“service tax law simplified” - session ii
DESCRIPTION
5th Knowledge Master ClassTRANSCRIPT
Presents5th Knowledge Master Class
On
“Service Tax Law Simplified”
Conducted byDr. Sanjiv Agarwal
FCA, FCS
Wednesday,20th March, 2013Gurgaon © Dr. Sanjiv
Agarwal
1
Corporate Knowledge Foundation
SESSION – II
Scope of Taxation of Services
2
Corporate Knowledge Foundation
This Presentation Covers
• Scope of ‘Service’ under New Regime
• Exclusions from /Inclusions in Service
• Charge of Service Tax
• Declared Services
• Bundled Services
3
Scope of Taxation of Services
4
‘Service' has been defined in clause (44) of the section 65B and means –
any activity
For a consideration
carried out by a person for another
and includes a declared service (66E)
What is Service
55
Scope of services under Service Tax
Services on which Service Tax shall be attracted comprise of :
Those services which satisfy the definition of service u/s 65B (44) Nine specified declared services u/s 66E Those services which do not find place in negative list of services
u/s 66D Those services which are not exempt from levy of Service Tax
under Notification No. 25/2012-ST dated 20.06.2012
to be contd….
6
Services on which no Service Tax shall be payable comprise of :• Services which are specifically excluded from the scope of
definition of service itself u/s 65B(44)• 17 broad services specified in the negative list of services u/s
66D• Services which are exempt from levy of Service Tax under N.
No. 25/2012-ST dated 20.06.2012• Specified services otherwise exempt under specific
notifications• Activities where service provider and service receiver are in
non –taxable territory
6
Scope of services under Service Tax
7
The New Taxability Concept
Taxable
3. Exemptions (39)
1. Non -
Taxable
territory
(POPS)
2. Negative list (17)
SERVICE FOR A CONSIDERATION
E - MAGIC TEST
E: EmployeeM: MoneyA: Actionable claimG: GoodsI: Immovable propertyC: Court Fee
9 DE
CL
AR
ED
SE
RV
ICE
S
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Activity must be for a consideration (nexus / reciprocity)
Activity – includes both activity as well as non-activity
Consideration – includes both monetary and non monetary consideration.
Two persons are involved –Service provider Service receiver
Only services provided by one person to another are taxable
Person – natural as well as artificial
What is Service
9
ActivityNot defined in the ActIn common understanding, activity includes –
An act done A work done A deed done An operation carried out Execution of an act Provision of a facility etc.
Activity could be active or passive and forbearance to actAgreeing to an obligation to refrain from an act or to tolerate an
act or a situation - listed as a declared service u/s 66E
What is Service
10
ConsiderationMeans everything received or recoverable in
return for a provision of service which includes -Monetary paymentNon-monetary paymentDeferred consideration
Under Indian Contract Act, 1872, Consideration means -
“When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”
What is Service
11
Activity for a Consideration Activity should be carried out by a person
for a considerationActivity without consideration like-
DonationGiftsFree charities
outside the ambit of serviceCharity for consideration would be service
and taxable unless otherwise exempted
What is Service
12
Money- 65B(33)
"money" means legal tender, cheques, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheques, money order, postal or electronic remittance or any similar instrument but shall not include any currency that is held for its numismatic value
Actionable Claim –Section 3 of Transfer of Property Act, 1882
• Claim to unsecured debts• Claim to beneficial interest in movable property not in
possession of claimant• Right to insurance claim• Arrears of rent
What is Service
13
Tax on Money Remittance (Circular No. 163 dated 10.7.2012)
No service tax on foreign currency remitted to India from overseas
Amount of remittance comprises moneyService excludes money transactionsEven fee for remittance is not taxable (POPS) Sender of money outside India - bank / company
remitting located outside IndiaFee charged by Indian bank - remitter located
outside India (not taxable as per POPS)
What is Service
14
Person-65B(37)"person" includes,––
• an individual,• a Hindu undivided family,• a company,• a society,• a limited liability partnership,• a firm,• an association of persons or body of individuals, whether
incorporated or not,• Government,• a local authority, or• every artificial juridical person, not falling within any of the
above
What is Service
15
Government – Not defined
Section 3 (22) of General Clause Act, 1897
Includes Central/State Government/ Union Territory
Actions taken in the name of President/ Governor
Most of services provided by Government are in
Negative List
What is Service
16
'Service' does not include - any activity that constitutes only a transfer in title of goods or immovable
property by way of sale, gift or in any other manner.
