~ tt,<ChI,<GOVERNMENT OF INDIA

f<tcrr +1?1I<'1l1 MINISTRY OF FINANCE'<1\J1't<t ~ DEPARTMENT OF REVENUE

c6 ')\"Ill \1CCII eo ~ ~ "WIT "ijR ~ q)f Cf) 11If<'111~.1. fcl~lIJOtt m. ct>~l"1~C, ~'()~iNIQj~ - 620 001.

OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE & SERVICE TAXNO.1 WILLIAMS ROAD, CANTONMENT, TIRUCHCHIRAPPALLI· 620 001.

Trade Notice No: 03/2011-S. Tax Date:12.05.2011

Sub: Service Tax - Communication of(i) Board's letter F.No.341/34/2010-TRU

dated 31.03.2011(ii) Circular NO.134/3/2011-ST dated 08.04.2011,(iii) DGST's letter F,No,V/DGSTIII-BE-09/2011/2260

dated 12.04.2011(iv) Circular NO.137/6/2011-ST dated 20.04.2011(v) Circular NO.136/5/2011- TRU dated 20.04.2011(vi) Circular NO.138/07/2011-ST dated .05.2011(vii) Circular NO.139/8/2011- TRU dated 10.5.2011(viii) TRU's D.O.F No.334/3/2011-TRU dated

25.04.2011-Req***

The above said Circulars and letters are enclosed herewith for information andnecessary action.

The contents of this Trade Notice may be brought to the knowledge of all theconstituent members of the Trade Associations and Chamber of Commerce.

(Issued from file C,No.IV/16/943/2011-STC)

Encl:As above, (P.DEVARAJ)JOINT COMMISSIONER

ToThe Mailing list 1/11/111

F.No.341/34/2010- TRUGovernment of IndiaMinistry of Finance

Department of Revenue(Tax Research Unit)

"--'t

. ****** ...:.;'~\ "_

New Delhi dated the 31stMarch, 2011.

To

AllChief Commissioners/Directors GeneralAllCommissioners of Service TaxAll Commissioners of Central ExciseAll Commissioners of Central Excise & Customs

Madam/Sir,

Subject: Amendments in Point of Taxation Rules. 2011 and other relatedprovisions

As you are aware, the Point of Taxation Rules (PTR) were formulated videNotification NO.18/2011-ST dated 01.03.2011. Based on the feedback, certainamendments are being carried out in these rules vide Notification No. 2S/2011-STdated 31.03.2011. The highlights of the changes are discussed in the followingparagraphs.

2. While the rules shall come into force from 01.04.2011, an option has beengiven in rule 9 to pay tax on payment basis, as at present, till 30.06.2011.

3. Rule 3 has been amended to provide that the point of taxation shall be asfollows:

(a) Date of invoice or payment, whichever is earlier, if the invoice isissued within the prescribed period of 14 days from the date ofcompletion of the provision of service.

(b) Date of completion of the provision of service or payment, if the -invoice is not issued within the prescribed period as above.

.\~The applicability of the. rule will be clear from the illustrations in the followingtable:

s. Date of Date of Date on Point of Remarks- ,

No. completion InVOlCe which pay- Taxation ~of service ment reed,

Invoice issued in 14 days1. April10, 2011 April 20, 2011 April30, 2011 April20, 2011 and before receipt of

_Q_i:!Y!!!_ent. Invoice not issued within2. April10, 2011 April 26, 2011 April30, 2011 April10, 2011 14 days and payment

received after completionof service

3· April10, 2011 April 20, 2011 AprilIS, 2011 April IS, 2011 Invoice issued in 14 daysbut payment receivedbefore invoice

April g, 2011 April g, 2011 Invoice not issued in 144· April10, 2011 April26, 2011 (part) and and days.Part paymentbefore

April25, 2011 April10, 2011 completion, remaining(remaining) for respective later

amounts

4. Rule 4 has been amended to clarify that change in the effective rate of tax shall alscinclude change in that portion of value on which tax is payable in terms of an exemptiornotification or rules made in this regard. It may be noted that an exemption has beergranted in value for various services vide Notification No. Ij2006-ST dated 01.03.2ootwhich has the effect of payment of tax only on a part of the value. Similarly either thevalues or the rates at which tax is payable are provided under rule 6(7, 7A, 7B or 7C) of theService Tax Rules, 1994 as well as the Works·Contract (Composition Scheme for Paymeniof Service Tax) Rules, 2007. Thus, whenever these values or the composition rates anchanged, it would have the same effect as the change in the rate of duty. It is herebjfurther clarified that the rate of tax shall also include any other notification which i~issued, rescinded or amended and has the effect of altering the taxability of any service.

