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ABATEMENT UNDER SERVICE TAX PROVISIONS

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ABATEMENT UNDER SERVICE TAX PROVISIONS
By: Mr. M. GOVINDARAJAN
February 14, 2011

                        Service Tax was introduced with effect from 1994.  The service tax is slowly expanding and now it covers nearly 117 services.   When a service is brought into the service tax net it is obligatory on the part of the service provider to levy service tax and pay the amount to the credit of the Central Government.   Government is given power to exempt any service from the provisions of the service tax.  Abatements are also given to some services now and then to the service providers.   In this article the list of services which are eligible for abatement as on date and the conditions to avail such abatements are furnished.

                        The following are the services for which abatement is allowed:

  • Mandap keeper;
  • Tour operator;
  • Renting of a cab;
  • Holding of a convention;
  • Business auxiliary service;
  • Chit;
  • Erection, commissioning or installation;
  • Commercial or Industrial Constructions Service;
  • Catering;
  • Pandal or shamiana;
  • Construction of complex.

MANDAP KEEPER:

                        Sec.65 (105) (m) defines the service ‘Mandap Keeper’. 

                        The use of mandap, including the facilities provided to any person in relation to such use and also for the catering charges – the service provider in this case is required to pay service tax on 60% value of the service provided.  This exemption shall apply only in such cases where the mandap keeper also providers catering service and the invoice, bill or challan issued indicates that it is inclusive of the charges for catering services.

                        In case of the taxable service provided by a hotel as mandap keeper who renders service including catering services, that is, supply of food along with any service in relation to use of a mandap – the service provider in this case is required to pay service tax 60% value of the service provided.   To avail this exemption the invoice, bill or challan issued should indicate that it is inclusive of charges for catering services.   The ‘Hotel; is said to be a place where boarding and lodging facilities are provided to public on commercial basis.

TOUR OPERATOR:

                        Sec.65(105)(n) defines the service ‘tour operator’.

                        For this service three types of abatements are there which are as follows:

  • Services provided or to be provided to any person, by a tour operator in relation to a package tour is required to pay service tax on 25% of the value of service provided.  The ‘package tour’ is a tour wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided by the tour operator as part of the package tour to the person undertaking the tour.   For this purpose the bill should indicate that it is inclusive of charges for such a tour;
  • Services provided or to be provided to any person, by a tour operator in relation to a tour, if the tour operator is providing services solely or arranging or booking accommodation for any person in relation to a tour is required to pay service tax on 10% of the value of service provided. 

The conditions stipulated for this purpose are as follows:

  • The invoice, bill or challan issued should indicates that it is towards charges for such accommodation; and
  • This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.
  • Services other than services specified above provided or to be provided to any person by a tour operator in relation to a tour is required to pay service tax on 40% of the value of service provided.  The bill issued for this purpose should indicate that the amount charged in the bill is the gross amount charged for such a tour.

RENTING OF A CAB:

                        Sec. 65(105)(o) defines the service ‘renting of a cab’.    The service provider in this case is required to pay service tax on 40% of value of taxable service.   No condition is prescribed for this abatement.

HOLDING OF CONVENTION:

                        Sec.65 (105) (zc) defines the service ‘holding of a convention’.  Holding of a convention where service provided includes catering service – in this case the service provider is required to pay service tax on 60% of the value of taxable service.   The gross amount charged from the recipient of service is inclusive of the charges for the catering service.   This is the condition imposed for this abatement.

BUSINESS AUXILIARY SERVICE:

                        Sec. 65(105) (zzb) defines this service.  Business auxiliary service in relation to production or processing of parts and accessories used in the manufacture of cycles, cycle rickshaws and hand-operated sewing machines, for, or on behalf of, the client – in this case the service provider is required to pay service tax on 70% of the value of taxable service.  The gross amount charged from the client is inclusive of the cost of inputs and input services, whether or not supplied by the client.

CHIT:

                        Sec. 65 (105) (zm) defines this service.  Chit means a transaction whether called chit, chit fund, chitty, kuri, or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount.  No condition is imposed for this abatement.

