TMI BlogNegative List of ServicesX X X X Extracts X X X X X X X X Extracts X X X X ..... , express parcel post, life insurance, and agency services carried out on payment of commission on non government business; ( b ) services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport; ( c ) transport of goods and/or passengers; ( d ) support services, other than those covered by clauses (a) to (c) above, to business entities. 4.1.2 Would the taxable services provided by the Government be charged to tax if they are otherwise exempt or specified elsewhere in the negative list? No. If the services provided by the government or local authorities that have been excluded from the negative list entry are otherwise specified in the negative list then such services would also not be taxable. 4.1.3 'Government' has not been defined in the Act. What is the meaning of Government? Please refer to point no. 2.4.7. 4.1.4 Are various corporations formed under Central Acts or State Acts or various government companies registered under the Companies Act, 1956 or autonomous institutions set up by a special Acts covered under the definition of 'Government'? No. For detailed analysis please refer to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate entities or sports events held by private entities be taxable? Yes. Services provided by government security agencies are covered by the main portion of the definition of support service as similar services can be provided by private entities. In any case it is also covered by the inclusive portion of the definition. However the tax will be actually payable on reverse charge by the recipient. 4.1.9 What is the meaning of local authority? Please refer to point no 2.4.8 and 2.4.9. 4.1.10 Department of Posts provides a number of services. What is the status of those services for the purpose of levy of service tax? As per sub-clause (i) of clause (a) of section 66D services provided by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services carried out on payment of commission on non government business are excluded from the negative list. Therefore, the following services provided by Department of Posts are not liable 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 univer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vacant land with or without a structure incidental to its use; loading, unloading, packing, storage and warehousing of agricultural produce; agricultural extension services; services provided by any Agricultural Produce Marketing Committee or Board or services provided by commission agent for sale or purchase of agricultural produce; 4.4.1 What is the meaning of 'agriculture'? 'Agriculture' has been defined in the Act as cultivation of plants and rearing or breeding of animals and other species of life forms for foods, fibre, fuel, raw materials or other similar products but does not include rearing of horses. 4.4.2 Are activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry included in the definition of agriculture? Yes. These activities are included in the definition of agriculture. 4.4.3 What is the meaning of agricultural produce? Agricultural produce has also been defined in section 65B of the Act which means any produce of agriculture on which either no processing is done or such processing is done as is us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce' since on these products certain amount of processing is done by a person other than a cultivator or producer? 'Agricultural produce' has been defined in clause (5) of section 65B as 'any produce resulting from cultivation or rearing of plants, animals including all life- forms, on which either no further processing is done or such processing is done as is usually done by the cultivator or producer which does not alter essential characteristics of agricultural produce but make it marketable for primary market'. The processes contemplated in the said definition are those as are 'usually done by the cultivator or producer'. 4.4.8 Would the processes of grinding, sterilizing, extraction packaging in retail packs of agricultural products, which make the agricultural products marketable in retail market, be covered in the negative list? No. Only such processes are covered in the negative list which makes agricultural produce marketable in the primary market. 4.4.9 Would leasing of vacant land with a green house or a storage shed meant for agricultural produce be covered in the negative list? Yes. In terms of the specified services rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of goods? Yes. Futures contracts would be covered under trading of goods as these are contracts which involve transfer of title in goods on a future date at a pre-determined price. 4.5.3 Would commodity futures be covered under trading of goods? Yes. In commodity futures actual delivery of goods does not normally take place and the purchaser under a futures contract normally offsets all obligations or closes out by selling an equal quantity of goods of the same description under another contract for delivery on the same date. There are, therefore, two contracts of sale/purchase involved which would fall in the category of trading of goods. 4.5.4 Would auxiliary services relating to future contracts or commodity futures be covered in the negative list entry relating to trading of goods? No. Such services provided by commodity exchanges clearing houses or agents would not be covered in the negative list entry relating to trading of goods. 