Overview of Service Tax Provisions

And
Important Services under the Service
Tax

Rishabh R. Adukia
rishfca@gmail.com
098198-61049
CA Final Student, Mumbai

1
 AGENDA
• Introduction
• Administration of Service Tax
• Act & Rules Applicable
• Category of Services
• Finance Bill (No.2),2009 Amendments
• Few Important Services
• Question & Answer Session

2
 INTRODUCTION
• Recommended by Dr. Raja Chelliah Committee (Tax
Reforms Committee)
• No separate law
• First introduced in the year 1994 vide Chapter V (Section
64 to 96) of Finance Act,1994
• Chapter VA (Section 96A to 96I) was inserted by
Finance Act,2003
• Applicable to whole of India except the state of Jammu and
Kashmir and its provisions were made applicable with
effect from July 1,1994.Ex:
• In India the service sector contributes nearly 53% of GDP
• Rate Applicable as of now is 10.3%

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Administration of Service
Tax
• Administered by the Excise department working under Department of Revenue ,
Ministry of Finance , Government of India
• The responsibility of administration and collection of service tax has been vested with
CBEC (Central Board of Excise and Customs)

• Section 93 and 94 of Chapter V and section 96 I of Chapter VA of Finance Act ,

1994 empowers the Central Government to issue Notifications to exempt any
service or part of service from service tax
Accordingly Notifications have been issued by Department of Revenue
,Ministry of Finance from time to time

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Act and Rules Applicable to
Service Tax
1. Chapter V and Chapter VA of Finance Act 1994
2. Service Tax Rules,1994
• Forms
• Procedure for Registration
• Due dates
• Records
1. Service Tax (Removal of Difficulty) Order,2002
2. Service Tax (Advance Rulings)  Rules, 2003
3. Cenvat Credit Rules 2004(Earlier Service Tax Credit
Rules,2002)
4. Export of Service Rules,2005

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Act and Rules Applicable to
Service Tax(Contd.)
8. Service Tax (Registration of Special Category of Persons)
Rules, 2005
9. Service Tax (Determination of Value) Rules, 2006
10. Taxation of Services (Provided from Outside India and
Received in India) Rules, 2006
11. Works Contract (Composition Scheme for Payment of
Service Tax) Rules, 2007
12. Service Tax (Publication of Names) Rules, 2008
13. Service Tax Dispute Resolution Scheme, 2008
14. Service Tax (Provisional Attachment of Property) Rules,
2008
15. Service Tax Return Preparer Scheme,2009

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 Acid Test to decide
Taxability
Recipient
Service Service of Service
Provider

Place Where Taxable Service

service is Section 65(105)
delivered

Threshold limit of Rs 10 lakhs for service

providers

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Taxable services

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 Category of Services
• Communication Services 5
• Travel & Transport Services 14
• Entertainment Services 13
• Professional/Marketing/Agency 20
• Real Estate 5
• Insurance 4
• Cargo/Port 7
• Financial 13
• Business/Commercial 17
• Others 8
– TOTAL 106

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 3 New services added
Finance(No. 2) Bill, 2009
• Cosmetic and Plastic surgery services introduced [Sec
65(105)(zzzzk)]
• Transport of goods by National waterways and Inland
Waters introduced [Sec 65(105)(zzzzl)]
• Legal services to a business entity, by any other business
entity introduced [Sec 65(105)(zzzzm)]

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 1.Practicing Chartered
Accountant/CS/CWA
Services
• Introduced : 16.10.1998
• Definition: Sec 65(83)
• "practicing chartered accountant" means a person who is a member
of the Institute of Chartered Accountants of India and is holding a
certificate of practice granted under the provision of the Chartered
Accountants Act, 1949 (38 of 1949) and includes any concern
engaged in rendering services in the field of Chartered accountancy;
• Taxable service- Taxable service means any service provided or to be
provided “to any person, by a practising chartered accountant in his
professional capacity, in any manner”-S.65(105)(s);