5. Rule 6 relating to continuous supply of service has been aligned with the reviserrule 3 and the date of completion of continuous service has been defined within the ruleThis date shall be the date of completion of the specified event stated in.the contract whiclobligates payment in part or whole for the contract. For example, in the case oconstruction services if the payments are linked to stage-by-stage completion 0construction, the provision of service shall be deemed to be completed in part when eacl

. such stage of construction is completed. Moreover.jt has been provided that this rule wilhave primacy over rules 3, 4 and 8. .

6. Moreover, the following services have been notified as "continuous supply 0services" in terms of clause 2(C) of the rules vide notification No. 28/ST-2011 dater01.04.2011:

(a)(b)(c)(d)(e)

Telecommunication service [6S(10S)(zzzx)]Commercial or industrial construction [6S(lOS)(zzq)]Construction of residential complex [6S(10S)(zzzh)]Internet Telecommunication Service [6S(lOS)(zzzu)]Works contract service [6S(los)(zzzza)]

..

Thus these services will constitute "continuous supply of services" irrespective of theperiod for which they are provided or agreed to be provided. Other services will beconsidered continuous supply only if they are provided or agreed to be providedcontinuously for a period exceeding three months.

7. Rule 7 relating to associated enterprises has been deleted. Now that the date otcompletion of the provision of service is. an important criterion in the determination otpoint of taxation,' it shall take care of most of the dealings between the associatedenterprises. Thus in case of failure to issue the invoice within the prescribed period, thedate of completion of provision of service shall come into effect even if payment is notmade.

8. Rule 7 has thus been replaced' by a new provision whereby the point ot taxationshall bethe date of making or receiving the payment, as the case may be. This provisionshall apply to the following:

(i) Export of services: ,(ii) Persons, where the obligation to pay tax is.on the service recipient in terms of

rule 2(1)(d) of the Service Tax Rules, 1994 in respect of services notified undersection 68(2) of the Finance Act, 1994.

(iii) Individuals, proprietorships and partnership firms providing specified services(Chartered Accountant, Cost Accountant, Company Secretary, Architect,Interior Decorator, Legal, Scientific and Technical consultancy services). Thebenefit shall not be available in case of any other service also supplied by theperson concerned alongwith the specified services.

9. Export of services is exempt subject, inter alia, to the condition that the paymentshould be received in convertible foreign exchange. Until the payment is received, theprovision of service, even if all other conditions are met, would not constitute export. Inorder to remove the hardship that will be caused due to accrual method, the point oftaxation has been changed to the date of payment. However, if the payment is notreceived within the period prescribed by RBI, the point of taxation shan be determined inthe absence of this rule. .

10. In the case of services where the.recipient is obligated to pay service tax under rule2 (1)(d) of Service Tax Rules i.e. on reverse charge basis, the point of taxation shall be thedateof making the payment. However, if the payment is not made within six months ofthe date of invoice, the point of taxation shall be determined as if this rule does not exist.Moreover, in the case of associated enterprises, when the service provider is outside India,the point of taxation will be the earlier of the date of credit in the books of aCcount of theservice receiver or the date of making the payment.

11. Changes have, also been made in the Service Tax Rules, 1994 vide notification No.26/2011-ST dated 31.03.2011 and have a close relationship with the.4J>ointof TaxationRules as follows:

I (i)

\'I:.~

The obligation to issue invoice shall be within 14 days of completion 01service and not provision of service.

(ii) If the amount of invoice is renegotiated due to deficient provision \~in anyother way changed in terms of conditions of the contract (e.g. contingent onthe happening or non-happening of a future event), the tax will be payableon the revised amount provided the excess amount is either refunded or <J

suitable credit note is issued to the service receiver. However, concession isnot available for bad debts .