ERECTION, COMMISSIONING OR INSTALLATION:

                        Sec. 65 (105) (zzd) defines this service.   Erection, commissioning or installation under a contract for supplying a plant, machinery or equipment and erection, commissioning or installation of such plant machinery, equipment or structures – in this case the service provider is required to pay service tax on 33% of the value of the taxable service.   This exemption is optional to the commissioning and installation agency.  The gross amount charged from the recipient of service shall include the value of the plant, machinery, equipment, structure parts and any other material sold by the commissioning and installation agency, during the course of providing erection, commissioning or installation service.

COMMERCIAL OR INDUSTRIAL CONSTRUCTIONS SERVICE:

                        Sec. 65 (105) (zzq) defines this service.  In this case the service provider is required to pay service tax on 33% of the value of taxable service.  This exemption shall not apply in such cases where the taxable services provided are only completion and finishing services in relation to building or civil structure referred to in Sec.65 (25)(b) (c).  The gross amount charged shall include the value of goods and materials supplied or provided or used by the provider of the construction service for providing such service.  Abatement providing effective taxable value  of 25% when cost of land has not been separately recovered is available vide amending Notification No. 29/2010-ST, dated 22.06.2010.

CATERING:

                        Sec. 65 (105) (zzt) defines this term.  The service provider is required to pay service tax on 50% of the value of taxable service.   This exemption shall apply in cases where-

  • The outdoor caterer also provides food; and
  • The invoice, bill or challan issued indicates that it is inclusive of charges for supply of food.

PANDAL OR SHAMIANA:

                        Sec. 65 (105) (zzw) defines this service.  Services in relation to pandal or shamiana in any manner, including services rendered as a caterer – in this case the service provider is required to pay service tax on 70% of the value of taxable service.  This exemption shall apply in cases where-

  • The pandal or shamiana contractor also provides catering services, that is, supply of food; and
  • The invoice, bill or challan issued indicates that it is inclusive of charges for catering service.

CONSTRUCTION OF COMPLEX:

                        Sec. 65 (105) (zzzh) defines this service.  In this case the service provider is required to pay service tax on 33% of the value of taxable service.   This exemption shall not apply in cases where the taxable services provided; are only completion and finishing services in relation to residential complex, referred  to in Sec. 65 (30a) (b) of the Finance Act, 1994.   The gross amount charged shall include the value of goods and materials supplied or provided or used for providing the taxable service by the service provider. Abatement providing effective taxable value of 25% when cost of land has not been separately recovered is available vide amending Notification No.29/2010-ST, dated 22.06.2010.

TRANSPORT OF GOODS IN CONTAINERS BY RAIL:

                        Sec. 65 (105) (zzzp) defines this service.   In this case it is required to pay service tax on 30% of the value of taxable service.

 
By: Mr. M. GOVINDARAJAN - February 14, 2011
 
 
Discussions to this article

Sir,

At the outset I must say this is a very good article ... 

Sir, I need some more information with respect to the abatement in case of Rent a Cab. Co. in which I am working providing the services of Rent a Cab to many companies to pick up their employees from a place to their work station and return. 

We are providing this service through our vendors. In short we are the mediator between the customers and suppliers. Suppliers are raising their invoice to us and we are raising our invoices to our customers. Some of our customers are asking us to bill them at abated rate i.e. service tax @ 4.12% in this case it is a condition as per notification / circular 01/2006 that if a service provider providing abated rate of service then he cannot claim CENVAT credit. if so then the service tax charged by my suppliers will be cost for me. My questions are ...

01. Can I ask my suppliers not to charge service tax to me ?

02. Can I provide Rent a Cab services at two rate i.e. @ 4.12 & 10.30 to my customers ?

03. In case if the CENVAT claimeed agaist the abated rate of service, can EA-2000 Service Tax auditors ask me to reverse the CENVAT or they can consider the said services @ 10.30 % and recover the difference of Service Tax from me ?

04. Is there any notification / circular where by it is mentioned that service provider cannot provide two rate of services. i,e, at bated rate and at full rate.

Request your opinion on the above questions. You opinion will help me a lot. You may directly send your opinion at thakor_2000@yahoo.com or you may contact me on 09987919777. Thanks in advance.

Thanks & Regards,

Sanjay Thakor 

By: Sanjay Thakor
Dated: 19/02/2011

 
 

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