INTRODUCTION:

BASIC CONCEPTSDefinition of Service [Section 65B(44)]

Earlier, under the selective approach of taxation of services, the word service was nowhere defined in the Financial Act,1994. In the negative list approach of taxation of services, the definition of service gains paramount importance. In order to determine where a person is liable to pay service tax, the first question he needs to answer is whether the activity undertaken by him come within the ambit of definition of service. Consequently, section 65B (44) defines the word service. For ease of understanding, the definition of service tax may be divided into three sections:-

Meaning of service

Service means

(i) Any activity for consideration

(ii) Carried out by a person for another and

(iii) Includes a declared service.

APPLICABILITY:

Provision:

1) Service tax extends to the whole of India. Except state of jammu&kasmir.

2) It shall come into force on such date as the central government may by notification in the official Gazzette appoint.

3) It shall to taxable services Provided on or after the commencement of service tax.

COMMENTS:1) WHEN: The Finance Act 1994 come into force from 1-7-1994.

2) WHAT: Vide section 64(3) the levy applies to all taxable service provided.

3) WHERE: Vide Section 64(1) the provision of the Act extends to the whole of the India except to the state of jammu& Kashmir.

4) INDIA: India Means

a) The Territory of the union as reffered into clauses (2) & (3) of article 1 of the constitution.

b) Its territory waters, continental shelf, exclusive economic zone or any other maritime zone & other maritime zones Act, 1976.

c) The seabed and the subsoil underlying the territorial waters.

d) The air space above its territory and territorial waters and.

e) In the Installation, structures and vessels located in the continental shelf of India and the Exclusive economic zone of India, for the purpose of prospecting or extraction production of mineral oil and natural gas and supply there of [SECTION 65B(27)] Indian territorial waters extend upto 12 nautical miles from the Indians landmass.

5) JAMMU AND KASHMIR-the provisions of the Act do not extended to Jammu & Kashmir hence, services provided in the states of Jammu & Kashmir are not liable to service tax However, if a person from Jammu & Kashmir provides the service tax as the location where service is consumed is relevant . Merely because the office of the services provider is situated to Jammu & Kashmir. It does not mean that service is provided in Jammu & Kashmir. After 1-7-2014,service tax is not payable, if the provision of service as per the place of provision of service rules, 2014 is the Jammu & Kashmir .

SERVICE TAX LAW

Service tax was introduced in the year 1994 but till date, there is no independent statute for levying service tax. However , following sources provided statutory provisions relating to service tax can be broadly grouped under the following under the following categories:

(a) FINANCE ACT,1994

The statutory provision relating to levy of service tax on services were first promulgated through chapter V of the finance Act, 1994. Since then Chapter V of the finance Act, 1994 is working as the Act for the service tax levy. Later, in the year 2003,the Finance Act 2003 inserted Chapter VA to deal with advance rulings. In the year 2004, the provisions relating to levy of Education Cess on the amount of service tax were made applicable through Chapter VI of the Finance (No.2) Act,2004.

(a) RULES ON SERVICE TAX

Service 94 the Chapter V and section 96-1 of Chapter VA of the Finance Act, 1994 grants power to the Central Government for making rules for effective carrying out the provisions of these Chapter. Using these power, the Central Government has issued service Tax Rules 1994, service Tax (Advance Ruling) Rules, 2003, service Tax ( Registration of Special Category of persons) Rules,2005, Service Tax (Determination of Value) Rules,2006, point of tax rules,2011 and Place of provision of Service Rules, 2012. Rules should be read with the statutory provisions contained in the Act. Rules are made for carrying out of the provision of the Act and the rules cannot override the provisions contained in the Act i.e. in short, the rules can never override the Act and in case of conflict Act will prevail.