.,

12. The credit of input services under rule 4 (7) of the Cenvat Credit Rules has alsc.been liberalized vide notification No. 13/2011-CE (Nf) dated 31.03.2011 and the sameshall be available on receipt of invoice (except in cases of reverse charge) as long as thepayment is made within three months. Even specified persons required to pay tax on caslbasis will be able to avail credit oil receipt of invoice. Suitable changes have also beermade for reversal of credit or payment when the value of service is renegotiated or alterecfor any reason by refund or issue of a credit note by the service provider. Amendment hasalso been made .in Rule 9 of Cenvat Credit Rules, 2004 by allowing, credit orsupplementary invoice, except in non-bonafide cases, which may become necessary ircertain situations e.g. where the point of tax is the date of payment while the invoice hac, already been issued e.g. rule 4(b )(i) of Point of Taxation Rules.

... 13. .It is further clarified that the transitional provisions will apply to all invoices issuer'before 31.03.2011 in so far as taxpayers who switch over to the new rules on 01.04.2011Those assessees who like to shift to the new rules on 01.07.2Q11 would have similaprotection in respect of invoices issued before the date they switch over to the new rulesThe benefit has also been extended to services when provision has been completed befon01.04.2011 or 01.07.2011, as the case may be. It is also clarified that the payments receiverbefore the new rules come into force do not require any transitional provisions as they analready required to pay tax on payment basis.

14. It is hoped that with these' changes and clarifications all representations on thsubject have been dealt with. It is requested that all officers may' be advised to explain an.clarify the new provisions to taxpayers and assist them in .every possible manner iJtransition to revised rules. Any difficulty experienced in this regard may be brought to thnotice of undersigned as soon as possible.

Yours faithfullj

~r4-~(V.K. Gar!

Joint Secretary (TRU-I:Tel: 23093027j'!Fax: 2309303

Email:' garg.vk@nic.i

Circular No. 134/3/ 2011 - ST

F.No.354/42/2011-TRUGovernment of IndiaMinistry of Finance

DepanrrnentofRevenueCentral Board of Excise& Customs

Tax Research UnitNorth Block, New Delhi

8 th April, 2011To

Chief Commissioners of Central Excise and Service Tax (All),Director General (Service Tax),Director General (Central Excise Intelligence),Director General (Audit),Commissioners of Service Tax (All),Commissioners of Central Excise and Service Tax (All).

.Madam/Sir,~ ,0,1 Subject: - Education Cess and Secondary and Higher Education Cess .;;~\~\ .

-reg.

Representations have been received from the field formations, seekingclarification regarding the applicability of service tax exemption to Education Cess(refers to both Education Cess leviable under Finance (No.2) Act, 2004 and Secondaryand Higher Education Cess leviable under Finance Act, 2007), under notificationswhere 'whole of service tax' stands.exempted. Apparently the doubt arises in the contextof Tribunal's Order in the matter of MIs. Balasore Alloys Ltd. Vs CCE, Customs andService Tax, BBSR~I(2010-TIOL-16S9-CESTAT-KOL).

2. The issue has been examined. Though Tribunal's Order referred above is in favorof revenue, it is inconsistent with the policy intention of the Government to exempteducation cess in addition to service tax, where 'whole of service tax' stands exempted.According to section 95(1) of Finance (No.2) Act, 2004 and section 140(1) of FinanceAct, 2007, Education Cess and Secondary and Higher Education Cess are leviable andcollected as service tax, and when whole of service tax is exempt, the same applies toeducation cess as well. Since Education Cess is levied and collected as percentage of

Page 1 of2

service tax, when and wherever service tax is NIL by virtue of exemption, Educ uonCess would also be NIL.

3. This being the principle, field formations are directed not to initiate proceedingsto recover the education cess, where 'whole of service tax' stands exempted under thenotification. Extending the same principle, where education cess has been refunded toexporters along with service tax, by virtue of exemption notifications where 'whole ofservice tax' is exempt, the same need not be recovered.

4. Field formations may be instructed accordingly.

5. Please acknowledge the receipt of this circular: Hindi version to follow.

'jJ0t(J.M. Kennedy)Director, TRU

Tel: 011-23092634

Page2 of2

.. '......

