fro the service
receiver to the $entral Eovernent( ,his provision also applies in case where
the service provider has collected the taxes in an! anner fro the service
receiver(
Sub Sec
43' L3M
$entral Bxcise )fficer shall issue a notice+ where an! person collected the tax
but not paid to the credit of $E(
*ule 1#
$$*
$envat $redit ta-en 5 utilised wrongl! or erroneousl! refunded then the
provisions of Section 43 9 4@ will appl!(
1#"
200#
N!rma8, a 5r!6eeding starts :ith the issue !" a sh!: 6ause n!ti6e t! the assessee and
giving him an !55!rtunit8 !" re5resenting his 6ase= An !rdinar8 n!ti6es and etter ma8 as!
have been issued earier but the 5r!6eeding is :ith the e""e6t !" issues !" sh!: 6ause n!ti6e
The )emand is 6!m5ete8 g!verned b8 Se6 GC the 5r!visi!ns 6an be summariHed in the
"!!:ing tabe9
.nitiation of proceedings under
Sec( 43
;henever there is a short lev!5short pa!ent or non7lev! or non7
pa!ent+ proceedings can be underta-en(
Show cause /otice .t is andator! for the Departent to issue a show cause notice(
,ie liit for serving show
cause notice
a( .nvolving fraud+ collusion+ wilful is7stateent or
suppression of facts or contravention of an! provisions with
an intent to evade pa!ent of dut! 7 @ !ears fro relevant
date(
b( .n other cases 10 onths fro relevant date(
c( ;here the service of notice is sta!ed b! court order+ the period
of such sta! would be excluded in coputing this tie liit(
*elevant date *elevant date ean 7
a( .n case of short lev!5non7lev! or short pa!ent5non7pa!ent
the date on which the six onthl! return is filed or required to
be filedI .f it is not filed+ the date on which it was required to
be filed( .f the return is filed date on which return filed will be
the relevant date(
b( .f there is no such tie liit+ the date of pa!ent of dut!(
c( .n cases of provisional assessent+ the date of adjustent of
dut! after final assessent(
d( .n case of erroneous refund+ the date of such refund(
?a!ent to drop proceedings .n case of during audit or investigation or verification+ it is found
that there is short lev!5 non lev!5short paid5not paid service tax or
erroneous refund but transaction are in records+ the assessee has
option to pa! 1J penalt! subject to a axiu of 2@J( )nce an
intiation is given+ the notice need not be issued
%oluntar! pa!ent .n case the service provider pa!s the service tax and infors the
departent about such pa!ent+ no notice shall be served under
1@0
this provision( ?enalt! also cannot be iposed(
*ecording of assessee3s
representation
Sub7section 2 to 43 a-es it andator! for the officer to consider
the representation of the assessee( ,he officer has to copl! with
the principles of natural justice(
&or of order .t is andator! for the officer to pass a spea-ing order( Spea-ing
order is one+ which gives the reasons for the decision( ' siple
letter as-ing for pa!ent of dut! is not an order(
?a!ent on passing of the order ,he service provider can either pa! the tax deterined or on the
other hand has a right of further appeal+ which grants hi rights of
obtaining sta! of deanded aounts in appeal(
's per $=B$ circular /o 00515200@7S,+ dated 107007200@+ Show cause notice can be issued b!
different ran- central excise officer with onetar! liit for the purpose of section 43 are given
belowF
$entral Bxcise )fficer 'ount of S, or $envat specified in a notice
for the purpose of adjudication
Superintendent of $entral Bxcise /ot exceeding *s(1 la-h Lexcluding the cases
relating to taxabilit! of services or valuation of
services and cases involving extended period
of liitationM
'ssistant5Deput! coissioner of $B /ot exceeding @ >a-h
Joint $oissioner of $B 'bove @ >a-h but not exceeding *s( 20 >a-h
'dditional $oissioner of $B 'bove *s( 20 >a-h but not exceeding *s @0
>a-h
$oissioner of $B ;ithout liit
E7tended time imit "!r issuing the sh!: 6ause n!ti6e in terms !" 5r!vis! t! Se6= GC
's there is a 2 different liitation periods for Deand it would be iportant to -now when the
longer period of liitation L@ !earsM is applicable in place of shorter period of 10 onths(
?roviso to Section 43 provides that if there is fraud+ collusion+ willful is7stateent+ suppression
of fact and with an intent to evading the pa!ent of dut! then the extended period of liitation
will be applicable(
Pa8ment !" e76ess 6!e6ti!n
Section 43' stets out that the aount has to be paid to the credit of the central governent in the
following casesF
1@1
?erson liable to pa! service tax has collected service tax in excess assessed or
deterined and paid
?erson has collected the service tax which was not required to do so(
.n case the aount is required to be paid b! a person in the circustances stated above but has
not paid+ then the $entral Bxcise )ffice shall issue a show cause notice( 'fter considering the
representation ade b! such person shall deterine the aount to be paid+ this shall not exceed
the aount stated in the notice(
$nterest !n am!unt 6!e6ted in e76ess9
Section 43= set out pa!ent of interest+ in the case where the aount is pa!able as deterined
b! the central excise officer( ,he interest shall be between the ranges of 10J upto axiu of
2#J(p(a( ,he rate fixed now is 10J p(a( Learlier 13JM vide notification 1@520117S, dated
1(03(2011
.n case the assessee has provided taxable service not exceeding *s A0 la-hs during an! financial
!ear covered under the notice or in the preceding financial !ear then the interest would be at the
rate of 1@J( ,his is b! a proviso inserted to section 43=
,he interest is pa!able onl! in case the aount is deterined b! the central excise officer( ;hen
the aount is paid voluntaril! such interest is not applicable
Pr!visi!na atta6hment
Section 43$ epowers central excise officer with previous approval of $oissioner of $entral
Bxcise b! an order in writing a! attach the propert! of a person on who the proceedings under
section 43 or 43' is pending( ,his can be done to protect the interest of the revenue and the
attachent shall be b! an order in writing( ,he attachent shall lost onl! for the period of A
onths fro the date of the order but the sae a! be extended b! the coissioner of central
excise for further period upto 2 !ears subject to recoding the reasons in writing(
Pubi6ati!n !" 6ertain in"!rmati!n
Section 43D epowers the central governent to publish the inforation relating to an!
proceedings under service tax of an! assessee if it dees to be fit for the public interest( ,he
central governent shall not publish an! inforation till the tie period available for the appeal(
1@2
,he central governent a! also publish the naes of the partners of the fir+ directors+
anaging agents+ secretaries and treasurers or anagers of the copan!+ or the ebers of the
association+ as the case a! be in case of a fir+ copan! or other association of persons(
=! virtue of powers given under this provisions service tax Lpublication of /aesM *ules+ 2000 is
notified w(e(f(1(0#(2000(in the said rules the procedures that is required to be followed for ta-ing
such action has been set out(
Re6ti"i6ati!n !" Mistakes
'n order can be aended b! the $entral Bxcise )fficer within two !ears fro the date of passing
the sae to correct a ista-e apparent fro the records( Under Section 4# where an! atter has
been considered and decided b! wa! of appeal or revision relating to the order referred above+
an! other atter on the order can be rectified with the exception of the atter that has been so
decided(
;here due to rectification under Section 4# an! refund due to an assessee is reduced or increases
his liabilit!+ then such assessee should be given a reasonable opportunit! of being heard in the
atter(
Revisi!n
,he $oissioner of $entral Bxcise has been epowered to call for and exaine the record of
an! proceedings in which an adjudicating authorit! subordinate to hi has passed an! decision or
order for the purpose of satisf!ing hiself as to the legalit! or propriet! of an! decision or order(
'fter exaination of the record if he finds an! issue or point which a! effect on the protection
of interest of revenue+ then he a! b! an order direct such authorit! or subordinate to appl! to the
$oissioner of $entral Bxcise L'ppealsM for the deterination of such points arising out of the
decision or order specified b! hi+
Bver! order under Section 0# shall be ade within a period of three onths fro the date of
counication of the decision or order of the adjudicating authorit!(
;here the $oissioner of $entral Bxcise order or direct the adjudicating authorit! to appl! to
the $oissioner of $entral Bxcise L'ppealsM for the deterination of points arising out of the
decision then the adjudicating authorit! in this behalf shall a-e an application to the
$oissioner of $entral Bxcise L'ppealsM within a period of one onth fro the date of
counication of such order(
1@3
A55eas
,he provisions related to appeals are governed b! the Section 0@ 9 0A of the &inance 'ct 1""#(
,he detailed discussion on the sae is further carried out in the following anner(
Se6ti!n K<9 A55eas t! C!mmissi!ner >A55eas?
'n! person aggrieved b! an! decision or order passed b! an adjudicating authorit! subordinate to
$oissioner of $entral Bxcise a! appeal to the first appellate authorit! $oissioner of
$entral Bxcise L'ppealsM( )pportunit! to be heard is to be provided to the aggrieved part!( ,he
appeal should be filed along with a sta! application to be relieved fro the pre7deposit of the
Dut! deterined under the order to be appealed in ters of Section 3@& of $entral Bxcise 'ct(
,he appeal shall be filed within 2 onths fro the date of counication5 receipt of the
decision( ,he coissioner a! condone the dela! for a further period of 1 onth+ further there
is no power to condone the dela! be!ond the said period of one onth after the initial period of 2
onths(
,he $=B$ is coe out with a $ircular no( "A45015 2013 $P dated 1(1(2013( $=B$ had
issued the first $entral Bxcise $ircular of the new !ear which is clarified for arrears recover!
during pendenc! of Sta! applications( ,he circular has rescinded seven previous circulars on
the sae subject(
'ccording to this $ircular+ if a sta! application is filed before the $oissioner L'ppealsM and
$BS,', and if there is no sta! within 30 da!s+ recover! action has to be initiated( .n case of sta!
applications before 8igh $ourts and Supree $ourt+ even this 30 da!s tie is not available(
*ecover! has to be initiated iediatel! after the orders if there is no sta!(
,his circular is not in line with the law( &urther the $onstitution =ench of the 8on Supree $ourt
in the case of $$B+ =olpur %s *atan :elting and ;ire .ndustries 2000 L231M B>, 22 LS$M has
held that a circular which is contrar! to the statutor! provisions has reall! no existence in law(
.n a recent judgeent in 20137,.)>70"78$7'?7S, delivered a few da!s ago in+ the '? 8igh
$ourt directed the *evenue not to initiate or pursue an! coercive steps against the petitioner Lor
others who owe dues to the petitionerM under Section 04 of the &inance 'ct+ 1""# or an! other
appropriate provision+ till disposal of the petitionerYs applications for condonation of dela! and for
grant of interi relief in the appeal preferred b! the petitioner to the ,ribunal on 2A7"72012( ,his
1@#
sta! is applicable onl! for that case( .n experience of paper writer+ a siilar application a! have
to be ade b! others also to obtain sta!(
Se6ti!n K;9 A55ea t! A55eate Tribuna
'n! person aggrieved b! an order passed b! a $oissioner of $entral Bxcise under Section 43
or 03' or an order passed b! the $oissioner of $entral Bxcise L'ppealsM under Section 0@+
a! appeal to the 'ppellate ,ribunal against such order( ,he appeal is also -nown as KSecond
'ppeal3(
,he coittee of chief coissioners of central excise or coissioners of central excise is not
satisfied b! the order passed b! the coissioner of central excise or coissioner of central
excise L'ppealsM respectivel! a! direct the central excise to go for an appeal(
,he appeal shall be filed within three5four onths Las the case a! beM of the date of receipt of
the order+ either assessee or the coissioner of central excise shall be having #@ da!s fro the
receipt of the notice for filing cross objection eorandu( (
Fees "!r a55ea t! Tribuna
,he prescribed fee is as under and to be paid through deand draft5pa! order in favour of
'ssistant *egistrar+ $BS,',+ /ew DelhiF
T!ta !" Servi6e ta7, $nterest and 5enat8 >Rs=? Fee >Rs=?
>ess than @+00+00057 100057
@+00+00157 to @0+00+00057 @00057
:ore than @0+00+00057 10+00057
,he fee for the sta! application or rectification or restoration shall be *s( @0057
/o such fee shall be paid b! the central excise officer for the appeal and in case of $ross
objection eorandu(
;here the atter involves onl! the question of facts and nothing of law the order passed b! the
,ribunal will be final and it cannot be ta-en further(
A55ea t! High C!urt9
,he appeal can be ade against the order of the 'ppellate ,ribunal when it involves a substantial
question of law( ;hether it involves a substantial question of law or not is soething to be
1@@
decided b! the high court( ,he appeal is to be ade within 100 da!s fro the receipt of the order
sought to be appealed u5s 3@E of $B'+ 1"## as aended b! tie to tie(
A55ea t! Su5reme C!urt9
's per section 3@> of $B' 1"## an appeal would be lie to the Supree $ourt froF
'n! judgent of the high court on appeal as entioned above I or
)n a reference ade b! the appellate tribunal before 1(04(2003I or
)n reference ade under section 3@8 for orders passed b! tribunal before 01(04(2003(
,he order of the ,ribunal will have to go to 8igh court generall! however if the atter involves
rate of tax or valuation the case can be ta-en directl! to the Supree $ourt(
;here there is an order of deand for tax and penalt! on which the appeal is preferred it is a pre
condition that the dut! and penalt! to be deposited( 8owever the appellate authorit! a! dispense
which such pre7deposit of the dut! deanded or penalt! levied on the reason that those pre7
deposit would cause undue hardship to such person(
Summar8 !" A55ea 5r!visi!ns
The a: reating t! a55ea 6an be summariHed in the "!rm !" "!!:ing tabe=
#rder 5assed b8 A55ea ies t! F!rm t! be
used
Se6ti!n
re"eren6e
1( 'ssistant5Deput!5
'dditional $oissioner+ and
assessing officer
$oissioner
L'ppealsM ;ithin 3
onths of receipt of
order
S,7# Sec( 0@
2($oissioner5 $oissioner
L'ppealsM
'ppellate ,ribunal
Lwithin 3 onths of
receipt of orderM
S,7@ Sec( 0A
3( :eorandu of $ross
)bjections
'ppellate
,ribunalL#@ da!s
fro the date of
counication of
appealM
S,7A Sec 0A
%h! 6an re5resent the Servi6e Pr!viderA
1@A
' counsel could be a person who is -nowledgeable in the law of $entral Bxcise as the
requireent of specialiGed -nowledge is of iportance under this law( .f representation services
are envisaged+ the counsel should in addition be a $hartered 'ccountant+ a $ost 'ccountant+ a
$opan! Secretar!+ a post graduate or honours degree holder in $oerce+ an advocate+ or post
graduate degree or diploa holder in =usiness adinistration or a retired eplo!ee of the
Departent of $entral Bxcise or $ustos after rendering not less than 10 !ears service(
Re6!ver8 !" am!unt
's per Section 04 where an! aount pa!able b! a person to the credit of $entral Eovernent
under an! of the provisions of this chapter or of the rules is not paid+ the central excise office
shall proceed to recover the aount b! in the following annerF
1( ,he $entral Bxcise )fficer a! deduct or a! require an! other $entral Bxcise )fficer
or an! officer of custos to deduct the aount so pa!able fro an! one! owing to such
person which a! be under the control of the said $entral Bxcise )fficer or an! officer
of custosI
2( ,he $entral Bxcise )fficer a!+ b! notice in writing+ require an! other person fro
who one! is due or a! becoe due to such person+ or who holds or a!
subsequentl! hold one! for or on account of such person+ to pa! to the credit of the
$entral Eovernent either forthwith upon the one! becoing due or being held or at or
within the tie specified in the notice+ not being before the one! becoes due or is
held+ so uch of the one! as is sufficient to pa! the aount due fro such person or
the whole of the one! when it is equal to or less than that aountI
3( Bver! person to who a notice is issued under this section shall be bound to copl! with
such notice+ and in particular+ where an! such notice is issued to a post office+ ban-ing
copan! or an insurer+ it shall not be necessar! to produce an! pass boo-+ deposit
receipt+ polic! or an! other docuent for the purpose of an! entr!+ endorseent or the
li-e being ade before pa!ent is ade+ notwithstanding an! rule+ practice or
requireent to the contrar!I
#( .n a case where the person to who a notice under this section is sent+ fails to a-e the
pa!ent in pursuance thereof to the $entral Eovernent+ he shall be deeed to be an
assessee in default in respect of the aount specified in the notice and all the
consequences of this $hapter shall followI
@( $entral Bxcise )fficer a!+ on an authorisation b! the $oissioner of $entral Bxcise+
in accordance with the rules ade in this behalf+ distrain an! ovable or iovable
1@4
propert! belonging to or under the control of such person+ and detain the sae until the
aount pa!able is paidI and in case+ an! part of the said aount pa!able or of the cost of
the distress or -eeping of the propert!+ reains unpaid for a period of thirt! da!s next
after an! such distress+ a! cause the said propert! to besold and with the proceeds of
such sale+ a! satisf! the aount pa!able and the costs including cost of sale reaining
unpaid and shall render the surplus aount+ if an!+ to such personI
A( ,he $entral Bxcise )fficer a! prepare a certificate signed b! hi specif!ing the
aount due fro such person and send it to the $ollector of the district in which such
person owns an! propert! or resides or carries on his business and the said $ollector+ on
receipt of such certificate+ shall proceed to recover fro such person the aount specified
thereunder as if it were an arrear of land revenue
Such aounts paid shall be considered for adjustent at the tie of finaliGation of the
assessent( .n case of an! surplus after such adjustent it shall be credited to consuer welfare
fund or the person having the incidence can a-e a refund application under section 11 = of
$entral Bxcise 'ct(
.n case aount so collected is not deposited b! within the period of A onths to the credit of the
central governent then the offense would attract prosecution for the period of 1 !ear or 3 !ears
as case a! be(
$nterest !n am!unt 6!e6ted in e76ess9
Section 43= set out pa!ent of interest+ in the case where the aount is pa!able as deterined
b! the central excise officer( ,he interest shall be between the ranges of 10J upto axiu of
2#J(p(a( ,he rate fixed now is 10J p(a( Learlier 13JM vide notification 1@520117S, dated
01(03(2011
.n case the assessee has provided taxable service not exceeding *s A0 la-hs during an! financial
!ear covered under the notice or in the preceding financial !ear then the interest would be at the
rate of 1@J(this is an exception to section 43=
,he interest is pa!able onl! in case the aount is deterined b! the central excise officer( ;hen
the aount is paid voluntaril! such interest is not applicable
Penaties
Penaties eviabe under servi6e ta7 5r!visi!ns are given be!:9
Se6ti!n G; N Faiure t! make 5a8ment !" servi6e ta7 :ithin due date9
1@0
?enalt! which shall not be less than *s(100 per da! or 1J of the tax per onth whichever is
higher fro the first da! after the due date till the date of actual pa!ent of Service ,ax subject
to axiu of @0J of tax aount that assessee has failed to pa!(
Se6ti!n GG9 *enera Penat8
Se6ti!n )e"aut and Buantum !" 5enat8 "!r the same
GG>/?>a? Fais t! take registrati!n a66!rding t! Se6ti!n ;@
Penat8 :i be highest !" the "!!:ing
Am!unt u5 t! Rs=/.,...4'

GG>/?>b? Faiure t! kee5, maintain !r retain b!!ks !" a66!unts and !ther
d!6uments
Penat8 ma8 e7tend u5t! Rs=/.,...4'
GG>/?>6? Faiure t! "urnish in"!rmati!n, 5r!du6e d!6uments !r a55ear be"!re
the Centra E76ise #""i6er= Penat8 :i be highest !" the "!!:ing9
Am!unt u5 t! Rs=/.,...4'
Rs=-..4' 5er da8 "!r ea6h da8 !" de"aut
GG>/?>d? Fais t! 5a8 ta7 ee6tr!ni6a8, thr!ugh internet banking
Penat8 ma8 e7tend u5t! Rs=/.,...4'
GG>/?>e? $ssuan6e an inv!i6e :ith in6!rre6t !r in6!m5ete detais !r "ais t!
a66!unt an inv!i6e in the b!!ks !" a66!unts
Penat8 ma8 e7tend u5t! Rs=/.,...4'
G/>-? C!ntraventi!n !" an8 5r!visi!ns !" this 6ha5ter !r an8 rues made
thereunder
Penat8 ma8 e7tend u5t! Rs=/.,...4'
Se6ti!n GK N Penat8 "!r Su55ressing et6=,
;here an! service tax has not been levied or paid or has been short levied or short paid or
erroneousl! refunded+ b! reason of fraud or collusion or willful is7stateent or suppression of
facts or contravention of an! of the provisions of this chapter or of the rules ade thereunder with
the intention to evade pa!ent of service tax( ?enalt! will be as underF
?enalt! will be 100J of the aount of service tax not levied or paid or short levied or
short paid or erroneousl! refunded(
,he above said penalt! will be reduced to @0J+ if the assessee has recorded the true and
coplete details of the transaction(
1@"
,he above said penalt! will be reduced to 2@J if the tax dues are paid within a period of
30 da!s L"0da!s in case of Sall Scale Sector 'ssessee1value of taxable services not
exceed *S A0 >a-hs for an! of !ears covered b! notice or during preceding financial
!earM together with interest and reduced penalt! for the date of counication of
concerned order(
Section 40'F
;here a copan! coits following contraventions7
a( Bvasion of tax or
b( .ssues invoice without providing taxable service or
c( 'vails and utiliGes credits of taxes or duties without actual receipt of taxable service or
excisable goods or
d( &ails to pa! aount collected as service tax to credit of $entral Eovernent within A
onths of date when it becoes due
,hen director+ anager+ secretar! or other officer who at the tie of such contravention was in
charge and responsible to copan! was -nowingl! concerned with contravention liable to penalt!
extending upto *s 1 >a-hs(
Section 4" penalt! for failure to copl! with notice #mitted
Se6ti!n K. N Penat8 n!t t! be im5!sed in 6ertain 6ases
Se6ti!n Penat8 n!t t! be im5!sed i"O=
00L1M ?enalt! under Section 4A+ 44 or first proviso to sub7section L1M of Section 40 are
leviable if the assessee proves that there was reasonable cause for the default
00L2M ?enalt! u5s 4A+44 and 40 shall not be levied if the service tax pa!able as on A
th
da! of :arch 2012 in relation to renting of iovable propert! along with
interest is paid in full within six onths fro the 20(0@(2012 i(e(+ b! 20(11(2012
Penat8 "!r ate "iing !" returns >i=e=, ST'C? 5res6ribed under Rue G !" Servi6e Ta7 Rues9
;here an assessee subits the returns after the date prescribed for subission of such return+ the
assessee is liable to pa! the penalt! under *ule 4$+ for the period of dela!
?eriod of dela! 'ount of ?enalt!
1@ da!s fro the date
prescribed or due date
*s(@0057
1A0
=e!ond 1@ da!s but not
later than 30 da!s for the
due date
*s(100057
=e!ond 30 da!s fro the
due date
*s(100057 ?lus *s(10057 for ever! da! fro the 31
st
da! till the date
of furnishing the return but axiu of *s(20+00057 as prescribed in
Section 40(
Penat8 "!r "aiure !" "iing N$L returns
Bven if there is no business during the period+ the assessees have to file K/.>3 return as long as
registration certificate is valid(
&iling of return b! the assessee within the prescribed tie liit is copulsor!I even it a! be a
nil return+ penal action a! be attracted on the such failure(
's per the proviso to *ule 4$ if there is a sufficient reason for not filing the returns and if the
service tax pa!able is nil+ the $entral Bxcise )fficer a! reduce or waive the penalt!(
Penat8 under Cenvat Credit Rues, -..D
's per *ule 1@ of the $$*+ 200#+ penalt! is leviable as given below in the tableF
*ule under $$* Default and penalt! for such default
1@L1M .f assessee avails or utiliGe cenvat credit in respect of input or capital
goods or input services+ wrongl! or in contravention of an! of the
provisions then penalt! will be leviable for the sae( 8igher of the
following will be iposed as penalt!(
/ot exceeding the dut! or service tax on such goods or
services or
*s(2+00057 whichever is higher
1@L3M .n case+ where the cenvat credit in respect of input or capital goods or
input services has been availed or utiliGed wrongl! b! reason of
fraud+ collusion or an! willful isstateent or suppression of facts or
contravention of an! of the provisions with intent to evade pa!ent
of service tax( ,hen an assessee shall be liable to pa! penalt! in ters
of provisions of Section 40 of the &inance 'ct
1@' Eeneral ?enalt!F contravention of provisions of $$* 200# for which
no penalt! has been provided in an! rule then penalt! a! extend to
*s(@00057
1A1
THE V#L+NTAR( C#MPL$ANCE ENC#+RA*EMENT SCHEME9
aM ,he &inance 'ct was enacted on 10th :a!+ 2013( Soe of the ajor changes brought
about in &inance 'ct+ including the KService ,ax %oluntar! $opliance Bncourageent
Schee3 would be effective fro the date the ?residential 'ssent is given(
bM 's a easure of increasing the governent revenue and reducing the litigation+ the
Eovernent has introduced a one7tie schee called K%oluntar! $opliance
Bncourageent Schee3 under which+ a defaulter a! pa! his taxes which he has
failed to pa! without an! interest or penalt!(
cM 's per Sec "@L1MLbM of the &inance =ill+ 2013+ Kdeclarant3 eans an! person who a-es
a declaration under sub7section L1M of Sec "4 of the &inance =ill+ 2013( ,he Sec "4L1M
provides that subject to the provisions of the schee+ a person a! a-e declaration to
the designated authorit! on or before the 31st da! of Deceber+ 2013 in such forat
and is such anner as a! be prescribed(
dM 's per the provision of the schee+ it is understood that a person on who no notice or
order of deterination of taxes have been issued or ade before 01(03(2013+ can appl!
for relief under the provisions of this schee( .t is also pertinent to note that a person
who has disclosed his liabilit! in the service tax return+ but have failed to pa! the taxes+
shall not have an option to avail the benefit under this schee(
eM ,he persons a-ing application under the this schee+ and on who inquir! or
investigation has been initiated for non7pa!ent or short pa!ent of service tax+ the
application of such persons under this schee+ a!be liable for rejection b! the
designated authorit! for reasons to be recorded in writing( &or the purposes of this
clause+ in ter investigation or inquir! eans a search+ issuance of suons+ requiring
production of boo-s+ docuents or an! other evidences+ or if an audit has been initiated
and such inquir!+ investigation and audit is pending as on 01(03(2013( ,he schee
details are in annexure 2( /otification no(10520137S, provides details in this regard(
1A2
fM ,he assesses who wishes to pa! taxes for past period 1upto Deceber 122 and not
registered can get registered now and opt for this schee( .t has been provided in
%$BS that+ beside interest and penalt!+ iunit! would also be available fro an!
other proceeding under the &inance 'ct+ 1""# and *ules ade thereunder(
Features !" VCES9
1( ,he schee has been introduced to incentivise the defaulting persons to voluntaril!
declare tax dues for the period )ctober 1 2004 to Deceber 31 2011(
2( ,he declaration cannot be filed in relation to following service tax dues7
a( Dues in relation to which a notice or order of tax deterination has been
passed before 1
st
:arch 2013 under Section 42 + Section 43 or section 43' of
the $hapter % of finance 'ct(
b( Dues in relation to periods for which declarant has furnished returns and
disclosed true liabilit! but has not actuall! paid the disclosed aount of tax or
an! part thereof(
c( Dues in relation to an! issue in respect of which a notice or order of
deterination has been issued for an! prior period(
3( &urther in following instances the designated authorit! shall for reasons to be recorded in
writing reject the declaration in relation to an! tax dueF
a( ;here an enquir! or investigation has been initiated in relation to such dues b! wa! of
search of preises+ issuance of suons or accounts+ docuents and other evidence has
been requisitioned in relation to such enquir! or investigation or
b( ;here an audit has been initiated
and such enquir!+ investigation or audit is pending as on 1
st
:arch 2013(
#( Upon receipt of the declaration filed b! declarant it is incubent upon the designated
authorit! to ac-nowledge the declaration within 4 wor-ing da!s fro date of receipt of
declaration(
@( Upon such ac-nowledgeent+ the declarant is required to pa! the tax dues on a staggered
basis with atleast @0J of dues being paid before 31
st
Deceber 2013 and reaining in
201#(
A( ,he declaration would be conclusive after issuance of ac-nowledgeent and once
concluded atter would not be reopened in an! proceeding under $hapter % before an!
authorit! or court relating to period covered b! such declaration(
4( ;here however $oissioner has reasons to believe that the declaration ade b!
declarant is substantiall! false he a! for reasons to be recorded in writing+ issue a notice
1A3
to the declarant and such proceedings would be deeed to be a notice issued under
Section 43 or Section 43' of the 'ct(
Me6hani6s "!r !5ting "!r sameM
d( Bver! person who intends to a-e a declaration under this schee is required
to obtain registration if not alread! registered(
e( 'n eligible person intending to opt for the Schee is required to voluntaril!
a-e a declaration before designated authorit! before 31
st
Deceber 2013 in
&or %$BS 1(
f( ,he declarant shall pa! the aount as declared in schee in 2 installents7
i( /ot less than @0J of tax dues b! 31
st
Deceber 2013 and
ii( *eaining tax dues b! June 30
th
201#(
g( .f declarant fails to pa! the second instalent the sae shall be paid b!
Deceber 31
st
201# along with interest calculated fro 1
st
Jul! 201#(
h( ,he tax dues declared under this schee cannot be discharged b! utilising
$envat credits(
REF+N)S AN) RE2ATES
$ntr!du6ti!n9
Siilar to an! other tax statutes even under Service tax law there is refund echanis( ;e
should also note that there are certain provisions under $entral Bxcise which are ade applicable
for Service tax also( )ne of such provision is Section 11= of the $entral Bxcise dealing with
refunds( ,he sae section will appl! with regard to the refunds under Service ,ax( Bxcept for the
cases where the self adjustent of tax is allowed+ if an! aount paid in excess b! the assessee to
the departent+ assessee needs to opt for a-ing an application for refund( ,he below entioned
provisions of $entral Bxcise has ade applicable for service tax in case of refund and sae is
prescribed under Section 03 of the &inance 'ct(
1( Section 11= $lai for refund of excise dut!