(b) NOTIFICATION ON SERVICE TAX

Sections 93and 94 of chapter V, and section 96-1 of chapter VA of the financial Act,1994 empower the central government to issued notifications to exempt any service from service tax and to make rules to implement service tax provisions, Accordingly, notification on service tax have been issued by the central government from time to time. These notifications usually declare date of enforceability of service tax provision, provide rules relating to service tax, make amendments therein, provide or withdraw exemptions from service tax or deal with any other matter which the central government may think would facilitate the government of service tax matters.

(c) CIRCULARS OR OFFICE LETTER (INSTRUCTIONS) ON SERVICE TAX:

The central Board of excise and customs (CBES) issues departmental circulars or instruction letters from time to time to explain the scope of taxable service and the scheme of service tax administration etc. these circulars/instructions have to be read with the statutory provisions and notifications on tax.(d) OREDERS ON SERVICE TAXOrders on service tax may be issued either by the CBEC or by the central government .rule 3 of the service tax Rules,1994, empower the CBEC to appoint such central Excise Officers as it thinks fit for exercising the powers under chapter V of the Finance Act,1994. Accordingly, orders have been issued by the CBEC, from time to time, to define jurisdiction of central Excise Officers for the purposes of service tax.

(e) TRADE NOTICES ON SERVICE TAX:

Trade notice are issued by the Central Excise/Service tax commission rates. These commisionerates receive various instruction from the ministry of finance or central board of excise & customs for effective implementation and administration of the various provision of service tax law. The same are circulated among the field officers and the instructions which pertain to trade are communicated to them in the formof trade notice. Trade associations are supplied with the copies of these trade notices.Individual assesses may also apply for copies of trade notices. The trade notice disseminate the contents of the notifications and circulars/letters/orders, define their jurisdiction, identify the bank in which service tax can be adiposities; give classifications regarding service tax matters, etc.

CHARGEABILITY OF SERVICE TAX

Section 66 B of chapter V of the finance act 1994 is the changes section which mentions the determinates of service tax the section can be analyzed as follows

There shall be levied a tax

At rate of twelve per cent

On the value of all service

Other than those service specified in the negative list

Provide or agreed to be provided

In the taxable territory

By one person to another and

Collected in such manner as may be prescribed

DECLARED SERVICES

Declared service are the following 9 specified in section 66 E of the Act

RENTING: renting of immoveable property

CONSTRUCTION: construction of a complex, building, civil structure or a part thereof, include a complex or building intended for sales to buyer, wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority

IPR: temporary transfer or permitting the use or enjoyment of any intellectual property right

SOFTWARE; development, design, programming, customization adaption, up gradation, enhancement, implementation of information technology software

OBLIGATION; agreeing to the obligation to refrain from an act or to tolerate an act or a situation or to do an act

HIRING; transfer of good by way of hiring,leasing, licensing or any such manner without transfer of right to use such good.

HP: actives in relation to delivery of goods on hire purchase or any system of paymentby instalment

WORKS CONTRACT: service portion in execution of a works contract

FOOD OR DIRNK: service portion in activity where in goods being food or any other article of human consumption or any drink is supplied in any manner as part the activity EXCLUDED SERVICES

The definition of service u/s 65 B (44) provided that service does not include.

TITLE: any activity that constitutes only a transfer in tittle of goods or immovable property by way of sale, gift or in any other manner.

GOODS: a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause of article 366 of the constitution.

MONEY: a transaction only in money or actionable claim.

EMPLOYEE: a service provided by an employee to an employer in the employer in course of the employment

FEES: fees payable to court a tribunal set up under a law for the time being in force.

MP/MLA: DUTIES OF MP/MLA

CONSTITUTIONAL POST: duties of person holding constitutional post.

GOVERNMENT BODY: duties of member of government body.SERVICES IN NEGATIVE LIST

In terms of section 66B of the act. Service tax be liveable on all service provided in the taxable territory by a person to anther for a consideration other than the services specified in the negative list the service specified in the negative list are not taxable the negative list of service is specified in the act itself section 66D in all there are 17 heads of service that have been specified in the negative list as shown in the below.

