Section 65(109a) of the Finance Act, 1994 – Telecommunication service – Clarification on taxability in respect of International Private Leased Circuit (IPLC) charges and amendment in the definition of Telegraph Authority under section 65(111) of the Finance Act, 1994.

The IPLC services rendered by a person located outside to a person located in India, is neither taxable under the category of “Telecommunication Services”, nor taxable under the category of “Business Support Services”

Letter [F. No. 137/21/2011 – Service Tax], Dated 19-12-2011

Please refer to the clarifications issued vide Board’s letter of even number dated 15-7-2011 on the subject mentioned above.

2. The matter has been re-examined and it is seen that the IPLC is specifically covered by the definition of the telecommunication service given in clause 65(109a)(iv) of the Finance Act, 1994. As per the said section these services are taxable only when provided by a person who has been granted a licence under the first proviso to sub-section (1) of section 4 of the Indian Telegraph Act, 1985. It is only because the foreign telecom service provider cannot constitute a telegraph authority under an Indian law that they remain outside the taxability clause of the telecommunication service.

3. Therefore, the view taken in the said letter that what otherwise constitutes a “telecommunication service” would amount to “business support service” is erroneous.

4. The clarification issued vide the above mentioned letter stands corrected accordingly.

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