TMI BlogDraft Circular - Clarification on technical issues relating to scope and classification of taxable services, levy of service tax and valuation of taxable services – regX X X X Extracts X X X X X X X X Extracts X X X X ..... hensive review of all the clarifications issued since the introduction of service tax on matters relating to service tax in various forms by different authorities keeping in view the changes that had taken place in the statutory provisions, the judicial pronouncements and other relevant factors and appointed a Committee under Shri T.R.Rustagi, former Chief Commissioner of Customs Central Excise and Director General of Inspection to undertake the review of clarifications. 3. Comments, views and suggestions were also sought from the trade and industry associations, departmental officers and interested persons. 4. Shri T.R.Rustagi submitted his report to the Government and suggested to withdraw all the clarifications and codify the clarifications into two circulars - one relating to technical issues and the other relating to procedural issues. The report of Shri T.R.Rustagi has been placed on the CBEC web site for comments and suggestions. 5. Taking into consideration the report submitted by Shri T.R.Rustagi, views and suggestions received from the trade and industry associations, departmental officers and other stakeholders, it is proposed to codify and issue a comprehensive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls. An amount collected for delayed payment of a telephone bill is not to be treated as consideration charged for provision of telecom service and therefore, does not form part of the value of taxable service under section 67 read with Service Tax (Determination of Value) Rules, 2006. 004.01/01.07.07 Persons/agencies canvass advertisements for publishing, on commission basis. Such persons / agencies do not provide any other services like making, preparation, display or exhibition of advertisement. Whether merely canvassing advertisement for publishing on a commission basis by persons / agencies is classifiable as Advertising Agency service [section 65(105)(e)] or not. Merely canvassing advertisements for publishing, on commission basis, is not classifiable under the taxable service falling under section 65(105)(e). Such services are leviable to service tax under business auxiliary service [section 65(105)(zzb)]. 005.01/01.07.07 Some transporters undertake door- to-door transportation of goods or articles and they have made special arrangements for speedy transportation and timely delivery of such goods or articles. Such services are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ', and service tax is leviable on services provided by such institutions in relation to campus recruitment under section 65(105)(k). 012.01/01.07.07 "Mandap" is defined as any immovable property as defined in section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixtures, light fittings and floor coverings therein let out for a consideration for organizing any official, social or business function. [section 65(66)] "Mandap keeper" is defined as a person who allows temporary occupation of a mandap for a consideration for organising any official, social or business function [section 65(67)]. Whether hotels / restaurants letting out their halls, rooms etc. for social, official or business functions fall within the definition of "mandap" and allowing temporary occupation of halls, rooms etc by such hotels / restaurants for organizing any official, social or business function is leviable to service tax under "mandap keeper service" [section 65(105)(m)]. Halls, rooms etc. let out by hotels / restaurants for a consideration for organising social, official or business functions are covered within the scope of "mandap" [section 65(66)], and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng or selling), at specified rates, without separately charging any amount as commission for such dealing, is leviable to service tax as foreign exchange broking under 'banking and other financial services' [section 65(105) (zm)]. Moneychangers are authorized by RBI to buy and sell foreign exchange at the prevalent market rates. Buying or selling of foreign exchange by such persons without separately charging any amount as commission or brokerage does not fall within the scope of foreign exchange broking and is not leviable to service tax under section 65(105)(zm). 034.02/01.07.07 'Asset management and all other forms of fund management' are leviable to service tax under 'banking and other financial service' [section 65(12)]. Whether the amount charged as 'entry and exit load' from the investor by a mutual fund is leviable to service tax as asset / fund management services under banking and other financial services [section 65(105)(zm)]. Entry load and exit load charged by a mutual fund are not for the purpose of management of assets. Thus, amount charged as "entry and exit load" are not to be treated as consideration received by Asset Management Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny amount as service charge from the customers. The vehicle manufacturer promises such a facility to attract customers and reimburses the service charges to the authorised dealers, who provide to customers free servicing of motor vehicles. However, as per agreement, consideration for the service provider is not directly paid by the customer but by the vehicle manufacturer. Whether such 'free services' given to the customer free of cost by the authorized dealers (for which they are reimbursed by the vehicle manufacturers) are leviable to service tax under authorised service station service [section 65(105) (zo)]. In this case, service is provided by an authorised service station to a customer and the service provider receives the consideration for the services provided. Service tax is leviable on the amount received from the vehicle manufacturer for the purpose of servicing of vehicles. 