1. Are all services provided by an employer to the employee outside the ambit of services?
No. Only services that are provided by the employee to the employer in the course of employment are outside the ambit of services. Services provided outside ambit of employment for a consideration would be a service. For example, if an employee provides his services on contract basis to an associate company of the employer, then this would be treated as provision of service. Likewise a person engaged by the employer in private capacity and beyond the demands of employment will be taxable.
2. Would services provided on contract basis by a person to another be treated as services in the course of employment?
No. Services provided on contract basis i.e. principal-to-principal basis are not services provided in the course of employment.
3. What is the status of services provided by casual workers or contract labour?
| If……. | Then…… |
| Services provided by casual worker to employer who gives wages on daily basis to the worker | These are services provided by the worker in the course of employment |
| Casual workers are employed by a contractor, like a building contractor or a security services agency, who deploys them for execution of a contract or for provision of security services to a client | Services provided by the workers to the contractor are services in the course of employment and hence not taxable. However, services provided by the contractor to his client by deploying such workers would not be a service provided by the workers to the client in the course of employment. The consideration received by the contractor would therefore be taxable if other conditions of taxability are present. |
4. Exclusions from the definition of ‘service’
♦ Explanation 1 clarifies that ‘service’ does not cover functions or duties performed by Members of Parliament, State Legislatures, Panchayat, Municipalities or any other local authority, any person who holds any post in pursuance of the provisions of the Constitution or any person as a Chairperson or a Member or a Director in a body established by the Central or State Governments or local authority and who is not deemed as an employee.
♦ Explanation 2 creates two exceptions, .by way of a deeming provision, to the general rule that only services provided by a person to another are taxable. As per these deeming provisions establishment of a person located in taxable territory and establishment of such person located in non-taxable territory are deemed to be establishments of distinct persons. Further an unincorporated association or body of persons and members thereof are also deemed as separate persons.
♦ Explanation 3 explains that a branch or an agency of a person through which the person carries out business is also an establishment of such person