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 Practicing Chartered
Accountant/CS/CWA
Services(Contd.)
• CA in practice may act as Liquidator, Trustee, Executor,
Administrator, Arbitrator, Receiver, or representative in
taxation or financial matter
• Services rendered in professional capacity – subject to
service tax
• Services rendered in a professional capacity relating to
representing the client before any statutory authority in the
course of proceedings initiated under any law- exempt from
tax from 13.07.2006 (Notification No. 25/2006)

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 Issues
• What is professional capacity ?
• Is Royalty income from authorship of books
taxable ?
• Personal/Group tutions given by practicing CA’s
taxable ?
• Whether receipts from Manpower recruitment
work or Management Consultancy will be taxed
under this head ?
• Persons not holding COP and rendering Tax
advisory services liable to pay service tax ?

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 2.Legal Services
• Introduced : yet to be effective
• Finance (No.2) Bill,2009
• Legal services to a business entity, by any other
business entity introduced [Sec 65(105)(zzzzm)]
• In relation to :
– Advice
– Consultancy
– Assistance in any branch of law

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 Issues
• What is a Law ?
• Whether Non advocates are taxable ?
• Firm of advocates giving consultancy on
any matter other than branch of law ?
• Advice on Package Scheme of
Incentives,other schemes of State or
Central Government ?

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 3.Commercial Training &
Coaching Services
• Introduced: 01.07.2003
• Definitions-
• Sec 65(27)- "commercial training or coaching centre“
– Any institute or establishment
– Imparting skill,knowledge,lessons
– Any subject other than sports
– Excludes pre school coaching
– Also excludes any institute or establishment issuing certificates
recognized by law
• Taxable service- any service provided or to be provided “To
any person, by a commercial training or coaching centre in
relation to commercial training or coaching” -Sec 65(105)
(zzc)

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 Issues
• What is the meaning of word Commercial ?
• NGO making surplus out of training,Does
NGO become commercial ?
• Person taking group tutions,is it commercial
coaching ?
• Certification courses provided by colleges
and universities not recognized by law,Will it
be taxed ?

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 4.Stock Broker Services
• Introduced : 1.7.1994
• Definition: Sec 65(101)
• Stock Broker means
– Application made for registration
– Registered as a stock broker or
– Sub broker
• Taxable service- Taxable service means any service
provided or to be provided “to any person, by a stock
broker in connection with sale or purchase of securities
listed on recognized stock exchange”-S.65(105)(s);
• The Finance (No.2) Bill,2009 has proposed to omit the words
Sub Broker from definition of Stock Broker

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 Issues
• Services provided by Unregistered Stock
Broker,taxable ?
• Services provided by one broker to another
broker,taxable ?
• Whether arbitrage,jobbing done by the
broker on his own account,taxable ?
• Transactions of unlisted securities of listed
companies I.e Debentures,Commercial
Papers,taxable ?

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 5.Management or Business
Consultant’s Services
• Introduced : 16/10/1998
• Definition : 65(65)
• “Management or Business Consultant” means
any person who is engaged in providing any
service,either directly or indirectly,in
connection with the management of any
organisation or business in any manner and
includes any person who renders any
advice,consultancy or technical assistance in
relation to :

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 Management or Business
Consultant’s
Services(Contd.)
– Financial management
– Human Resources Management
– Marketing Management
– Production Management
– Logistics Management
– Procurement & Management of Information Technology
resources ;or
– other similar areas of management
• Taxable service- Taxable service means any service provided or to be provided
“to any person by a management or business consultant in connection with
the management of any organisation or business in any manner”-S.65(105)(r);

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 Issues
• Are the following activities management ?
– Service of Drafting of Whistle Blower Policy
– Drafting a Risk Management Framework
– Corporate Governance Rating
– Internal Audit by a non practicing CA/CS/CWA
– Advisory services in getting ISO certification,various
government approvals like SEZ,environment
clearances,FDA approvals

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 6.Sponsorship Services
• Introduced : 01.05.2006
• Definition: Sec 65(99a)
• “sponsorship" includes naming an event after the
sponsor,displaying the sponsor’s company logo or trading
name,giving the sponsor exclusive or priority booking
rights,sponsoring prizes or trophies for competition;
But does not include any financial or other support in the form
of donations or gifts,given by the donors subject to the
condition that the service provider in under no obligation to
provide anything in return to such donors;
• Taxable service- Taxable service means any service provided or
to be provided “to any body corporate or firm,by any person
receiving sponsorship,in relation to such sponsorship,in any
manner but does not include services in relation to sponsorship
of sports events”-S.65(105)(s);

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 Issues
• What is a Sports event?
• What is a body corporate?
• What is a firm ?
• In respect of Services provided from
outside India and received in
India,Whether services provided to
other than body corporate and firms
can be taxed ?