Service by government or a local authority.

Excluding the following service to the extent they are not covered elsewhere;

a) Service by the department of post by way of speed post express parcel post life insurance and agency provide to a person other than government.

b) Service in relation to an aircraft to a vessel inside or outside the parcel of post or an airport

c) Transport of goods or passengers or

d) Support service other than service covered under clauses (a) to (c) above provide to business entities.

Service by the reserve bank of India

Service by foreign diplomatic mission located in India

Service relating to agriculture or agricultural produce by way of

a) Agricultural operations directly related to production of any agricultural produce including cultivation harvesting plant protection or testing.

b) Supply of farm lobour

c) Processes carried out at an agricultural farm including lending, pruning, cutting harvesting, drying cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operation which do not alter essential characteristic of agricultural produce but make it only marketable for the primary marker.

d) Renting or leasing of agro machinery or vacant land with or without a structure incidental to use its use.

e) Loading, unloading, packing, storage or where house of agricultural produce.

f) Agricultural extension service

g) Service by any agricultural produce marketing committee or board or service provide

Trading of goods

Any process amounting to manufacture or production of goods

Selling by way access to a road or bridge on payment of toll charges

Betting, gambling or lottery

Admission to entertainment events or access to amusements facilities

Transmission or distribution of electricity by an electricity transmission or distribution utility

Service by way of

a) Pre-school education and education up to higher secondary school or equivalent

b) Educations as a part a curriculum for obtaining a qualification recognized by law.

c) Education as part of an approved Vocation course.

Service by way renting of residential dwelling for use as residence

Service by way of

a) Extending deposits, loans in advances in so far as the considerations is represent by way of interest or discount

b) Inter-se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealer.

Service of transportation of passengers without accompanied belonging by

a) A stage carriage

b) Railways in a class other than

c) First class

d) An air conditioned coach

e) Metro, monorail or tramway

f) Inland waterways

g) Public transport, other than predominantly for tourism purpose in a vessel between placed located in India and

h) Metered cabs, radio taxis or auto rickshawS Service by way of transportation of goods

a) By road except the service of

a. A goods transportation agency

b. A courier agency

b) By an aircraft or vessel from a place outside India up to the customs stations of clearance in india

c) By inland waterways

Funeral burial crematorium or mortuary service including transporting of the deceased.MEGA EXEMPTIONS

1. Service provided to the untied nation or a specified international organisations

2. Health care service clinic establishment, an authorized medical practitioner or para medics

3. Service by a veterinary clinic in relation to health care of animals or birds

4. Service by an entity registered under section 12AA of the income tax act (43OF 1961) by way of charitable activies

5. Service by a person by way of

Renting of precincts of religious place meant for general public or

Conduct of any religious ceremony

6. Service Provided by

i) An arbitral tribunal to

Any person than a business entity or

A business entity with a turnover up to rupees ten lakh in the preceding financial year

ii) An individual as an advocate or partnership firm of advocate by way of legal service to

An advocate or partnership fir of advocate providing legal service

An person other than a business entity or

A business entity with a turnover up to rupees ten lakh in the preceding financial year or

iii) A person represented on an arbitral tribunal, to an arbitral tribunal.

7. Service by way of technical testing or analysis of newly development drugs, including vaccines and herbal remedies on human participants by a clinic research organization approved to conduct clinical trials by the drug controller general of India

8. Service by way of training or coaching in recreational activities relating to acts, culture or sport

9. Service Provided to an education; institution in respect of education exempted from service by way of

Auxiliary educational services or

Renting of immovable property

10. Service provided to a recognized sports body by

An individual as a player, referee, umpire coach or term manager for participation in a sporting event organized by sports body

Another recognized sports body

11. Service by way of sponsorship of sporting event organdies

By a national sports federation, or its affiliated federation where the participating terms or individual represent any district, state or zone

