The Finance Act, 1994 covers nearly 120 services in the service tax net up to the year 2012 during which negative list was introduced. As such all services except the services in the negative list and in the mega exemption list are liable for the levy of service tax. However, there are certain activities which are difficult to determine whether such activities would be classified as a service or not. Therefore the Government while introducing the negative list inserted a section in which certain services are declared as ‘declared services’. It is the deeming fiction of law. It provides the lawmakers to declare any service as ‘declared service’.
Section 65B(22) of the Finance Act,1994 defines the term ‘declared service’ as any activity carried out by a person for another person for consideration and declared as such under Section 66E.
Section 66E provides that the following shall constitute declared services, namely,-
- renting of immovable property;
- construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion-certificate by the competent authority.
Explanation.- For the purposes of this clause,-
- the expression "competent authority" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of no requirement of such certificate from such authority, from any of the following, namely-
- architect registered with the Council of Architecture constituted under the Architects Act, 1972; (20 of 1972.) or
- chartered engineer registered with the Institution of Engineers (India); or
- licensed surveyor of the respective local body of the city or town or village or development or planning authority;
- the expression "construction" includes additions, alterations, replacements or remodeling of any existing civil structure;
(c) temporary transfer or permitting the use or enjoyment of any intellectual property right;
- development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software;
- agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;
- transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods;
- activities in relation to delivery of goods on hire purchase or any system of payment by installments;
- service portion in the execution of a works contract;
- service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity;
- assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof.(introduced with effect from 14.05.2016).
Now the service tax is to be subsumed in the Goods and Services Tax, which is expected to be effective from 01.04.2017. Under this regime three types of taxes are to be levied viz., Central Goods and Services Tax, Sales Goods and Services Tax and Integrated Goods and Service Tax.
The Empowered Committee of State Finance Ministers released Model Goods and Services Tax Act, 2016 in June 2016 which is yet to be made as a law. The taxation under this Act is on the basis of supply. Section 3 of the Act provides the meaning and scope of supply.
Section 3(1) provides that ‘supply’ includes-
- all forms of supply of goods and/or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
- importation of service, whether or not for a consideration and whether or not in the course of furtherance of business; and
- a supply specified in Schedule I, made or agreed to be made without a consideration;
Section 3(2) provides that Schedules in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.
In Schedule II of Model GST Act, 2016, almost all the declared services in Section 66E of the Finance Act are found place, except the following-
- transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods;
- assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof.(introduced with effect from 14.05.2016).
Point 5 in Schedule II provides that the following shall be treated as ‘supply of service’-
- renting of immovable property;
- construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or before its completion, whichever is earlier.
Explanation : For the purposes of this clause-
- the expression ‘competent authority’ means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non requirement of such certificate from such authority, from any of the following, namely-
- an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
- a chartered engineer registered with the Institution of Engineers (India); or
- a licenced surveyor of the respective local body of the city or town or village or development or planning authority;
- the expression ‘construction’ includes additions, alterations, replacements or remodeling of any existing civil structure;
(c) temporary transfer or permitting the use or employment of any intellectual property right;
- development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology services;
- agreeing to the obligation to refrain from an act, or to tolerate an act or a situation or to do an act;
- works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
- transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; and
- supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption) where such supply or service is for cash, deferred payment or other valuable consideration.