'.' e~ICf)( 'i~I~~~II(1Iq":,,;9W;JfRJlJ fq<f40:)~, ~ ~, tffiir, (ffI(flGWI, ~ 400 012

'.~ .... -r . ... , /"

~<~ "::'~I:~-:;:~II~~;;~~~~b~!N~~;~~.~~~~~.EM::'i400012a 2410 2584 / 86 / 89, e-mail: dgst@sify.com -2417 8515, 2410 2587 /

F. No. V/DGSTJII-BE-09/2011 2-'l~r1{ Mumbai, the 12thApril, 2010

~ To,I \_;ffle Chief Commissioner of C. Ex (All Zones)~ The Commissioner servic.e Tax (All)~t41?o'J The Commissioner LTU (All)

'..'. .~.

Sirl Madam,

Sub: -Clarification on applicability of service Tax on overseas Trade Fairs 1Exhibition under 'Business Exhibition Services'- reg.

********

Please find enclosed herewith, a copy of the TRU's letter F. No. 354/11/2011-TRU dated 22.03.2011 on the above subject.

The same is forwarded for information please.

Yours faithfully,

~(SIt1ITA DOLAS) ~

JOINT DIRECTORfncl:-As above.I

........ (

F No. 354/11/2011-TRUGovernment of IndiaMinistry of Finance

Department of RevenueTax Research Unit

******** .RoomNo.- 146 G, North Block,NewDelhi, the 22nd March, 2011 ",~,El( ~j bl

, '.,J__'()j,I\.IJ'''_''' .

\1l.J..~~'c_).. • .

~ D·~ ..~. c, r ~,p~J.k,s,.. . ~

./Subject: Clarification on applicability of Service Tax on overseas Trade Jl)\

Fairs I Exhibition under 'Business Exhibition Services' - reg .

Director General,Confederation of Indian Industry,The Mantosh Sondhi Centre,23, Institutional Area, Lodhi Road,NewDelhi - 110 003

Sir,

. I) Please refer to your letter dated 18.11.2010 addressed to the Revenue~. .Secretary, Ministry of Finance, North Block, NewDelhi on the above subject.

;2. The matter has been examined. As per your letter; organizing a~business exhibition involves three activities viz (a) hiring of premises outsideIndia, (b) arranging/ coordinating installation of stalls and (c) renting ofst.alls to Indian Exhibitors. The first two activities are the services received•by ClI from outside India and third activity is service provided by cn withinIndia.

~~3. The first two activities are services performed entirely outside India>1 and thus will not qualify for taxation as per Taxation of Services (Provided. from Outside India & Received in India) Rules, 2006, being Category I andCategory II services respectively.

4. The third activity is service provided by CII to Indian Exhibitors toparticipate in exhibition held abroad and does not qualify as export as theconsideration is not received by ell in convertible foreign currency asprovided under Rule 3(2)(b)of the Export of Services Rules, 2005.

·5. As the notification no. 5/2011-ST dated 01.03.2011 exempting.Business Exhibition Service when provided by an organiser of husiness·exhibition for holding a business exhibition outside India has been issued,

Q the scope of this clarification will be limited till 28.02.2011.8 1 '

~,

\'.,~py to DG, DGST,Mumbai for circulation

(Dr. .b .In)O.S.D (TRU)

Tel: 011-23094819'f

Circular No. 137/6/2011- ST

F.No.332/11/2010- TRUGovernment of IndiaMinistry of Finance

Department of RevenueCentral Board of Excise & Customs .

Tax Research Unit

To

North Block, New Delhi20 th April, 2011

Madam/Sir,

Subject: -Assistance provided for processing visa applications :- reg.

An issue has been brought before the Board, seeking a clarification as to whether

service tax liability would arise on the assistance provided by visa facilitators, to

individuals directly, for processing of visa applications.

2. The same has been examined. Assistance provided by a visa facilitator, for

obtaining visa, to a visa applicant or for foreign employer does not fall within the scope

of supply of manpower service. Visa facilitators, while providing visa assistance directly

to individuals does not act on behalf of the embassies, as agents of the principal and

hence service tax is not leviable within the meaning of business auxiliary service. Also

where the assistance is rendered to an individual directly, by a visa facilitator, and the

visa applicant pays the service charge on his own (meaning such service charge is not

borne by any business entity), the same cannot be considered as support service for

business or commerce.

