CA Nitin Gupta
In terms of Section 66B of the Act, service tax will be leviable on all services provided in the taxable territory by a person to another for a consideration other than the services specified in the negative list. Due to Section 66B, the regime of service tax from taxable 119 services to 17 services under negative list. Meaning thereby that except these 17 Services, all Services will be taxable under Service tax. In all, there are seventeen heads of services that have been specified in the negative list.
2. The scope and ambit of these is explained in paras below
3. Services provided by Government or local authority
Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere—
(i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;
(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
(iii) transport of goods or passengers; or
(iv) support services, other than services covered under clauses (i) to (iii) above, provided to business entities;
a) What is the exact meaning of Government or local authority?
Government has not been defined in the Finance Act, 1994 or the rules made thereunder. As per clause 23 of section 3 of the General Clauses Act, 1897, Government shall include both the Central Government and any State Government.
It would include various departments and offices of the Central or State Government or the Union Territory Administrations which carry out their functions in the name and by order of the President of India or the Governor of a State.
Local authority is defined in clause (31) of section 65B and means the following:-
b) What are the Services covered in this Rule?
(i) Agency or intermediary services on commission basis (distribution of mutual funds, bonds, passport applications, collection of telephone and electricity bills), which are provided by the Department of Posts to non-government entities are liable to service tax because these are Agency services carried out on payment of commission on non-government business.
(ii) As Per clause 49 of Section 65 B “support services” means
(iii) Sovereign right shall be treated as non-taxable
Thus services which are provided by government in terms of their sovereign right to business entities, and which are not substitutable in any manner by any private entity, are not support services.
(iv) INTER- DEPARTMENTAL SERVICE
4. Services by the Reserve Bank of India
As Per clause 42 of section 65B of finance Act,1994 – “Reserve Bank of India” means the bank established under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934.).
5. Services by a foreign diplomatic mission located in India
6. Services relating to agriculture or agricultural produce by way of —
(i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing;
(ii) supply of farm labour;
(iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;
(iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
leasing of vacant land with a green house or a storage shed meant for agricultural produce will also be covered in the negative list.
(v) loading, unloading, packing, storage or warehousing of agricultural produce;
(vi) agricultural extension services;
have also been defined in Section 65B of the Act as application of scientific research and knowledge to agricultural practices through farmer education or training.
(vii) Services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.
Agricultural Produce Marketing Committees or Boards are set up under a State Law for purpose of regulating the marketing of agricultural produce. Such marketing committees or boards have been set up in most of the States and provide a variety of support services for facilitating the marketing of agricultural produce by provision of facilities and amenities like shops, sheds, water, light, electricity, grading facilities etc. They also take measures for prevention of sale or purchase of agricultural produce below the minimum support price. APMCs collect market fees, license fees, rents etc. Services provided by such Agricultural Produce Marketing Committee or Board are covered in the negative list.
7. Trading of goods
Transfer of title of goods is one of the essential conditions for a transaction to come under the ambit of trading of goods. However, the services supporting or ancillary to the trading of goods would not come under the above item of Negative List.
8. Any process amounting to manufacture or production of goods
9. Selling of space or time slots for advertisements other than advertisements broadcast by radio or television
Not Covered Under Negative List
Covered Under Negative List
|Sale of space or time|
for advertisement to be
broadcast on radio or
Sale of space for
advertisement in print
Sale of time slot by a broadcasting organization.
Sale of space for
advertisement in bill
boards, public places,
cell phones, automated
teller machines, internet.
Commission amount receivedAerial advertising
Making or preparing advertisements
Canvassing advertisement for publishing on a commission basis
Aerial advertising is a form of advertising that incorporates the use of aircraft, balloons or airships to create, transport, or display, advertising media. The media can be static, such as a banner, logo, lighted sign or sponsorship branding. It can also be dynamic, such as animated, lighted or audio.
(ii) Other important points
a. How would the Service Tax liability be determined when an advertisement agency raises bill towards its commission and sale of space charges?
IF SEPARATELY BILL RAISED
Charges received by advertisement agency towards its commission are not covered by the negative list entry. Consideration received towards sale of space or time slots for advertisements other than advertisements broadcast by radio or television would not be liable to service tax if contracted and amount invoiced separately.
IF COMPOSITE BILL RAISED
This would be a case of bundled services taxability of which has to be determined in terms of the principles laid down in section 66F of the Act.
