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Government has extended the base of service tax. It has been decided to include nine new services and expand the scope of existing 12 services. Exemptions from levy of service tax has also been extended to certain categories. Several measures have also been taken for trade facilitations. Fifteen notifications on these issues have been issued today. This information was given by Shri Parthasarthi Shome, Adviser to Finance Minister, while talking to mediapersons here today.
Central Government issued fifteen notifications No.15/2005-Service Tax to 28/2005-Service Tax and No.28/2005-Central Excise (NT) all dated 7th June, 2005. These notifications are (i) specify the effective date from which certain provisions of the Finance Act, 2005 will become effective; (ii) provide exemption to certain taxable services; and (iii) pertain to other procedural and facilitation issues relating to levy of service tax.
Giving details Chairman, Central Board of Excise and Customs, Shri A.K.Singh said that in Section 65 of the Finance Act, 1994 defines taxable services and various terms used in relation to levy of service tax. Section 66 is the charging section for service tax. Amendments in section 65 and section 66 made vide Section 88 (a) and 88 (b) of the Finance Act, 2005 shall come into force from a date to be notified. Notification No. 15/2005-ST has notified 16th June, 2005 as the date from which the provisions of the said Section 88 of the Finance Act, 2005 shall come into force.
In the Finance Act, 2005 levy of service tax has been proposed on the following 9 new services:
1) Transport of goods through pipeline or other conduit;
2) Site formation and clearance, excavation and earth moving and demolition services, other than those provided to agriculture, irrigation and watershed development;
3) Dredging service of river, port, harbour, backwater or estuary;
4) Survey and map making other than those by Government departments;
5) Cleaning services other than in relation to agriculture, horticulture, animal husbandry or dairying;
6) Membership of club or association with specified exclusions;
7) Packaging services;
8) Mailing list compilation and mailing; and
9) Construction of residential complexes having more than twelve residential houses or apartments together with common areas and other appurtenances.
The scope of existing twelve services has also been expanded as per details given below:
(i) Commercial or industrial construction service to include:
· renovation of building or civil structure;
· post construction, completion and finishing services for building or civil structure;
· construction, repair, alteration, renovation or restoration of pipeline or conduits;
(ii) Erection, commissioning or installation services to include specified installation services;
(iii) Maintenance or repair services to include:
· maintenance or management of immovable properties;
· reconditioning or restoration undertaken as part of a contract or agreement;
(iv) Broadcasting services to include charges recovered by broadcasting agencies from multisystem operator (MSO) and provision of direct to home (DTH) signals to the customers;
(v) Sound recording to include recording of sound on any media and includes post production services such as sound mixing or re-mixing;
(vi) Video-tape production to include recording of any programme, event or function on any media and includes post production services;
(vii) Taxable services provided by authorised service station to include reconditioning or restoration of motor-cars, two-wheeled and light motor vehicles;
(viii) Beauty parlours service to include all services provided by beauty parlours;
(ix) Manpower recruitment service to include supply of manpower, temporary or otherwise;
(x) Franchisee service to cover all agreements by which, the franchisor grants representational rights to franchisee to sell or manufacture goods or provide services identified with the franchisor without any other conditions;
(xi) Business Auxiliary Service to include ‘production or processing of goods for, or on behalf, of the client;
(xii) Outdoor catering would also include catering from a place or premises provided, by way of tenancy or otherwise, by the person receiving such catering services.
Levy of service tax on 9 new services and the expansion in the scope of 12 existing services shall come into force with effect from16th June, 2005 (Notification No.15/2005-ST dated 7th June, 2005).
At present, any person receiving taxable service in India from a person who is a non-resident and does not have any office in India, is liable to pay service tax under rule 2(d) (iv) of the Service Tax Rules, 1994.