2( Section 11== .nterest on dela!ed refund be!ond 3 onths
Re"und under Se6ti!n //2 !" Centra E76ise A6t, /@DD9
=rief explanation of Section 11= is as followsI
1A#
1( ,he person claiing the refund of an! dut! of excise a! a-e an application to '$$B
or D$$B before the Bxpir! of one !ear fro the relevant date in the prescribed anner(
8owever liitation period of one !ear shall not appl! where an! dut! has been paid
under protest(
2( ,he application for refund should be ade in &or * Lin triplicateM(
3( ,he liitation period of one !ear is to be calculated fro the date of pa!ent of service
tax(
#( ,he application should be accopanied b! such docuentar! or other evidence Bnsure
that
a( Erounds on which refund is claied(
b( Docuents in support of refund clai should be enclosed( ,he docuents
should establish that the aount of dut! claied as refund has been paid b!
hi and the incidence of dut! has not been passed on b! hi to an! other
person(
c( 'ount of service tax relating to which such refund is claied was either
collected fro hi or has been paid b! hi(
d( Details of the anner in which the aount of dut! originall! paid ust be
given(
@( ,he 'ssistant $oissioner+ on being satisfied that due is refundable+ shall grant refund
onl! in the following casesF
*ebate of dut! paid on excisable goods exported out of india or on
excisable aterials used in anufacture of goods which are exported out
of india(
*efund of balance aount in ?>' of applicant3s account current
aintained with coissioner of $entral Bxcise L?>'M(
*efund of credit of dut! paid on excisable goods used as inputs in
accordance with rules and act(
,he dut! of Bxcise paid b! the anufacturer if he had not passed on
incidence of such dut! to an! other person(
,he dut! of Bxcise paid b! the bu!er if he had not passed on incidence
of such dut! to an! other person(
,he dut! of excise borne b! an! other such class of applicants as $entral
Eovernent a! b! notification in the official EaGette(
1A@
A( .n other cases+ the '$ shall a-e an order that the whole or an! part of the dut! is
refundable including service tax collected and not reitted and the aount so deterined
shall be credited to the Nconsuer welfare fundO established under Section 12$(
4( /o *efund shall be granted contrar! to that contained in an! judgent+ decree+order or
direction of appellate tribunal(
Re"und !" Cenvat Credit under Rue < !" CCR -..D=
,he refund *ule @ is siplified b! vide /otification /o 10520127$B dated 14(03(2012
read with /otification /o 24520127$B dated 10(0A(2012 wherein the duties or taxes paid
on an! goods or services that qualif! as inputs or input services will be entitled to be
refunded in the ratio of the export turnover to total turnover subject to procedure+
safeguards+ conditions and liitations as a! be specified b! notification in the official
gaGetteF
*efund aount V LBxport ,urnover of goods Q Bxport turnover of servicesM P /et $envat $redit
,otal ,urnover
*efund of cenvat credit under rule @ shall be subjected to the conditions and procedures laid
down in /otification /o 24520127$BF
LaM Bver! anufacturer or provider of output service shall subit not ore than one refund
clai on quarterl!( 8owever+ where a person exporting goods and services
siultaneousl!+ a! subit two refund clais one in respect of goods exported and other
in respect of the export of services ever! quarter(
LbM &or the purpose of this notification quarter eans a period of three consecutive onths
with the first quarter beginning fro 1
st
'pril of ever! !ear+ second quarter fro 1
st
Jul!+
third quarter fro 1
st
)ctober and fourth quarter fro 1
st
Januar! of ever! !ear(
LcM .n respect of goods exported7
the value of goods cleared for export during the quarter shall be the su total of
all the goods cleared b! the exporter for exports during the quarter as per the
onthl! or quarterl! return filed b! the claiant(
,otal value of goods cleared during the quarter shall be the su total of value of
all goods cleared b! the claiant during the quarter as per the onthl! or
quarterl! return filed b! the claiant(
1AA
>d? $n res5e6t !" Servi6es e75!rted'
&or the purpose of coputation of total turnover+ the value of export services
shall be deterined in accordance with clause LDM of sub7rule L1M of rule @ of the
said rules(
&or the value of all services other than export during the quarter+ the tie of
provision of services shall be deterined as per the provisions of the ?oint of
,axation *ules+ 2011(
LeM the aount of refund claied shall not be ore than the aount l!ing in balance at the
end of quarter for which refund clai is being ade or at the tie of filing of the refund
clai+ whichever is less(
LfM the aount that is claied as refund under rule @ of the said rules shall be debited b! the
claiant fro his $B/%', credit account at the tie of a-ing the clai(
LgM .n case the aount of refund sanctioned is less than the aount of refund claied+ then
the claiant a! ta-e bac- the credit of the difference between the aount claied and
aount sanctioned(
Pr!6edure "!r "iing the re"und 6aim
aM ,he anufacturer or provider of output service+ as the case a! be+ shall subit an
application in &or ' to the 'ssistant $oissioner of $entral Bxcise or Deput!
$oissioner of $entral Bxcise+ as the case a! be+ in whose jurisdiction+7
iM ,he factor! fro which the final products are exported is situated(
iiM ,he registered preises of the provider of service fro which output services
are exported is situated(
bM ,he application in the &or ' along with the docuents specified therein and enclosures
relating to the quarter for which refund is being claied shall be filed b! the claiant+
before the expir! of the period specified in section 11= of the $entral Bxcise 'ct+ 1"## L1
of 1"##M(
cM 'pplication shall be certified5signed b!
LiM ,he individual or the proprietor in the case of proprietar! fir or -arta in case of
8indu Undivided &ail! as the case a! beI
LiiM 'n! partner in case of a partnership firI
LiiiM ' person authoriGed b! the =oard of Directors in case of a liited copan!I
LivM .n other cases+ a person authoriGed to sign the refund application b! the entit!(
1A4
dM ,he applicant shall file the refund clai along with the copies of ban- realiGation
certificate in respect of the services exported(
eM ,he refund clai shall be accopanied b! a certificate in &or '7.+ dul! signed b! the
auditor Lstatutor! or an! otherM certif!ing the correctness of refund claied in respect of
export of services(
fM ,he 'ssistant $oissioner or Deput! $oissioner to who the application for
refund is ade a! call for an! docuent in case he has reason to believe that
inforation provided in the refund clai is incorrect or insufficient and further enquir!
needs to be caused before the sanction of refund clai(
gM 't the tie of sanctioning the refund clai the 'ssistant $oissioner or Deput!
$oissioner shall satisf! hiself or herself in respect of the correctness of the clai
and the fact that goods cleared for export or services provided have actuall! been
exported and allow the clai of exporter of goods or services in full or part as the case
a! be(
?rovided further no refund of credit will be allowed if the anufacturer or service provider avails
drawbac- allowed under the $ustos and $entral Bxcise Duties and Service tax Drawbac- *ules
1""@ or clais rebate of dut! under the $entral Bxcise *ules+ 2002+ in respect of such dut! or
clais rebate of service tax under the Service ,ax *ules 1""# in respect of such tax(
T%e ne$ sc%eme $.e.+. 1
st
April -.1- d!es n!t re<uire t%e c!rrelati!n 2et$een e*p!rts
and input services used in suc% e*p!rts.
Pr!6edure "!r re"und !" 6redits u4r < !" CCR -..D 5ri!r t! the ./=.D=-./-
,he clais are to be ade once in a quarter in the calendar !ear Lunless the assessee is an
100J B)U or exports in preceding quarter exceeded @0J of total value+ when it can be
ade onthl!M
,he service provider shall subit an application in &or ' to the jurisdictional
'$$B5D$$B within the tie specified u5s 11= of $B' 1"##
,he clai shall be accopanied b! a cop! of the invoice and a ban- certificate certif!ing
realiGation of export proceeds(
,he refund of unutiliGed input service credits would be as per the forula L,otal $envat
$redit on input services during the period P LBxport ,urnover5,otal ,urnoverMM
,he service provider shall ensure proper follow up with the authorities till granting of
refund(
1A0
/oteF 7 ,he assessees are also advised to subit copies of cenvat registers plus docuents on
which credits are ta-en as these a! practicall! be required( ,he proof as to pa!ent of aounts
to the service provider on these bills on which credits are ta-en+ would also have to be furnished
to facilitate quic-er refunds(
)ssues6 ;hether nexus of input services5inputs is required to be co7related with the export of
taxable serviceC
C!mments9 'endent was ade in budget 2010 requiring the service provider availing the
benefit under *ule @ of $envat $redit *ules+ 200# to establish the nexus between the input
service and output service( ,he aendent was ade in the notification and not in the rule+
which in our view is disputable( &urther the $BS,', in various decisions has observed that one
to one co7relation is not required(
>%et%er t%e time limit !+ !ne year is applica2le t! re+unds !+ service ta* paid in e*cessH
*eaders a! note that this has alread! been dealt with b! the ,ribunal5$ourts( ,he Delhi ,ribunal
in .ndian .spat ;or-s L?M >td %s $$B *aipur L200A L03M S,* 1A1 L,ri7DelMM had held that where
service tax was not pa!able+ the departent had no authorit! under law to collect the sae and
therefore the tie liit of one !ear for refund was not applicable( ,hus this question is a valid
one and the view can be ta-en b! assessees(
>%et%er re+und !+ accumulated credits p!ssi2leH
.n .dol textiles >td %s $$B ,hane L2004 L214M B>, 2"" L,ri7:uMM+ *ule @ of $envat $redit
*ules was held to be a beneficiar! piece of legislation and refund of accuulated credit held to be
available despite hoe consuption as it was a substantive right of the assessee( ,herefore
assessees having accuulated credits on account of exports Lgoods or taxable servicesM could go
in for the refund option
,he clai should norall! be accopanied b! full docuentar! proof regarding the pa!ent of
appropriate taxes on which the clai for refund is being filed( ,he refund can be denied where
an! of the required conditions are not satisfied( ,he refund would be granted once an order for the
sae is passed b! the concerned authorit!( ;here the order is against the assessee the sae
would have to be ta-en up on appeal with the $oissioner L'ppealsM(
;here the refund is not granted within three onths fro the date of application for the sae or
fro the date of the order passed b! $oissioner 'ppeals5'ppellate ,ribunal5$ourt+ interest
1A"
shall be pa!able as per section 11== of $entral Bxcise 'ct 1"## fro the first da! after the
expir! of three onth period and up to the date of refund at the rates notified which is currentl! at
AJ p(a under /otification A452003 $B L/,M dated 12(0"(2003
,he service tax provisions provide an option for the provider of taxable service who exports his
services in accordance with the Bxport of Service *ules 200@ to opt for refund of the cenvat
credits in respect of excise dut! paid on inputs and service tax paid on input services Lunder *ule
@ of $$* 200#M used for providing such taxable services which are exported( ,his would be
useful where the service provider is not in a position to utilise the said credits towards his liabilit!
on services provided within the countr!( 'part fro this there is also an option to go for rebates
Lthe procedure for which is explained in this chapterM( .n the !ear 2004+ the governent also
notified certain input services norall! received b! exporters of goods for the purpose of
exeption( .(e the exporters of goods now have the option of going in for refund of the service
tax paid on specified input services which the! use for exporting their goods( .n other words+ the
exeption fro service tax is not given to the service provider who provides services to such
exporters( ,he exporter would have to file a clai for refund of the service tax he has paid on his
input services once the goods have been exported( ,he procedures are explained below
Re"und +nder N!ti"i6ati!n N! D/4-./-'ST dated -@=.;=-./- :=e=" /=G=-./-
,he notification grants rebate of service tax paid on the taxable services which are received b! an
exporter of goods and used for export of goods( .n the said notification standard rates of claiing
rebate have been revised and the sae is given in the annexure
:eaning of ter NSpecified ServicesO in respect of which rebate can be claiedF
iM in the case of excisable goods+ taxable services that have been used be!ond the place of
reoval+ for the export of said goodsI
iiM in the case of goods other than LiM above+ taxable services used for the export of said
goodsI
=ut shall not include an! service entioned in sub7clauses L'M+L=M+L='M and L$M of
clause LlM of rule L2M of the $B/%', $redit *ules+ 200#I >re"er e76usi!n 5art !" the
in5ut servi6e de"initi!n?
?lace of reoval have the eaning assigned to it in section# of the $entral Bxcise 'ct+
1"##(
,he rebate shall not be claied b! a unit or developer of a Special Bconoic XoneI
,he goods that are exported can either be excisable or non excisable
140
,he refund can be claied either b! anufacturer exporter or erchant exporter(
,he exporter a! appl! to the jurisdictional '$5D$ of $entral Bxcise
,he application for for claiing refund of service tax paid on specified services is
provided in the notification itself(
/o $B/%', credit of service tax paid on the specified services used for export of said
goods has been ta-en under the $B/%', $redit *ules+ 200#I
Pr!6edure "!r 6aiming Rebate
/= F!r th!se e75!rters !" g!!ds :h! intend t! 6aim rebate !n the basis !" rates
s5e6i"ied in the S6hedue !" Rates
a? anufacturer7exporter+ who is registered as an assessee under the $entral Bxcise
'ct+ 1"## L1 of 1"##M or the rules ade thereunder shall register his central
excise registration nuber and ban- account nuber with the custosI
b? exporter who is not so registered under the provisions referred to in clause LaM+
shall register his service tax code nuber and ban- account nuber with the
custosI
6? Pr!6edure "!r !btaining ST 6!der N!9 service tax code nuber referred to in
clause LbM+ shall be obtained b! filing a declaration in &or '72 to the 'ssistant
$oissioner of $entral Bxcise or the Deput! $oissioner of $entral Bxcise+
as the case a! be+ having jurisdiction over the registered office or the head
office+ as the case a! be+ of such exporterI
d? the exporter shall a-e a declaration in the electronic shipping bill or bill of
export+ as the case a! be+ while presenting the sae to the proper officer of
custos+ to the effect that7
i? the rebate of service tax paid on the specified services is claied as a
percentage of the declared &ree )n =oardL&)=M value of the said goods+
on the basis of rate specified in the ScheduleI
ii? no further rebate shall be claied in respect of the specified services+
under procedure specified in paragraph 3 or in an! other anner+
including on the ground that the rebate obtained is less than the service
tax paid on the specified servicesI
iii? conditions of the notification have been fulfilledI
e? 'ount of rebate V &)= value of the goods of a class or description given in the
Schedule P Standard *ate of *ebate
141
"? ,he aount of rebate calculated shall deposit in the ban- account of the exporter
g? .t is specified that the shipping bill or bill of export used for claiing rebate on
Standard *ates will not be used for claiing *ebate on 'ctual basis(
h? where the rebate involved in a shipping bill or bill of export is less than rupees
fift!+ the sae shall not be allowedI
-= F!r th!se E75!rters !" *!!ds :h! intend t! 6aim Rebate !n the basis !" a6tua
5a8ment !" servi6e ta7 !n s5e6i"ied servi6es=
>a? rebate a! be claied on the service tax actuall! paid on an! specified service
on the basis of dul! certified docuentsI
>b? the person liable to pa! service tax under section A0 of the said 'ct on the taxable
service provided to the exporter for export of goods shall not be eligible to clai
rebate under this notificationI
>6? ,he anufacturer Bxporter+ who is a central excise assessee+ is required to file
rebate clai in prescribed &or71 having jurisdiction over his factor!(
>d? 'n exporter other than a anufacturer7exporter as entioned above is required to
file a declaration in &or '72 see-ing allotent of Service ,ax $ode before
filing a rebate clai( ,he &or '72 has to be filed to '$ or D$ of central excise
having jurisdiction over his registered office or head office(
>e? 'fter obtaining the Service ,ax $ode /o the rebate clai has to be filed in &or
'71(
>"? the clai for rebate of service tax paid on the specified services used for export
of goods shall be filed within one !ear fro the date of export of the said goods(
>g? where the total aount of rebate sought under a clai is upto 0(@0J of the total
&)= value of export goods and the exporter is registered with the Bxport
?rootion $ouncil sponsored b! :inistr! of $oerce or :inistr! of ,extiles+
&or '71 shall be subitted along with relevant invoice+ bill or challan+ or
an! other docuent for each specified service+ in original+ issued in the nae
of the exporter+ evidencing pa!ent for the specified service used for export of
the said goods and the service tax paid thereon+ certified in the anner specified
in sub7clauses L'M and L=MF
A= if the exporter is a proprietorship concern or partnership fir+ the
docuents enclosed with the clai shall be self7certified b! the exporter
and if the exporter is a liited copan!+ the docuents enclosed with
142
the clai shall be certified b! the person authorised b! the =oard of
DirectorsI
2= the docuents enclosed with the clai shall also contain a certificate
fro the exporter or the person authorised b! the =oard of Directors+ to
the effect that specified service to which the docuent pertains has been
received+ the service tax pa!able thereon has been paid and the specified
service has been used for export of the said goods under the shipping bill
nuberI
>h? where the total aount of rebate sought under a clai is ore than 0(@0J of the
total &)= value of the goods exported+ the procedure specified in clause LhM
above shall stand odified to the extent that the certification prescribed thereon+
in sub7 clauses L'M and L=M shall be ade b! the $hartered 'ccountant who
audits the annual accounts of the exporter for the purposes of the
$opanies 'ct+ 1"@A L1 of 1"@AM or the .ncoe ,ax 'ct+ 1"A1L#3 of 1"A1M+
as the case a! beI
>i? where the rebate involved in a clai is less than rupees five hundred+ the sae
shall not be allowedI
>j? the 'ssistant $oissioner of $entral Bxcise or the Deput! $oissioner of
$entral Bxcise+ as the case a! be+ shall+ after satisf!ing hiself+7
i? that the service tax rebate clai filed in &or '71 is coplete in ever!
respectI
ii? that dul! certified docuents have been subitted evidencing the
pa!ent of service tax on the specified servicesI
iii? that rebate has not been alread! received on the shipping bills or bills of
export on the basis of procedure prescribed in paragraph 2Iand
iv? that the rebate claied is aritheticall! accurate+ refund the service tax
paid on the specified service within a period of one onth fro the
receipt of said claiF
Pr!vided that where the 'ssistant $oissioner of $entral Bxcise or the Deput! $oissioner
of $entral Bxcise+ as the case a! be+ has reason to believe that the clai+ or the enclosed
docuents are not in order or that there is a reason to den! such rebate+ he a!+ after recording
the reasons in writing+ ta-e action+ in accordance with the provisions of the said 'ct and the rules
ade thereunderI
143
;here an! rebate of service tax paid on the specified services has been allowed to an exporter on
export of goods but the sale proceeds in respect of said goods are not received b! or on behalf of
the exporter+ in .ndia+ within the period allowed b! the *eserve =an- of .ndia under section 0 of
the &oreign Bxchange :anageent 'ct+ 1""" L#2 of 1"""M+ including an! extension of such
period+ such rebate shall be deeed never to have been allowed and a! be recovered under the
provisions of the said 'ct and the rules ade there underI
&efund under notification "B#$$;8/. dated $"!$"!#$$; supersession by +otification
+o 5#B#$ dated 1$!#!#$@ -vailable to exporters of goods in respect of specified
input services >prior to !"!#$#?
"!nditi!ns
,he specified services are indicated below in the note to this paragraph and readers a!
refer the concerned notifications indicated for the exact set of conditions to be fulfilled(
*eaders a! also note that the services have not been specified fro a single date and
have been introduced over a period of tie which has also been indicated below this
paragraph(
,he exeption claied b! the exporter shall be provided b! wa! of refund of service tax
paid on the specified services used for export of the said goodsI
,he exporter claiing the exeption should actuall! have paid the service tax on the
specified services+ to the service provider
Bxeption or refund of service tax paid on the specified services used for export of said
goods shall not be claied except under this notification(
;here the exporter hiself is liable to pa! service tax under section A0L2M of the 'ct on
the services which gets consued on the goods that are being exported+ the exporter is
exept fro pa!ing the service tax(
/oteF 7 ,he services covered for the purpose of this notification are as follows
1( Eeneral insurance service in relation to export goods Sec( A@L10@MLdM
2( ?ort services for export of said goods Sec( A@L10@MLGnM
3( ,echnical testing and anal!sis of said goods for export Sec( A@L10@MLGGhM
#( .nspection and certification of export goods Sec( A@L10@MLGGiM
@( )ther port services for export of goods Sec( A@L10@MLGGlM
A( ,ransport of goods b! road in a goods carriage fro .$D to port of export Sec( A@L10@M
LGGpM
14#
4( ,ransport of goods in containers b! rail fro .$D to port of export 7 Sec( A@L10@MLGGGpM
0( $leaning services in relation to containers used for export of goods Sec( A@L10@MLGGGdM
"( Storage and warehousing services for export goods Sec( A@L10@MLGGaM
10( $ourier service in relation to transportation of goods and docuents for export Sec(
A@L10@MLfM
11( $ustos house agent services in relation to export of goods Sec( A@L10@MLhM
12( =an-ing and other financial services li-e collection of export bills or export letters of
credit Sec( A@L10@MLGM
13( &oreign exchange bro-er3s service in relation to sale or purchase of foreign currenc!
Sec( A@L10@MLGG-M
1#( Suppl! of tangible goods for use without transfer of control or right as to possession+ in
relation to export goods Sec( A@L10@MLGGGGjM
1@( $learing and forwarding agent3s services in relation to export goods Sec( A@L10@MLjM
1A( ?a!ent of service tax paid on services coonl! -nown as terinal handling charges 7
classified under an! sub7clause of clause L10@M of section A@
*eaders are advised to go through the various notifications available on www(cbec(gov(in to stud!
the conditions to be followed in order to clai the refund(
'ttention of the readers is also drawn to $ircular 10A50"52000 S, dated 11(12(00 which requires
grating of adhoc refund of 00J of the claied figure within 1@ da!s of filing of clais on an
interi basis in case of specified assessees which include those exporters Lregistered under
$entral Bxcise or Service ,axM who have paid dut! of excise or service tax of *s( 1 crore or ore
during preceding financial !ear as well as 100J B)Us( 'ssessees are also advised to go through
$ircular 11250A50" S, dated 12(03(0" which clarifies certain specific issues pertaining to
docuentation and procedure(
'rocedure for Clai(ing the &efund under notification 3$B#$# /. dated #$!$7!#$# which
superseded the earlier notification "B#$ dated $!$1!#$! this notification exe(pts the
service tax on the services provided to /*C or /*C unitBdeveloper! .he exe(ption under the
said notification can be clai(ed in two ways6
LaM ;here the specified services received in SBX and used for the authoriGed operations are
wholl! consued within the SBX+ then the service provider need not charge5collect the
service tax on such services provided( ,his is called ab initio exeption( &or the purpose
of this notification wholl! consued is deterined as followsF
14@
iM in respect of services specified in rule # of the ?)? *ules+ the place where the
services are actuall! perfored is within the SBX(
iiM in respect of services specified in rule @ of the ?)? *ules+ the place where the
propert! is located or intended to be located is within the SBX
iiiM in respect of services other than those falling under clauses LiM and LiiM+ the
recipient does not own or carr! on an! business other than the operations in SBX
LbM $n 6ase :here servi6es are 5art8 6!nsumed in SEL, the ma7imum re"und sha be
determined as "!!:s9
*efund aount V Lexport turnover of goods Q services of SBXunit5developerM P
Service tax paid on services other than wholl! consued
services Lboth SBX 9 D,'M
,otal turnover for the period(
F!r the 5ur5!se !" ab!ve "!rmua9
L'M *efund aount eans the axiu refund that is adissible for the period
L=M NBxport turnover of goodsO eans the value of final products and interediate
products cleared during the relevant period and exportedI
L$M E75!rt Turn!ver !" servi6es 6an be 6a6uated in the "!!:ing manner
Bxport turnover of services V pa!ents received during the relevant period for
export services Q export services whose provision has been copleted for which
pa!ent had been received in advance in an! period prior to the relevant period
advances received for export services for which the provision of service has not
been copleted during the relevant periodI
LDM ,otal ,urnover eans the su total value of
iM all excisable goods cleared during the relevant period including
exepted goods+ dutiable goods and excisable goods exportedI
iiM export turnover of services deterined in ters of clause L$M and the
value of all other services+ during the relevant period
)ther conditions 9 procedure for refund claiF
aM ,he SBX unit5developer require to obtain a list of services that are liable to service tax as
are required for authoriGed operations approved b! the 'pproval $oittee of the
$oncerned SBX
14A
bM &or claiing ab initio exeption the SBX unit5developer is required to furnish a
declaration in &or '71 verified b! specified officer of SBX+ in addition to the list
specified above(
cM &or claiing refund the SBX unit5developer file a declaration with '$5D$ of $entral
Bxcise as the case a! be having jurisdiction over SBX or registered office as the case be
in the &or '72
dM ,he unit of SBX is not registered shall+ before claiing a refund under this notification+
file a declaration with '$5D$ of $entral Bxcise+ as the case a! be having jurisdiction
over the SBX or registered office or the head office of the SBX as the case a! be in
&or '73(
eM ,he '$5D$ after the verification allot a service tax code nuber to the SBX within 4
da!s fro the date of receipt of declaration in &or '73(
fM ,he refund shall be accopanied b! the following docuentsF
a cop! of the list of specified services as are required for the authoriGed operations in
the SBX+ as approved b! the 'pproval $oitteeI wherever applicable+ a cop! of the
declaration ade in &or '71
invoice or a bill or as the case a! be+ a challan+ issued in accordance with the
provisions of the said 'ct or rules ade thereunder+ in the nae of the unit of a SBX
or developer+ b! the registered service provider+ along with proof of pa!ent for such
specified services used for the authorised operations and service tax paid+ in original
a declaration b! SBX unit5developer claiing such exeption to the effect LiM the
specified services on which refund is claied have been used for authoriGed
operations in SBX+ LiiM proper account for the specified services received and used for
the authoriGed operations are aintained b! the SBX unit5developer and the sae
shall be reproduced to the officer sanctioning the refund on deand+ LiiiM accounts or
docuents furnished b! the SBX unit5developer as proof of pa!ent of service tax
claied as refund based on invoices or bill or as the case a! be challan issued b!
the registered service provider indicating the service tax paid on such specified
services are true and correct in all respects(
gM ,he '$5D$ shall after due verification of the refund clai and after obtaining
satisfaction as to the copleteness of the clai shall refund the service tax paid on
specified services(
144
H!: d!es the s6heme !" rebate :!rkA
,he rebate can be granted b! the central governent either on the service tax paid on taxable
service exported or service tax paid on input services and5or dut! paid on inputs used in providing
such taxable service( ,his rebate shall be subject to conditions and liitations specified in the
concerned notification dealing with the rebate(
Rebate !" the servi6e ta7 !n ta7abe servi6es e75!rted
/otification 115200@ S, dated 1"(0#(0@ as aended grants rebate of service tax and cess
Lincluding S8B cessM paid on all taxable services Loutput servicesM exported in ters of rule 3 of
Bxport of Services *ules 200@+ to an! countr! other than /epal and =hutan subject to conditions
specified below
,he taxable service has been exported in ters of rule 3 of the aforesaid rules
,he pa!ent for export of such taxable service has been received in .ndia in convertible
foreign exchange
,he service tax and cess of which rebate has been claied has been paid on the taxable
service exported
,he rebate of service tax and cess is not less than rupees five hundred
;here the service tax and cess Lincluding S8B cessM of which rebate has been claied has not
been paid or the taxable service has not been exported+ the rebate allowed shall be recoverable
with interest(
Pr!cedure +!r t%e same A
,he clai for rebate shall be filed with the jurisdictional 'ssistant $oissioner or
Deput! $oissioner of $entral Bxcise in &or 'S,* 1
,he application shall be accopanied b! a docuentar! evidence of receipt of pa!ent
against the taxable service exported and the pa!ent of service tax and cess on such
taxable service exported(
,here shall also be a declaration that the taxable service has been exported in ters of
rule 3 of Bxport of Services *ules 200@ along with the docuents evidencing the export
of such taxable service(
,he jurisdictional '$$B5D$$B if satisfied that the clai is in order+ shall sanction the
rebate either in whole or in part(
140
/oteF 7 ,he assessees are also advised to subit the details as to cenvat credits availed with the
pa!ents ade to the service provider+ to facilitate quic-er rebate( &or this+ a cenvat register
giving details of the credits availed plus details of the debits against the credits on export of
taxable service would have to be aintained( ,his should be bac-ed up with other docuentar!
evidence in the for of invoices for export+ bills for claiing credit+ proof of pa!ent to service
provider+ export realiGation+ etc(
;hether a certificate fro statutor! auditor would be required to be furnished for claiing rebate
of service tax under notification 115200@C
,he requireent of furnishing a certificate fro statutor! auditor would be required onl! in case
the refund clai is filed in ters of notification @5200A+ wherein the refund clai was for ore
than *s @ la-hs+ therefore rebate under notification 115200@ would not require certificate fro
$hartered 'ccountant(
;hether co7relation between input services and output tax required under notification 115200@C
/otification 115200@ onl! requires the following conditions to be fulfilled(
Service should have been exported
?a!ent should have been received in foreign currenc!
Service tax claied as rebate should have been paid(
$lai of rebate should be for ore than *s @0057
&ro the above it is clear that notification 115200@ does not require co7relation between input
services with output tax( &urther there are plethora of decisions have held that no stateent of co7
relation was required between input services and output tax(
Rebate !" the servi6e ta7 !n in5ut servi6es !r dut8 !n in5uts
/otification 125200@ S, dated 1"(0#(0@ grants rebate of the whole of dut! paid on excisable
inputs or whole of service tax and cess Lincluding S8B cessM paid on all taxable input services
used in providing taxable service exported in ters of rule 3 of Bxport of Services *ules 200@+ to
an! countr! other than /epal and =hutan subject to conditions specified below
,he taxable service has been exported in ters of rule 3 of Bxport of Service *ule 200@
,he pa!ent for export has been received in .ndia in convertible foreign exchange
,he dut!+ the rebate of which has been claied+ has been paid on the inputs
14"
,he service tax and cess+ the rebate of which has been claied+ have been paid on the
input services
,he total aount of rebate of dut!+ service tax and cess adissible is not less than rupees
five hundred
$envat credit should not have been availed on inputs and input services on which rebate
is claied
;here the dut! or the service tax+ rebate of which has been claied+ have not been paid or the
taxable service has not been exported or the cenvat credit has been availed on inputs and input
services on which rebate has been claied+ the rebate shall be recoverable with interest(
Pr!cedure +!r t%e same 7
,he provider of taxable shall+ 2e+!re t%e date !+ e*p!rt !+ ta*a2le service+ file a
declaration with the jurisdictional '$$B5D$$B describing the taxable services to be
exported(
,he declaration shall be accopanied b! 7
1( ' description+ quantit!+ value+ rate of dut! and the aount of dut! pa!able on the
inputs actuall! required to be used in providing taxable service to be exported(
2( .n case of input services+ the description+ value and the aount of service tax and
cess pa!able on input services actuall! required to be used in providing taxable
services to be exported shall also be given(
,he '$$B5D$$B shall verif! the correctness of the declaration and a! accept
the declaration on being satisfied as to the truth of its contents(
,he inputs shall be procured directl! fro a registered factor! or fro a
registered dealer accopanied b! valid invoices issued under $entral Bxcise
*ules 2002
,he input services shall be received along with an invoice+ bill or a challan as per
the provisions of Service ,ax *ules 1""#
,he clai for rebate of dut! paid on inputs or service tax and cess paid on input
services shall be filed with jurisdictional '$$B5D$$B in &or 'S,* 2
,he application has to be accopanied b! invoices issued under $entral Bxcise
*ules 2002 for procureent of inputs+ invoices for input services as per Service
,ax *ules 1""# + plus docuentar! proof for pa!ent of dut! on inputs and
service tax on input services
100
?roof of receipt of pa!ent against service exported in convertible foreign
exchange
' declaration shall also be filed stating the service has actuall! been exported in
ters of rule 3 of the Bxport of Service *ules 200@
?roof of such export of service
%here the 6aim is in !rder, the jurisdi6ti!na ACCE4)CCE sha san6ti!n the rebate either
in :h!e !r in 5art= %hether the time imit !" !ne 8ear a55ies in 6ase !" re"und 6aimA
.n case of Swagat S!nthetics >td+ the 8on 8$ of Euj+ had held that refund under notification
@5200A $B L/,M+ was refund of credit+ whereas section 11= was with respect to tie liit for
application of refund of dut!+ as dut! was different fro input5input service credit( ,herefore
applicabilit! of tie liit of one !ear was not applicable to refund clais under notification
125200@(
Whether ti(e li(it of one year was applicable fro( the date of raising invoice or date of
realiDation?
&or considering a service to be exported+ the consideration should be received in foreign
exchange+ if the consideration was not received in foreign currenc!I the service would not be
construed as exported( ,he service provider would be liable to pa! the taxes( ,herefore the
service could be construed as exported onl! fro the date of receipt of consideration+ and not
fro date of raising invoice( ,herefore in the opinion of the author the one !ear period should be
considered fro the date of receipt of consideration and not fro the date of raising service
invoice( 8owever with the introduction of ?oint of ,axation *ules 2011+ the sae needs to be
factored+ in order to deterine the applicabilit! of tie liit of one !ear(
Whether obtaining registration under a correct service a pre8reEuisite for clai(ing refund of
taxes?