By association of India Universities, inter university sport board school games federation of India, all Indian all the sport council for the deaf, Paralympic committee of India or special olympisbharat

By central civil service cultural and sport board

As part of national games, by Indian Olympic association or

Under panchayatYuvakreesanaurkhelabhiyaanschem

12. Service provide to the government a local authority or government authority by way of construction , erection, commission, installation, completion fitting out, repair, maintenances, revaluation or alteration of---

A civil structure or any other original work meant predominantly for use other than for commerce, industry or any other business or profession

A historical; monument, archaeological site or remains of national importance archaeological excitation or antiquity specified under the ancient monument and archaeological sites and remains act ,1958

A structure meant predominantly for use as i) an educational ii) a clinical or iii) an art or cultural establishment

Canal, dam or there irrigation works

Pipeline, conduit or plant for i) water supply ii) water treatment or) sewerage treatment or disposal a residential complex predominantly meant of self- use or the of their employees or other person specified in the explanation 1 to clause 44 of section 65 B of the said act

13. Service provide by wayof construction, erection, commissioning installation, completion, fitting out, repair, maintenance, renovation or alterations of

A road, bridge, tunnel or terminal for road transportation for use by general public

A civil structure or any other original works pirating to scheme under Jawaharlal Nehru national urban renewal mission or Rajiv Awassyojana

A building owned by an entity registered under section 12AA of income tax act,1961 and meant predominantly for religious use by general public

A pollution control or effluent treatment plant, except located as part of factory or

A structure meant for funeral, burial or cremation of deceased

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

An airport, port or railways, including monorail or metro

A single residential unit otherwise than as a part a residential complex

Low cost house up to carpet area of 60 square meters per house in a housing project approved by computer authority empowerment under the scheme of affordable housing in partnership framed by the ministry of housing and urban poverty alleviation, movement of India

Post-harvest storage infrastructure for agricultural produce including a cold storages for such purpose or

Mechanized food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages

15. Service provided by way of temporary transfer of permitting the use of enjoyment eco a copyright---

Covered under clause of sub-section1) of section 12 of the copyright act 1957 relating to original literacy, dramatic musical or artistic works of cinematograph film for exhibition in cinema theatre

16. Service by a performing artist in folk or classical hall froms of music or dance or theatre excluding service provided by such artist as brand ambassador.

17. Service by way of collcting or providing or loading purpose, having declared tariff of unit of accommodation below rupess one thousand per day or equivalent.

18. Service provide in relation of a hotel, inn, guest house, club composite or other commercial places meant for residential or lodging purpose, having declared tariff of unit of accommodation below rupess one thousand per day or equivalent.

19. Service provide in relation of a hotel, inn, guest house, club composite or other commercial places meant for residential or lodging purpose, having the facility of air conditioning or central air heating in any part of the establishment at any time during the year.

20. Service by way of transportation by rail or a vessel from one place in India to inother of the following goods:-

Omitted

Relief materials meant for victim of natural or man-made disaster, calamities accidents or mishap

Defence or military equipment

Omitted

Newspapers or magazines registered with the registrar of newspapers

Railway equipment or materials

Agricultural produce

Foodstuff including flours tea, coffee, jiggery, sugar, milk product salt and edible oil, excluding alcoholic beverages or

Chemical fertilizer and oilcakes

21. Service provided by a goods transport agency, by way of transport in a goods carriage of

Agricultural produce

Goods where gross amount charges for transportation of goods on a consignment transported in single carriage does not exceed one thousand five hundred rupees

Goods where gross amount charges for transportation of goods on a consignment transported in single carriage does not exceed Seven hundred fifty rupees

Foodstuff including flours tea, coffee, jiggery, sugar, milk product salt and Relief materials meant for victim of natural or man-made disaster, calamities accidents or mishap

edible oil, excluding alcoholic beverages or

Chemical fertilizer and oilcakes

Newspapers or magazines registered with the registrar of newspapers

Defence or military equipment

22. Service by way of giving on hire

To state transport undertaking a motor vehicle meant to carry more than twelve passengers or