Sale of developed plots is a service (Narne Constructions Pvt. Ltd. v UOI 2013 (29)STR 3 (SC)
a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of article 366 of the Constitution
a transaction only in money or actionable claim
a service provided by an employee to an employer in the course of the employment.
fees payable to a court or a tribunal set up under a law for the time being in force
What is Service : Exclusions
17
This scope shall not apply to –
a) functions performed by M.P., M.L.A., Members of Panchayats / Municipalities who receive any consideration in performing the functions of that office as such member; or
b) duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or
c) duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Government or local authority and who is not deemed as an employee before the commencement of this section.
What is Service
18
What is Service
For the purpose of scope of service -
(a) an unincorporated association or a AOP and a member thereof shall be
treated as distinct persons;
(b) an establishment of a person in the taxable territory and any of his other
establishment in a non-taxable territory shall be treated as establishments of
distinct persons.
(c) A person carrying on a business through a branch or agency or
representational office in any territory shall be treated as having an
establishment in that territory
Draft Circular (F. No. 354 /127/2012-TRU dated 27.7.2012) issued for clarification on certain activities / facilities / reimbursements to employees by the employers
(a) Treatment of supplies made by the employer to employees
Amount deducted from salary / paid for service provided by the
employer to employee is for consideration and hence taxable
Employer who provides some services free of cost (e.g. crèche,
gymnasium or a health club) are not liable to tax
(b) Treatment of reimbursements made by the employer to the
employee
Reimbursements of expenditure incurred on behalf of the
employer in course of employment would not amount to a
service, hence non-taxable
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Employer’s Facilities to Employees
(c )Treatment of supplies and reimbursements made by the employer to ex-employees/ pensionersSame tax treatment for ex- employees of the
company – Reimbursement of expenses on behalf of company – non-taxable ? Facilities for consideration – taxable Facilities free of cost - non taxable ?
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Employer’s Facilities to Employees
Director’s Services to Company - Taxable
Director’s services to the company are taxable w.e.f 1.7.2012
Sitting fees, commission, bonus, etc. are subject to service tax
W.e.f. 1.7.2012 upto 6.8.2012, service tax to be deposited by the directors while from 7.8.2012 vide Notification No. 45/2012, Service Tax on such services will be deposited by the company under reverse charge
WTDs /MDs /EDs who are under contractual employment with the company and receive salary or remuneration from the company will not be covered - considered as employees of the company
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Director’s Services to company- Taxable
Interest on loan by director to company, dividend on shares, other professional charges on account of services not rendered as a director (in professional capacity) are not liable to Service Tax
In case of nominee director, the nominating company who receives fees will be liable to pay service tax
The invoice / receipt to be issued by the directors within 30 days
In case of nominee directors, the invoice will be issued by the nominating company if payment made to such Company
In the case of Government nominees, the services shall be deemed to be provided by the Government but liable to be taxed under reverse charge basis (support service)
22
Remuneration to Partner – Not a Service
Partnership firm is not a distinct legal entity apart from the partners under the Partnership Act, 1932
Partner is not an employee of the firm -contract of employment requires two distinct firms, viz., employer and employee
Partners are the real owners of the assets of Firm to the extent of their share
Salary paid to partner is only profit known by a different name
It is only a transaction in moneyIncomes received from firm treated as income from
Profits and Gains of Business or Profession under I T Act, 1961
Partnership Act, 1932 can not be over-looked 23
Examples of new activities which may be taxed
Non commercial construction for non-government purpose
Private roads (not meant for general public) Residential construction of more than one unit Commercial artists/performers Film actors/ directors /reality show judges Tourism boats Board director’s sitting fee Non-compete fee Arbitrators to business entities Discourses and lectures/ yoga classes
to be contd..24
Banking services to governmentUnrecognized IPRsServices to RBIHotel telephone callsVideo library facilities by hotelsMatrimonial sitesAstrologersWorks contracts for movable propertiesAll sub-contracts except exempted works contractsOn board catering and other facilitiesExecutive Lounge at railway station/ airport
Examples of new activities which may be taxed
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Section 66 (upto 30.6.2012)
There shall be levied a tax @ 12 percent of the value of taxable services as referred to in section 65(105), i.e., taxable services
Not to apply w.e.f. 1.07.2012
Charge of Service Tax
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Section 66B (W.e.f 1.7.2012)
There shall be levied a tax at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed
Charge of Service Tax
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Essential ingredients to be present for charge of Service Tax
There should be a service involvedSuch service should not be one included in the negative
list as defined in section 66D.Services should be provided or agreed to be provided.Services should be provided in the taxable territory only.Services should be provided by one person to another
person.Tax shall be levied on value of services so provided or
agreed to be provided.Collection shall be in prescribed manner.