3. Visa facilitators, merely facilitate the procurement of visa and directly assist,

individuals who intend to travel abroad, to complete the immigration formalities. Visa

facilitators collect certain statutory charges like visa fee, certification fee, attestation fee,

Page 1 of 2

emigration fee, etc. from the visa applicant, which are remitted to the respecti ..·"\

authorities, and in addition collect service charges for themselves as remuneration for

the assistance provided by them to obtain the visa. Such a service provided by a visa

facilitator, in the form of assistance to individuals directly, to obtain a visa, does not fallunder any of the taxable services under section 65(105) of the Finance Act, 1994. Henceservice tax is not attracted.

4. However, service tax is leviable on any service provided other than assistancedirectly to individuals for obtaining visa, falling under the description of any taxableservice, as classifiable under the. appropriate heading. To cite a few instances, where inaddition to rendering assistance directly to individuals for obtaining visa, visafacilitators may also act as agents of recruitment or of foreign employer, in which case,service tax is leviable to the extent.under the service of 'supply of manpower'. In certain. ', :

other cases, for example, a visa facilitator, may be rendering visa assistance toindividuals who are employed in a business entity, but the service charge may be paid bythe business entity on behalf of those individuals, to the visa facilitator, in which case,

service tax is leviable under 'business support service'.

5. Trade Notice/Public Notice may be issued to the field formations accordingly.

6. Please acknowledge the receipt of this circular. Hindi version to follow.

jM~ ;---(J. M. Kennedy)Director, TRU

Tel: 011-23092634

Page20f2

G

Ministry of FinanceDepartment of Revenue

Central Board of Excise & CustomTax Research Unit

Chief Commissioners of Central Excise and Customs (All),Director General (Service Tax),Director General (Central Excise Intelligence),Director General (Audit), .Commissioners of Service Tax (All)Commissioners of Central Excise (All)Commiseioners of Central Excise and Customs (All).

To

Madam/Sir,

Subject: Accounting Codes for the taxable services introduced vide the Finance Act,2011 -- regarding.

Heads of Account under the Major Head "0044-Service Tax" in respect of thenew taxable services have been allotted by the Office of the Principal Chief Controllerof Accounts, CBEe.

2 A C d ~ h f f t: 11ccountmg 0 es or t e purpose ot payment 0 service tax are as o ows:Sl.No. Taxable Services Accounting Code

Tax Other DeductCollection Receipts Refunds

~..Jl)-

(4) (5)......._.__ ._J2) ._QL_l. Service provided by a restaurant having 00441067 00441068 00441069

air-conditioning and license to servealcoholic beverages in relation to servingof food or beverage, including alcoholicbeverages or both, in its premises{Finance Act 1994, Section65(1o5Hzzzzv})

2. Service provided by a hotel, inn, guest 00441070 00441071 00441072house, club or campsite in relation toproviding of accommodation for acontinuous period of less than threemonths[Finance Act 1994, Section65( 105)(zzzzw)J

Note: A. The sub-head "other receipts" is meant for interest, penalty, leviable on

delayed payment of service tax

B. The sub-head "deduct refunds" is not to be used by the.assessees, as it ismeant for the Revenue/Commissionerates while allowing refund of tax

C. Primary education cess on all taxable services will be booked under00440298 and Secondary Higher Education Cess will be booked under00440426

D. IfNSDLhave issued any dummy codes for revenue collection and

interest! penalty for the above services, all these dummy codes shouldbe treated as void and may be replaced by the correct account codes asstated above

3. Description of taxable services provided at column (2) of the table for easeof reference, does not restrict the scope of the taxable service.

4. Trade Notice/Public Noticemay be issued to the field formations and taxpayers.

5. Please acknowledge receipt of this Circular. Hindi version follows.

~.

jM\~p. M.Kennedy);.r­Director (TRU)

Tel: 011-23092634

..