To goods transport agency a means of transportation of goods

23. Transport or passengers with or without accompanied belongings, by

Air, embarks from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in west Bengal

A contact carriage for the transportation of passengers, excluding tourisms conducted tour, charter or hire or

Ropeway, cable car or aerial tramway

24. Omitted

25. Service provided to government, a local authority or a government authority by way of----

Carrying out any activity in relation to any function ordinarily end- trusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste maintenance or slum improvements and up gradation or

Repair or maintenance of a vessel

26. Services of general insurances business provided under following schemes___

Hut insurance scheme

Cattle insurance under swarnajaynti gram swarozgaryojna

Scheme for insurance of tribal

Janata persona accident policy and gamin accident policy

Group personal accident policy for self-employment women

Agricultural plumpest and failed well insurance

Premia collectedand failed well insurance

Weather based crop insurance scheme or the modifies national agricultural insurance scheme, approved by the government of India and implemented by the ministry of agriculture

Jan ArogyaBima Policy

National agricultural insurance scheme

Pilot scheme on seed crop insurance

Central sector scheme on cattle insurance

Universal health insurance scheme

Rashtriuaswasthyabimayojana or

Coconut palm insurance scheme

26.a]. service of life insurance business provided under following scheme

Janashreebimayojana or

Aamaadmiblimayojana

27. Service provided by an incubate up to a total turnover of fifty lakh rupees in financial year subject to the following condition, namely-

The total turnover had not exceeded fifty lakh rupees during the preceding financial year and

A period of three year has not been elapsed from the date of entering on to an agreement as an incubate

28. Service by an unincorporated body or anon- profit entity registered under any law for the time being in force, to its own member by way of reimbursement of charges of share of contribution

As a trade union

For the provision of carrying out any activity which is exempt from the levy of service tax or

Up to an amount of five thousand rupees per month per member for sourcing of goods or service from a third person for the common use of its member in a housing society or residential

29. Service by the following person in respective capacities

Sub-broker or an authorizes person to a stock broker

Authorizes person to a member of commodity exchanges

Mutual fund agent to a mutual fund or assets management company

Distribution to a mutual fund or assets management company

Selling agent or distribution of sim cards or exchanges coupon vouchers

Business facilities or business correspondent to a banking company or an insurance company in a rural area or

Sub-contractor providing service by way of works contract to other contractors providing works contract service which are exempt

30. Carrying out an intermediate production process as job work in relation to

Agriculture, printing, or textile processing

Cut and polished diamond and gemstones or plain and studded jewellery of gold and other precious metal, falling under chapter 71 of the central excise tariff act 1985

Any goods on which appropriate duty is payable by the principal manufacturer or

Processes of electroplating, zinc planting, anodizing, heat treatment, power coating painting including spray painting or auto black, during the course of manufactory of the parts of systems or sewing machines up to an aggregate value of taxable service of the specified processes of one hundred and fifty lakh rupees in financial year subject to the condition that such aggregate value had not exceeded one hundred and fifty lakh rupees during the preceding financial year

31. Service by an organization to any person in respect of business exhibition held outside India

32. Service by way of making telephone calls from-

Departmentally run public telephone

Guaranteed public telephone operating only for local calls or

Free telephone at airport and hospital where no bills are being issued

33. Service by way of slaughtering

34. Service received from a provider of service located in non-taxable territory by

Government , a local authority, a government authority or an individual in relation to any purpose other commerce, industry or any other business or profession

An entity registered under section 12AA of the income tax act 1961 for the purposes of providing charitable activates or

A person located in non-taxable territory

35. Service of public libraries by way of lending of books, publications or any other knowledge- enhancing content or material