Charge of Service Tax
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Provided or to be provided v. provided or agreed to be provided
Before actual provision of service is made, all relevant information on chargeable event must be known
On account advance payment without any identification of services or activities may not be liable to service tax
Services which have only been agreed to be provided but are yet to be provided are taxable
Receipt of advances for services agreed to be provided become taxable before the actual provision of service
Advances that are retained by the service provider in the event of cancellation of contract of service by the service receiver become taxable as these represent consideration for a service that was agreed to be provided.
Charge of Service Tax
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Declared Services Clause 44 of section 65B defines service – it includes a declared service.
There are 9 categories of services or activities as declared services implying that on all such nine declared services, Service Tax shall be payable
Does not include any such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of Article 366(29A) of the Constitution of India.
What is declared services is defined in section 65B(22) to mean any activity carried out by a person for another person for a consideration and declared as such under section 66E of the Act.
They are amply covered by the definition of service but have been declared with a view to remove any ambiguity for the purpose of uniform application of law all over the country
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List of declared services
Following constitute Declared Services (Section 66E)
Renting of immovable property;
Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority;
Temporary transfer or permitting the use or enjoyment of any intellectual property right;
Development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software;
32
List of declared services
Agreeing to an obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;
Transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods;
Activities in relation to delivery of goods on hire purchase or any system of payment by installments ;
Service portion in execution of a works contract;
Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity.
Renting of Immovable Property
Renting (Section 65B (41)) -allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property
Renting of certain kinds of immovable properties is specified in the negative list • Renting of vacant land, with or without a structure incidental to
its use, relating to agriculture.• Renting of residential dwelling for use as residence• Renting out of any property by Reserve Bank of India• Renting out of any property by a Government or a local authority
to a non-business entity
33
Renting of Immovable Property
Exemptions to Renting of Immovable property
Threshold level exemption up to Rs. 10 lakh.
Renting of precincts of a religious place meant for general public is exempt.
Renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a room below rupees one thousand per day or equivalent is exempt.
Renting of immovable property to / by educational institution in respect of exempted education
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Renting of Immovable Property
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Renting of Immovable Property
Nature of Activity Taxability
Renting of property to educational body Not chargeable to service tax; exemption
Renting of vacant land for animal husbandry or floriculture
Not chargeable to service tax as it is covered in the negative list entry relating to agriculture
Permitting use of immoveable property for placing vending/dispensing machines
Chargeable to service tax as permitting usage of space is covered in the definition of renting
Allowing erection of communication tower on a building for consideration.
Chargeable to service tax as permitting usage of space is covered in the definition of renting
Renting of land or building for entertainment or sports
Chargeable to service tax as there is no specific exemption.
Renting of theatres by owners to film distributors
Chargeable to service tax as the arrangement amounts to renting of immovable property.
Renting of immovable property outside India not taxable in India even if owners are in India
Construction Activities [Section 66E (b)] Construction activities means construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority.It includes construction of -
Complex Building Civil structure or part thereof Complex or building intended for sale to a buyer except
where entire consideration is received after issuance of completion certificate by the competent authority.