*egistration under a correct service is not a pre7requisite for claiing refund of service tax( 's
refund notification nowhere specifies requireent as to obtaining registration( &urther registration
under service tax was onl! for assesees who were liable to pa! taxes+ Lsec A"M( .n case of export
of services there was no requireent to pa! taxes( &urther this view was also upheld in case of
,extech .nternational L?M >td(+ %s( $S, 2011 L21M S,* 20" L,riM+ it is held that registration cannot
be ade as a basis to reject the refund clai when the entire services were exported
101
PR#CE)+RES %$TH RE*AR) T# RE*$STRAT$#N
,he provisions under service tax with regard to registration not onl! require the assessee to
register hiself when he starts providing a taxable service+ but also to aend his certificate of
registration ever! tie there is a change in his business profile( 8e is also required to state at the
tie of registering as whether he wants to opt for centraliGed registration or not( ,his option can
be exercised even at a later date in which case+ he would have to get his *egistration $ertificate
aended( 'part fro a service provider+ even a service receiver who is liable to pa! service tax
u5s A0L2M of $hapter % of &inance 'ct 1""# would be required to register hiself under service
tax for the purpose of pa!ing service tax( ,he requireent as to registration would also extend to
an .nput Service Distributor who would want to distribute $envat credits on inputs+ input services
or capital goods to the unit providing taxable service or engaging in anufacturing of dutiable
final products( ,he procedures with regard to registration under service tax in each of the
scenarios would basicall! be the sae with ver! inor changes which would be evident on the
application for registration(
%hen d!es the servi6e 5r!vider reBuire registrati!n under Servi6e Ta7A
' service provider whose value of service exceeds *s " la-hs+ in the !ear of providing the service
or in an! subsequent !ear+ when the value of service cross *s " la-h for the first tie+ would
require registration + however such service provider can avail exeption if the value of service
does not exceed *s 10 >a-hs per annu(
%hat is the 5r!6edure "!r registrati!nA
1( ,he assessee shall a-e an application in for S, 1 to the Superintendent of $entral
Bxcise in duplicate( Such application can be filed online www(aces(gov(in( &or this the
following procedure shall be adhered to F
a( ,he user shall first log onto the site aces(gov(in and select NService ,axO option
on the left side of the screen
b( 8e shall then register hiself b! clic-ing on N/ew users to clic- here to register
with '$BSO option( )n clic-ing the sae he will be required to give certain
basic details and a e7ail id( ,he password for such registration will be sent to
this ail id(
102
c( )n subitting the for the password will be sent to the .D above and the user
shall login into '$BS with this password( Such a password is onl! to gain access
to '$BS and it does not ipl! that registration with the departent is done(
d( .n the case of an existing assessee+ he shall fill in the NDeclaration &or for
'$BSO Lin 'ppendix .M and subit it to the respective coissionerate( ,he
assessee will then receive a user .D and password at the ail .D specified in such
for to activate his registration nuber in '$BS( 'n existing assessee is /),
required to fill &or S,71 again in '$BS(
e( &or a new assessee who does not have a service tax registration certificate+ shall
register with '$BS with the .D and password that is sent as entioned in Kc3
above and select the option N*BEO and N&ill S,71O(
f( ,he for shall be filed online with all the required details and subitted online
itself(
g( ' print of the for subitted online shall be ta-en and along with this the
docuents as entioned in below shall be subitted to the departent at the
concerned $oissionerate within 1@ da!s(
2( ,he application shall be filed within 30 da!s fro the date of providing taxable service
and shall bear the address sought to be registered
3( ,he application should be filled up carefull! without errors and coluns and boxes which
are not applicable a! contain N/'O stated across the( 'll the taxable services
provided should be entioned on the application and there would not be separate
applications for each of such taxable services
#( ,he &or should be signed b! the director5partner5sole proprietor as the case a! be or
the authoriGed signator!(
@( ,he application shall be accopanied b! copies of the following docuents 7
Self certified cop! of ?'/+ Lwhere allotent is pending+ cop! of the application
for ?'/ a! be givenM
$op! of :)'5')' in case of $opanies
$op! of =oard *esolution in case of $opanies
$op! of >ease deed5*ental agreeent of the preises
' brief technical write up on the services provided
*egistration certificate of ?artnership fir
'ddress proof of the assessee
103
$op! of a valid ?ower of 'ttorne! where the owner5:D5:anaging ?artner does
not file the application
A( )nce filed+ the ac-nowledgeent for having filed the application is to be obtained on the
duplicate cop! for one3s own reference
4( .f the ?articulars stated in the &or are correct+ then the registration certificate would be
provided within a period of seven da!s( ;here not so provided+ the registration is deeed
to have been granted(
H!: is 6entraiHed registrati!n di""erentA
$entralised registration is opted for in a case where the accounting and billing operations of the
assessee are centraliGed in an adinistrative office which a! be a branch or 8ead )ffice despite
the services being provided fro ore than one location( ,he preises that is registered here is
the one where the centraliGed accounting and billing is done( ,his decision is at the option of the
tax pa!er and he can also opt to have ultiple registration which however a! not be advisable(
,he procedure would be the sae as explained above with a few exceptions 7
,he registration in case of centraliGed registration would be granted b! the $oissioner
of $entral Bxcise having jurisdiction over the centraliGed preises
,he registration foralit! at the departent3s end ta-es a little longer than the period
stated above and the concept of deeed registration need not appl! here
,he following docuents are required in addition to the docuents needed under the aforesaid
procedure 7
a( ?roof of address of each such preises or branches for which centralised registration is
sought
b( ?roof of address of branches+ new offices opened if an!
H!: t! make amendments :ith regard t! 6hanges in 5arti6uarsA
'endent would be required where there is an! change in the particulars furnished in the S, 1
at the tie of registration(
,he changes shall be intiated to the departent within 30 da!s of such change
,he fact that the S, 1 is being filed for an aendent+ should be clearl! highlighted on
the for
,he assessee shall subit a certified cop! of the *egistration $ertificate
10#
,he application a! also be accopanied b! a covering note explaining the
circustances that led to the change with copies of relevant docuents being given(
Such aendent can be done online as well which will then have to be subitted to the
departent with the required docuents(
Servi6e Ta7 Registrati!n Number
Service tax registration no is also called as Service ,ax code+ which is a fifteen digit ?'/ based
code+ wherein the first 10 digits are the sae as ?'/+ next 2 digits are S,+ and the last 3 digits are
the serial nubers indicating the nuber of registration(
Premise 6!de
.t is a nuber for eas! identification of location of registration of tax pa!er+ preises code is
given on the basis of $oissionerate+ division+ range(
10@
PR#CE)+RE %$TH RE*AR) T# $NV#$C$N*
,he invoicing procedure with regard to service tax is soething that is not assigned adequate
iportance b! certain service providers( 's far as possible where the records of the assessee are
full! coputeriGed+ invoices a! be generated fro the s!ste( :an! of the accounting
pac-ages available in the countr! support invoicing and the invoicing option under these
softwares are required to be opted( =ut in quite a few cases+ it has been found that though the
records of the assessees are coputeriGed+ the invoicing is anual raised or raised through
independent software pac-age+ which do not spea- to each other( 't ties+ the choice of invoicing
ethod 5 forats a!be at the behest of the custoers(
H!: t! raise a 5r!5er inv!i6eA
,he assessee can follow the below entioned guidelines for the purpose of ensuring a proper
invoicing ethodolog!( ,he invoicing requireent is governed b! *ule #' of Service ,ax *ules
1""#(
'( ,he invoice is to be issued within 30 da!s of copletion of taxable service or receipt of
aount whichever is earlier(
=( .n case of continuous suppl! of service+ invoice was to be issued within 30 da!s of the date
when each event specified in the contract which requires the service receiver to a-e an!
pa!ent is copleted (,he invoice 5 bill 5 challan should be signed b! such service provider
or a person authoriGed b! hi(
,he invoice shall be seriall! nubered and should contain the following
inforation
,he nae+ address and registration nuber of the service provider(
,he nae and address of the service receiver
Date of raising of invoice
Details of the custoer3s5client3s wor- order5purchase order
Description+ classification and value of taxable service provided(
,he aount of S, and Bducation cess5S8B $ess charged on such service
tax
=rea-up of the aount charged towards the service 5 goods(
10A
Details as to exeption being claied with reference to the concerned
notification
N!te@ A T%e assessee is advised t! indicate t%e values clearly $%ere %e claims deducti!n +!r value
!+ )!!ds !r materials trans+erred durin) t%e c!urse !+ pr!vidin) t%e service. II+ t%e service
pr!vider is +!ll!$in) t%e 2ene+it !+ n!ti+icati!n 1-B-..4 ST t%e material value is t! 2e indicated
clearly s! as t! av!id disputes $it% t%e departmentJIt%e deducti!n under t%is n!ti+icati!n is
availa2le upt! 4..C.-.1- !nlyJ. T%e service pr!vider is als! re<uired t! raise an inv!ice !n
receipt !+ advances t!$ards t%e ta*a2le services t! 2e pr!vided t%!u)% very +e$ assessees
practically +!ll!$ t%is re<uirement.
Illustrative +!rmat +!r t%e service inv!ice is )iven 2el!$ E
Ta7 $nv!i6e4$nv!i6e +4r DA !" Servi6e Ta7 Rues /@@D
L/ae and address of the service providerM
S, *egistration nuber
.nvoice /uber
Date
L/ae and address of the service receiverM ?) *ef
Date
Particulars Am!unt in ,s
Descripti!n !+ service pr!vided
Gr!ss am!unt
(*empti!n 2ein) claimed #details&
Am!unt t! 2e su2'ected t! service ta*
Service ta* at 1-7
(ducati!n cess
Sec!ndary and 5i)%er (ducati!n cess
T!tal service ta*
#In $!rds&
T!tal VATBsales ta*
Ot%ers
T!tal 2ill am!unt
104
REC#R) KEEP$N*
*ecord -eeping under service tax is one of the ost critical factors fro the point of view of
copliance( ,he assessee should have a sound record7-eeping s!ste if he is to avoid a scenario
where he struggles at a later date to ensure copliance with the law( $onsidering the level and
scale of coputeriGation in .ndia+ it is shoc-ing to note that the assessees who struggle the ost
with record -eeping are those who have full! coputeriGed s!ste or even the B*? environent(
^uite often assessees end up using custoiGed software either developed in7house or sourced
fro abroad+ which do not full! cater to the reporting requireents under service tax(
Surprisingl! the entire indirect tax copliance would be outside the B*?+ which eans that none
of the chec-s and balances is within the s!ste(
'ssessees also struggle due to ignorance as to the provisions of law as well as to the reporting
requireents thereunder( Until and unless the assessee hiself is clear about the concepts of
service tax and the reporting requireents thereunder+ he would not be in a position to educate the
s!stes anal!sts and the prograers to a-e changes to the software in order to ensure better
reporting(
>%at are t%e rec!rds t! 2e =ept and $%et%er t%ere are any statut!ry rec!rds t! 2e maintainedH
,here is no statutor! record prescribed under service tax as far as record -eeping is concerned(
,he assessee should follow the basic guidelines laid down here
' proper record should be -ept of the aterials received and used for the purpose of
providing taxable services( ,he basic docuents for this would be the Eoods *eceived
/otes and the *aw aterials ledger in stores( ;here the service provider has both taxable
as well as exepted services+ separate aterial accounts a! be -ept and $envat credits
availed onl! on those aterials used for providing taxable services( ,his can be done b!
segregating the aterial receipts at the E*/ stage itself b! having separate series for
aterials eant for use in taxable services( ,his should be followed up with proper
ph!sical control over stoc-s( ;here stoc-s are transferred fro one location to another+ a
s!ste of having requisition slips can be followed in addition to stoc- transfer
notes5invoices which would indicate the intended usage of the stoc-s so transferred(
/ext would be the tas- of identif!ing the input services to be used for providing services(
,o the extent possible+ the services to be used for providing taxable services should be
100
identified so that full credits can be claied on the sae( ;here segregation is not
possible+ the sae would have to be flagged off for appl!ing the forula laid down in
*ule A of $$* 200#
's far as input services are concerned+ the! a! be assigned codes while accounting the
sae in the financial ledgers to identif! the in ters of the intended usage( 'nother
effective wa! of doing this is b! docuenting the reasons for procuring the service at the
tie of raising of the wor- order on vendors5service providers which would facilitate
proper trac-ing of such input services at subsequent stages(
?roper recording of $envat credits in respect of inputs and input services( ,he assessee
here can aintain a $envat credit register which would give in detail the aounts of
credits availed( ,he register can furnish the following details Bntr! serial nuber+
vendor nae+ ite description and description of input service+ basic value of
goods5services+ basic excise dut! or service tax+ cess on dut!5tax+ E*/ reference for
receipts+ pa!ent reference for having paid the service charges Q service tax to the input
service provider+ total credits available+ aount debited+ invoice5bill for such debit+
closing balance of credits( ,he assessee should also record the credit figures correctl! in
financial ledgers which can then facilitate a s!ste of reconciliation between the $envat
registers and the financial ledgers(
,he assessee should ta-e due care in ascertaining and discharging service tax on cash
basis+ as corporate assessee are bound to aintain boo-s of accounts on accrual basis+
therefore the corporate assessee should ensure in accounting and discharging service tax
on cash basis+ which could be a tedious tas-(
$are should be ta-en with regard to invoicing to ensure that proper brea-ups are given
for the values so that the correct aount liable to service tax a! be deterined( &or the
purpose of filing of the S, 3 returns+ detailed wor- sheets would have to be aintained
clearl! indicating the value of services billed+ the aounts received towards such services
billed+ the aount of %',5sales tax paid+ the value of aterials sold and the aounts
charged towards labour so that the correct aount of service tax pa!able a! be
ascertained(
.n case the assessee opts for claiing deduction towards value of aterial used in course
of providing wor-s contract service+ i(e( notification 2#520127S, + the assessee should
ensure+ proper supporting docuents are aintained supporting the deduction claied b!
the assessee+ else the benefit of the said notification could be denied( &urther the
deduction towards value of aterial would not be available on adhoc basis(
10"
,he assessee should also have a proper referencing s!ste through which the various
docuents are lin-ed( ,his lin-ing can be brought about through quoting the bill nubers
and the voucher references on the registers being aintained which would also ensure
that no bill or voucher has been left out(
,he list of records is to be declared within the end of the onth in which the first return
being filed(
1"0
PA(MENT #F SERV$CE TA&
Service tax is pa!able on the aount or value of taxable service received and not on the gross
aount billed( =ut even toda! there are quite a few service providers who pa! on the aount
billed i(e( following accrual basis( .n case+ an! advance is received for service to be provided then
the service provider shall pa! the service tax on the aount received( ;here the service is not
provided and the aounts are refunded to the service receiver+ such service tax paid can be
adjusted in the returns b! the service provider+ however &inance =ill 2011 has introduce point of
taxation *ules 2011+ and these rules would transfor fro cash basis of accounting to accrual
basis of accounting(
)eterminati!n !" P!int !" Ta7ati!n
?oint of taxation *ules+ 2011 cae in to effect fro 01(0#(2011(
'( ?oint of taxation shall be deterined as under L*ule 3M
,he point of taxation is the earliest of the following
i( Date of invoice
ii. Date of copletion of provision of service
iii( Date of pa!ent
Barlier the provision for continuos suppl! of service was provided in *ule A( ;ef
1(#(2012 this was inserted in proviso to *ule 3( 's per proviso+ the point of
taxation for continuos suppl! of service is as follows7
;here the provision of whole or part of the service is deterined periodicall! on
copletion of event which is as per contract entered+ which requires the receiver
of service to a-e pa!ent to service provider+ then the point of taxation would
be copletion of event(
,o su upF
Scenario ?oint of taxation
.nvoice issued within 30 da!s of
copletion of service
Date of invoice
Service copleted but invoice not
issued within 30 da!s
Date of copletion of service
'dvance received before copletion Date of receipt to extent of advance
1"1
received(
.nvoice issued before copletion of
service
Date of invoice
.n case of continuos suppl! of service $opletion of respective events as per
contract entered
b( Deterination of point of taxation in case of change in rate of tax L*ule #M
/otwithstanding an! thing contained in *ule 3+ point of taxation in case of
change of rate shall be deterined in the following anner(
;hen taxable service was provided before change of rate
i( ;here invoice for the sae is issued and pa!ent received after change of
rate ?oint of is date of pa!ent or date of issuing of invoice which ever is
earlier( )r
ii( ;here invoice is raised prior to change in tax rate+ but pa!ent is received
after change of rate ?oint of taxation is date of issuing of invoice( )r
iii( ;here pa!ent is also received before change in rate+ but invoice for the
sae has been issued after change of rate ?oint of taxation is date of
pa!ent(
Deterination of point of taxation after change in rate of tax
i( ;here the pa!ent for invoice is also ade after the change in tax rate+ but
invoice has been issued prior to change in rate point of taxation shall be
date of pa!ent( )r
N!te@ T%e aut%!r is !+ t%e !pini!n t%at t%e c!ncept !+ accrual !r cas% $%ic%
ever is 2ene+icial t! t%e revenue is 2ein) ad!pted %ere
ii( ;here the invoice has been issued and the pa!ent for the invoice was
received before change in tax rate point of taxation shall be date of receipt
of pa!ent or issue of invoice which ever is earlier( )r
iii( ;here the invoice has been raised after the change of rate + but pa!ent has
been received before the change of rate+ point of taxation shall be date of
rising the invoice
N!te@ T%e aut%!r is !+ t%e !pti!n t%at t%e c!ncept !+ accrual !r cas% $%ic%
ever is 2ene+icial t! t%e revenue is 2ein) ad!pted %ere
1"2
=( ?a!ent of taxes in case of new services L*ule @M
;here a service is being taxed for the first tie+ not being covered under *ule A
i( /o tax shall be pa!able to an extent of invoice being raised and pa!ent
being received before such service becae taxable
ii( /o tax shall be pa!able+ if pa!ent was received before such service becae
taxable and invoice was issued within 1# da!s as per *ule #' of Service ,ax
*ules 1""#(
$( Deterination of point of taxation in case of the following FL *ule 4M .n case of persons
liable to pa! service tax under reverse charge echanis E,'+ sponsorship+ and iport
of services as well as other services where the service tax liable to be paid b! the
recipient of service+ if the pa!ent has been ade before A onths fro the date of
pa!ent(
8owever if the pa!ent is not ade within A onths of date of invoice+ the general rule
as explained above would be applicable(
.n case of associated enterprises date of credit in the boo-s of accounts or a-ing
pa!ent whichever is earlier would be considered as point of taxation(
,he *ule A of Service ,ax *ules gives an option to individuals and partnership firs
whose aggregate value of taxable services provided fro one or ore preises is *s @0
>a-hs or less during the previous financial !ear to pa! tax on receipt basis upto *s @0
>a-hs(
D( Deterination of point of taxation in case of a cop! right L*ule 0M
.n case of ro!alties and pa!ents pertaining to cop!rights+ tradear-s+designs or
patents+ where whole aount of consideration for provision of service was not
ascertainable at the point of perforance of service and subsequentl! use of benefit of
these services results in pa!ent of consideration+ service shall be treated as having
been provided each tie when a pa!ent is received in respect of use of such benefit
or raising of invoice+ which ever was earlier
B( ,hese rules shall not be applicable for invoices issued prior to 1
st
'pril 2011(
1"3
's per old *ule 4 of ?oint of ,axation *ules applicable upto 31(3(2012+ the point of taxation for a
few specified service providers was receipt of consideration fro custoer( 8ence for !ear 20117
12 such specified service providers such as $hartered accountants were pa!ing service tax on
receipt basis( ,he service tax rate was increased fro 10 to 12J wef 1(#(2012(
Due to this there was a confusion in inds of such service providers whether to pa! service tax at
10J or 12J( ,here was a circular issued b! the $=B$ stating service tax to be paid at 12J(
,he 83nble 8igh $ourt in decision in Delhi $hartered 'ccountant Societ!L*egdM vs U).
L2013L2"M S,* #A1 LDelM quashed the circulars as contrar! to provisions of service tax and held
that service tax required to be paid <10J for above entioned situation as providing of service
is iportant(
/oteF ,hese provisions would result in widespread inequalit! and pain to the tax copliant
service provider( ,he sae is against the 'ccounting Standard of *evenue *ecognition 'S7"
and also would not be practicable for professional who are under the cash s!ste of accounting
for decades( Soe exceptions a! have to be put in place to itigate this hardship(
Service tax is to be paid on the gross value of taxable service+ and not on the net aount realiGed
fro the service receiver after deduction of tax at source L,DSM under the .ncoe ,ax 'ct 1"A1(
,he service tax deterined as per ?oint of ,axation *ules 2011+ shall be paid to the credit of
central governent b! @
th
of the subsequent onth LA
th
of the subsequent onth if pa!ent is
ade electronicall!M and the aount is to be paid b! 31
st
of :arch for the onth of :arch of the
financial !ear( &ro 01(0#(2010 e7pa!ent of service tax is andator! for those who had paid
central excise dut! or service tax of *s( 10 la-hs or ore in the preceding financial !ear+ whether
b! cash or debit in $envat credit account or both vide circular /o( "1"50"520107$P dated
23(03(2010(
.f the service provider happens to be individual or proprietar! fir or partnership fir the service
tax aount has to be paid b! @
th
of the subsequent onth+ following the quarter LA
th
of the onth
following the quarter if done electronicall!M and 31
st
of :arch for the quarter ending :arch of the
financial !ear(
's per *ule 2' the date of pa!ent is as follows7
,he earlier of following dates would be considered as date of pa!ent7
e( Date on which pa!ent is entered in boo-s of account(
f( Date on which pa!ent is credited to ban- account of person liable to pa! tax(
(
&urther the date of boo- entr! would not be considered and onl! date of credit into ban- account
would be considered if all the following conditions are satisfied(
1"#
a( =etween date of entr! and date of credit there is change in effective rate
of tax or when a service is taxed for the first tie and
b( ,he credit in the ban- account is after # wor-ing da!s fro date of rate
change or new lev!(
c( ,he pa!ent is ade b! wa! of an instruent which is credited to ban-
account(
H!: t! 5a8 servi6e ta7A
,he service provider shall hiself assess the tax pa!able for the onth or quarter as the
case a! be on the basis of ?oint of ,axation *ules 2011(
8e shall then ascertain the aount of credits left in balance at the end of the period stated
above for which pa!ent is being ade( 8e shall then reduce the credits balance to the
extent available or to the extent of his liabilit! whichever is lesser(
;here an! aount is reaining pa!able after the adjustent discussed above against the
credits+ the sae shall be reitted within the due dates explained above(
,he aount shall be paid into the designated ban- account using the for E'* 4 which
is filled up( ,he aounts are to be rounded off to the nearest rupee( Separate accounting
codes have been notified for service tax+ education cess+ secondar! and higher education
cess+ interest+ penalties etc(,he service provider reitting the tax shall segregate these
aounts and pa! the sae under the respective codes(
N!te@ A I+ e*cess payment is made t%en t%e am!unt paid in e*cess s%all 2e ad'usted in t%e
su2se<uent m!nt%$it%!ut any limit .
T%e service pr!vider !n %is +ailure t! pay t%e am!unt $it%in t%e n!ti+ied date s%all 2e lia2le t!
pay interest at t%e rate !+ 1D7 p.a.
I+ t%e service pr!vider is una2le t! <uanti+y t%e am!unt !+ service ta* paya2le t%en %e may
re<uest A"BD" !+ "entral (*cise t! all!$ t%e service pr!vider t! pay !n pr!visi!nal 2asis al!n)
$it% t%e reas!ns.
N!$ rule C#1A& all!$s t%e service pr!viders lia2le t! pay service ta* t! ma=e t%e payment in
advance and ad'ust t%e same +!r t%e lia2ility in su2se<uent peri!d. 5!$ever suc% payment in
advance %as t! 2e intimated t! t%e department $it%in 18 days +r!m t%e date !+ ma=in) suc%
payment and t%e details !+ suc% advance payment and ad'ustment t%ere!+ s%all 2e indicated in t%e
returns.
1"@
SERV$CE TA& RET+RNS
&iling of service tax returns has been one aspect in service tax copliance which has been posing
considerable probles for assessees( )ne of the ain reasons is that in past till 1(4(2011+ the
service tax had to be paid not on billing basis but on receipt of consideration fro custoers(
,hus all organiGations especiall! those where transaction are in thousands should have a good
accounting s!ste in order to enable the to lin- the bills with the aounts received( ,he
concept sounds siple but few organiGations reall! ipleent the sae in spirit( 's a result+ the!
face considerable probles in filing the service tax returns as one is expected to give details as to
the aounts received towards taxable services(
,he dela!s in filing entail fines and non filing an enquir! under best judgent(( )ther than that it
would be one of the criterions for pic-ing up the unit for audit under the ris- based selection
proposed for the service tax audit(
Bver! service provider liable to pa! service tax is required to subit half !earl! return in for
S,73 within 2@ da!s fro the end of half !ear+ i(e( 'pril to Septeber 2@
th
)ctober and for
)ctober to :arch 2@
th
'pril is the due date to file the returns(
Bven an input service distributor is required to file half !ear returns+ even if he was not liable to
pa! service tax(
.n case last date to file the return was a public holida! then the last da! to file the returns would
be the next wor-ing date(
H!: t! "ie the servi6e ta7 returnA
&or S, 3 or S, 3' as the case a! be has to be filed in triplicate to the Superintendent
of $entral Bxcise( &ro 01(0#(2010 e7filing of return is andator! for those who had
paid central excise dut! or service tax of *s( 10 la-hs or ore in the preceding financial
!ear+ whether b! cash or debit in $envat credit account or both vide circular /o(
"1"50"520107$P dated 23(03(2010( L*efer 'ppendix .. for case studies on filing of
&or S,73M
,he return has to be filed once in six onths and it contains the particulars of all the six
onths
,he value of taxable services should be coputed on the basis of gross aount received
or advance received for the services provided5to be provided
' nil return is required to be filed if there are no transactions
1"A
E'* 4 evidencing pa!ent has to be filed along with the return
.f an! aount representing interest or penalt! is paid+ then references of such pa!ent
along with the particulars are required to be ade(
,he S, 3 return is to be subitted within 2@
th
of the subsequent onth following the
quarter i(e( &or the half !ear 'pril to Septeber+ the due date is 2@
,h
of )ctober and 2@
th
of 'pril for the next half !ear(
.f the da! happens to be a public holida!+ then the return can be subitted on the next
wor-ing da! iediatel! following the holida!(
,he return a! be subitted electronicall! using e7filing facilit! in '$BS utilit!(
%hat is the 5r!6edure t! "ie the returns !nineA
,he assesses can electronicall! &ill S,73 b! choosing one of the two facilities being offeredF LaM
the! can file it online+ or
LbM download the off7line return utilities which can be filled7in off7line and uploaded to the
s!ste through the internet(
Ste5s "!r 5re5aring and "iing returns9'
LiM 'ssessee can download the )ffline return preparation utilit! available at
httpF55www(aces(gov(in LUnder DownloadM
LiiM &ill the return offline using this utilit!( ,he return preparation utilit! contains
preliinar! validations which are thrown up b! the utilit! fro tie to tie(
LiiiM 'ssessee then should log in using the User .D and password(
LivM Select N*B,O option fro the ain enu and further choose required activit!
such as e7filing5 aending5*evise return as the case a! be and upload the
return(
LvM *eturns uploaded through this procedure are validated b! the '$BS before
acceptance into the s!ste which a! ta-e up to one business da!( 'ssessee can
trac- the status of the return b! selecting the appropriate option in the *B, sub
enu( ,he status will appear as NuploadedO eaning under process b! '$BS+
N&iledO eaning successfull! accepted b! the s!ste or N*ejectedO eaning the
'$BS has rejected the return due to validation error( ,he rejected returns can be
resubitted after corrections(
1"4
LviM *eturns can also be prepared and filed on line b! selecting the K&ile *eturn3
option under *B, odule after logging into the '$BS(
LviiM 'll validations are thrown up during the preparation of the return in this ode
and the status of the return filed using the online ode is instantaneousl! shown
b! '$BS(
.t is recoended that assessees who are for the first tie filing returns through '$BS
shall do it through the offline utilit! so that the ista-es and the changes can be done
instantl!(
Can a revised return be filed?
Ues( *ule 4= of Service tax *ules 1""# allow an assessee to revise the return filed under *ule 4
to correct an! error+ oission or ista-e within "0 da!s fro the date of filing the return u5r 4(
Can the revised return be filed after the expiry of ;$ days fro( the date of filing the original
return?
,here is no provision for subission of revised return after the expir! of "0 da!s fro the date of
filing the original return+ however as per the authors view+ service provider shall intiate such
changes to departent via letter+ which should be dul! ac-nowledged+ and the said changes needs
to be factored in while preparing the subsequent returns( ,his would be required to ensure that
errors are not carried forward(
N!te@ A
An anne*ure is pr!vided t! t%e said +!rm #ST 4 return& pr!vidin) tips +!r +ilin) up t%e
particulars !+ t%e return. T%e list !+ tips +!r +illin) up t%e STA4 returns in ne$ +!rmat as
applica2le $e+ 1.3.-.1- is in appendice III.
T%e +!rm can 2e d!$nl!aded +r!m t%e departmental $e2site #www(cbec(gov(in&
ST 4A is used $%en t%e assessee !pts +!r pr!visi!nal assessment. T%e assessee s%all +!r
t%is purp!se ma=e a re<uest in $ritin) t! t%e A""(BD""( )ivin) reas!ns +!r payment !+
service ta* !n pr!visi!nal 2asis and t%e payment can 2e made !n t%e ta*a2le value as
speci+ied 2y A""(BD""( !n pr!visi!nal 2asis. T%e assessment $!uld 2e +inalised later
and t%e pr!visi!ns !+ "entral (*cise ,ules $it% re)ard t! pr!visi!nal assessment $!uld
apply %ere. 5!$ever e*ecuti!n !+ 2!nd $!uld n!t 2e re<uired %ere.
A sin)le return is su++icient even t%!u)% t%e service pr!vider is pr!vidin) m!re t%an !ne
ta*a2le service.
1"0
T%e ST 4 return can 2e +iled electr!nically.