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 7.Security Agency Services
• Introduced : 16.10.1998
• Definition: Sec 65(94) “Security Agency” means
– Any person engaged in business
– Security of any property,movable & immovable
– Includes services of investigation
– Detection or verification
– Of any fact or activity
– Supply of security personnel
• Taxable service- any service provided or to be provided To any
person, by a security agency in relation to security of any
property or person and detection,etc services -Sec 65(105) (zzc)

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 Issues
• Is security agency service provided
by a Police Department taxable ?
• Is security agency service provided
by a NGO taxable ?
• Is security agency service provided
by animal keepers like
dog,horse,other pets taxable ?

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 8.Cosmetic & Plastic
Surgery Services
• Introduced : yet to be effective
• Finance (No.2) Bill,2009
• Services by any person to any person
in relation to
– Costmetic & Plastic surgery
– Excludes any surgery undertaken to
restore or reconstruct anatomy or
functions of body due to diseases

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 Issues
• Removal of Fat
• Smile surgery
• Dental Surgery

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 Useful Links
• Directorate of Service Tax, Ministry of Finance
http://www.servicetax.gov.in/
• Union Budget
http://www.indiabudget.nic.in/ub2009-10/fb/bill5.pdf

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 QUESTIONS?

SUGGESTIONS??

COMMENTS???

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31
 2.Insurance Auxillary
Services
• Introduced : 16.10.1998
• Definition: Sec 65(83)
• "practicing chartered accountant" means a person who is a
member of the Institute of Chartered Accountants of India
and is holding a certificate of practice granted under the
provision of the Chartered Accountants Act, 1949 (38 of
1949) and includes any concern engaged in rendering
services in the field of Chartered accountancy;
• Taxable service- Taxable service means any service
provided or to be provided “to any person, by a practising
chartered accountant in his professional capacity, in any
manner”-S.65(105)(s);

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 3. Event Management
Services
• Introduced: 16.08.2002
• Definition : Sec 65(40)- Event Management
: Sec 65(41) – Event manager
• Taxable service - any service provided or to be provided to
“to any person, by an event manager in relation to event
management “[Sec 65(105) (zu)]

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 Event Management
Services(Contd.)
• An event manager is hired to execute an event such as a
product launch of any corporate, promotional activities,
exhibitions and private functions, etc.
• Event manager uses his expertise and ideas to manage an
event
• Includes any consultation provided for organizing event
• No service tax on sale proceeds of tickets or revenue
generated from the sale of space
• Services provided by an organizer of trade fairs and
exhibitions to an exhibitor in relation to business exhibition
is liable to service tax under “Business Exhibition Service”

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 5. Information Technology
Software Services
• Introduced: 16.05.2008
• Definition – Sec 65(53a)
• "information technology software” means any
representation of instructions, data, sound or image,
including source code and object code, recorded in a
machine readable form, and capable of being manipulated
or providing interactivity to a user, by means of a computer
or an automatic data processing machine or any other
device or equipment

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 Taxable service
• Sec 65(105) (zzzze)
• any service provided or to be provided
• “To any person, by any other person in relation to information
technology software for use in the course, or furtherance, of
business or commerce, including,—
(i) development of information technology software, 
(ii) study, analysis, design and programming of information
technology software,
(iii) adaptation, upgradation, enhancement, implementation and
other similar services related to information technology software

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(iv) providing advice, consultancy and assistance on matters
related to information technology software, including
conducting feasibility studies on implementation of a system,
specifications for a database design, guidance and assistance
during the startup phase of a new system, specifications to
secure a database, advice on proprietary information
technology software, 
(v) acquiring the right to use information technology software
for commercial exploitation including right to reproduce,
distribute and sell information technology software and right
to use software components for the creation of and inclusion
in other information technology software products,
(vi) acquiring the right to use information technology software
supplied electronically