Actual sale after construction-if any consideration received before such completion certificate, it will also be taxed.
36
Construction Activities
Construction is not defined
Construction includes additions,
alteration,
replacement, or
remodeling
of any existing civil structure
37
Construction Activities
Who is Competent Authority to issue Completion Certificate
Government
Any authority authorized to issue CC under any law
In absence of any requirement to issue CC,
• Architect under Architect Act, 1972
• Chartered Engineer registered with Institution of
Engineers
• Licensed surveyor (of local body / development or
planning authority)
38
Construction Activities
Residential Complex
Complex comprising of one or more buildings having more than
one residential unit
Even two units would be called ‘complex’
Single residential unit – self contained residential unit designed
for use, wholly / principally, for residence of one family
Original work – new construction and all type of addition /
alteration to abandoned / damaged structures on land as are
required to make them workable / erection , commissioning,
installation.
Sale of developed plots is a service (Narne Constructions Pvt. Ltd.
v UOI 2013 (29)STR 3 (SC)39
Construction Activities
40
Temporary transfer or permitting the use or enjoyment of any intellectual property right [Section 66 E (c)]Intellectual property right’ has not been defined but Intellectual property right includes : Copyright
Patents
Trademarks
Designs
Any other similar right to an intangible property
Intellectual Property Right
Examples of IPRs Patents - New technical, concepts,
inventions Copyright - Text, graphics, software, data
compilations, art, music Trademarks - Brands (Services/
Products)
image and reputation Confidential Information - Ideas, information, know-how,
processes etc. Design Rights -Form and appearance,
decoration, apparels41
Intellectual Property Right
What is taxed in IPR
all IPRs (whether recognized in law or not)
excluding copy rights
temporary transfer of IPRs
permitting the use of IPRs
enjoyment of IPRs
42
Intellectual Property Right
Copyrights as IPRs are exempted which
include :
literary work
dramatic work
musical work
artistic works
cinematograph films
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Intellectual Property Right
Information Technology software related services [section 66E(d)]
It includes following in relation to Information Technology
Software (ITS) –
Development
Design
Programming
Customization
Adaptation
Upgradation
Enhancement
Implementation 44
Information Technology Software
ITS is defined in Section 65B(28) Representation in ITS should be of any of the following –
• Instruction• Data • Sound • Image • Source code • Object code
Such items represented should be recorded in a machine readable form,
Such items represented and recorded should be capable of being manipulated.
They should provide interactivity by way of a – • computer, or • automatic data processing machine, or • any other device or equipment
45
Information Technology Software
Scope of ITS Service
Design - plan, scheme
Programming - process of writing a computer programme
Customization - modifying to meet a specific requirement
Adaptation - change to suit, adopt
Up gradation - raising standard, improving quality / version /
features
Enhancement - in value, content, quality
Implementation - execution 46
Information Technology Software
Agreeing to obligation to refrain from an Act / to tolerate Act or situation / to do an Act [section 66E(e)]
Following activities if carried out by a person for another for consideration would be treated as provision of service -
Agreeing to the obligation to refrain from an act.Agreeing to the obligation to tolerate an act or a
situation.Agreeing to the obligation to do an act.
47
Obligations / Actions
Examples of Obligations / Actionsnon compete fees for agreeing not to compete compensation on termination of business agreementsadvance forfeited for cancellation of agreement to
provide a service. forfeiture of security deposit for damages done by
service receiver in course of receiving of services. cancellation charges being charged by airlines, hotels
etc.consideration for non-appearance in a court of law or
withdrawal of suit.demurrage charges or detention charges
48
Obligations / Actions
Transfer of goods by hiring, leasing, licensing [66E(f)]
There should be transfer of goods involved Such transfer of goods should be by way of –
hiring leasing licensing, or any such manner
Such transfer should be without transfer of right to use such goods.