1""
SERV$CE TA& A+)$TS 2( PR#FESS$#NALS
' service provider cannot ignore copliance with the legal provisions for the reason that if he
does so+ the non7copliance would invariable hit his business hard considering the copetitive
argins involved as well as the ipact of interest and penalt! becoing increasingl! harsh da!
b! da!(
.t has been the experience that ver! often assessees are not even aware of the fact that the! are not
copl!ing with the legal provisions till such tie when the! are called upon b! the departent to
furnish soe clarifications or their unit is ta-en up for an audit(
'ssessees in this regard should note that considering the uncertain nature of the law+ the frequent
aendents b! wa! of notification+ clarifications b! the ,ax *esearch Unit L,*UM+ $entral
=oard of Bxcise9 $ustos L$=B$M+ Director Eeneral Service ,ax LDES,M other than *egional
'dvisor! $oittee and $oissioners clarification the law would continue to be unclear(
:an! advocates of the Supree $ourt with decades of standing in the .ndirect taxes opine that
there is no suret! in this segent( ,herefore a echanis would have to be built in to ensure that
copliance is aintained at high levels all the ties( ,his would require a coprehensive
fraewor- to be put in place which would ensure proper training of eplo!ees as well as see-ing
professional opinion fro tie to tie on atters of doubt plus a review of the docuentation+
records pertaining to service tax b! either the internal audit tea of the concern or b! an
independent professional(
%hat is reBuired !" the audit!rA
'n auditor engaged for the assignent should understand the business+ the environent in which
the industr! wor-s the coon confusions prevalent in the industr! in addition to the -nowledge
of service tax law( ,he -nowledge about the latest auditing procedures and techniques to be
adopted would also axiiGe the benefits to the client( Use of the audit tools especiall! the
generaliGed audit software for large concerns would enhance the results( 's far as carr!ing out the
audit itself is concerned+ he can follow the guidelines given belowF
! -scertaining scope of the assign(ent
,he auditor should first understand the requireents of the anageent( ,he scope of the
assignent should be designed b! the auditor considering the requireent( ,his is to avoid a
scenario where the client perceives the audit effort in a different wa! fro the one it actuall! is(
200
,his is quite coon in the service sector as the concept of service tax audit is new to the as
well as the fact that clients are specialists in their respective fields with no uch of exposure to
subject of accounting or auditing( 't ties the client a! wish a pre7 audit or shifting of the
responsibilit! of copliance on the auditor(
&urther an! a tie assessees in the service sector ista-e auditing for outsourcing and expect
the auditor to engage in an outsourcing job rather than reporting to the anageent on
copliance related issues( ,he scope can be ascertained and confired b! preparing a
letter5scope docuent entailing the areas which would be covered and the aspects which would
not be ta-en up during the audit(
#! Fnowledge of the business and the activities perfor(ed
,his is one of the ost iportant aspects to be ta-en care of b! the auditor( ,he auditor should
first of all understand the assessee3s business+ the services he provides+ the activities that are
involved at various levels of the organisation in providing these services+ the custoer profile
whether sub contracted or not etc( before the start of his review5verification( &or this purpose+ he
a! interview the -e! anageent personnel in the organisation besides going through ajor
contracts and agreeents+ organisation chart+ anuals and publications of the organisation( 8e
should also a-e it a point to visit the preises fro where the services are provided+ to the
extent possible and interview the technicians 5 engineers who actuall! perfor the tas-s Lwhere
ever applicableM to get a first hand inforation of the nature of the processes involved in case of
services of a technical nature(
1! Gbtaining relevant infor(ation for a preli(inary review and ris: analysis
,he auditor should a-e it a point to understand the financial perforance of the entit! in the
recent past as well as the during the audit period+ apart fro anal!Ging the sae it would also
help in devising his procedures accordingl!( 8e5she should also a-e it a point to perfor a
quic- review of the concerned records li-e the service tax returns+ cenvat bills+ invoices and
agreeents with ajor clients35custoers so that the ris- arising fro non7copliance can be
assessed( ,he following aspects assue significance
*eview of the past audited financial stateents for understanding the past
financial perforance in ters of incoes+ expenses+ receipts and pa!ents apart
fro accounting policies and nature of investents
201
*eview of the ledgers for the period under audit to chec- the incoe and
expenditure pattern besides understanding the custoer profile and the pattern of
billing
*eview of the cenvat invoices+ agreeents with ajor custoers+ service bills
raised on custoers b! the assessee+ Bxcise invoices if an! raised b! the
assessee+ review of the fixed asset registers to for an idea as to record -eeping
and copliance with the law(
,he auditor should have a grip with the organiGational structure of the assessee
with the assignent of responsibilities with the associated internal controls( &or
this he would be required to use an .nternal $ontrol ^uestionnaire which would
docuent the areas where the controls are sought to be tested( 8e should also
specificall! address the issue as to the internal reporting fraewor- and :.S in
his questionnaire so that the functional lin-ages can be chec-ed( ;here ever
possible+ the auditor could ta-e copies of the organiGational chart and anuals
for his peranent audit file(
,he auditor would have to docuent his findings so that he can effectivel! ove on to the next
stage( &or this purpose+ he5she a! use an assessee profile which would consist of all relevant
inforation needed for a des- review( ,he assessee profile should be drawn up in such a wa! that
apart fro financial indicators+ even the non7financial indicators li-e existence of branches+
anner of providing services etc are also reflected( ,his could for part of the peranent audit
file to be used even in subsequent audits( LDraft 'sseessee ?rofile at the end of this chapterM
3! 4es: review of the infor(ation obtained and preli(inary (eeting
,he auditor+ on the basis of his5her findings at the previous stage+ should carr! out a des- review
of the inforation available with hi to arrive at proper conclusions as far as the possible ris-
levels involved+ are concerned( ,he des- review should ideall! indicate to the auditor the level of
chec-ing required and the areas he should concentrate upon in order to arrive at proper
conclusions at the end of the audit( )n the basis of the review he should docuent the ris- level
prevalent in the audit( .t is alwa!s preferable in this odern da! that the auditor spends at least
20J of his tie in planning the audit after getting the idea of the process and people involved in
the client3s organiGation to enhance his effectiveness(
)nce this has been done+ he should identif! the audit tea that would ta-e up the tas- and discuss
the preliinar! findings with the ebers of the tea to appraise the of the li-el! issues that
202
could crop up during the audit apart fro explaining the ipact the legal provisions would have
on the assessee3s business and his activities(
5! 4evising the audit progra( for carrying out co(pliance and substantive tests
,he audit plan should basicall! ai at perforing the audit with axiu efficienc! possible
under the circustances( ,his is possible onl! where the audit tea is able to address contentious
and core issues within a liited tie frae( ,he auditor should devise a proper audit plan onl!
after carr!ing out a des- review so that the sae would be ore effective than a progra which is
coon to all audits irrespective of the differences in services+ related activities and the ris-
levels involved( ,his would enable the auditor to concentrate on -e! areas which would be
relevant to arrive at proper conclusions at the end of the audit( ,he tie factor also needs to be
-ept in view especiall! when the audit is done with specific objective such as a pre7audit for
ensuring preparedness before departent audit( ,he audit chec- list should indicate the areas to
be covered and the individuals who are supposed to ta-e it up( LSee at end of $hapterM
7! 4ocu(entation and proper supervision of audit effort
,he auditor should ensure that the audit findings and the explanations given fro the assessee are
docuented properl! b! his audit tea( ' standardiGed pattern a! also be followed to facilitate
eas! reading of the observations. ,he tea should ideall! consist of individuals at various stages
of a learning curve( ,he tea can consist of three ebers with one of the ebers being a
senior with sufficient experience and two juniors( ,he responsibilit! of supervising the tea on a
dail! basis would be with the senior and the entire audit effort would have to be supervised at
regular intervals b! the qualified professional5partner( ,he audit findings should be discussed at
periodic intervals Lif not on dail! basisM with the executive designated fro the assessee3s side so
as to ensure assessee3s cooperation( ,his would also ensure that the audit is headed along the right
path with ever! li-el!7hood of achieving its intended objectives at the conclusion stage(
"! 0or(ulation of the draft report and discussions with the (anage(ent
)nce the audit has been copleted+ the draft report containing the draft of the observations
should be forulated and a cop! is sent to the anageent( ,his would then be followed up with
a discussion of the points in order to ascertain the future course of action to be ta-en+ which
should also be docuented( ,he report should a-e it clear as to whether the assessee has agreed
to his5her findings or disputed the sae( ,he auditor could coe up with valuable suggestions
203
here in order to secure effective copliance with the law and in order to avoid pit falls in future(
,his discussion is critical for the acceptance of the observation and its correction(
0( 0inaliDing the draft and ensuring audit follow up
)nce the draft has been prepared+ the points discussed with the anageent and future course of
action ascertained+ the final report is to be sent on a tiel! basis( ,he report shall contain all the
relevant details li-e the observations+ the repl! fro the assessee3s side+ the corrective action
ta-en up b! the assessee+ the course of action which is to be ta-en in the future( ,he auditor3s
responsibilit! does not end here and he would have to ensure proper follow up b! going through
the steps ta-en up b! the assessee for the purpose of ensuring copliance with the law(
P!inters "!r 5ra6ti6e
,he auditor should be well versed in the atters pertaining to service tax and to a certain
extent central excise and should have a clear understanding of the legal provisions and its
possible iplications on an assessee3s business depending upon the activities perfored(
8e should have the abilit! to get the required inforation fro the assessee in a wa! that
would enable hi to ascertain the legal ipact on the assessee3s business( ,his in fact
could be a big challenge as he would have to pose his queries in a wa! the assessee
understands the sae so that the right answers and explanations can be obtained fro
hi(
,he auditor should also be careful not to treat the audit li-e a fault finding exercise as it
would result in the client losing interest in the audit itself and thereb! negating the ver!
purpose of audit(
,hese audits could be said to be consultative exercise as differentiated fro a regular
internal audit( ,herefore it a!be a good idea for the auditor to appraise the client on the
latest aendents and ,ribunal judgents in regard to the issues of interest5 concerns(
Illustrative audit pr!)ram +!r Service Ta* Audit
Name !+ t%e auditee@ A
Address@ A
"!ntact pers!ns@ A
"!ntact num2ers@ A
(Amail@ A
Peri!d under audit@ A
,evie$ed 2y@ A
Area c!vered durin) audit "%ec=ed 2y N! !+ days ta=en
20#
1. Initial revie$s and visits
a& ,evie$ !+ t%e past audited +inancial statements
2& ,evie$ !+ t%e activities !+ t%e enterprise
Site visitsBdepartment visits i+ any
Intervie$in) +uncti!nal c%ie+sBm)nt pers!nnel
,evie$ !+ pr!cess c%artsBpu2licati!ns !+ t%e assessee
c& ,evie$ !+ t%e led)ers and trial 2alances +!r t%e
current peri!d
d& ,evie$ !+ t%e a)reements $it% t%e ma'!r
cust!mersBclients !+ t%e enterprise
e& ,evie$ !+ t%e cenvat 2ills and 2ills +!r pr!visi!ns !+
services
+& ,evie$ !+ t%e c!rresp!ndences $it% t%e aut%!rities
)& ,evie$ !+ t%e Service Ta* ,eturns t! scan +!r details
as t! classi+icati!n !+ services and payments
%& ,evie$ t%e met%!d!l!)y 2ein) ad!pted +!r ta*in)
t%e value t!$ards materials in case !+ $!r=s c!ntract
i& "%ec= +!r transacti!ns $it% ass!ciated enterprises
$%ic% may attract service ta* levy
'& "%ec= $%at is t%e place !+ pr!visi!n !+ services 2y
assessee in acc!rdance $it% t%e relevant rules and
$%et%er t%ere are payments in e*cess !r s%!rt+all in
payments madeH
-. ,evie$ !+ t%e lia2ilities !n acc!unt !+ service ta*
a& ,evie$ t%e e*penses acc!unts made in +!rei)n
currencies. I+ +!und t! e*ist A
"%ec= t%e nature !+ payments 2y )!in) t%r!u)%
a)reements
"%ec= $%et%er applica2le service ta* paid 2y cr!ss
veri+yin) $it% t%e returns
2& ,evie$ t%e inc!me acc!unts t! c%ec= t%e impact !n
service ta*. "%ec= t%e p!ssi2ility !+ t%e activities 2ein)
re)arded as ta*a2le services 2y ascertainin) t%e nature
!+ services +r!m a)reementsB!rders $it% cust!mers.
"%ec= t%e valuati!n met%!d!l!)yA$%et%er all c%ar)es
included +!r ta*H
c& "%ec= +!r +rei)%t e*penses. I+ t%ey e*ist
"r!ss veri+y $it% e*penses +iles +!r c!nsi)nment n!tes.
20@
"r!ss veri+y $it% t%e returns +!r details as t! payments
d& "r!ss veri+y t%e 2ills +!r services pr!vided $it% t%e
statementB$!r=in)s +!r +ilin) !+ service ta* returns.
"%ec= t%e accuracy as t! E
Value !+ service
Service ta* am!unts includin) cess
(*empti!ns 2ein) claimed
e& "r!ss veri+y t%e statementsBacc!unts +acilitatin)
+urnis%in) !+ returns $it% t%e t!tals as per returns in
terms !+ E
Value !+ ta*a2le services
(*empti!nsBa2atements
Service ta* am!unts $it% cess
+& "%ec= +!r traces !+ payment !+ sp!ns!rs%ip m!ney
and t%e purp!se +!r $%ic% it %as 2een paid
4. ,evie$ !+ "envat and p!ssi2le reversals
a& ,evie$ t%e +i*ed assets re)ister t! list !ut t%e assets
2ein) used +!r pr!vidin) ta*a2le services.
"%ec= $%et%er cenvat "redits %ave 2een claimed !n
n!nApr!ductive assets 2y cr!ss veri+yin) t%e purc%ase
details $it% t%at in t%e "envat re)ister
"%ec= t%e p%ysical l!cati!n !+ assets
"%ec= $%et%er assets sent !ut and i+ s! $%et%er a
rec!rd !+ t%e same is availa2le. >%et%er it is
returna2leH
2& "r!ss veri+y t%e cenvat inv!ices $it% t%e cenvat
re)ister. Veri+y details E
"envat am!unt
0asic values address!r addressee
ItemBservice descripti!n
"r!ss c%ec= t%e t!tals as per "envat re)ister $it% t%e
+i)ures as per returns
"%ec= $%et%er E
In case !+ input services $%et%er t%e credit %as 2een
availed c!nsiderin) P!int !+ Ta*ati!n ,ules
In case !+ inputs $%et%er inputs really receivedH
20A
"%ec= $%et%er t%e assessee %as !pted +!r centralised
re)istrati!n !r Input Service Distri2ut!r r!ute.
c& "%ec= $%et%er inputsBcapital )!!dsBt!!ls rem!ved
+!r '!2 $!r= and i+ s! $%et%er a re)ister %as 2een =ept
+!r t%e same and $%et%er t%e same are sent !n
returna2le 2asisH
>%et%er applica2le credits %ave 2een reversed $%ere
ever necessaryH
d& "%ec= $%et%er t%e assessee %as 2alance !+ credits
pertainin) t! e*p!rt !+ services $%ic% cann!t 2e
utili;ed. I+ s!
"%ec= $%et%er t%e assessee %as )!ne in +!r re2ate
re+und !+ t%e credits !r re2ate !+ service ta* paidH
e& "%ec= $%et%er t%e credits admissi2le %ave 2een
calculated c!rrectly $%ere ,ule C !+ "", -..6 applies
in respect !+ 2!t% ta*a2le an e*empted services 2ein)
pr!videdH
+& "%ec= t%e d!cumentati!n in case !+ availment !+
credits !n 2ills !+ ISD. "%ec= t%e returns +iled
6. Ot%er areas
a& "%ec= $%et%er t%e assessee %as a system !+
rec!nciliati!n 2et$een t%e +i)ures as per +inancial
led)ers and t%!se as per returns
2& "%ec= $%et%er t%e assessee is als! a manu+acturer
and i+ s! $%et%er applica2le duties !+ "( are c%ar)edH
I+ n!t $%et%er t%ere is any pr!cess carried !ut $%ic%
can 2e deemed t! am!unt t! manu+acture !r $%ic%
am!unts t! manu+acture as per "(A 1K66.
c& >%ere e*empti!ns are claimed $%et%er any
c!nditi!n !+ t%e n!ti+icati!ns %ave 2een +l!utedH "r!ss
c%ec= $it% t%e appr!priate n!ti+icati!n
/oteF ' ore coprehensive5 odified progras a!be required depending on the nature+
decentalised ethod of operation+ ode of recording+ level of anageent involveent in
accounting aong other factors(
ILLUST,ATIV( S(,VI"( TAL ASS(SS(( P,O/IL(
Name and address !+ t%e assessee@ A Pr!+ile revie$ed 2y@ A
204
"!ntact pers!ns@ A
"!ntact num2er and eAmail ID
Area 2ein) c!vered ,emar=s
1. Ascertain t%e past rec!rd pertainin) t! matters
liti)ated !r demands raised 2y t%e department and
c!mplied 2y t%e assessee
Assess ris= level E 5i)% L!$ !r M!derate
-. Ascertain t%e nature !+ services pr!vided 2y t%e
assessee and detail t%e classi+icati!n ad!pted 2y
t%e assessee +!r payment.
Assess ris= level E 5i)% L!$ !r M!derate
4. >%et%er any manu+acturin) inv!lvedH I+ s!
$%et%er assessee is re)istered under "(H
Assess ris= level E 5i)% L!$ !r M!derate
6. >%et%er t%e assessee %as incurred e*penditure
in +!rei)n currency and i+ s! E
>%et%er t%e assessee %as re)istered +!r payin)
applica2le ta*esH
Assess ris= level E 5i)% L!$ !r M!derate
8. >%et%er t%e assessee %as ass!ciates !r
c!mpanies $it%in t%e same )r!up $it% $%!m
transacti!ns e*istH
Assess ris= level E 5i)% L!$ !r M!derate
C. >%et%er assessee %as e*penditure $it%in India
!n services $it% re)ard t! $%ic% t%e service
receiver is lia2leH I+ s! $%et%er assessee is
re)istered +!r payin) applica2le ta*esH
Assess ris= level E 5i)% L!$ !r M!derate
3. Ascertain t%e met%!d ad!pted 2y t%e assessee t!
calculate %is lia2ility under t%e l!cal sales ta*BVAT
la$ !+ t%e c!ncerned state.
Assess ris= level E 5i)% L!$ !r M!derate
D. Ascertain $%et%er t%e assessee %as multiple
unitsB2ranc%es t! pr!vide services !r +!r
!perati!ns and t%e d!cumentati!n %andled 2y t%ese
!++icesBunits.
Assess ris= level E 5i)% L!$ !r M!derate
K. Ascertain $%et%er service ta* matters %andled
200
2y select individuals. I+ s! $%et%er t%ey are
=n!$led)ea2leH
Assess ris= level E 5i)% L!$ !r M!derate
1.. Ascertain t%e rep!rtin) +rame $!r= $it%in t%e
!r)anisati!n and t%e e*istence !+ pr!per MIS.
Assess ris= level E 5i)% L!$ !r M!derate
Overall audit ris= !n t%e 2asis !+ p!ints n!ted E 5i)% L!$ !r M!derate
20"
FRE3+ENT ERR#RS C#MM$TTE) $N SERV$CE TA&
Since service tax was introduced recentl! as copared to $entral Bxcise 'ct and $ustos 'ct
which have been in force for ore than three decades now+ and since the subject has been seeing
a lot of changes ever! !ear+ the chances of the assessees Lespeciall! those who are new to service
taxM going wrong or coitting ista-es at the initial stages of copliance are quite high( .n this
segent we shall ta-e a close loo- at soe of the errors we have noticed fro the assessees( ,he
assessees are advised to be careful in this regard to ensure that the! do not coit the ista-es
given here
1( ;rongl! classif!ing the services under a categor! which is not applicable to the(
2( ;rong availent of cenvat credit on ineligible docuents(
3( ;rong availent of $envat credit upto #
th
of the subsequent onth instead of
availing credit upto 30
th
or 31
st
of the onth as the case a! be(
#( ;rong availent of cenvat credits on services which do not qualif! as input services
such as construction credits for setting up within the definition of input service as
given in $envat $redit *ules 200#
@( Short pa!ent or excess pa!ent of service tax due to iproper accounting of the
aounts collected fro the custoers5clients especiall! on account of service tax
A( /on7pa!ent of service tax liabilit! for the onth of :arch b! 31
st
:arch(
4( :ista-es being coitted while filling up the S, 3 returns with regard to the value
of taxable services+ aounts received and the exeptions availed
0( ,reating the services provided fro .ndia to a person abroad as Bxport of Service
when it is not satisf!ing conditions to be treated as an export of service as per *ule
A' of Service ,ax *ules
"( &ailing to pa! tax u5s A0L2M on services received in .ndia fro abroad when the sae
constitutes an iport of service
10( &ailing to obtain registration under service tax for being an recipient of service in
service specified in rule 2L1MLdM
11( ?a!ing service tax on the gross value including aounts charged for transfer of
propert! in goods when the assessee could have claied deduction for such transfer
of propert! in goods under *ule 2' of S, %aluation *ules(
210
12( /ot considering out of poc-et expense while discharging service tax as per *ule @L1M
of the %aluation rules(
13( Bxporting services but not going in for either the rebate of service tax or refund under
*ule @ of $envat $redit *ules
1#( $onsidering export of service as exepted service
1@( $laiing full cenvat credit when the service provider has both taxable as well as
exepted services
1A( Utilising the cenvat credits in respect of the exepted services which are exported
14( ?a!ing service tax as well as excise dut! on service charges where the anufactured
goods are installed at the custoer3s preises
10( Bxcluding the expenses reibursed b! the service receiver fro the purview of
service tax where the sae is not incurred b! the service provider as a pure agent of
the service receiver
1"( /on segregation of the education cess and Secondar! 8igher Bducation cess aounts
fro the basic portion of service tax
20( /ot fulfilling the conditions laid down b! the exeption notifications while claiing
exeption benefits
21( $ollecting service tax fro the custoers5clients but not pa!ing the sae to the
governent
22( /ot registering and pa!ing service tax in respect of those services where the service
receiver is liable to pa! tax u5s A0L2M
23( 'vailing input service credits before the pa!ents of service tax and value of
services can be ade to the input service provider
2#( /ot availing cenvat credits in respect of input services on a tiel! basis thereb!
necessitating the pa!ent of taxes in cash
2@( 'ssesee fail to obtain cop! of relied upon docuents which the Service ,ax audit
tea use as a basis to issue S$/(
2A( .n case of suons and during investigation+ assessees tend to accept the
departent raise objection+ and blindl! signs the stateent dictated 5recorded b! the
departent(
,hese are soe of an! and a deeper anal!sis would lead to ore issues which are quite
coon especiall! in each of the individual services(
211
#THER M$SCELLANE#+S ASPECTS $N SERV$CE TA&
$nterest and 5enat8 6a6uati!ns
,he &inance 'ct 1""# has prescribed interest and penalties for contravention of an! provisions or
rules ade under the act( /o penalt! is leviable under sec 4A+ 44 or 40 if the assessee proves that
there was reasonable cause for such failure( ,he relaxation is provided u5s sec 00( ,his relaxation
is provided onl! under service tax law( 's per statutor! provisions onl! one penalt! can be
iposed for dela! in ta-ing registration for ore than one taxable service or for dela! in filing of
return b! assessee providing ore than one taxable service( .nterest pa!ents are andator! and
cannot be waived however penalt! can be waived partiall! or full!( ?enalt! u5s 4A+ which is
levied for failure to pa! tax+ cannot exceed the tax pa!able( &urther penalties under sec 4A and 40
are utuall! exclusive(
Illustrati!n 1@ Mr. NS Sid%u $as lia2le t! remit t%e service ta* t! t%e tune !+ ,s 38... +!r t%e
m!nt% !+ Marc%. Mr. NS Sid%u $as a ta* c!mpliant service pr!vider and %e $as !+ t%e
understandin) t%at t%e due date is 8
t%
!+ su2se<uent m!nt% and paid t%e am!unt 2y Apr 8
t%
. Later
!n Mr. NS Sid%u reali;es %is mista=e and $ants t! pay t%e interest +!r delayed p!rti!n.
SolutionF
?articulars 'ount
Due date for pa!ent 31
st
:arch
Date of ?a!ent @
th
of 'pril
Da!s of Dela! @
*ate of interest 13J
'ount of interest to be paid *s 4@000 P 13J P @53A@ V 13357
,he aount of interest is required to be paid in cash and adjustent in cenvat credit account
would not be available(
Illustrati!n -@ Mr. Prince service pr!vider +ails t! pay service ta* !+ ,s D la=%s paya2le 2y 8
t%
Manuary. Mr. Prince pays it !n -.
t%
Manuary. T%e de+ault %as c!ntinued +!r 18 days. Nuanti+y t%e
penalty t! 2e paid 2y Mr. Prince.
SolutionF
?articulars 'ount
Default in aount 0 la-hs
212
Da!s of default 1@ da!s
?enalt! LaM 2J P 0 la-hs P 1@531 V44#1
LbM 200 per da! P 1@ da!sV 3000
?enalt! under sec 4A is higher of LaM and LbM *s 44#157
,he aount of interest is required to be paid in cash and adjustent in cenvat credit account
would not be available(
Pr!visi!ns as t! 5enat8
,he provisions as to penalt! under service tax are as follows
Section 4A Deals with penalt! to pa! service tax at *s( 200 per da! of failure or at 2J
of such tax per onth whichever is higher+ fro the first da! after due date up to the date
of actual pa!ent( ?enalt! however cannot exceed service tax pa!able( .t is proposed to
reduce the penalt! b! half of what is presentl! being levied(
Section 40 Deals with penalt! for suppression of value of taxable service and the
penalt! shall not be less than the service tax and shall not exceed twice the aount of
service tax pa!able( ,his can be reduced on pa!ent of tax and interest within the stated
period of 30 da!s as explained earlier+ along with the penalt! deterined( L>%ere penalty
is levied uBs 3D n! penalty s%all apply uBs 3C&
5!$ever t%e revised penal pr!visi!ns $%ic% is e++ective +r!m t%e date t! 2e n!ti+ied is
pr!vided 2el!$.
Situation ?osition in
records
?enalt! and
provision
:itigation $oplete
waiver
/o fraud+
suppression
etc
$aptured 1J of tax or *s
100 per da! upto
@0J of tax
aount LSec 4AM
,otall! itigated if tax
and interest is paid
before issue of notice
)n showing
reasonable
cause under
section 00
$ases of
fraud+
suppression
etc
$aptured true and
coplete position
in records
@0J of the tax
aount Lproviso
to section 40M
LaM 1J ?(:F ax of
2@J if all dues
paid before issue
of notice
LbM 2@J of tax if all
dues paid within
30 da!s L"0 da!s
for sall
assesseeM
)n showing
reasonable
cause under
section 00
/ot so captured Bqual aount /o itigation /ot
213
section 40 possible
Section 44 Deals with penalt! for a contravention where no penalt! is prescribed under
law 7
'articulars -(ount of penalty in &s!
)n account of failure to a-e pa!ent and ta-e registration
under service tax
*s( 200 per da! of default or a
su of *s( @000 whichever is
higher
)n account of failure to a-e electronic pa!ent of tax *s( @000
&ailure to aintain proper records or boo-s *s( @000
&ailure to furnish inforation called for under this chapter
or&ailure to furnish docuents required under this chapter
or&ailure to appear before $B) when issued suons to
appear or produce docuents in an inquir!
*s 200 per da! of default or a
su of *s( @000 which ever is
higher
&ailure to issue proper invoice or issuing invoice with incorrect
or incoplete details or failure to account invoice in boo-s
*s( @000
)ther cases *s( @000
L.t is -now proposed to enhance the penalt! fro *s @00057 to *s 10+00057M
Sear6hing !" 5remises b8 auth!riHed !""i6ers
,he $oissioner of $entral Bxcise u5s 02 can authoriGe an! '$$B5D$$B to search for and
seiGe docuents or boo-s or things+ which have been secreted in an! place and which in his
opinion would be useful for or relevant to an! proceeding under this chapter( 8e a! even ta-e
up the tas- hiself( ,he $ode of $riinal ?rocedure 1"43 shall also appl! here(
#ther re6!ver8 5r!visi!ns
Section 04 of the &inance 'ct 1""#+ epowers the $entral Bxcise )fficer L$B)M to require an!
other person or other $B) to deduct the aounts due to the governent fro the assessee and
pa! the sae( ,his deduction would be relevant where the person to who a notice has been
issued+ owes soething to the person who owes one! to the governent( ;here the person to
who a notice is issued does not pa! the aount+ he hiself would be treated as an assessee in
default( ,he $B) can even send a certificate specif!ing the aount due+ to the collector of the
district where the person liable to pa! resides or has his propert!( ,his would be so where the
district is different fro the one over which the $B) has jurisdiction(
21#
Liabiit8 under A6t t! be First Charge
Section 00F ;here an assessee owing dues Laount of tax + penalt! interest or an! other suM
pa!able b! the assessee or an! person under this chapter+ shall be first charged to as provided in
*ecover! of Debt Due to =an-s and &inancial .nstitution 'ct 1""3 and SecuritiGation and
*econstruction of &inancial 'ssets and Bnforceent of Securit! .nterest 'ct 2002
#""en6e and 5enaties
Section 0"F ;here an offence nael!
a( =n!$in)ly evades payment !+ service ta* !r
2. Irre)ular availment !+ cenvat credit $it%!ut actual receipt !+ ta*a2le service !r e*cisa2le
)!!ds eit%er +ully !r partially in vi!lati!n !+ t%e rules made under t%is c%apter !r
c( Maintains +alse 2!!=s !+ acc!unts !r +ails t! supply any in+!rmati!n $%ic% %e is re<uired
t! supply under t%is c%apter !r rules made t%ere under !r
d( "!llects any am!unt as service as service ta*2ut +ails t! pay t%e am!unt s! c!llected t!
t%e credit !+ t%e central )!vernment 2ey!nd a peri!d !+ C m!nt%s +r!m t%e date !n $%ic%
suc% payment 2ec!mes due.
S%all 2e punis%a2le $it% impris!nment +!r t%e peri!d as may 2e prescri2ed.
T%e !++ences set !ut at #a& #2&#c& $%ere am!unts e*ceed speci+ied am!unts ,s 8. La=%s and
pr!vides +!r impris!nment +!r term upt! 4 years is c!)ni;a2le.
All !t%er !++ences are n!nAc!)nisa2le and 2aila2le.