4.6 Processes amounting to manufacture or production of goods The phrase 'processes amounting to manufacture or production of goods' has been defined in section 65B of the Act as a process on which duties of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sale of space or time for advertisement to be broadcast on radio or television Sale of space for advertisement in print media Sale of time slot by a broadcasting organization. Sale of space for advertisement in bill boards, public places (including stadia), buildings, conveyances, cell phones, automated teller machines, internet Aerial advertising 4.7.2 Would services provided by advertisement agencies relating to preparation of advertisements be covered in the negative list entry relating to sale of space for advertisements? No. Services provided by advertisement agencies relating to making or preparation of advertisements would not be covered in this entry and would thus be taxable. This would also not cover commissions received by advertisement agencies from the broadcasting or publishing companies for facilitating business, which may also include some portion for the preparation of advertisement. 4.7.3 In case a person provides a composite service of providing space for advertisement that is covered in the negative list entry coupled wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary services that are used for organizing or promoting betting or gambling events also covered in this entry? No. These services are in the nature of services used for providing the negative list services of betting or gambling. As per the principle laid down in sub section (1) of section 66F of the Act the reference to a service by nature or description in the Act will not include reference to a service used for providing such service. 4.10 Entry to Entertainment Events and Access to Amusement Facilities. 'Entertainment events' has been defined in section 65B of the Act 'as an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, such as exhibition of cinematographic films, circus, concerts, sporting events, fairs, pageants, award functions, dance performances, musical performances, theatrical performances including cultural programs, drama, ballets or any such event or programme'. 'Amusement facility' has been defined in the Act as 'a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the said Act any other entity entrusted with such function by the Central or State Government 4.11.2 If charges are collected by a developer or a housing society for distribution of electricity within a residential complex then are such services covered under this entry? No. The developer or the housing society would be covered under this entry only if it is entrusted with such function by the Central or a State government or if it is, for such distribution, a distribution licensee licensed under the Electricity Act, 2003. 4.11.3 If the services provided by way installation of gensets or similar equipment by private contractors for distribution of electricity covered by this entry? No. the entry does not cover services provided by private contractors. Moreover the services provided are not by way of transmission or distribution of electricity. 4.12 Specified services relating to education The following services relating to education are specified in the negative list - pre-school education and education up to higher secondary school or equivalent; education as a part of a prescribed curriculum for obtaining a qualification recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary course of business. Therefore the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle. In this case since dominant nature is determined by the service of education other dominant service of providing residential dwelling is also covered in a separate entry of the negative list, the entire bundle would be treated as a negative list service. 4.12.5 Are services provided to educational institutions also covered in this entry? No. Such services are not covered under the negative list entry. However certain services provided to or by educational institutions are separately exempted under the mega-notification. These are services provided to or by an educational institution in respect of education exempted from service tax, by way of,- ( a ) auxiliary educational services; or ( b ) renting of immovable property. 4.12.6 What are auxiliary educational services? 'Auxiliary educational services' are defined in the mega notification. In term of the definition, the following activities are auxiliary educational services: any services relating to imparting any skill, knowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an example of naturally bundled course. One relevant consideration in such cases will be the amount of extra billing being done for the unrecognized component viz-a-viz the recognized course. (For guidance on 'bundled services' please refer to Guidance Note 9). 4.12.11 Are placement services provided to educational institutions for securing job placements for the students covered in this negative list entry? No. Such services do not fall in the category of exempt services provided to educational institutions (please refer to point no 4.12.5 above). 4.12.12 Educational institutes such as IITs, IIMs charge a fee from prospective employers like corporate houses/MNCs, who come to the institutes for recruiting candidates through campus interviews. Whether services provided by such institutions are taxable? Yes. Service tax is liable on services provided by such institutions in relation to campus recruitment as such services are not covered in the negative list. 4.12.13 Are services of conducting admission tests for admission to colleges exempt? Yes in case the educational institutions are providing qualification recognized by law for the time being in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the renting transaction is not covered in this negative list entry because a hotel or a lodge is not a residential dwelling. (iv) government department allots houses to its employees and charges a license fee such service would be covered in the negative list entry relating to services provided by government and hence non- taxable. (v) furnished flats given on rent for temporary stay (a few days) such renting as residential dwelling for the bonafide use of a person or his family for a reasonable period shall be residential use; but if the same is given for a short stay for different persons over a period of time the same would be liable to tax. 4.14 Financial sector 4.14.1 What is the manner of dealing with various services