TMI Blog2014 (2) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... provision either in the TRAI Regulations or in the Service Tax to ensure that the entire sale of vouchers is accounted for the purposes of levy of Service Tax The Service Tax Department needs to look at the above aspect in respect of all cellular operators to ensure that Service Tax is assessed and levied on all schemes, transactions and plans by whatever name called and under whatever schemes as long as they result in providing of service by Cellular operator to the consumer. Regarding TDS - The commission paid by Cellular Service Providers to the distributors or retailers is thus commission from which the tax is required to be deducted at source under the provisions of Section 194 of the Income Tax Act. - Whether tax is deducted at source on such amount or not is not clear and whether such TDS is reflected in the accounts of cellular operators as well as distributors, needs to be seen. - When the commission is paid by way of additional talk time, how the same has to be treated for the purposes of tax is another angle which needs to be looked into by the Income-Tax Authorities. It the issues which have been highlighted before the Court by the amicus curiae as noted abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice period. The bill is required to include details of charges for service and the Service Tax. The assessment of Service Tax, insofar as postpaid services are concerned, is not the issue in the present PIL. 4. Prepaid connections are granted by cellular operators. The following entities are involved in the service : (i) Service provider (cellular telephone provider); (ii) Distributors; (iii) Retailer appointed by the distributors; (iv) Other retailers like shops, etc., who sell vouchers over the counter; and (v) Customers. 5. The Cellular Service Provider grants the facility of distributing/selling talk time to the distributor. This talk time can be by way of coupons/vouchers which are known as (i) plan vouchers, (ii) top up vouchers and (iii) special tariff vouchers. The latter two of the vouchers are by way of sale of talk time by the cellular operator to the consumer, which is either sold through distributor, retailer or directly by the service provider to the customer. 6. The above vouchers can also be purchased electronically by logging on to the website of the service provider (E-Recharge). 7. In each of the above cases when a voucher is eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e settled. In this type of sell of talk-time, the end use customer [citizen] is charged for Service Tax but the said revenue is not reflected in the accounts as well as the Service Tax is not remitted back to the Govt. 11. There is no system by which the entire talk time, which is sold by the cellular operator, can be accounted so as to assess the revenue generated from that for the purposes of Service Tax. 12. To correctly assess the entire revenue generated for cellular telephone services provided by the cellular operator, the following steps need to be taken : (i) All vouchers, whether physically or electronically sold by the Service Providers, should have a record; (ii) The sale of vouchers should be correspondingly matched with the actual cellular telephone services provided by the Service Providers to match the sale and utilization of talk time; (iii) In the few instances referred to above, there is obviously additional talk time sold and utilized by the customer, which is not accounted for, for the Service Tax; (iv) Post 2012, by virtue of Telecom Consumers Protection Regulations, 2012 framed by the Telecom Regulatory Authority of India (TR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any nature, by wire, radio, optical, visual or other electro-magnetic means or systems, including the related transfer or assignment of the right to use capacity for such transmission, emission or reception by a person who has been granted a licence under the first proviso to sub-section (1) of Section 4 of the Indian Telegraph Act, 1885 and includes - (i) voice mail, data services, audio text services, video text services, radio paging; (ii) fixed telephone services including provision of access to and use of the public switched telephone network for the transmission and switching of voice, data and video, inbound and outbound telephone service to and from national and international destinations; (iii) cellular mobile telephone services including provision of access to and use of switched or non-switched networks for the transmission of voice, data and video, inbound and outbound roaming service to and from national and international destinations; (iv) carrier services including provision of wired or wireless facilities to originate, terminate or transit calls, charging for interconnection, settlement or termination of domestic or international calls, charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. (3) Section 66D provides for a negative list of services which are not to be charged for Service Tax. Telecommunication services are not a part of the negative list. Section 66D reads as follows : 66D. The negative list shall comprise of the following services, namely :- (a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere - (i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) support services, other than services covered under Clauses (i) to (iii) above, provided to business entities. (4) The valuation of chargeable services continues to be under Section 67, which reads as follows : 67. Valuation of taxable services for charging Service Tax. - (1) Subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly and there is no provision either in the TRAI Regulations or in the Service Tax to ensure that the entire sale of vouchers is accounted for the purposes of levy of Service Tax; The Service Tax Department needs to look at the above aspect in respect of all cellular operators to ensure that Service Tax is assessed and levied on all schemes, transactions and plans by whatever name called and under whatever schemes as long as they result in providing of service by Cellular operator to the consumer. 17. Re : Tax deduction at source (1) Chapter XVII of thee Income-tax Act, 1961 provides for collection and recovery of tax. (2) Sections 192 to 195 provide for tax deduction at source. (3) Section 194H requires that any person paying income by way of commission/brokerage shall deduct tax at source at the rate of 5%. (4) Section 195 is the residuary provision for tax deduction at source which requires any person paying to another person any other sum chargeable under the provisions of Income-tax Act to deduct tax at the rates specified. (5) The commission paid by Cellular Service Providers to the distributors or retailers is thus commission from which the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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