A55i6ati!n !" the 5r!visi!ns !" the Centra E76ise A6t /@DD
,he assessee should note that certain provisions of $entral Bxcise 'ct 1"## would also appl!
with regard to service tax b! virtue of section 03( ,hus with regard to these aspects+ the aforesaid
law would have to be referred( Soe of the iportant aspects with regard to which the
provisions of $B' 1""# would appl! are as follows
$ertain offences to be non7cogniGable LSec "'M(
)ffences b! copanies LSec "''M
?ower of $ourt to publish nae+ place of business+ etc(+ of persons convicted under the
'ct(LSec "=M
?resuption of culpable ental state LSec "$M
*elevanc! of stateents under certain circustances LSec "DM
'pplication of section @A2 of the $ode of $riinal ?rocedure+ 10"0+ and of the ?robation
of )ffenders 'ct+ 1"@0 LSec "BM
21@
$lai for refund of dut! LSec 11=M
.nterest on dela!ed refunds LSec 11==M
?ower not to recover dut! of excise not levied or short7levied as a result of general
practice LSec 11$M
'pplication of the provisions of 1'ct /o( @2 of 1"A22 to $entral Bxcise Duties LSec12 M
Declaration of the aount of dut! on invoice LSec 12'M
?resuption that the incidence of dut! has been passed on to the bu!er LSec 12=M
$rediting of refunds to $onsuer ;elfare &und LSec 12$M
Utilisation of the &und LSec 12DM
?owers of $entral Bxcise )fficers LSec12BM
?ower to suon persons to give evidence and produce docuents in inquiries under
this 'ct LSec 1#M
Special audit in cases where credits availed or utiliGed are not within noral liits LSec
1#''M
)fficers required to assist $entral Bxcise )fficers LSec1@M
?rocedure for adjudication LSec 33'M
$onfiscation or penalt! not to interfere with other punishents LSec 3#'M
Deposit of dut! pending appeal LSec 3@&M
Sections 3@&& to 3@ ) dealing with 'ppeals.nstruction to officers LSec( 34=M
Service of decisions+ orders+ suons etc LSec 34$M
Bffect of aendents of rules+ notifications etc LSec 30'M
,he professional who advises on service tax should be aware of the iplications of the above
provisions which a!be judiciall! clear as the! have gone through a nuber of !ears of
odifications(
21A
S#ME #F THE $MP#RTANT C#MM#N SERV$CES
Preevant "!r an8 dis5utes "!r 5eri!d 5ri!r t! /=G=-./-Q
,he liitation in the siGe of this boo- constrains us fro discussing an!5 all the services( ;e
restrict to the ones where we find there is ore potential for disputes and litigation possible for
previous !ears(
Renting !" $mm!vabe Pr!5ert8 Servi6es
*enting of iovable propert! service was brought under service tax net with effect fro
01(0A(04( ,his lev! has led to a lot of confusion as one does not associate letting out of
iovable propert! with the concept of service for the siple reason that there is strictl!
spea-ing+ no service involved( ,his aspect however this !ear has been addressed b! the Delhi
8igh $ourt in responding to the writ petition filed b! certain assessees who had challenged the
lev! of service tax on the renting of iovable propert!( ,he 8igh $ourt has in 8oe Solution
*etail .ndia >td %s Union of .ndia L200"7,.)>71"A7DB>78$7S,M sought to draw a distinction
between Nservice in relation to renting of iovable propert!O and Nrenting of iovable
propert!O and held that renting in itself would not aount to provision of taxable service and held
both notification 2#52004 S, and circular "05152004 S, to be ultra vires the 'ct as far as
requireent for lev! of service tax on renting is concerned( .n the eantie the &inance 'ct 2010
has aended the definition of the taxable service in this respect+ retrospectivel! fro the date of
introduction of the service+ to include ere renting of iovable propert! also in the tax net( =ut
Delhi 8igh $ourt has again granted sta! to 8oe Solution *etail L.M >td( in ;(?( LcM /o 33"0 of
2010 on 10(0@(2010 fro pa!ent of service tax on ere renting of iovable propert!( )n
contrar! to Delhi 8igh $ourt decision ?unjab and 8ara!ana high court in case of in case of
Shubh ,ib Steels liited %s U). passed an order dated 22(11(2010 upholding the validit! of
lev! of service tax on renting of iovable propert! with retrospective aendent ade in
&inance 'ct 1""# vide &inance 'ct 2010+ in provisions relating to service tax on renting of
iovable propert!(
Constitutional validity
's per Bntr! #" of list ..+ tax on land and building is a subject atter of state+ there are divergent
views in this aspect+ wherein one view is that service tax cannot be levied under residuar! ite in
214
list . b! central governent( 8owever the other view is that service tax is not directl! on land or
building but onl! for use of such land or building( ;herein this aspect was upheld b! apex court
in the atter of $hartered 'ccountants 'ssociation %sU). 2000 S,, A#+ 4 S,, 2"++11@ ,axan
@#3+ 2@2 .,* @3 Euj 8$ D=(+
,his+ in view of the authors is an indicator as to the interpretation which could possibl! be ta-en
up the $ourts though the Supree $ourt is !et to repl! in respect of writ petitions l!ing before it
and there could be questions as to the applicabilit! of the stance of the 8igh $ourt to areas
outside its jurisdiction if one were to consider 'rticle 22A of the $onstitution of .ndia( Service
providers who have been charging service tax would be better off continuing to do so until the
atter is finall! decided b! the Supree $ourt(
"an "!nstructi!n service credit 2e availed 2y t%e service pr!vider pr!vidin) rentin) !+
imm!va2le pr!perty serviceH
's per circular issued b! $=B$ dated 0#(01(2000+ no credit of construction or industrial or
construction service be ta-en b! service provider providing renting of iovable propert!
service( 8owever the circular has overloo-ed the definition of input service which was wide
enough to cover availent of input service credit pertaining to construction services(
)ne of the ain drivers in taxing this categor! could have been the fact that in developed
countries which are under a unified %', the rents are also liable(
)ne saving grace is that the propert! should be used for business or coerce( .n other words
where letting out is not for business or coerce+ there would be no liabilit!(
*enting b! or to a religious bod! has been exepted as well as renting to an educational bod!
other than coercial training or coaching centre( :oreover+ renting of vacant land would not be
liable except where vacant land is given on lease or license and a building or a teporar!
structure is constructed for use in furtherance of business or coerce( =uildings used solel! for
residential purposes or for accoodation including hotels+ hostels+ boarding houses+ tents+
caping facilities etc( would also not be liable(
&ro the gross aount charged+ deduction would be available for the propert! tax levied and
collected b! the local authorities with the calculation of deduction being on a proportionate basis
under /otification 2#52004 S, dated 22(0@(04 ,here is no deduction for interest and penalt! and
what is deductible is propert! tax paid(
210
;here there is a case of co7ownership+ one should proceed on a reasonable basis to ascertain his
respective share in the propert! and the basis being adopted for .ncoe ,ax assessent could
possibl! be followed here( 8owever the agreeents would be critical here( Bven those cases
where there is teporar! letting out of spaces without there being an associated transfer of the
right of possession and effective control over such space+ to the user+ is to be covered under the
tax net( ,hus spaces let out in alls for vending achines+ cinea theatres etc+ would be liable(
Management, Maintenan6e !r Re5air Servi6es
,he activities covered here would be aintenance or anageent of properties whether ovable
or iovable+ aintenance or repair of goods( ,he activit! should be under a contract or
agreeent unless we have aintenance or repair of goods5properties b! a anufacturer in which
case+ an agreeent would not be a pre7requisite(
;here there is transfer of propert! in goods during the course of provision of service+ service tax
would have to be paid on the labour charges alone( ,he service provider can therefore exaine
availing the benefit of notification 1252003 S, as per which+ deduction would be given for the
value of aterials or goods sold( ,he assessee in such cases would not be able to avail cenvat
credit of excise duties paid on such goods and aterials though the credit of service tax on input
services and excise duties on capital goods would be available(
'ssessees a! note that the scope of this categor! would be ver! wide and ost of the repair
activities underta-en on goods would be liable under this categor!( ' classic exaple could be
that of reconditioning of goods underta-en b! a anufacturer on rejection b! his custoer where
the sae does not aount to anufacture under the $entral Bxcise 'ct 1"##( ;here the
anufacturer bills the custoer for the sae especiall! when not covered b! the warrant! period+
the sae could be liable to service tax under this categor!(
Bven aintenance of software and coputer hardware would be liable under this categor!( ;ith
regard to software what is taxed is aintenance of coputer software wherein the functionalit! of
the odules5software is not enhanced be!ond the existing capacit!( ,he aintenance activit!
should be under a contract5agreeent( *eaders a! also note that there a! be cases of contracts
for coposite services in which case the essential nature of the service5contract would have to be
deterined( ;here it is not one of taxable service+ it could not be taxable at all( .n $:S L.ndiaM
)perations 9 :aintenance $opan! L?M >td %s $$B ?ondicherr! L2004 L04M S,* 3A" L,ri7
$hennaiMM+ the contention of the departent regarding brea-ing up of a operation and
aintenance contract for operating and aintaining a facilit! for generating and suppl!ing
21"
electricit! to ,/B= was discarded b! the ,ribunal which held the said contract to be a wor-s
contract for anufacture of goods viG(+ electricit!(
'ssessees should be careful enough to distinguish this categor! of service fro that of =usiness
'uxiliar! Service as what is taxed here is repair or aintenance activit! and not processing of
goods which would be liable under ='S( Bxaple could be re7engraving of c!linders for printing
new designs would be processing and not repair(
;hether re7treading of old t!res would tantaount to anageent aintenance or repair serviceC
?resentl! this issue is being debated across the countr!+ as to retreading of old t!res would
aount to repair services+ wherein departent is issuing notices to the assessee considering the
activit! to be anageent aintenance or repair service( 8owever the authors are of the view
that the re7treading of old t!res would aount to wor-s contract+ however wor-s contract service
under service tax does not include anageent+ aintenance or repair service+ therefore the
sae would be out of the purview of service tax net( 8owever this view requires judicial
confiration(
$n"!rmati!n Te6hn!!g8 S!"t:are Servi6es
' review of the definition of taxable service under the new categor! of .nforation ,echnolog!
Software service which has coe into effect fro 1A(0@(00 reveals that the said categor! see-s to
lev! service tax on custoiGed software developental activit!( ,his has also been clarified b!
the departent through its letter &(/o( 33#5152000 ,*U dated 2"(02(00(+ ., software whether
used for business or not were liable to service tax( :ost of the activities which for part of the
S!stes Developent >ifec!cle and required to develop and ipleent software fro the
conceptualiGation stage and up to the stage of final ipleentation would be covered under this
categor!( /otification 1452010 dated 24(02(2010 provides for exeption for service provided for
pac-aged or canned software intended for single use subject to certain conditions entioned
therein(
's per notification @3520107 S,+ Service tax with respect to right to use canned or pac-ed
software+ is exepted fro service tax+ provided dut! of excise or custos dut! was paid(
&urther a declaration should be obtained fro the service provider+ that an aount not ore than
retail sale price was charged fro the custoers(
's highlighted above even the process of acquiring the right to use inforation technolog!
software for coercial exploitation including the right to reproduce or to distribute or to sell the
220
sae has been covered b! the definition under this categor!( Bven acquisition of the right to use
software coponents for the creation of and inclusion in other ., software products has been
included( ,his could lead to considerable litigation in future if one were to also ta-e into
consideration the verdict given b! the Supree $ourt in ,ata $onsultanc! Services %s State of
'ndhra ?radesh L200# L140M B>, 22 LS$MM where both canned and uncanned software were held
to be capable of being regarded as goods( ,his was also reinforced b! the decision of the :adras
8igh $ourt in .nfos!s ,echnologies >td %s $,) L 200" L233M B>, @A L8$7:adMM where both
tangible and intangible propert! Lincluding custoiGed or non7custoiGed softwareM were held to
be capable of being goods if the! had the required attributes to hold the as goods( .f that were
the case+ then acquisition of the right to use software or software coponents whether it is canned
software or uncanned software could also be held liable under the sales tax law b! the concerned
authorities( 8ere where sales tax is leviable+ the assessee would have to contend that the right is
with regard to goods and that the acquisition of right with regard to the sae cannot be subjected
to service tax(
.n case of .nfotech Software Dealer 'ssociation %s U). in 2010 L20M S,* 20" L:adM+ wherein
the issue as to whether right to use software was goods or service was exained( ,he honorable
high court ade an observation+ when a software was developed+ the cop!rights of the sae was
retained b! the developer and onl! the right to use the sae was given to an! subscribers+
which iplies that the ownership of the software was retained b! the developer onl! the facilit!
to use software was given to various subscribers+ therefore the said transaction was liable to
service tax+ in order to lev! sales tax under deeed sale+ right to use the goods should also be
transferred+ &ro the above it is clear that leviablit! of service tax or sales tax depend upon
nature of transaction(
>%et%er t%e service pr!vider $%! e*p!rts IT s!+t$are services a2r!ad $!uld 2e eli)i2le t! !pt +!r
re+undH
)ne advantage of the introduction of service tax lev! on ., software services has been the
opening up of options available for an exporter of services( ,he service provider exporting .,
software services in accordance with the Bxport of Service *ules 200@ can have the option of
going in for refund of the cenvat credit under *ule @ of $envat $redit *ules 200#( 'nother
alternative could be to go in for rebate of service tax paid under *ule @ of Bxport of Service *ules
200@( L/ote the service has been put under the third categor! i(e recipient based criterion for the
purpose of deterining whether the service has reall! been exported out of .ndia in accordance
221
with the Bxport of Service *ules 200@ where the services are provided fro .ndia to a person
residing abroad(M
*!!ds Trans5!rt Agen68 Servi6es
,his is one categor! which has been found to be posing probles to ost of the assessees under
service tax( ,he coon perception aong the assessees is that the service provider alone is
liable to service tax( ,he assessees often overloo- the provisions of section A0L2M of $hapter % of
&inance 'ct 1""# as aended fro tie to tie as per which a service receiver can also be held
liable b! the governent in certain cases b! issuing a notification in this regard( ,he notification
would appl! to certain categories of services rather than categories of assessees(
)ne of the categories with regard to which the service receiver is held liable is that of Eoods
,ransport 'genc! service( 8ere the consignor or the consignee whoever pa!s the freight would be
liable to service tax( =ut first of all+ the service provider should be a E,'( .(e( a person providing
services in relation to transport of goods b! road and issuing a consignent note( .n the opinion
of the paper writers+ the goods transport owner or operator who wor-s under a contract or who
bills on wee-l! 5 dail! basis or is paid per trip a! not be covered under this lev! as per the &:
speech as well as the $oittee established in 200# who opined that onl! boo-ing agents would
be liable( 'lso in the case of 6(:(=( Eranites ?( >td( v $o( of $entral Bxcise+ Sale 120102
2@ S,, 1#1 it was held that that transport underta-en b! individuals owning and operating lorr!
and truc-s is not subject to service tax(
,he liabilit! would be on the person pa!ing the freight is the pa!er happens to be an! one of the
following
&actor! registered under or governed b! &actories 'ct 1"#0
$opan! established under $opanies 'ct 1"@A
$orporation established b! or under an! law
Societ! registered under Societies *egistration 'ct 10A0
'n! cooperative societ! established b! or under an! law
' dealer registered under $entral Bxcise 'ct 1"##
=od! corporate established or a partnership fir registered b! or under an! law
,he person who is liable to pa! the freight is liable and the person who pa!s on behalf of another
would not be liable( &urther the benefit of sall service provider exeption would also not be
available((
222
,he service tax would not have to be paid on the entire aount and the pa!er can avail a
deduction of 4@J of the gross aount charged as freight( ,he condition as to getting the
declaration as to non availent of $envat credits fro the E,' which existed earlier has been
done awa! with((
,he liabilit! would arise where the freight charged exceeds *s( 4@0 for individual consignents
and *s( 1@00 for other consignents( ,he intention here is not to tax freight paid to local tepo
operators who do not issue a consignent note(
,he pa!ent would have to be ade in cash and once pa!ent has been ade+ the service tax
paid can be availed as credits if the service constitutes input service to the pa!er( ' controvers!
that the outward freight is not allowed has been precipitated b! the bureaucrats of this countr!
going against the concepts of $envat credit and oveent to ES,( .n case of =ellar! .ron and
ores ?vt >td %s $$B 2010 L10M S,* #0A L,ri7 =angM it was held that transportation of goods b!
truc- owners or operators was out fro the scope of taxabilit! under Eoods ,ransport 'genc!
Service+ onl! the boo-ing agents were ade liable to Service ,ax under Eoods ,ransportation
Services+ further the activit! carried out b! truc- owners was liable to service tax under Suppl! of
,angible Eoods services+ wherein the truc- owners operated the vehicle without transferring the
possession of such truc-s+ the said service was taxable onl! fro 1A(0@(2000 and not prior to that
date( &urther the ter road was also discussed as entioned in Eoods transportation 'genc!
Service+ wherein it was held that *oad would onl! ean public road+ and transportation b! ud
roads fored in the ining area could not be held to be transportation b! road
%!rks 6!ntra6t servi6e
,his entr! would be applicable to the following existing service providersF
.ndustrial and $oercial $onstruction
$onstruction of $oplex
Brection+ installation and $oissioning
.f there are wor-s contracts which cover activities not coing under the ones specified above+
the! would have to be taxed under other existing heads and consequentl!+ the coposition benefit
in such cases would not be available( .n such a scenario+ the existing notifications such as
1252003 S, and 15200A S, would have to be relied upon to get an! deduction(
&or pure labour services where there is no aterial involved the service would continue to be
covered under the above categories as the definition of wor-s contract a-es it clear as t! t%e
re<uirement !+ trans+er !+ pr!perty in )!!ds +!r a c!ntract t! 2e lia2le under t%is cate)!ry(
223
Whether 2oint develop(ent liable?
Under the Joint Developent 'greeent+ the builder delivers the share to the land owner in
exchange for land while retaining his own share( ;hat is the iplication under service tax on the
constructed portion shared with the land ownerC
,he $BS,', in the case of ?urvan-ara ?rojects >td %s $S, =angalore L20107,.)>7207
$BS,',7=ang7Sta!M where in the context of construction of flats and transferring the to land
owners who are co7developers it was held that in exchange for land received fro the it cannot
be held to be an! service( ' pria facie view was that there is no service involved in the
transaction( .t a! be noted that the final ruling of the ,ribunal in this regard is awaited(
,he service tax liabilit! is attracted on the value of taxable services( ,here was an explanation
inserted to the taxable service definition in construction services+ wef 1(4(2010 which sought to
tax the sums re6eived prior to grant of copletion certificate b! builder was levied to service tax(
8owever+ what was sought to be covered b! this deeing fiction was sus of one! received b!
the builder fro the bu!er as advances( .n view of paperwriters it cannot be extended to cover the
land5developent rights which is not a su(
's per erstwhile Section AA1presentl! AA=2 Lwhich was charging section prior to 1(4(2012M read
with Section A4 it levies tax on the vaue !" ta7abe servi6es where provision of service is for a
6!nsiderati!n( 's per explanation below section A4+ (*planati!nA/!r t%e purp!ses !+ t%is
secti!n#a& Oc!nsiderati!nO includes any a(ount that is payable +!r t%e ta*a2le services pr!vided
!r t! 2e pr!videdP
8owever deands could be ade b! revenue citing $ircular /o(1@1520127S, issued in &ebruar!+
2012( =oard $ircular /o( 1@152520127S(,(+ dated 107272012 clarifies on taxabilit! as underF
T:! di""erent identi"iabe transa6ti!ns9
7 LaM sale of land b! the landowner which is not a taxable serviceI and
7 LbM construction service provided b! the builder5developer(
,he builder5developer receives consideration for the construction service
provided b! hi+ fro two categories of service receiversF
7 LaM fro landownerF in the for of land5developent rightsI and
taxable in case an! part of the pa!ent5developent rights of the land was
received b! the builder5 developer before the issuance of copletion
22#
certificate and the service tax would be required to be paid b!
builder5developers even for the flats given to the land owner(
7 LbM fro other bu!ersF norall! in cash(
,he circular clarifies on valuation of land owners share as follows7
a( ,he value of these flats would be equal to the value of siilar flats charged b! the
builder5developer fro the end bu!ers for cash(
b( .n case the prices of flats5houses undergo a change over the period of sale Lfro the
first sale of flat5house in the residential coplex to the last sale of the flat5houseM+ the
value of siilar flats as are sold nearer to the date on which developent rights given
to develop the land could be used for arriving at the taxable value(
,hough there is a possibilit! of challenge to service tax on land owners share+ there could be a
deand of service tax on land owner3s share of constructed area b! revenue as the law stands
presentl! after 1(4(2012( ,hough there is a difference of views+ if the bu!ers are aware and
willing to pa! the service tax and therefore when in doubt it a!be preferable to collect and pa!
the service tax(
)ne thing the assessees have to anal!se is whether there exists a service provider who provides
the wor-s contract service and a service receiver who receives such service( .n the absence of
such service+ there would not be a liabilit! under service tax( Soeties+ the construction activit!
a! not be underta-en on behalf of a client5custoer but a! be underta-en b! the
builder5developer on his own account and the constructed propert! sold to bu!ers( .n such
situations+ there would be no liabilit! under service tax as there is no distinct service provider and
service receiver and the builder5developer cannot provide service to hiself( ,his has also been
decided b! the Eauhati 8igh $ourt in :agus $onstruction L?M >td %s U). L2000 L11M S,* 22@
LEauMM(
't sae tie+ wef 1(4(2010 where an! part of sus received b! builder before copletion
certificate+ it is liable to service tax(
,he assessees are advised to be careful even where partl! constructed propert! plus land is
transferred to prospective bu!ers and then the reainder of construction wor- underta-en on their
behalf as the entire aount involved in the project would not be liable to service tax because of
the land and partl! built up unit being sold5transferred to the bu!ers and then wor-s contract
service in relation to construction being provided( Due care is to be ta-en to ensure that the
22@
agreeents are properl! drawn up to indicate the various coponents and the aounts being
charged for the sae(
C!m5!siti!n S6heme
;or-s contract L$oposition Schee for ?a!ent of Service ,axM *ules 2004 has been notified
vide notification 3252004 S, dated 22(0@(2004 b! the $entral Eovernent for the purpose of
specif!ing the schee for coposition( ,he person executing wor-s contract has the option to
pa! tax under the coposition schee at the rate of four percent Lrate changed fro earlier rate of
2J b! notification 452000 S, wef 01(03(2000M on the gross aount charged for the wor-s
contract( Eross aount shall not include the %', or sales tax paid on the goods transferred during
the execution of such wor-s contract but shall include the value of all goods used in or in relation
the wor-s contract whether supplied under an! the contract for a consideration or otherwise and
all services used for execution of the wor-s contract Lnotification 235200" dated 04(04(200"M(
,he option is to be exercised prior to pa!ent of service tax in respect of the said wor-s contract
and once exercised+ shall be in force till the copletion of the wor-s contract(
E7em5ti!n
Services in relation to execution of wor-s contract provided b! an! person to an! other person in
relation to construction of ports or other ports has been exepted fro service tax( ,his
exeption shall not extend to services of copletion+ finishing+ repair+ alteration+ renovation+
restoration+ aintenance or repair(
Vauati!n
' new *ule 2' has been inserted b! notification 2"52004 S, dated 22(0@(2004+ which prescribes
the valuation ethod in case of wor-s contract service( ,he value of wor-s contract service shall
be equivalent to the gross aount charged for wor-s contract less the value of goods transferred
in respect of which %',5sales tax has been paid+ during the course of execution of wor-s contract(
,he gross aount shall not include the %', and sales tax paid on the goods transferred( ,he
service provider shall ensure that the value of wor-s contract service as aforesaid shall include the
following
>abour charges for execution of the wor-s
'ount paid to a sub7contractor for labour and services
$harges for planning+ designing and architect3s fees
22A
$harges for obtaining on hire or otherwise+ achiner! and tools used for execution of the
wor-s contract
$ost of consuables such as water+ electricit!+ fuel used in the execution of the wor-s
contract
$ost of establishent of the contractor relatable to suppl! of labour and services
)ther siilar expenses relatable to suppl! of labour and services and
?rofit earned b! the service provider relatable to suppl! of labour and services
Cenvat 6redit
;here the service provider opts for the coposition schee for the purpose of pa!ent of
service tax+ he shall not ta-e cenvat credit of dut! and cess paid on inputs used in relation to such
wor-s contract( 8owever the credit on capital goods used for providing the service as well as the
input service credit Lsub contractors+ insurance+ telephone+ anpower suppl!+ architect+ securit!+
suppl! of tangible goods+ etcM would be available(
;here the service provider does not opt for coposition schee+ he should be entitled to cenvat
credit on inputs+ input services and capital goods used in execution of such wor-s contract(
.n case of Sunil 8i7,ech Bngineerings >td %s $$B+ L2010 L14M S,* 121 L,ri7 :ubaiM it was
held that prior to introduction of ;or-s $ontract service+ the assessee was liable to service tax
under construction service+ however with respect to value of aterial on which sale tax was paid+
the assessee could clai the benefit of notification 1252003(
.t was held that when assessee had paid service tax under construction service prior to
introduction of wor-s contract service( ,herefore the plea of estoppel in tax atters and tax
liabilit! can be disowned 8owever there are contrar! decision wherein it was held that no tax was
pa!able+ if the activit! carried out b! the assessee was a wor-s contract service+ prior to
introduction of ;or-s $ontract Service(
8owever in case of $$B %s =S=6 decision ?vt >td+ 2010 L2@3M B>, @22 L,ri Del 7 >=M it was
held that coposite contracts would be divisible+ once the value of aterial was established+ the
balance would be value of labour and the sae would be liable to service tax( )n the basis of this
decision+ Daeli .ndustries case where it was held that coposite contract were not vivisectable+
was referred to larger bench of Supree $ourt(
224
/= P!ssibe $ssues9 %hether the ev8 !" servi6e ta7 !n :!rks 6!ntra6ts is 6!nstituti!na8
vaidA
C!mments9 ,he Union Eovernent has a right under Bntr! "4 of >ist . of Seventh Schedule
to lev! a tax on a subject+ which is not specificall! covered under >ist .. or >ist ... of ibid(
,he transaction of ;or-s $ontract is neither a sale nor a service as held b! the Supree
$ourt in case of Eannon Dun-erl!( ,he aended definition of sale of goods as per the
constitution covers onl! the transfer of goods in the course of execution of wor-s contract(
,herefore the service eleent is not a subject atter of lev! either under >ist .. or >ist ...(
,herefore in the opinion of the authors the sae would be well within the powers of the
Union Eovernent to lev! tax( 8owever another view in the industr! is that there is no
facilit! under the constitution to vivisect a single transaction and tax the portion of the sae(
-= %hether the :!rks 6!ntra6t!r 6an 6!ntinue under the e7isting entries "!r !ng!ing
6!ntra6tsA
C!mmentsF Since there is a new entr! it is presued that service providers a! have to
choose considering the principles of Section A@' on classification( 8owever if the! do
not transfer an! aterials the! would continue under construction or erection categories(
8erein it is iportant to note that the departent letter &(/o( =151A52004 ,*U dated
22(0@(2004 goes on to sa! that contracts which are treated as wor-s contract for lev!ing
%',5sales tax shall also be treated as wor-s contract for lev!ing service tax( 8owever+
this letter would have to be seen in the light of the explanation to section A@L10@MLGGGGaM+
which deals with the contracts which can be regarded as wor-s contract under this
categor!(
C= %hether the :!rks 6!ntra6ts inv!ving materias in 5r!gress 6an as! !5t "!r the
ne: entr8 th!ugh earier the8 :ere registered under the !d entriesA
C!mments9 'ssessees a! note that the departent had coe out with circular
"05152000 S, dated 0#(01(2000 which clarified that where service providers had
classified their services under other categories viG(+ erection+ coissioning or
coercial or industrial construction or construction of coplexes+ the! could not
reclassif! the single coposite service under wor-s contract( ,his circular also
ephasiGed the fact that a wor-s contract could not be vivisected and that the sae was
not legall! sustainable( ,he said circular was issued after the decision in case of
/agarjuna $onstruction $o( >td( %s( Eovernent of .ndia 120127,.)>71047S$7S,2
where Supree $ourt held that in respect of wor-s contract+ where service tax had
alread! been paid+ no option to pa! service tax under the ;or-s $ontract $oposition
Schee can be exercised( 'ssessee who wants to avail of benefit of pa!ent of service
220
tax as per $oposition Schee *ules ust opt to so do before a-ing pa!ent of
service tax in respect of said wor-s contract( )ption so exercised would appl! to entire
wor-s contract+ and assessee is not peritted to change option till said wor-s contract is
copleted(
#( %hether the !5ti!n !" avaiing the 6redit !n a the in5uts >6ement, stee, gaHing,
ties et6? and 5a8ing the servi6e ta7 !n the gr!ss am!unt is sti avaiabeA
$oentsF ,he coposition schee is optional and the wor-s contractor can even pa!
service tax on a value arrived at as aforesaid at the noral rate( ,he law as it stands toda!
is silent regarding the cenvat credit on inputs in such a scenario as the credit has been
expressl! barred onl! in case of an assessee opting for coposition schee( ,he assessee
can as per the huble view of the authors+ pa! service tax on the gross aount for the
service which should include the value of aterials transferred if the! are to avail $envat
credit of the excise duties on the aterials used for the construction wor-5wor-s contract
service( ,his could enable the contractor to bring down his construction costs and the
benefit of such reduced costs+ can be passed on to his bu!er(
<= %hether the !5ti!n 6h!sen under VAT a: has an8 bearing "!r the 6assi"i6ati!n !r
vauati!n under this ne: entr8A
$oentsF ,he ;$ option provides for the option of deducting the value on which %',
has been paid and on the balance the service tax would be leviable( ,his option if chosen
would require that the regular schee under %', has been opted for( 8owever for the
coposition schee the ethod under %', is not relevant(
A( %hether the servi6e 5r!viders under the s5e6i"ied 6ateg!ries :ere n!t iabe "!r
:!rks 6!ntra6ts earier t! this entr8A
$oentsF ,he entr! read with the &inance :inister3s Speech along with departent
circular indicates that wor-s contracts were not earlier covered( ,he purpose for which
this entr! was bought in also is favorable to this interpretation( ,herefore it can be
construed that there was no liabilit! earlier( ,his could lead to a situation where the
service provider who has paid the service tax fro their poc-ets Lnot recovered fro the
custoersM could go for a refund especiall! if the sae was done in pursuance of an
investigation(
22"
G= %hether the sub 6!ntra6t!rs :!ud be e7em5t as the main 6!ntra6t!r is 5a8ing the
servi6e ta7A
$oentsF ,he sub contractors would also have to discharge the S, under wor-s
contract or other categories and would be liable for the tax unless the! are below *s( 10
>a-hs(
0( %hether the deeming "i6ti!n !" servi6e ta7 :ith res5e6t t! an8 am!unt re6eived b8
the buider "r!m its 6ust!mer be"!re grant !" 6erti"i6ate !" 6!m5eti!n :!ud be
iabe "!r servi6e ta7 under :!rks 6!ntra6tA
$oentsF ,he author is of the opinion that the said explanation is provided under
section A@L10@MLGGqM i(e( L$onstruction services onl!M and the said explanation is not
provided under section A@L10@MLGGGGaM i(e( wor-s contract services( ,herefore the said
deeing fiction would not appl! to wor-s contract service(
/inance 0ill -.11 %as restricted cenvat credit t! an e*tent !+ C.7 $%en t%e service is received
+r!m service receivers pr!vidin) services classi+ia2le under c!nstructi!n !+ residential c!mple*
service "!mmercial and industrial c!nstructi!n service and erecti!n c!mmissi!nin) and
installati!n services $%! %ad !pted t! pay service ta* !n )r!ss am!unt includin) t%e value !+
inputs.
Su558 !" tangibe g!!ds "!r use servi6e
's per Section A@L10@MLGGGGjM of $hapter % of &inance 'ct as aended+ taxable service eans
an! service provided or to be provided to an! person+ b! an! other person in relation to suppl! of
tangible goods including achiner!+ equipent and appliances for use+ without transferring right
of possession and effective control of such achiner!+ equipent and appliances( ,hus if one
purel! goes b! the definition+ it a! also be possible to argue that what is liable is service in
relation to suppl! of tangible goods without transferring right of possession and effective control
of such achiner! and not the suppl! itself(
C!n6e5t !" tangibe g!!ds
,he ter Ntangible goodsO has not been defined under the &inance 'ct and one would have to
refer the definition of NEoodsO as per Sale of Eoods 'ct( 8ere+ it has been defined to ean ever!
-ind of ovable propert! other than actionable clais and one!I and including stoc- and
shares+ growing crops+ grass and things attached to or foring part of the land+ which are agreed
230
to be severed before sale or under the contract of sale( Eoods should thus be ovable propert!
capable of being bought and sold and capable of being transitted+ transferred+ delivered+ stored
and possessed( .ovable propert! is not being taxed under this categor! and would have to be
exained under the categor! *enting of .ovable ?ropert! service under service tax(
,he ter NtangibleO would have to be seen in light of the eaning assigned b! Bnglish
Dictionar!( 's per *ando 8ouse ;ebster3s Unabridged Dictionar!+ tangible eans capable of
being touched or discernible b! the touch( ,he goods being supplied should be tangible goods i(e(
having ph!sical existence and for+ in order to attract liabilit! under this categor!(
C!n6e5t !" su558, 6!ntr! et6
,he ter Nsuppl!O eans to furnish or provide La person+ establishent or place etcM with what is
lac-ing or requisite( ,he word suppl! need not necessaril! indicate transfer of the right of
possession or effective control over the goods5aterials in question(
,he ter NtransferO eans Nto a-e over the possession or control ofO or Nto conve! or reove
fro one place+ person to anotherO(
,he ter NpossessionO has been defined as Nactual holding or occupanc!+ either with or without
rights of ownershipO(
,he ter NcontrolO has been defined as Nto exercise restraint or direction overI doinate+
regulate+ or coand(O
.n order to a-e a transaction of suppl! of tangible goods not liable under this categor!+ there
should be a transfer of both possession as well as effective control over the said goods+ to the
user( ,he presuption here sees to be that %',5sales tax is levied in cases where both right of
possession as well as effective control over the goods is transferred to the user( ,he ris- and
reward of ownership would lie with the person who enjo!s the possession(
C!n6e5t !" deemed sae
.n this regard+ it would be interesting to go through 'rticle 3AAL2"'M of the $onstitution of .ndia
as well as the decision of the Supree $ourt in =harat Sanchar /iga >td and 'nother %s Union
of .ndia and )thers L200A7,.)>71@7S$7$,7>=M wherein the concept of sale+ deeed sale and the
powers of the states to lev! sales tax on deeed sales had been discussed in detail in light of the
#A
th
aendent to our $onstitution( 'rticle 3AAL2"'M after the said aendent+ goes thus Ntax
on the sale or purchase of goodsO includes
231
a tax on the transfer+ otherwise than in pursuance of a contract+ of propert! in an! goods
for cash+ deferred pa!ent or other valuable considerationI
a tax on the transfer of propert! in goods Lwhether as goods or in soe other forM
involved in the execution of a wor-s contractI
a tax on the deliver! of goods on hire7purchase or an! s!ste of pa!ent b!
installentsI
a tax on the transfer of the right to use an! goods for an! purpose Lwhether or not for a
specified periodM for cash+ deferred pa!ent or other valuable considerationI
a tax on the suppl! of goods b! an! unincorporated association or bod! of person to a
eber thereof for cash+ deferred pa!ent or other valuable considerationI
a tax on the suppl!+ b! wa! of or as part of an! service or in an! other anner
whatsoever+ of goods+ being food or an! other article for huan consuption or an!
drin- Lwhether or not intoxicatingM+ where such suppl! or service+ is for cash+ deferred
pa!ent or other valuable considerationI
and such transfer+ deliver! or suppl! of an! goods shall be deeed to be a sale of those goods b!
the person a-ing the transfer+ deliver! or suppl! and a purchase of those goods b! the person to
who such transfer+ deliver! or suppl! is ade(
,he Supree $ourt in the aforesaid case L=S/> %s U).M had reiterated that the sale eleent in
those contracts not falling under the aforesaid six clauses would be taxed depending on the
substance of the contract Li(e( appl!ing doinant nature testM( 8ere+ the intention of the parties
entering into the particular transaction of sale would be iportant( 8owever+ in cases where the
contract falls under an! of the six categories specified above under 'rticle 3AAL2"'M of the
$onstitution of .ndia+ the doinant nature test need not appl! and the sale eleent of those
contracts can be subjected to sales tax b! the concerned state even if one or ore of the
ingredients for sale as specified b! Section # of Sale of Eoods 'ct 1"30 are absent( ,hus one
would have to exaine the nature of transactions that one intends to bring under this categor! of
service as the sae would also have to be seen fro the sales tax5%', angle to -now the overall
liabilit! for the assessee(
,he departental letter tal-s about certain cases where both+ right as to possession and effective
control a! not be transferred to the user( ,hese could cover the present practice of hiring of
232
excavators+ wheel loaders+ dup truc-s+ crawler carriers+ copaction equipent+ cranes+ offshore
construction vessels and barges+ geotechnical vessels+ tug and barge flotillas+ rigs+ airplanes and
high value achineries( ,here a! however+ be cases where hiring of equipent involves
exercising of control over such equipent albeit teporaril!+ b! the user without ph!sicall!
operating the sae( .n such a scenario+ the transaction would be liable under service tax( 8ere+
there is a danger of the transaction inviting scrutin! of the >%) as well(
'ssessees a! here note that transfer of right to use goods for an! purpose falls under clause LdM
of 'rticle 3AAL2"'M of $onstitution of .ndia which can be subjected to sales tax b! the concerned
states as a deeed sale( 8ere+ the right in question is legal right to use goods( 's discussed in
=S/> %s U). case+ to constitute a transaction for the transfer of the right to use the goods the
transaction ust have the following attributes
,here ust be goods available for deliver!