Excludes intangible goods Only goods [section 65B(25)] covered
49
Transfer of Goods
Transfer of right to useTaxable only when transfer of right to use goods is
not there Constitutional / legal concept Can be determined when agreement is read in
whole, not just one clause Transfer of right to use is deemed sale u/s 366(29A)
of Constitution If owner retains effective control, no transfer of
right can take place Service excludes deemed sale u/s 366(29A)
50
Transfer of Goods
Tests laid down by Supreme Court in BSNL v UOI [(2006)2 STR 161
(SC)] There must be goods available for delivery ; There must be consensus ad idem as to the identity of the
goods; The transferee should have legal right to use the goods –
consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee;
For the period during which the transferee has such legal right, it has to be the exclusion to the transferor – this is the necessary concomitant of the plain language of the statute, viz., a ‘transfer of the right to use’ and not merely a license to use the goods;
Having transferred, the owner cannot again transfer the same right to others
51
Transfer of Goods
52
Examples of transfer without right to use
Car on hire with driver – right to use not transferred
Conditional supply of equipment – not free to use goods
Bank lockers – possession not transferred to hirer
Scaffolding structure for temporary purpose – no transfer
of right / effective control and possession
Hiring of Pandal / Shamiyana – No effective control
Hiring of audio visual equipment with attendant – no
transfer of right / possession
Transfer of Goods
53
Delivery of goods on hire purchase / installments [section 66E(g)]
Includes delivery of goods on -
hire purchase
any system of payment by installment
Payment in parts / installments
Lease payment is calculated so as to cover full cost of asset
together with interest charges
Transfer of substantially all risks and rewards in relation to
goods so transferred
Not taxable as covered under deemed sale of goods
But services in relation to such sale taxable
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Delivery of goods on hire purchase Transfer of possession (and not just of custody) The hirer has the option or obligation to purchase the goods in
accordance with the terms of the agreement. In hiring, hirer has no such option and risks remain with owner
/ not transferred to hirer In hire purchase, hirer has option / obligation to purchase
goods Operating lease not covered Involves two transactions – financial transaction and hire
purchase. Financial transaction is chargeable to Service Tax [Association of Leasing & Financial Services v. Union of India (2010) 20 STR 417 (SC)].
Service Tax levied only on 10 percent value representing interest in financial lease and not full value (Notification No. 26/2012-ST)
Delivery of goods on hire purchase / installments [section 66E(g)]
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Works Contract [66E(h)]
Works Contract [65B(54)]
“Works Contract” means a contract wherein transfer
of property in goods involved in the execution of such
contract is leviable to tax as sale of goods and such
contract is for the purpose of carrying out
construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance,
renovation, alteration of any movable or immovable
property or for carrying out any other similar activity
or a part thereof in relation to such property.
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Works Contract
Works Contract covers ConstructionErection Commissioning CompletionFitting out Repair Maintenance RenovationAlteration, or Any other similar activity or part there of
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Works Contract
Some issues in works contracts
Labour contracts Excluded
Repair & Maintenance of motor vehicles
yes if property in goods transferred in execution of WC
Construction of pipeline / conduit yes, structures on land
Painting / repair / renovation of building , wall tiling, flooring etc.
yes if involves provision of material also
Erection/commissioning installation of plant/ machine etc
yes if transfer of property in goods is involved and machinery etc
58
Valuation of service portion in Works Contract
Value of service portion in execution of work contract = gross amount charged for works
contact less value of transfer of property in goods involved in execution of works contract Gross amount includes Gross amount does not include
Labour charges for execution of the works Amount paid to a sub-contractor for labour and servicesCharges for planning, designing and architect’s fees
Value of transfer of property in goods involved in the execution of the said works contract.where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then such value adopted for the purposes of payment of value added tax or sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract. (Rule 2A explanation)
Cost of establishment of the contractor relatable to supply of labour and services and other similar expenses relatable to supply of labour and services
Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract
Profit earned by the service provider relatable to supply of labour and services
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Valuation of service portion in Works Contract
Alternative valuation model (Rule 2A of Valuation Rules) Where works contract is for… Value of the service portion shall
be…
(A) execution of original works forty percent of the total amount charged for the works contract
(B) maintenance or repair or reconditioning or restoration or servicing of any goods
seventy per cent of the total amount charged including such gross amount
(C) in case of other works contracts, not included in serial nos. (A) and (B) above, including contracts for maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings.