An explanation to section 65(105) of the Finance Act, 1994 has been inserted for removal of doubts. Accordingly, services received from outside India by an Indian resident is to be taxed at the hands of the Indian recipient treating the recipient as if he is the provider of the taxable services. This provision relates to supply of services by a foreign supplier to an Indian customer and is generally known as ‘reverse charge’. For example, a person who has his place of business or fixed establishment or his permanent address or usual place of residence in India, receives advertising services from a US company for a consideration of $10,000. The Indian recipient of the advertising services, though not the actual service provider, is required to pay service tax on an amount equivalent to $10,000. The reverse charge does not apply if the taxable service received is exempt from service tax. Exemption from levy of service tax applicable on any taxable service is equally applicable for reverse charge cases, wherein the recipient of service is deemed to be the provider of taxable service and accordingly required to pay the service tax.
Notification No. 23/2005-ST dated 7th June, 2005 amends rule 2(d)(iv) so as to align it with the explanation inserted in section 65(105).
Section 67 of the Finance Act, 1994 has been amended so that service tax is required to be paid towards the taxable service on receipt of payment before, during or after provision of such service. This amendment has already come into force with effect from the date of enactment of the Finance Act i.e. 13th May, 2005.
Section 69 and 70 of the Finance Act, 1994 has been amended requiring registration of input service distributors and small service providers whose aggregate value of taxable services exceeds Rs. 3 lakh in a year. For this purpose, Service Tax (Registration of Special Category of Persons) Rules, 2005 notified vide notification No. 27/2005-ST dated 7th June, 2005.
Following exemptions from levy of service tax have been notified which would come into effect from the16th June, 2005:-
(a) Notification No. 16/2005-ST dated 7th June, 2005: Commercial or industrial construction service in relation to construction of major and minor ports;
(b) Notification No. 17/2005-ST dated 7th June, 2005: Site formation and clearance, excavation and earth moving and demolition services provided in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports or other ports;
(c) Notification No. 18/2005-ST dated 7th June, 2005: Option to avail abatement and pay service tax only on 33% of the gross amount charged subject to fulfillment of certain specified conditions for services provided in relation to construction of residential complexes;
(d) Notification No. 21/2005-ST dated 7th June, 2005: Production or processing of goods for or on behalf of a client provided in the course of manufacture of cut and polished diamonds and gem stones and plain and studded jewellery of gold and other precious metals;
(e) Notification No. 22/2005-ST dated 7th June, 2005: Taxable services received from abroad by an Indian recipient are taxed at the hands of Indian recipient under reverse charge. However, specified services provided in relation to handling of ships in a port outside India, handling or storage of goods carried in a ship in a port outside India or any other services related to handling or storage of goods carried in a ship and received from a non-resident person in the course of sailing of an Indian ship or a chartered ship registered by an Indian citizen or an Indian company (or a cooperative society) are exempted from levy of service tax.
(f) Notification No. 25/2005-ST dated 7th June, 2005: Taxable services received from abroad by an Indian recipient are taxed at the hands of Indian recipient under reverse charge. However, any taxable service received and consumed outside India by an individual, not in the course or furtherance of commerce or industry or any other business, is exempt from levy of service tax.
To avail the benefit of export of service under the Export of Service Rules, 2005, the taxable service exported is to be delivered outside India and used outside India and payment for the service exported is received by the service provider in convertible foreign exchange. These criteria are specifically incorporated also for taxable services which are performed in relation to immovable property and where the actual performance is relevant. New taxable services are also categorized under rule 3 of the said rules. Export of Service Rules, 2005 are amended suitably vide Notification No.28/2005-ST dated 7th June, 2005.
As a trade facilitation measure, any excess amount paid as service tax, the service provider is allowed to make suo moto adjustment of the excess amount so paid and utilize the excess amount for payment of service tax for the subsequent period. Such facility is extended to all service providers who have opted for centralized registration. Rule 6 of the Service Tax Rules, 1994 is amended for this purpose vide Notification No. 23/2005-ST dated 7th June, 2005.
BSC/BY/CS-233/05
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