,here ust be consensus ad idem as to the identit! of the goods
,he transferee should have a legal right to use the goods consequentl! all legal
consequences of such use including an! perissions or licenses required therefore should
be available to the transferee
&or the period during which the transferee has such legal right+ it has to be to the
exclusion of the transferor
8aving transferred the right to use the goods during the period for which it is to be
transferred+ the owner cannot again transfer the sae rights to others
;here the aforesaid criteria are satisfied in a transaction+ the sae would fall under clause LdM of
'rticle 3AAL2"'M of $onstitution of .ndia and would attract sales tax( ;hen the transaction is
subject to sales tax+ the sae cannot be subject to service tax( Bven where the transaction is one
of hiring+ the question of lev!ing sales tax5%', would arise where full possession and control is
given to the hirer5user as per the decision rendered in *ashtri!a .spat /iga %s State of 'ndhra
?radesh L20027,.)>7@A07S$7$,M(
E7em5ti!ns
,he suppl! of goods carriage to a Eoods ,ransport 'genc! for carriage of goods b! road liable
under E,' service+ without transferring the right as to possession and effective control+ has been
exepted under notification 15200" S,( ,he usage of the vehicle should be b! the said E,'(
233
2ene"its N Cenvat Credits
,he service provider is entitled to clai cenvat credits on the input services used for providing
such taxable service+ in the opinion of the authors( .nput services could be in the nature of
anpower recruitent and suppl! services+ authoriGed service station services+ securit! services
etc( ,he credit of excise dut! on capital goods would also be adissible where the equipents are
procured b! the assessee5service provider fro a anufacturer or a dealer registered under
$entral Bxcise and then supplied to the user( 8owever+ the goods in question should not fall under
the categor! of otor vehicles as credit would not be available on the( $redits would also be
adissible in ters of the excise dut! on the spares(
%hether the L!rries !:ned b8 mine !:ners4 *T# :!ud be eigibe t! avai 6a5ita g!!ds
6redit !n su6h !rriesA
's the definition of capital goods under $envat credit rules+ provides eligibilit! of credit with
respect to otor vehicles onl! for specified services+ wherein such specified service include Site
foration service and ining services+ therefore the said credits would be adissible with respect
to capital goods credits on such lorries(
.n case of .ndian /ational Ship7owners 'ssociation %s U). 200" L1#M S,* 20" L8$ =oM+ had
held that+ when vessel was given on tie charter basis without parting the right of possession and
effective control+ wherein such vessel was used either pre7ining or post ining+ such activit!
would not be construed as service in relation to ining+ but would be considered as service of
suppl! of tangible goods service and the sae was taxable onl! fro 1A(0@(2000 and not prior to
1A(0@(2000(
C!nstru6ti!n !" 6!m5e7es
Section A@L"1aM defines Nresidential coplexO to ean an! coplex coprising of 7
LaM ' building or buildings+ having ore than 12 residential unitsI
LbM ' coon areaI and
LcM 'n! one or ore of facilities or services such as par-+ lift+ par-ing space+ counit!
hall+ coon water suppl! or effluent treatent s!ste+ located within a preises and
the la!out of such preises is approved b! an authorit! under an! law for the tie being
in force+
23#
but does not include a coplex which is constructed b! a person directl! engaging an! other
person for designing or planning of the la!out+ and the construction of such coplex is
intended for 5ers!na use as residence b! such person(
&urther an explanation is added to the construction of coplex service definition vide the
&inance =ill+ 2010 in section A@L10@MLGGGhM which states that where the coplex is intended
for sale+ wholl! or partl!+ then an! su received fro the prospective bu!er b! the builder+
before+ during or after constructionI before the grant of the copletion certificate b! the
copetent authorit! would be deeed to be service provided and hence taxable(
.t a! be pointed out that in a recent judgeent passed b! the :ubai 8igh $ourt in the
case of :aharashtra $haber of 8ousing .ndustr! and )thers vs( Union of .ndia 10127,.)>7
4078$7:u7S,2 has upheld the $onstitutional validit! of lev! of service tax+ under clauses
LGGGhM and LGGGGuM of section A@+ on construction services provided b! a builder( ,he fact that
the activit! in question is an activit! which is rendered on land does not a-e the tax a taxon
land((
,here are two explanations to this clause which are as follows
LaM Npersonal useO includes peritting the coplex for use as residence b! another person on
rent or without considerationI
LbM Nresidential unitO eans a single house or a single apartent intended for use as a place
of residence
,hus+ in order to be regarded as a residential coplex+ a coplex should have ore than 12
residential units( ;here this condition is not satisfied+ there cannot be a liabilit! under this
heading( *eaders a! note that the definition of Nresidential coplexO given above would hold
good even under wor-s contract categor!( ,hus where the service of construction of coplex is
involved with transfer of propert! in goods during such execution+ the said coplex is required to
have ore than 12 residential units in the absence of which+ the said service would not be liable
even under wor-s contract service(
,he ter NcoplexO has not been defined and if one refers *ando 8ouse ;ebster3s Unabridged
Dictionar!+ NcoplexO has been defined to be coposing of an! interconnected parts(
Servi6e 5r!vider'servi6e re6eiver reati!nshi5
23@
$ircular /o( "A5452004 S, dated 23(00(2004 tal-s about the iportance of service provider and
service receiver relationship existing in order to attract liabilit! under service tax( ,his circular
clears doubts about liabilit! when the builder5developer hiself constructs the residential
coplex( ;hen the construction wor- is not ta-en up b! another contractor and the
builder5developer5prooter hiself underta-es the sae+ there is no service provider7service
receiver relationship and the services are in the nature of self suppl! and hence not liable to
service tax(
%hether sub'6!ntra6t!r iabeA
,he aforesaid circular also clarifies the liabilit! of the sub7contractor who provides taxable
service in relation to construction of residential coplex Li(e( coplex having ore than 12
residential unitsM( ;here the builder5developer5prooter appoints a contractor for carr!ing out the
construction wor-+ such contractor would be liable to service tax( ,he liabilit! would be on the
gross aount for the taxable service( ,he circular also goes on to clarif! that wherever a portion
of the wor- is sub7contracted and the sub7contractor provides taxable service+ he would be liable
to pa! service tax(
.n :agus $onstruction ?vt( >td( %s U). L2000 L11M S,* 22@ LEau(MM+ the 8igh $ourt held that
where the flats5preises were constructed and then transferred to the bu!ers5custoers under a
sale agreeent on copletion of construction and the agreeents had been relied on b! the
registering authorities and stap dut! levied on the basis of such agreeent+ the transaction was
one of sale and not service and hence service tax could not be levied( ,his position had also been
aintained earlier b! the 'llahabad 8igh $ourt in 'ssotech realt! ?vt( >td %s State of U? L2004
L04M S,* 12" L'llMM( 8owever as the concept of deeed service was upheld+ then views
expressed in :agus $onstruction ?vt >td and 'ssotech *ealt! ?vt >td would not hold good(
Cir6uar /.K4.-4-..@ ST -@=./=-..@
,his circular discusses the liabilit! where the flats5properties are transferred b! the
builders5prooters5developers after copletion of construction b! the and transfer is b!
executing a sale deed after receipt of full pa!ent( ;here the propert! is so transferred+ there
would not be service tax liabilit!(
8owever+ if the construction wor- is underta-en b! another contractor hired b! the builder 5
prooter 5 developer+ then such contractor would be liable to service tax as the service provider7
23A
service receiver relationship would coe into pla!( ,his has also been indicated b! the circular
"A5452004 S, stated earlier(
An!t%er aspect $%ic% %as 2een clari+ied 2y t%e circular is $it% re)ard t! lia2ility $%ere t%e
c!nstructi!n plannin) and desi)n are underta=en 2y t%e 2uilder !r pr!m!ter !r devel!per in
pursuance !+ a c!ntract $it% t%e ultimate !$ners #2ein) t%e +lat !$nerBresidents&. In suc% a
scenari! t%e service ta* lia2ility $!uld n!t arise $%ere t%e pr!perty is intended +!r pers!nal use
!+ t%e ultimate !$ner. T%is is an imp!rtant clari+icati!n as t%e 2uilderB +lat !$ners can n!$
e*amine t%e !pti!n !+ re+und $%ere service ta* %ad 2een c!llected +r!m t%em.
;here however+ a contractor is hired for construction b! the developer5builder+ the position for
the contractor would be the sae as explained earlier i(e( the contractor would be liable to service
tax(
E7em5ti!n
'ssessees who are liable under this heading would be entitled to the benefit of notification 15200A
S, dated 01(03(200A which exepts taxable service of the value of A4J of the gross aount
charged fro service tax( .n other words+ service tax would be pa!able on 33J of the gross
aount( ,he assessee would have to -eep couple of points in ind
1( ,his exeption is not available in respect of copletion and finishing services alone
being provided
2( ,he gross aount shall have to include the value of aterials and goods transferred
during construction as well
3( ,he service provider would not be entitled to benefit of $envat credits on inputs+ input
services and capital goods used for the said service as well as benefit of notification
1252003 S,
'ssessees are also advised to be careful while opting for the benefit of this notification where the
contract involves transfer of propert! in goods which are of high value( .n such circustances+
the assessee would lose out on the credits of excise duties on construction aterials as the benefit
of credits can be claied onl! when the service provider pa!s service tax at the noral rate i(e(
10(3J( ,his can at ties prove to be a better option as the excise duties would go towards
reducing the cost of aterials used in construction+ a benefit which can be passed on to the
service receiver(
234
/urt%er /inance 0ill -.11 %as amended $%erein t%e service pr!vider !ptin) +!r a2atement under
n!ti+icati!n 1B-..C needs t! +act!r in t%e a2ated p!rti!n !+ t%e service +!r t%e purp!se !+ rule C
as e*empted service.
What is the distinction between the category of wor:s contract service and this category?
*eaders a! note that there are two categories which virtuall! cover the sae set of activities
though with a difference( ,he wor-s contract categor! covers the activities specified in clauses
LaM+ LbM and LcM in the definition of Nconstruction of coplexO given above within its scope(
8owever+ assessees would have to ensure that the service the! provide is classifiable under the
heading wor-s contract service( ,his can happen where the service in relation to construction of
coplex involves transfer of propert! in goods during its execution( Unless there is transfer of
propert! in goods+ the sae would not be classifiable under wor-s contract(
Whether the buyers of the apart(ent can opt for clai(ing refund of service tax?
Ues+ if the bu!er has borne the incidence of the aount collected as service tax the! can appl! for
the refund( ,he aounts paid for the past 1 !ear as set out in Section 11= would be clearl!
available( 8owever for the period prior to that the atter a! have to be litigated on the
arguent that the aount was not a tax at all as there was no liabilit! under law for the sae(
%hether 6!nstru6ti!n !" r!ad is ta7abe servi6eA
's per circular 11050#5200" S, dated 23(2(200"+ which clarifies that construction of road was not
a taxable service+ however aintenance of road was taxable service+ under anageent
aintenance or repair service Lfor the period upto 200"M 's per the authors view even
aintenance of roads should not be taxed+ as the law specificall! entions services in respect of
road+ airports+ railwa!s+ transport terinals+ bridges+ das and tunnels were not taxable( ;hen
service in respect of road was not taxable+ how can a circular be issued b! $=B$ taxing
aintenance of road( ,herefore the circular was conflicting with the provision of law+ as held b!
8$ of ?98 in case of $$B %s Dr( >al ?ath >ab L?M ltd+ when there is specific entr! for an ite
in the tax code with respect to exeption+ the sae cannot be taxed under an! other entr!( &urther
in case of $$B vs *atan :elting 'nd ;ire industries+ it was held that an! circular which was
issued in contrar! to law are invalid in law(
/pecial /ervice by Huilder
230
,his service intends to cover the charges collected b! the builder fro the prospective bu!er for
providing preferential location or for the developent of residential coplex+ or a coercial
coplex( ,his service does not include the service provided in relation to *epairs+ :anageent
or :aintenance+ coercial or industrial construction+ construction of coplex and in relation to
par-ing place(
Bxplanation defines KKpreferential location to ean to have an! location having extra advantage
which attracts extra pa!ent over and above the basic sale price( ,he definition is ver! wide to
cover the developent of coercial or residential coplex( 8owever the ,*U circular has
clarified that scope of tax under this service to be internal or external developent charges which
are collected for
a( developing5aintaining par-s+
b( la!ing of sewerage and water pipelines+
c( providing access roads and coon lighting etcI
d( fire7fighting installation chargesI
e( power bac- up charges etc
8ence an! aount collected b! the builder in this respect will not get taxed prior to the
introduction of this service(
,*U circular also clarifies Developent charges+ to the extent the! are paid to State Eovernent
or local bodies+ will be would be excluded fro the taxable value lev!+ however the notification
for the sae is not in place as of now(
.t is expected that an! issues on valuation would arise as to what is the preiu for location
part as contract entered at different ties with different persons would be driven b! business
considerations which are difficult to differentiate( Under central excise where such disputes
abounded earlier+ the final decision was that different prices to different person5 sae person at
different ties is valid(
2usiness Au7iiar8 Servi6e
=usiness auxiliar! service is perhaps one of the ost iportant services liable to service tax( ,his
is one categor! which should be noted b! anufacturers under $entral Bxcise as well( ,he
activities liable here would be production+ processing of goods for or on behalf of client+
provision of services on behalf of client+ prooting or ar-eting the service5goods of client+
custoer care service on behalf of client+ procureent of goods or services which are inputs for
the client plus a service incidental or auxiliar! to services covered above( ?roduction or
23"
processing would not cover activities aounting to anufacture of excisable goods+ as per
$entral Bxcise 'ct 1"##(
,hus where one provides services on behalf of another part! or production is done for a client+
the sae would be liable to service tax here( ;ith regard to production or processing of goods
underta-en there is a notification L05200@ S,M which provides an exeption fro service tax
where the goods so processed or produced are used in subsequent anufacturing of dutiable
goods b! the client( ,his would basicall! provide relief to job wor-ers who underta-e processing
of goods+ which does not aount to anufacture as per $entral Bxcise law(
,here has been litigation related to job wor-er availing credits at sae tie ta-ing benefit of
exeption in notification 05200@7S, when principal anufacturer pa!s excise dut! on clearance
of final products( ;hile definitive decision in this regards is awaited erring on side of caution job
wor-er could under protest reverse such credits availed(
:an! of the services provided b! =?) industr! would be falling under this categor! as services
are provided to third parties on behalf of the client(
)ne of the activities liable here is that of procureent of goods and services+ which are inputs for
the client( ,his service has to be distinguished fro the services of a clearing and forwarding
agent( ,he $9& agenc! services also include the services provided b! a consignent agent(
;hile coission agents would be liable under ='S+ consignent agents would be liable under
$9& agent3s services( ;hile both coission agent and consignent agent are agents+ there are
differences between the scope of their activities and their relationship with the principal as well as
their dealings with third parties concerned(
,he coission agent can either act on behalf of the principal in his dealings with third parties or
act in his own nae and deals with goods or services or docuents of title to such goods or
services+ collects pa!ent of sale price of such goods and services+ guarantees for collection of
pa!ent for such goods and services+ underta-es activities in relation to sale or purchase of such
goods or services( ,he scope of consignent agent3s wor- is narrower as copared to that of a
coission agent and a! be restricted to ere handling of goods or ta-ing custod! on a
teporar! basis for facilitating either storage or oveent of goods( ,here a! be cases where a
consignent agent also acts as a coission agent in which case+ the classification would have
to be done -eeping in ind the essential characteristics of the agreeent(
2#0
=usiness 'uxiliar! service provided b! the .ndian /ew agenc! is exepted fro service tax
provided such .ndian /ews 'genc! was exepted fro service tax u5s 10L22=M of .ncoe ,ax
'ct+ and such incoe was not distributed in an! anner to its ebers(
.n case of =lue Star >td %s $$B+ 2000+ L11M S,* 23 L,ri7 =angM had held that+ boo-ing of orders
for foreign principal b! its .ndian counterpart+ on the basis of such order+ the foreign principle
supplies the goods to the custoer in .ndia and .ndian counterpart received coission in
convertible foreign exchange+ was held as service exported in ters of rule 3L2M of Bxport of
Service+ *ules+ 200@( Subsequentl! following sae principal sta! was granted in case of .=:
.ndia L?M >td+ 8owever there also exists a contrar! decision in case of :icrosoft $orpn L.ML?M >td
%s $S, 200" L1@M S,* A00 L,ri7 DelM+ the said decision was also affired b! Delhi 8igh $ourt(
.n 20117,.)>71@007$BS,',7DB> considering the two different views of the :ebers of the
bench of the ,ribunal this atter has now been referred to third eber b! $BS,', to deterine
whether Service provided to ?rincipal situated in Singapore to ar-et products in .ndia is Bxport
of service or service provided in .ndia( Since the issue is pending+ we a! have to wait for a final
decision for &./'> clarit! to eerge in this regards(
Su55!rt servi6es !" business !r 6!mmer6e
,he ter NbusinessO has not been defined for the purposes of this clause and one would have to
go b! the eaning assigned b! a standard dictionar!( 's per *ando 8ouse ;ebsterYs Dictionar!+
the ter NbusinessO eans an occupation+ profession or trade( N$oerceO has been defined as
an interchange of goods or coodities between different countries or between areas of the sae
countr!( ,hus in order to render the service provided liable to service tax as a taxable service
under this clause+ the service should be one which supports the service receiverYs business or
coerce( ;here the service cannot be related to his business or coerce+ the service
provided+ in our view+ cannot be brought under this heading(
&or the purposes of this clause+ Ninfrastructural support servicesO includes providing office along
with office utilities+ lounge+ reception with copetent personnel to handle essages+ secretarial
services+ internet and teleco facilities+ pantr! and securit!( ,he ter NinfrastructureO has been
defined b! *ando 8ouse ;ebsterYs Dictionar! as the basic underl!ing fraewor- or features of
a s!ste or organisation(
/inance 0ill -.11 %as replaced t%e $!rds !perati!nal assistance +!r mar=etin) $it% !perati!nal
!r administrative assistance in any manner.
2#1
5ere !perati!nal !r administrative assistance $!uld c!ver all supp!rt activates +!r !t%ers !n a
c!ntract !r +ee t%at are !n)!in) 2usiness supp!rt +uncti!n t%at t%e 2usiness !r !r)ani;ati!n
c!mm!nly d! +!r t%emselves 2ut s!metimes +ind it ec!n!mical t! !uts!urce.
H-/ ,s H//
'ssessees should note the distinction between the two categories being discussed here( $opared
to the =usiness Support Service categor!+ the categor! of =usiness 'uxiliar! Service is ore
specific see-ing to tax specified activities5services( ,here can be confusion at ties where the
services provided are those such as billing+ issue or collection or recover! of cheques+ pa!ents
or aintenance of accounts and reittance+ inventor! anageent+ evaluation or developent of
prospective custoer or vendor+ public relations service+ anageent or supervision as these too
are services in relation to business or coerce( =ut one essential difference between the two
categories being discussed here is that while business support service see-s to tax outsourced
service in relation to business or coerce+ business auxiliar! service would appl! to those
services which are incidental or auxiliary to services of prootion or ar-eting of goods or
service provided b! client+ custoer care service provided on behalf of the client+ procureent of
goods or services which are inputs for the client+ production or processing of goods for or on
behalf of the client or provision of service on behalf of the client(
)ne should also see whether services are provided to a client or on behalf of the client to a third
part!( ;here the services covered here are provided on behalf of the client to a third part!+ the
sae would be liable under business auxiliar! service as services provided on behalf of the client(
H// ,s &enting of )((ovable property service
=usiness Support Service also includes infrastructural support services within its purview( 't the
sae tie assessees should note the presence of another service categor! and that is renting of
iovable propert! service which was aended recentl! to include the service of letting out
space teporaril!( ;here space is let out teporaril! without transferring the right as to
ownership and control over such space to the service receiver+ the sae would be liable under the
categor! renting of iovable propert!( /ow a situation can arise sa!+ where space is provided in
an office to an entit! to either set up its counter for prooting its business5service or even a help
des- to assist the eplo!ees of the organisation( .n such a scenario one would have to scan the
agreeent if it is available+ to understand the exact nature of service involved( .n order to tax the
service under =SS+ the setting up of the counter or help des- should qualif! as a service which
would support or supports the organisationYs business or coerce( Soeties answering this
2#2
question could prove to be tric-! where the service a! not support the organisationYs business
directl! though it a! help its eplo!ees as in case of the help des- entioned above(
,he possible wa! to distinguish between =SS and renting of iovable propert! service is that+
when a portion of space in office along with personnel is provided along with infrastructure
support for a consolidated aount would fall within the preview of =SS( .n case were erel!
space was provided+ ;here the tenant hiself installs infrastructure facilit! li-e telephone
connection+ internet etc would fall within the purview of renting of iovable propert! service(
H// ,s Consulting *ngineer /ervice ,s Husiness I Janage(ent Consultancy
Soeties advice as well as services which support service receiverYs business+ a! be provided
b! the service provider( .n such cases+ the service agreeents would have to be reviewed to see
whether the service is reall! a coposite one or the services involved can be identified separatel!(
.n case of coposite services+ the service would be classified on the basis of the service which
gives it the essential character( 8ere it would be worthwhile to note the circustances under
which advice+ consultanc! or technical assistance can fall under consulting engineerYs categor!(
Such advice+ consultanc! or technical assistance should be provided b! a consulting engineer i(e(
professionall! qualified engineer or a bod! corporate or fir providing such service+ in one or
ore disciplines of engineering(
Soeties we a! also have a scenario where advice in relation to anageent is given b! the
service provider( .n that case+ we would have to loo- at another taxable service nael!+
anageent or business consultantYs service( )nce again in case of coposite service involving
advice as well as services supporting business+ the classification would have to be on the basis of
the service which gives the sae its essential character( 8ere one would have to distinguish
between services in relation to anageent and those which erel! support the business(
Services which enable the service receiver to effectivel! anage or organise his business can be
said to fall under anageent or business consultantYs service(
H// ,s Jailing List co(pilation and Jailing /ervices
'ssessees should note that where the services are provided in relation to ailing list copilation
and ailing+ the said service would have to be seen in light of the taxable service of ailing list
copilation and ailing service( &or this+ the assessee would have to anal!se whether the service
is one of pure ailing or whether it is part of a larger bouquet of services( .n case of the latter+ the
classification would have to be done as explained earlier i(e( using the essential character test(
;here the service is onl! in relation to copiling and providing list of nae and address and an!
2#3
other inforation fro an! source or erel! sending docuent+ inforation+ goods or an! other
aterial in a pac-et b! whatever nae called+ b! addressing+ stuffing+ sealing+ etering or
ailing+ the sae would be classifiable under ailing list copilation and ailing service(
H// ,s 4evelop(ent and /upply of Content
,he activit! of telear-eting i(e( selling or advertising over telephone would be liable under =SS(
8owever there can be a scenario where a service provider develops the content for such
advertising and then ta-es up the activit! of telear-eting as well( ;hen the essential character
of the service or arrangeent is one of telear-eting+ the sae would be liable under =SS in our
view( =ut where the service is essentiall! one of developent and suppl! of content+ the sae
would have to be seen under another heading( Services in relation to developent and suppl! of
content for use in telecounication services+ advertising agenc! services and on7line
inforation and database access or retrieval services would be taxed under the separate heading
developent and suppl! of content service(
H// ,s Janpower &ecruit(ent or /upply agencyKs service
'nother aspect which erits attention is the anner in which support services of business or
coerce are obtained( ,he anal!sis of Service level 'greeents along with the Stateent of
;or- L for exaining what are the deliverablesM in ost of the cases where processes are
outsourced+ would assue significance as there have been cases where the agreeents were
essentiall! for suppl! of anpower though the activities underta-en were intended to support the
service receiverYs business( ;here the agreeent is one for suppl! of anpower where the
personnel continue to be the service providerYs eplo!ees but wor- on support services to service
receiverYs business under receivers supervision would be liable under anpower recruitent or
suppl! agenc!Ys service( .n this case the service is erel! of suppl!ing people with the requisite
s-ill 5 qualifications( Such suppl! a! be teporar! or otherwise( ,his would have soe
iplications as anpower recruitent or suppl! agenc!Ys services has been in existence for quite
soetie now though =SS was introduced onl! with effect fro 01(0@(0A(
H// ,s Gn8line infor(ation and 4atabase -ccess andBor &etrieval service
Support services of business or coerce a! also involve usage of coputer networ- b! the
service provider+ for the purpose of sending5receiving inforation to5fro the service receiver( 's
per the views of the paper writers+ one would have to see whether such usage of coputer
networ- is onl! incidental to carr!ing out the support services for business or coerce( ,his
2##
would have to be evident fro a reading of the agreeent( ;here the ain intention is to carr!
out the activities laid down under this categor!+ it should be possible to hold the service provided
as liable under business support service though revenue a! tr! to classif! the sae under on7
line inforation and data base access or retrieval service(
Sae !" g!!ds
Service providers a! at ties end up transferring propert! in goods during the course of
providing taxable service( ;here this happens+ the benefit of notification 1252003 S, which
provides an abateent for the value of goods and aterials sold+ can be availed b! the service
provider where he charges %',5$S, on the value such goods sold(
.n S* 6al!ana-rishnan 9 Sree 6rishna :andira %s $$B $ochin L20047,.)>71"1#7$BS,',7
=angM+ the service of verification of correctness+ fairness and authenticit! of inforation
furnished b! those see-ing loan fro .$.$. ban- was distinguished fro activit! of prooting
the clientYs business and held to be liable under =usiness Support Service and taxable fro
01(0@(0A and not under =usiness 'uxiliar! Service and therefore not taxed for the service
provided prior to 01(0@(0A
.n Jaded Siddappa 9 $o %s $$B :angalore L2004 L0"M >$P 0201 ,ri7=angM+ the activit! of
outsourcing of eter reading+ billing and ledger posting was held not to fall within the abit of
professional activit! of $hartered 'ccountants and was held to be classifiable under business
support service( ,hus+ in other words+ just because support services happen to be provided b!
professionals+ the sae would not be assessable as a professional service unless the professional
is reall! called upon to bring in his professional expertise in carr!ing out or perforing the
service(
.n case of 'garwal $olour 'dvance ?hoto S!ste %s $$B 2010 L1"M S,* 101 L,ri7DelM+ it was
held that when the contract was for provision of service+ divisibilit! of service and goods
coponent unwarranted+ as the contract was not for sale of goods but used for provision of
service+ therefore the deduction towards aterial under notification 1252003 was not
unwarranted( &urther it was held that the judgent in case of Shilpi $olor >abs was required to
be re7considered( ,herefore the said atter was referred to larger bench for re7consideration(
$nteri!r de6!rat!r
.t a! be seen fro the definitions that the interior decorator a! be an! person including an
individual and need not be a fir5corporate assessee( ,he interior decorator should be providing
the services of planning+ designing or beautification of spaces and this service a! be b! wa! of
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advice+ consultanc!+ technical assistance or a! also be provided in an! other anner( >andscape
designers have also been ade liable under this categor! even though the services the! render is
generall! outdoor in nature(
.n order to tax the service under this head+ the presence of advice+ consultanc! or technical
assistance is a requireent and in the absence of these requireents+ the liabilit! cannot be under
this head( .n this regard+ the advisor! function as is covered here should be distinguished fro the
function of execution( ;here an assessee executes the tas- of beautification of spaces or
landscaping on the basis of the advice of a consultant+ he would not be liable and the liabilit!
would be on the consultant for providing such advice(
>%et%er Vaastu B /en) S%ui c!nsultants lia2leH
,hese consultants norall! offer advisor! services in relation to planning+ designing or
beautification of spaces and therefore would be liable under this categor!(
>%et%er su2 c!ntract!r lia2leH
Ues( ?ost 23(00(04+ even sub contractors are required to pa! the service tax and the principal is to
avail the credit at his option+ on the service tax paid(
Value +!r service ta*
,he interior decorator a! wherever possible+ tr! to bifurcate the contract into one of advice and
one of suppl! and execution5suppl! of aterials( ,his would enable hi to identif! the charges
towards advice which can then be taxed under the interior decorator categor! with suppl! of
aterials suffering %',5$S, as this would reduce the scope for litigation( ,he interior decorator
in such a case would be entitled to benefit of notification 1252003 S, with regard to sale of
aterials subject to pa!ent of %',5$S,(
Renting !" 6abs
,he service provider a! be an! person engaged in renting of otor cab+ axi cab or otor
vehicle as put down in the definition explained above( ,hus even an individual would be liable if
he is engaged in renting of cabs( 's per the clarification given b! the $hief $oissioner of
$entral Bxcise $oibatore+ rent a cab does not cover etered taxis or radio taxis used for
transportation fro one place to another+ as the! are not rented as such for a period of tie(
.t is worthwhile to note here that the definition of rent a cab operator had been aended in 1""0
and till such tie the lev! was onl! on a person who held a license under the *ent a cab schee
1"0" fraed b! the central governent under :otor %ehicles 'ct 1"00( $onsequentl!+ persons
having a iniu of @0 cabs alone were taxed as such persons alone were given licenses(
2#A
;ith effect fro 01(0A(04 the clause relating to otor vehicles carr!ing ore than twelve persons
was inserted to expand the scope of lev! under this categor!( 't the sae tie+ a relaxation has
been introduced b! wa! of exclusion of renting of axi cabs and otor vehicles b! an
educational bod!( Bducational bod! for this purpose shall not include coercial training or
coaching center( ,hus with effect fro 01(0A(04 while renting out of otor vehicles other than
otor cabs and axi cabs would be liable+ renting of axi cabs and otor vehicles Ldesigned to
carr! ore than twelve passengers excluding the driverM b! educational bodies would be exept(
O$ners%ip !+ ve%icles n!t t%e criteria +!r c%ar)in) service ta*
's decided in ,ransport Solution Eroup %s( $$B :ubai LL200AM 1 S,* L30"M ,rS:ubaiM
case+ the service provider would be liable even if he does not own the otor vehicles( 8owever
where he does not own the otor vehicles+ credit on such vehicles as capital goods ight not be
available as the definition of capital goods under $envat $redit *ules 200# requires vehicles to
be registered in the nae of the service provider(
>%et%er transp!rt !+ empl!yees +r!m !++ice is lia2le !r is t! 2e distin)uis%edH
.t is interesting to note that the decisions given b! the ,ribunals have led to considerable
confusion in this regard( .n Shiva ,ravels %s( $$B+ :eerut case LL200AM L#M S,* L@00M L,ri7
DelMM+ the assessee was held liable even though he tried to argue that the possession of the vehicle
had not been transferred to the client and that his own driver was in control of the vehicle5cab(
,his decision was also followed in Sonia ,ravels %s( $$B Jaipur+ case(
8owever in 6uldip Singh Eill %s( $$B+ Jalandhar LL200AM L3M S,* A0" L,ri7DelMM case+ the
,ribunal sought to distinguish between renting of cabs and hiring of cabs for transportation under
a contract where the vehicles were not leased to the client for use at his discretion( .n this case+
onl! renting of cabs was held liable and not all anner of transport or vehicle hire services( 's
per the discussion held under this case+ where the vehicles are not rented or leased for use b! the
client at his discretion+ service tax need not be levied( ,he sae stance was also adopted b! the
'hedabad ,ribunal in Dharabha-ti ,ravels %s( $$B+ *aj-ot case(
.n Sur!a ,ours and ,ravels %s $$B Jaipur .. L20007,.)>7203@7$BS,',7DB>M+ the activit! of
providing a cab on hire on per7-iloeter basis b! providing driver and retaining control of
vehicle+ was held not to be liable to service tax(
:ere hiring of cabs could be liable under suppl! of tangible goods for use service+ and that too+ if
one were to strictl! follow the said categor! without question the lev!(
,eaders are als! advised t! re+er c%apter !n e*empti!ns +!r t%e e*empti!ns !n t%is cate)!ry.