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 Points to note
• Software consists of carrier medium such as CD, Floppy and
coded data
• Packaged software sold off the shelf, being treated as
goods, is leviable to excise duty
• IT software services provided for use in business or
commerce are included
• Supply of IT software electronically included
• Services provided in relation to advice, consultancy on IT
software included

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 Amendment proposed in
Finance Bill 2009
• the word “providing” is to be substituted for “acquiring” in
Sec 65(105)(zzzze)- Information Technology Software
Services with retrospective effect from 16.05.2008

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 6. Consulting Engineer
• Introduced : 07.07.1997
• Definition Sec 65(31)
• "consulting engineer" means any professionally qualified engineer
or anybody corporate or any other firm who, either directly or
indirectly, renders any advice, consultancy or technical assistance in
any manner to any person in one or more disciplines of engineering
• Taxable service- Sec 65(105) (g)
• Taxable service means any service provided or to be provided
“to any person, by a consulting engineer in relation to advice,
consultancy or technical assistance in any manner in one or more
disciplines of engineering including the discipline of computer
hardware engineering

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 Consulting Engineer…
• Includes self-employed professionally qualified engineer,
whether or not employing others for assistance.
• For services rendered by the sub-consultant to the prime
consultant, the levy of Service Tax, on the prime or
main consulting engineer who raises a bill on his client
(which would include the charge for services by the sub-
consultant).

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 Illustrative list
(i) Feasibility study
(ii) Pre-design services/project report
(iii) Basic design engineering
(iv) Detailed design engineering
(v) Procurement
(vi) Construction supervision and project management
(vii) Supervision of commissioning and initial operation
(viii) Manpower planning and training
(ix) Post-operation and management
(x) Trouble shooting and technical services,
including establishing systems and procedures for an existing
plant.

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 Specific Exemption
• taxable services provided by a consulting engineer to a
client on transfer of technology

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 Taxable services
Communication Services
1. Telecommunication Service
65(105)(zzzx)
2. Mailing List Compilation and Mailing
65(105)(zzzg)
3. Internet Telephony
65(105)(zzzu)
4. Internet Cafe
65(105)(zzf)
5. Development and Supply of Contents
65(105)(zzzzb)

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 Travel and Transport
6. Air Travel Agent 65(105)(l)
7. Airport Services 65(105)(zzm)
8. Transport of Goods by Aircraft 65(105)(zzn)
9. Transport of passenger embarking in India for
international journey by air 65(105)(zzzo)
10. Tour operator 65(105)(n)
11. Rent-A-Cab scheme operator 65(105)(o)
12. Rail Travel Agent 65(105)(zz)
13. Transport of goods by road 65(105)(zzp)
14. Travel Agent – Other 65(105)(zzx)
15. Transport of goods other than water through
pipeline or other conduit 65(105)(zzz)

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 Travel and Transport…..
16. Transport of goods in Container by Rail
65(105)(zzzp)
17. Ship Management
65(105)(zzzt)
18. Transport by Cruise Ship 65(105)
(zzzv)
19. Courier 65(105)(f)

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 Entertainment
20. Photography 65(105)(zb)
21. Online Information & Data Base Access or retrieval 65(105)(zh)
22. Video-tape Production 65(105)(zi)
23. Sound Recording 65(105)(zj)
24. Broadcasting agency or organization 65(105)(zk)
25. Cable Operator 65(105)(zs)
26. Event Management 65(105)(zu)
27. Fashion Designer 65(105)(zv)
28. Club or Association 65(105)(zzze)
29. Mandap Keeper 65(105)(m)
30. Convention Centre 65(105)(zc)
31. Outdoor Caterer 65(105)(zzt)
32. Pandal or shamiana 65(105)(zzw)

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 Professional /
Marketing/Agency
33. Consulting Engineer 65(105)(g)
34. Architect 65(105)(p)
35. Interior decorator 65(105)(q)
36. Management or Business consultant 65(105)(r)
37. Chartered Accountant 65(105)(s)
38. Cost Accountant 65(105)(t)
39. Company Secretary 65(105)(u)
40. Scientific and Technical consultancy 65(105)(za)
41. Beauty Treatment 65(105)(zq)
42. Health Club & Fitness 65(105)(zw)
43. Opinion Poll 65(105)(zzs)
44. Programme Producer 65(105)(zzu)

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 Professional /
Marketing/Agency…..
45. Security Agency 65(105)(w)
46. Credit Rating Agency
65(105)(x)
47. Market Research Agency 65(105)(y)
48. Advertisement Agency 65(105)(e)
49. Manpower Recruitment and Supply Agency
65(105)(k)
50. Registrar to an issue
65(105)(zzzi)
51. Share Transfer Agent
65(105)(zzzj)
52. Design Services 65(105)
(zzzzd)

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 Real estate
53. Real Estate Agent 65(105)(v)
54. Commercial or Industrial Construction Service
65(105)(zzq)
55. Site formation and clearance, excavation and
earthmoving and demolition and such other activities
65(105)(zzza)
56. Construction of Complex
65(105)(zzzh)
57. Survey and Map Making 65(105)
(zzzc)

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 Insurance
58. General Insurance
65(105)(d)
59. Insurance auxiliary services concerning general
insurance business
65(105)(zl)
60. Life insurance in relation to risk cover
65(105)(zx)
61. Insurance auxiliary services concerning
life insurance business
65(105)(zy)

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 Cargo/Port
62. Custom House Agent
65(105)(h)
63. Steamer Agent 65(105)(i)
64. Clearing & Forwarding Agent
65(105)(j)
65. Cargo Handling 65(105)(zr)
66. Port
65(105)(zn)
67. Other Port
65(105)(zzl)
68. Dredging Service 65(105)
(zzzb)

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 Financial
69. Stock-Broker 65(105)(a)
70. Underwriter 65(105)(z)
71. Banking or Financial Services 65(105)(zm)
72. Foreign Exchange Broker 65(105)(zzk)
73. Forward Contract 65(105)(zzy)
74. ATM operations, maintenance or management 65(105)(zzzk)
75. Recovery Agent 65(105)(zzzl)
76. Credit / Debit / Charge or Other payment Card 65(105)(zzzw)
77. Asset management service 65(105)(zzzzc)
78. Management of Investment ULIP Service 65(105)(zzzzf)
79. Stock Exchange Service 65(105)(zzzzg)

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 Financial…
80. Commodity Exchange Service
65(105)(zzzzh)
81. Processing and Clearing House Service
65(105)(zzzzi)

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 Business/ Commercial
82. Authorized Service Station 65(105)(zo)
83. Dry Cleaning 65(105)(zt)
84. Storage and warehousing 65(105)(zza)
85. Business Auxiliary Service 65(105)(zzb)
86. Commercial Training or Coaching Centre 65(105)(zzc)
87. Franchise 65(105)(zze)
88. Management, maintenance or repair 65(105)(zzg)
89. Technical testing and analysis 65(105)(zzh)
90. Technical inspection and certification 65(105)(zzi)
91. Business Exhibition 65(105)(zzo)
92. Intellectual Property 65(105)(zzr)

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 Business/ Commercial
93. Cleaning Activity 65(105)
(zzzd)
94. Packing Activity 65(105)
(zzzf)
95. Sale of space or time for advertisement
65(105)(zzzm)
96. Sponsorship
65(105)(zzzo)
97. Support services of business or commerce
65(105)(zzzq)
98. Information Technology Software Services
65(105)(zzzze)

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 Others
99. Erection, Commissioning or Installation 65(105)(zzd)
100.Survey and Exploration of Mineral Oil and Gas 65(105)(zzv)
101.Auctioneers 65(105)(zzzr)
102.Public Relation 65(105)(zzzs)
103. Mining 65(105)(zzzy)
104.Renting of immovable property 65(105)(zzzz)
105.Works contract 65(105)(zzzza)
106.Supply of Tangible Goods Service 65(105)(zzzzj)

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