sixty percent of the total amount charged for the works contract
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Valuation of service portion in Works Contract
Total Value = Sum total of + gross amount charged + value of goods and services supplied free of
cost for use in or in relation to execution
of WC whether us same contract /any other
contract+ value of land charged as part of total
consideration- amount charged for such goods / services, if
any - VAT levied, if any
If value of FOC goods / services is not ascertainable, it will be determined on basis of fair market value having close resemblance
FMV based on generally accepted accounting principles No Cenvat available on goods / inputs used in works contract
61
Service portion in supply of foods and drinks [section 66E(i)]
Supply of foods and drinks is deemed sale and hence not taxable
However, only service portion in deemed sale is sought to be taxed
Service portion in activity wherein goods, being food or any other
article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity is a declared service.
Levy of Service Tax on services provided by only such restaurants where service portion in total supply is substantial and discernible
62
Restaurants provided conditional exemption Services provided in relation to serving of food or beverages
by a restaurant, eating joint or a mess, other then those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and which has a license to serve alcoholic beverage.
W.e.f. 1.04.2013, and has been deleted and thus, all AC restaurants will be taxable
Threshold exemption What activities are covered –
• Supply of food or drinks in a restaurant; • Supply of food and drinks by an outdoor caterer.
Service portion in supply of foods and drinks [section 66E(i)]
63
Valuation of Service portion (Rule 2C of valuation Rules)
in a restaurant -40% of total value charged
by outdoor catering - 60% of total value charged
Exemption under Notification No. 25/2012-ST to mid day meal scheme and restaurants without bar license / air conditioning / central heating facility
Abatement @ 30% under Notification No. 26/2012-ST provided Cenvat credit is not taken on goods
64
Bundled Services
Principles of Interpretation of specific description of services [section 66F]
Section 65A dealing with classification of taxable services omitted w.e.f. 1.7.2012
useful in deciding whether a service falls in negative list / exemptions / declared services
composite v bundled service bundled service –
collection of services / tied up services more than one service element of one service combined with element of provision of
other service (s). Examples - Mailing done by RTI, Air traveling and catering therein Earlier issue – which taxable service Now – whether any activity is a ‘service’ or not a ‘service’.
65
Bundled Services
Rule 1 Reference to main service can not be used for services used for
providing the main service If some service is provided with reference to provision of main
service, it does not be come main service, Related services do not take the colour of main service. Examples
Provision of access to any road or bridge on payment of toll Security services IT related services Contract commission
Transportation of passengers by rail Air travel agency Tour operators
66
Bundled Services
Rule 2Most specific description to be preferred over more
general description for services capable of differential treatment
for any purpose based on its description Examples
Real estate agent for immovable property• If taxed as intermediary, his location is important • If taxed as immovable property, location of property is
important Outdoor catering by pandal & shamiana / convention to be
taxed as specific combined entry exist for abatement and not as individual services
67
Bundled Services
Taxability of naturally bundled services in ordinary course of business (Rule 3)
If various elements of a bundled service are naturally bundled in the ordinary course of business, it shall be treated as provision of a single service which gives such bundle its essential character
Perception of service provider / service receiver Trade practice Example
• Packaged hotel accommodation for convention delegates may include Hotel room accommodation Breakfast Tea / coffee during conference
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Access to gym / health club / pool Internet Business centre Sight seeing
Could be considered as naturally bundled convention services as each activity is taxable but does not provide essential character and taxed accordingly
Indicators of naturally bundled services There is a single price or the customer pays the same amount, no
matter how much of the package they actually receive or use The elements are normally advertised as a package. The different elements are not available separately. The different elements are integral to one overall supply – if one or
more is removed, the nature of the supply would be affected. Each case to be individually examined
Bundled Services
69
Rule 4 Taxability of services not naturally bundled in ordinary course of
business
If various elements of a bundled service are not naturally bundled in the ordinary course of business, it shall be treated as provision of a service which attracts the highest amount of service tax.
Examples Renting of two floors or two portions of building by a
common agreement (treated as commercial use) Management of event covering advertisement,
promotion, space booking, photography, videography, public relation etc.
Bundled Services
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THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur