TMI BlogSubject: Tax on 15 New Services to be effective from 16.7.2001- Instructions regarding.X X X X Extracts X X X X X X X X Extracts X X X X ..... on of self-assessment procedure vide amendment of section 70 of the Finance Act 1994. Section 71 has also been amended to provide for verification by the Superintendent for correctness of the tax assessed by the assessee on self-assessment basis. Where service tax on any services provided has escaped assessment or has been under assessed, the Assistant Commissioner / Deputy Commissioner of Central Excise (AC/DC) is required to pass an order of assessment. In view of the amended provisions, the Superintendent of Central Excise is not required to pass any order of assessment. He should only refer the matter to AC/DC concerned along with his observation and report. 4.2 Section 67 of the Finance Act, 1994 has been amended to provide for a comprehensive definition of value of taxable service instead of separate definitions for each of the services. However, there is no change in the definitions relating to existing taxable services. Accordingly clarifications/circulars issued in this regard in the past will continue to hold good. 4.3 Section 69 has been amended to specify that application for registration shall be made to the "Superintendent of Central Excise". 4.4 Section 73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure I (ii) Photography service Annexure II (iii) Convention service Annexure III (iv) On-line information and database access and/or retrieval Annexure IV (v) Broadcasting service Annexure V (vi) Insurance auxiliary services Annexure VI (vii) Banking and other financial services Annexure VII (viii) Port services Annexure VIII (ix) Authorised service station for service or repair of motorcar and two wheeled motor vehicle Annexure IX (x) Video tape production service Annexure X (xi) Sound recording service Annexure XI (xii) Telegraph services Annexure XII (xiii) Telex service Annexure XII (xiv) Facsimile service Annexure XII (xv) Leased circuits Annexure XII The section or clause nos. referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2001. 8 The Commissioners are requested to issue suitable tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labs, etc. would come under the purview of the proposed levy. In common parlance, these categories of service providers are not known as scientists or technocrats or science or technology institutions or organisations. They will not be covered under service tax. Whether public funded research institutions like CSIR, ICAR, DRDO, IITs and IISc.,Regional Engineering Colleges etc, which are exempt from payment of income tax are covered under the service tax. Yes. Service tax is liable to be paid when any scientific or technical consultancy service is rendered whether by public funded institutions or by private agencies. Whether testing services will be covered under the proposed levy? Mere testing will not attract service tax. However, in case testing is an integral part of the consultancy, then such activity is part and parcel of the taxable service and no abatement of any kind admissible. Many public funded research institutions receive grants or aids from the Government for conducting research /project work. Whether such activities would be covered under the levy? In the facts of this case, no service is rendered to any one. Hence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices such as restoration of old photographs, processing and developing of photographic films and printing of photographs etc. 3. The photography services are rendered by still photography studios, still film processing laboratories, cinematographic studios/labs who undertake motion picture photography and processing of cine films, holography studios (laser photography) who make holograms, aerial photographers, industrial photographers, etc. 4. The value of taxable service is the gross amount charged from the customer for the service rendered. However, the cost of unexposed photography films sold to the customer is excluded. The service provider claiming benefit of the cost of film should be advised to show them clearly on the invoices along with description and particulars of the film. Otherwise, the claim will not be considered as admissible. No other cost (such as photographic paper, chemicals, etc.) is excluded from the taxable value. 5. In regard to still photography, notification No. 6/2001-ST dated the 9th July, 2001, has been issued. Accordingly, service providers who are registered under various States/Municipal laws relating to Shops and Establishments or any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is not liable to pay service tax again under the category of convention services. Similarly, a convention service is not liable to tax as mandap keeper service also. 3. A doubt has been raised whether holding of conventions by Chambers of Commerce and Industry for their members would be liable to service tax. In this regard, it is clarified that service tax, in the case of convention services, is applicable only when the service is provided by a commercial concern. If the Chamber of Commerce and Industry is not a commercial concern, then the tax does not apply. The memorandum and articles of association of a Chamber of Commerce Industry would indicate whether it is a commercial concern or not. It is informed by the Chambers that generally they are not commercial concerns. Annexure IV On-line information and database access and/or retrieval 1 . As per section 65(19), 1994, the term "On-line information and data base access or retrieval" means providing data or information, retrievable or otherwise, to a customer in electronic form through a computer network. The words "Data", "information", "electronic form" and "computer network" have the same meanings assign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tabase or information. Some of the well-known ISPs operating in India are VSNL, MTNL, Satyam online, Bharti, Tata, RPG, HCL, Wipro, BPL, Mantra online, Dishnet. They normally charge the customers on the basis of usage of time (hours). They also provide dedicated lease lines on lump-sump payment basis. Clearly ISPs provide service in relation to on-line information and database access or retrieval. They are an integral part of the internet operations and without their service, the data or information can neither be accessed nor retrieved. They are, therefore, liable to pay service tax on the amount charged from the customers whether on usage time basis or on lease line basis. 5. As regards paid web-sites, a few examples of Indian dot companies are, Indiainformer.com, CIIonline.com, who charge the customer for certain specific information contained in their website either in advance or credit basis. They shall be also liable to pay service tax on the paid services provided by them. It is obvious that where the information is supplied free of charge, no service tax is payable. 6. Point for clarification: A question has been raised as to whether e-commerce transactions (ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of relay stations and all is grammatical variations and cognate expressions shall be construed accordingly. The taxable service is any service provided to a client, by a broadcasting agency or organisation in relation to broadcasting, in any manner. 2. The service covers both radio broadcasting and television broadcasting . While radio broadcasting is done by the All India Radio or any private radio channel, television broadcasting is done by Doordarshan, Indian TV Channels and Foreign TV channels . The broadcasting may be of advertisements, serials/programmes or live events. The client is the person who wants an advertisement to be broadcast or the sponsor of a serial or programme or event who wants the serial or programme or event to be broadcast. The service provider, that is, broadcasting agency or organisation is the AIR, Doordarshan, other Indian TV Channels and foreign TV channels who broadcast the programme in India. 3. Broadcasting is done either terrestrially or through satellite links. Most of the private TV channels are using satellite links for broadcasting their programmes. The uplinking of the programme to the satellite is done through VSNL or other ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charges and remitting the same to their head office/holding company/principals as the case may be. In such cases, these branch offices/subsidiary companies/ agents are rendering the service in relation to broadcasting and therefore, they are liable to pay the service tax and comply with all other procedural formalities relating to service tax. 6. In the case of AIR and Doordarshan, the billing for the service rendered is done by the Regional Stations of AIR or Regional Doordarshan Kendras. These Regional Offices will have to be, therefore, registered for payment of service tax and for complying with other procedural formalities. 7. A doubt has been raised whether Prasar Bharati (AIR and Doordarshan) is liable to pay service tax since under section 22 of the Prashar Bharati Act 1990, they are exempt from any income tax or any other tax in respect of any income, profit or gains, accruing or arising out of the Fund of the corporation or any amount received by them. In this regard, it is clarified that the said section 22 applies only in respect of taxes on income or profit or gains. The exemption is only in respect of direct tax and not in respect of indirect tax. As such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge the policy holder. However, the insurance company pays the agent a commission (usually as a percentage of the insurance premium) on a periodic basis. In the case of an insurance agent, it has been provided in the Service Tax Rules that the person liable to pay service tax will be the concerned insurance company who has appointed the agent. Notification no. 5/2001-ST refers. 4. The service tax is applicable to services provided on or after16th July 2001 and any payment made for the services provided prior to this date will not liable to tax even though payment is made on or after the 16 th July 2001. 5. A point has been raised that the service provider, namely, an actuary, an intermediary or insurance intermediary or an insurance agent is reimbursed certain out of pocket expenses such as travelling expenses, boarding and lodging charges on actual basis. These expenses are reimbursed in addition to the prescribed fee. Whether such reimbursements will be included in the taxable value? In this regard it is clarified that the amount billed to the client on account of out of pocket expenses which are reimbursable on actual basis, such as travelling, boarding and lodgin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or part of its business any of the following activities, namely- (i) the financing, whether by way of making loans or advances or otherwise, of any activity other than its own: (ii) the acquisition of shares, stock, bonds, debentures or securities issued by a government or local authority or other marketable securities of like nature: (iii) letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire Purchase Act. 1972 (26 of 1972): (iv) the carrying of any class of insurance business: (v) managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto; (vi) collecting, for any purpose or under any scheme or arrangement by whatever name called, monies in lumpsump or otherwise, by way of subscription or by sale of units, or other instruments or in any other manner and awarding prizes or gifts whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are collected or to any other person, but does not include any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post dated cheques and no separate bills are raised for the monthly recovery. Every agreement bears a unique number. 2.1.3 The EMIs consist of recovery of principal amount (towards the original cost of the equipment) and finance /interest charges. The allocation between the principal and the finance/interest charges are known to and agreed upon by both the parties. The customer repayment schedule contains the details of the EMIs with the break up for the principal and the interest. In respect of leasing and hire-purchase, the amount recovered as principal is not the consideration for services rendered but is credited to the capital account of the lessor/hire purchase service provider. The interest/finance charges is the revenue or income and is credited to the revenue account. Such interest or finance charges together with the lease management fee/ processing fee/documentation charges is the consideration for the services rendered and, therefore, they constitute the value of taxable service and service tax is payable on this value. Accordingly it is clarified that service tax in the case of financial leasing including equipment leasing and hire purchase will be leviable only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies as manager, consultant, advisor or rendering corporate advisory service in relation to such issue management. This, inter-alia, consists of preparation of prospectus and other information relating to the issue, determining financial structure, tie up of financiers and final allotment and refund of the subscription for debt/ equity issue management and acting as advisor, consultant, co-manager, underwriter and portfolio manager. In addition, merchant banking services also include advisory services on corporate restructuring, debt or equity restructuring, loan restructuring, etc. The fee charged by the merchant banker for rendering these services will be the taxable value in respect of this service. 2.4 Asset management including portfolio management and all forms of fund management, pension fund mangement, custodial depository and trust services. 2.4.1 Asset management and portfolio managers are also governed by the SEBI (Portfolio Managers) Rules, 1993 and SEBI (Portfolio Managers) Regulations, 1993. As per these rules and regulations, the "portfolio manager" means any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to pay service tax in respect of such service. Where the billing and accounting is not centralised and is undertaken by different branches of a bank or a financial institution including NBFCs, each such branch office will have to be registered and made responsible for payment of service tax and compliance with other procedural formalities. Annexure VIII Port services 1. As per the section 65(51), the "port services" means any service rendered by a port or any person authorized by the port, in any manner, in relation to a vessel or goods. As per section 65 (72)(zn), taxable service is any service provided to any person by a port or any person authorized by the port, in relation to port services, in any manner. 2. Port services generally consist of port and dock services (these are for services rendered in relation to vessels), cargo handling and storage services, railway haulage services, and container handling services(these are for services rendered in relation to goods). The Dock Labour Board of the Port provides service of labour for handling of goods. The port or the person authorised by the port rendering these services is the service provider. 2.1 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be covered in the ambit of service tax. Examples of taxable services include services provided during warranty period, subsequent services such as routine check of performance of engine and vehicle, engine tuning, engine oil check, gear oil check, wheel alignment, wheel balancing, clutch and brake adjustment, wheel rotation, cleaning/washing and any repairs undertaken. However cost of parts and accessories supplied during course of repair and servicing of vehicle will not be includible in the taxable value. Such cost should be shown separately in the bill/ invoice. 3. Authorised service station provides free service in respect of new vehicles during the warranty period on behalf of the manufacturer and they are reimbursed for the same by the manufacture of such vehicle. In this regard a point has been raised as to whether service tax is leviable on the amount reimbursed to them for carrying out free services. It is clarified that though the authorized service stations are providing free service to the customer during the warranty period, they are being reimbursed service charges for the same by the manufacturer of motor vehicles. The definition for value of taxable servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or all the facilities in a consolidated manner, required for recording of sound, editing thereof, providing different kinds of sounds from the sound library for use in theater, films and radio etc. services for mixing of sounds, etc. The service charges that are paid for the use of these facilities and it is usually in terms of hours of usage. It is clarified that reproduction of original master to make further copies of the audio tape or CDs etc. will not come within the purview of service tax. Annexure XII Leased circuits / telegraph service / telex service /facsimile service: 1. As per section 65(72) (zd),(ze), (zf) and (zg), taxable service in relation to these services is any service provided, to a subscriber, by the telegraph authority in relation to leased circuits, telegraph, telex and facsimile communication. 2. As regards facsimile services, at present the telegraph authorities are providing it in two ways. One is "bureau fax" where the charges are based on a flat rate per page depending upon paper size and the other is "ordinary fax" where charges are equivalent to the number of calls consumed in faxing the paper. In case of "bureau fax", this is pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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