2#4
T!ur !5erat!rFs servi6e
,he service provider is required to be a tour operator( ;here the service provider holds a tourist
perit granted under the :otor %ehicles 'ct 1"00+ he shall autoaticall! be covered under the
definition of tour operator( )ne a! note that the earlier definition of tour operator had been
aended in 200# to expand the scope of the categor! b! including transport b! an! ode as
being liable rather than the earlier concept of operating tours in a tourist vehicle Las per :otor
%ehicles 'ct 1"00M alone being liable(
;hat is liable is not just pac-age tour but even ere boo-ing or arranging of accoodation b!
the tour operator as well as other services provided in relation to a tour b! the tour operator(
Services provided in relation to tours abroad would not be taxed and in case of coposite tours
one would have to refer Bxport of Service *ules 200@ to find out whether the sae would aount
to export of service( ,he liabilit! extends to contract carriage as well(
,he concept of NtourO does not include a journe! organiGed or arranged for use b! an educational
bod!+ other than a coercial training or coaching centre+ iparting s-ill or -nowledge or
lessons on an! subject or field(
>%et%er t!ur in a ve%icle %avin) sta)e carria)e permit is lia2leH
,he definition with effect fro 1A(0@(00 does not cover transport under stage carriage perit and
therefore the sae would not be liable( ,ransport under contract carriage would be liable
provided the operator engages in planning+ scheduling+ organiGing or arranging tours(
.n ,ail /adu State ,ransport $orporation >td %s $$B ,rich! L200"7,.)>7A237$BS,',7:adM+
the activit! of deplo!ing the ,ail /adu State ,ransport $orporation buses to transport
eplo!ees of =8B> fro various points was held not to be liable to service tax under this
categor!(
>%et%er services in relati!n t! c!mp!site '!urneys $%ere part !+ travel is a2r!ad and part !+ it is
in India 2e lia2leH
.f one goes through circular "A5A52004 dated 23(00(04 issued b! the departent+ the gross aount
would be liable where the ultiate destination is outside .ndia or it is a round the world trip and
one lup su aount is charged( ,his was in context of travel b! air for international journe!
,eaders s%!uld als! re+er t%e c%apter !n e*empti!ns +!r e*empti!ns under t%is cate)!ry.
%hen a t!ur !5erat!r dire6t8 b!!k 6ruise 5a6kage !utside $ndia, :hat is the im5i6ati!n !"
servi6e ta7A
2#0
's the said service was provided in relation to outbound tours+ it would be covered under tour
operator service( 8owever if the conditions pertaining to export of service rules are dul!
coplied with+ the sae would treated as export of services and not be liable to service tax(
%hen a t!ur !5erat!r d!es a h!te b!!king, via an intermediar8, :hat is the im5i6ati!n !"
servi6e ta7 A
,he aforesaid activit! would enable the custoers boo- hotel roos in .ndia+ and the sae would
be covered under the categor! of tour operator service+ the service provider would get an
abateent of "0J fro gross aount+ and wherein the service provider also provides service of
accoodation+ the value should also include the cost of such accoodation(
C!mmer6ia training !r 6!a6hing
' review of the definitions would reveal that an! institute or establishent iparting s-ill or
-nowledge or lessons on an! subject other than sports would be liable( ,he service in relation to
coercial training or coaching a! be provided to an! person( =ut where the said institute or
establishent issues an! certificate or diploa or degree or an! educational qualification whether
or not recogniGed b! law+ there would be liabilit! under this categor! on such coaching5training(
8ere+ readers should note that where the institute or establishent issues a degree or diploa or
certificate or educational qualification whether or not recogniGed b! law+ the said institute or
establishent would be regarded as a coercial training or coaching centre and therefore even
other coaching services li-e preparation of candidates for entrance exas or copetitive exas
would be liable to service tax(( ?reschool coaching is not taxable(
,hus where the taxabilit! is to be exained under this heading+ one should first of all ascertain
whether the service provider can be regarded as a coercial training or coaching centre at all(
%ide the &inance =ill+ 2010 an explanation was added+ with effect fro 01(04(2003+ that a
coercial training or coaching centre shall include an! training centre or institute whether
registered as a trust or societ! or not and whether having profit otive or not( 8ence now
exclusion cannot be claied b! non7profit organiGations( ;here the service provider cannot be
regarded as a coercial training or coaching centre+ the service provided cannot be held to be
liable under this categor!( .n this regard+ the eaning of the ters NestablishentO and NinstituteO
would have to be studied( ,hese ters have not been defined under service tax but if one were to
refer *ando 8ouse ;ebster3s Dictionar!+ the following would eerge
2#"
NBstablishentO can ean a peranent civil+ ilitar! or other force or organisation( N.nstituteO in
this context+ eans a societ! or organisation for carr!ing on a particular wor-+ as of a literar!+
scientific or educational character( So+ unless the service provider can be regarded as being an
establishent or institute+ there cannot be a liabilit! under this heading(
/ervices provided in relation to co((ercial training or coaching by a vocational training
institute or a recreational training institute
,he services in relation to coercial training or coaching provided b! a vocational training
institute or a recreational training institute to an! person+ has been exepted fro service tax
vide /otification 2#5200# S, dated 10(0"(200#( &or this purpose+ Nvocational training instituteO
eans a coercial training or coaching centre which provides vocational training or coaching
that ipart s-ills to enable the trainee to see- eplo!ent or underta-e self7eplo!ent+ directl!
after such training or coaching( ' Nrecreational training instituteO eans a coercial training or
coaching centre which provides training or coaching relating to recreational activities such as dance+
singing+ artial arts or hobbies(
Services pr!vided 2y a c!mmercial trainin) !r c!ac%in) centre t! an institute !r esta2lis%ment
leadin) t! issue !+ de)ree !r certi+icate !r educati!nal <uali+icati!n $%et%er !r n!t rec!)ni;ed
rec!)ni;ed 2y la$
,he services in relation to coercial training or coaching provided b! the coercial training
or coaching centre would be exept fro service tax where the sae fors an essential part of
the curriculu or course of the other institute or establishent leading to an issue of degree or
certificate or diploa or educational qualification recogniGed b! law for the tie being in force(
,his exeption has been in force fro 01(04(2003 under /otification 1052003 S, dated
20(0A(2003(
Services in relati!n t! c!mmercial trainin) !r c!ac%in) pr!vided 2y a c!mputer trainin) institute
/otification 1"5200@ S, dated 04(0A(200@ was issued b! the Eovernent which specificall!
excludes services in relation to coercial training or coaching provided b! a coputer training
institute+ fro the purview of exeption notification 2#5200# S,( .n other words where a
coputer training institute provides vocational training+ the sae would not be exept fro
service tax( ,hough this aendent was ade in 200@+ the services referred to here+ enjo!ed
specific exeption under notification "52003 dated 20(0A(03 whose validit! had been extended up
2@0
to 30(0A(200#( &or this purpose+ the Ncoputer training instituteO was defined to be a coercial
training or coaching centre which provides coaching or training relating to coputer software or
hardware(
Whether the service of pre8screening of candidates and conducting assess(ent tests in order to
ad(it the( to specific courses, is liable under this category?
/o( ,his activit! cannot be liable under this heading where no s-ill or -nowledge transfer is
involved( ,he activit! would have to be seen under the heading :anpower recruitent or suppl!
agenc!3s services where once again the sae would not be liable as the service is not in relation
to recruitent5suppl!(
Whether the co(puter training provided to clients now would be taxable?
Ues( ,he exeption on vocational training under notification 2#5200# S, was revo-ed in 200@
with regard to training provided b! a coputer training institute( ,herefore+ coputer training
Lwhether in relation to software or hardwareM provided now would be taxable even if the sae is
to enable the client to ta-e up eplo!ent or to engage hiself in self7eplo!ent(
Whether higher education is to be distinguished fro( co((ercial training and coaching as
defined under 0inance -ct?
,he decision given in Ereat >a-es .nstitute case has also been followed in :agnus Societ! %s
$o( )f $ustos+ Service ,ax and $entral Bxcise 8!derabad L20007,.)>710127$BS,',7
=angM where the ,ribunal went one step further to distinguish higher education Lli-e :=' and
:anageent in $oputer Science or other disciplinesM fro coercial training and coaching as
defined under &inance 'ct as higher education was far ore coprehensive as copared to
training in particular s-ill( 8igher education could include coaching and training but vice7versa
was not possible( =ut whether this view would prevail in the long run is soething that would
have to be seen in due course of tie(
Whether co((ercial training or coaching institutes which prepare applicants for Hoard
*xa(s or co(petitive exa(s or entrance exa(s etc are liable to service tax?
Ues( ,his atter had been specificall! clarified b! $ircular @"5052003 S, dated 20(0A(2003 which
held the said service of preparing applicants for copetitive exas+ liable to service tax(
'ostal coaching
2@1
Bven postal coaching i(e( distance education where coaching is done b! sending across aterials
to the candidates would be liable to service tax( ,he service provider would however have to
exaine the option of availing the benefit of /otification 1252003 S, in respect of the value of
the goods and aterials sold to the service receiver( $ircular @"5052003 S, clarifies that where the
service provider sells standard text boo-s which are priced+ the sae can be excluded for the
purpose of charging service tax( ,he value being charged for sale of boo-s should be separatel!
identifiable( *eaders a! however note that the ,ribunal had granted a sta! on recover! of
service tax in $hate $oaching $lasses L?M >td %s $$B 'urangabad L2000 L0"M S,* 204 L,ri7
:uMM where the departent had sought to den! benefit of notification 1252003 S, where the
boo-s sold were not standard text boo-s( ,he ,ribunal held that the circular cannot whittle down
the effect of a notification( ,he assessee would however do well to wait for soe ore clarit! in
this regard if benefit is to be claied without an! hassles(
Circular $"BB#$$; /. dated #9!$!#$$;
,his $ircular see-s to clarif! an! of the doubts that have arisen with regard to taxabilit! of
coercial training or coaching services under his categor!( ,he following aspects have been
clarified
O2'ective !+ t%e institute !r esta2lis%ment pr!vidin) c!mmercial trainin) !r c!ac%in)
,he objective of the institute or establishent a! not be to a-e profit( .n other words+ even not
for profit organiGations would be liable to service tax( ,he circular draws distinction between the
nature of training provided b! the institute and the otive of the institute in providing such
training( ,he training should however be for a consideration as there cannot be service tax
liabilit! in the absence of consideration(
,here a! be a view contrar! to the one given above if one were to go b! the decision of the
,ribunal in Ereat >a-es .nstitute of :anageent >td %s $S, $hennai L2000 L10M S,* 202 L,ri7
$hennaiMM where service tax was held to be applicable onl! where the institute providing
education was a coercial concern( ,his view of the ,ribunal was contradictor! to the
$oissioner3s view that what was essential was the coercial nature of the services provided
and not the nature of the entit! itself i(e( whether the entit! could be regarded as a coercial
concern or not( .nterestingl!+ this view of the departent has now been put forth in the new
circular 104515200" S, which could lead to soe ore litigation in this area( 8owever Supree
$ourt in case of $S, %s Ereat >a-es .nstitute of :anageent >td+ had directed the ,ribunal to
2@2
exaine de novo in light of explanation inserted under $oercial ,raining or $oaching
services(
,he view of the departent regarding the training and coaching service having to be coercial
would also have to be studied( ?resentl! this is not clear(
;here private institutes issue a diploa or certificate of educational qualification to students
which are recogniGed abroad and which enable the to secure jobs+ the sae would not be
covered under the exepted categor! and would be liable to service tax unless such qualification
is recogniGed b! statutor! authorities li-e UE$ or '.$,B(
.n a recent decision .ndian .nstitute of 'ircraft Bngineering %s U). 20137,.)>7#3078$7
DB>7S, in the bac-drop of .nstruction /o( 1345132520107S, dated 11(0@(2011+ $=B$
clarif!ing that &l!ing ,raining .nstitutes providing training for obtaining $oercial ?ilot
>icence L$?>M and on 'ircraft Bngineering .nstitutes for obtaining =asic 'ircraft :aintenance
Bngineer >icence L=':B>M would clearl! coe in the categor! of coaching centres(
^uashing circular held that even if the certificate5degree5diploa5qualification is not the product
of a statute but has approval of soe -ind in YlawY+ would be exept( ,he 8igh $ourt was of the
view that the 'ct+ the *ules and the $'*+ having provided for grant of approval to such institutes
have recogniGed the $ourse $opletion $ertificate and the qualification offered b! such
.nstitutes( ,he $ourse $opletion $ertificate5training offered b! such .nstitutes is recogniGed b!
law( Delhi high court has ruled that training provided for obtaining $?> and =':B> is
not liable to service tax(
Institutes pr!vidin) )eneral c!urse !n impr!vin) certain s=ills
,he circular specificall! covers certain general courses aied at personalit! developent+
iproving general grooing+ counication s-ills+ effectiveness in group discussion and in
facing personal interviews+ provided b! institutes and holds such courses liable to service tax b!
distinguishing the fro vocational courses which would equip the candidates to ta-e up
eplo!ent or engage theselves in self7eplo!ent( ,hus institutes providing general courses
and not pa!ing service tax run the ris- of facing S$/s fro the departent where none has been
issued so far(
2@3
Management !r business 6!nsutantFs servi6es
;hat is sought to be taxed under this categor! is the taxable service provided b! a anageent
or business consultant in connection with the anageent of an! organisation or business( ,he
areas which are generall! dealt with are those spanning financial anageent+ huan resource
anageent+ ar-eting anageent+ production anageent+ logistics anageent
procureent and anageent of inforation technolog! resources or other siilar areas of
anageent(
;hile the service provider is to be a anageent or business consultant+ there is no specific
requireent as to educational qualification and this was also highlighted in ?arasal =a %s
$$B .ndore L200A L03M S,* 43 L,ri7DelMM(
Janage(ent consultancy ,s Consulting engineer ,s /cientific or technical consultancy
service
*eaders should be able to distinguish between anageent consultanc! services and that of
consulting engineer( ,he classification of the taxable service would be under the latter categor!
when the service involves advice+ consultanc! or technical assistance in an! anner in one or
ore disciplines of engineering including coputer hardware engineering( ,he consultanc! can
be b! a professionall! qualified engineer or b! an! bod! corporate or fir( ,he liabilit! would be
under anageent or business consultant3s service where the advice+ consultanc! or technical
assistance is in relation to anageent as explained earlier( ,his would have to be ascertained b!
reviewing the agreeent( Soeties there could be soe confusion especiall! in ters of
production related advice or consulting in case of a anufacturer and the doinant nature of the
service would have to be ascertained as to whether it is one of advice in engineering field or one
of advice in relation to anageent of the function itself(
,he question of the service being liable under scientific or technical consultanc! service would
arise where advice+ consultanc! or scientific or technical assistance in one or ore disciplines of
science or technolog! is provided b! scientist or technocrat or a science or technolog! institution
or organisation( ,hus a proper understanding of the contract would be critical(
C!m5!site servi6es
*eaders a! also note that there a! be cases where a coposite contract is entered into li-e for
instance an agreeent5contract for operating and aintaining a power plant( .n such a scenario+
2@#
one question that arises is whether such an agreeent can be bro-en up5 vivisected in order to
identif! possible service eleents and tax the sae( .n $:S L.M )perations 9 :aintenance $o(
L?M >td %s $$B ?ondicherr! L2004 L04M S,* 3A" L,ri7$hennaiMM+ the ,ribunal held that the
contract was for generation of power and that no taxable service was provided and that generation
of electricit! was within the eaning of anufacture under $entral Bxcise(
Heath Servi6e
,his service intends to cover the service provided b! an! hospital+ nursing hoe or a ulti7
specialt! clinic in relation to health chec-7up+ preventive care or treatent in certain cases( Such
services would be taxable onl! whenF
a. 'n! health chec-7up or preventive care is given to an eplo!ee of a business entit! and
the pa!ent for the sae is ade b! such business entit!
b. 'n! health chec-7up or treatent is given to a person covered b! health insurance
schee and the pa!ent for the is ade b! the insurance copan!(
,his service was introduced b! the &inance =ill+ 2010 and the effective date of taxing was fro
01(04(2010(
8owever &inance =ill 2011 has proposed a coplete revap in the definition+ which shall be
effective fro the date to be notified(
.n previous !ear budget+ service tax was levied on the health service provided b! a
8ospital+ /ursing 8oe and :ultispecialt! clinic to the insured patient and
consideration received directl! fro the .nsurance $opan!( .n this budget the service
tax base has been enhanced to include clinic+ individual doctor etc(
a( ,reatent
i( ,he taxable service is diagnosis+ treatent or care for illness+ disease+
injur!+ deforit!+ abnoralit! or pregnanc!(
ii( ,he service provider is N$linical BstablishentO eans a hospital+
aternit! hoe+ nursing hoe+ dispensar!+ clinic+ sanatoriu or an
institution+ b! whatever nae called(
iii( .t should andatoril! have the facilit! of central air7condition and should
be having ore than 2@ beds at an! tie during the financial !ear(
b( Diagnosis
i( ,he taxable service is diagnosis of diseases through pathological+
bacterial+ genetic+ radiological+ cheical+ biological investigations or
other diagnostic or investigate service
ii( .t should have the aid of laborator! or other edical equipent(
2@@
iii( ,he service provider is an! entit! either independent or as a part of an!
clinical establishent(
c( Doctor
i( ,he taxable service is diagnosis+ treatent or care for illness+ disease+
injur!+ deforit!+ abnoralit! or pregnanc!(
ii( ,he service provider is a individual doctor+ not being an eplo!ee of the
clinical establishent
iii( ,he service has to be provided in a clinical establishent(
d( Bxclusion
Bstablishent owned or controlled b! Eovernent or a local authorit!(
;ith the introduction of this service+ now the hospitals are also into tax net and the! would be
eligible to ta-e the $B/%', credit on the excise dut! paid on capital goods+ input service and
service tax paid on input service( )n the other hand the .nsurance $opan! or the =usiness
Bntit! Lif anufacturer or taxable service provideM would be eligible ta-e the credit of the sae(
;hether value of edicine supplied during the course of providing treatent was to be included
to discharge service taxC
:edicine consued during the course of treatent was essentiall! a service contract+ further
rel!ing upon the decision of Supree $ourt in case of ,ata :ain 8ospital 2000 L2M J$* 14#+ it
was held that suppl! of edicines during treatent in hospital is incidental to the ain activit! of
providing health service and thus not liable under sales tax(
%hen a heath servi6e 5r!vider !""ers 6ash ess "a6iities "!r the 5atients :h! are the
em5!8ees !" Centra 0 State *!vernment auth!rities, :hat are the $m5i6ati!ns under
servi6e ta7A
,he service provider would be liable onl! when the consideration is received fro business entit!
or insurance copanies( 's a business entit!+ is defined under sec A@L1"bM to include an
association of person+ bod! of individuals+ copan! or fir but does not include an individual( .n
the view of the author Eovt cannot be considered as a business entit!(
,his taxable services categor! was full! exepted fro service tax b! exeption notification
no(30520117S, wef 1(@(2011(
Lega C!nsutan68 servi6e
,his services covers services provided in relation to advice+ consultanc! or assistance in an!
branch of law+ in an! anner but does not include an! service of appearance before an! court of
law or statutor! authorit!( &urther the service provider and service recipient shall be business
2@A
entit! for the sae to be taxable( 8ence where service is provided b! an individual or service is
received b! an individual then there is no liabilit!(
&inance =ill 2011 has expanded the coverage to either a business entit! providing the service or
business entit! receiving the service( ,herefore onl! services provided b! individuals and
received b! individuals would be outside the net(
=usiness entit! includes an association of persons+ bod! of individuals+ copan! or fir but does
not include an individual(
,his service was introduced b! the &inance 'ct+ 200" and the effective date of taxing this service
was 01(0"(200"
/ervices that would be exe(pt under this head
,he circular 33#5135200" dated 0A(04(200" clarifies the exclusion of appearance before an! court
of law or appearance before an! statutor! authorit! fro service tax( So preparation of
eorandu appeal which are subissions before statutor! authorit! in support of the case
would also not be liable( &urther preparation and certification of affidavit+ acting as an official
liquidator etc( would be outside the purview of service tax( 8owever with &inance bill 2011+ the
aforesaid exclusion with respect to appearance before an! court of law or appearance before an!
statutor! authorit! is brought into the tax net which is against the rights of the citiGen(
Services t%at mi)%t )et c!vered under t%is %ead
?reparation of notice b! law!er fir would get covered as it would be in the nature of technical
assistance and an! consultanc! or advice provided b! non individual to a non individual would
get covered(
.n opinion of the authors+ law!ers are professionals as the! are not engaged in an! activit! of
trade+ but render service to the clients as the! are governed b! the code of ethics siilar to the
$hartered 'ccountants( ,herefore the! a! not be considered as business entities and
consequentl! a! not be covered(
2rand Pr!m!ti!n servi6e
,his service intends to cover the under entioned activit! done b! appearing in advertiseent
and prootional event or carr!ing out an! prootional activit! for such goods+ service or event
a( prootion or ar-eting of a brand of F
i( goods+
ii( service+
2@4
iii( event
b( endorseent of nae including a F
i( trade nae+
ii( logo of a business entit!
iii( house ar- of a business entit!
=rand has also been defined for this purpose to include s!bol+ onogra+ label+ signature or
invented words which indicate connection with the said goods+ service+ and event or business
entit!(
,he service in relation to prooting or ar-eting or sale of goods is alread! covered under the
categor! N=usiness 'uxiliar! ServiceO+ however the cases of prootion of the brand of the
copan! per sa! and not related to an! product was escaping tax net+ to tap this t!pe of
prootion+ a new service has been introduced( ,he ,*U circular expresses the intention of
introduction of this service as to tax the celebrities Lfil stars+ cric-eters etcM who act a brand
abassador(
%hether mere a6ting :!ud am!unt t! brand 5r!m!ti!n servi6eA
,he intension of the said service was to onl! tax brand prootion service+ in case of an! person
erel! acts+ without prooting the brand would not be taxed under this head(
2@0
2$2L$#*RAPH(4REFERENCES4 ACKN#%LE)*EMENTS
Service ,ax >aw Euide b! :r( *6 Jain
?ractical Euide to Service ,ax b! :adhu-ar / 8iregange+ *ajesh 6uar ,* and %S
Sudhir ?ublished b! =harat >aw 8ouse
$entral Bxcise :ade Bas! published b! :adhu-ar / 8iregange+ *ajesh 6uar ,* and
%S Sudhir( ?ublished b! =harat >aw 8ouse
$entral Bxcise >aw 9 ?rocedures 13
th
Bdition %( *aghuraan and :adhu-ar /
8iregange( ?ublished b! $entax ?ublication
$entral Bxcise :anual b! :r( *6 Jain
'rticles fro web site7 hiregange(co
Legends
$$B $oissioner of $entral Bxcise
'$$B 'ssistant $oissioner of $entral Bxcise
D$$B Deput! $oissioner of $entral Bxcise
S,*? Service ,ax *eturn ?reparer
$B,' $entral Bxcise ,ariff 'ct
$,' $ustos ,ariff 'ct
S8B Secondar! 9 8igher Bducation
., .nforation ,echnolog!
&B:' &oreign Bxchange :anageent 'ct
='S =usiness 'uxilliar! Service
=SS =usiness Support Service
;$ ;or-s $ontract Service
E,' Eoods ,ransport 'genc! service
2@"
APPEN)$&
A55endi7 $
NAME !" Registered Assessee9 RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
STC >Servi6e Ta7 C!de4 Registrati!n C!de?9 RRRRRRRRRRRRRRRRRR
/= )ivisi!n9
-= Range9 >Pease menti!n Range Number? RRRRRRRRRRRRRRRRR
C= Emai id9 RRRRRRRRRRRRRRRRRRRRRRRRRRRR
D= Re5eat Emai id9 RRRRRRRRRRRRRRRRRRRRRRRRRRRR
<= C!nstituti!n !" 8!ur Firm9 RRRRRRRRRRRRRRRRRRRRRRRRRRRR
L?roprietorship 5 ?artnership 5 *egistered ?ublic >iited
$opan! 5 *egistered ?rivate >iited $opan! 5
*egistered ,rust 5 Societ! 5 $o7operative Societ! 5
)thersM
;= C!nta6t Pers!n Name9 RRRRRRRRRRRRRRRRRRRRRRRRRRRR
G= C!nta6t Number9 RRRRRRRRRRRRRRRRRRRRRRRRRRRR
$, hereb8 de6are the $ am du8 auth!riHed b8 M4s RRRRRRRRRRRRRRRRRRRRRR t! sign this
de6arati!n and the 6!ntents !" this de6arati!n are true and 6!rre6t=
>Signature?
Name9 RRRRRRRRRRRRRRRRRRRRRRR
)esignati!n9RRRRRRRRRRRRRRRRRR
)ate9RRRRRRRRRRRRRRRRRRRRRRRR
T! L?lease send to the concerned jurisdictional DivisionM
APPEN)$& $$
A "ied F!rm ST'/
;e would ta-e a siple exaple of an assessee who wishes to register a single preises for 2
services(,he sae for would have to be used in case it is an aendent of an existing
2A0
registration Lli-e sa! change of address or change in authoriGed signator! etc(M ,he for that is
filled below is self explanator! except certain aspects which are explained belowF
$ategor! of registrantF .n case an assessee is liabile to pa! service tax as a recipient of service
Lsa! E,'M then he would have to select the option Kservice recipient3 as well+ else just selecting
the option Kservice provider3 would suffice(
/ature of registrationF ;here an assessee provides or receives taxable services fro5at ore than
one preises then he shall have to register all such preises( ;here the assessee has a centraliGed
accounting or billing then he can get a centraliGed service tax registration b! selecting the option
Kcentralised registration for ore than one preises3( 8e shall be required to ention the
addresses of all the preises he wishes to register in @LbM( &urther the address of the preises
where there is centraliGed accounting or billing would have to be entioned in S /o( A in the
for(
.n S /o( 4 all the taxable services for whih the assessee wishes to register shall be entioned(
F!rm ST N /
[-pplication for( forregistration under /ection 7; of the 0inance -ct, ;;3 >1# of ;;3?%
LPlease tic= appr!priate 2!* 2el!$M
Ne: Registrati!n
Amendments to inforation declared b! the existing *egistrant
*egistration /uber in case of existing *egistrant see-ing 'endent
/( >a? /ae of applicant
L E R C # N S T R + C T $ # N S L T )
>b? 'ddress of the applicant
< K 4 - ; @ * A N ) H $ N A * A R
P A N 1 A * + T T A
H ( ) E R A 2 A )
< . . . / -
2A1
-( Details of ?eranent 'ccount /uber L?'/M of the applicant
>a? ;hether ?'/ has been issued b! the .ncoe ,ax Departent
( E S
Ues /o
>b? .f Ues+ the ?'/
A ) F T * H 1 C G <
>6? /ae of the applicant Las appearing in ?'/M
C( >a? $onstitution of applicant L,ic- as applicableM
LiM ?roprietorship
LiiM ?artnership
LiiiM *egistered ?ublic >iited $opan!
_
LivM *egistered ?rivate >iited $opan!
LvM *egistered ,rust
LviM Societ!5$ooperative societ!
LviiM )thers
>b? /ae+ 'ddress and ?hone /uber of ?roprietor5 ?artner5 Director
LiM /ae
2A2
L E R C # N S T R + C T $ # N S L T )
M R= R A 1 $ V M E H T A
LiiM 'ddress
/ D P A N 1 A * + T T A R # A )
H ( ) E R A 2 A )
LiiiM ?hone /uber
@ G D ; C < ; G K C
D( $ategor! of *egistrant LPlease tic= appr!priate 2!*M
>a?Pers!n iabe t! 5a8 servi6e ta7
LiM Service provider
LiiM Service recipient
>b?#ther 5ers!n46ass !" 5ers!ns
LiM .nput service distributor
LiiM 'n! provider of taxable service whose aggregate value of taxable service in a
financial !ear exceeds nine la-h rupees
<( >a? /ature of *egistration #Tic= as applica2le&
LiM *egistration of single preises
LiiM $entraliGed registration for ore than one preises
>b? 'ddress of preises for which registration is sought
LiM /ae of ?reises5 =uilding
LiiM &lat5 Door5 =loc- /o(
< < 4 - ; @
LiiiM *oad5 Street5 >ane
* A N ) H $ N A * A R
2A3
LivM %illage5 'rea5 >ane
P A N 1 A * + T T A
LvM =loc-5 ,alu-5 Sub7Division5 ,own
LviM ?ost office
? ' / J ' E U , , '
LviiM$it!5 District
H ( ) E R A 2 A )
LviiiMState5 Union ,erritor!
A N ) H R ' ? * ' D B S 8
LixM ?./
< . . . / -
LxM ,elephone /os(F
- C ; G D C < @
LxiM &ax /o(
LxiiM B7ail 'ddress
R A 1 $ V S L E R = C P M
>6? .n case of application for $entraliGed *egistration+ furnish address of a the preises
fro where taxable services are provided or intended to be provided L&orat as per
@LbM aboveM
Premises9 /
LiM /ae of ?reises5 =uilding
2A#
LiiM &lat5 Door5 =loc- /o(
LiiiM *oad5 Street5 >ane
LivM %illage5 'rea5 >ane
LvM =loc-5 ,alu-5 Sub7Division5 ,own
LviM ?ost office
LviiM$it!5 District
LviiiMState5 Union ,erritor!
LixM ?./
LxM ,elephone /os(F
LxiM &ax /o(
LxiiM B7ail 'ddress
Premises9 -
LiM /ae of ?reises5 =uilding
2A@
LiiM &lat5 Door5 =loc- /o(
LiiiM *oad5 Street5 >ane
LivM %illage5 'rea5 >ane
LvM =loc-5 ,alu-5 Sub7Division5 ,own
LviM ?ost office
LviiM$it!5 District
LviiiMState5 Union ,erritor!