Page2 of2

rage 1 (

Circular No. 138/07/2011 - Service 1

F. No. 137/57/2011- Service TaxGovernment of IndiaMinistry of Finance

Department of Revenue(Central Board of Excise & Customs)

****NewDelhi, the May 2(

To

Chief Commissioners of Central Excise & Customs (All)Chief Commissioners of Central Excise (All)Director General of Central Excise IntelligenceDirector General of Audit & DGSTCommissioners of Service Tax (All)

Madam/Sir

Subject: Representation by Jaiprakash Associates Limited, Noida, in termsJudgement dated 14.02.2011 in W.P.No. 7705 of 2008 - regarding

**********The Works Contract service (WCS) in respect of construction of Dams, Tunnels, Road, Brid:etc. is exempt from service tax. WCS providers engage sub-contractors who provide servi.such as Architect's Service, Consulting Engineer's Service, Construction of Complex ServiDesign Services, Erection Commissioning or Installation Service, Management, MaintenanceRepair Service etc. The representation by Jaiprakash Associates Limited seeks to extend 1benefit of such exemption to the sub contractors providing various services to the WCS provi:by arguing that the service provided by the sub contractors are 'in relation to' the exempiworks contract service and hence they deserve classification under WCS itself.

2. The matter has been examined.

(i) Section 65A of the Finance Act, 1994 provides for classification of taxable servicementions that classification of taxable services shall be determined according to the terms ofclauses (105) of section 65. When for any reason, a taxable service is prima facie, classifiable l

or more sub-clauses of clause (105) of section 65, classification shall be effected under the swhich provides the most specific description and not the sub-clauses that provide a mortdescription.

(ii) In this case the service provider is providing WCS and he in turn is receiving variouslike Architect service, Consulting Engineer service, Construction of complex, Design service,Commissioning or installation, Management, maintenance or repair etc., which are used bproviding output service. The services received by the WCS provider from its subcontradistinctly classifiable under the respective sub clauses of section 65 (105) of the Finance Actdescription. When a descriptive sub clause is available for classification, the service cannot beunder another sub clause which is generic in nature. As such, the services that are being prethe sub contractors of WCS providers are classifiable under the respective heads and not under

5/10/2(

Page 2 (

(iii) Attention is also invited to CIRCULARNO 9617/2007-ST,dated 23rd August, 2007clarification on technical issues relating to taxation of services under the Finance Act,relevant portion is reproduced below,-

999.03/23.08.07 A taxable service provider A sub-contractor is essentially a taxableoutsourcesa part of the work by service provider. The fact that servicesengaginganother service provided by such sub-contractors areprovider, generally known as used by the main service provider forsub-contractor. Service tax is completion of his work does not in anypaid by the service provider for way alter the fact of provision of taxablethe total work. In such cases, service by the sub-contractor. Serviceswhether service tax is liable to provided by sub-contractors are in thebe paid by the service provider nature of input services.known as sub-contractor who Service tax is, therefore, leviableon anyundertakes only part of the taxable services provided, whether or notwholework. the services are provided by a person in

his capacity as a sub-contractor andwhether or not such services are usedasinput services. The fact that a giventaxable service is intended for useas aninput service by another service providerdoes not alter the taxability of the serviceprovided.

4. Therefore, it is clarified that the servicesprovided by the subcontractors I consultants:service providers are classifiable as per Section 65 A of the Finance Act, 1994 under respeclauses (105)ofSection 65 of the FinanceAct, 1944 and chargeable to service tax accordingly.

Yours faithfu

(Deepankar ArcDirector (ServiceT:

CBEC,NewDe

51l0/2(

To

Page 1Circular No. 139/8/2011-TRU (

F.No.334/B1/2011-TRUGovernment of IndiaMinistry of Finance

UepartmentofRevenueCentral Board of Excise & Customs

Tax ResearchUnitNew Delhi, the 10th May 2011

Chief Commissioners of Central Excise and Customs (Ali),Director General (Service Tax),Director General (Central Excise Intelligence),Director General (Audit),

Commissioners of Service Tax (All)Commissioners of Central Excise (All)Commissioners of Central Excise and Customs (Ali).