036.02/01.07.07 Whether servicing/repair of heavy vehicles like trucks by authorized service station is leviable to service tax under section 65(105)(zo). Service tax is leviable on services provided by an authorised service station to a customer in relation to servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.07 Whether commission received by distributors for distribution of mutual fund units is liable to Service Tax under business auxiliary service. Distributors receive commission from mutual fund for providing services relating to purchase and sale of Mutual fund units. Services provided by such distributors are in the nature of commission agent and are, thus, leviable to service tax under business auxiliary service [section 65(105)(zzb)]. 076.01/01.07.07 "Club or association" is defined as any person or body of persons providing services, facilities or advantages, for a subscription or any other amount, to its members, but does not include such person or body of persons engaged in any activity having objectives which are of a charitable nature. Whether a club or association enjoying exemption under the provisions of Income Tax Act as a public charitable institution gets automatically excluded from levy of service tax under section 65(105)(zzze) read with section 65(25a) of the Finance Act, 1994. Exemption under the Income Tax Act on the ground of being a public charitable institution is of no consequence or relevance for service tax purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut excluding the value attributable, if any, to the domestic sector travel. 086.03/01.07.07 An international journey commences from an airport outside India and completed at an airport outside India but including a sector wherein the passenger disembarks and subsequently embarks at an Indian airport as part of international journey (say Sydney-Mumbai-Dubai-Singapore-Sydney). Whether service tax is leviable for Mumbai-Dubai sector only or on the total value of the ticket. In this case, the journey being a single one and the aim of the passenger is not to travel from India to outside India, service tax is not leviable under section 65(105)(zzzo). 086.04/01.07.07 Whether ticket issued outside India for an international journey commencing from India (say Delhi-London) is leviable to service tax. Service tax is payable by the service provider, namely aircraft operator, for the taxable service provided. Place of purchase/ issue of ticket is of no relevance or consequence to determine the levy of service tax under section 65(105)(zzzo) read with section 66. Service tax is leviable as long as the passenger embarks in India for international j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices provided by Department of Posts are not leviable to service tax. Basic mail services known as postal services such as post card, inland letter, book post, registered post provided exclusively by the Department of Posts to meet the universal postal obligations. Transfer of money through money orders, operation of savings accounts, issue of postal orders, pension payments and other similar services which are of the nature of banking and other financial services. Department of Posts also provides a number of services used predominantly for business or commerce which are also provided by other commercial organizations. Services such as courier services (Speed Post) Insurance Services (Postal Life Insurance), Agency or intermediary services on commission basis (distribution of mutual funds, bonds, passport applications, collection of telephone and electricity bills) fall under the category of services where Department of Posts is in competition with other similar service providers. Such category of services are liable to service tax under appropriate taxable services. (G.G.Pai) Under Secretary (Tax Research Unit) ANNEXURE I Three digit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cargo handling [Section (105)(zr)] 039 Cable operator [Section (105)(zs)] 040 Dry cleaning [Section (105)(zt)] 041 Event management [Section (105)(zu)] 042 Fashion designing [Section (105)(zv)] 043 Health club and fitness [Section (105)(zw)] 044 Life insurance in relation to risk cover [Section (105)(zx)] 045 Insurance auxiliary services concerning life insurance business [Section (105)(zy)] 046 Rail travel agent [Section (105)(zz)] 047 Storage and warehousing [Section (105)(zza)] 048 Business auxiliary service [Section (105)(zzb)] 049 Commercial coaching or training [Section (105)(zzc)] 050 Erection, commissioning or installation [Section (105)(zzd)] 051 Franchise [Section (105)(zze)] 052 Internet caf [Section (105)(zzf)] 053 Management, maintenance or repair [Section (105)(zzg)] 054 Technical testing and analysis [Section (105)(zzh)] 055 Technical inspection and certificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (105)(zzzq)] 089 Auctioneers [Section (105)(zzzr)] 090 Public relations [Section (105)(zzzs)] 091 Ship management [Section (105)(zzzt)] 092 Internet telephony [Section (105)(zzzu)] 093 Transport by cruise ship [Section (105)(zzzv)] 094 Credit card, debit card, charge card or other payment card [Section (105)(zzzw)] 095 Mining [Section (105)(zzzy)] 096 Renting of immovable property [Section (105)(zzzz )] 097 Services involved in the execution of works contract [Section (105)(zzzza)] 098 Development and supply of content [Section (105)(zzzzb)] 099 Asset management service by individuals [Section (105)(zzzzc)] 100 Design services [Section (105)(zzzzd)] 996 Services provided from outside India and received in India 997 Export of Services 998 Valuation of taxable services 999 Miscellaneous **** CBEC solicits views, comments and suggestions on the draft circulars, particularly suggestion ..... 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