36. Service by employees state insurance corporation to person governed under the employees insurance act, 1948

37. Service by way of transfer of going concern as whole or an independent thereof

38. Service by way of public conveniences such as provided of facilities of bathroom, washroom, lavatories, urinals or toilets

39. Service by a government authority by way activity in relation to any function entrusted to a municipality under article 243W of the constitution

LEVY OF SERVICE TAX

THRESHOLD EXEMPTION [33/2014]

1. RS.10LAKHS

Taxable service provided by a service provider are exempted from whole of service tax livable there-on up to the aggregate taxable value Rs.10 lakhs

2. NOT APPLICABLE

Above exemption is not application to

Taxable service provided by a person under a brand name or trade name, whether registered on not, of another person or

Such value of taxable service in respect of which service tax shall be paid by recipient of service under S.68(2) read with service tax rules, 1994.

3. CONDITIONS

Above exemption is admissible subject of following coditions

Option: taxable service provider has the option not avail the said exemption and pay service tax on the taxable service and such option once exercised in financial year shall not be withdrawn during the remaining part of such financial year

No. CENVAT credit on capital on inputs: the provider of taxable service shall not avail cenvat credit of service tax paid on any input used for providing taxable service on which exemption of small scale in availed

No. CENVAT credit on capital goods the provider of taxable service shall not avail cenvat credit under rule 3 of the cen vat credit rule 2004

4. 1.7.2014

This notification shall come into force on the 1st day of july 2014

5. Special points the following special point should be kept in mind

Brand name:If a person two service a taxable service under a brand name of another person and anther taxable service threshold exemption will not apply to the service under brand name however, he can avail threshold exemption for the other service threshold exemption is not available if the brand name is of a service provider exemption is available if the brand name is in respect of good

TAXBy recipient the threshold exemption does not apply where tax is payable by service recipient on behalf of the service provider, thus, an insurance company required on behalf of insurance agents will have to pay tax on insurance commission earned by an insurance agent, even if the amount agent will have to pay tax on insurance commission earned by an insurance agent, even if the amount is less than threshold exemption i.e Rs.10 lakh. INVOICE

The threshold exemption is computed on this basis of invoice raised and not the payment received, once the invoice issued cross the limit of Rs.10 lakh, the subsequent service become taxable, the exemption is not affected even if payment is not received subsequently

GTA

For goods transport agency the aggregate value, is to be determined after excluding the amount charged by the GAT for which the consignor is liable to pay the tax

OPTION

The decision not to claim the exemption and pay tax must be taken by the service provider at the commencement of the financial year itself before that first date on which payment of tax become due.

SPECIAL PROVISION FOR PAYMENT OF SERVICE TAXAir travel agent rule 6(7)

Person liable for paying the service tax in relation to the sevices of booking of ticket for travel by air provided by an air travel agent shall have the option to pay following amount instead of paying service tax the rate of 12%

In the case ofOption to pay an amount calculated at the rate of

Domestic booking of passage for travel by air0.6% of the basis fare

International booking of passage of travel by air1.2% if the basis fare

Life Insurance Rule 6[7]

An insurer carrying on life insurance business shall have the option to pay on the gross premium charged from a policy holder reduced by the amount allocated for investment or savings on behalf of policy holder, if such amount is intimated to the policy holder at time of providing of service.where amount of the gross premium allocated for investment or saving on behalf of policy holder is not intimated to the policy holder at the time of providing of service:

First yearOn 3% of the gross amount of premium charged

Subsequent yearOn 1.5% of the gross amount of premium charged

Lottery Rule 6(7)

An optional mode of payment of service tax has been proved for the taxable service of promotion marketing or organizing assisting in organizing lottery in the following manner instead of paying service tax at the rate of tax of 12%

Where the guaranteed lottery prize pay-out >80%Rs.7000 on every Rs.10 lakh of aggregate face value of lottery ticket printed by the organizing state for a draw

Where the guaranteed lottery prize pay-out