When Section 66F of finance Act, 1994 is applicable
b. Discuss (in above A point) answer is similar, in the case, when an advertisement agency raises bill towards its preparation and sale of space charges.
c. Whether printing and publishing of yellow pages or business directory is liable to service tax?
Printing and publishing of yellow pages and business directory is not in the nature of sale of space or time for advertisement and hence are liable to service tax.
10. service by way of access to a road or a bridge on payment of toll charges
A toll charge is a fixed charge or tax for a privilege, especially for passage across a bridge or along a road.
11. Betting, gambling or lottery
(i) Only amount which is involved in the betting is covered under this entry. So that I would like to discuss that meaning of “betting or gambling” which has been defined in Section 65B of finance Act, 1994.
(ii) Following are the services is not covered under this entry
(a) Auxiliary services used to provide betting/ gambling
(b) Any support services rendered by the Club and certain amount collected from the members.
12. Admission to entertainment events or access to amusement facilities
(i) Entertainment events’ has been defined in section 65B of the Act
Means an event or a performance which is intended to provide recreation, pastime, fun or enjoyment,
(a) exhibition of cinematographic films,
(d) Sporting events,
(i) Musical performances,
(j)theatrical performances including cultural programs, drama, ballets or any such event or programme’.
(ii) Amusement facility’ has been defined in Section 65B of the Act
Means a facility where fun or recreation is provided by means of
but does not include a place within such facility where other services are provided’.
(iii) Other Important aspects
(a) Cultural Programme, Drama Or A Ballet Held In An Open Garden And Not In A Theatre Qualifies As An Entertainment Event?
Yes, the words used in the definition are ‘theatrical performances’ and not ‘performances in theatres’.
(b) Standalone ride set up in a mall qualifies as an amusement facility?
Yes, a standalone amusement ride in a mall is also a facility in which fun or recreation is provided by means of a ride.
(c) Entry to video parlors exhibiting movies played on a DVD player and displayed through a TV screen covered in the entry?
Yes, such exhibition is an exhibition of cinematographic film.
(d) Would membership of a club qualify as access to an amusement facility?
No. A club does not fall in the definition of an amusement facility.
(e) Would auxiliary services provided by a person, like an event manager, for organizing an entertainment event or by an entertainer for providing the entertainment to an entertainment event organizer be covered in this entry?
No. Such services are in the nature of services used for providing the service specified in this negative list entry and would not be covered in the ambit of such specified service by operation of the rule of interpretation contained in clause (1) of section 66F of the Act.
13. Transmission or distribution of electricity by an electricity transmission or distribution utility
CASE 1 when transmission or distribution of electricity by following Service Provider which are defined in clause 23 of Section 65B of the Finance Act, 1994
In Such Case, transmission or distribution of electricity service is covered under Negative List.
CASE 2 when transmission or distribution of electricity by private contractors
The above entry does not cover transmission or distribution of electricity service is provided by private contractors.
CASE 3 when developer is collected charges for distribution of electricity within a residential complex.
Charges collected by a developer of a housing society for distribution of electricity within a residential complex are not covered in the Negative List. But as per recent judgement, if developer purchase electricity (i.e. invoice in the name of developer) and collect charge for distribute of electricity within a residential complex then such transaction is treated as “good” due to Electricity is specified “goods” in the First Schedule of Central Excise Tariff Act, 1985. Therefore, would not be liable to service tax.
14. Services by way of—
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course
As Per clause 11 of section 65B of finance Act, 1994 “approved vocational education course” means,-
(i) a course run by an industrial training institute or an industrial training center affiliated to the National Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961.); or
(ii) a Modular Employable Skill Course, approved by the National Council of Vocational Training or State Council for Vocational Training22, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment
15. Services by way of renting of residential dwelling for use as residence
16. Services by way of—
(i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount;
The services of loans, advances or deposits are in the list in so far as the consideration is represented by way of interest or discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration.
|Covered Under Negative List|
Not Covered Under Negative List
Extending deposits, loans or advances to the Extent consideration is interest or discount ( For Example)
Extending deposits, loans or advances to the Extent consideration is other than interest or discount ( For Example)
(ii) inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers
17. Service of transportation of passengers, with or without accompanied belongings, by—
|Covered under Negative List|
Not Covered Under Negative List
18. Service by way of transportation of goods—
|Covered under Negative List||Not Covered Under Negative List|
19. Funeral, burial, crematorium or mortuary services including transportation of the deceased