LixM ?./
LxM ,elephone /os(F
LxiM &ax /o(
LxiiM B7ail 'ddress
2AA
>d? .n case of application for .nput Service Distributor+ furnish address of a the
preises to which credit of input services is distributed or intended to be distributed
L&orat as per @LbM aboveM
;= 'ddress of the preises or office pa!ing service tax under centralised billing or
centralised accounting under sub7rule L2M and L3'M of rule # of the Service ,ax *ules+
1""#(
'ddress
G= Description of taxable services provided or to be provided b! applicant
Sr(
/o(
Description of service *elevant clause of section A@ of
the &inance 'ct+ 1""#+ to be
indicated+ if possible
L1M L2M L3M
1 $oercial or .ndustrial constructions GGq
2 $ostruction of coplex GGGh
K= /ae+ designation and address of the auth!riHed signat!r84 signat!ries9
/ae Designation 'ddress
*ajiv :ehta )ire6t!r 1#+ ?anjagutta *oad+ 8!derabad
)ECLARAT$#N
.+ Rajiv Mehta hereb! declare that the inforation given in this application for is true+ correct
and coplete in ever! respect and that . a authoriGed to sign on behalf of the registrant(
>a? F!r ne: registrati!n9
2A4
. would li-e to receive the *egistration $ertificate b! ail 5 b! hand5 B7:'.>
>b? F!r amendments t! in"!rmati!n 5ertaining t! e7isting registrant9
Date fro which aendents are adeF
#Ori)inal e*istin) ,e)istrati!n "erti+icate is re<uired t! 2e encl!sed&
DateF
?laceF H8derabad LSignature of the applicant5 authoriGed person with stapM
ACKN#%LE)*EMENT
L,o be given in the event *egistration $ertificate is not issued at the tie of receipt of application
for *egistrationM
. hereb! ac-nowledge the receipt of !our application for
LaM &or new *egistration
L's desired+ the /ew *egistration $ertificate would be sent b! B7:'.>5 ail5 handed
over to !ou in person on\\\\\\\\\\\\\M
LbM &or aendents to inforation in existing *egistration
L. hereb! ac-nowledge receipt of original existing *egistration $ertificateM
DateF Signature of the )fficer of $entral Bxcise
Lwith /ae 9 )fficial SealM
A55endi7'$$$
2A0
Ti5s "!r "iing the ST'C Return
S=N!=
return
Parti6uars Remarks
'1 Eeneral .nforation 'ssesssee is required to ention whether the return is
original or *evised return
'2 S,$ /uber Service tax registration nuber of the assesssee is required
to be entioned
'3 /ae &ull /ae of the assesssee to be entioned
'# &inancial Uear &inancial !ear to which the return pertains needs to be
entioned(
'@ *eturn for the period ?eriod for which the return belongs required to be
entioned i(e( 'pril7Septeber or )ctober to :arch( &or
this tie it is Jul! 2012 to Septeber 2012
'A >arge ,ax ?a!ers details .f assesssee is >,U then he has to select and also required
to ention the >,U nae fro drop down list(
'4 ?reises code 'ssesssee needs to ention the preises code of the
business allotted b! the departent( .t is suggested to ta-e
the sae fro the S,72 while filling the return(
'0 $onstitution $onstitution of the assesssee needs to be selected
'" $ategor! of Service 'ssesssee is required to ention the categor! of service
under which he is providing service is required to ention(
'10 'ssesssee liable to pa! service
tax
'10(1 Service ?rovider under Section
A0L1M
'll 'ssessee3s except those who are liable to pa! service
tax under reverse charge and joint charge are required
select this colun
'10(2 Service receiver under Section
A0L2M
,he assesssee who is receiver of service of service and is
liable to pa! service tax is required to select this colun( .t
covers onl! reverse charge .(e( iport of service excluding
the partial reverse charge(
'10(3 Service provider under partial
reverse charge under Section
A0L2M
,he 'ssessee who is liable to pa! service tax under partial
reverse charge basis as a service provider such as
anpower+ securit!+ rent a cab and wor-s contract is
required to select this colun(
'10(# Service receiver under partial
reverse charge under Section
A0L2M
,he 'ssessee who is liable to pa! service tax under partial
reverse charge basis as a service receiver such as
anpower+ securit!+ rent a cab and wor-s contract is
required to select this colun(
'10(@ ?ercentage of service tax for
'10(3 above
,he assessee who is liable to pa! service tax as a service
provider under partial reverse charge basis is required to
ention the percentage of service tax he is required to pa!(
'10(A ?ercentage of service tax for
'10(# above
,he assessee who is liable to pa! service tax as a service
receiver under partial reverse charge basis is required to
ention the percentage of service tax he is required to pa!(
'11 Bxeption details .n this colun the assessee is required to ention whether
he is opted for an! exeption and also /otification
nuber of that exeption(
'12 'bateent .f assessee is claiing an! abateent under /otification
2A52012 dated 20(0A(2012 then he required to select this
2A"
colun and also required to ention the above notification
nuber and corresponding Sl(no( of the notification(
'13 ?rovisional 'ssessent .f assessee opted for provisional assessent for then he is
required to select this colun and also required to ention
the order nuber of the provisional assessent(
2 Vaue !" ta7abe servi6e and
servi6e ta7 5a8abe
=1(1 Eross aount .n this colun the assessee being a service provider is
required ention the gross aount for which bills+
invoice+ challans+ invoices or an! other docuents has
been issued related to service provided or to be provided
including export and exepted service( =ut in the above
aount aounts received in advance and aount taxable
on receipt basis for which bills+ invoice or challans have
not been raised have to be excluded(
=1(2 'dvance received .n this colun the assessee is required to ention the
aount received as advance but for which bills+ invoice or
challans have not been raised(
=1(3 ,axable on receipt basis under
third proviso to *ule AL1M
.n case of .ndividual and ?artnership firs whose
aggregate value of taxable services provided fro one or
ore preises is fift! la-hs rupees or less in the previous
financial !ear the service provider shall have the option to
pa! service tax on receipt basis up to rupees fift! la-hs in
the current financial !ear( .f the assessee coes under the
above categor! then he is required to ention the aount
in this colun(
=1(# =ills5 .nvoice or challans not
been raised
,he aount of service provided for which bills+ invoice or
challans have not been raised is required to ention in this
colun(
=1(@ /on onetar! consideration ,he aount received in non7onetar! consideration for
service provided is required to ention in this colun(
,he value of such service should be equivalent of one!(
=1(A ?artial reverse charge ,he assessee who is liable to pa! service tax under partial
reverse charge is required to ention the aount of
service which is liable in this colun(
=1(4 ,otal of Eross aount ,otal of all the above colun should coe in this colun(
=1(0 Bxport of service 'ount which is considered as export of service as per the
place of provision of service rules and also *ule A' of
service tax rules is required to be entioned in this
colun(
=1(" Bxepted Service ,he services which are exepted fro pa!ent of service
tax b! virtue of /otification no(2@52012 are to be
considered in this colun excluding the export of service
as entioned above(
=1(10 ?ure agent service ,he aount of service which is considered as provided
under pure agent concept as specified in the service tax
Ldeterination of valueM *ules is required to be entioned
in this colun(
=1(11 'bateent aount ,he aount which is claied as abateent as per
/otification /o(2A52012 is required to be entioned in
240
this colun(
=1(12 'n! other Deduction 'part fro above if assessee is claiing an! deduction
li-e adjustent of excess aount and all is to be
entioned in this colun(
=1(13 ,otal of all deductions ,otal of all deduction fro =1(0 to =1(12 is to be
entioned in this colun(
=1(1# /et taxable value 'fter deducting =1(13 fro =1(4 assessee will get the /et
taxable aount(
=1(1@ 'dvolore rate Service tax 'dvolore rate is to be entioned in this
colun i(e(12J(
=1(1A Specific rate 's per the *ule A Service tax *ules in case of certain
categor! of services there is specific rate is applicable if
the sae is applicable for assessee then he is required to
ention that rate(
=1(14 Service tax pa!able ,he aount pa!able as service tax after appl!ing the
'dvolore or specific rate is be entioned here(
=1(10 * 9 D cess .n case of iport of certain software there is lev! of
*esearch and Developent $ess( .f the assessee has been
levied such cess then he can ta-e deduction of such cess
while a-ing pa!ent of service tax on the sae( ,he
sae aount of *9D cess is required to be entioned
here(
=1(1" /et Service tax pa!able 'fter deducting the *9D cess fro the service tax
pa!able net service tax pa!able will coe(
=1(20 Bducation $ess Bducation $ess on the net service tax pa!able at the rate of
2J needs to be entioned here(
=1(21 Secondar! and 8igher
Bducation $ess
Secondar! and 8igher Bducation $ess on the net service
tax pa!able at the rate of 1J needs to be entioned here
=2 Service receiver details ,his colun contains the sae details as entioned in =1
but the onl! difference is it is applicable for service
receiver(
PART C Advan6e 5a8ment !" servi6e
ta7
,his part contains the aount of service tax paid in
advance details( ,he sae needs to be entioned with the
brea-up of service tax+ Bducation and S8B cess with
corresponding challans details(
PART ) Servi6e ta7 5aid detais
D1 $ash .f service tax is paid using cash then the assessee is
required to ention the aount which is paid through cash
in this colun(
D2 $envat $redit .f 'ssessee is a-ing pa!ent b! utiliGing the cenvat
credit then such aount is required to be entioned here(
.n addition to that it is specificall! entioned that this
colun is not applicable for recipient of service therefore
if the assessee is a service receiver then he supposed to
pa! through cash onl!(
D3 'djustent of excess aount 's alread! entioned in the ?'*, $ if an! is paid as an
advance then such aount can be utiliGed for a-ing
pa!ent of service tax without an! liit as per service tax
rules(
D# 'djustent as per *ule AL3M 's per *ule AL3M+ Service ,ax paid on accrual basis but
241
credit note raised subsequentl! can be adjusted against
future pa!ent of Service ,ax( ?a!ent ade through
such adjustents required to be entioned here(
D@ 'djustent as per *ule AL#'M 's per rule AL#'M+ if the assessee pa!s the excess aount
of Service ,ax in the previous onth+ the sae can be
adjusted for the current period( Such adjustents required
to be entioned here(
DA 'djustent as per *ule AL#$M 's per rule AL#$M+ if the assessee pa!s the Service ,ax on
*enting of .ovable propert! without considering the
propert! tax paid+ such excess pa!ent can be adjusted for
future pa!ents( Such adjustents required to be
entioned here(
D4 =oo- adjustents b!
governent departents
.t is applicable onl! for governental departents where
there would be option to pa! Service tax b! boo-
adjustents( BgF for .ndian post dept(
D0 ,otal tax paid .t is su total of D1 to D4(
PART E N Edu6ati!n Cess Paid in Cash and Thr!ugh CENVAT Credit
B 1 .n $ash Details of Bducation ?aid in $ash for the relevant onth
to be provided here
B2 =! $B/%', $redit Lnot
applicable where the service tax
is liable to be paid b! the
recipient of ServiceM
Details of Bducation paid b! utiliGation of $B/%', $redit
to be provided here( &urther+ it sa!s Lnot applicable where
the service tax is liable to be paid b! the recipient of
ServiceM( ,his is because+ the under Joint 9 reverse charge
echanis+ the Service receiver should require to pa!
service tax b! cash onl!( 8ence+ pa!ent b! wa! of
$B/%', $redit is not allowed here
B3 =! adjustent of aount paid
as service tax in advance under
*ule AL1'M of the S, *ules
.f the Bducation $ess requires to be adjusted against the
pa!ent ade in the previous onth+ the sae requires to
be entioned here(
B# =! adjustent of excess aount
paid earlier as service tax and
adjusted+ b! ta-ing credit of
such excess service tax paid+ in
this period under *ule AL3M of
the S, *ules
.f the Service ,ax has paid in earlier period and credit note
has been issued for the sae+ the sae can be adjusted for
the current period( ,his details required to be furnished
here(
B@ =! adjustent of excess aount
paid earlier as service tax and
adjusted in this period under
*ule AL#'M of the S, *ules
.f an! Service ,ax has been paid excess under *ule AL#'M
i(e( pa!ing the tax in cash which is ore than the liabilit!
in the previous period+ the sae can be adjusted in the
current period( Such adjustents required to be furnished
here(
BA =! adjustent of excess aount
paid earlier as service tax in
respect of service of *enting of
.ovable ?ropert!+ on
account of non7availent of
deduction of propert! tax paid
and adjusted in this period
under *ule AL#$M of the S,
*ules
's per *ule AL#$M excess pa!ent against *enting of
.ovable propert! Service b! not considering exeption
available for propert! tax can be adjusted against future
pa!ents( Such adjustents required to be disclosed here(
B4 =! boo- adjustent in the case ,his is applicable onl! for specified governent
242
of specified Eovernent
departents
departents for which the! can pa! the liabilit! through
boo- adjustents
B0 ,otal Bducation $ess paid .t is the suar! fro B1 to B4
PART F N Se6!ndar8 0 Higher Edu6ati!n Cess Paid in Cash and Thr!ugh CENVAT Credit
&1 .n $ash Details of S8B $ess ?aid in $ash for the relevant onth
to be provided here
&2 =! $B/%', $redit Lnot
applicable where the service tax
is liable to be paid b! the
recipient of ServiceM
Details of S8B $ess paid b! utiliGation of $B/%', $redit
to be provided here( &urther+ it sa!s Lnot applicable where
the service tax is liable to be paid b! the recipient of
ServiceM( ,his is because+ the under Joint 9 reverse charge
echanis+ the Service receiver should require to pa!
service tax b! cash onl!( 8ence+ pa!ent b! wa! of
$B/%', $redit is not allowed here
&3 =! adjustent of aount paid
as service tax in advance under
*ule AL1'M of the S, *ules
.f the S8B $ess requires to be adjusted against the
pa!ent ade in the previous onth+ the sae requires to
be entioned here(
&# =! adjustent of excess aount
paid earlier as service tax and
adjusted+ b! ta-ing credit of
such excess service tax paid+ in
this period under *ule AL3M of
the S, *ules
.f the Service ,ax has paid in earlier period and credit note
has been issued for the sae+ the sae can be adjusted for
the current period( ,his details required to be furnished
here(
&@ =! adjustent of excess aount
paid earlier as service tax and
adjusted in this period under
*ule AL#'M of the S, *ules
.f an! Service ,ax has been paid excess under *ule AL#'M
i(e( pa!ing the tax in cash which is ore than the liabilit!
in the previous period+ the sae can be adjusted in the
current period( Such adjustents required to be furnished
here(
&A =! adjustent of excess aount
paid earlier as service tax in
respect of service of *enting of
.ovable ?ropert!+ on
account of non7availent of
deduction of propert! tax paid
and adjusted in this period
under *ule AL#$M of the S,
*ules
's per *ule AL#$M excess pa!ent against *enting of
.ovable propert! Service b! not considering exeption
available for propert! tax can be adjusted against future
pa!ents( Such adjustents required to be disclosed here(
&4 =! boo- adjustent in the case
of specified Eovernent
departents
,his is applicable onl! for specified governent
departents for which the! can pa! the liabilit! through
boo- adjustents
&0 ,otal Secondar! 9 8igher
Bducation $ess paid
.t is the suar! fro B1 to B4
Part *' Arrears, $nterest, Penat8, An8 #ther Am!unt et6 5aid
E1 'rrears of revenue L,ax
aountM paid in cash
,he details of Service ,ax paid in cash in the current
period for the previous periods required to be disclosed
here
E2 'rrears of revenue L,ax
aountM paid b! utilising
$B/%', credit
,he details of Service ,ax paid b! wa! of $B/%', $redit
in the current period for the previous periods required to
be show here
243
E3 'rrears of Bducation $ess paid
in cash
,he details of Bducation $ess paid in cash in the current
period for the previous periods required to be disclosed
here
E# 'rrears of Bducation $ess paid
b! utilising $B/%', credit
,he details of Bducation $ess paid b! wa! of $B/%',
$redit in the current period for the previous periods
required to be show here
E@ 'rrears of Secondar! 9 8igher
Bducation $ess paid in cash
,he details of S8B $ess paid in cash in the current period
for the previous periods required to be disclosed here
EA 'rrears of Secondar! 9 8igher
Bducation $ess paid b! utilising
$B/%', credit
,he details of S8B $ess paid b! wa! of $B/%', $redit
in the current period for the previous periods required to
be show here
E4 'ount paid in ters of section
43' of &inance 'ct+ 1""#
?a!ent Service ,ax which collected excess than required
to be disclosed here
E0 .nterest paid Lin cash onl!M .nterest paid in cash to be disclosed here
E" ?enalt! paid Lin cash onl!M ?enalt! paid in cash to be disclosed here
E10 'ount of >ate fee paid+ if an!( ?enalt! paid for dela! in filing of return to be disclosed
here
E11 'n! other aount paid Lplease
specif!M
'n! other aount other than this requires to be disclosed
here
E12 ,otal pa!ent of arrears+
interest+ penalt! and an! other
aount+ etc( ade
E12VLE1QE2QE3QE#QE@QEA
QE4QE0QE"QE10QE11M
.t is suar! of E1 to E11
Part H
81 DB,'.>S )& $8'>>'/ .n this details of challan li-e $hallan nuber+ challan date+
and challan aount pertaining to the respective onth to
be disclosed in that onth( $hallan nubers will first
=an- =S* code+ then date of pa!ent in Date5::5Uear
for and sl(no(
82 Source docuents
details for pa!ents ade in
advance 5 adjustent+
.n this filed the details of source docuent nuber
required to be disclosed for a-ing adjustents+ advance
pa!ents+ pa!ent of arrears etc( Source docuent
nuber is previous S, 3 return ac-nowledgeent
nuber
Part $ N )etais !" CENVAT Credit
.1(1 ;hether providing an!
exepted service or non7taxable
service LKU35K/3M
Select Ues5/o( Ues if providing an! exepted service or
non taxable service
.1(2 ;hether anufacturing an!
exepted excisable goods
LKU35K/3M
Select Ues5/o( Ues if anufacturing exepted goods(
.1(3 .f repl! to an! one of the above
is KU3+ whether aintaining
separate account for receipt or
consuption of input service
and input goods 1refer to *ule A
L2M of $B/%', $redit *ules+
Select Ues if separate accounts is being aintained
24#
200#2LKU35K/3M
.1(# .f repl! to an! one of the
coluns .1(19.1(2 above is KU3
and .1(3 is K/3+ which option+
fro the below entioned
options+ is being availed under
*ule AL3M of the $B/%',
$redit *ules+ 200#
)ption under *ule AL3M of the $envat $redit *ules+ 200#
should be selected here
.1(#(1 ;hether pa!ing an aount
equal to AJ of the value of the
exepted goods and exepted
services 1refer to *ule AL3MLiM of
$B/%', $redit *ules+ 200#2
LKU35K/3MI or
$lic- Ues if opted for this schee
.1(#(2 ;hether pa!ing an aount
equivalent to $B/%', $redit
attributable to inputs and input
services used in or in relation to
anufacture of exepted goods
or provision of exepted
services 1refer to *ule AL3MLiiM
of $B/%', $redit *ules+ 200#2
LKU35K/3MIor
$lic- Ues if opted for this schee
.1(#(3 ;hether aintaining separate
account for receipt or
consuption of input goods+
ta-ing $B/%', credit onl! on
inputs Lused in or in relation to
the anufacture of dutiable
final products excluding
exepted goods and for the
provision of output services
excluding exepted servicesM
and pa!ing an aount
equivalent to $B/%', $redit
attributable to input services
used in or in relation to
anufacture of exepted goods
or provision of exepted
services 1refer to *ule AL3MLiiiM
of $B/%', $redit *ules+ 200#2
LKU35K/3M
$lic- Ues if opted for this schee
$-= Am!unt 5a8abe under rue ;>C? !" the CENVAT Credit Rues, -..D=
.2(1 %alue of exepted goods
cleared
:ention value of exepted goods
.2(2 %alue of exepted services
provided
:ention value of Bxeption Service
.2(3 'ount paid under *ule AL3M of
$B/%', $redit *ules+ 200#+
:ention aount paid under rule AL3M b! $B/%', $redit
24@
b! debiting $B/%', $redit
account
.2(# 'ount paid under *ule AL3M of
$B/%', $redit *ules+ 200#+
b! cash
:ention aount paid under rule AL3M b! cash
.2(@ ,otal aount paid under *ule
AL3M of $B/%', $redit *ules+
200#
.2(@ V .2(3 Q .2(#
:ention total aount paid under *ule AL3M of $B/%',
$redit *ules+ 200#
$C=/ )ETA$LS #F CENVAT CRE)$T #F SERV$CE TA& AN) CENTRAL E&C$SE )+T(
TAKEN AN) +T$L$SAT$#N THERE#F N
.3(1(1 )pening =alance )pening balance of $B/%', credit to be entioned here
.3(1(2 $redit ta-en
.3(1(2(1 on inputs $envat $redit availed on .nputs required to be entioned
here
.3(1(2(2 )n $apital goods $envat credit availed on $apital goods required to be
entioned here
.3(1(2(3 )n .nput Services received
directl!
$envat credit availed on .nput services required to be
entioned here
.3(1(2(# 's received fro .nput Service
distributor
$envat $redit received as a distribution fro .nput Service
distributor require to be entioned here
.3(1(2(@ &ro inter unit transfer b! a
>,U
$envat credit received fro >,U unit Lonl! applicable for
>,UM to be shown here
.3(1(2(A 'n! other credit ta-en Lplease
specif!M
$redit ta-en in an! other wa! required to be ta-en
Lillustration for this aM departent allows to ta-e credit in
the current onth which is issed out in the previous
onth b! letter( bM availent of excess reversal of credit
under *ule A of $$*+ 200#
.3(1(2(4 ,otal $redit ,a-en Su of $redit ta-en
.3(1(3 $redit utiliGed
.3(1(3(1 &or pa!ent of Service ,ax $redit utiliGed for pa!ent of Service ,ax required to be
entioned here
.3(1(3(2 &or pa!ent of education $ess
on a taxable service
$redit utiliGed for pa!ent of Bducation cess on service
tax required to be entioned here
.3(1(3(3 for pa!ent of Secondar! and
8igher Bducation $ess on
taxable services
$redit utiliGed for pa!ent of S8B $ess of Service ,ax
required to be entioned here
.3(1(3(# for pa!ent of excise dut! or
an! other dut!
$redit utiliGed for pa!ent of Bxcise dut! required to be
entioned here
.3(1(3(@ towards clearance of input
goods and capital goods
reoved as such or after use
$redit utiliGed for pa!ent of $envat reversal as such as
per rule 3 of $envat $redit *ules+ required to be
entioned here
.3(1(3(A towards inter unit transfer to
>,U
$envat $redit transferred to inter unit transfer to be
entioned Lapplicable onl! for >,U unitM
.3(1(3(4 for pa!ent of an aount under
rule AL3M of $B/%', $redit
$envat $redit utiliGed for pa!ent ade under rule AL3M
of $B/%', $redit *ules to be entioned here(
24A
*ules+ 200#
.3(1(3(0 for an! other
pa!ents5adjustents5reversal
L?lease specif!M
?a!ent ade for an! other reasons apart fro above
required to be entioned( BgF $envat reversed for wrong
availent of $envat $redit etc
.3(1(3(" ,),'> $*BD., U,.>.SBD
.3(1(3("VL.3(1(3(1Q.3(1(3(2Q.3(1
(3(3Q.3(1(3(#Q
.3(1(3(@Q.3(1(3(AQ.3(1(3(4Q.3(1(
3(0M
,otal $envat $redit utiliGed
.3(1(# $losing =alance of $B/%',
credit
.3(1(# V `L.3(1(1 Q .3(1(2(4M
.3(1(3("a
$losing balance to be entioned here
$C=- )ETA$LS #F CENVAT CRE)$T #F E)+CAT$#N CESS TAKEN 0 +T$L$SAT$#N
THERE#F N
.3(2(1 )pening =alance of Bducation
$ess
$losing balance of previous return to be entioned here
.3(2(2 $redit of Bducation $ess ta-en
.3(2(2(1 on inputs B( $ess credit availed on inputs for the current onth
required to be entioned here
.3(2(2(2 on capital goods B( $ess credit availed on $apital goods for the current
onth required to be entioned here
.3(2(2(3 on input services received
directl!
B( $ess credit availed on input services for the current
onth required to be entioned here
.3(2(2(# as received fro .nput Service
Distributor
B($ess credit received fro .nput Service Distributor
required to be entioned here
.3(2(2(@ fro inter unit transfer b! a
>,U
B($ess credit availed fro .nter transfer unit required to be
entioned here L.t is applicable onl! for >,U UnitsM
.3(2(2(A 'n! other credit ta-en Lplease
specif!M
'n! other credit availed required to be entioned here
.3(2(2(4 ,otal credit of Bducation $ess
ta-en .3(2(2(4V
L.3(2(2(1Q.3(2(2(2Q.3(2(2(3Q.3(2
(2(#Q .3(2(2(@Q.3(2(2(AM
,otal of the above
.3(2(3 $redit of Bducation $ess
utilised
.3(2(3(1 for pa!ent of Bducation $ess
on goods 9 services
$redit used for pa!ent of Bducation $ess on goods and
services required to be entioned here
.3(2(3(2 towards pa!ent of Bducation
$ess on clearance of input
$redit used for pa!ent of Bducation $ess on clearance of
.nput goods and capital goods reoved as such should be
244
goods and capital goods
reoved as such or after use
entioned here
.3(2(3(3 towards inter unit transfer to
>,U
$redit transferred to inter unit to be entioned hereL this is
applicable onl! for >,U unitsM
.3(2(3(# for an! other
pa!ents5adjustents5 reversal
Lplease specif!M
$redit reversed for an! other reasons required to be
entioned here
.3(2(3(@ ,otal credit of Bducation $ess
utilised
.3(2(3(@V
L.3(2(3(1Q.3(2(3(2Q.3(2(3(3Q.3(2
(3(#M
,otal reversal 5 pa!ent of Bducation $ess
.3(2(# $losing =alance of Bducation
$ess .3(2(#V`L.3(2(1Q.3(2(2(4M7
.3(2(3(@a
$losing balance of Bducation $ess
$C=C )ETA$LS #F CENVAT CRE)$T #F SEC#N)AR( AN) H$*HER E)+CAT$#N CESS
TAKEN 0 +T$L$SAT$#N THERE#F N
.3(3(1 )pening =alance of S8B$ $losing balance of previous return to be entioned here
.3(3(2 $redit of S8B$ ta-en
.3(3(2(1 on inputs She $ess credit availed on inputs for the current onth
required to be entioned here
.3(3(2(2 on capital goods She $ess credit availed on $apital goods for the current
onth required to be entioned here
.3(3(2(3 on input services received
directl!
She $ess credit availed on input services for the current
onth required to be entioned here
.3(3(2(# as received fro .nput Service
Distributor
She $ess credit received fro .nput Service Distributor
required to be entioned here
.3(3(2(@ fro inter unit transfer b! a
>,U
She $ess credit availed fro .nter transfer unit required to
be entioned here L.t is applicable onl! for >,U UnitsM
.3(3(2(A 'n! other credit ta-en Lplease
specif!M
'n! other credit availed required to be entioned here
.3(3(2(4 ,otal credit of S8B$ ta-en
.3(3(2(4V
L.3(3(2(1Q.3(3(2(2Q.3(3(2(3Q.3(3
(2(#Q.3(3(2(@Q.3(3(2(AM
,otal of the above
.3(3(3 $redit of S8B$ utilised
.3(3(3(1 for pa!ent of S8B$ on goods
9 services
$redit used for pa!ent of S8e $ess on goods and
services required to be entioned here
.3(3(3(2 towards pa!ent of S8B$ on
clearance of input goods and
capital goods reoved as such
or after use
$redit used for pa!ent of She cess on clearance of .nput
goods and capital goods reoved as such should be
entioned here
.3(3(3(3 towards inter unit transfer to
>,U
$redit transferred to inter unit to be entioned hereL this is
applicable onl! for >,U unitsM
.3(3(3(# for an! other
pa!ents5adjustents5reversal
Lplease specif!M
$redit reversed for an! other reasons required to be
entioned here
.3(3(3(@ ,otal credit of S8B$ utilised
.3(3(3(@V
,otal reversal 5 pa!ent of She $ess
240
L.3(3(3(1Q.3(3(3(2Q.3(3(3(3Q.3(3
(3(#M
.3(3(# $losing =alance of S8B$
.3(3(# V `L.3(3(1Q.3(3(2(4M7
.3(3(3(@a
$losing balance of She $ess
Part 1' CRE)$T )ETA$LS F#R $NP+T SERV$CE )$STR$2+T#R
>T# 2E F$LLE) #NL( 2( AN $NP+T SERV$CE )$STR$2+T#R?9
J1 DB,'.>S )& $B/%', $*BD., )& SB*%.$B ,'P 9 $B/,*'> BP$.SB DU,U ,'6B/ '/D
D.S,*.=U,.)/ ,8B*B)&
J1(1 )pening =alance of $B/%',
credit
)pening balance of $B/%', $redit required to be
entioned here
J1(2 $redit ta-en Lfor distributionM
on input services
$envat $redit availed on .nput Services for distribution to
be entioned here
J1(3 $redit distributed ,otal aount of credit distributed for the onth to be
entioned here
J1(# $redit not eligible for
distribution in ters of rule 4LbM
of $B/%', $redit *ules+ 200#
$redit not eligible as per rule 4LbM of $envat $redit *ules+
200# requires to be entioned here
J1(@ $losing =alance of $B/%',
credit J1(@ V `LJ1(1QJ1(2M
LJ1(3QJ1(#Ma
$losing balance of $envat $redit requires to be entioned
here
1- )ETA$LS #F CENVAT CRE)$T #F E)+CAT$#N CESS TAKEN AN) )$STR$2+T$#N
THERE#F
J2(1 )pening balance of $B/%',
credit of Bducation $ess
)pening balance of $B/%', $redit of Bducation $ess
required to be entioned here
J2(2 $redit of Bducation $ess ta-en
Lfor distributionM on input
services
$envat $redit of Bducation $ess availed on .nput Services
for distribution to be entioned here
J2(3 $redit of Bducation $ess
distributed
,otal aount of credit distributed for the onth to be
entioned here
J2(# $redit of Bducation $ess not
eligible for distribution in ters
of rule 4LbM of $B/%', $redit
*ules+ 200#
$redit not eligible as per rule 4LbM of $envat $redit *ules+
200# requires to be entioned here
J2(@ $losing =alance of $B/%',
credit of B$ V
J2(@V`LJ2(1QJ2(2M
LJ2(3QJ2(#Ma
$losing balance of $envat $redit of Bducation $ess
requires to be entioned here
1C )ETA$LS #F CENVAT CRE)$T #F SEC#N)AR( AN) H$*HER E)+CAT$#N CESS
TAKEN AN) )$STR$2+T$#N THERE#F N
J3(1 )pening balance of $B/%',
credit of S8B$
)pening balance of $B/%', $redit of S8B $ess required
to be entioned here
J3(2 $redit of S8B$ ta-en Lfor
distributionM on input services
$envat $redit of S8B $ess availed on .nput Services for
distribution to be entioned here
J3(3 $redit of S8B$ distributed ,otal aount of credit distributed for the onth to be
entioned here
24"
J3(# $redit of S8B$ not eligible for
distribution in ters of rule 4LbM
of $B/%', $redit *ules+ 200#
$redit not eligible as per rule 4LbM of $envat $redit *ules+
200# requires to be entioned here
J3(@ $losing =alance of $B/%',
credit of S8B$ V J3(@
V`LJ3(1QJ3(2M LJ3(3QJ3(#Ma
$losing balance of $envat $redit of S8B $ess requires to
be entioned here
J3(1 )pening balance of $B/%',
credit of S8B$
?art >7 Self 'ssessent :eorandu .n this assessee requires to declare the self assessent
procedure followed+ above particulars are in with the records and boo-s aintained+ $envat credit has
been availed properl!+ interest deposited for the dela! pa!ent ade+ authoriGed person on behalf of the
copan! for subitting the return( ,his declaration to be subitted b! clic-ing the spaced provided for
this( &urther+ nae of the signator!+ date and place should be provided
?art >7 Service ,ax *eturn preparer .f the assesssee has ta-en the help of Service ,ax return preparer+
the details of this requires to be subitted here(
200