Madam/Sir,

Subject: Short Term Accommodation Service and Restaurant Servlce- clarification -regarding

Since the levy of service tax on the two new services relating to services provided by specifiedrestaurants and by way of short-term hotel accommodation came into force with effect from 1st May 2011, anumber of queries have been raised by the potential tax payers.

2. These are addressed as follows:

Short Term Accommodation Service:

1.

2.

3.

4.

SI.No

What is the position relating to off­season prices? Will they beconsidered as declared tariff?

Queries

What is the relevance of declaredtariff? Is the tax required to be paidon declared tariff or actual amountcharged?

Is it possible to levy separate tariff forthe same accommodation in respectof corporate/privileged customersand other normal customers?

Is the dec/ared tariff supposed toinclude cost of meals or beverages?

Clarification

"Declared tariff' includes charges for all amenitiesprovided in the unit of accommodation like furniture, air­conditioner, refrigerators etc., but does not include anydiscount offered on the published charges for such unit.The relevance of 'declared tariff is in determining theliability to pay service tax as far as short termaccommodation is concerned. However, the actual taxwill be liable to be paid on the amount charged i.e.declared tariff minus any discount offered. Thus if thedeclared tariff is Rs 11001-, but actual room rent chargedis Rs 8001-, tax will be required to be paid @ 5% on RsBOOI-.

It is possible to levy separate tariff for the sameaccommodation in respect of a class of customers whichcan be recognized as a distinct class on an intelligiblecriterion. However, it is not applicable for a single or fewcorporate entities.

Where the declared tariff includes the cost of food orbeverages, Service Tax will be charged on the totalvalue of declared tariff. But where the bill is separatelyraised for food or beverages, and the amount is chargedin the bill, such amount is not considered as part ofdeclared tariff.

When the declared tariff is revised as per the touristseason, the liability to pay Service Tax shall be only onthe declared tariff for the accommodation where thepublished/printed tariff is above Rupees 1000/-.However, the revision in tariff should be made uniformlyapplicable to all customers and declared when suchchange takes place.

511 012 (

Page:

5. Is the luxury tax imposed by States For the purpose of service tax luxury tax has to berequired to be included for the excluded from the taxable value.purpose of determining either thedeclared tariff or the actual roomrent?

Services Provided bv Restaurants:1. If there are more than one restaurants

belonging to the same entity in a complex,out of which only one or more satisfy boththe criteria relating to air-conditioning andlicence to serve liquor, will the otherrestaurant(s) be also liable to pay ServiceTax?

2.

3.

4.

Will the services provided by taxablerestaurant in other parts of the hotel e.g.swimming pool, or an open area attachedto a restaurant be also liable to ServiceTax?Is the serving of food and/or beverages byway of room service liable to service tax?

Is the value added tax imposed by Statesrequired to be included for the purpose ofservice tax?

Service Tax is leviable on the service provide bya restaurant which satisfies two conditions: (i) itshould have the facility of air conditioning in anypart of the establishment and (ii) it should havelicense to serve alcoholic beverages. Within thesame entity, if there are more than onerestaurant, which are clearly demarcated andseparately named, the ones which satisfy boththe criteria is only liable to service tax.The taxable services provided by a restaurant inother parts of the hotel e.g. swimming pool, oran open area attached to the restaurant arealso liable to Service Tax as these areasbecome extensions of the restaurant.When the food is served in the room, servicetax cannot be charged under the restaurantservice as the service is not provided in thepremises of the air-conditioned restaurant with alicence to serve liquor. Also, the same cannotbe charged under the Short TermAccommodation head if the bill for the food willbe raised separately and it does not form part ofthe declared tariff.For the purpose of service tax, State ValueAdded Tax (VAT) has to be excluded from thetaxable value.

