New Section Section 66F related to – Principles of interpretation of specified description of Services or bundled Services has been inserted vide Notification No. 19/2012-SERVICE TAX, DATED 5-6-2012 w.e.f. 1st day of July, 2012 and related provisions are as follows.
Principles for interpretation of specified descriptions of services
Although the negative list approach largely obviates the need for descriptions of services, such descriptions continue to exist in the following areas –
• In the negative list of services.
• In the declared list of services.
• In exemption notifications.
• In the Place of Provision of Service Rules, 2012
• In few other rules and notifications.
There are two principles laid down which are contained in clauses (1) and (2) of section 66F of the Act.
What is the scope of the clause (1) of section 66F: ‘Unless otherwise specified, reference to a service (hereinafter referred to as the “main service”) shall not include reference to a service which is used for providing the main service’
This rule can be best understood with few illustrations which are given below –
• ‘Provision of access to any road or bridge on payment of toll’ is a specified entry in the negative list in section 66D of the Act. Any service provided in relation to collection of tolls or for security of a toll road would be in the nature of service used for providing such specified service and will not be entitled to the benefit of the negative list entry.
• Transportation of goods on an inland waterway is a specified entry in the negative list in section 66D of the Act. Services provided by an agent to book such transportation of goods on inland waterways or to facilitate such transportation would not be entitled to the negative list entry.
What is the scope of clause (1) of section 66F: ‘where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description’.
This rule can also be best understood with few illustrations which are given below –
• The services provided by a real estate agent are in the nature of intermediary services relating to immovable property. As per the proposed Place of Provision of Service Rule, 2012, the place of provision of services provided in relation to immovable property is the location of the immovable property. However in terms of the rule 5 pertaining to services provided by an intermediary the place of provision of service is where the intermediary is located. Since rule 5 of the draft ‘Place of Provision of Services Rules, 2012′ provides a specific description of ‘estate agent’, the same shall prevail.
• Pandal and Shamiana is an existing service and will remain a subject of taxation. Likewise service provided by way of catering is a taxable service and entitled to abatement. There is abatement when the two are provided in combination. Since the combination is more a specific entry than the two provided individually, there is no need to apply the later rule of bundled services, where the character could be judged by the service which provides it the essential character.