provided by banks and other financial institutions? Banks and financial institutions provide a bouquet of financial services relating to lending or borrowing of money or investments in money. For such services invariably a variety of instruments, often complex in nature, are used in the financial markets. Transactions in such instruments have to be exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (25) of section 65 B to include 'securities'. Definition of 'securities include 'derivatives'. These two instruments have been discussed in detail in point no. 2.6.6 to 2.6.8. Transactions in instruments like interest rate swaps and foreign exchange swaps would be excluded from the definition of 'service' as such instruments are derivatives, being securities, based on contracts of difference. Since only transfer of title in securities is excluded from the definition of 'service' any attendant service charges or fees would be chargeable to service tax. Further services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. This has been explained in point nos. 14.2 to 14.4 below. 4.14.2 What are the services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount ? The negative list entry covers any such service wherein moneys due are allowed to be used or retained on payment of interest or on a discount. The words used are 'deposits, loans or advances and have to be taken in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to repurchase the securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed'. Section 45U (d) of the RBI Act, 1934 defines 'reverse repos' as' an instrument for lending funds by buying securities with an agreement to resell the securities on a mutually agreed future date at an agreed price which includes interest for the funds lent'. Repos and reverse repos are financial instruments of short term call money market that are normally used by banks to borrow from or lend money to RBI. The margins, called the repo rate or reverse repo rate in such transactions are nothing but interest charged for lending or borrowing of money. Thus they have the characteristics of loans and deposits for interest. However they are more appropriately excluded from the definition of service itself being the sale and purchase of securities, which are goods. 4.14.7 Would subscription to or trading in Commercial Paper (CP) or Certificates of Deposit (CD) be taxable? Commercial Paper ( CP ) and Certificate of Deposit ( CD ) are understood as unsecured money market instruments which may be issued in the form of a promisso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.14.9 Would 'future contracts' be chargeable to Service tax? Future contracts are similar to forward contracts. Main difference is that in future contracts, the underlying are stocks or index of stocks or certain approved currencies and the settlement happens only by way of net settlement with no actual delivery. Another difference is that future contracts are traded only on recognized stock exchange while forward contracts may also be traded over-the-counter. Since future contracts are in the nature of contracts of difference based on the prices of underlying stocks or index of stocks or approved currencies, they would be outside to the ambit of definition of 'service' as being transactions only in money or transfer of title in derivatives. 4.14.10 Would charges for late payment of dues on credit card outstandings be chargeable to service tax? In case of a credit card, issuing entity allows the facility of payment of the purchases made by the card holder within a specified period failing which some charges are levied. The question that arises is whether the credit so extended for this payment is in the nature of a loan or advance for interest. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces be taxable? Specific exemption is available to services of transport passengers by a contract carriage for transportation of passengers, excluding tourism, conducted tours, charter or hire. (Refer entry No. 23 of Exhibit A3). 4.15.3 Are national waterways covered in the definition of inland waterways? Yes. 4.15.4 Would services by way of transportation of passengers on a vessel, from say Chennai to Port Blair (mainland - island) or Port Blair to Havelock (inter island), be covered in the negative list entry? Yes in case the transportation is not predominantly for tourism purpose as such transportation by a vessel (of any size) is between two places located in India. 4.15.5 What is the scope of the phrase 'predominantly for tourism purpose' which qualifies the negative list entry relating to public transportation of passengers by a vessel in sub-clause (v) of clause (o) of section 66D? The words 'other than predominantly for tourism purpose' qualify the preceding words public transport . This implies that the public transport by a vessel should not be predominantly for tourism purposes. Normal public ships or other vessels that sail b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , goods or articles utilizing the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles. The nature of service provided by 'Express Cargo Service' falls within the scope and definition of the courier agency. Hence, the said service is excluded from the negative list entry relating to transportation of goods by road. 4.16.4 Whether services provided by 'angadia' are liable to service tax as a courier service? 'Angadia' undertakes delivery of documents, goods or articles received from a customer to another person for a consideration. Therefore, 'angadias' are covered within the definition of a 'courier' and services provided by angadia are liable to service tax. 4.16.5 Are the following services of transportation of goods covered in the negative list entry? Nature of service relating to transportation of goods Whether covered in the negative list entry? By railways No By air within the country or abroad No By a vessel in the coastal water ..... X X X X Extracts X X X X X X X X Extracts X X X X
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