3. Trade Notice/Public Notice may be issued to the field formations and taxpayers.

4. Please acknowledge receipt of this Circular. Hindi version follows.

(J. M. Kennedy)Director (TRU)

Tel: 011-23092634

5/10/20

V.K.GargJoint Secretary (TRU-II)Tel: 23093027Fax: 23093037e-mail: garg.vk@nic.in

D. O. F. No. 334/3/2011-TRUNew Delhi, 25th April, 2011.

/

Madam/Sir,

The new services specified in clauses (zzzzv) and (zzzzw) of section 65 (105)of the Finance Act, 1994 and amendments to the existing clauses of the same sectionare being operationalized w.e.f. May 1, 2011. The scope of these services wasexplained in my D.O. letter of even number dated Feb. 28, 2011. In accordance withthe budget announcements certain changes are necessitated and the relatedclarifications are given as follows:

Services provided by a Restaurant

2. An exemption @ 70% of the gross value i.e. the total price charged by therestaurant has been given by amending the notification No. 1/2006-ST dated01.03.2006 vide notification No. 34/2011-ST dated April 25, 2011. The exemption isavailable provided no Cenvat credit is availed either of inputs or input services. It isclarified that the exemption is available on the gross price charged by the restaurantfor the taxable service, including any portion shown separately e.g. service charge.However the amount paid by the customer ex-gratia e.g. as tip to any member of thestaff doesn't constitute consideration paid to the restaurant and shall remainoutside this levy.

Short Term Accommodation

3. In accordance with the budget announcement, the levy will be applicable onshort-term accommodation with a declared tariff of Rs 1000 per day or above. Asuitable exemption has been given below this amount vide notification No. 31/2011-ST dated April 25, 2011. Declared tariff has been defined within the notification ascharges for all amenities provided in the unit of accommodation. Thus it will includecost of all electronic gadgets installed in the room and any other facility normallyprovided by a hotel as part of the stay. Cost of extra bed will not form a part of thedeclared tariff. No further exclusions are provided from the declared tariff e.g. onaccount of breakfast or any other meal whose cost is included in the declared tariff

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including any discount given to the customer. However an exemption @ soW 'lasbeen given by amending the notification NO.l/2006-ST dated 01.03.2006 vide

. notification No. 34!201l-ST dated April 25, 2011 provided no Cenvat credit isavailed either of inputs or input services.

Life Insurance Services

4. The new definition will include all services provided by a life insurancecompany. The optional scheme available in rule 6(7A) of the Service Tax Rules, 1994has been amended vide notification No. 35/2011-ST dated April 25, 2011. Theassessee will have the option 'to pay tax on that portion of the premium which is notinvested, when such break-up is given to the policy holder. Where the break-up isnot so provided, tax amount shall be 1.5%of the gross premium. However, wherethe entire premium is only for the risk portion the same shall constitute the taxablevalue of the service. '

Health Services

5. The new levy on medical services in terms of sub-clause (zzzzo) of section65(105) has been exempted vide notification No. 30/2011-ST dated April 25, 2011.Itmay be noted that the earlier levy on certain services provided by hospitals imposed .last year was substituted by the new entry. Thus the levy imposed last year will notbe applicable anymore.

Commercial Coaching and Training

6. The revised definition is intended to bring into the tax net all unrecognizededucation within its ambit irrespective of the fact whether the institute impartingthe education is conducting anyone or more course recognized by law. Accordingly,an exemption has been given to pre-school education and all education that leads tothe award of a qualification recognized by law vide notification No. 33/2011~STdated April 25, 2011.

LegalServices

7· With the amendments coming into force, exemption provided to CAs,CWAsand ess vide notification No. 2S/2006-ST dated 13.07.2006 for similar services isbeing withdrawn by notification No. 32!2011-ST dated Apri12S, 2011.

Other Services

8. Changes have also been made. in other services namely club or association,business support services and service centre for motor vehicles and have alreadybeen explained in my previous D.O. letter dated Feb. 28, 2011.

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Other changes

9. Both the new services i.e. Services provided by Restaurants and short-termAccommodation have also been notified for the purpose of Export of ServicesRules,2005 and Taxation of Services (Provided from Outside India and Received in India)Rules, 2006 and placed in category 1i.e. based on the location of the property.

10. All the above changes may be carefully studied and any issues in theirimplementation may be informed as and when they arise. Potential new assessees aswell existing assessees who are required to pay tax on certain hitherto non-taxableservices may be informed suitably of the changes and assisted in any desiredmanner.

With regards,

Yours sincerely,

~~'

(V.K Garg)

To

All Chief Commissioners/Director GeneralsAll Commissioners of Service TaxAll Commissioners of Central Excise

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