Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Dated: July 15, 2011
Subject: Taxability in respect of International Private Leased Circuit (IPCL) charges and amendment in the definition of Telegraph Authority u/s 65 (111) of the Finance Act, 1994-reg.
1.Representations have been received seeking clarification regarding taxability of IPCL charges incurred in foreign currency by BPO/MNCs against receipt of services from the service provider situated outside India/group companies under reverse charge mechanism [Section 66A of the Finance Act, 1994 read with Rule 2 (1) (d) (iv) of the Service Tax Rules 1994].
2. The matter has been examined. The activities are in the nature of Leased Circuit services presently covered under Telecommunication service. However, for getting classified under Telecommunication service, Section 65 (105 (zzzx) of the Finance Act, 1994 provides that the service should be provided by a Telegraph authority. Telecommunication service as defined under Section 65 (109a) covers services which are provided by a person who has been granted a licence under the first proviso to sub-section (I) of section 4 of the Indian Telegraph Act, 1885. In this situation in the instant case since the service provider is located abroad, he is not covered under the definition given in Section 65 (109a), Thus the service provided by foreign vendors cannot be taxed under Telecommunication service.
3. Section 65 (105) (zzzq) read with Section 65 (104c) of the Finance Act, 1994, defines Business Support Service as services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
Explanation – For the purposes of this clause, the expression “infrastructural support services” includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security.
4. It is clarified that the above activity of receiving IPCL service from abroad is chargeable to Service Tax under Business Support Service [Section 65 (105)(zzzq) ibid] at the hands of recipients situated in India in terms of Section 66A of the Finance Act, 1994, read with Rule 2 (1) (d) (iv) of the Service Tax Rules. 1994 and provisions of Taxation of Services (Provided) From Outside India and Received in India, Rules 2006 apply.
All pending issues may be decided accordingly.
(R K Kapur)
OSD (Service Tax)
CBEC, New Delhi